HARTFORD FINANCIAL SERVICES GROUP INC/DE (Form: 10-Q, Received: 11/01/2012 16:27:10)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-Q

____________________________________

(Mark One)



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

For the quarterly period ended September 30, 2012



¨	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 001-13958

____________________________________

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)



Delaware		13-3317783
(State or other jurisdiction of incorporation or organization)		(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:	Yes	No

• 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.	ý	¨

• 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).	ý	¨

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



Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨



• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)	¨	ý

As of October 26, 2012 , there were outstanding 436,307,932 shares of Common Stock, $0.01 par value per share, of the registrant.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012

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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 and Nine Months Ended September 30, 2012 and 2011	6

	Condensed Consolidated Statements of Comprehensive Income — For the Three and Nine Months Ended September 30, 2012 and 2011	7

	Condensed Consolidated Balance Sheets — As of September 30, 2012 and December 31, 2011	8

	Condensed Consolidated Statements of Changes in Stockholders’ Equity — For the Nine Months Ended September 30, 2012 and 2011	9

	Condensed Consolidated Statements of Cash Flows — For the Nine Months Ended September 30, 2012 and 2011	10

	Notes to Condensed Consolidated Financial Statements	11

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	68

3.	Quantitative and Qualitative Disclosures About Market Risk	134

4.	Controls and Procedures	134

	Part II. OTHER INFORMATION

1.	Legal Proceedings	135

1A.	Risk Factors	136

2.	Unregistered Sales of Equity Securities and Use of Proceeds	136

6.	Exhibits	136

	Signature	137
	Exhibits Index	138

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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, legislative and other 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” or “The Hartford”). Future developments may not be in line with management’s expectations or may have unanticipated effects. Actual results could differ materially from expectations, depending on the evolution of various factors, including those set forth in Part I, Item 1A, Risk Factors in The Hartford’s 2011 Form 10-K Annual Report; and Part II, Item IA, Risk Factors in The Hartford's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012. These important risks and uncertainties include:

•

challenges related to the Company’s current operating environment, including continuing uncertainty about the strength and speed of the recovery in the United States and other key economies and the impact of governmental stimulus and austerity initiatives, sovereign credit concerns, including the potential consequences associated with recent and further potential downgrades to the credit ratings of debt issued by the United States government or European sovereigns and other adverse developments on financial, commodity and credit markets and consumer spending and investment, including in respect of Europe, and the effect of these events on our returns in our life and property and casualty investment portfolios and our hedging costs associated with our variable annuities business;

•

the risks, challenges and uncertainties associated with our March 21, 2012 announcement that we will focus on our Property and Casualty, Group Benefits and Mutual Fund businesses, place our Individual Annuity business into runoff and pursue sales or other strategic alternatives for the Individual Life, Woodbury Financial Services and Retirement Plans businesses and related implementation plans and goals and objectives, as set forth in our Current Report on Form 8-K dated March 21, 2012;

•

the success of our initiatives relating to the realignment of our business, including the continuing realignment of our hedge program for our variable annuity business, and plans to improve the profitability and long-term growth prospects of our key divisions, including through opportunistic acquisitions or divestitures or other actions or initiatives, and the impact of regulatory or other constraints on our ability to complete these initiatives and deploy capital among our businesses as and when planned;


•	market risks associated with our business, including changes in interest rates, credit spreads, equity prices, market volatility and foreign exchange rates, and implied volatility levels, as well as continuing uncertainty in key sectors such as the global real estate market;


•	the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;


•	volatility in our earnings and potential material changes to our results resulting from our adjustment of our risk management program to emphasize protection of statutory surplus and cash flows;


•	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 rating 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 changes in 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;

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•	the possibility of unfavorable loss development including with respect to long-tailed exposures;


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


•	the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses and cost and availability of reinsurance;


•	weather and other natural physical events, including the severity and frequency of storms, hail, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns;


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


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


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

•

the cost and other effects of increased regulation as a result of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), which, among other effects, has resulted in the establishment of a newly created Financial Services Oversight Council with the power to designate “systemically important” institutions, will require central clearing of, and/or impose new margin and capital requirements on, derivatives transactions, and created a new “Federal Insurance Office” within the U.S. Department of the Treasury (“Treasury”);


•	unfavorable judicial or legislative developments;


•	the uncertain effects of emerging claim and coverage issues;

•

the potential effect of other 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 or changes in U.S. federal or other tax laws that affect the relative attractiveness of our investment products;


•	regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends, including dividends associated with the proceeds from a sale of any of our life businesses;


•	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, cyber or other information security incident or other unanticipated event;


•	the risk that our framework for managing business risks may not be effective in mitigating material risk and loss to the Company;


•	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 the Company in this document speaks only as of the date of the filing of this Form 10-Q. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

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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 September 30, 2012 , and the related condensed consolidated statements of operations and comprehensive income for the three-month and nine -month periods ended September 30, 2012 and 2011 and changes in stockholders' equity, and cash flows for the nine -month periods ended September 30, 2012 and 2011 . 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, 2011 , and the related consolidated statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for the year then ended prior to retrospective adjustment for the adoption of Accounting Standards Update (“ASU”) No. 2010-26 Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts , (not presented herein); and in our report dated February 24, 2012 (which report includes an explanatory paragraph relating to the Company's change in its method of accounting and reporting for variable interest entities and embedded credit derivatives as required by accounting guidance adopted in 2010 , and for other-than-temporary impairments as required by accounting guidance adopted in 2009), we expressed an unqualified opinion on those consolidated financial statements. We also audited the adjustments described in Note 1 that were applied to retrospectively adjust the December 31, 2011 consolidated balance sheet of the Company (not presented herein). In our opinion, such adjustments are appropriate and have been properly applied to the previously issued consolidated balance sheet in deriving the accompanying retrospectively adjusted condensed consolidated balance sheet as of December 31, 2011 .

DELOITTE & TOUCHE LLP

Hartford, Connecticut

November 1, 2012

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Operations



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions, except for per share data)	2012			As currently reported (see Note 1) 2011			2012			As currently reported (see Note 1) 2011
	(Unaudited)
Revenues
Earned premiums	$	3,401		$	3,518		$	10,243		$	10,582
Fee income	1,118			1,192			3,366			3,620
Net investment income (loss):
Securities available-for-sale and other	1,030			1,062			3,197			3,274
Equity securities, trading	710			(1,890		)	1,889			(1,684		)
Total net investment income (loss)	1,740			(828		)	5,086			1,590
Net realized capital gains (losses):
Total other-than-temporary impairment (“OTTI”) losses	(59		)	(71		)	(201		)	(221		)
OTTI losses recognized in other comprehensive income (“OCI”)	22			11			37			83
Net OTTI losses recognized in earnings	(37		)	(60		)	(164		)	(138		)
Net realized capital gains (losses), excluding net OTTI losses recognized in earnings	156			635			(38		)	379
Total net realized capital gains (losses)	119			575			(202		)	241
Other revenues	64			63			184			188
Total revenues	6,442			4,520			18,677			16,221
Benefits, losses and expenses
Benefits, losses and loss adjustment expenses	3,271			4,006			9,930			11,160
Benefits, losses and loss adjustment expenses – returns credited on international variable annuities	710			(1,889		)	1,888			(1,683		)
Amortization of deferred policy acquisition costs and present value of future profits	566			1,005			1,441			2,047
Insurance operating costs and other expenses	1,275			1,287			3,896			4,093
Loss on extinguishment of debt	—			—			910			—
Interest expense	109			128			348			384
Total benefits, losses and expenses	5,931			4,537			18,413			16,001
Income (loss) from continuing operations before income taxes	511			(17		)	264			220
Income tax expense (benefit)	108			(74		)	(136		)	(289		)
Income from continuing operations, net of tax	403			57			400			509
Income (loss) from discontinued operations, net of tax	(2		)	3			(4		)	85
Net income	$	401		$	60		$	396		$	594
Preferred stock dividends	10			10			31			31
Net income available to common shareholders	$	391		$	50		$	365		$	563
Income from continuing operations, net of tax, available to common shareholders per common share
Basic	$	0.90		$	0.11		$	0.84		$	1.07
Diluted	$	0.83		$	0.10		$	0.79		$	0.99
Net income available to common shareholders per common share
Basic	$	0.90		$	0.11		$	0.83		$	1.27
Diluted	$	0.83		$	0.11		$	0.78		$	1.17
Cash dividends declared per common share	$	0.10		$	0.10		$	0.30		$	0.30

See Notes to Condensed Consolidated Financial Statements.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Comprehensive Income



	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2012			As currently reported (see Note 1) 2011		2012		As currently reported (see Note 1) 2011
	(Unaudited)
Comprehensive Income
Net income	$	401		$	60	$	396	$	594
Other comprehensive income (loss):
Change in net unrealized gain on securities	882			914		1,870		1,801
Change in OTTI losses recognized in other comprehensive income	35			10		40		11
Change in net gain (loss) on cash-flow hedging instruments	(1		)	154		27		157
Change in foreign currency translation adjustments	88			78		8		104
Change in pension and other postretirement plan adjustments	35			24		99		72
Total other comprehensive income	1,039			1,180		2,044		2,145
Total comprehensive income	$	1,440		$	1,240	$	2,440	$	2,739

See Notes to Condensed Consolidated Financial Statements.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Balance Sheets



(In millions, except for share and per share data)	September 30, 2012			As currently reported (see Note 1) December 31, 2011
	(Unaudited)
Assets
Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost of $80,690 and $78,978) (includes variable interest entity assets, at fair value, of $265 and $153)	$	86,726		$	81,809
Fixed maturities, at fair value using the fair value option (includes variable interest entity assets of $344 and $338)	1,355			1,328
Equity securities, trading, at fair value (cost of $30,454 and $32,928)	29,980			30,499
Equity securities, available-for-sale, at fair value (cost of $865 and $1,056)	878			921
Mortgage loans (net of allowances for loan losses of $83 and $102)	6,863			5,728
Policy loans, at outstanding balance	2,000			2,001
Limited partnerships and other alternative investments (includes variable interest entity assets of $6 and $7)	3,039			2,532
Other investments	1,540			2,394
Short-term investments (includes variable interest entity assets, at fair value, of $1 as of September 30, 2012)	4,787			7,736
Total investments	137,168			134,948
Cash	2,705			2,581
Premiums receivable and agents’ balances, net	3,646			3,446
Reinsurance recoverables, net	4,726			4,768
Deferred policy acquisition costs and present value of future profits	5,947			6,556
Deferred income taxes, net	1,248			2,131
Goodwill	1,006			1,006
Property and equipment, net	979			1,029
Other assets	3,124			2,274
Separate account assets	148,369			143,870
Total assets	$	308,918		$	302,609
Liabilities
Reserve for future policy benefits and unpaid losses and loss adjustment expenses	$	40,992		$	41,016
Other policyholder funds and benefits payable	43,086			45,612
Other policyholder funds and benefits payable – international variable annuities	29,938			30,461
Unearned premiums	5,370			5,222
Short-term debt	320			—
Long-term debt	6,806			6,216
Consumer notes	190			314
Other liabilities (includes variable interest entity liabilities of $420 and $471)	10,477			8,412
Separate account liabilities	148,369			143,870
Total liabilities	285,548			281,123
Commitments and Contingencies (Note 9)
Stockholders’ Equity
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 575,000 shares issued, liquidation preference $1,000 per share	556			556
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 469,746,638 and 469,750,171 shares issued	5			5
Additional paid-in capital	10,032			10,391
Retained earnings	11,235			11,001
Treasury stock, at cost — 33,680,760 and 27,211,115 shares	(1,753		)	(1,718		)
Accumulated other comprehensive income, net of tax	3,295			1,251
Total stockholders’ equity	23,370			21,486
Total liabilities and stockholders’ equity	$	308,918		$	302,609

See Notes to Condensed Consolidated Financial Statements.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity



	Nine Months Ended September 30,
(In millions, except for share data)	2012			As currently reported (see Note 1) 2011
	(Unaudited)
Preferred Stock	$	556		$	556
Common Stock	5			5
Additional Paid-in Capital, beginning of period	10,391			10,448
Repurchase of warrants	(300		)	—
Issuance of shares under incentive and stock compensation plans	(58		)	(43		)
Tax expense on employee stock options and awards	(1		)	(10		)
Additional Paid-in Capital, end of period	10,032			10,395
Retained Earnings, beginning of period	11,001			10,509
Net income	396			594
Dividends on preferred stock	(31		)	(31		)
Dividends declared on common stock	(131		)	(134		)
Retained Earnings, end of period	11,235			10,938
Treasury Stock, at Cost, beginning of period	(1,718		)	(1,774		)
Treasury stock acquired	(149		)	—
Issuance of shares under incentive and stock compensation plans from treasury stock	121			94
Return of shares under incentive and stock compensation plans and other to treasury stock	(7		)	(7		)
Treasury Stock, at Cost, end of period	(1,753		)	(1,687		)
Accumulated Other Comprehensive Income (Loss), net of tax, beginning of period	1,251			(990		)
Total other comprehensive income	2,044			2,145
Accumulated Other Comprehensive Income (Loss), net of tax, end of period	3,295			1,155
Total Stockholders’ Equity	$	23,370		$	21,362
Preferred Shares Outstanding (in thousands)	575			575
Common Shares Outstanding, at beginning of period (in thousands)	442,539			444,549
Treasury stock acquired	(8,045		)	—
Issuance of shares under incentive and stock compensation plans	1,905			1,203
Return of shares under incentive and stock compensation plans and other to treasury stock	(333		)	(238		)
Common Shares Outstanding, at end of period	436,066			445,514

See Notes to Condensed Consolidated Financial Statements.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Cash Flows



	Nine Months Ended September 30,
(In millions)	2012			As currently reported (see Note 1) 2011
	(Unaudited)
Operating Activities
Net income	$	396		$	594
Adjustments to reconcile net income to net cash provided by operating activities
Amortization of deferred policy acquisition costs and present value of future profits	1,441			2,047
Additions to deferred policy acquisition costs and present value of future profits	(1,251		)	(1,271		)
Change in reserve for future policy benefits and unpaid losses and loss adjustment expenses and unearned premiums	153			1,309
Change in reinsurance recoverables	(332		)	(31		)
Change in receivables and other assets	(442		)	(452		)
Change in payables and accruals	778			(141		)
Change in accrued and deferred income taxes	(118		)	(449		)
Net realized capital losses	202			(360		)
Net disbursements from investment contracts related to policyholder funds—international variable annuities	(523		)	(2,059		)
Net decrease in equity securities, trading	519			2,050
Depreciation and amortization	366			532
Loss on extinguishment of debt	910			—
Other operating activities, net	113			(145		)
Net cash provided by operating activities	2,212			1,624
Investing Activities
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale	35,928			26,124
Fixed maturities, fair value option	191			40
Equity securities, available-for-sale	213			130
Mortgage loans	332			366
Partnerships	124			151
Payments for the purchase of:
Fixed maturities, available-for-sale	(34,556		)	(26,513		)
Fixed maturities, fair value option	(182		)	(664		)
Equity securities, available-for-sale	(74		)	(200		)
Mortgage loans	(1,467		)	(1,503		)
Partnerships	(728		)	(594		)
Proceeds from business sold	—			278
Derivatives, net	(1,593		)	1,603
Change in policy loans, net	1			5
Other investing activities, net	(51		)	(119		)
Net cash used for investing activities	(1,862		)	(896		)
Financing Activities
Deposits and other additions to investment and universal life-type contracts	8,907			8,419
Withdrawals and other deductions from investment and universal life-type contracts	(18,373		)	(16,123		)
Net transfers from separate accounts related to investment and universal life-type contracts	8,406			7,661
Repayments at maturity or settlement of consumer notes	(124		)	(33		)
Net increase (decrease) in securities loaned or sold under agreements to repurchase	1,585			—
Repurchase of warrants	(300		)	—
Repayment of long-term debt	(2,133		)	—
Proceeds from the issuance of long-term debt	2,123			—
Proceeds from net issuance of shares under incentive and stock compensation plans, excess tax benefit and other	10			6
Treasury stock acquired	(154		)	—
Dividends paid on preferred stock	(32		)	(32		)
Dividends paid on common stock	(132		)	(107		)
Changes in bank deposits and payments on bank advances	—			(30		)
Net cash provided by (used for) financing activities	(217		)	(239		)
Foreign exchange rate effect on cash	(9		)	38
Net increase in cash	124			527
Cash – beginning of period	2,581			2,062
Cash – end of period	$	2,705		$	2,589
Supplemental Disclosure of Cash Flow Information
Income taxes paid (received)	$	(448	)	$	245
Interest paid	$	314		$	340
Supplemental Disclosure of Non-Cash Investing Activity
Conversion of fixed maturities, available-for-sale to equity securities, available-for-sale	$	67		$	—

See Notes to Condensed Consolidated Financial Statements

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in millions, except for per share data, unless otherwise stated)

(Unaudited)

1. Basis of Presentation and Accounting Policies

Basis of Presentation

The Hartford Financial Services Group, Inc. is a holding company for insurance and financial services 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”, the “Company”, “we” or “our”). Also, The Hartford continues to administer business previously sold in Japan and the U.K.

On March 21, 2012, the Company announced the completion of its businesses and strategy evaluation. As a result of this review, the Company announced that it will focus on its Property and Casualty, Group Benefits and Mutual Fund businesses, place its existing Individual Annuity business into runoff and pursue sales or other strategic alternatives for the Individual Life and Retirement Plans businesses and Woodbury Financial Services, Inc. ("Woodbury Financial Services", "WFS"), an indirect wholly-owned subsidiary.

On April 26, 2012, the Company announced it had entered into an agreement to sell its U.S. individual annuity new business capabilities to a third party. A purchase and sale agreement was entered into with Forethought Financial Group in mid-June 2012 and the anticipated transaction closing date is in late 2012 or early 2013. Effective May 1, 2012, all new U.S. annuity policies sold by the Company are reinsured to Forethought Life Insurance Company. The Company will cease the sale of such annuity policies and the reinsurance agreement will terminate as to new business in the second quarter of 2013. The reinsurance agreement has no impact on in-force policies issued on or before April 27, 2012.

On July 31, 2012, the Company entered into a definitive agreement to sell Woodbury Financial Services to AIG Advisor Group, Inc. ("AIG Advisor Group"), a subsidiary of American International Group, Inc. The transaction is expected to close by the end of 2012, pending regulatory approval. The WFS broker-dealer business is included in the Corporate reporting category.

On September 4, 2012, the Company announced it had entered into a definitive agreement to sell its Retirement Plans business to Massachusetts Mutual Life Insurance Company ("MassMutual") for a cash ceding commission of $ 400 , subject to a downward adjustment at closing of up to $ 51 based upon net flows adjusted for retirement plan discontinuances. The sale, which is structured as a reinsurance transaction, is expected to close in the fourth quarter of 2012 or the first quarter of 2013, subject to regulatory approvals and customary closing conditions. As part of the agreement, the Company will continue to sell retirement plans during a transition period, and MassMutual will assume all expenses and risk for these sales through the reinsurance agreement.

On September 27, 2012, the Company announced it had entered into a definitive agreement to sell its Individual Life insurance business to Prudential Financial, Inc. ("Prudential") for cash consideration of $ 615 consisting primarily of a ceding commission. The sale, which is structured as a reinsurance transaction, is expected to close in the first quarter of 2013, subject to regulatory approvals and customary closing conditions. As part of the agreement, the Company will continue to sell life insurance products and riders during a transition period, and Prudential will assume all expenses and risk for these sales through a reinsurance agreement.

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. 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 2011 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.

The accompanying Condensed Consolidated Financial Statements and Notes as of September 30, 2012 , and for the three and nine months ended September 30, 2012 and 2011 are unaudited. These financial statements reflect all adjustments (generally 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.

On January 1, 2012, the Company retrospectively adopted Accounting Standards Update (“ASU”) No. 2010-26, Financial Services – Insurance (Topic 944): Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts which clarifies the definition of policy acquisition costs that are eligible for deferral. Previously reported financial information has been revised to reflect the effect of the Company’s adoption of this accounting standard. As a result of this accounting change, total stockholders’ equity as of January 1, 2011, decreased by approximately $1.6 billion , after-tax from $20.3 billion , as previously reported, to $18.7 billion due to a reduction of the Company’s deferred acquisition cost asset ("DAC") balance related to certain costs that do not meet the provisions of the revised standard.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

1. Basis of Presentation and Accounting Policies (continued)

The effect of adoption of this accounting standard on the Company’s Condensed Consolidated Balance Sheet and Condensed Consolidated Statements of Operations was as follows:



	December 31, 2011
	As previously reported		Effect of change			As currently reported
Deferred policy acquisition costs and present value of future profits	$	8,744	$	(2,188	)	$	6,556
Deferred income taxes, net	$	1,398	$	733		$	2,131
Other liabilities	$	8,443	$	(31	)	$	8,412
Retained earnings	$	12,519	$	(1,518	)	$	11,001
Accumulated other comprehensive income, net of tax	$	1,157	$	94		$	1,251
Total stockholders’ equity	$	22,910	$	(1,424	)	$	21,486



	Three Months Ended September 30, 2011
	As previously reported			Effect of change			As currently reported
Amortization of deferred policy acquisition costs and present value of future profits	$	1,320		$	(315	)	$	1,005
Insurance operating costs and other expenses	$	1,059		$	228		$	1,287
Income (loss) from continuing operations before income taxes	$	(104	)	$	87		$	(17	)
Income tax expense (benefit)	$	(101	)	$	27		$	(74	)
Net income	$	—		$	60		$	60
Net income (loss) available to common shareholders	$	(10	)	$	60		$	50
Income (loss) from continuing operations, net of tax, available to common shareholders per common share:
Basic	$	(0.03	)	$	0.14		$	0.11
Diluted	$	(0.03	)	$	0.13		$	0.10
Net income (loss) available to common shareholders per common share:
Basic	$	(0.02	)	$	0.13		$	0.11
Diluted	$	(0.02	)	$	0.13		$	0.11



	Nine Months Ended September 30, 2011
	As previously reported			Effect of change			As currently reported
Amortization of deferred policy acquisition costs and present value of future profits	$	2,819		$	(772	)	$	2,047
Insurance operating costs and other expenses	$	3,403		$	690		$	4,093
Income from continuing operations before income taxes	$	138		$	82		$	220
Income tax expense (benefit)	$	(312	)	$	23		$	(289	)
Net income	$	535		$	59		$	594
Net income available to common shareholders	$	504		$	59		$	563
Income from continuing operations, net of tax, available to common shareholders per common share:
Basic	$	0.94		$	0.13		$	1.07
Diluted	$	0.87		$	0.12		$	0.99
Net income available to common shareholders per common share:
Basic	$	1.13		$	0.14		$	1.27
Diluted	$	1.05		$	0.12		$	1.17

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

1. Basis of Presentation and Accounting Policies (continued)

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 (“VIEs”) 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 VIEs see Note 5 of the Notes to Condensed Consolidated Financial Statements.

Discontinued Operations

The results of operations of a component of the Company that either has been disposed of or is classified as held-for-sale are reported in discontinued operations if the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Company as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction.

The Company is presenting the operations of certain businesses that meet the criteria for reporting as discontinued operations. Amounts for prior periods have been retrospectively reclassified. See Note 12 of the Notes to Condensed Consolidated Financial Statements for information on the specific subsidiaries and related impacts.

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 insurance product reserves, net of reinsurance; 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.

Mutual Funds

The Company maintains a retail mutual fund operation whereby the Company provides investment management, administrative and distribution services to The Hartford Mutual Funds, Inc. and The Hartford Mutual Funds II, Inc. (collectively, “mutual funds”). These mutual funds are registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940. The mutual funds are owned by the shareholders of those funds and not by the Company. As such, the mutual fund assets and liabilities and related investment returns are not reflected in the Company’s Condensed Consolidated Financial Statements since they are not assets, liabilities and operations of the Company.

Reclassifications

Certain reclassifications have been made to prior year financial information to conform to the current year presentation.

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 2011 Form 10-K Annual Report, which should be read in conjunction with these accompanying Condensed Consolidated Financial Statements.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

1. Basis of Presentation and Accounting Policies (continued)

Income Taxes

A reconciliation of the tax provision at the U.S. Federal statutory rate to the provision for income taxes is as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Tax expense (benefit) at U.S. Federal statutory rate	$	179		$	(6	)	$	92		$	77
Tax-exempt interest	(35		)	(37		)	(106		)	(112		)
Dividends-received deduction	(28		)	(42		)	(91		)	(169		)
Valuation allowance	(3		)	6			(17		)	(83		)
Other	(5		)	5			(14		)	(2		)
Income tax expense (benefit)	$	108		$	(74	)	$	(136	)	$	(289	)

The current year separate account dividends-received deduction (“DRD”) is estimated based on information from the prior year-end, adjusted for current year equity market performance and other appropriate factors, including estimated levels of corporate dividend payments and level of policy owner equity account balances. 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. The Company evaluates its DRD computations on a quarterly basis.

The Company’s unrecognized tax benefits were unchanged during the three and nine months ended September 30, 2012 , remaining at $48 as of September 30, 2012 . This entire amount, if it were recognized, would affect the effective tax rate in the period it is released.

The Internal Revenue Service (“IRS”) routinely audits the Company's federal income tax returns. Audits have concluded for all years through 2006. The audit of the years 2007—2009 commenced during 2010 and is expected to conclude in 2013. In addition, for the nine months ended September 30, 2011, the Company recorded a tax benefit of $52 as a result of a resolution of a tax matter with the IRS for the computation of DRD for years 1998, 2000 and 2001.

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. The deferred tax asset valuation allowance, which related predominantly to foreign net operating losses, was $67 as of September 30, 2012 and $84 as of December 31, 2011 . In evaluating the need for a valuation allowance, management considers many factors, including: future taxable temporary differences reversals, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in open carry back years, and other tax planning strategies. Based on the availability of additional tax planning strategies identified during the nine months ended September 30, 2011, the Company released $86 , or 100% , of the valuation allowance associated with realized capital losses.

For federal income tax purposes, the tax law distinguishes between assets that are treated as ordinary versus capital in nature. The Company’s September 30, 2012 $1.2 billion net deferred tax asset includes $2.7 billion of assets relating to items treated as ordinary and a $1.5 billion net deferred tax liability for items classified as capital. The $1.5 billion for capital items is comprised of $665 of gross deferred tax assets related to realized capital losses and $2.1 billion of gross deferred tax liabilities related to net unrealized capital gains.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Earnings (Loss) Per Common Share

The following table presents a reconciliation of net income 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 September 30,					Nine Months Ended September 30,
(In millions, except for per share data)	2012			2011		2012			2011
Earnings
Income from continuing operations
Income from continuing operations, net of tax	$	403		$	57	$	400		$	509
Less: Preferred stock dividends	10			10		31			31
Income from continuing operations, net of tax, available to common shareholders	393			47		369			478
Add: Dilutive effect of preferred stock dividends	10			—		—			—
Income from continuing operations, net of tax, available to common shareholders and assumed conversion of preferred shares	$	403		$	47	$	369		$	478
Income (loss) from discontinued operations, net of tax	$	(2	)	$	3	$	(4	)	$	85
Net income
Net income	$	401		$	60	$	396		$	594
Less: Preferred stock dividends	10			10		31			31
Net income available to common shareholders	391			50		365			563
Add: Dilutive effect of preferred stock dividends	10			—		—			—
Net income available to common shareholders and assumed conversion of preferred shares	$	401		$	50	$	365		$	563
Shares
Weighted average common shares outstanding, basic	435.8			445.3		438.2			445.0
Dilutive effect of warrants	23.8			27.4		25.1			34.8
Dilutive effect of stock compensation plans	2.1			0.7		1.9			1.2
Dilutive effect of mandatory convertible preferred shares	21.0			—		—			—
Weighted average shares outstanding and dilutive potential common shares	482.7			473.4		465.2			481.0
Earnings (loss) per common share
Basic
Income from continuing operations, net of tax, available to common shareholders	$	0.90		$	0.11	$	0.84		$	1.07
Income from discontinued operations, net of tax	—			—		(0.01		)	0.20
Net income available to common shareholders	$	0.90		$	0.11	$	0.83		$	1.27
Diluted
Income from continuing operations, net of tax, available to common shareholders	$	0.83		$	0.10	$	0.79		$	0.99
Income from discontinued operations, net of tax	—			0.01		(0.01		)	0.18
Net income available to common shareholders	$	0.83		$	0.11	$	0.78		$	1.17

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Earnings (Loss) Per Common Share (continued)

For the nine months ended September 30, 2012 , 20.9 million shares for mandatory convertible preferred shares, along with the related dividend adjustment, would have been antidilutive to the earnings per share calculations. 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 486.1 million for the nine months ended September 30, 2012 .

For the three and nine months ended September 30, 2011 , 20.7 million and 20.8 million shares, respectively, for mandatory convertible preferred shares, along with the related dividend adjustment, would have been antidilutive to the earnings per share calculations. 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 494.1 million and 501.8 million , for the three and nine months ended September 30, 2011, respectively.

The declaration of a quarterly common stock dividend of $0.10 during the first, second, and third quarters of 2012 triggered a provision in The Hartford’s Warrant Agreement with The Bank of New York Mellon, relating to warrants to purchase common stock issued in connection with the Company’s participation in the Capital Purchase Program, resulting in an adjustment to the warrant exercise price. The warrant exercise price at September 30, 2012, June 30, 2012, March 31, 2012 and December 31, 2011 was $9.622 $9.649 , $9.676 and $9.699 , respectively.

In addition, the declaration of a quarterly common stock dividend in the first quarter of 2012 triggered a provision in The Hartford’s Fixed Conversion Rate Agreement, relating to the Company’s mandatory convertible preferred stock, resulting in an adjustment to the minimum conversion rate to 29.8831 from 29.536 shares of Common Stock per share of Series F Preferred Stock and the maximum conversion rate to 36.4596 from 36.036 shares of Common Stock per share of Series F Preferred Stock.

On March 30, 2012 the Company entered into an agreement with Allianz and repurchased the outstanding Series B and Series C warrants. As a result, Allianz no longer holds potentially dilutive outstanding warrants. See Note 15 for additional information regarding the warrant repurchase.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. Segment Information

The Company is organized into four divisions: Commercial Markets, Consumer Markets, Wealth Management and Runoff Operations and conducts business principally in eight reporting segments, as well as a Corporate category. Starting in the second quarter of 2012 , financial results for the former Individual Annuity segment have been reported in the Life Other Operations segment and segment data for prior reporting periods has been adjusted accordingly. The Company’s reporting segments as of September 30, 2012 are as follows:

Commercial Markets

Property & Casualty Commercial

Property & Casualty Commercial provides workers’ compensation, property, automobile, marine, livestock, liability and umbrella coverages primarily throughout the United States (“U.S.”), along with a variety of customized insurance products and risk management services including professional liability, fidelity, surety, and specialty casualty coverages.

Group Benefits

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.

Consumer Markets

Consumer Markets provides standard automobile, homeowners and home-based business coverages to individuals across the U.S., including a special program designed exclusively for members of AARP. Consumer Markets also operates a member contact center for health insurance products offered through the AARP Health program.

Wealth Management

Individual Life

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

Retirement Plans

Retirement Plans provides products and services to corporations pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), and products and services to municipalities and not-for-profit organizations under Sections 457 and 403(b) of the Code, collectively referred to as government plans.

Mutual Funds

Mutual Funds offers retail mutual funds, investment-only mutual funds and college savings plans under Section 529 of the Code (collectively referred to as non-proprietary) and proprietary mutual funds supporting insurance products issued by The Hartford.

Runoff Operations

Life Other Operations

Life Other Operations includes the Company's management of certain life operations that have discontinued writing new business encompassing U.S. individual, international (primarily in Japan and Europe) and institutional annuity products and private placement life insurance.

Property & Casualty Other Operations

Property & Casualty Other Operations includes the Company’s management of certain property and casualty operations that have discontinued writing new business and substantially all of the Company’s asbestos and environmental exposures.

Corporate

The Company includes in the Corporate category the Company’s debt financing and related interest expense, as well as other capital raising activities; banking operations; certain fee income and commission expenses associated with sales of non-proprietary products by broker-dealer subsidiaries; and certain purchase accounting adjustments and other charges not allocated to the segments.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. Segment Information (continued)

Financial Measures and Other Segment Information

Certain transactions between segments occur during the year that primarily relate to tax settlements, insurance coverage, expense reimbursements, services provided, security transfers and capital contributions. Also, one segment may purchase group annuity contracts from another to fund pension costs and annuities to settle casualty claims. In addition, certain inter-segment transactions occur that relate to interest income on allocated surplus. Consolidated net investment income is unaffected by such transactions.

The following table presents net income (loss) for each reporting segment, as well as the Corporate category.



	Three Months Ended September 30,						Nine Months Ended September 30,
Net income (loss)	2012			2011			2012			2011
Property & Casualty Commercial	$	164		$	53		$	502		$	494
Group Benefits	30			25			83			77
Consumer Markets	94			(16		)	152			(80		)
Individual Life	11			(9		)	66			55
Retirement Plans	(7		)	(23		)	9			9
Mutual Funds	18			24			56			79
Life Other Operations	145			105			344			439
Property & Casualty Other Operations	24			8			36			(135		)
Corporate	(78		)	(107		)	(852		)	(344		)
Net income	$	401		$	60		$	396		$	594

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

3. Segment Information (continued)

The following table presents revenues by product line for each reporting segment, as well as the Corporate category.



	Three Months Ended September 30,					Nine Months Ended September 30,
Revenues	2012		2011			2012			2011
Earned premiums, fees, and other considerations
Property & Casualty Commercial
Workers’ compensation	$	762	$	721		$	2,232		$	2,071
Property	127		129			378			398
Automobile	148		146			440			437
Package business	290		289			871			857
Liability	142		135			419			404
Fidelity and surety	53		55			156			164
Professional liability	60		78			195			237
Total Property & Casualty Commercial	1,582		1,553			4,691			4,568
Group Benefits
Group disability	426		467			1,308			1,460
Group life and accident	468		501			1,425			1,529
Other	47		48			146			147
Total Group Benefits	941		1,016			2,879			3,136
Consumer Markets
Automobile	632		649			1,894			1,978
Homeowners	280		281			831			847
Total Consumer Markets [1]	912		930			2,725			2,825
Individual Life
Variable life	82		122			254			304
Universal life	112		109			360			324
Term / Other life	13		13			40			37
Total Individual Life	207		244			654			665
Retirement Plans
401(k)	79		82			244			254
Government plans	12		11			37			37
Total Retirement Plans	91		93			281			291
Mutual Funds
Non-Proprietary	133		138			403			461
Proprietary	15		15			44			45
Total Mutual Funds	148		153			447			506
Life Other Operations	593		666			1,792			2,050
Property & Casualty Other Operations	—		—			(2		)	—
Corporate	45		55			142			161
Total earned premiums, fees, and other considerations	4,519		4,710			13,609			14,202
Net investment income:
Securities available-for-sale and other	1,030		1,062			3,197			3,274
Equity securities, trading	710		(1,890		)	1,889			(1,684		)
Total net investment income (loss)	1,740		(828		)	5,086			1,590
Net realized capital gains (losses)	119		575			(202		)	241
Other revenues	64		63			184			188
Total revenues	$	6,442	$	4,520		$	18,677		$	16,221


[1]	For the three months ended September 30, 2012 and 2011 , AARP members accounted for earned premiums of $ 679 and $ 687 , respectively. For the nine months ended September 30, 2012 and 2011 , AARP members accounted for earned premiums of $ 2.0 billion and $ 2.1 billion , respectively.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements

The following financial instruments are carried at fair value in the Company’s Condensed Consolidated Financial Statements: fixed maturity and equity securities, available-for-sale (“AFS”), fixed maturities at fair value using fair value option (“FVO”), equity securities, trading, short-term investments, freestanding and embedded derivatives, separate account assets and certain other liabilities.

The following section applies 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 securities, open-ended mutual funds reported in separate account assets and derivative securities.


Level 2	Observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities. Most 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.

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, guaranteed product embedded and reinsurance derivatives and other complex derivative securities. Because Level 3 fair values, by their nature, contain one or more significant unobservable 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. As of September 30, 2012 , the amount of transfers from Level 1 to Level 2 was $2.0 billion , which represented previously on-the-run U.S. Treasury securities that are now off-the-run, and there were no transfers from Level 2 to Level 1. 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 because these securities are primarily priced by independent brokers and/or within illiquid markets.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

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



	September 30, 2012
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets accounted for at fair value on a recurring basis
Fixed maturities, AFS
Asset-backed securities (“ABS”)	$	2,758		$	—		$	2,443		$	315
Collateralized debt obligations ("CDOs")	3,072			—			2,142			930
Commercial mortgage-backed securities ("CMBS")	6,273			—			5,402			871
Corporate	43,433			—			41,413			2,020
Foreign government/government agencies	4,216			—			4,166			50
States, municipalities and political subdivisions (“Municipal")	14,291			—			14,087			204
Residential mortgage-backed securities ("RMBS")	7,477			—			6,185			1,292
U.S. Treasuries	5,206			497			4,709			—
Total fixed maturities	86,726			497			80,547			5,682
Fixed maturities, FVO	1,355			—			830			525
Equity securities, trading	29,980			1,946			28,034			—
Equity securities, AFS	878			334			458			86
Derivative assets
Credit derivatives	(11		)	—			(20		)	9
Equity derivatives	44			—			—			44
Foreign exchange derivatives	282			—			282			—
Interest rate derivatives	226			—			260			(34		)
U.S. guaranteed minimum withdrawal benefit ("GMWB") hedging instruments	192			—			11			181
U.S. macro hedge program	63			—			—			63
International program hedging instruments	653			—			457			196
Other derivative contracts	24			—			(1		)	25
Total derivative assets [1]	1,473			—			989			484
Short-term investments	4,787			278			4,509			—
Reinsurance recoverable for U.S. GMWB	199			—			—			199
Separate account assets [2]	142,382			102,884			38,119			1,379
Total assets accounted for at fair value on a recurring basis	$	267,780		$	105,939		$	153,486		$	8,355
Percentage of level to total	100		%	40		%	57		%	3		%
Liabilities accounted for at fair value on a recurring basis
Other policyholder funds and benefits payable
U.S guaranteed withdrawal benefits	$	(1,413	)	$	—		$	—		$	(1,413	)
International guaranteed withdrawal benefits	(37		)	—			—			(37		)
International other guaranteed living benefits	1			—			—			1
Equity linked notes	(10		)	—			—			(10		)
Total other policyholder funds and benefits payable	(1,459		)	—			—			(1,459		)
Derivative liabilities
Credit derivatives	(332		)	—			(42		)	(290		)
Equity derivatives	24			—			—			24
Foreign exchange derivatives	150			—			150			—
Interest rate derivatives	(481		)	—			(483		)	2
U.S. GMWB hedging instruments	482			—			47			435
U.S. macro hedge program	19			—			—			19
International program hedging instruments	(91		)	—			12			(103		)
Total derivative liabilities [3]	(229		)	—			(316		)	87
Other Liabilities	(43		)	—			—			(43		)
Consumer notes [4]	(2		)	—			—			(2		)
Total liabilities accounted for at fair value on a recurring basis	$	(1,733	)	$	—		$	(316	)	$	(1,417	)

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)



	December 31, 2011
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets accounted for at fair value on a recurring basis
Fixed maturities, AFS
ABS	$	3,153		$	—		$	2,792		$	361
CDOs	2,487			—			2,119			368
CMBS	6,951			—			6,363			588
Corporate	44,011			—			41,756			2,255
Foreign government/government agencies	2,161			—			2,112			49
States, municipalities and political subdivisions (“Municipal”)	13,260			—			12,823			437
RMBS	5,757			—			4,694			1,063
U.S. Treasuries	4,029			750			3,279			—
Total fixed maturities	81,809			750			75,938			5,121
Fixed maturities, FVO	1,328			—			833			495
Equity securities, trading	30,499			1,967			28,532			—
Equity securities, AFS	921			352			476			93
Derivative assets
Credit derivatives	(24		)	—			(11		)	(13		)
Equity derivatives	31			—			—			31
Foreign exchange derivatives	519			—			519			—
Interest rate derivatives	195			—			147			48
U.S. GMWB hedging instruments	494			—			11			483
U.S. macro hedge program	357			—			—			357
International program hedging instruments	731			—			692			39
Other derivative contracts	28			—			—			28
Total derivative assets [1]	2,331			—			1,358			973
Short-term investments	7,736			750			6,986			—
Reinsurance recoverable for U.S. GMWB	443			—			—			443
Separate account assets [2]	139,432			101,644			36,757			1,031
Total assets accounted for at fair value on a recurring basis	$	264,499		$	105,463		$	150,880		$	8,156
Percentage of level to total	100		%	40		%	57		%	3		%

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)



	December 31, 2011
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Liabilities accounted for at fair value on a recurring basis
Other policyholder funds and benefits payable
U.S guaranteed withdrawal benefits	$	(2,538	)	$	—	$	—		$	(2,538	)
International guaranteed withdrawal benefits	(66		)	—		—			(66		)
International other guaranteed living benefits	(5		)	—		—			(5		)
Equity linked notes	(9		)	—		—			(9		)
Total other policyholder funds and benefits payable	(2,618		)	—		—			(2,618		)
Derivative liabilities
Credit derivatives	(573		)	—		(25		)	(548		)
Equity derivatives	9			—		—			9
Foreign exchange derivatives	134			—		134			—
Interest rate derivatives	(527		)	—		(421		)	(106		)
U.S. GMWB hedging instruments	400			—		—			400
International program hedging instruments	19			—		23			(4		)
Total derivative liabilities [3]	(538		)	—		(289		)	(249		)
Other Liabilities	(9		)	—		—			(9		)
Consumer notes [4]	(4		)	—		—			(4		)
Total liabilities accounted for at fair value on a recurring basis	$	(3,169	)	$	—	$	(289	)	$	(2,880	)

[1]

Includes over-the-counter derivative instruments in a net asset value position which may require the counterparty to pledge collateral to the Company. As of September 30, 2012 and December 31, 2011 , $320 and $1.4 billion , respectively, of cash collateral liability was netted against the derivative asset value in the Condensed Consolidated Balance Sheet and is excluded from the table above. See footnote 3 below for derivative liabilities.


[2]	Approximately $6.0 billion and $4.0 billion of investment sales receivable that are not subject to fair value accounting are excluded as of September 30, 2012 and December 31, 2011, respectively.


[3]	Includes over-the-counter derivative instruments in a net negative market value position (derivative liability). In the Level 3 roll-forward table included below in this Note 4, the derivative asset and liability are referred to as “freestanding derivatives” and are presented on a net basis.


[4]	Represents embedded derivatives associated with non-funding agreement-backed consumer equity linked notes.

Determination of Fair Values

The valuation methodologies used to determine the fair values of assets and liabilities under the “exit price” notion, reflect market-participant objectives and are based on the application of the fair value hierarchy that prioritizes relevant observable market inputs over unobservable inputs. The Company determines the fair values of certain financial assets and financial liabilities based on quoted market prices where available and where prices represent a reasonable estimate of fair value. The Company also determines fair value based on future cash flows discounted at the appropriate current market rate. Fair values reflect adjustments for counterparty credit quality, the Company’s default spreads, liquidity and, where appropriate, risk margins on unobservable parameters. The following is a discussion of the methodologies used to determine fair values for the financial instruments listed in the above tables.

The fair value process is monitored by the Valuation Committee, which is a cross-functional group of senior management within the Company that meets at least quarterly. The Valuation Committee is co-chaired by the Heads of Investment Operations and Accounting and has representation from various investment sector professionals, accounting, operations, legal, compliance and risk management. The purpose of the committee is to oversee the pricing policy and procedures by ensuring objective and reliable valuation practices and pricing of financial instruments, as well as addressing fair valuation issues and approving changes to valuation methodologies and pricing sources. There is also a Fair Value Working Group (“Working Group”) which includes the Heads of Investment Operations and Accounting, as well as other investment, operations, accounting and risk management professionals that meet monthly to review market data trends, pricing and trading statistics and results, and any proposed pricing methodology changes described in more detail in the following paragraphs.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

Available-for-Sale Securities, Fixed Maturities, FVO, Equity Securities, Trading, and Short-term Investments

The fair value of AFS securities, fixed maturities, FVO, equity securities, trading, and short-term investments in an active and orderly market (e.g. not distressed or forced liquidation) are determined by management after considering one of three primary sources of information: third-party pricing services, independent broker quotations or pricing matrices. Security pricing is applied using a “waterfall” approach whereby publicly available prices are first sought from third-party pricing services, the remaining unpriced securities are submitted to independent brokers for prices, or lastly, securities are priced using a pricing matrix. Based on the typical trading volumes and the lack of quoted market prices for fixed maturities, third-party pricing services will normally derive the security prices from recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information as outlined above. If there are no recently reported trades, the third-party pricing services and independent brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Included in the pricing of ABS and RMBS are estimates of the rate of future prepayments of principal over the remaining life of the securities. Such estimates are derived based on the characteristics of the underlying structure and prepayment speeds previously experienced at the interest rate levels projected for the underlying collateral. Actual prepayment experience may vary from these estimates.

Prices from third-party pricing services are often unavailable for securities that are rarely traded or are traded only in privately negotiated transactions. As a result, certain securities are priced via independent broker quotations which utilize inputs that may be difficult to corroborate with observable market based data. Additionally, the majority of these independent broker quotations are non-binding.

A pricing matrix is used to price private placement securities for which the Company is unable to obtain a price from a third-party pricing service by discounting the expected future cash flows from the security by a developed market discount rate utilizing current credit spreads. Credit spreads are developed each month using market based data for public securities adjusted for credit spread differentials between public and private securities which are obtained from a survey of multiple private placement brokers. The appropriate credit spreads determined through this survey approach are based upon the issuer’s financial strength and term to maturity, utilizing an independent public security index and trade information and adjusting for the non-public nature of the securities.

The Working Group performs ongoing analysis of the prices and credit spreads received from third parties to ensure that the prices represent a reasonable estimate of the fair value. This process involves quantitative and qualitative analysis and is overseen by investment and accounting professionals. As a part of this analysis, the Company considers trading volume, new issuance activity and other factors to determine whether the market activity is significantly different than normal activity in an active market, and if so, whether transactions may not be orderly considering the weight of available evidence. If the available evidence indicates that pricing is based upon transactions that are stale or not orderly, the Company places little, if any, weight on the transaction price and will estimate fair value utilizing an internal pricing model. In addition, the Company ensures that prices received from independent brokers represent a reasonable estimate of fair value through the use of internal and external cash flow models developed based on spreads, and when available, market indices. As a result of this analysis, if the Company determines that there is a more appropriate fair value based upon the available market data, the price received from the third party is adjusted accordingly and approved by the Valuation Committee. The Company’s internal pricing model utilizes the Company’s best estimate of expected future cash flows discounted at a rate of return that a market participant would require. The significant inputs to the model include, but are not limited to, current market inputs, such as credit loss assumptions, estimated prepayment speeds and market risk premiums.

The Company conducts other specific activities to monitor controls around pricing. Daily analyses identify price changes over 3 - 5% , sale trade prices that differ over 3% from the prior day’s price and purchase trade prices that differ more than 3% from the current day’s price. Weekly analyses identify prices that differ more than 5% from published bond prices of a corporate bond index. Monthly analyses identify price changes over 3% , prices that haven’t changed, missing prices and second source validation on most sectors. Analyses are conducted by a dedicated pricing unit that follows up with trading and investment sector professionals and challenges prices with vendors when the estimated assumptions used differ from what the Company feels a market participant would use. Any changes from the identified pricing source are verified by further confirmation of assumptions used. Examples of other procedures performed include, but are not limited to, initial and on-going review of third-party pricing services’ methodologies, review of pricing statistics and trends and back testing recent trades. For a sample of structured securities, a comparison of the vendor’s assumptions to our internal econometric models is also performed; any differences are challenged in accordance with the process described above.

The Company has analyzed the third-party pricing services’ valuation methodologies and related inputs, and has also evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs. Most prices provided by third-party pricing services are classified into Level 2 because the inputs used in pricing the securities are market observable. Due to a general lack of transparency in the process that brokers use to develop prices, most valuations that are based on brokers’ prices are classified as Level 3. Some valuations may be classified as Level 2 if the price can be corroborated with observable market data.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

Derivative Instruments, including embedded derivatives within investments

Derivative instruments are fair valued using pricing valuation models that utilize independent market data inputs, quoted market prices for exchange-traded derivatives, or independent broker quotations. Excluding embedded and reinsurance related derivatives, as of September 30, 2012 and December 31, 2011 , 99% and 98% , respectively, of derivatives, based upon notional values, were priced by valuation models or quoted market prices. The remaining derivatives were priced by broker quotations.

The Company performs various controls on derivative valuations which include both quantitative and qualitative analysis. Analyses are conducted by a dedicated derivative pricing team that works directly with investment sector professionals to analyze impacts of changes in the market environment and investigate variances. There is a monthly analysis to identify market value changes greater than pre-defined thresholds, stale prices, missing prices and zero prices. Also on a monthly basis, a second source validation, typically to broker quotations, is performed for certain of the more complex derivatives, as well as for all new deals during the month. A model validation review is performed on any new models, which typically includes detailed documentation and validation to a second source. The model validation documentation and results of validation are presented to the Valuation Committee for approval. There is a monthly control to review changes in pricing sources to ensure that new models are not moved to production until formally approved.

The Company utilizes derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instrument may not be classified with the same fair value hierarchy level as the associated assets and liabilities. Therefore the realized and unrealized gains and losses on derivatives reported in Level 3 may not reflect the offsetting impact of the realized and unrealized gains and losses of the associated assets and liabilities.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

Valuation Techniques and Inputs for Investments

Generally, the Company determines the estimated fair value of its AFS securities, fixed maturities, FVO, equity securities, trading, and short-term investments using the market approach. The income approach is used for securities priced using a pricing matrix, as well as for derivative instruments. For Level 1 investments, which are comprised of on-the-run U.S. Treasuries, exchange-traded equity securities, short-term investments, and exchange traded futures and option contracts, valuations are based on observable inputs that reflect quoted prices for identical assets in active markets that the Company has the ability to access at the measurement date.

For most of the Company’s debt securities, the following inputs are typically used in the Company’s pricing methods: reported trades, benchmark yields, bids and/or estimated cash flows. For securities except U.S. Treasuries, inputs also include issuer spreads, which may consider credit default swaps. Derivative instruments are valued using mid-market inputs that are predominantly observable in the market.

A description of additional inputs used in the Company’s Level 2 and Level 3 measurements is listed below:


Level 2	The fair values of most of the Company’s Level 2 investments are determined by management after considering prices received from third party pricing services. These investments include most fixed maturities and preferred stocks, including those reported in separate account assets.


•	ABS, CDOs, CMBS and RMBS – Primary inputs also include monthly payment information, collateral performance, which varies by vintage year and includes delinquency rates, collateral valuation loss severity rates, collateral refinancing assumptions, credit default swap indices and, for ABS and RMBS, estimated prepayment rates.


•	Corporates, including investment grade private placements – Primary inputs also include observations of credit default swap curves related to the issuer.


•	Foreign government/government agencies —Primary inputs also include observations of credit default swap curves related to the issuer and political events in emerging markets.


•	Municipals – Primary inputs also include Municipal Securities Rulemaking Board reported trades and material event notices, and issuer financial statements.


•	Short-term investments – Primary inputs also include material event notices and new issue money market rates.


•	Equity securities, trading – Consist of investments in mutual funds. Primary inputs include net asset values obtained from third party pricing services.


•	Credit derivatives – Primary inputs include the swap yield curve and credit default swap curves.


•	Foreign exchange derivatives – Primary inputs include the swap yield curve, currency spot and forward rates, and cross currency basis curves.


•	Interest rate derivatives – Primary input is the swap yield curve.

Level 3

Most of the Company’s securities classified as Level 3 include less liquid securities such as lower quality ABS, CMBS, commercial real estate (“CRE”) CDOs and RMBS primarily backed by below-prime loans. Securities included in level 3 are primarily valued based on broker prices or broker spreads, without adjustments. Primary inputs for non-broker priced investments, including structured securities, are consistent with the typical inputs used in Level 2 measurements noted above, but are Level 3 due to their less liquid markets. Additionally, certain long-dated securities are priced based on third party pricing services, including municipal securities, foreign government/government agencies, bank loans and below investment grade private placement securities. Primary inputs for these long-dated securities are consistent with the typical inputs used in Level 1 and Level 2 measurements noted above, but include benchmark interest rate or credit spread assumptions that are not observable in the marketplace. Also included in Level 3 are certain derivative instruments that either have significant unobservable inputs or are valued based on broker quotations. Significant inputs for these derivative contracts primarily include the typical inputs used in the Level 1 and Level 2 measurements noted above; but also include equity and interest rate volatility and swap yield curves beyond observable limits.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

Significant Unobservable Inputs for Level 3 Assets Measured at Fair Value

The following table presents information about significant unobservable inputs used in Level 3 assets measured at fair value.



Securities	As of September 30, 2012
Assets accounted for at fair value on a recurring basis	Fair Value		Predominant Valuation Method	Significant Unobservable Input	Range of Values – Unobservable Inputs (Weighted Average) [1]	Impact of Increase in Input on Fair Value [2]
CMBS	$	871	Discounted cash flows	Spread (encompasses prepayment, default risk and loss severity)	300 - 3,151 bps (1,202 bps)	Decrease
Corporate [3]	620		Discounted cash flows	Spread	87 -1,223 bps (213 bps)	Decrease
Municipal	204		Discounted cash flows	Spread	118 - 371 bps (265 bps)	Decrease
RMBS	1,292		Discounted cash flows	Spread	52 - 1,948 bps (463 bps)	Decrease
				Constant prepayment rate	0% - 12% (2%)	Decrease [4]
				Constant default rate	1% - 28% (8%)	Decrease
				Loss severity	45% - 100% (79%)	Decrease


[1]	The weighted average is determined based on the fair value of the securities.


[2]	Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table above.


[3]	Level 3 corporate securities excludes those for which the Company bases fair value on broker quotations as discussed below.


[4]	Decrease for above market rate coupons and increase for below market rate coupons.



Freestanding Derivatives	As of September 30, 2012
	Fair Value			Predominant Valuation Method	Significant Unobservable Input	Range of Values – Unobservable Inputs	Impact of Increase in Input on Fair Value [1]
Equity derivatives
Equity options	$	68		Option model	Equity volatility	14% – 29%	Increase
Interest rate derivative
Interest rate swaps	(58		)	Discounted cash flows	Swap curve beyond 30 years	2.6%	Increase
Long interest rate swaptions	26			Option model	Interest rate volatility	24% – 65%	Increase
U.S. GMWB hedging instruments
Equity options	347			Option model	Equity volatility	23% – 36%	Increase
Customized swaps	269			Discounted cash flows	Equity volatility	10% – 50%	Increase
U.S. macro hedge program
Equity options	82			Option model	Equity volatility	22% – 33%	Increase
International program hedging
Equity options	80			Option model	Equity volatility	19% – 28%	Increase


[1]	Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table. Changes are based on long positions, unless otherwise noted. Changes in fair value will be inversely impacted for short positions.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

Securities and derivatives for which the Company bases fair value on broker quotations predominately include ABS, CDOs, corporate, fixed maturities, FVO and certain credit derivatives. Due to the lack of transparency in the process brokers use to develop prices for these investments, the Company does not have access to the significant unobservable inputs brokers use to price these securities and derivatives. The Company believes however, the types of inputs brokers may use would likely be similar to those used to price securities and derivatives for which inputs are available to the Company, and therefore may include, but not be limited to, loss severity rates, constant prepayment rates, constant default rates and counterparty credit spreads. Therefore, similar to non broker priced securities and derivatives, generally, increases in these inputs would cause fair values to decrease. For the three and nine months ended September 30, 2012 , no significant adjustments were made by the Company to broker prices received.

Product Derivatives

The Company currently offers and subsequently reinsures certain variable annuity products with GMWB riders in the U.S., and formerly in the U.K. and Japan. The GMWB represents an embedded derivative in the variable annuity contract. When it is determined that (1) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and (2) a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host for measurement purposes. The embedded derivative is carried at fair value, with changes in fair value reported in net realized capital gains and losses. The Company’s GMWB liability is reported in other policyholder funds and benefits payable in the Condensed Consolidated Balance Sheets.

In valuing the embedded derivative, the Company attributes to the derivative a portion of the expected fees to be collected over the expected life of the contract from the contract holder equal to the present value of future GMWB claims (the “Attributed Fees”). The excess of fees collected from the contract holder in the current period over the current period’s Attributed Fees are associated with the host variable annuity contract and reported in fee income.

U.S. GMWB Reinsurance Derivative

The Company has reinsurance arrangements in place to transfer a portion of its risk of loss due to GMWB. These arrangements are recognized as derivatives and carried at fair value in reinsurance recoverables. Changes in the fair value of the reinsurance agreements are reported in net realized capital gains and losses.

The fair value of the U.S. GMWB reinsurance derivative is calculated as an aggregation of the components described in the Living Benefits Required to be Fair Valued discussion below and is modeled using significant unobservable inputs, as well as policyholder behavior inputs, identical to those used in calculating the underlying liability, such as lapses, fund selection, resets and withdrawal utilization and risk margins.

Living Benefits Required to be Fair Valued (in Other Policyholder Funds and Benefits Payable)

Living benefits required to be fair valued include U.S. GMWB, international GMWB and international other guaranteed living benefits. Fair values for GMWB and guaranteed minimum accumulation benefit (“GMAB”) contracts are calculated using the income approach based upon internally developed models because active, observable markets do not exist for those items. The fair value of the Company’s guaranteed benefit liabilities, classified as embedded derivatives, and the related reinsurance and customized freestanding derivatives is calculated as an aggregation of the following components: Best Estimate Claim Payments; Credit Standing Adjustment; and Margins. The resulting aggregation is reconciled or calibrated, if necessary, to market information that is, or may be, available to the Company, but may not be observable by other market participants, including reinsurance discussions and transactions. The Company believes the aggregation of these components, as necessary and as reconciled or calibrated to the market information available to the Company, results in an amount that the Company would be required to transfer or receive, for an asset, to or from market participants in an active liquid market, if one existed, for those market participants to assume the risks associated with the guaranteed minimum benefits and the related reinsurance and customized derivatives. The fair value is likely to materially diverge from the ultimate settlement of the liability as the Company believes settlement will be based on our best estimate assumptions rather than those best estimate assumptions plus risk margins. In the absence of any transfer of the guaranteed benefit liability to a third party, the release of risk margins is likely to be reflected as realized gains in future periods’ net income. Each component described below is unobservable in the marketplace and require subjectivity by the Company in determining their value.

Oversight of the Company’s valuation policies and processes for product and U.S. GMWB reinsurance derivatives is performed by a multidisciplinary group comprised of finance, actuarial and risk management professionals. This multidisciplinary group reviews and approves changes and enhancements to the Company’s valuation model as well as associated controls.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

Best Estimate

Claim Payments

The Best Estimate Claim Payments is calculated based on actuarial and capital market assumptions related to projected cash flows, including the present value of benefits and related contract charges, over the lives of the contracts, incorporating expectations concerning policyholder behavior such as lapses, fund selection, resets and withdrawal utilization. For the customized derivatives, policyholder behavior is prescribed in the derivative contract. Because of the dynamic and complex nature of these cash flows, best estimate assumptions and a Monte Carlo stochastic process is used in valuation. The Monte Carlo stochastic process involves the generation of thousands of scenarios that assume risk neutral returns consistent with swap rates and a blend of observable implied index volatility levels. Estimating these cash flows involves numerous estimates and subjective judgments regarding a number of variables –including expected market rates of return, market volatility, correlations of market index returns to funds, fund performance, discount rates and assumptions about policyholder behavior which emerge over time.

At each valuation date, the Company assumes expected returns based on:


•	risk-free rates as represented by the euro dollar futures, LIBOR deposits and swap rates to derive forward curve rates;


•	market implied volatility assumptions for each underlying index based primarily on a blend of observed market “implied volatility” data;


•	correlations of historical returns across underlying well known market indices based on actual observed returns over the ten years preceding the valuation date; and


•	three years of history for fund indexes compared to separate account fund regression.

On a daily basis, the Company updates capital market assumptions used in the GMWB liability model such as interest rates, equity indices and the blend of implied equity index volatilities. The Company monitors various aspects of policyholder behavior and may modify certain of its assumptions, including living benefit lapses and withdrawal rates, if credible emerging data indicates that changes are warranted. In addition, the Company will continue to evaluate policyholder behavior assumptions as we begin to implement initiatives to reduce the size of the variable annuity business. At a minimum, all policyholder behavior assumptions are reviewed and updated, as appropriate, in conjunction with the completion of the Company’s comprehensive study to refine its estimate of future gross profits during the third quarter of each year.

Credit Standing Adjustment

This assumption makes an adjustment that market participants would make, in determining fair value, to reflect the risk that guaranteed benefit obligations or the GMWB reinsurance recoverables will not be fulfilled (“nonperformance risk”). The Company incorporates a blend of observable Company and reinsurer credit default spreads from capital markets, adjusted for market recoverability. The credit standing adjustment assumption, net of reinsurance, resulted in pre-tax realized gains (losses) of $(31) and $75 , for the three months ended September 30, 2012 and 2011 , respectively, and $(64) and $75 for the nine months ended September 30, 2012 and 2011 . As of September 30, 2012 and December 31, 2011 the credit standing adjustment was $16 and $80 , respectively.

Margins

The behavior risk margin adds a margin that market participants would require, in determining fair value, for the risk that the Company’s assumptions about policyholder behavior could differ from actual experience. The behavior risk margin is calculated by taking the difference between adverse policyholder behavior assumptions and best estimate assumptions.

Assumption updates, including policyholder behavior assumptions, affected best estimates and margins for total pre-tax realized gains of $301 and $51 for the three and nine months ended September 30, 2012 and 2011 . As of September 30, 2012 and December 31, 2011 the behavior risk margin was $291 and $419 , respectively.

In addition to the non-market-based updates described above, the Company recognized non-market-based updates driven by the relative outperformance (underperformance) of the underlying actively managed funds as compared to their respective indices resulting in pre-tax realized gains (losses) of approximately $25 and $(131) , for the three months ended September 30, 2012 and 2011 , respectively and $34 and $(102) for the nine months ended September 30, 2012 and 2011 .

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

Significant unobservable inputs used in the fair value measurement of living benefits required to be fair valued and the U.S. GMWB reinsurance derivative are withdrawal utilization and withdrawal rates, lapse rates, reset elections and equity volatility. The following table provides quantitative information about the significant unobservable inputs and is applicable to all of the Living Benefits Required to be Fair Valued and the U.S. GMWB Reinsurance Derivative. Significant increases in any of the significant unobservable inputs, in isolation, will generally have an increase or decrease correlation with the fair value measurement, as shown in the table.



Significant Unobservable Input	Range of Values-Unobservable Inputs	Impact of Increase in Input on Fair Value Measurement [1]
Withdrawal Utilization[2]	20% to 100%	Increase
Withdrawal Rates [2]	0% to 8%	Increase
Lapse Rates [3]	0% to 75%	Decrease
Reset Elections [4]	20% to 75%	Increase
Equity Volatility [5]	10% to 50%	Increase


[1]	Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.


[2]	Ranges represent assumed cumulative percentages of policyholders taking withdrawals and the annual amounts withdrawn.


[3]	Range represents assumed annual percentages of full surrender of the underlying variable annuity contracts across all policy durations for in force business.


[4]	Range represents assumed cumulative percentages of policyholders that would elect to reset their guaranteed benefit base.


[5]	Range represents implied market volatilities for equity indices based on multiple pricing sources.

Generally a change in withdrawal utilization assumptions would be accompanied by a directionally opposite change in lapse rate assumptions, as the behavior of policyholders that utilize GMWB or GMAB riders is typically different from policyholders that do not utilize these riders.

Separate Account Assets

Separate account assets are primarily invested in mutual funds. Other separate account assets include fixed maturities, limited partnerships, equity securities, short-term investments and derivatives that are valued in the same manner, and using the same pricing sources and inputs, as those investments held by the Company. Separate account assets classified as Level 3 primarily include limited partnerships in which fair value represents the separate account’s share of the fair value of the equity in the investment (“net asset value”) and are classified in level 3 based on the Company’s ability to redeem its investment.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

The tables below provide fair value roll-forwards for the three and nine months ended September 30, 2012 and 2011 , for the financial instruments classified as Level 3.

For the three months ended September 30, 2012



	Fixed Maturities, AFS
Assets	ABS			CDOs			CMBS			Corporate			Foreign govt./govt. agencies			Municipal			RMBS			Total Fixed Maturities, AFS			Fixed Maturities, FVO
Fair value as of June 30, 2012	$	323		$	900		$	986		$	1,805		$	55		$	650		$	1,208		$	5,927		$	493
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	1			(8		)	(33		)	(4		)	—			(4		)	(17		)	(65		)	32
Included in OCI [3]	10			46			53			(47		)	1			14			155			232			—
Purchases	11			—			8			40			11			—			81			151			—
Settlements	(5		)	(8		)	(36		)	(3		)	(1		)	—			(41		)	(94		)	—
Sales	(9		)	—			(127		)	(9		)	(16		)	(22		)	(56		)	(239		)	—
Transfers into Level 3 [4]	9			—			20			283			—			—			1			313			—
Transfers out of Level 3 [4]	(25		)	—			—			(45		)	—			(434		)	(39		)	(543		)	—
Fair value as of September 30, 2012	$	315		$	930		$	871		$	2,020		$	50		$	204		$	1,292		$	5,682		$	525
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7]	$	1		$	(8	)	$	(26	)	$	(4	)	$	—		$	(4	)	$	1		$	(40	)	$	23

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)



				Freestanding Derivatives [5]
Assets (Liabilities)	Equity Securities, AFS			Credit			Equity			Interest Rate			U.S. GMWB Hedging			U.S. Macro Hedge Program			Intl. Program Hedging			Other Contracts			Total Free- Standing Derivatives [5]
Fair value as of June 30, 2012	$	86		$	(439	)	$	53		$	(66	)	$	756		$	180		$	161		$	26		$	671
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	(4		)	64			(16		)	1			(159		)	(98		)	(92		)	(1		)	(301		)
Included in OCI [3]	1			—			—			—			—			—			—			—			—
Purchases	5			—			31			1			19			—			6			—			57
Settlements	—			94			—			—			—			—			18			—			112
Sales	(2		)	—			—			—			—			—			—			—			—
Transfers into Level 3 [4]	—			—			—			—			—			—			—			—			—
Transfers out of Level 3 [4]	—			—			—			32			—			—			—			—			32
Fair value as of September 30, 2012	$	86		$	(281	)	$	68		$	(32	)	$	616		$	82		$	93		$	25		$	571
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7]	$	(3	)	$	26		$	(14	)	$	1		$	(159	)	$	(98	)	$	(69	)	$	(1	)	$	(314	)



Assets	Reinsurance Recoverable for U.S. GMWB			Separate Accounts
Fair value as of June 30, 2012	$	376		$	1,335
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	(184		)	(2		)
Included in OCI [3]	—			—
Purchases	—			97
Settlements	7			—
Sales	—			(41		)
Transfers into Level 3 [4]	—			(3		)
Transfers out of Level 3 [4]	—			(7		)
Fair value as of September 30, 2012	$	199		$	1,379
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7]	$	(184	)	$	8

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)



	Other Policyholder Funds and Benefits Payable
Liabilities	U.S. Guaranteed Withdrawal Benefits			International Guaranteed Living Benefits			International Other Living Benefits			Equity Linked Notes			Total Other Policyholder Funds and Benefits Payable			Other Liabilities			Consumer Notes
Fair value as of June 30, 2012	$	(2,203	)	$	(53	)	$	(4	)	$	(10	)	$	(2,270	)	$	(29	)	$	(4	)
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	823			20			6			—			849			(14		)	2
Included in OCI [3]	—			(1		)	—			—			(1		)	—			—
Settlements	(33		)	(3		)	(1		)	—			(37		)	—			—
Fair value as of September 30, 2012	$	(1,413	)	$	(37	)	$	1		$	(10	)	$	(1,459	)	$	(43	)	$	(2	)
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7]	$	823		$	20		$	6		$	—		$	849		$	(14	)	$	2

For the nine months ended September 30, 2012



	Fixed Maturities, AFS
Assets	ABS			CDOs			CMBS			Corporate			Foreign govt./govt. agencies			Municipal			RMBS			Total Fixed Maturities, AFS			Fixed Maturities, FVO
Fair value as of January 1, 2012	$	361		$	368		$	588		$	2,255		$	49		$	437		$	1,063		$	5,121		$	495
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	—			(9		)	(67		)	(7		)	—			(4		)	7			(80		)	53
Included in OCI [3]	43			122			112			(50		)	3			38			202			470			—
Purchases	36			—			21			205			18			275			364			919			—
Settlements	(43		)	(31		)	(106		)	(56		)	(3		)	—			(111		)	(350		)	—
Sales	(24		)	(3		)	(198		)	(63		)	(17		)	(87		)	(195		)	(587		)	(23		)
Transfers into Level 3 [4]	9			483			621			605			—			—			1			1,719			—
Transfers out of Level 3 [4]	(67		)	—			(100		)	(869		)	—			(455		)	(39		)	(1,530		)	—
Fair value as of September 30, 2012	$	315		$	930		$	871		$	2,020		$	50		$	204		$	1,292		$	5,682		$	525
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7]	$	(2	)	$	(10	)	$	(27	)	$	(4	)	$	—		$	(4	)	$	1		$	(46	)	$	62

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)



				Freestanding Derivatives [5]
Assets (Liabilities)	Equity Securities, AFS			Credit			Equity			Interest Rate			U.S. GMWB Hedging			U.S. Macro Hedge Program			Intl. Program Hedging			Other Contracts			Total Free- Standing Derivatives [5]
Fair value as of January 1, 2012	$	93		$	(561	)	$	40		$	(58	)	$	883		$	357		$	35		$	28		$	724
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	7			192			(30		)	(9		)	(332		)	(275		)	51			(3		)	(406		)
Included in OCI [3]	(3		)	—			—			2			—			—			—			—			2
Purchases	19			—			77			1			42			—			(59		)	—			61
Settlements	—			89			(19		)	—			—			—			58			—			128
Sales	(30		)	—			—			—			—			—			—			—			—
Transfers into Level 3 [4]	—			—			—			—			—			—			—			—			—
Transfers out of Level 3 [4]	—			(1		)	—			32			23			—			8			—			62
Fair value as of September 30, 2012	$	86		$	(281	)	$	68		$	(32	)	$	616		$	82		$	93		$	25		$	571
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7]	$	4		$	142		$	(16	)	$	(9	)	$	(332	)	$	(274	)	$	71		$	(3	)	$	(421	)



Assets	Reinsurance Recoverable for U.S. GMWB			Separate Accounts
Fair value as of January 1, 2012	$	443		$	1,031
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	(265		)	31
Included in OCI [3]	—			—
Purchases	—			336
Settlements	21			(1		)
Sales	—			(442		)
Transfers into Level 3 [4]	—			451
Transfers out of Level 3 [4]	—			(27		)
Fair value as of September 30, 2012	$	199		$	1,379
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7]	$	(265	)	$	(18	)

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)



	Other Policyholder Funds and Benefits Payable
Liabilities	U.S. Guaranteed Withdrawal Benefits			International Guaranteed Living Benefits			International Other Living Benefits			Equity Linked Notes			Total Other Policyholder Funds and Benefits Payable			Other Liabilities			Consumer Notes
Fair value as of January 1, 2012	$	(2,538	)	$	(66	)	$	(5	)	$	(9	)	$	(2,618	)	$	(9	)	$	(4	)
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	1,235			36			9			(1		)	1,279			(34		)	2
Included in OCI [3]	—			—			—			—			—			—			—
Settlements	(110		)	(7		)	(3		)	—			(120		)	—			—
Fair value as of September 30, 2012	$	(1,413	)	$	(37	)	$	1		$	(10	)	$	(1,459	)	$	(43	)	$	(2	)
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2012 [2] [7]	$	1,235		$	36		$	9		$	(1	)	$	1,279		$	(34	)	$	2

For the three months ended September 30, 2011



	Fixed Maturities, AFS
Assets	ABS			CDOs			CMBS			Corporate			Foreign govt./govt. agencies			Municipal		RMBS			Total Fixed Maturities, AFS			Fixed Maturities, FVO
Fair value as of June 30, 2011	$	452		$	2,575		$	654		$	2,110		$	51		$	280	$	1,114		$	7,236		$	556
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	(15		)	(26		)	—			(9		)	—			—		—			(50		)	(24		)
Included in OCI [3]	(2		)	(34		)	(56		)	(63		)	(1		)	46		(39		)	(149		)	—
Purchases	58			—			25			42			1			85		—			211			—
Settlements	(14		)	(50		)	(12		)	(41		)	(1		)	—		(36		)	(154		)	(1		)
Sales	(8		)	—			(2		)	(7		)	(1		)	—		—			(18		)	(39		)
Transfers into Level 3 [4]	14			—			45			268			28			—		68			423			—
Transfers out of Level 3 [4]	(15		)	—			—			(81		)	—			—		—			(96		)	—
Fair value as of September 30, 2011	$	470		$	2,465		$	654		$	2,219		$	77		$	411	$	1,107		$	7,403		$	492
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2011 [2] [7]	$	(15	)	$	(26	)	$	—		$	(9	)	$	—		$	—	$	—		$	(50	)	$	(24	)

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)



				Freestanding Derivatives [5]
Assets (Liabilities)	Equity Securities, AFS			Credit			Equity		Interest Rate			U.S. GMWB Hedging			U.S. Macro Hedge Program		Intl. Program Hedging			Other Contracts			Total Free- Standing Derivatives [5]
Fair value as of June 30, 2011	$	100		$	(402	)	$	6	$	7		$	548		$	251	$	6		$	30		$	446
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	—			(142		)	5		(16		)	516			171		(6		)	(1		)	527
Included in OCI [3]	(6		)	—			—		—			—			—		—			—			—
Purchases	—			—			25		—			—			—		—			—			25
Settlements	—			1			—		—			(3		)	—		—			—			(2		)
Sales	(1		)	—			—		—			—			—		—			—			—
Transfers into Level 3 [4]	—			—			—		—			—			—		—			—			—
Transfers out of Level 3 [4]	—			—			—		—			—			—		—			—			—
Fair value as of September 30, 2011	$	93		$	(543	)	$	36	$	(9	)	$	1,061		$	422	$	—		$	29		$	996
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2011 [2] [7]	$	—		$	(140	)	$	5	$	(16	)	$	510		$	171	$	(6	)	$	(1	)	$	523



Assets	Reinsurance Recoverable for U.S. GMWB		Separate Accounts
Fair value as of June 30, 2011	$	237	$	1,068
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	241		11
Included in OCI [3]	—		—
Purchases	—		131
Settlements	7		—
Sales	—		(11		)
Transfers into Level 3 [4]	—		1
Transfers out of Level 3 [4]	—		(16		)
Fair value as of September 30, 2011	$	485	$	1,184
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2011 [2] [7]	$	241	$	8

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)



	Other Policyholder Funds and Benefits Payable
Liabilities	U.S. Guaranteed Withdrawal Benefits			International Guaranteed Living Benefits			International Other Living Benefits			Equity Linked Notes			Total Other Policyholder Funds and Benefits Payable			Other Liabilities			Consumer Notes
Fair value as of June 30, 2011	$	(1,420	)	$	(30	)	$	—		$	(10	)	$	(1,460	)	$	(44	)	$	(4	)
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	(1,315		)	(49		)	(5		)	4			(1,365		)	31			—
Included in OCI [3]	—			—			—			—			—			—			—
Settlements	(36		)	(2		)	(1		)	—			(39		)	—			—
Fair value as of September 30, 2011	$	(2,771	)	$	(81	)	$	(6	)	$	(6	)	$	(2,864	)	$	(13	)	$	(4	)
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2011 [2] [7]	$	(1,315	)	$	(49	)	$	(5	)	$	4		$	(1,365	)	$	31		$	—

For the nine months ended September 30, 2011



	Fixed Maturities, AFS
Assets	ABS			CDOs			CMBS			Corporate			Foreign govt./govt. agencies			Municipal			RMBS			Total Fixed Maturities, AFS			Fixed Maturities, FVO
Fair value as of January 1, 2011	$	477		$	2,581		$	689		$	2,129		$	56		$	272		$	1,285		$	7,489		$	522
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	(21		)	(41		)	11			(37		)	—			—			(9		)	(97		)	12
Included in OCI [3]	35			89			91			(44		)	—			55			(14		)	212			—
Purchases	58			—			25			94			3			85			25			290			—
Settlements	(32		)	(128		)	(42		)	(114		)	(3		)	—			(103		)	(422		)	(3		)
Sales	(10		)	(66		)	(317		)	(141		)	(6		)	(2		)	(16		)	(558		)	(39		)
Transfers into Level 3 [4]	82			30			197			541			39			4			82			975			—
Transfers out of Level 3 [4]	(119		)	—			—			(209		)	(12		)	(3		)	(143		)	(486		)	—
Fair value as of September 30, 2011	$	470		$	2,465		$	654		$	2,219		$	77		$	411		$	1,107		$	7,403		$	492
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2011 [2] [7]	$	(21	)	$	(41	)	$	11		$	(37	)	$	—		$	—		$	(9	)	$	(97	)	$	12

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)



				Freestanding Derivatives [5]
Assets (Liabilities)	Equity Securities, AFS			Credit			Equity		Interest Rate			U.S. GMWB Hedging			U.S. Macro Hedge Program			Intl. Program Hedging			Other Contracts			Total Free- Standing Derivatives [5]
Fair value as of January 1, 2011	$	154		$	(390	)	$	4	$	(53	)	$	600		$	203		$	5		$	32		$	401
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	(10		)	(148		)	7		(21		)	457			74			(10		)	(3		)	356
Included in OCI [3]	(5		)	—			—		—			—			—			—			—			—
Purchases	37			1			25		64			23			180			5			—			298
Settlements	—			—			—		—			(19		)	(35		)	—			—			(54		)
Sales	(2		)	(6		)	—		1			—			—			—			—			(5		)
Transfers into Level 3 [4]	—			—			—		—			—			—			—			—			—
Transfers out of Level 3 [4]	(81		)	—			—		—			—			—			—			—			—
Fair value as of September 30, 2011	$	93		$	(543	)	$	36	$	(9	)	$	1,061		$	422		$	—		$	29		$	996
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2011 [2] [7]	$	(11	)	$	(148	)	$	7	$	(19	)	$	449		$	91		$	(11	)	$	(3	)	$	366



Assets	Reinsurance Recoverable for U.S. GMWB		Separate Accounts
Fair value as of January 1, 2011	$	280	$	1,247
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	180		35
Included in OCI [3]	—		—
Purchases	—		165
Settlements	25		—
Sales	—		(180		)
Transfers into Level 3 [4]	—		13
Transfers out of Level 3 [4]	—		(96		)
Fair value as of September 30, 2011	$	485	$	1,184
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2011 [2] [7]	$	180	$	9

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)



	Other Policyholder Funds and Benefits Payable
Liabilities	U.S. Guaranteed Withdrawal Benefits			International Guaranteed Living Benefits			International Other Living Benefits			Equity Linked Notes			Total Other Policyholder Funds and Benefits Payable			Other Liabilities			Consumer Notes
Fair value as of January 1, 2011	$	(1,611	)	$	(36	)	$	3		$	(9	)	$	(1,653	)	$	(37	)	$	(5	)
Total realized/unrealized gains (losses)
Included in net income [1], [2], [6]	(1,047		)	(38		)	(6		)	3			(1,088		)	24			1
Included in OCI [3]	—			—			—			—			—			—			—
Settlements	(113		)	(7		)	(3		)	—			(123		)	—			—
Fair value as of September 30, 2011	$	(2,771	)	$	(81	)	$	(6	)	$	(6	)	$	(2,864	)	$	(13	)	$	(4	)
Changes in unrealized gains (losses) included in net income related to financial instruments still held at September 30, 2011 [2] [7]	$	(1,047	)	$	(38	)	$	(6	)	$	3		$	(1,088	)	$	24		$	1


[1]	The Company classifies gains and losses on GMWB reinsurance derivatives and Guaranteed Living Benefit embedded derivatives as unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract basis the realized gains (losses) for these derivatives and embedded derivatives.


[2]	All amounts in these rows are reported in net realized capital gains/losses. The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. All amounts are before income taxes and amortization DAC.


[3]	All amounts are before income taxes and amortization of DAC.


[4]	Transfers in and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.


[5]	Derivative instruments are reported in this table on a net basis for asset/(liability) positions and reported in the Condensed Consolidated Balance Sheet in other investments and other liabilities.


[6]	Includes both market and non-market impacts in deriving realized and unrealized gains (losses).


[7]	Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

Fair Value Option

The Company holds fair value option investments that contain an embedded credit derivative with underlying credit risk primarily related to corporate bonds and commercial real estate. Also included are foreign government securities that align with the accounting for yen-based fixed annuity liabilities, which are adjusted for changes in spot rates through realized gains and losses. Similar to other fixed maturities, income earned from these securities is recorded in net investment income. Changes in the fair value of these securities are recorded in net realized capital gains and losses.

The Company previously elected the fair value option for one of its consolidated VIEs in order to apply a consistent accounting model for the VIE’s assets and liabilities. The VIE is an investment vehicle that holds high quality investments, derivative instruments that reference third-party corporate credit and issues notes to investors that reflect the credit characteristics of the high quality investments and derivative instruments. The risks and rewards associated with the assets of the VIE inure to the investors. The investors have no recourse against the Company. As a result, there has been no adjustment to the market value of the notes for the Company’s own credit risk.

The following table presents the changes in fair value of those assets and liabilities accounted for using the fair value option reported in net realized capital gains and losses in the Company’s Condensed Consolidated Statements of Operations.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Assets
Fixed maturities, FVO
Corporate	$	6		$	(3	)	$	6		$	11
CRE CDOs	17			(64		)	26			(43		)
Foreign government	13			33			(16		)	44
Other liabilities
Credit-linked notes	(14		)	31			(34		)	24
Total realized capital gains (losses)	$	22		$	(3	)	$	(18	)	$	36

The following table presents the fair value of assets and liabilities accounted for using the fair value option included in the Company’s Condensed Consolidated Balance Sheets.



	As of
	September 30, 2012		December 31, 2011
Assets
Fixed maturities, FVO
ABS	$	65	$	65
CRE CDOs	247		225
Corporate	281		272
Foreign government	762		766
Total fixed maturities, FVO	$	1,355	$	1,328
Other liabilities
Credit-linked notes [1]	$	43	$	9


[1]	As of September 30, 2012 and December 31, 2011 , the outstanding principal balance of the notes was $243 .

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. Fair Value Measurements (continued)

Financial Instruments Not Carried at Fair Value

The following table presents carrying amounts and fair values of The Hartford’s financial instruments not carried at fair value and not included in the above fair value discussion as of September 30, 2012 and December 31, 2011 .



		September 30, 2012				December 31, 2011
	Fair Value Hierarchy Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Policy loans	Level 3	$	2,000	$	2,176	$	2,001	$	2,153
Mortgage loans	Level 3	6,863		7,156		5,728		5,977
Liabilities
Other policyholder funds and benefits payable [1]	Level 3	$	9,937	$	10,241	$	10,343	$	11,238
Senior notes [2]	Level 2	6,026		6,874		4,481		4,623
Junior subordinated debentures [2]	Level 2	1,100		1,247		500		498
Private placement junior subordinated debentures [2]	Level 3	—		—		1,235		1,932
Consumer notes [3]	Level 3	188		189		310		305


[1]	Excludes guarantees on variable annuities, group accident and health and universal life insurance contracts, including corporate owned life insurance.


[2]	Included in long-term debt in the Condensed Consolidated Balance Sheets, except for current maturities, which are included in short-term debt.


[3]	Excludes amounts carried at fair value and included in disclosures above.

The Company has not made any changes in its valuation methodologies for the following assets and liabilities since December 31, 2011 .


•	Fair value for policy loans and consumer notes were estimated using discounted cash flow calculations using current interest rates adjusted for estimated loan durations.


•	Fair values for mortgage loans were estimated using discounted cash flow calculations based on current lending rates for similar type loans. Current lending rates reflect changes in credit spreads and the remaining terms of the loans.


•	Fair values for other policyholder funds and benefits payable, not carried at fair value, are estimated based on the cash surrender values of the underlying policies or by estimating future cash flows discounted at current interest rates adjusted for credit risk.


•	Fair values for senior notes and junior subordinated debentures are determined using the market approach based on reported trades, benchmark interest rates and issuer spread for the Company which may consider credit default swaps.


•	Fair values for private placement junior subordinated debentures are based primarily on market quotations from independent third party brokers.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments

Significant Investment Accounting Policies

Recognition and Presentation of Other-Than-Temporary Impairments

The Company deems debt securities and certain equity securities with debt-like characteristics (collectively “debt securities”) to be other-than-temporarily impaired (“impaired”) if a security meets the following conditions: a) the Company intends to sell or it is more likely than not the Company will be required to sell the security before a recovery in value, or b) the Company does not expect to recover the entire amortized cost basis of the security. If the Company intends to sell or it is more likely than not the Company will be required to sell the security before a recovery in value, a charge is recorded in net realized capital losses equal to the difference between the fair value and amortized cost basis of the security. For those impaired debt securities which do not meet the first condition and for which the Company does not expect to recover the entire amortized cost basis, the difference between the security’s amortized cost basis and the fair value is separated into the portion representing a credit other-than-temporary impairment (“impairment”), which is recorded in net realized capital losses, and the remaining impairment, which is recorded in OCI. Generally, the Company determines a security’s credit impairment as the difference between its amortized cost basis and its best estimate of expected future cash flows discounted at the security’s effective yield prior to impairment. The remaining non-credit impairment, which is recorded in OCI, is the difference between the security’s fair value and the Company’s best estimate of expected future cash flows discounted at the security’s effective yield prior to the impairment, which typically represents current market liquidity and risk premiums. The previous amortized cost basis less the impairment recognized in net realized capital losses becomes the security’s new cost basis. The Company accretes the new cost basis to the estimated future cash flows over the expected remaining life of the security by prospectively adjusting the security’s yield, if necessary. The following table presents the change in non-credit impairments recognized in OCI as disclosed in the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2012 and 2011 , respectively.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
OTTI losses recognized in OCI	$	(22	)	$	(11	)	$	(37	)	$	(83	)
Changes in fair value and/or sales	91			21			125			88
Tax and deferred acquisition costs	(34		)	—			(48		)	6
Change in OTTI losses recognized in OCI	$	35		$	10		$	40		$	11

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

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

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

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

Mortgage Loan Valuation Allowances

The Company’s security monitoring process reviews mortgage loans on a quarterly basis to identify potential credit losses. Commercial mortgage loans are considered to be impaired when management estimates that, based upon current information and events, it is probable that the Company will be unable to collect amounts due according to the contractual terms of the loan agreement. Criteria used to determine if an impairment exists include, but are not limited to: current and projected macroeconomic factors, such as unemployment rates, and property-specific factors such as rental rates, occupancy levels, LTV ratios and debt service coverage ratios (“DSCR”). In addition, the Company considers historic, current and projected delinquency rates and property values. These assumptions require the use of significant management judgment and include the probability and timing of borrower default and loss severity estimates. In addition, projections of expected future cash flows may change based upon new information regarding the performance of the borrower and/or underlying collateral such as changes in the projections of the underlying property value estimates.

For mortgage loans that are deemed impaired, a valuation allowance is established for the difference between the carrying amount and the Company’s share of either (a) the present value of the expected future cash flows discounted at the loan’s effective interest rate, (b) the loan’s observable market price or, most frequently, (c) the fair value of the collateral. A valuation allowance has been established for either individual loans or as a projected loss contingency for loans with an LTV ratio of 90% or greater and consideration of other credit quality factors, including DSCR. Changes in valuation allowances are recorded in net realized capital gains and losses. Interest income on impaired loans is accrued to the extent it is deemed collectible and the loans continue to perform under the original or restructured terms. Interest income ceases to accrue for loans when it is probable that the Company will not receive interest and principal payments according to the contractual terms of the loan agreement, or if a loan is more than 60 days past due. Loans may resume accrual status when it is determined that sufficient collateral exists to satisfy the full amount of the loan and interest payments, as well as when it is probable cash will be received in the foreseeable future. Interest income on defaulted loans is recognized when received.

Net Realized Capital Gains (Losses)



	Three Months Ended September 30,						Nine Months Ended September 30,
(Before-tax)	2012			2011			2012			2011
Gross gains on sales	$	205		$	197		$	710		$	519
Gross losses on sales	(131		)	(63		)	(387		)	(294		)
Net OTTI losses recognized in earnings	(37		)	(60		)	(164		)	(138		)
Valuation allowances on mortgage loans	—			—			1			23
Japanese fixed annuity contract hedges, net [1]	(24		)	9			(42		)	(2		)
Periodic net coupon settlements on credit derivatives/Japan	2			1			1			(8		)
Results of variable annuity hedge program
GMWB derivatives, net	381			(323		)	451			(300		)
U.S. macro hedge program	(109		)	107			(292		)	6
Total U.S. program	272			(216		)	159			(294		)
International program	(167		)	1,132			(633		)	865
Total results of variable annuity hedge program	105			916			(474		)	571
Other, net [2]	(1		)	(425		)	153			(430		)
Net realized capital gains (losses)	$	119		$	575		$	(202	)	$	241


[1]	Relates to the Japanese fixed annuity product (adjustment of product liability for changes in spot currency exchange rates, related derivative hedging instruments, excluding net period coupon settlements, and Japan FVO securities).


[2]	Primarily consists of gains and losses on non-qualifying derivatives and fixed maturities, FVO, Japan 3Win related foreign currency swaps, and other investment gains and losses.

Net realized capital gains and losses from investment sales, after deducting the life and pension policyholders’ share for certain products, are reported as a component of revenues and are determined on a specific identification basis. Gross gains and losses on sales and impairments previously reported as unrealized gains in A O CI were $ 37 and $ 159 , respectively, for the three and nine months ended September 30, 2012 and $ 74 and $ 87 for the three and nine months ended September 30, 2011 , respectively. Proceeds from sales of AFS securities totaled $ 10.8 billion and $ 34.2 billion for the three and nine months ended September 30, 2012 , respectively, and $ 8.7 billion and $ 26.3 billion for the three and nine months ended September 30, 2011 , respectively. For the three and nine months ended September 30, 2012 , the gain on U.S. GMWB related derivatives, net, was primarily due to liability model assumption updates of $301 related to lower benefit utilization by policyholders.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

Other-Than-Temporary Impairment Losses

The following table presents a roll-forward of the Company’s cumulative credit impairments on debt securities held.



	Three Months Ended September 30,						Nine Months Ended September 30,
(Before-tax)	2012			2011			2012			2011
Balance as of beginning of period	$	(1,407	)	$	(1,933	)	$	(1,676	)	$	(2,072	)
Additions for credit impairments recognized on [1]:
Securities not previously impaired	(5		)	(4		)	(21		)	(40		)
Securities previously impaired	(9		)	(38		)	(19		)	(63		)
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	104			157			392			349
Securities due to an increase in expected cash flows	2			4			9			12
Balance as of end of period	$	(1,315	)	$	(1,814	)	$	(1,315	)	$	(1,814	)


[1]	These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.

Available-for-Sale Securities

The following table presents the Company’s AFS securities by type.



	September 30, 2012												December 31, 2011
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-Credit OTTI [1]			Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Non-Credit OTTI [1]
ABS	$	2,916	$	69	$	(227	)	$	2,758	$	(3	)	$	3,430	$	55	$	(332	)	$	3,153	$	(7	)
CDOs [2]	3,279		50		(217		)	3,072		(13		)	2,819		16		(348		)	2,487		(44		)
CMBS	6,114		403		(244		)	6,273		(13		)	7,192		271		(512		)	6,951		(31		)
Corporate [2]	39,032		4,794		(393		)	43,433		(23		)	41,161		3,661		(739		)	44,011		—
Foreign govt./govt. agencies	4,019		202		(5		)	4,216		—			2,030		141		(10		)	2,161		—
Municipal	12,939		1,372		(20		)	14,291		—			12,557		775		(72		)	13,260		—
RMBS	7,382		337		(242		)	7,477		(47		)	5,961		252		(456		)	5,757		(105		)
U.S. Treasuries	5,009		213		(16		)	5,206		—			3,828		203		(2		)	4,029		—
Total fixed maturities, AFS	80,690		7,440		(1,364		)	86,726		(99		)	78,978		5,374		(2,471		)	81,809		(187		)
Equity securities, AFS	865		77		(64		)	878		—			1,056		68		(203		)	921		—
Total AFS securities	$	81,555	$	7,517	$	(1,428	)	$	87,604	$	(99	)	$	80,034	$	5,442	$	(2,674	)	$	82,730	$	(187	)


[1]	Represents the amount of cumulative non-credit OTTI losses recognized in OCI on securities that also had credit impairments. These losses are included in gross unrealized losses as of September 30, 2012 and December 31, 2011 .


[2]	Gross unrealized gains (losses) exclude the change in fair value of bifurcated embedded derivative features of certain securities. Changes in fair value are recorded in net realized capital gains (losses).

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

The following table presents the Company’s fixed maturities, AFS, by contractual maturity year.



	September 30, 2012
Contractual Maturity	Amortized Cost		Fair Value
One year or less	$	2,178	$	2,195
Over one year through five years	14,920		15,851
Over five years through ten years	15,614		17,161
Over ten years	28,287		31,939
Subtotal	60,999		67,146
Mortgage-backed and asset-backed securities	19,691		19,580
Total fixed maturities, AFS	$	80,690	$	86,726

Estimated maturities may differ from contractual maturities due to security call or prepayment provisions. Due to the potential for variability in payment speeds (i.e. prepayments or extensions), mortgage-backed and asset-backed securities are not categorized by contractual maturity.

Securities Unrealized Loss Aging

The following tables present the Company’s unrealized loss aging for AFS securities by type and length of time the security was in a continuous unrealized loss position.



	September 30, 2012
	Less Than 12 Months							12 Months or More							Total
	Amortized Cost		Fair Value		Unrealized Losses			Amortized Cost		Fair Value		Unrealized Losses			Amortized Cost		Fair Value		Unrealized Losses
ABS	$	12	$	11	$	(1	)	$	1,071	$	845	$	(226	)	$	1,083	$	856	$	(227	)
CDOs [1]	20		19		(1		)	3,169		2,914		(216		)	3,189		2,933		(217		)
CMBS	232		201		(31		)	1,575		1,362		(213		)	1,807		1,563		(244		)
Corporate	1,402		1,332		(70		)	2,289		1,966		(323		)	3,691		3,298		(393		)
Foreign govt./govt. agencies	272		270		(2		)	19		16		(3		)	291		286		(5		)
Municipal	135		131		(4		)	183		167		(16		)	318		298		(20		)
RMBS	148		146		(2		)	1,147		907		(240		)	1,295		1,053		(242		)
U.S. Treasuries	1,085		1,069		(16		)	—		—		—			1,085		1,069		(16		)
Total fixed maturities	3,306		3,179		(127		)	9,453		8,177		(1,237		)	12,759		11,356		(1,364		)
Equity securities	112		106		(6		)	278		220		(58		)	390		326		(64		)
Total securities in an unrealized loss	$	3,418	$	3,285	$	(133	)	$	9,731	$	8,397	$	(1,295	)	$	13,149	$	11,682	$	(1,428	)

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)



	December 31, 2011
	Less Than 12 Months							12 Months or More							Total
	Amortized Cost		Fair Value		Unrealized Losses			Amortized Cost		Fair Value		Unrealized Losses			Amortized Cost		Fair Value		Unrealized Losses
ABS	$	629	$	594	$	(35	)	$	1,169	$	872	$	(297	)	$	1,798	$	1,466	$	(332	)
CDOs [1]	81		59		(22		)	2,709		2,383		(326		)	2,790		2,442		(348		)
CMBS	1,297		1,194		(103		)	2,144		1,735		(409		)	3,441		2,929		(512		)
Corporate	4,388		4,219		(169		)	3,268		2,627		(570		)	7,656		6,846		(739		)
Foreign govt./govt. agencies	218		212		(6		)	51		47		(4		)	269		259		(10		)
Municipal	299		294		(5		)	627		560		(67		)	926		854		(72		)
RMBS	415		330		(85		)	1,206		835		(371		)	1,621		1,165		(456		)
U.S. Treasuries	343		341		(2		)	—		—		—			343		341		(2		)
Total fixed maturities	7,670		7,243		(427		)	11,174		9,059		(2,044		)	18,844		16,302		(2,471		)
Equity securities	167		138		(29		)	439		265		(174		)	606		403		(203		)
Total securities in an unrealized loss	$	7,837	$	7,381	$	(456	)	$	11,613	$	9,324	$	(2,218	)	$	19,450	$	16,705	$	(2,674	)


[1]	Unrealized losses exclude the change in fair value of bifurcated embedded derivative features of certain securities. Changes in fair value are recorded in net realized capital gains (losses).

As of September 30, 2012 , AFS securities in an unrealized loss position, comprised of 2,191 securities, primarily related to commercial real estate, corporate securities within the financial services sector RMBS and ABS which have experienced price deterioration. As of September 30, 2012 , 81% of these securities were depressed less than 20% of cost or amortized cost. The decline in unrealized losses during 2012 was primarily attributable to credit spread tightening and declining interest rates.

Most of the securities depressed for twelve months or more relate to structured securities with exposure to commercial and residential real estate, as well as certain floating rate corporate securities or securities with greater than 10 years to maturity, concentrated in the financial services sector. Current market spreads continue to be significantly wider than spreads at the security's respective purchase date for structured securities with exposure to commercial and residential real estate largely due to the economic and market uncertainties regarding future performance of commercial and residential real estate. The majority of these securities have a floating-rate coupon referenced to a market index that has declined substantially. In addition, equity securities include investment grade perpetual preferred securities that contain “debt-like” characteristics where the decline in fair value is not attributable to issuer-specific credit deterioration, none of which have, nor are expected to, miss a periodic dividend payment. These securities have been depressed due to the securities’ floating-rate coupon in the current low interest rate environment, general market credit spread widening since the date of purchase and the long-dated nature of the securities. The Company neither has an intention to sell nor does it expect to be required to sell the securities outlined above.

Mortgage Loans



	September 30, 2012							December 31, 2011
	Amortized Cost [1]		Valuation Allowance			Carrying Value		Amortized Cost [1]		Valuation Allowance			Carrying Value
Commercial	$	6,946	$	(83	)	$	6,863	$	5,830	$	(102	)	$	5,728
Total mortgage loans	$	6,946	$	(83	)	$	6,863	$	5,830	$	(102	)	$	5,728


[1]	Amortized cost represents carrying value prior to valuation allowances, if any.

As of September 30, 2012 and December 31, 2011 , the carrying value of mortgage loans associated with the valuation allowance was $ 546 and $ 621 , respectively. Included in the table above are mortgage loans held-for-sale with a carrying value and valuation allowance of $ 57 and $ 4 , respectively, as of September 30, 2012 and $ 74 and $ 4 , respectively, as of December 31, 2011 . The carrying value of these loans is included in mortgage loans in the Company’s Condensed Consolidated Balance Sheets. As of September 30, 2012 , loans within the Company’s mortgage loan portfolio that have had extensions or restructurings other than what is allowable under the original terms of the contract are immaterial.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

The following table presents the activity within the Company’s valuation allowance for mortgage loans. These loans have been evaluated both individually and collectively for impairment. Loans evaluated collectively for impairment are immaterial.



	2012			2011
Balance, as of January 1	$	(102	)	$	(155	)
(Additions)/Reversals	1			(27		)
Deductions	18			35
Balance, as of September 30	$	(83	)	$	(147	)

The current weighted-average LTV ratio of the Company’s commercial mortgage loan portfolio was 64% as of September 30, 2012 , while the weighted-average LTV ratio at origination of these loans was 63% . LTV ratios compare the loan amount to the value of the underlying property collateralizing the loan. The loan values are updated no less than annually through property level reviews of the portfolio. Factors considered in the property valuation include, but are not limited to, actual and expected property cash flows, geographic market data and capitalization rates. DSCRs compare a property’s net operating income to the borrower’s principal and interest payments. The current weighted average DSCR of the Company’s commercial mortgage loan portfolio was 2.29x as of September 30, 2012 . The Company held only two delinquent commercial mortgage loans past due by 90 days or more . The total carrying value and valuation allowance of these loans totaled $ 32 and $ 50 , respectively, as of September 30, 2012 , and are not accruing income.

The following table presents the carrying value of the Company’s commercial mortgage loans by LTV and DSCR.



Commercial Mortgage Loans Credit Quality
	September 30, 2012			December 31, 2011
Loan-to-value	Carrying Value		Avg. Debt-Service Coverage Ratio	Carrying Value		Avg. Debt-Service Coverage Ratio
Greater than 80%	$	372	1.54x	$	707	1.45x
65% - 80%	2,569		2.12x	2,384		1.60x
Less than 65%	3,922		2.49x	2,637		2.40x
Total commercial mortgage loans	$	6,863	2.29x	$	5,728	1.94x

The following tables present the carrying value of the Company’s mortgage loans by region and property type.



Mortgage Loans by Region
	September 30, 2012				December 31, 2011
	Carrying Value		Percent of Total		Carrying Value		Percent of Total
East North Central	$	145	2.1	%	$	94	1.6	%
Middle Atlantic	498		7.3	%	508		8.9	%
Mountain	100		1.5	%	125		2.2	%
New England	335		4.9	%	294		5.1	%
Pacific	2,054		29.9	%	1,690		29.5	%
South Atlantic	1,388		20.2	%	1,149		20.1	%
West North Central	16		0.2	%	30		0.5	%
West South Central	435		6.3	%	224		3.9	%
Other [1]	1,892		27.6	%	1,614		28.2	%
Total mortgage loans	$	6,863	100.0	%	$	5,728	100.0	%


[1]	Primarily represents loans collateralized by multiple properties in various regions.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)



Mortgage Loans by Property Type
	September 30, 2012				December 31, 2011
	Carrying Value		Percent of Total		Carrying Value		Percent of Total
Commercial
Agricultural	$	155	2.3	%	$	249	4.3	%
Industrial	2,082		30.3	%	1,747		30.5	%
Lodging	82		1.2	%	93		1.6	%
Multifamily	1,329		19.4	%	1,070		18.7	%
Office	1,517		22.1	%	1,078		18.8	%
Retail	1,449		21.1	%	1,234		21.5	%
Other	249		3.6	%	257		4.6	%
Total mortgage loans	$	6,863	100.0	%	$	5,728	100.0	%

Variable Interest Entities

The Company is involved with various special purpose entities and other entities that are deemed to be VIEs primarily as a collateral manager and as an investor through normal investment activities, as well as a means of accessing capital. A VIE is an entity that either has investors that lack certain essential characteristics of a controlling financial interest or lacks sufficient funds to finance its own activities without financial support provided by other entities.

The Company performs ongoing qualitative assessments of its VIEs to determine whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The Company is deemed to have a controlling financial interest when it has both the ability to direct the activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s Condensed Consolidated Financial Statements.

Consolidated VIEs

The following table presents the carrying value of assets and liabilities, and the maximum exposure to loss relating to the VIEs for which the Company is the primary beneficiary. Creditors have no recourse against the Company in the event of default by these VIEs nor does the Company have any implied or unfunded commitments to these VIEs. The Company’s financial or other support provided to these VIEs is limited to its investment management services and original investment.



	September 30, 2012						December 31, 2011
	Total Assets		Total Liabilities [1]		Maximum Exposure to Loss [2]		Total Assets		Total Liabilities [1]		Maximum Exposure to Loss [2]
CDOs [3]	$	446	$	420	$	15	$	491	$	471	$	29
Investment funds [4]	164		—		157		—		—		—
Limited partnerships	6		—		6		7		—		7
Total	$	616	$	420	$	178	$	498	$	471	$	36


[1]	Included in other liabilities in the Company’s Condensed Consolidated Balance Sheets.


[2]	The maximum exposure to loss represents the maximum loss amount that the Company could recognize as a reduction in net investment income or as a realized capital loss and is the cost basis of the Company’s investment.


[3]	Total assets included in fixed maturities, AFS, and fixed maturities, FVO, in the Company’s Condensed Consolidated Balance Sheets.


[4]	Total assets included in fixed maturities, AFS, and short-term investments in the Company’s Condensed Consolidated Balance Sheets.

CDOs represent structured investment vehicles for which the Company has a controlling financial interest as it provides collateral management services, earns a fee for those services and also holds investments in the securities issued by these vehicles. Investment funds represents wholly-owned fixed income funds established in 2012 for which the Company has exclusive management and control of this investment which is the activity that most significantly impacts its economic performance. Limited partnerships represent one hedge fund for which the Company holds a majority interest in the fund as an investment.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

Non-Consolidated VIEs

The Company holds a significant variable interest for one VIE for which it is not the primary beneficiary and, therefore, was not consolidated on the Company’s Condensed Consolidated Balance Sheets. This VIE represents a contingent capital facility (“facility”) that has been held by the Company since February 2007 for which the Company has no implied or unfunded commitments. Assets and liabilities recorded for the facility were $ 24 and $ 23 , respectively as of September 30, 2012 and $ 28 and $ 28 , respectively, as of December 31, 2011 . Additionally, the Company has a maximum exposure to loss of $ 3 and $ 3 , respectively, as of September 30, 2012 and December 31, 2011 , which represents the issuance costs that were incurred to establish the facility. The Company does not have a controlling financial interest as it does not manage the assets of the facility nor does it have the obligation to absorb losses or the right to receive benefits that could potentially be significant to the facility, as the asset manager has significant variable interest in the vehicle. The Company’s financial or other support provided to the facility is limited to providing ongoing support to cover the facility’s operating expenses. For further information on the facility, see Note 14 of the Notes to Consolidated Financial Statements included in The Hartford’s 2011 Form 10-K Annual Report.

In addition, the Company, through normal investment activities, makes passive investments in structured securities issued by VIEs for which the Company is not the manager which are included in ABS, CDOs, CMBS and RMBS in the Available-for-Sale Securities table and fixed maturities, FVO, in the Company’s Condensed Consolidated Balance Sheets. The Company has not provided financial or other support with respect to these investments other than its original investment. For these investments, the Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the principal amount of the structured securities issued by the VIEs, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits and the Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment.

Repurchase Agreements and Dollar Roll Agreements

The Company enters into repurchase agreements and dollar roll transactions to earn incremental spread income. A repurchase agreement is a transaction in which one party (transferor) agrees to sell securities to another party (transferee) in return for cash (or securities), with a simultaneous agreement to repurchase the same securities at a specified price at a later date. A dollar roll is a type of repurchase transaction where a mortgage backed security is sold with an agreement to repurchase substantially the same security at a specified time in the future. These transactions are generally short-term in nature, and therefore, the carrying amounts of these instruments approximate fair value.

As part of repurchase agreements and dollar roll transactions, the Company transfers U.S. government and government agency securities and receives cash. For the repurchase agreements, the Company obtains collateral in an amount equal to at least 95% of the fair value of the securities transferred, and the agreements with third parties contain contractual provisions to allow for additional collateral to be obtained when necessary. The cash received from the repurchase program is typically invested in short-term investments or fixed maturities. The Company accounts for the repurchase agreements and dollar roll transactions as collateralized borrowings. The securities transferred under repurchase agreements and dollar roll transactions are included in fixed maturity, available-for-sale securities with the obligation to repurchase those securities recorded in Other Liabilities on the Company's Condensed Consolidated Balance Sheets. The fair value of the securities transferred was $ 1.6 billion as of September 30, 2012 . The obligation for securities sold under agreement to repurchase was $ (1.6) billion as of September 30, 2012 .

Derivative Instruments

The Company utilizes a variety of over-the-counter and exchange traded derivative instruments as a part of its overall risk management strategy, as well as to enter into replication transactions. Derivative instruments are used to manage risk associated with interest rate, equity market, credit spread, issuer default, price, and currency exchange rate risk or volatility. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that would be permissible investments under the Company’s investment policies. The Company also purchases and issues financial instruments and products that either are accounted for as free-standing derivatives, such as certain reinsurance contracts, or may contain features that are deemed to be embedded derivative instruments, such as the GMWB rider included with certain variable annuity products.

Cash flow hedges

Interest rate swaps

Interest rate swaps are primarily used to convert interest receipts on floating-rate fixed maturity securities. These derivatives are predominantly used to better match cash receipts from assets with cash disbursements required to fund liabilities. The Company also enters into forward starting swap agreements to hedge the interest rate exposure related to the purchase of fixed-rate securities. These derivatives are primarily structured to hedge interest rate risk inherent in the assumptions used to price certain liabilities.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

Foreign currency swaps

Foreign currency swaps are used to convert foreign currency-denominated cash flows related to certain investment receipts and liability payments to U.S. dollars in order to reduce cash flow fluctuations due to changes in currency rates.

Fair value hedges

Interest rate swaps

Interest rate swaps are used to hedge the changes in fair value of certain fixed rate liabilities and fixed maturity securities due to fluctuations in interest rates.

Foreign currency swaps

Foreign currency swaps are used to hedge the changes in fair value of certain foreign currency-denominated fixed rate liabilities due to changes in foreign currency rates by swapping the fixed foreign payments to floating rate U.S. dollar denominated payments.

Non-qualifying strategies

Interest rate swaps, swaptions, caps, floors, and futures

The Company uses interest rate swaps, swaptions, caps, floors, and futures to manage duration between assets and liabilities in certain investment portfolios. In addition, during the three months ended September 30, 2012, the Company entered into interest rate swaptions to hedge the interest rate risk of the securities being transferred related to the sale of the Retirement Plan business segment.

The Company also enters into interest rate swaps to terminate existing swaps, thereby offsetting the changes in value of the original swap. As of September 30, 2012 and December 31, 2011 , the notional amount of interest rate swaps in offsetting relationships was $ 7.6 billion and $ 7.8 billion , respectively.

Foreign currency swaps and forwards

The Company enters into foreign currency swaps and forwards to convert the foreign currency exposures of certain foreign currency-denominated fixed maturity investments to U.S. dollars.

Japan 3Win foreign currency swaps

Prior to the second quarter of 2009, The Company offered certain variable annuity products with a guaranteed minimum income benefit (“GMIB”) rider through a wholly-owned Japanese subsidiary. The GMIB rider is reinsured to a wholly-owned U.S. subsidiary, which invests in U.S. dollar denominated assets to support the liability. The U.S. subsidiary entered into pay U.S. dollar, receive yen swap contracts to hedge the currency and interest rate exposure between the U.S. dollar denominated assets and the yen denominated fixed liability reinsurance payments.

Japanese fixed annuity hedging instruments

Prior to the second quarter of 2009, The Company offered a yen denominated fixed annuity product through a wholly-owned Japanese subsidiary and reinsured to a wholly-owned U.S. subsidiary. The U.S. subsidiary invests in U.S. dollar denominated securities to support the yen denominated fixed liability payments and entered into currency rate swaps to hedge the foreign currency exchange rate and yen interest rate exposures that exist as a result of U.S. dollar assets backing the yen denominated liability.

Credit derivatives that purchase credit protection

Credit default swaps are used to purchase credit protection on an individual entity or referenced index to economically hedge against default risk and credit-related changes in value on fixed maturity securities. These contracts require the Company to pay a periodic fee in exchange for compensation from the counterparty should the referenced security issuers experience a credit event, as defined in the contract.

Credit derivatives that assume credit risk

Credit default swaps are used to assume credit risk related to an individual entity, referenced index, or asset pool, as a part of replication transactions. These contracts entitle the Company to receive a periodic fee in exchange for an obligation to compensate the derivative counterparty should the referenced security issuers experience a credit event, as defined in the contract. The Company is also exposed to credit risk due to credit derivatives embedded within certain fixed maturity securities. These securities are primarily comprised of structured securities that contain credit derivatives that reference a standard index of corporate securities.

Credit derivatives in offsetting positions

The Company enters into credit default swaps to terminate existing credit default swaps, thereby offsetting the changes in value of the original swap going forward.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

Equity index swaps and options

The Company offers certain equity indexed products, which may contain an embedded derivative that requires bifurcation. The Company enters into S&P index swaps and options to economically hedge the equity volatility risk associated with these embedded derivatives. In addition, during the third quarter of 2011, the Company entered into equity index options and futures with the purpose of hedging the impact of an adverse equity market environment on the investment portfolio.

U.S. GMWB product derivatives

The Company currently offers certain variable annuity products with a GMWB rider in the U.S. Effective May 1, 2012, all new U.S. annuity policies, including the GMWB rider, sold by the Company are reinsured to a third party. The GMWB is a bifurcated embedded derivative that provides the policyholder with a guaranteed remaining balance (“GRB”) if the account value is reduced to zero through a combination of market declines and withdrawals. The GRB is generally equal to premiums less withdrawals. Certain contract provisions can increase the GRB at contractholder election or after the passage of time. The notional value of the embedded derivative is the GRB.

U.S. GMWB reinsurance contracts

The Company has entered into reinsurance arrangements to offset a portion of its risk exposure to the GMWB for the remaining lives of covered variable annuity contracts. Reinsurance contracts covering GMWB are accounted for as free-standing derivatives. The notional amount of the reinsurance contracts is the GRB amount.

U.S. GMWB hedging instruments

The Company enters into derivative contracts to partially hedge exposure associated with a portion of the GMWB liabilities that are not reinsured. These derivative contracts include customized swaps, interest rate swaps and futures, and equity swaps, options, and futures, on certain indices including the S&P 500 index, EAFE index, and NASDAQ index.

The following table represents notional and fair value for U.S. GMWB hedging instruments.



	Notional Amount				Fair Value
	September 30, 2012		December 31, 2011		September 30, 2012		December 31, 2011
Customized swaps	$	8,153	$	8,389	$	269	$	385
Equity swaps, options, and futures	6,330		5,320		308		498
Interest rate swaps and futures	5,330		2,697		97		11
Total	$	19,813	$	16,406	$	674	$	894

U.S. macro hedge program

The Company utilizes equity options and futures contracts to partially hedge against a decline in the equity markets and the resulting statutory surplus and capital impact primarily arising from guaranteed minimum death benefit (“GMDB”), GMIB and GMWB obligations.

The following table represents notional and fair value for the U.S. macro hedge program.



	Notional Amount				Fair Value
	September 30, 2012		December 31, 2011		September 30, 2012		December 31, 2011
Equity futures	$	—	$	59	$	—	$	—
Equity options	5,583		6,760		82		357
Total	$	5,583	$	6,819	$	82	$	357

International program product derivatives

The Company formerly offered certain variable annuity products with GMWB or GMAB riders in the U.K. and Japan. The GMWB and GMAB are bifurcated embedded derivatives. The GMWB provides the policyholder with a GRB if the account value is reduced to zero through a combination of market declines and withdrawals. The GRB is generally equal to premiums less withdrawals. Certain contract provisions can increase the GRB at contractholder election or after the passage of time. The GMAB provides the policyholder with their initial deposit in a lump sum after a specified waiting period. The notional amount of the embedded derivatives are the foreign currency denominated GRBs converted to U.S. dollars at the current foreign spot exchange rate as of the reporting period date.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

International program hedging instruments

The Company utilizes equity futures, options and swaps, and currency forwards and options to partially hedge against a decline in the debt and equity markets or changes in foreign currency exchange rates and the resulting statutory surplus and capital impact primarily arising from GMDB, GMIB and GMWB obligations issued in the U.K. and Japan. The Company also enters into foreign currency denominated interest rate swaps and swaptions to hedge the interest rate exposure related to the potential annuitization of certain benefit obligations.

The following table represents notional and fair value for the international program hedging instruments.



	Notional Amount				Fair Value
	September 30, 2012		December 31, 2011		September 30, 2012		December 31, 2011
Credit derivatives	$	50	$	—	$	6	$	—
Currency forwards [1]	10,148		8,622		14		446
Currency options	9,708		7,357		166		127
Equity futures	4,323		3,835		—		—
Equity options	4,751		1,565		51		74
Equity swaps [2]	2,588		392		34		(8		)
Interest rate futures	727		739		—		—
Interest rate swaps and swaptions	34,999		11,216		291		111
Total	$	67,294	$	33,726	$	562	$	750


[1]	As of September 30, 2012 and December 31, 2011 net notional amounts are $ 1.9 billion and $ 7.2 billion , respectively, which include $ 6.0 billion and $ 7.9 billion , respectively, related to long positions and $ 4.1 billion and $ 0.7 billion , respectively, related to short positions.


[2]	As of September 30, 2012 the net notional amount is $ 0.8 billion , which includes $ 1.7 billion related to long positions and $ 0.9 billion related to short positions. As of December 31, 2011 the net notional amount of $ 0.4 billion related to long positions only.

Contingent capital facility put option

The Company entered into a put option agreement that provides the Company the right to require a third-party trust to purchase, at any time, The Hartford’s junior subordinated notes in a maximum aggregate principal amount of $500 . Under the put option agreement, The Hartford will pay premiums on a periodic basis and will reimburse the trust for certain fees and ordinary expenses.

Derivative Balance Sheet Classification

The table below summarizes the balance sheet classification of the Company’s derivative related fair value amounts, as well as the gross asset and liability fair value amounts. For reporting purposes, the Company offsets the fair value amounts, income accruals, and cash collateral held related to derivative instruments executed in a legal entity and with the same counterparty under a master netting agreement, which provides the Company with the legal right of offset. The fair value amounts presented below do not include income accruals or cash collateral held amounts, which are netted with derivative fair value amounts to determine balance sheet presentation. Derivative fair value reported as liabilities after taking into account the master netting agreements, is $1.7 billion and $3.2 billion as of September 30, 2012 , and December 31, 2011 , respectively. Derivatives in the Company’s separate accounts are not included because the associated gains and losses accrue directly to policyholders. The Company’s derivative instruments are held for risk management purposes, unless otherwise noted in the table below. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and is presented in the table to quantify the volume of the Company’s derivative activity. Notional amounts are not necessarily reflective of credit risk.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)



	Net Derivatives										Asset Derivatives				Liability Derivatives
	Notional Amount				Fair Value						Fair Value				Fair Value
Hedge Designation/ Derivative Type	Sep 30, 2012		Dec 31, 2011		Sep 30, 2012			Dec 31, 2011			Sep 30, 2012		Dec 31, 2011		Sep 30, 2012			Dec 31, 2011
Cash flow hedges
Interest rate swaps	$	7,914	$	8,652	$	359		$	329		$	359	$	329	$	—		$	—
Foreign currency swaps	180		291		(18		)	6			4		30		(22		)	(24		)
Total cash flow hedges	8,094		8,943		341			335			363		359		(22		)	(24		)
Fair value hedges
Interest rate swaps	776		1,007		(61		)	(78		)	—		—		(61		)	(78		)
Foreign currency swaps	40		677		15			(39		)	15		63		—			(102		)
Total fair value hedges	816		1,684		(46		)	(117		)	15		63		(61		)	(180		)
Non-qualifying strategies
Interest rate contracts
Interest rate swaps, caps, floors, and futures	13,179		10,144		(553		)	(583		)	578		531		(1,131		)	(1,114		)
Foreign exchange contracts
Foreign currency swaps and forwards	397		380		(14		)	(12		)	7		6		(21		)	(18		)
Japan 3Win foreign currency swaps	2,054		2,054		78			184			78		184		—			—
Japanese fixed annuity hedging instruments	1,648		1,945		371			514			392		540		(21		)	(26		)
Credit contracts
Credit derivatives that purchase credit protection	1,041		1,721		(4		)	36			15		56		(19		)	(20		)
Credit derivatives that assume credit risk [1]	3,669		2,952		(339		)	(648		)	13		2		(352		)	(650		)
Credit derivatives in offsetting positions	9,428		8,189		(39		)	(57		)	110		164		(149		)	(221		)
Equity contracts
Equity index swaps and options	924		1,501		55			27			68		40		(13		)	(13		)
Variable annuity hedge program
U.S. GMWB product derivatives [2]	30,213		34,569		(1,413		)	(2,538		)	—		—		(1,413		)	(2,538		)
U.S. GMWB reinsurance contracts	6,116		7,193		199			443			199		443		—			—
U.S. GMWB hedging instruments	19,813		16,406		674			894			842		1,022		(168		)	(128		)
U.S. macro hedge program	5,583		6,819		82			357			82		357		—			—
International program product derivatives [2]	2,607		2,710		(36		)	(71		)	—		—		(36		)	(71		)
International program hedging instruments	67,294		33,726		562			750			1,150		887		(588		)	(137		)
Other
Contingent capital facility put option	500		500		24			28			24		28		—			—
Total non-qualifying strategies	164,466		130,809		(353		)	(676		)	3,558		4,260		(3,911		)	(4,936		)
Total cash flow hedges, fair value hedges, and non-qualifying strategies	$	173,376	$	141,436	$	(58	)	$	(458	)	$	3,936	$	4,682	$	(3,994	)	$	(5,140	)
Balance Sheet Location
Fixed maturities, available-for-sale	$	703	$	703	$	(40	)	$	(72	)	$	—	$	—	$	(40	)	$	(72	)
Other investments	74,605		60,227		1,473			2,331			2,322		3,165		(849		)	(834		)
Other liabilities	59,051		35,944		(229		)	(538		)	1,415		1,074		(1,644		)	(1,612		)
Consumer notes	27		35		(2		)	(4		)	—		—		(2		)	(4		)
Reinsurance recoverables	6,116		7,193		199			443			199		443		—			—
Other policyholder funds and benefits payable	32,874		37,334		(1,459		)	(2,618		)	—		—		(1,459		)	(2,618		)
Total derivatives	$	173,376	$	141,436	$	(58	)	$	(458	)	$	3,936	$	4,682	$	(3,994	)	$	(5,140	)


[1]	The derivative instruments related to this strategy are held for other investment purposes.


[2]	These derivatives are embedded within liabilities and are not held for risk management purposes.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

Change in Notional Amount

The net increase in notional amount of derivatives since December 31, 2011 , was primarily due to the following:

•

The $67.3 billion notional amount related to the international program hedging instruments as of September 30, 2012 , consisted of $62.3 billion of long positions and $5.0 billion of offsetting short positions, resulting in a net notional amount of $57.3 billion . The $33.7 billion notional amount as of December 31, 2011, consisted of $33.0 billion of long positions and $0.7 billion of offsetting short positions, resulting in a net notional amount of $32.3 billion . The increase in net notional of $25.0 billion primarily resulted from The Company increasing its hedging of interest rate exposure.

Change in Fair Value

The net increase in the total fair value of derivative instruments since December 31, 2011 , was primarily related to the following:


•	The increase in fair value related to the combined U.S. GMWB hedging program, which includes the U.S. GMWB product, reinsurance, and hedging derivatives, was primarily due to a liability model assumption update, favorable policyholder behavior, and lower equity market volatility.


•	The increase in fair value related to credit derivatives that assume credit risk was primarily due to credit spread tightening.


•	The fair value related to the international program hedging instruments decreased as a result of an improvement in global and domestic equity markets and depreciation of the Japanese yen in relation to the euro and the U.S. dollar.


•	The fair value related to the U.S. macro hedge program decreased due to an improvement in domestic equity markets, passage of time, and lower equity volatility.


•	The fair value related to the Japanese fixed annuity hedging instruments and Japan 3Win foreign currency swaps decreased primarily due to a decline in U.S. interest rates, depreciation of the Japanese yen in relation to the U.S. dollar and strengthening of the currency basis swap spread between U.S. dollar and Japanese yen.

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current period earnings. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

The following table presents the components of the gain or loss on derivatives that qualify as cash flow hedges:

Derivatives in Cash Flow Hedging Relationships



	Gain (Loss) Recognized in OCI on Derivative (Effective Portion)										Net Realized Capital Gains(Losses) Recognized in Income on Derivative (Ineffective Portion)
	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012			2011		2012		2011			2012		2011
Interest rate swaps	$	42		$	263	$	185		$	345	$	—	$	(3	)	$	—	$	(5	)
Foreign currency swaps	(2		)	—		(31		)	—		—		—			—		—
Total	$	40		$	263	$	154		$	345	$	—	$	(3	)	$	—	$	(5	)

Derivatives in Cash Flow Hedging Relationships



		Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)
		Three Months Ended September 30,					Nine Months Ended September 30,
	Location	2012		2011			2012			2011
Interest rate swaps	Net realized capital gain/(loss)	$	4	$	4		$	10		$	8
Interest rate swaps	Net investment income	36		33			110			96
Foreign currency swaps	Net realized capital gain/(loss)	1		(9		)	(7		)	(1		)
Total		$	41	$	28		$	113		$	103

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

As of September 30, 2012 , the before-tax deferred net gains on derivative instruments recorded in AOCI that are expected to be reclassified to earnings during the next twelve months are $ 119 . This expectation is based on the anticipated interest payments on hedged investments in fixed maturity securities that will occur over the next twelve months, at which time the Company will recognize the deferred net gains (losses) as an adjustment to interest income over the term of the investment cash flows. The maximum term over which the Company is hedging its exposure to the variability of future cash flows (for forecasted transactions, excluding interest payments on existing variable-rate financial instruments) is approximately three years .

During the three months months ended September 30, 2012 , the Company had no net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring. During the nine months ended September 30, 2012 the Company had $15 of net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring. During the three months and nine months ended September 30, 2011 , the Company had no net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring.

Fair Value Hedges

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. The Company includes the gain or loss on the derivative in the same line item as the offsetting loss or gain on the hedged item. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

The Company recognized in income gains (losses) representing the ineffective portion of fair value hedges as follows:

Derivatives in Fair-Value Hedging Relationships



	Gain or (Loss) Recognized in Income [1]
	Three Months Ended September 30,										Nine Months Ended September 30,
	2012					2011					2012					2011
	Derivative			Hedge Item		Derivative			Hedge Item		Derivative			Hedge Item		Derivative			Hedge Item
Interest rate swaps
Net realized capital gain/(loss)	$	(2	)	$	1	$	(54	)	$	54	$	(7	)	$	4	$	(71	)	$	71
Foreign currency swaps
Net realized capital gain/(loss)	(6		)	6		(28		)	28		(8		)	8		8			(8		)
Benefits, losses and loss adjustment expenses	—			—		(5		)	5		(6		)	6		(14		)	14
Total	$	(8	)	$	7	$	(87	)	$	87	$	(21	)	$	18	$	(77	)	$	77


[1]	The amounts presented do not include the periodic net coupon settlements of the derivative or the coupon income (expense) related to the hedged item. The net of the amounts presented represents the ineffective portion of the hedge.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

Non-qualifying Strategies

For non-qualifying strategies, including embedded derivatives that are required to be bifurcated from their host contracts and accounted for as derivatives, the gain or loss on the derivative is recognized currently in earnings within net realized capital gains (losses). The following table presents the gain or loss recognized in income on non-qualifying strategies:

Derivatives Used in Non-Qualifying Strategies

Gain or (Loss) Recognized within Net Realized Capital Gains and Losses



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Interest rate contracts
Interest rate swaps, caps, floors, and forwards	$	3		$	(25	)	$	(12	)	$	(24	)
Foreign exchange contracts
Foreign currency swaps and forwards	(4		)	19			23			7
Japan 3Win foreign currency swaps [1]	15			39			(106		)	14
Japanese fixed annuity hedging instruments [2]	24			103			(46		)	98
Credit contracts
Credit derivatives that purchase credit protection	(18		)	31			(49		)	11
Credit derivatives that assume credit risk	99			(183		)	272			(178		)
Equity contracts
Equity index swaps and options	(13		)	(56		)	(29		)	(54		)
Variable annuity hedge program
U.S. GMWB product derivatives	823			(1,315		)	1,235			(1,047		)
U.S. GMWB reinsurance contracts	(184		)	241			(265		)	180
U.S. GMWB hedging instruments	(258		)	751			(519		)	567
U.S. macro hedge program	(109		)	107			(292		)	6
International program product derivatives	26			(54		)	45			(44		)
International program hedging instruments	(193		)	1,186			(678		)	909
Other
Contingent capital facility put option	(2		)	(1		)	(5		)	(4		)
Total	$	209		$	843		$	(426	)	$	441


[1]	The associated liability is adjusted for changes in spot rates through realized capital gains and was $ (46) and $ (93) for the three months ended September 30, 2012 and 2011 , respectively, and $ 19 and $ (100) for the nine months ended September 30, 2012 and 2011 , respectively.


[2]	The associated liability is adjusted for changes in spot rates through realized capital gains and was $ (54) and $ (115) for the three months ended September 30, 2012 and 2011 , respectively, and $ 33 and $ (125) for the nine months ended September 30, 2012 and 2011 , respectively.

For the three and nine months ended September 30, 2012 , the net realized capital gain (loss) related to derivatives used in non-qualifying strategies was primarily comprised of the following:

•

The net loss for the three months ended September 30, 2012 , associated with the international program hedging instruments was primarily driven by an improvement in global and domestic equity markets, partially offset by appreciation of the Japanese yen in relation to the euro and the U.S. dollar. The net loss for the nine months ended September 30, 2012 , was primarily driven by an improvement in global and domestic equity markets and depreciation of the Japanese yen in relation to the euro and the U.S. dollar, partially offset by a decrease in interest rates.

•

For the three and nine months ended September 30, 2012 the net gain related to the combined U.S. GMWB hedging program, which includes the U.S. GMWB product, reinsurance, and hedging derivatives, was primarily a result of a liability model assumption update related to lower benefit utilization by policyholders, a decrease in equity volatility, and outperformance of the underlying actively managed funds as compared to their respective indices.


•	For the three and nine months ended September 30, 2012 the net gain related to credit derivatives that assume credit risk was primarily due to the credit spread tightening.


•	For the nine months ended September 30, 2012 the net loss related to the Japan 3Win foreign currency swaps was primarily due to a decline in U.S. interest rates, depreciation of the Japanese yen in relation to the U.S. dollar and strengthening of the currency basis swap spread between U.S. dollar and Japanese yen.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

For the three and nine months ended September 30, 2011 , the net realized capital gain (loss) related to derivatives used in non-qualifying strategies was primarily comprised of the following:


•	The net gain associated with the international program hedging instruments was primarily due to a decrease in equity markets and foreign currency movements, primarily the Japanese yen strengthening in comparison to the euro.


•	The loss related to the combined U.S. GMWB hedging program, which includes the U.S. GMWB product, reinsurance, and hedging derivatives, was primarily a result of a general decrease in long-term interest rates and higher interest rate volatility.


•	The loss on credit derivatives that assume credit risk was primarily due to credit spread widening.


•	The net gain related to the Japanese fixed annuity hedging instruments was primarily due to the U.S. dollar weakening in comparison to the Japanese yen.

Refer to Note 9 for additional disclosures regarding contingent credit related features in derivative agreements.

Credit Risk Assumed through Credit Derivatives

The Company enters into credit default swaps that assume credit risk of a single entity, referenced index, or asset pool in order to synthetically replicate investment transactions. The Company will receive periodic payments based on an agreed upon rate and notional amount and will only make a payment if there is a credit event. A credit event payment will typically be equal to the notional value of the swap contract less the value of the referenced security issuer’s debt obligation after the occurrence of the credit event. A credit event is generally defined as a default on contractually obligated interest or principal payments or bankruptcy of the referenced entity. The credit default swaps in which the Company assumes credit risk primarily reference investment grade single corporate issuers and baskets, which include standard and customized diversified portfolios of corporate issuers. The diversified portfolios of corporate issuers are established within sector concentration limits and may be divided into tranches that possess different credit ratings.

The following tables present the notional amount, fair value, weighted average years to maturity, underlying referenced credit obligation type and average credit ratings, and offsetting notional amounts and fair value for credit derivatives in which the Company is assuming credit risk as of September 30, 2012 and December 31, 2011 .

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Investments and Derivative Instruments (continued)

As of September 30, 2012



							Underlying Referenced Credit Obligation(s) [1]
Credit Derivative type by derivative risk exposure	Notional Amount [2]		Fair Value			Weighted Average Years to Maturity	Type	Average Credit Rating	Offsetting Notional Amount [3]		Offsetting Fair Value [3]
Single name credit default swaps
Investment grade risk exposure	$	2,402	$	(7	)	3 years	Corporate Credit/ Foreign Gov.	A	$	1,368	$	(30	)
Below investment grade risk exposure	144		(1		)	1 year	Corporate Credit	BB-	144		(4		)
Basket credit default swaps [4]
Investment grade risk exposure	4,434		(10		)	4 years	Corporate Credit	BBB+	2,677		(4		)
Investment grade risk exposure	330		(24		)	4 years	CMBS Credit	A	330		24
Below investment grade risk exposure	353		(282		)	3 years	Corporate Credit	BB	—		—
Below investment grade risk exposure	195		(54		)	4 years	CMBS Credit	B+	195		54
Embedded credit derivatives
Investment grade risk exposure	225		205			4 years	Corporate Credit	BBB-	—		—
Below investment grade risk exposure	300		264			4 years	Corporate Credit	BB+	—		—
Total	$	8,383	$	91					$	4,714	$	40

As of December 31, 2011



							Underlying Referenced Credit Obligation(s) [1]
Credit Derivative type by derivative risk exposure	Notional Amount [2]		Fair Value			Weighted Average Years to Maturity	Type	Average Credit Rating	Offsetting Notional Amount [3]		Offsetting Fair Value [3]
Single name credit default swaps
Investment grade risk exposure	$	1,628	$	(34	)	3 years	Corporate Credit/ Foreign Gov.	A+	$	1,424	$	(15	)
Below investment grade risk exposure	170		(7		)	2 years	Corporate Credit	BB-	144		(5		)
Basket credit default swaps [4]
Investment grade risk exposure	3,645		(92		)	3 years	Corporate Credit	BBB+	2,001		29
Investment grade risk exposure	525		(98		)	5 years	CMBS Credit	BBB+	525		98
Below investment grade risk exposure	553		(509		)	3 years	Corporate Credit	BBB+	—		—
Embedded credit derivatives
Investment grade risk exposure	25		24			3 years	Corporate Credit	BBB-	—		—
Below investment grade risk exposure	500		411			5 years	Corporate Credit	BB+	—		—
Total	$	7,046	$	(305	)				$	4,094	$	107


[1]	The average credit ratings are based on availability and the midpoint of the applicable ratings among Moody’s, S&P, and Fitch. If no rating is available from a rating agency, then an internally developed rating is used.


[2]	Notional amount is equal to the maximum potential future loss amount. There is no specific collateral related to these contracts or recourse provisions included in the contracts to offset losses.


[3]	The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap.

[4]

Includes $ 5.0 billion and $ 4.2 billion as of September 30, 2012 and December 31, 2011 , respectively, of standard market indices of diversified portfolios of corporate issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index. Also includes $ 353 and $ 533 as of September 30, 2012 and December 31, 2011 , respectively, of customized diversified portfolios of corporate issuers referenced through credit default swaps.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

6. Deferred Policy Acquisition Costs and Present Value of Future Profits

The Company capitalizes policy acquisition costs that are directly related to the successful acquisition of new and renewal insurance contracts in accordance with ASU No. 2010-26. On January 1, 2012, the Company adopted ASU No. 2010-26 as further discussed in Note 1 of the Notes to Condensed Consolidated Financial Statements. As a result of this change in accounting policy, deferred policy acquisition costs and present value of future profits as of January 1, 2011 decreased by approximately $2.4 billion from $9.9 billion , as previously reported.



Changes in the DAC balance are as follows:	Nine Months Ended September 30,
	2012			2011
Balance, beginning of period, as currently reported	$	6,556		$	7,473
Deferred Costs	1,251			1,271
Amortization – DAC	(1,397		)	(1,660		)
Amortization – Unlock charge, pre-tax	(44		)	(387		)
Adjustments to unrealized gains and losses on securities available-for-sale and other [1]	(408		)	(223		)
Effect of currency translation	(11		)	73
Balance, end of period	$	5,947		$	6,547

[1] Other includes a $ 16 reduction of the DAC asset as a result of the sale of assets used to administer the Company's PPLI business in 2012. The reduction is directly attributable to this transaction as it results in lower future estimated gross profits than originally estimated on these products. For further information regarding this transaction see Note 17 of the Notes to Condensed Consolidated Financial Statements.

7. Separate Accounts, Death Benefits and Other Insurance Benefit Features

U.S. GMDB, International GMDB/GMIB, and UL Secondary Guarantee Benefits

Changes in the gross U.S. GMDB, International GMDB/GMIB, and UL secondary guarantee benefits are as follows:



	U.S. GMDB			International GMDB/GMIB			UL Secondary Guarantees
Liability balance as of January 1, 2012	$	1,104		$	975		$	228
Incurred	159			100			84
Paid	(141		)	(146		)	—
Unlock	(198		)	13			21
Currency translation adjustment	—			(17		)	—
Liability balance as of September 30, 2012	$	924		$	925		$	333
Reinsurance recoverable asset, as of January 1, 2012	$	724		$	40		$	22
Incurred	90			8			(2		)
Paid	(90		)	(21		)	—
Unlock	(108		)	18			—
Currency translation adjustment	—			—			—
Reinsurance recoverable asset, as of September 30, 2012	$	616		$	45		$	20



	U.S. GMDB			International GMDB/GMIB			UL Secondary Guarantees
Liability balance as of January 1, 2011	$	1,053		$	696		$	113
Incurred	171			91			29
Paid	(156		)	(116		)	—
Unlock	171			250			66
Currency translation adjustment	—			33			—
Liability balance as of September 30, 2011	$	1,239		$	954		$	208
Reinsurance recoverable asset, as of January 1, 2011	$	686		$	36		$	30
Incurred	99			14			(10		)
Paid	(101		)	(21		)	—
Unlock	113			11			—
Currency translation adjustment	—			2			—
Reinsurance recoverable asset, as of September 30, 2011	$	797		$	42		$	20

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. Separate Accounts, Death Benefits and Other Insurance Benefit Features (continued)

The following table provides details concerning GMDB and GMIB exposure as of September 30, 2012 :



Individual Variable and Group Annuity Account Value by GMDB/GMIB Type
Maximum anniversary value (“MAV”) [1]	Account Value (“AV”) [8]		Net Amount at Risk (“NAR”) [10]		Retained Net Amount at Risk (“RNAR”) [10]		Weighted Average Attained Age of Annuitant
MAV only	$	20,175	$	4,204	$	851	69
With 5% rollup [2]	1,484		392		121		69
With Earnings Protection Benefit Rider (“EPB”) [3]	5,159		619		83		66
With 5% rollup & EPB	576		131		28		69
Total MAV	27,394		5,346		1,083
Asset Protection Benefit (“APB”) [4]	20,816		1,282		836		67
Lifetime Income Benefit (“LIB”) – Death Benefit [5]	1,085		42		42		65
Reset [6] (5-7 years)	3,165		158		157		69
Return of Premium (“ROP”) [7]/Other	22,147		381		362		66
Subtotal U.S. GMDB	74,607		7,209		2,480		67
Less: General Account Value with U.S. GMDB	7,380
Subtotal Separate Account Liabilities with U.S. GMDB	67,227
Separate Account Liabilities without U.S. GMDB	81,142
Total Separate Account Liabilities	$	148,369
Japan GMDB [9], [11]	$	28,725	$	9,107	$	7,882	70
Japan GMIB [9], [11]	$	26,917	$	6,092	$	6,092	70


[1]	MAV GMDB is the greatest of current AV, net premiums paid and the highest AV on any anniversary before age 80 years (adjusted for withdrawals).


[2]	Rollup GMDB is the greatest of the MAV, current AV, net premium paid and premiums (adjusted for withdrawals) accumulated at generally 5% simple interest up to the earlier of age 80 years or 100% of adjusted premiums.


[3]	EPB GMDB is the greatest of the MAV, current AV, or contract value plus a percentage of the contract’s growth. The contract’s growth is AV less premiums net of withdrawals, subject to a cap of 200% of premiums net of withdrawals.


[4]	APB GMDB is the greater of current AV or MAV, not to exceed current AV plus 25% times the greater of net premiums and MAV (each adjusted for premiums in the past 12 months ).


[5]	LIB GMDB is the greatest of current AV, net premiums paid, or for certain contracts a benefit amount that ratchets over time, generally based on market performance.


[6]	Reset GMDB is the greatest of current AV, net premiums paid and the most recent five to seven year anniversary AV before age 80 years (adjusted for withdrawals).


[7]	ROP GMDB is the greater of current AV or net premiums paid.


[8]	AV includes the contract holder’s investment in the separate account and the general account.

[9]

GMDB includes a ROP and MAV (before age 80 years ) paid in a single lump sum. GMIB is a guarantee to return initial investment, adjusted for earnings liquidity which allows for free withdrawal of earnings, paid through a fixed payout annuity, after a minimum deferral period of 10 years , 15 years or 20 years . The GRB related to the Japan GMIB was $32.3 billion and $34.1 billion as of September 30, 2012 and December 31, 2011 , respectively. The GRB related to the Japan GMAB and GMWB was $657 as of September 30, 2012 and $701 as of December 31, 2011 . These liabilities are not included in the Separate Account as they are not legally insulated from the general account liabilities of the insurance enterprise. As of September 30, 2012 , 54% of the GMDB RNAR and 64% of the GMIB NAR is reinsured to a Hartford affiliate, as a result, the effects of the reinsurance are not reflected in this disclosure.


[10]	NAR is defined as the guaranteed benefit in excess of the current AV. RNAR represents NAR reduced for reinsurance. NAR and RNAR are highly sensitive to equity markets movements and increase when equity markets decline. Additionally Japan’s NAR and RNAR are highly sensitive to currency movements and increase when the Yen strengthens.


[11]	Policies with a guaranteed living benefit (GMIB in Japan) also have a guaranteed death benefit. The NAR for each benefit is shown in the table above, however these benefits are not additive. When a policy terminates due to death, any NAR related to GMWB or GMIB is released. Similarly, when a policy goes into benefit status on a GMWB or GMIB, its GMDB NAR is released.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. Separate Accounts, Death Benefits and Other Insurance Benefit Features (continued)

In the U.S., account balances of contracts with guarantees were invested in variable separate accounts as follows:



Asset type	As of September 30, 2012		As of December 31, 2011
Equity securities (including mutual funds)	$	60,631	$	61,472
Cash and cash equivalents	6,596		7,516
Total	$	67,227	$	68,988

As of September 30, 2012 and December 31, 2011 , approximately 17% and 17% , respectively, of the equity securities above were invested in fixed income securities through these funds and approximately 83% and 83% , respectively, were invested in equity securities through these funds.

See Note 4 for further information on guaranteed living benefits that are accounted for at fair value, such as GMWB.

8. Sales Inducements



Changes in sales inducement activity are as follows:	Nine Months Ended September 30,
	2012			2011
Balance, beginning of period	$	434		$	459
Sales inducements deferred	10			15
Amortization—Unlock	(68		)	(19		)
Amortization charged to income	(26		)	(31		)
Balance, end of period	$	350		$	424

9. Commitments and Contingencies

Litigation

The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending or providing indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford accounts for such activity through the establishment of unpaid loss and loss adjustment expense reserves. Subject to the uncertainties discussed below under the caption “Asbestos and Environmental Claims,” management expects that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition, results of operations or cash flows of The Hartford.

The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. These actions include, among others, and in addition to the matters described below, putative state and federal class actions seeking certification of a state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper underwriting practices in connection with various kinds of insurance policies, such as personal and commercial automobile, property, disability, life and inland marine. The Hartford also is involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims or other allegedly unfair or improper business practices. Like many other insurers, The Hartford also has been joined in actions by asbestos plaintiffs asserting, among other things, that insurers had a duty to protect the public from the dangers of asbestos and that insurers committed unfair trade practices by asserting defenses on behalf of their policyholders in the underlying asbestos cases. Management expects that the ultimate liability, if any, with respect to such lawsuits, after consideration of provisions made for estimated losses, will not be material to the consolidated financial condition of The Hartford. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, the outcome in certain matters could, from time to time, have a material adverse effect on the Company’s results of operations or cash flows in particular quarterly or annual periods.

Apart from the inherent difficulty of predicting litigation outcomes, the Mutual Funds Litigation identified below purports to seek substantial damages for unsubstantiated conduct spanning a multi-year period based on novel and complex legal theories. The alleged damages are not quantified or factually supported in the complaint, and, in any event, the Company’s experience shows that demands for damages often bear little relation to a reasonable estimate of potential loss. The matter is in the earliest stages of litigation, with no substantive legal decisions by the court defining the scope of the claims or the potentially available damages. The Company has not yet answered the complaint or asserted its defenses, and fact discovery has not yet begun. Accordingly, management cannot reasonably estimate the possible loss or range of loss, if any, or predict the timing of the eventual resolution of this matter.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

9. Commitments and Contingencies (continued)

Mutual Funds Litigation — In February 2011, a derivative action was brought on behalf of six Hartford retail mutual funds in the United States District Court for the District of New Jersey, alleging that Hartford Investment Financial Services, LLC (“HIFSCO”), an indirect subsidiary of the Company, received excessive advisory and distribution fees in violation of its statutory fiduciary duty under Section 36(b) of the Investment Company Act of 1940. HIFSCO moved to dismiss and, in September 2011, the motion was granted in part and denied in part, with leave to amend the complaint. In November 2011, plaintiffs filed an amended complaint on behalf of The Hartford Global Health Fund, The Hartford Conservative Allocation Fund, The Hartford Growth Opportunities Fund, The Hartford Inflation Plus Fund, The Hartford Advisors Fund, and The Hartford Capital Appreciation Fund. Plaintiffs seek to rescind the investment management agreements and distribution plans between HIFSCO and these funds and to recover the total fees charged thereunder or, in the alternative, to recover any improper compensation HIFSCO received, in addition to lost earnings. HIFSCO disputes the allegations and has filed a partial motion to dismiss.

Asbestos and Environmental Claims – As discussed in Note 12, Commitments and Contingencies, of the Notes to Consolidated Financial Statements under the caption “Asbestos and Environmental Claims”, included in the Company’s 2011 Form 10-K Annual Report, The Hartford continues to receive asbestos and environmental claims that involve significant uncertainty regarding policy coverage issues. Regarding these claims, The Hartford continually reviews its overall reserve levels and reinsurance coverages, as well as the methodologies it uses to estimate its exposures. Because of the significant uncertainties that limit the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid losses and related expenses, particularly those related to asbestos, the ultimate liabilities may exceed the currently recorded reserves. Any such additional liability cannot be reasonably estimated now but could be material to The Hartford’s consolidated operating results, financial condition and liquidity.

Derivative Commitments

Certain of the Company’s derivative agreements contain provisions that are tied to the financial strength ratings of the individual legal entity that entered into the derivative agreement as set by nationally recognized statistical rating agencies. If the legal entity’s financial strength were to fall below certain ratings, the counterparties to the derivative agreements could demand immediate and ongoing full collateralization and in certain instances demand immediate settlement of all outstanding derivative positions traded under each impacted bilateral agreement. The settlement amount is determined by netting the derivative positions transacted under each agreement. If the termination rights were to be exercised by the counterparties, it could impact the legal entity’s ability to conduct hedging activities by increasing the associated costs and decreasing the willingness of counterparties to transact with the legal entity. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a net liability position as of September 30, 2012 , is $ 566 . Of this $ 566 the legal entities have posted collateral of $ 589 in the normal course of business. Based on derivative market values as of September 30, 2012 , a downgrade of one level below the current financial strength ratings by either Moody’s or S&P could require approximately an additional $ 22 to be posted as collateral. Based on derivative market values as of September 30, 2012 , a downgrade by either Moody’s or S&P of two levels below the legal entities’ current financial strength ratings could require approximately an additional $ 41 of assets to be posted as collateral. These collateral amounts could change as derivative market values change, as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated. The nature of the collateral that we would post, if required, would be primarily in the form of U.S. Treasury bills and U.S. Treasury notes.

On March 21, 2012, Standard & Poor’s (“S&P”) Rating Services lowered its counterparty credit and insurer financial strength ratings on Hartford Life and Annuity Insurance Company to BBB+. Given this downgrade action, termination rating triggers in three derivative counterparty relationships were impacted. The Company has re-negotiated the rating triggers with two of the counterparties and is in the process of re-negotiating the rating triggers with the remaining counterparty. As of September 30, 2012 , the notional amount and fair value related to the one counterparty in which the rating trigger is still in process of re-negotiation is $ 1.0 billion and $ 35 , respectively. This counterparty has the right to terminate this relationship and would have to settle the outstanding derivatives prior to exercising their termination right. Accordingly, as of September 30, 2012 this counterparty would owe the Company the derivatives fair value of $ 35 . The counterparty has not exercised this termination right.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

10. Employee Benefit Plans

On April 23, 2012 , the Company, approved changes to The Hartford Retirement Plan for U.S. Employees ("The Plan") its non-contributory, tax qualified defined benefit pension plan, to freeze participation and benefit accruals. As a result, employees will not accrue further benefits under the cash balance formula of the plan, although interest will continue to accrue to existing account balances. The freeze will be effective December 31, 2012 . Compensation earned by employees up to December 31, 2012 shall be used for purposes of calculating benefits under the Plan but there will be no future benefit accruals after this date. Participants as of December 31, 2012 will continue to earn vesting credit with respect to their frozen accrued benefits as they continue to work. The freeze also applies to The Hartford Excess Pension Plan II, the Company's non-qualified excess benefit plan for certain highly compensated employees, effective December 31, 2012. The Company announced these changes in April 2012.

As a result of these actions, the Company remeasured the pension benefit obligations of the affected plans effective April 30, 2012 , causing an increase in the pension benefit obligation of $117 pre-tax with a decrease in accumulated other comprehensive income of $76 after-tax in the second quarter of 2012 . The increase primarily reflects a decrease in the discount rates used to remeasure the pension plan obligation from 4.75% at December 31, 2011 to 4.50% at April 30, 2012 , reflecting the change in market interest rates. The expected long-term rate of return of 7.3% remains unchanged from December 31, 2011. A curtailment of benefits occurs as a result of this action because it eliminates all future service for active employees in the domestic pension plans. Accordingly, the Company recognized an after-tax curtailment gain of $ 7 during the second quarter of 2012 , which is the remaining unamortized prior service cost at April 30, 2012 .

Effective January 1, 2013, the Company will increase benefits under The Hartford’s Investment and Savings Plan, its defined contribution 401(k) savings plan, and The Hartford Excess Savings Plan. The Company's contributions will be increased to include a non-elective contribution of 2% of eligible compensation and a dollar-for-dollar matching contribution of up to 6.00% of eligible compensation contributed by the employee each pay period. Eligible compensation will be expanded to include overtime and bonuses. The plan will qualify for a “safe harbor” from annual discrimination testing. Currently, employee contributions of up to 6.00% of base pay are matched at a 50% rate, by the Company. Additionally, in 2012, employees who had earnings of less than $110,000 in the preceding year receive a floor contribution of 1.5% of base pay and employees who had earnings of $110,000 or more in the preceding year receive a floor contribution of 0.5% of base pay.

Also, in April 2012 changes to the Company's other postretirement medical, dental and life insurance coverage plans ("other postretirement plans") were approved to no longer provide subsidized coverage for current employees who retire on or after January 1, 2014 . The Company announced these changes in April 2012.

As a result of these actions, the Company remeasured the other postretirement benefit obligations effective April 30, 2012 , causing a decrease in the other postretirement plans benefit liability of $111 pre-tax with an increase in accumulated other comprehensive income of $72 after-tax in the second quarter of 2012 . The decrease is primarily a result of the plan change which eliminates benefits and service costs for all employees eligible to retire as of January 1, 2014 offset by a decrease in the discount rates used to remeasure the other postretirement plans obligations from 4.50% at December 31, 2011 to 4.00% at April 30, 2012 reflecting the change in market interest rates. A curtailment of benefits occurs as a result of this action because it eliminates all future service for active employees in the domestic other postretirement plans. Accordingly, the Company recognized an after-tax curtailment gain of less than less than $1 , during the second quarter of 2012 , which is the remaining unamortized prior service cost at April 30, 2012 .

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

10. Employee Benefit Plans (continued)

Components of Net Periodic Benefit Cost

Net periodic benefit cost includes the following components:



	Pension Benefits						Other Postretirement Benefits
	Three Months Ended September 30,						Three Months Ended September 30,
	2012			2011			2012			2011
Service cost	$	20		$	24		$	—		$	2
Interest cost	64			64			3			5
Expected return on plan assets	(78		)	(74		)	(4		)	(3		)
Amortization of prior service credit	(2		)	(2		)	(2		)	(1		)
Amortization of actuarial loss	52			40			—			—
Curtailment gain due to plan freeze	—			—			—			—
Net periodic benefit cost	$	56		$	52		$	(3	)	$	3



	Pension Benefits						Other Postretirement Benefits
	Nine Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Service cost	$	70		$	76		$	2		$	4
Interest cost	188			194			11			15
Expected return on plan assets	(234		)	(223		)	(11		)	(10		)
Amortization of prior service credit	(7		)	(7		)	(3		)	(1		)
Amortization of actuarial loss	171			119			—			—
Curtailment gain due to plan freeze	(11		)	—			—			—
Net periodic benefit cost	$	177		$	159		$	(1	)	$	8

11. Stock Compensation Plans

The Company’s stock-based compensation plans include The Hartford 2010 Incentive Stock Plan, The Hartford Employee Stock Purchase Plan and The Hartford Deferred Stock Unit Plan. For a description of these plans, see Note 18 of the Notes to Consolidated Financial Statements included in The Hartford’s 2011 Form 10-K Annual Report.

Shares issued in satisfaction of stock-based compensation may be made available from authorized but unissued shares, shares held by the Company in treasury or from shares purchased in the open market. The Company typically issues shares from treasury in satisfaction of stock-based compensation.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Stock-based compensation plans (benefit)/expense	$	20		$	(16	)	$	73		$	30
Income tax (benefit)/expense	(7		)	6			(25		)	(11		)
Total stock-based compensation plans (benefit)/expense, net of tax	$	13		$	(10	)	$	48		$	19

In 2010 and 2009, the Company issued awards that will ultimately be settled in cash. As a result, these awards are re-measured at the end of each reporting period until settlement.

The Company did not capitalize any cost of stock-based compensation. As of September 30, 2012 , the total compensation cost related to non-vested awards not yet recognized was $95 , which is expected to be recognized over a weighted average period of 1.9 years .

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

12. Discontinued Operations

The following table presents the combined amounts related to the operations of Federal Trust Corporation and Specialty Risk Services, which have been reflected as discontinued operations in the Condensed Consolidated Statements of Operations. For further explanation of the Company’s discontinued operations refer to Note 20 of the Notes to Consolidated Financial Statements in The Hartford’s 2011 Form 10-K Annual Report.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues
Fee income	$	—		$	(1	)	$	—		$	—
Net investment income	—			5			—			16
Net realized capital losses	—			—			—			(5		)
Other revenues	—			—			—			47
Total revenues	—			4			—			58
Benefits, losses and expenses
Insurance operating costs and other expenses	2			5			5			51
Total benefits, losses and expenses	2			5			5			51
Income (loss) before income taxes	(2		)	(1		)	(5		)	7
Income tax expense (benefit)	(1		)	—			(2		)	2
Income (loss) from operations of discontinued operations, net of tax	(1		)	(1		)	(3		)	5
Net realized capital gain (loss) on disposal, net of tax	(1		)	4			(1		)	80
Income (loss) from discontinued operations, net of tax	$	(2	)	$	3		$	(4	)	$	85

13. Goodwill

The carrying value of goodwill allocated to reporting units is as follows:



	September 30, 2012									December 31, 2011
	Gross		Accumulated Impairments			Discontinued Operations		Carrying Value		Gross		Accumulated Impairments			Discontinued Operations [1]			Carrying Value
Commercial Markets
Property and Casualty Commercial	$	30	$	(30	)	$	—	$	—	$	30	$	(30	)	$	—		$	—
Consumer Markets	119		—			—		119		119		—			—			119
Wealth Management
Individual Life	224		—			—		224		224		—			—			224
Retirement Plans	87		—			—		87		87		—			—			87
Mutual Funds	159		—			—		159		159		—			—			159
Total Wealth Management	470		—			—		470		470		—			—			470
Corporate	772		(355		)	—		417		787		(355		)	(15		)	417
Total Goodwill	$	1,391	$	(385	)	$	—	$	1,006	$	1,406	$	(385	)	$	(15	)	$	1,006


[1]	Represents goodwill written off related to Federal Trust Corporation which is currently recorded in discontinued operations.

During the first quarter of 2012, the Company determined that a triggering event requiring an impairment assessment had occurred as a result of its decision to pursue sales or other strategic alternatives for the Individual Life and Retirement Plans reporting units. The Company completed interim impairment tests during each of the first three quarters of 2012 for these two reporting units which resulted in no impairment of goodwill.

Retirement Plans and Individual Life passed step one of the interim goodwill impairment test with a margin of less than 10% between fair value and book value of the reporting unit as of September 30, 2012. The fair value of the Retirement Plans and Individual Life reporting units is based on a negotiated transaction price. There could be a positive or negative impact on the result of step one in future periods based on ultimate transaction prices, market conditions and business operations.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

14. Debt

Senior Notes

On April 5, 2012, the Company issued $1.55 billion aggregate principal amount of senior notes. The issuance consisted of $325 of 4% senior notes due 2017, $800 of 5.125% senior notes due 2022 and $425 of 6.625% senior notes due 2042 (collectively, the “Senior Notes”) for net proceeds of approximately $1.5 billion , after deducting underwriting discounts and offering expenses. The Senior Notes bear interest at their respective rate, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2012.

Junior Subordinated Debentures

On April 17, 2012, the Company (i) repurchased all outstanding 10% fixed-to-floating rate junior subordinated debentures due 2068 with a $1.75 billion aggregate principal amount held by Allianz SE (“Allianz”) (the “10% Debentures”) for $2.125 billion (plus a payment by the Company of unpaid interest on the 10% Debentures) and (ii) settled the repurchase of the Series B and Series C warrants held by Allianz to purchase shares of the Company’s common stock, see Note 15. In addition, the 10% Debentures replacement capital covenant (the “10% Debentures RCC”) was terminated on April 12, 2012 with the consent of the holders of a majority in aggregate principal amount of the Company’s outstanding 6.1% senior notes due 2041. Upon closing, the Company recognized a loss on extinguishment in the second quarter of 2012 of $ 587 , after-tax, representing the premium associated with repurchasing the 10% Debentures at an amount greater than the face amount, the write-off of the unamortized discount and debt issuance costs related to the 10% Debentures and other costs related to the repurchase transaction. On April 5, 2012, the Company issued $600 aggregate principal amount of 7.875% fixed-to-floating rate junior subordinated debentures due 2042 (the “Debentures”) for net proceeds of approximately $586 , after deducting underwriting discounts and offering expenses. The Company financed the repurchase of the 10% Debentures through the issuance of the Senior Notes and the Debentures.

The Debentures bear interest from the date of issuance to but excluding April 15, 2022 at an annual rate of 7.875%, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, commencing on July 15, 2012, to and including April 15, 2022. Commencing on April 15, 2022 the Debentures bear interest at an annual rate equal to three-month LIBOR, reset quarterly, plus 5.596%, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, commencing on July 15, 2022. The Company has the right, on one or more occasions, to defer the payment of interest on the Debentures. The Company may defer interest for up to ten consecutive years without giving rise to an event of default. Deferred interest will accumulate additional interest at an annual rate equal to the annual interest rate then applicable to the Debentures. If the Company defers interest payments on the Debentures, the Company generally may not make payments on or redeem or purchase any shares of its capital stock or any of its debt securities or guarantees that rank upon liquidation, dissolution or winding up equally with or junior to the Debentures, subject to certain limited exceptions.

The Company may elect to redeem the Debentures in whole at any time or in part from time to time on or after April 15, 2022, at a redemption price equal to the principal amount of the Debentures being redeemed plus accrued and unpaid interest to but excluding the date of redemption. If the Debentures are not redeemed in whole, at least $25 aggregate principal amount of the Debentures must remain outstanding after giving effect to such redemption. The Debentures may be redeemed in whole at any time prior to April 15, 2022, within 90 days of the occurrence of a tax event or rating agency event, at a redemption price equal to the greater of (i) the principal amount of the Debentures being redeemed, or (ii) the present value of the (a) outstanding principal and (b) remaining scheduled payments of interest that would have been payable from the redemption date to and including April 15, 2022 on the Debentures to be redeemed (not including any portion of such payments of interest accrued and unpaid to but excluding the redemption date), discounted from their respective interest payment dates to but excluding the redemption date at a discount rate equal to the Treasury Rate plus a spread of 0.7% , in each case, plus accrued and unpaid interest to but excluding the redemption date.

The Debentures are unsecured, subordinated and junior in right of payment and upon liquidation to all of the Company’s existing and future senior indebtedness. In addition, the Debentures are effectively subordinated to all of the Company’s subsidiaries’ existing and future indebtedness and other liabilities, including obligations to policyholders. The Debentures do not limit the Company’s or the Company’s subsidiaries’ ability to incur additional debt, including debt that ranks senior in right of payment and upon liquidation to the Debentures.

The Debentures rank equally in right of payment and upon liquidation with (i) any indebtedness the terms of which provide that such indebtedness ranks equally with the Debentures, including guarantees of such indebtedness, (ii) the Company’s existing 8.125% fixed-to-floating rate junior subordinated debentures due 2068 (the “8.125% Debentures”), (iii) the Company’s Income Capital Obligation Notes due 2067, issuable pursuant to the Junior Subordinated Indenture, dated as of February 12, 2007, between us and Wilmington Trust Company (the “ICON securities”), (iv) our trade accounts payable, and (v) any of our indebtedness owed to a person who is our subsidiary or employee.

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

14. Debt (continued)

Revolving Credit Facility

In January 2012, the Company entered into a senior unsecured revolving credit facility (the “Credit Facility”) that provides for borrowing capacity up to $1.75 billion (which is available in U.S. dollars, and in Euro, Sterling, Canadian dollars and Japanese Yen) through January 6, 2016. Of the total availability under the Credit Facility, up to $250 is available to support letters of credit issued on behalf of the Company or subsidiaries of the Company. Under the Credit Facility, the Company must maintain a minimum level of consolidated net worth of $14.9 billion . The definition of consolidated net worth under the terms of the Credit Facility, excludes AOCI and includes the Company’s outstanding junior subordinated debentures and perpetual preferred securities, net of discount. In addition, the Company’s maximum ratio of consolidated total debt to consolidated total capitalization is 35% , and the ratio of consolidated total debt of subsidiaries to consolidated total capitalization is limited to 10% . As of September 30, 2012 , the Company was in compliance with all financial covenants under the Credit Facility.

15. Equity

During the nine months ended September 30, 2012 , the Company completed a $500 equity repurchase program authorized on July 27, 2011 by the Board of Directors that permitted for purchases of common stock, as well as warrants and other derivative securities. In addition to repurchases that occurred in 2011, the repurchases in 2012 included 8.0 million common shares for $ 149 , and the repurchase of all outstanding Series B and Series C warrants held by Allianz for $300 .

On March 30, 2012 the Company repurchased all of the outstanding Series B and Series C warrants (collectively, the “warrants”) held by Allianz for $300 . These warrants authorized Allianz to purchase 69,351,806 shares of the Company’s common stock at an exercise price of $25.23 per share. The repurchase was settled on April 17, 2012 .

16. Restructuring and Other Costs

As a result of a strategic business evaluation, the Company is currently focusing on its Property and Casualty, Group Benefits and Mutual Fund businesses. In the third quarter of 2012, the Company entered into definitive agreements to sell its Individual Life and Retirement Plans businesses and Woodbury Financial Services. In addition, the Company's existing Individual Annuity business has been placed into runoff. For further discussion of the Company's strategic business evaluation and these transactions, see Note 1 of the Notes to Condensed Consolidated Financial Statements.

These actions, in addition to previously disclosed restructuring activities aimed at reducing overall expense levels, will result in termination benefits to current employees not transitioned to the buyers whose roles are impacted by the Company's continued alignment with its current business plans, costs to terminate leases and other contracts and asset impairment charges. The Company intends to complete much of these restructuring activities over the next 12 - 18 months.

Termination benefits related to workforce reductions and lease and other contract terminations have been accrued through September 30, 2012 . Additional costs are expected to be incurred in subsequent quarters and such costs will be accrued when appropriate. Asset impairment charges were recorded in the nine months ended September 30, 2012 and will be recorded in subsequent quarters, as appropriate.

The total costs associated with restructuring and other are currently expected to be approximately $ 250 , pre-tax, with the additional costs attributable mainly to severance and other related costs and professional fees. Actual costs associated with restructuring may differ from these estimates as the Company executes on its operational and strategic initiatives.

Restructuring and other costs, pre-tax incurred in connection with these activities are as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Severance benefits and related costs	$	38	$	11	$	76	$	11
Professional fees	15		—		28		—
Asset impairment charges	—		—		5		—
Other contract termination charges	—		3		1		3
Total restructuring and other costs	$	53	$	14	$	110	$	14

Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

16. Restructuring and Other Costs (continued)

The following table presents restructuring costs, included in insurance operating costs and other expenses in the Condensed Consolidated Statements of Operations for each reporting segment, as well as the Corporate category.



	Three Months Ended September 30,				Nine Months Ended September 30,				Total Estimated Costs
	2012		2011		2012		2011
Property & Casualty Commercial	$	1	$	—	$	5	$	—	$	7
Group Benefits	1		—		1		—		1
Consumer Markets	—		—		1		—		3
Individual Life	18		—		25		—		30
Retirement Plans	10		—		14		—		16
Mutual Funds	1		—		2		—		4
Life Other Operations	5		—		8		—		12
Corporate	17		14		54		14		177
Total restructuring and other costs	$	53	$	14	$	110	$	14	$	250

Changes in the accrued restructuring liability balance included in other liabilities in the Condensed Consolidated Balance Sheets are as follows:



	Nine Months Ended September 30, 2012
	Severance Benefits and Related Costs			Professional Fees			Asset impairment charges			Other Contract Termination Charges			Total Restructuring and Other Costs
Balance, beginning of period	$	12		$	—		$	—		$	5		$	17
Accruals/provisions	76			28			5			1			110
Payments/write-offs	(67		)	(19		)	(5		)	(5		)	(96		)
Balance, end of period	$	21		$	9		$	—		$	1		$	31

17. Sale of Assets

Servicing Agreement of Hartford Life Private Placement LLC

On July 13, 2012, the Company closed a sale transaction with Philadelphia Financial Group, Inc. (“Philadelphia Financial”) whereby Philadelphia Financial acquired certain assets used to administer the Company's private placement life insurance (“PPLI”) businesses and will service the PPLI businesses. The Company retained certain corporate functions associated with this business as well as the mortality risk on the insurance policies. Upon closing, the Company recorded a deferred gain of $61 after-tax, which will be amortized over the estimated life of the underlying insurance policies. The PPLI business is included in the Life Other Operations reporting segment.

Table of Contents

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

(Dollar amounts in millions except share data unless otherwise stated)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) addresses the financial condition of The Hartford Financial Services Group, Inc. and its subsidiaries (collectively, “The Hartford” or the “Company”) as of September 30, 2012 , compared with December 31, 2011 , and its results of operations for the three months ended September 30, 2012 , compared to the equivalent 2011 period. This discussion should be read in conjunction with the MD&A in The Hartford’s 2011 Form 10-K Annual Report. Certain reclassifications have been made to prior period financial information to conform to the current period classifications. Also, prior period amounts have been retrospectively reclassified to reflect discontinued operations, see Note 12 of the Notes to Condensed Consolidated Financial Statements for further information on discontinued operations.

On January 1, 2012, the Company retrospectively adopted Accounting Standards Update (“ASU”) No. 2010-26, Financial Services – Insurance (Topic 944): Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts which clarifies the definition of policy acquisition costs that are eligible for deferral. Previously reported financial information has been revised to reflect the effect of the Company’s adoption of this accounting standard. For further information regarding the effect of adoption of this accounting standard, see Note 1 and Note 6 of the Notes to Condensed Consolidated Financial Statements.

The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as “NM” or not meaningful.

INDEX



Description	Page
Consolidated Results of Operations	70
Outlooks	74
Critical Accounting Estimates	75
The Hartford’s Operations Overview	86
Key Performance Measures and Ratios	86
Property & Casualty Commercial	94
Group Benefits	96
Consumer Markets	97
Individual Life	99
Retirement Plans	100
Mutual Funds	101
Life Other Operations	102
Property & Casualty Other Operations	104
Corporate	105
Enterprise Risk Management	106
Capital Resources and Liquidity	127
Impact of New Accounting Standards	134

Table of Contents

CONSOLIDATED RESULTS OF OPERATIONS



Operating Summary	Three Months Ended September 30,								Nine Months Ended September 30,
	2012			2011			Change		2012			2011			Change
Earned premiums	$	3,401		$	3,518		(3	%)	$	10,243		$	10,582		(3	%)
Fee income	1,118			1,192			(6	%)	3,366			3,620			(7	%)
Net investment income (loss):
Securities available-for-sale and other	1,030			1,062			(3	%)	3,197			3,274			(2	%)
Equity securities, trading [1]	710			(1,890		)	NM		1,889			(1,684		)	NM
Total net investment income (loss)	1,740			(828		)	NM		5,086			1,590			NM
Net realized capital gains (losses)	119			575			(79	%)	(202		)	241			NM
Other revenues	64			63			2	%	184			188			(2	%)
Total revenues	6,442			4,520			43	%	18,677			16,221			15	%
Benefits, losses and loss adjustment expenses	3,271			4,006			(18	%)	9,930			11,160			(11	%)
Benefits, losses and loss adjustment expenses – returns credited on international variable annuities [1]	710			(1,889		)	NM		1,888			(1,683		)	NM
Amortization of deferred policy acquisition costs and present value of future profits (“DAC”)	566			1,005			(44	%)	1,441			2,047			(30	%)
Insurance operating costs and other expenses	1,275			1,287			(1	%)	3,896			4,093			(5	%)
Loss on extinguishment of debt	—			—			—	%	910			—			—	%
Interest expense	109			128			(15	%)	348			384			(9	%)
Total benefits, losses and expenses	5,931			4,537			31	%	18,413			16,001			15	%
Income (loss) from continuing operations before income taxes	511			(17		)	NM		264			220			20	%
Income tax expense (benefit)	108			(74		)	NM		(136		)	(289		)	53	%
Income from continuing operations, net of tax	403			57			NM		400			509			(21	%)
Income (loss) from discontinued operations, net of tax	(2		)	3			NM		(4		)	85			NM
Net income	$	401		$	60		NM		$	396		$	594		(33	%)
Supplemental Operating Data
Income from continuing operations, net of tax, available to common shareholders per diluted common share	$	0.83		$	0.10		NM		$	0.79		$	0.99		(20	%)
Net income available to common shareholders per diluted common share	0.83			0.11			NM		0.78			1.17			(33	%)
Total revenues, excluding net investment income on equity securities, trading	5,732			6,410			(11	%)	16,788			17,905			(6	%)



	September 30,		December 31,
Summary of Financial Condition	2012		2011
Total assets	$	308,918	$	302,609
Total investments, excluding equity securities, trading	107,188		104,449
Total stockholders’ equity	23,370		21,486


[1]	Includes investment income and mark-to-market effects of equity securities, trading, supporting the international variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within benefits, losses and loss adjustment expenses.

Table of Contents



	Three Months Ended September 30,									Nine Months Ended September 30,
Net income (loss) by segment	2012			2011			Increase (Decrease) From 2012 to 2011			2012			2011			Increase (Decrease) From 2012 to 2011
Property & Casualty Commercial	$	164		$	53		$	111		$	502		$	494		$	8
Group Benefits	30			25			5			83			77			6
Commercial Markets	194			78			116			585			571			14
Consumer Markets	94			(16		)	110			152			(80		)	232
Individual Life	11			(9		)	20			66			55			11
Retirement Plans	(7		)	(23		)	16			9			9			—
Mutual Funds	18			24			(6		)	56			79			(23		)
Wealth Management	22			(8		)	30			131			143			(12		)
Life Other Operations	145			105			40			344			439			(95		)
Property & Casualty Other Operations	24			8			16			36			(135		)	171
Corporate	(78		)	(107		)	29			(852		)	(344		)	(508		)
Total net income	$	401		$	60		$	341		$	396		$	594		$	(198	)

Three months ended September 30, 2012 compared to the three months ended September 30, 2011

The increase in net income from 2011 to 2012 was primarily due to the following items:

•

A decrease in the Unlock charge to $79, after-tax, in 2012 from $469, after-tax, in 2011. The Unlock charge in 2012 was primarily due to the annual policyholder assumption update, partially offset by actual separate account returns being above our aggregated estimated returns during the period. The Unlock charge in 2011 was driven by assumption changes, including the impact of changes to the international variable annuity hedge program and declines in equity markets. For further discussion see Unlocks within the Estimated Gross Profits Used in the Valuation and Amortization of Assets and Liabilities Associated with Variable Annuity and Other Universal Life-Type Contracts section in Critical Accounting Estimates.


•	Current accident year catastrophe losses of $7, after-tax, in 2012, compared to $134, after-tax in 2011. Losses in 2011 were primarily due to Hurricane Irene in the Northeast and thunderstorms in the Midwest.

Partially offsetting the increase in net income were the following items:

•

Net realized capital gains decreased primarily due to losses on the international variable annuity hedge program. The losses resulted from rising equity markets, partially offset by strengthening of the yen. Certain hedge assets generated realized capital losses on rising equity markets and are used to hedge liabilities that are not carried at fair value. For further discussion of the results, see Net Realized Capital Gains (Losses) within Investment Results of Key Performance Measures and Ratios. For information on the related sensitivities of the variable annuity hedging program, see Variable Product Guarantee Risks and Risk Management within Enterprise Risk Management.

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Nine months ended September 30, 2012 compared to the nine months ended September 30, 2011

The decrease in net income from 2011 to 2012 was primarily due to the following items:

•

A loss on extinguishment of debt of $ 587 , after-tax, recognized in the second quarter of 2012 related to the repurchase of all outstanding 10% fixed-to-floating rate junior subordinated debentures due 2068 with a $1.75 billion aggregate principal amount held by Allianz. The loss consisted of the premium associated with repurchasing the 10% Debentures at an amount greater than the face amount, the write-off of the unamortized discount and debt issuance costs related to the 10% Debentures and other costs related to the repurchase transaction.

•

Net realized capital gains decreased primarily due to losses on the international variable annuity hedge program. The losses resulted from rising equity markets and weakening of the yen. Certain hedge assets generated realized capital losses on rising equity markets and are used to hedge liabilities that are not carried at fair value. For further discussion of the results, see Net Realized Capital Gains (Losses) within Investment Results of Key Performance Measures and Ratios. For information on the related sensitivities of the variable annuity hedging program, see Variable Product Guarantee Risks and Risk Management within Enterprise Risk Management.


•	Income tax benefit in 2011 includes a release of $86, or 100%, of the valuation allowance associated with realized capital losses, as well as a tax benefit of $52 as a result of a resolution of a tax matter with the IRS for the computation of DRD for years 1998, 2000 and 2001.


•	Income (loss) from discontinued operations, net of tax, decreased, primarily due to the realized capital gain on the sale of Specialty Risk Services of $150, after-tax, in the first quarter of 2011, which was partially offset by a loss of $74, after-tax, from the disposition of Federal Trust Corporation in the second quarter of 2011.

Partially offsetting the decrease in net income were the following items:


•	Current accident year catastrophe losses of $241, after-tax, in 2012, primarily due to severe thunderstorms, hail events, and tornadoes in the South, Midwest and Mid-Atlantic states, compared to $475, after-tax in 2011, primarily due to Hurricane Irene in the Northeast, thunderstorms in the Midwest and tornadoes and windstorms in the Midwest, Plains States and Southwest.

•

An Unlock charge of $11, after-tax, in 2012, compared to an Unlock charge of $478, after-tax, in 2011. The Unlock charge in 2012 was primarily due to the annual policyholder assumption update, partially offset by actual separate account returns being above our aggregated estimated returns during the period. The Unlock charge in 2011 was primarily due to the impact of changes to the international variable annuity hedge program. For further discussion of Unlocks see the Critical Accounting Estimates within the MD&A.


•	Net asbestos reserve strengthening of $31, after-tax, in 2012, compared to $189, after tax, in 2011 resulting from the Company's annual review of its asbestos liabilities. For further information, see Property & Casualty Other Operations Claims with the Property and Casualty Insurance Product Reserves, Net of Reinsurance section in Critical Accounting Estimates.

See the segment sections of the MD&A for a discussion on their respective performances.

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OUTLOOKS

The Hartford provides projections and other forward-looking information in the following discussions, which contain many forward-looking statements, particularly relating to the Company’s future financial performance. These forward-looking statements are estimates based on information currently available to the Company, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the precautionary statements set forth on pages 3-4 of this Form 10-Q. Actual results are likely to differ, and in the past have differed, materially from those forecast by the Company, depending on the outcome of various factors, including, but not limited to, those set forth in each discussion below and in Part I, Item 1A, Risk Factors in The Hartford’s 2011 Form 10-K Annual Report; Part II, Item 1A, Risk Factors in The Hartford's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 ; and Part II, Item IA, Risk Factors of this Form 10-Q.

Overview

In the first quarter of 2012, The Hartford concluded an evaluation of its strategy and business portfolio deciding to focus on its property and casualty and group benefits businesses of the Commercial Markets and Consumer Markets divisions, and the mutual funds business of the Wealth Management division. This focus is expected to position the organization for higher returns on equity, reduced sensitivity to capital markets, a lower cost of capital and increased financial flexibility. As a result, the Company is pursuing sales or other strategic alternatives for the Individual Life and Retirement Plans businesses and Woodbury Financial Services, an indirect wholly-owned subsidiary.

In the second quarter of 2012, the Company entered into a purchase and sale agreement for the Company's U.S. individual annuity new business capabilities with Forethought Financial Group and placed its Individual Annuity business into runoff. The anticipated closing date for the Forethought transaction is in the fourth quarter of 2012 or the first quarter of 2013. Effective May 1, 2012, all new U.S. annuity policies sold by the Company are reinsured to Forethought Life Insurance Company. The Company will cease the sale of such annuity policies and the reinsurance agreement will terminate as to new business in the second quarter of 2013. The reinsurance agreement has no impact on in-force policies issued on or before April 27, 2012.

In the third quarter of 2012, the Company announced it had entered into definitive agreements to sell its Retirement Plans business, its Individual Life insurance business and Woodbury Financial Services. The Woodbury Financial Services transaction is expected to close in the fourth quarter of 2012, pending regulatory approval and is not expected to have a material impact on the Company's financial results.

As part of the agreement to sell the Retirement Plans business to MassMutual, the Company will continue to sell retirement plans during a transition period, and MassMutual will assume all expenses and risk for these sales through a reinsurance agreement. The sale, which is structured as a reinsurance transaction, is expected to close in the fourth quarter of 2012 or the first quarter of 2013, subject to regulatory approvals and customary closing conditions. Based on current financial information the Company does not expect to record a material gain or loss in net income on the closing of the transaction. The estimated financial impacts will be affected by business operations and other changes affecting recorded balances until closing.

The sale of the Individual Life insurance business to Prudential, which is structured as a reinsurance transaction, is expected to close in the first quarter of 2013, subject to regulatory approvals and customary closing conditions. As part of the agreement, the Company will continue to sell life insurance products and riders during a transition period, and Prudential will assume all expenses and risk for these sales through a reinsurance agreement. Based on current financial information the Company does not expect to record a material gain or loss in net income on the closing of the transaction. The estimated financial impacts will be affected by business operations and other changes affecting recorded balances until closing.

The performance of The Hartford’s insurance protection and asset accumulation businesses may be adversely impacted due to slow economic and employment expansion where customers may change their levels of insurance and/or savings based on anticipated economic conditions. In addition, the performance of The Hartford’s divisions is subject to uncertainty due to capital market conditions, which impact the earnings of its asset management businesses and valuations and earnings in its investment portfolio. The current and future interest rate environment also affects the performance of the Company’s divisions. A sustained low interest rate environment would result in lower net investment income, lower estimated gross profits on certain products, lower margins and increased pension expense.

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Commercial Markets

Commercial Markets focuses on growth through market-differentiated products and services while maintaining a disciplined underwriting approach. In Property & Casualty Commercial, improving market conditions are expected to continue, which should enable the Company to achieve price increases, while a slowly recovering economy is anticipated to drive an increase in insurance exposures. The Company expects low single-digit written premium growth for the full year, as compared to 2011, driven by small commercial, with programs aimed at growing total policy counts, the rollout of new product enhancements, a leveraging of the payroll model, and the continued expansion of ease of doing business technology, while middle market growth is tempered as a result of pricing actions taken to restore returns to adequate levels. The Property & Casualty Commercial combined ratio before catastrophes and prior accident year development is expected to remain in the mid to upper 90s for full year 2012 as compared to the 97.3% achieved in 2011. Earned pricing increases are outpacing loss costs. In Group Benefits, premiums are expected to decline for the full year, as compared to 2011, reflecting the competitive environment coupled with pricing actions implemented with the goal of improving profitability. The Company expects Group Benefits' loss ratio to remain elevated for full year 2012 given the expectation of persistent heightened incidence, lower claim terminations and higher severity in group long term disability.

Consumer Markets

The Company expects written premium to decline for full year 2012, as compared to 2011, including a decrease in AARP direct and in business sold through independent agents other than to AARP members. Despite an improvement in policy retention in the first nine months of 2012 and an increase in new business in 2012, management expects an overall decline in written premium in 2012 due to lower renewal premium. For the remainder of 2012, management expects it will sustain its improvement in policy retention but that retention will continue to be affected by the impact of renewal written pricing increases in a price sensitive market. Within the Agency channel, policy retention will also be affected by continued pricing and underwriting actions to improve profitability, including efforts to reposition the book into more mature, preferred market business. The Company expects continued new business growth for the remainder of 2012, primarily driven by AARP member business, both direct and through independent agents, as well as new business from affinities other than AARP and other targeted consumer direct marketing. New business is expected to benefit from the recent rollouts of the Open Road Advantage and the Hartford Home Advantage products. Management expects that the combined ratio before catastrophes and prior accident year development will be flat to slightly lower for full year 2012, as compared to the 91.9% achieved in 2011, as an improvement in the current accident year loss and loss adjustment expense ratio before catastrophes will be largely offset by an expected increase in the underwriting expense ratio. For home, the current accident year loss and loss adjustment expense ratio before catastrophes is expected to improve during 2012, driven by earned pricing increases and lower non-cat weather claim frequency. For auto, the current accident year loss and loss adjustment expense ratio is expected to increase slightly for full year 2012 as an expected increase in average claim severity for physical damage and property damage claims will largely be offset by the effect of earned pricing increases.

Wealth Management

In the third quarter of 2012, the Company announced it had entered into a definitive agreement to sell its Retirement Plans business to MassMutual and its Individual Life insurance business to Prudential. In light of The Hartford’s strategic review and the announcement of these agreements, Wealth Management currently focuses primarily on growing the Mutual Funds business. Wealth Management's Mutual Funds business has been offering new funds to improve participation in asset classes where the Company sees potential growth opportunities. In addition, the Company has partnered with Wellington Management Company, LLP (“Wellington Management”) to serve as the sole sub-advisor for The Hartford’s non-proprietary mutual funds and certain proprietary fixed income funds.

Runoff Operations

The Runoff Operations division consists of Life Other Operations and Property & Casualty Other Operations. The objective of the Runoff Operations division is to focus on managing profitability, improving capital efficiency and effectiveness, and limiting and managing risk associated with the businesses residing in the division with the ultimate objective of isolating or separating these risks from the ongoing businesses of the Company. The focus of Life Other Operations is on mitigating and isolating the risks of the U.S. and International in-force variable annuities. In addition, Life Other operations includes the Company's U.S. and international fixed annuity business, and institutional annuities business. The international variable annuity business within Life Other Operations will continue to be a significant driver of earnings variability due to hedge programs which generate mark to market gains and losses while the underlying international liabilities being hedged are not marked to marked. This can result in unpredictable earnings volatility period to period. Property & Casualty Other Operations is focused on managing the Company's asbestos, environmental and other legacy liabilities. The results of the annual ground up studies of asbestos and environmental reserves, performed in the second quarter of each year, will be the primary driver impacting the results for this segment.

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CRITICAL ACCOUNTING ESTIMATE S

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ, and in the past have differed, from those estimates.

The Company has identified the following estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability:


•	property and casualty insurance product reserves, net of reinsurance;


•	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 (in other policyholder funds and benefits payable);


•	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 Consolidated Financial Statements. In developing these estimates management makes subjective and complex judgments that are inherently uncertain and subject to material change as facts and circumstances develop. Although variability is inherent in these estimates, management believes the amounts provided are appropriate based upon the facts available upon compilation of the financial statements.

Property and Casualty Insurance Product Reserves, Net of Reinsurance

Based on the results of the quarterly reserve review process, the Company determines the appropriate reserve adjustments, if any, to record. Recorded reserve estimates are changed after consideration of numerous factors, including but not limited to, the magnitude of the difference between the actuarial indication and the recorded reserves, improvement or deterioration of actuarial indications in the period, the maturity of the accident year, trends observed over the recent past and the level of volatility within a particular line of business. In general, adjustments are made more quickly to more mature accident years and less volatile lines of business. Such adjustments of reserves are referred to as “reserve development”. Reserve development that increases previous estimates of ultimate cost is called “reserve strengthening”. Reserve development that decreases previous estimates of ultimate cost is called “reserve releases”. Reserve development can influence the comparability of year over year underwriting results and is set forth in the paragraphs and tables that follow.

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Reserve Roll Forwards and Development

A roll-forward follows of property and casualty insurance product liabilities for unpaid losses and loss adjustment expenses for the nine months ended September 30, 2012 :



Nine Months Ended September 30, 2012
	Property & Casualty Commercial		Consumer Markets			Property & Casualty Other Operations		Total Property and Casualty Insurance
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	15,437	$	2,061		$	4,052	$	21,550
Reinsurance and other recoverables	2,343		9			681		3,033
Beginning liabilities for unpaid losses and loss adjustment expenses, net	13,094		2,052			3,371		18,517
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes	3,111		1,797			—		4,908
Current accident year catastrophes	116		255			—		371
Prior accident years	54		(127		)	60		(13		)
Total provision for unpaid losses and loss adjustment expenses	3,281		1,925			60		5,266
Less: Payments	3,001		2,049			234		5,284
Ending liabilities for unpaid losses and loss adjustment expenses, net	13,374		1,928			3,197		18,499
Reinsurance and other recoverables	2,345		10			678		3,033
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	15,719	$	1,938		$	3,875	$	21,532
Earned premiums	$	4,691	$	2,725
Loss and loss expense paid ratio [1]	64.0		75.2
Loss and loss expense incurred ratio	69.9		70.6
Prior accident years development (pts) [2]	1.2		(4.7		)


[1]	The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.


[2]	“Prior accident years development (pts)” represents the ratio of prior accident years development to earned premiums.

Prior accident years development recorded in 2012

Included within prior accident years development for the three and nine months ended September 30, 2012 were the following reserve strengthenings (releases):



Three Months Ended September 30, 2012
	Property & Casualty Commercial			Consumer Markets			Property & Casualty Other Operations		Total Property and Casualty Insurance
Auto liability	$	14		$	(38	)	$	—	$	(24	)
Homeowners	—			(4		)	—		(4		)
Professional liability	22			—			—		22
Package business	(2		)	—			—		(2		)
Workers’ compensation	18			—			—		18
General liability	(36		)	—			—		(36		)
Fidelity and surety	(8		)	—			—		(8		)
Commercial property	1			—			—		1
Change in workers’ compensation discount, including accretion	8			—			—		8
Catastrophes	(2		)	(6		)	—		(8		)
Other reserve re-estimates, net	—			(1		)	1		—
Total prior accident years development	$	15		$	(49	)	$	1	$	(33	)

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Nine Months Ended September 30, 2012
	Property & Casualty Commercial			Consumer Markets			Property & Casualty Other Operations		Total Property and Casualty Insurance
Auto liability	$	45		$	(79	)	$	—	$	(34	)
Homeowners	—			(10		)	—		(10		)
Professional liability	40			—			—		40
Package business	(34		)	—			—		(34		)
Workers’ compensation	69			—			—		69
General liability	(76		)	—			—		(76		)
Fidelity and surety	3			—			—		3
Commercial property	(5		)	—			—		(5		)
Net asbestos reserves	—			—			48		48
Net environmental reserves	—			—			8		8
Change in workers’ compensation discount, including accretion	45			—			—		45
Catastrophes	(38		)	(29		)	—		(67		)
Other reserve re-estimates, net	5			(9		)	4		—
Total prior accident years development	$	54		$	(127	)	$	60	$	(13	)

During the three and nine months ended September 30, 2012 , the Company’s re-estimates of prior accident years reserves included the following significant reserve changes:


•	Released reserves for personal auto liability claims, primarily for accident years 2008 through 2011. As these accident years matured, favorable bodily injury severity trends were observed and management has placed more weight on the emerged experience.


•	Strengthened reserves for commercial auto liability claims, primarily for accident year 2010 and 2011. Higher than expected bodily injury severity, driven by large loss activity, has been observed for these accident years.


•	Strengthened reserves for professional liability directors and officers claims for accident years 2011 and prior as a result of higher severity, primarily for mid- and large-sized accounts.


•	Released reserves in package business liability coverages and general liability, primarily for accident years 2006 through 2011. Claim severity emergence for these years was lower than expected and management has placed more weight on the emerged experience. In addition, older years have improved due to favorable emergence of larger claims.


•	Strengthened reserves in workers' compensation primarily due to the emergence of lost time claims from 2011.


•	The change in workers’ compensation discount, including accretion, primarily reflects a decrease in the number of tabular claims, and to a lesser extent, the decrease in interest rates.


•	Reserve releases on certain prior year catastrophes, primarily related to 2001 World Trade Center worker's compensation claims.


•	Refer to the Property & Casualty Other Operations Claims section for further discussion on net asbestos and net environmental reserves.

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A roll forward follows of property and casualty insurance product liabilities for unpaid losses and loss adjustment expenses for the nine months ended September 30, 2011 :



Nine Months Ended September 30, 2011
	Property & Casualty Commercial		Consumer Markets			Property & Casualty Other Operations		Total Property and Casualty Insurance
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	14,727	$	2,177		$	4,121	$	21,025
Reinsurance and other recoverables	2,361		17			699		3,077
Beginning liabilities for unpaid losses and loss adjustment expenses, net	12,366		2,160			3,422		17,948
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes	2,997		1,902			—		4,899
Current accident year catastrophes	305		426			—		731
Prior accident years	16		(58		)	311		269
Total provision for unpaid losses and loss adjustment expenses	3,318		2,270			311		5,899
Less: Payments	2,826		2,287			284		5,397
Ending liabilities for unpaid losses and loss adjustment expenses, net	12,858		2,143			3,449		18,450
Reinsurance and other recoverables	2,428		9			730		3,167
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	15,286	$	2,152		$	4,179	$	21,617
Earned premiums	$	4,568	$	2,825
Loss and loss expense paid ratio [1]	61.9		81.0
Loss and loss expense incurred ratio	72.6		80.4
Prior accident years development (pts) [2]	0.4		(2.1		)


[1]	The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.


[2]	“Prior accident years development (pts)” represents the ratio of prior accident years development to earned premiums.

Prior accident years development recorded in 2011

Included within prior accident years development for the three and nine months ended September 30, 2011 were the following reserve strengthenings (releases):



Three Months Ended September 30, 2011
	Property & Casualty Commercial			Consumer Markets			Property & Casualty Other Operations		Total Property and Casualty Insurance
Auto liability	$	(4	)	$	(19	)	$	—	$	(23	)
Homeowners	—			14			—		14
Professional liability	29			—			—		29
Package business	(42		)	—			—		(42		)
Workers’ compensation	7			—			—		7
General liability	(8		)	—			—		(8		)
Fidelity and surety	(7		)	—			—		(7		)
Commercial property	1			—			—		1
Net environmental reserves	—			—			19		19
Change in workers’ compensation discount, including accretion	15			—			—		15
Catastrophes	2			—			—		2
Other reserve re-estimates, net	(2		)	(4		)	2		(4		)
Total prior accident years development	$	(9	)	$	(9	)	$	21	$	3

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Nine Months Ended September 30, 2011
	Property & Casualty Commercial			Consumer Markets			Property & Casualty Other Operations		Total Property and Casualty Insurance
Auto liability	$	(5	)	$	(83	)	$	—	$	(88	)
Homeowners	—			1			—		1
Professional liability	22			—			—		22
Package business	(46		)	—			—		(46		)
Workers’ compensation	10			—			—		10
General liability	4			—			—		4
Fidelity and surety	(9		)	—			—		(9		)
Commercial property	(4		)	—			—		(4		)
Net asbestos reserves	—			—			290		290
Net environmental reserves	—			—			21		21
Change in workers’ compensation discount, including accretion	32			—			—		32
Catastrophes	7			28			—		35
Other reserve re-estimates, net	5			(4		)	—		1
Total prior accident years development	$	16		$	(58	)	$	311	$	269

During the three and nine months ended September 30, 2011 , the Company’s re-estimates of prior accident years reserves included the following significant reserve changes:


•	Released reserves for personal auto liability claims for both the three month and nine month periods, primarily for accident years 2006 through 2010. Favorable trends in reported severity had persisted or improved over this time period. As these accident years develop, the uncertainty around the ultimate losses is reduced and management places more weight on the emerged experience.


•	Strengthened homeowners' reserves for the three months ended September 30, 2011, for accident years 2008 through 2010, primarily due to increased frequency of sinkhole claims in Florida and increased severity on slower reporting homeowner casualty claims.


•	Strengthened reserves in professional liability for accident years 2007 through 2009, primarily in the directors and officers (“D&O”) line of business. Detailed reviews of claims involving the sub-prime mortgage market collapse, and shareholder class action lawsuits, resulted in a higher estimate of future case development.


•	Released reserves in package business liability coverages and general liability in accident years 2005 through 2009 as a result of lower than expected claim severity emergence.


•	Strengthened reserves in workers’ compensation for the 2010 accident year as a result of higher than expected claim frequency emergence. This is offset by releases in accident years 2007 and prior. Reserve indications in these years had been stable, giving greater confidence in the adequacy of estimates.


•	Prior year catastrophe strengthening, for the three and nine month period, primarily related to a severe wind and hail storm event in Arizona during the fourth quarter of 2010.


•	Refer to the Property & Casualty Other Operations Claims section for further discussion on net asbestos and net environmental reserves.

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Property & Casualty Other Operations Claims

Reserve Activity

Reserves and reserve activity in Property & Casualty Other Operations are categorized and reported as asbestos, environmental, or “all other”. The “all other” category of reserves covers a wide range of insurance and assumed reinsurance coverages, including, but not limited to, potential liability for construction defects, lead paint, silica, pharmaceutical products, molestation and other long-tail liabilities.

The following table presents reserve activity, inclusive of estimates for both reported and incurred but not reported claims, net of reinsurance, categorized by asbestos, environmental and all other claims, for the three and nine months ended September 30, 2012.

Property & Casualty Other Operations Losses and Loss Adjustment Expenses



For the Three Months Ended September 30, 2012	Asbestos			Environmental		All Other [1]		Total
Beginning liability—net [2][3]	$	1,857		$	304	$	1,094	$	3,255
Losses and loss adjustment expenses incurred	—			—		1		1
Less : losses and loss adjustment expenses paid	32			7		20		59
Ending liability – net [2][3]	$	1,825	[4]	$	297	$	1,075	$	3,197

For the Nine Months Ended September 30, 2012	Asbestos			Environmental		All Other [1]		Total
Beginning liability—net [2][3]	$	1,892		$	320	$	1,159	$	3,371
Losses and loss adjustment expenses incurred	48			8		4		60
Less : losses and loss adjustment expenses paid	115			31		88		234
Ending liability – net [2][3]	$	1,825	[4]	$	297	$	1,075	$	3,197

[1]

“All Other” includes unallocated loss adjustment expense reserves. “All Other” also includes The Company's allowance for uncollectible reinsurance. When the Company commutes a ceded reinsurance contract or settles a ceded reinsurance dispute, the portion of the allowance for uncollectible reinsurance attributable to that commutation or settlement, if any, is reclassified to the appropriate cause of loss.

[2]

Excludes amounts reported in Property & Casualty Commercial and Consumer Markets reporting segments (collectively “Ongoing Operations”) for asbestos and environmental net liabilities of $15 and $7, respectively, as of September 30, 2012, $14 and $8, respectively, as of June 30, 2012 and $15 and $8, respectively, as of December 31, 2011; total net losses and loss adjustment expenses incurred for the three and nine months ended September 30, 2012 includes $3 and $10, respectively, related to asbestos and environmental claims; and total net losses and loss adjustment expenses paid for the three and nine months ended September 30, 2012 includes $3 and $12, respectively, related to asbestos and environmental claims.


[3]	Gross of reinsurance, asbestos and environmental reserves, including liabilities in Ongoing Operations, were $2,380 and $341, respectively, as of September 30, 2012, $2,421 and $350, respectively, as of June 30, 2012 and $2,442 and $367, respectively, as of December 31, 2011.

[4]

The one year and average three year net paid amounts for asbestos claims, including Ongoing Operations, are $172 and $224, respectively, resulting in a one year net survival ratio of 10.7 and a three year net survival ratio of 8.2. Net survival ratio is the quotient of the net carried reserves divided by the average annual payment amount and is an indication of the number of years that the net carried reserve would last (i.e. survive) if the future annual claim payments were consistent with the calculated historical average.

For paid and incurred losses and loss adjustment expenses reporting, the Company classifies its asbestos and environmental reserves into three categories: Direct, Assumed Reinsurance and London Market. Direct insurance includes primary and excess coverage. Assumed reinsurance includes both “treaty” reinsurance (covering broad categories of claims or blocks of business) and “facultative” reinsurance (covering specific risks or individual policies of primary or excess insurance companies). London Market business includes the business written by one or more of the Company’s subsidiaries in the United Kingdom, which are no longer active in the insurance or reinsurance business. Such business includes both direct insurance and assumed reinsurance.

Of the three categories of claims (Direct, Assumed Reinsurance and London Market), direct policies tend to have the greatest factual development from which to estimate the Company’s exposures.

Assumed reinsurance exposures are inherently less predictable than direct insurance exposures because the Company may not receive notice of a reinsurance claim until the underlying direct insurance claim is mature. This causes a delay in the receipt of information at the reinsurer level and adds to the uncertainty of estimating related reserves.

London Market exposures are the most uncertain of the three categories of claims. As a participant in the London Market (comprised of both Lloyd's of London and London Market companies), certain subsidiaries of the Company wrote business on a subscription basis, with those subsidiaries' involvement being limited to a relatively small percentage of a total contract placement. Claims are reported, via a broker, to the “lead” underwriter and, once agreed to, are presented to the following markets for concurrence. This reporting and claim agreement process makes estimating liabilities for this business the most uncertain of the three categories of claims.

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The following table sets forth, for the three and nine months ended September 30, 2012, paid and incurred loss activity by the three categories of claims for asbestos and environmental.

Paid and Incurred Losses and Loss Adjustment Expenses (“LAE”) Development – Asbestos and Environmental



	Asbestos [1]						Environmental [1]
Three Months Ended September 30, 2012	Paid Losses & LAE			Incurred Losses & LAE			Paid Losses & LAE			Incurred Losses & LAE
Gross
Direct	$	31		$	—		$	7		$	—
Assumed Reinsurance	7			—			—			—
London Market	3			—			2			—
Total	41			—			9			—
Ceded	(9		)	—			(2		)	—
Net	$	32		$	—		$	7		$	—

Nine Months Ended September 30, 2012	Paid Losses & LAE			Incurred Losses & LAE			Paid Losses & LAE			Incurred Losses & LAE
Gross
Direct	$	96		$	55		$	26		$	7
Assumed Reinsurance	28			14			6			—
London Market	11			5			3			3
Total	135			74			35			10
Ceded	(20		)	(26		)	(4		)	(2		)
Net	$	115		$	48		$	31		$	8

[1]

Excludes asbestos and environmental paid and incurred loss and LAE reported in Ongoing Operations. Total gross losses and LAE incurred in Ongoing Operations for the three and nine months ended September 30, 2012 includes $3 and $10, respectively, related to asbestos and environmental claims. Total gross losses and LAE paid in Ongoing Operations for the three and nine months ended September 30, 2012 includes $3 and $12, respectively, related to asbestos and environmental claims.

During the second quarter of 2012, the Company completed its annual ground-up asbestos reserve evaluation. As part of this evaluation, the Company reviewed all of its open direct domestic insurance accounts exposed to asbestos liability, as well as assumed reinsurance accounts and its London Market exposures for both direct insurance and assumed reinsurance. Based on this evaluation, the Company increased its net asbestos reserves by $48. The Company found estimates for individual cases changed based upon the particular circumstances of such accounts. These changes were case specific and not as a result of any underlying change in the current environment. The Company experienced moderate increases in claim severity, expense and costs associated with litigating asbestos coverage matters, particularly against certain smaller, more peripheral insureds. The Company also experienced unfavorable development on certain of its assumed reinsurance accounts driven largely by the same factors experienced by the direct policyholders. The Company currently expects to continue to perform an evaluation of its asbestos liabilities annually.

During the second quarter of 2012, the Company completed its annual ground-up environmental reserve evaluation. As part of this evaluation, the Company reviewed all of its open direct domestic insurance accounts exposed to environmental liability, as well as assumed reinsurance accounts and its London Market exposures for both direct and assumed reinsurance. Based on this evaluation, the Company found estimates for certain individual account exposures increased based upon unfavorable litigation results and increased clean-up or expense costs. The Company currently expects to continue to perform a ground-up evaluation of its environmental liabilities annually and regularly evaluate the Company's historical direct net loss and expense paid and reported experience, and net loss and expense paid and reported experience by calendar and/or report year, to assess any emerging trends, fluctuations or characteristics suggested by the aggregate paid and reported activity.

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Uncertainties Regarding Adequacy of Asbestos and Environmental Reserves

A number of factors affect the variability of estimates for asbestos and environmental reserves including assumptions with respect to the frequency of claims, the average severity of those claims settled with payment, the dismissal rate of claims with no payment and the expense to indemnity ratio. The uncertainty with respect to the underlying reserve assumptions for asbestos and environmental adds a greater degree of variability to these reserve estimates than reserve estimates for more traditional exposures. While this variability is reflected in part in the size of the range of reserves developed by the Company, that range may still not be indicative of the potential variance between the ultimate outcome and the recorded reserves. The recorded net reserves as of September 30, 2012 of $2.14 billion ($1.84 billion and $303 for asbestos and environmental, respectively) is within an estimated range, unadjusted for covariance, of $1.7 billion to $2.5 billion. The process of estimating asbestos and environmental reserves remains subject to a wide variety of uncertainties, which are detailed in the Company's 2011 Form 10-K Annual Report. The Company believes that its current asbestos and environmental reserves are appropriate. However, analyses of future developments could cause the Company to change its estimates and ranges of its asbestos and environmental reserves, and the effect of these changes could be material to the Company's consolidated operating results, financial condition and liquidity.

Consistent with the Company's long-standing reserve practices, the Company will continue to review and monitor its reserves in Property & Casualty Other Operations regularly, including its annual reviews of asbestos liabilities, reinsurance recoverables and the allowance for uncollectible reinsurance, and environmental liabilities, and where future developments indicate, make appropriate adjustments to the reserves. For a discussion of the Company's reserving practices, see the Critical Accounting Estimates - Property and Casualty Insurance Product Reserves, Net of Reinsurance section of the MD&A included in the Company's 2011 Form 10-K Annual Report.

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Estimated Gross Profits Used in the Valuation and Amortization of Assets and Liabilities Associated with Variable Annuity and Other Universal Life-Type Contracts

Estimated gross profits (“EGPs”) are used in the amortization of the DAC asset, which includes the present value of future profits; sales inducement assets (“SIA”); and unearned revenue reserves (“URR”). See Note 1 and Note 6 of the Notes to Condensed Consolidated Financial Statements for additional information on DAC. See Note 8 of the Notes to Condensed Consolidated Financial Statements for additional information on SIA. Portions of EGPs are also used in the valuation of reserves for death and other insurance benefit features on variable annuity and universal life-type contracts. See Note 7 of the Notes to Condensed Consolidated Financial Statements for additional information on death and other insurance benefit reserves.

In the third quarter of 2012 , the Company completed its annual comprehensive non-market related policyholder behavior assumption study and incorporated the results of the study into its projections of future gross profits. All assumptions changes are considered an Unlock in the period of revision. The Company will continue to evaluate our assumptions related to policyholder behavior as we begin to implement initiatives to reduce the size of the variable annuity business.

The most significant EGP based asset and liability balances are as follows:



	Individual Life				Retirement Plans				Life Other Operations
	September 30, 2012		December 31, 2011		September 30, 2012		December 31, 2011		September 30, 2012		December 31, 2011
DAC	$	1,976	$	2,002	$	218	$	304	$	3,123	$	3,625
SIA	$	48	$	47	$	22	$	22	$	280	$	365
URR	$	1,740	$	1,570	$	—	$	—	$	84	$	128
Death and Other Insurance Benefit Reserves	$	333	$	228	$	—	$	1	$	1,849	$	2,079

Unlocks

The after-tax (charge) benefit to net income by asset and liability as a result of the Unlocks for the three months ended September 30, 2012 and 2011 are as follows:



	Individual Life						Retirement Plans						Life Other Operations						Total
	2012			2011			2012			2011			2012			2011			2012			2011
DAC	$	11		$	(26	)	$	(9	)	$	(26	)	$	(53	)	$	(166	)	$	(51	)	$	(218	)
SIA	—			—			—			(1		)	(44		)	(6		)	(44		)	(7		)
URR	(8		)	11			—			—			17			3			9			14
Death and Other Insurance Benefit Reserves	(8		)	(43		)	—			—			15			(215		)	7			(258		)
Total	$	(5	)	$	(58	)	$	(9	)	$	(27	)	$	(65	)	$	(384	)	$	(79	)	$	(469	)

The Unlock charge, after-tax for the three months ended September 30, 2012 was primarily due to the annual policyholder assumption update, partially offset by actual separate account returns being above our aggregated estimated returns during the period. The Unlock charge for the three months ended September 30, 2011 was driven by assumption changes, including the impact of changes to the international hedge program and declines in equity markets.

The after-tax (charge) benefit related to the annual policyholder assumption update and market performance for the three months ended September 30, 2012 is as follows:



	Policyholder Assumption Update		Market Performance		Total
U.S. Annuity	(120	)	46		(74	)
Japan Annuity	21		(18	)	3
All Other	(4	)	(4	)	(8	)
Total	(103	)	24		(79	)

U.S. Annuity's Unlock charge related to the annual policyholder assumption update was driven by lower EGPs due to increased unit costs and changes to benefit utilization assumptions.

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The after-tax (charge) benefit to net income by asset and liability as a result of the Unlocks for the nine months ended September 30, 2012 and 2011 are as follows:



	Individual Life						Retirement Plans						Life Other Operations						Total
	2012			2011			2012			2011			2012			2011			2012			2011
DAC	$	7		$	(29	)	$	(5	)	$	(27	)	$	(30	)	$	(195	)	$	(28	)	$	(251	)
SIA	—			—			—			(1		)	(44		)	(11		)	(44		)	(12		)
URR	(6		)	12			—			—			19			4			13			16
Death and Other Insurance Benefit Reserves	(14		)	(43		)	—			—			62			(188		)	48			(231		)
Total	$	(13	)	$	(60	)	$	(5	)	$	(28	)	$	7		$	(390	)	$	(11	)	$	(478	)

The Unlock charge, after-tax for the nine months ended September 30, 2012 was primarily due to the annual policyholder assumption update, partially offset by actual separate account returns being above our aggregated estimated returns during the period. The Unlock charge for the nine months ended September 30, 2011 was primarily due to the impact of changes to the international hedge program.

An Unlock revises EGPs, on a quarterly basis, to reflect market updates of policyholder account value and the Company’s current best estimate assumptions. Modifications to the Company’s hedging programs may impact EGPs, and correspondingly impact DAC recoverability. After each quarterly Unlock, the Company also tests the aggregate recoverability of DAC by comparing the DAC balance to the present value of future EGPs. The margin between the DAC balance and the present value of future EGPs for U.S. and Japan individual variable annuities was 36% and 43% , respectively, as of September 30, 2012 . If the margin between the DAC asset and the present value of future EGPs is exhausted, then further reductions in EGPs would cause portions of DAC to be unrecoverable and the DAC asset would be written down to equal future EGPs.

Goodwill Impairment

The carrying value of goodwill allocated to reporting units as of September 30, 2012 and December 31, 2011 is as follows:



	Segment Goodwill		Goodwill in Corporate		Total
Group Benefits	$	—	$	138	$	138
Consumer Markets	119		—		119
Individual Life	224		118		342
Retirement Plans	87		69		156
Mutual Funds	159		92		251
Total	$	589	$	417	$	1,006

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Pension and Other Postretirement Benefit Obligations

The Company maintains The Hartford Retirement Plan for U.S. Employees, a U.S. qualified defined benefit pension plan (the “Plan”) that covers substantially all employees, as well as unfunded excess plans to provide benefits in excess of amounts permitted to be paid to participants of the Plan under the provisions of the Internal Revenue Code. The Company has also entered into individual retirement agreements with certain retired directors providing for unfunded supplemental pension benefits. In addition, the Company provides certain health care and life insurance benefits for eligible retired employees. The Company maintains international plans which represent an immaterial percentage of total pension assets, liabilities and expense and, for reporting purposes, are combined with domestic plans.

Pursuant to accounting principles related to the Company's pension and other postretirement obligations to employees under its various benefit plans, the Company is required to make a significant number of assumptions in order to calculate the related liabilities and expenses each period. The two economic assumptions that have the most impact on pension and other postretirement expense are the discount rate and the expected long-term rate of return on plan assets. In determining the discount rate assumption, the Company utilizes a discounted cash flow analysis of the Company's pension and other postretirement obligations and currently available market and industry data. The yield curve utilized in the cash flow analysis is comprised of bonds rated Aa or higher with maturities primarily between zero and thirty years. Based on all available information, it was determined that 4.75% and 4.50% were the appropriate discount rates as of December 31, 2011 to calculate the Company's pension and other postretirement obligations and to calculate the 2012 pension and other postretirement expense, respectively. As of December 31, 2011, a 25 basis point increase/decrease in the discount rate would decrease/increase the pension and other postretirement obligations by $157 and $10, respectively.

The Company determines the expected long-term rate of return assumption based on an analysis of the Plan portfolio's historical compound rates of return since 1979 (the earliest date for which comparable portfolio data is available) and over 5 year and 10 year periods. The Company selected these periods, as well as shorter durations, to assess the portfolio's volatility, duration and total returns as they relate to pension obligation characteristics, which are influenced by the Company's workforce demographics. In addition, the Company also applies long-term market return assumptions to an investment mix that generally anticipates 60% fixed income securities, 20% equity securities and 20% alternative assets to derive an expected long-term rate of return. Based upon these analyses, management maintained the long-term rate of return assumption at 7.30% as of December 31, 2011. This assumption was used to determine the Company's 2012 expense.

On April 23, 2012 , the Company, approved the freezing of participation and benefit accruals effective December 31, 2012 . Compensation earned by employees up to December 31, 2012 shall be used for purposes of calculating benefits under the Plan but there will be no future benefit accruals after this date. Participants as of December 31, 2012 will continue to earn vesting credit with respect to their frozen accrued benefits as they continue to work. The Company announced these changes in April 2012.

As a result of these changes, the Company remeasured the Plan's benefit obligations effective April 30, 2012 . The remeasurement resulted in an increase in the pension benefit obligation of $117 pre-tax ( $76 after-tax) primarily due to a decrease in the discount rates used to remeasure the Plan obligation from 4.75% at December 31, 2011 to 4.50% at April 30, 2012 , reflecting the change in market interest rates. In addition, the Company recorded a curtailment gain of $ 7 during the second quarter of 2012 , which was the remaining unamortized prior service cost at April 30, 2012 . No other assumptions changed as a result of the remeasurement.

Pension expense reflected in the Company's results was $56 and $177 for the three and nine months ended September 30, 2012 and $52 and $159 for the three and nine months ended September 30, 2011 . The Company estimates its 2012 pension expense will be approximately $241 based on the updated assumptions. The savings from these changes will be partially offset by increased cost related to the enhanced benefits within The Hartford’s Investment and Savings Plan, its defined contribution 401(k) savings plan, and The Hartford Excess Savings Plan ("collectively "defined contribution plans"), resulting in a net decline in benefit plan costs of approximately $120, pre-tax annually on a go-forward basis. For further information regarding the changes to the defined contribution plans, see Note 10 of the Notes to Condensed Consolidated Financial Statements.

The Company remeasured the other postretirement plans benefit obligations effective April 30, 2012 . The remeasurement resulted in a decrease in the other postretirement plans benefit liability of $111 pre-tax ( $72 after-tax) primarily due to the elimination of service costs for all employees not eligible to retire as of January 1, 2014 offset by a decrease in the discount rates used to remeasure the pension plan obligations from 4.50% at December 31, 2011 to 4.00% at April 30, 2012 reflecting the change in market interest rates. In addition, the Company recorded an after-tax curtailment gain of less than $1 , during the second quarter of 2012 , which was the remaining unamortized prior service cost at April 30, 2012 .

Other postretirement plans expense reflected in the Company's results was $(3) and $(1) for the three and nine months ended September 30, 2012 and $3 and $8 for the three and nine months ended September 30, 2011 . The Company estimates its 2012 other postretirement plans expense will be approximately $(3) based on the updated assumptions. As a result of the freezing of the plan, the Company expects the run rate of the other postretirement expense to decline by approximately $5 annually on a go-forward basis.

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THE HARTFORD’S OPERATIONS OVERVIEW

The Hartford is a financial holding company for a group of subsidiaries that provide property and casualty and life insurance and investment products to both individual and business customers in the United States and continues to administer business previously sold in Japan and the U.K.

The Company conducts business in four divisions, Commercial Markets, Consumer Markets, Wealth Management and Runoff Operations, each containing reporting segments. The Commercial Markets division consists of the reporting segments of Property & Casualty Commercial and Group Benefits. The Consumer Markets division is also the reporting segment. The Wealth Management division consists of the following reporting segments: Individual Life, Retirement Plans and Mutual Funds. The Runoff Operations division consists of Life Other Operations and Property & Casualty Other Operations. For additional discussion regarding The Hartford’s reporting segments, see Note 3 of the Notes to Condensed Consolidated Financial Statements.

KEY PERFORMANCE MEASURES AND RATIOS

The Company considers several measures and ratios to be the key performance indicators for its businesses. The following discussions include the more significant ratios and measures of profitability for the three and nine months ended September 30, 2012 and 2011 . Management believes that these ratios and measures are useful in understanding the underlying trends in The Hartford’s businesses. However, these key performance indicators should only be used in conjunction with, and not in lieu of, the results presented in the segment discussions that follow in this MD&A. These ratios and measures may not be comparable to other performance measures used by the Company’s competitors. For additional information on key performance measures and ratios, see Definitions of Non-GAAP and other measures and ratios within MD&A of The Hartford’s 2011 Form 10-K Annual Report.

Definitions of Non-GAAP and other measures and ratios

Account Value

Account value includes policyholders’ balances for investment contracts and reserves for future policy benefits for insurance contracts.

After-tax Margin, Core Earnings excluding Unlock

After-tax margin, core earnings excluding Unlock, is a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of, certain of the segment’s operating performance. After-tax margin, core earnings excluding Unlock is calculated by dividing core earnings excluding Unlocks by total core revenues excluding Unlocks. After-tax margin is the most directly comparable U.S. GAAP measure. A reconciliation of after-tax margin to after-tax margin, core earnings excluding Unlock, for the three and nine months ended September 30, 2012 and 2011 is set forth in the After-tax Margin section within Key Performance Measures and Ratios.

Assets Under Management

Assets under management (“AUM”) include account values and mutual fund assets.

Catastrophe ratio

The catastrophe ratio (a component of the loss and loss adjustment expense ratio) represents the ratio of catastrophe losses incurred in the current calendar year (net of reinsurance) to earned premiums and includes catastrophe losses incurred for both the current and prior accident years. A catastrophe is an event that causes $25 or more in industry insured property losses and affects a significant number of property and casualty policyholders and insurers. The catastrophe ratio includes the effect of catastrophe losses, but does not include the effect of reinstatement premiums.

Combined ratio

The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. This ratio is a relative measurement that describes the related cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100.0 demonstrates underwriting profit; a combined ratio above 100.0 demonstrates underwriting losses.

Combined ratio before catastrophes and prior accident year development

The combined ratio before catastrophes and prior accident year development, a non-GAAP financial measure, represents the combined ratio for the current accident year, excluding the impact of catastrophes. Combined ratio is the most directly comparable U.S.GAAP measure. A reconciliation of combined ratio to combined ratio before prior accident year reserve development for the three and nine months ended September 30, 2012 and 2011 is set forth in the Combined ratio before catastrophes and prior year development section within Key Performance Measures and Ratios.

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Core Earnings

Core earnings, a non-GAAP measure is an important measure of the Company’s operating performance. Core earnings excludes the effect of realized gains and losses (net of tax and the effects of deferred policy acquisition costs (“DAC”)) and discontinued operations. The Hartford believes, however, that some realized capital gains and losses are integrally related to the insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives and net periodic settlements on the Japan fixed annuity cross-currency swap. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. Net income is the most directly comparable U.S. GAAP measure. A reconciliation of net income to core earnings for the three and nine months ended September 30, 2012 and 2011 is set forth below.



	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012			2011
Net income (loss)	$	401		$	60	$	396		$	594
Less: Income from discontinued operations, net of tax	(2		)	3		(4		)	85
Less: Net realized capital gains (losses), net of tax and DAC, excluded from core earnings	25			7		(122		)	(129		)
Less: Loss on extinguishment of debt, net of tax	—			—		(587		)	—
Core earnings	$	378		$	50	$	1,109		$	638

DAC amortization ratio, Core Earnings excluding Unlock

DAC amortization ratio, core earnings excluding Unlock, is a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of, certain of the segment’s operating performance. DAC amortization ratio, core earnings excluding Unlock is calculated by dividing core DAC amortization costs by pre-tax core earnings before DAC amortization costs. DAC amortization ratio is the most directly comparable U.S. GAAP measure. A reconciliation of DAC amortization ratio to DAC amortization ratio, core earnings excluding Unlock for the three and nine months ended September 30, 2012 and 2011 is set forth in the Life Other Operations operating summary within MD&A.

Mutual Fund Assets

Mutual fund assets include retail, investment-only and college savings plan assets under Section 529 of the Code, collectively referred to as non-proprietary, and proprietary mutual funds. Non-proprietary mutual fund assets are owned by the shareholders of those funds and not by the Company. Proprietary mutual funds include mutual funds sponsored by the Company which are owned by the separate accounts of the Company to support insurance and investment products sold by the Company. The non-proprietary mutual fund assets are not reflected in the Company’s consolidated financial statements.

Net Investment Spread

Management evaluates performance of certain products based on net investment spread. These products include those that have insignificant mortality risk, such as fixed annuities, certain general account universal life contracts and certain institutional contracts. Net investment spread is determined by taking the difference between the annualized earned rate, (excluding the effects of realized capital gains and losses, including those related to the Company’s GMWB product and related reinsurance and hedging programs), and the related annualized crediting rates on average general account assets under management. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to insurance aspects of our businesses. Accordingly, net investment spread excludes the effect of all realized gains and losses that tend to be highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized capital gains and losses are integrally related to our insurance operations and they are included in the net investment spread calculation.

Return on Assets (“ROA”), Core Earnings excluding Unlock

ROA, core earnings excluding Unlock, is a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of, certain of the segment’s operating performance. ROA, core earnings excluding Unlock is calculated by dividing core earnings excluding Unlocks by a two-point average of AUM. ROA is the most directly comparable U.S. GAAP measure. A reconciliation of ROA to ROA, core earnings excluding Unlock for the three and nine months ended September 30, 2012 and 2011 is set forth in the ROA section within Key Performance Measures and Ratios.

Underwriting results

Underwriting results is a before-tax measure that represents earned premiums less incurred losses, loss adjustment expenses, underwriting expenses and policyholder dividends. Net Income is the most directly comparable U.S. GAAP measure. A reconciliation of underwriting results to net income for Property & Casualty Commercial and Consumer Markets is set forth in their respective operating summaries within MD&A.

Written and earned premiums

Written premium is a statutory accounting financial measure which represents the amount of premiums charged for policies issued, net of reinsurance, during a fiscal period. Earned premium is a U.S. GAAP and statutory measure. The difference between written and earned premium is the change in unearned premium reserve.

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Combined ratio before catastrophes and prior year development

Combined ratio before catastrophes and prior accident year development is a key indicator of overall profitability for the property and casualty underwriting segments of Property & Casualty Commercial and Consumer Markets since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year reserve development.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Property & Casualty Commercial
Combined ratio	99.1		104.8		99.8		103.0
Catastrophe ratio	0.5		6.1		1.7		6.8
Non-catastrophe prior year development	1.1		(0.7	)	2.0		0.2
Combined ratio before catastrophes and prior year development	97.5		99.4		96.1		96.0
Consumer Markets
Combined ratio	87.9		106.7		95.8		104.8
Catastrophe ratio	(0.7	)	12.2		8.3		16.1
Non-catastrophe prior year development	(4.7	)	(1.0	)	(3.6	)	(3.0	)
Combined ratio before catastrophes and prior year development	93.3		95.5		91.1		91.8

Property & Casualty Commercial

Three months ended September 30, 2012 compared to the three months ended September 30, 2011

•

Property & Casualty Commercial's combined ratio before catastrophes and prior year development improved primarily due to a decrease in the current accident year loss and loss adjustment expense ratio before catastrophes primarily as a result of lower non-catastrophe property losses, partially offset by a higher current accident year loss and loss adjustment expense ratio before catastrophes for workers' compensation. In addition, both periods included current accident year reserve strengthening related to prior quarters, which, in 2012, added 2.5 points primarily related to workers' compensation business and commercial auto liability claims, and in 2011, added 3.0 points primarily related to workers' compensation business.

Nine mo nths ended September 30, 2012 compared to the nine months ended September 30, 2011

•

Property & Casualty Commercial's combined ratio before catastrophes and prior year development deteriorated slightly primarily due to an increase in the current accident year loss and loss adjustment expense ratio before catastrophes in workers' compensation substantially offset by lower non-catastrophe property losses. Workers' compensation frequency has been improving since recognizing the increase in the latter six months of 2011, while severity has moderated and earned pricing has increased.

Consumer Markets

Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011


•	Consumer Markets combined ratio before catastrophes and prior year development improved primarily due to a lower ratio of current accident year loss and loss adjustment expenses before catastrophes for home, driven by earned pricing increases and a decrease in the frequency of non-catastrophe weather claims, partially offset by an increase in the expense ratio.

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Return on Assets

Return on assets is a key indicator of overall profitability for the Retirement Plans, Mutual Funds and Life Other Operations reporting segments as a significant portion of their earnings is based on average assets under management.



	Three Months Ended September 30,						Nine Months Ended September 30,
Ratios	2012			2011			2012			2011
Retirement Plans
ROA	(5.1	)	bps	(17.5	)	bps	2.2		bps	2.3		bps
Effect of Unlock on ROA	(4.4	)	bps	(18.2	)	bps	(0.2	)	bps	(6.2	)	bps
Effect of net realized gains (losses), net of tax and DAC on ROA	(4.3	)	bps	(2.3	)	bps	(1.8	)	bps	1.7		bps
ROA, core earnings excluding Unlock	3.6		bps	3.0		bps	4.2		bps	6.8		bps
Mutual Funds
ROA	8.3		bps	10.5		bps	8.6		bps	11.5		bps
Effect of net realized gains /(losses), net of tax and DAC on ROA	—		bps	—		bps	—		bps	0.2		bps
ROA, core earnings excluding Unlock	8.3		bps	10.5		bps	8.6		bps	11.3		bps
Life Other Operations
ROA	34.8		bps	23.8		bps	27.2		bps	32.8		bps
Effect of Unlock on ROA	(2.6	)	bps	(28.6	)	bps	4.4		bps	(6.3	)	bps
Effect of net realized gains (losses), net of tax and DAC on ROA	2.1		bps	14.0		bps	(15.9	)	bps	(6.7	)	bps
ROA, core earnings excluding Unlock	35.3		bps	38.4		bps	38.7		bps	45.8		bps

Three months ended September 30, 2012 compared to three months ended September 30, 2011


•	Retirement Plans ROA, core earnings excluding Unlock, was relatively unchanged in 2012 as core earnings were flat during the period.


•	Mutual Funds ROA, core earnings excluding Unlock, decreased in 2012 primarily due to lower fee income and other driven by lower average AUM during the third quarter of 2012.


•	Life Other Operations ROA, core earnings excluding Unlock, decreased in 2012 primarily due to increased total benefits, losses and expenses, including higher restructuring costs.

Nine months ended September 30, 2012 compared to nine months ended September 30, 2011


•	Retirement Plans ROA, core earnings excluding Unlock, decreased in 2012 primarily due to increased total benefits, losses and expenses, including higher restructuring costs.


•	Mutual Funds ROA, core earnings excluding Unlock, decreased in 2012 primarily due to lower fee income and other driven by lower average AUM during the nine months ended September 30, 2012 .


•	Life Other Operations ROA, core earnings excluding Unlock, decreased in 2012 primarily due to lower fee income and higher restructuring costs. In addition, ROA, core earnings excluding Unlock for 2011 reflects the favorable impact of the release of a deficiency reserve related to a product line in Japan.

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After-tax margin

After-tax margin is a key indicator of overall profitability for the Individual Life and Group Benefits reporting segments as a significant portion of their earnings are a result of the net margin from losses incurred on earned premiums, fees and other considerations.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Individual Life
After-tax margin	3.4	%	(2.3	)%	6.4	%	5.4	%
Less: Effect of Unlock	(1.6	)%	(16.6	)%	(1.2	)%	(6.2	)%
Less: Effect of net realized gains/losses, net of tax and DAC	(1.1	)%	3.3	%	(0.1	)%	(0.3	)%
After-tax margin, core earnings excluding Unlock	6.1	%	11.0	%	7.7	%	11.9	%
Group Benefits
After-tax margin, excluding buyouts	2.9	%	2.2	%	2.6	%	2.3	%
Less: Effect of net realized gains, net of tax	0.7	%	0.4	%	0.6	%	0.3	%
After-tax margin, excluding buyouts and realized gains	2.2	%	1.8	%	2.0	%	2.0	%

Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

•

Individual Life's after-tax margin, core earnings excluding Unlock, decreased for the three and nine months ended September 30, 2012 as compared to the prior year periods primarily due to increased operating costs, including restructuring costs and increased benefits, losses and loss adjustment expenses, including death benefits, for the nine months ended September 30, 2012 and a higher effective income tax rate in 2012.

•

Group Benefits' after-tax margin increased for the three months ended September 30, 2012 and remained flat for the nine months ended September 30, 2012 , as compared to prior year. For both periods, there is a decrease in fully insured ongoing premiums due to the Company's pricing actions and a challenging economic environment, partially offset by lower commissions and operating expense. For the nine months, group disability loss ratio was higher than prior year while for the three months, the loss ratio was lower due to slightly favorable long term disability terminations.

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Investment Results

Composition of Invested Assets



	September 30, 2012				December 31, 2011
	Amount		Percent		Amount		Percent
Fixed maturities, AFS, at fair value	$	86,726	80.9	%	$	81,809	78.3	%
Fixed maturities, at fair value using the fair value option	1,355		1.3	%	1,328		1.3	%
Equity securities, AFS, at fair value	878		0.8	%	921		0.9	%
Mortgage loans	6,863		6.4	%	5,728		5.5	%
Policy loans, at outstanding balance	2,000		1.9	%	2,001		1.9	%
Limited partnerships and other alternative investments	3,039		2.8	%	2,532		2.4	%
Other investments [1]	1,540		1.4	%	2,394		2.3	%
Short-term investments	4,787		4.5	%	7,736		7.4	%
Total investments excluding equity securities, trading	107,188		100	%	104,449		100	%
Equity securities, trading, at fair value [2]	29,980				30,499
Total investments	$	137,168			$	134,948


[1]	Primarily relates to derivative instruments.

[2]

As of September 30, 2012 and December 31, 2011 , approximately $ 28.0 billion and $ 28.5 billion , respectively, of equity securities, trading, support Japan variable annuities. Those equity securities, trading, were invested in mutual funds, which, in turn, invested in the following asset classes as of September 30, 2012 and December 31, 2011 , respectively, Japan equity 19% and 21% , Japan fixed income (primarily government securities) 15% and 15% , global equity 22% and 20% , global government bonds 43% and 43% , and cash and other 1% and 1% .

Total investments increased since December 31, 2011 driven by fixed maturities, AFS, and mortgage loans, partially offset by declines in short-term investments. The increase in fixed maturities, AFS, was largely the result of improved valuations as a result of credit spread tightening and declining interest rates, and mortgage loans increased due to the continued funding of commercial whole loans. The decline in short-term investments primarily relates to a decline in derivative collateral due to decreases in derivative market values, as well as increased allocations to mortgage loans and limited partnerships and other alternative investments.

Net Investment Income (Loss)



	Three Months Ended September 30,										Nine Months Ended September 30,
	2012					2011					2012					2011
(Before-tax)	Amount			Yield [1]		Amount			Yield [1]		Amount			Yield [1]		Amount			Yield [1]
Fixed maturities [2]	$	830		4.1	%	$	836		4.1	%	$	2,536		4.2	%	$	2,552		4.2	%
Equity securities, AFS	5			2.3	%	8			3.0	%	23			3.2	%	27			3.5	%
Mortgage loans	88			5.1	%	75			5.6	%	253			5.2	%	205			5.4	%
Policy loans	30			6.1	%	32			5.9	%	90			6.1	%	99			6.1	%
Limited partnerships and other alternative investments	28			3.8	%	67			12.8	%	152			7.8	%	245			16.8	%
Other [3]	75					73					225					231
Investment expense	(26		)			(29		)			(82		)			(85		)
Total securities AFS and other	1,030			4.2	%	1,062			4.3	%	3,197			4.3	%	3,274			4.5	%
Equity securities, trading	710					(1,890		)			1,889					(1,684		)
Total net investment income (loss)	$	1,740				$	(828	)			5,086					1,590
Total securities, AFS and other excluding limited partnerships and other alternative investments	$	1,002		4.2	%	$	995		4.1	%	$	3,045		4.2	%	$	3,029		4.2	%

[1]

Yields calculated using annualized investment income before investment expenses divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding consolidated variable interest entity noncontrolling interests. Included in the fixed maturity yield is other, which primarily relates to derivatives (see footnote [3] below). Included in the total net investment income yield is investment expense.


[2]	Includes net investment income on short-term investments.


[3]	Includes income from derivatives that qualify for hedge accounting and hedge fixed maturities.

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Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

Total net investment income improved largely due to equity securities, trading, resulting from improvements in market performance of the underlying investment funds supporting the Japanese variable annuity product. Total net investment income, excluding equity securities, trading, declined due to lower income on limited partnerships and other alternative investments as a result the stabilizing equity market. Also included was lower income on fixed maturities largely due to lower reinvestment rates and a slight increase in U.S. Treasuries and MBS. These declines were partially offset by increased mortgage loan income due to additional investments in commercial whole loans. Based on the current interest rate and credit environment, the Company expects the 2012 portfolio yield, excluding limited partnerships, to decline slightly throughout the remainder of 2012 .

Net Realized Capital Gains (Losses)



	Three Months Ended September 30,						Nine Months Ended September 30,
(Before-tax)	2012			2011			2012			2011
Gross gains on sales	$	205		$	197		$	710		$	519
Gross losses on sales	(131		)	(63		)	(387		)	(294		)
Net OTTI losses recognized in earnings	(37		)	(60		)	(164		)	(138		)
Valuation allowances on mortgage loans	—			—			1			23
Japanese fixed annuity contract hedges, net [1]	(24		)	9			(42		)	(2		)
Periodic net coupon settlements on credit derivatives/Japan	2			1			1			(8		)
Results of variable annuity hedge program
GMWB derivatives, net	381			(323		)	451			(300		)
U.S. macro hedge program	(109		)	107			(292		)	6
Total U.S. program	272			(216		)	159			(294		)
International program	(167		)	1,132			(633		)	865
Total results of variable annuity hedge program	105			916			(474		)	571
Other, net [2]	(1		)	(425		)	153			(430		)
Net realized capital gains (losses)	$	119		$	575		$	(202	)	$	241


[1]	Relates to the Japanese fixed annuity product (adjustment of product liability for changes in spot currency exchange rates, related derivative hedging instruments, excluding net period coupon settlements, and Japan FVO securities).


[2]	Primarily consists of gains and losses on non-qualifying derivatives and fixed maturities, FVO, Japan 3Win related foreign currency swaps, and other investment gains and losses.

Details on the Company’s net realized capital gains and losses are as follows:

Gross gains and losses on sales

• Gross gains and losses on sales for the three and nine months ended September 30, 2012 were predominately from sales of investment grade corporate securities, U.S. Treasuries and municipals bonds due to tactical repositioning of the portfolio.

• Gross gains and losses on sales for the three and nine months ended September 30, 2011 were predominately from investment grade corporate securities, U.S. Treasuries and commercial real estate related securities.

Net OTTI losses

• For further information, see Other-Than-Temporary Impairments within the Investment Portfolio Risks and Risk Management section of the MD&A.

Variable annuity hedge program

• For the three and nine months ended September 30, 2012 , the gain on U.S. GMWB related derivatives, net, was primarily due to liability model assumption updates of $301 related to lower benefit utilization by policyholders, decreased domestic equity volatility gains of $42 and $73 , respectively, and outperformance of the underlying actively managed funds as compared to their respective indices of $25 and $34 , respectively.


•	For the three and nine months ended September 30, 2012 , the loss on the U.S. macro hedge program was primarily due to losses of $47 and $124 , respectively, related to an increase in domestic equity markets, losses of $49 and $121 , respectively, related to the passage of time, and losses of $16 and $56 , respectively, related to a decrease in equity volatility.

•

For the three months ended September 30, 2012 , the loss associated with the international program was primarily driven by losses of approximately $240 due to an improvement in global and domestic equity markets, partially offset by gains of approximately $91 due to an appreciation of the Japanese yen in relation to the euro and the U.S. dollar. For the nine months ended September 30, 2012 , the loss associated with the international program was primarily driven by losses of approximately $574 due to an improvement in global and domestic equity markets, and losses of approximately $202 due to depreciation of the Japanese yen in relation to the euro and the U.S. dollar, partially offset by gains of approximately $79 due to a decline in interest rates.

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• The loss on U.S. GMWB related derivatives, net, for the three and nine months ended September 30, 2011 was primarily due to a decrease in long-term interest rates that resulted in a charge of $ 247 and $261 , respectively, and a higher interest rate volatility that resulted in a charge of $72 and $76, respectively. The gain on the U.S. macro hedge program for the three months ended September 30, 2011 was primarily due to a decrease in domestic equity markets. The gain on the international program for the three and nine months ended September 30, 2011 was primarily the result of a decrease in global and domestic equity markets, and the appreciation of the Japanese yen in relation to the euro.

Other, net

• Other, net loss for the three months ended September 30, 2012 , was primarily due to losses of $72 on transactional foreign currency re-valuation associated with the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, due to appreciation of the Japanese yen versus the U.S. dollar. Additional loss of $31 on Japan 3Win foreign currency swaps was primarily due to the strengthening of the currency basis swap spread between U.S. dollar and Japanese yen and the decline in U.S. interest rates. These losses were primarily offset by gains of $91 on credit derivatives driven by credit spread tightening.


•	Other, net gain for the nine months ended September 30, 2012 , was primarily due to gains of $242 on credit derivatives driven by credit spread tightening, partially offset by losses of $87 related to Japan 3Win foreign currency swaps primarily driven by the strengthening of the currency basis swap spread between U.S. dollar and Japanese yen and the decline in U.S. interest rates.

• Other, net loss for the three and nine months ended September 30, 2011 was primarily due to losses of $178 and $148 , respectively, on credit derivatives driven by credit spread widening and losses of $135 and $126 , respectively, on transactional foreign currency re-valuation associated with the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, due to an appreciation of the Japanese yen versus the U.S. dollar. Also included were losses of $54 and $86 , respectively, on Japan 3Win foreign currency swaps primarily driven by a decrease in U.S. interest rates. In addition, losses of $58 for the three and nine months ended September 30, 2011 resulted from equity futures and options used to hedge equity market risk in the investment portfolio due to an increase in the equity market during the hedged period.

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PROPERTY & CASUALTY COMMERCIAL



	Three Months Ended September 30,								Nine Months Ended September 30,
Underwriting Summary	2012			2011			Change		2012			2011			Change
Written premiums	$	1,552		$	1,551		—	%	$	4,755		$	4,694		1	%
Change in unearned premium reserve	(30		)	(2		)	NM		64			126			(49	%)
Earned premiums	1,582			1,553			2	%	4,691			4,568			3	%
Losses and loss adjustment expenses
Current accident year before catastrophes	1,089			1,085			—	%	3,111			2,997			4	%
Current accident year catastrophes	10			93			(89	%)	116			305			(62	%)
Prior accident years	15			(9		)	NM		54			16			NM
Total losses and loss adjustment expenses	1,114			1,169			(5	%)	3,281			3,318			(1	%)
Amortization of deferred policy acquisition costs	231			229			1	%	693			687			1	%
Underwriting expenses	218			224			(3	%)	698			688			1	%
Dividends to policyholders	5			5			—	%	8			13			(38	%)
Underwriting results	14			(74		)	NM		11			(138		)	NM
Net servicing income	5			2			150	%	13			6			117	%
Net investment income	222			217			2	%	696			698			—	%
Net realized capital gains (losses)	10			(51		)	NM		37			(61		)	NM
Other expenses	(31		)	(38		)	18	%	(83		)	(116		)	28	%
Income from continuing operations before income taxes	220			56			NM		674			389			73	%
Income tax expense	54			1			NM		168			50			NM
Income from continuing operations, net of tax	166			55			NM		506			339			49	%
Income (loss) from discontinued operations, net of tax [1]	(2		)	(2		)	—	%	(4		)	155			NM
Net income	$	164		$	53		NM		$	502		$	494		2	%


[1]	Represents the income from operations and sale of Specialty Risk Services (“SRS”). For additional information, see Note 12 of the Notes to Condensed Consolidated Financial Statements.



	Three Months Ended September 30,						Nine Months Ended September 30,
Premium Measures [1]	2012			2011			2012			2011
New business premium	$	230		$	271		$	747		$	860
Standard commercial lines policy count retention	84		%	82		%	83		%	82		%
Standard commercial lines renewal written pricing increase	8		%	4		%	7		%	3		%
Standard commercial lines renewal earned pricing increase	6		%	2		%	5		%	2		%
Standard commercial lines policies in-force as of end of period							1,268,823			1,257,012


[1]	Standard commercial lines represents the Company’s small commercial and middle market property and casualty lines.

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	Three Months Ended September 30,								Nine Months Ended September 30,
Ratios	2012			2011			Change		2012			2011		Change
Loss and loss adjustment expense ratio
Current accident year before catastrophes	68.8			69.9			1.1		66.3			65.6		(0.7	)
Current accident year catastrophes	0.6			6.0			5.4		2.5			6.7		4.2
Prior accident years	0.9			(0.6		)	(1.5	)	1.2			0.4		(0.8	)
Total loss and loss adjustment expense ratio	70.4			75.3			4.9		69.9			72.6		2.7
Expense ratio	28.4			29.2			0.8		29.7			30.1		0.4
Policyholder dividend ratio	0.3			0.3			—		0.2			0.3		0.1
Combined ratio	99.1			104.8			5.7		99.8			103.0		3.2
Catastrophe ratio
Current accident year	0.6			6.0			5.4		2.5			6.7		4.2
Prior accident years	(0.1		)	0.1			0.2		(0.8		)	0.2		1.0
Total catastrophe ratio	0.5			6.1			5.6		1.7			6.8		5.1
Combined ratio before catastrophes	98.6			98.6			—		98.1			96.2		(1.9	)
Combined ratio before catastrophes and prior accident year development	97.5			99.4			1.9		96.1			96.0		(0.1	)
Other revenues [1]	$	27		$	28		(4	%)	$	75		$	77	(3	%)


[1]	Represents servicing revenues.

Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

Net income, as compared to the prior year periods, increased for the three and nine months ended September 30, 2012 primarily due to improvements in underwriting results driven by less severe catastrophes, and in addition, improvements in net realized capital gains (losses), mainly on derivatives. In the nine-month period this was offset by the gain on sale of SRS which occurred in 2011 .

Current accident year catastrophe losses for the three months ended September 30, 2012 of $ 10 , pre-tax, primarily included Hurricane Isaac. For the nine months ended September 30, 2012 , pre-tax catastrophes of $ 116 also included thunderstorms and tornadoes in the Midwest and South. In 2011 , catastrophes primarily included Hurricane Irene in the Northeast, thunderstorms in the Midwest and Tropical Storm Lee in the Southeast, and for the nine-month period, winter storms in the Northeast and Midwest and severe thunderstorms and tornadoes in the Midwest and South.

For information regarding prior accident years reserve development, including reserve (releases) strengthenings by reserve line, see the Property and Casualty Insurance Product Reserves, Net of Reinsurance section within Critical Accounting Estimates.

Earned premiums increased for the three and nine months ended September 30, 2012 primarily due to improvements in workers’ compensation, driven by renewal earned pricing increases, improved policy count retention and an increase in policies-in-force. The earned pricing changes were primarily a reflection of written pricing changes over the last year. Renewal written pricing increased across all standard commercial lines driven by improving market conditions.

Current accident year loss and loss adjustment expenses before catastrophes remained flat for the three months ended September 30, 2012 and increased for the nine months ended September 30, 2012 . The increase in the nine months was primarily due to increases in earned premiums and the current accident year loss and loss adjustment expense ratio before catastrophes particularly in workers’ compensation. Workers' compensation frequency has been improving since recognizing the increase in the latter six months of 2011, while severity has moderated and earned pricing has increased.

Net realized capital gains (losses) improved primarily due to gains on derivatives as a result of credit spreads tightening. For additional information, see the Investment Results section within Key Performance Measures and Ratios.

The effective tax rate in both periods differs from the U.S. Federal statutory rate primarily due to permanent differences related to investments in tax exempt securities. For further discussion, see Income Taxes within Note 1 of the Notes to Condensed Consolidated Financial Statements.

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GROUP BENEFITS



	Three Months Ended September 30,								Nine Months Ended September 30,
Operating Summary	2012			2011			Change		2012			2011			Change
Premiums and other considerations	$	941		$	1,016		(7	%)	$	2,879		$	3,136		(8	%)
Net investment income	98			102			(4	%)	304			312			(3	%)
Net realized capital gains	11			6			83	%	31			2			NM
Total revenues	1,050			1,124			(7	%)	3,214			3,450			(7	%)
Benefits, losses and loss adjustment expenses	746			814			(8	%)	2,312			2,492			(7	%)
Amortization of deferred policy acquisition costs	9			9			—	%	25			27			(7	%)
Insurance operating costs and other expenses	258			274			(6	%)	777			851			(9	%)
Total benefits, losses and expenses	1,013			1,097			(8	%)	3,114			3,370			(8	%)
Income before income taxes	37			27			37	%	100			80			25	%
Income tax expense	7			2			NM		17			3			NM
Net income	$	30		$	25		20	%	$	83		$	77		8	%
Premiums and other considerations
Fully insured – ongoing premiums	$	926		$	1,000		(7	%)	$	2,830		$	3,041		(7	%)
Buyout premiums	—			—			—	%	3			49			(94	%)
Other	15			16			(6	%)	46			46			—	%
Total premiums and other considerations	$	941		$	1,016		(7	%)	$	2,879		$	3,136		(8	%)
Fully insured ongoing sales, excluding buyouts	$	55		$	91		(40	%)	$	349		$	427		(18	%)
Ratios, excluding buyouts
Loss ratio	79.3		%	80.1		%	0.8		80.3		%	79.1		%	(1.2)
Loss ratio, excluding financial institutions	83.8		%	84.7		%	0.9		84.9		%	84.2		%	(0.7)
Expense ratio	28.4		%	27.9		%	(0.5)		27.9		%	28.4		%	0.5
Expense ratio, excluding financial institutions	24.5		%	23.9		%	(0.6)		24.0		%	23.9		%	(0.1)

Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

Net income, as compared to the prior year periods, increased for the three and nine months ended September 30, 2012 . While realized capital gains improved in both periods, this was partially offset by a decrease in fully insured ongoing premiums, due to the competitive marketplace, while the Company remains disciplined in meeting pricing expectations.

The loss ratio for the three months was lower, primarily in group disability, due to slightly favorable long-term disability terminations. For the nine months, the loss ratio remains higher than prior year, primarily due to higher severity in group disability. In addition, the Company continues to experience stable but elevated claims incidence and lower than historical terminations in long-term disability.

The change in insurance operating costs and other expenses is due to lower commission payments as a result of lower sales and a one-time payment to a third party administrator in the first quarter of 2011.

The effective tax rate, in both periods, differs from the U.S. Federal statutory rate primarily due to permanent differences related to investments in tax exempt securities. For further discussion, see Income Taxes within Note 1 of the Notes to Condensed Consolidated Financial Statements.

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CONSUMER MARKETS



	Three Months Ended September 30,								Nine Months Ended September 30,
Operating Summary	2012			2011			Change		2012			2011			Change
Written premiums	$	960		$	964		—	%	$	2,771		$	2,817		(2	%)
Change in unearned premium reserve	48			34			41	%	46			(8		)	NM
Earned premiums	912			930			(2	%)	2,725			2,825			(4	%)
Losses and loss adjustment expenses
Current accident year before catastrophes	628			663			(5	%)	1,797			1,902			(6	%)
Current accident year catastrophes	—			113			(100	%)	255			426			(40	%)
Prior accident years	(49		)	(9		)	NM		(127		)	(58		)	(119	%)
Total losses and loss adjustment expenses	579			767			(25	%)	1,925			2,270			(15	%)
Amortization of deferred policy acquisition costs	82			84			(2	%)	249			254			(2	%)
Underwriting expenses	141			141			—	%	437			437			—	%
Underwriting results	110			(62		)	NM		114			(136		)	NM
Net servicing income	2			4			(50	%)	12			13			(8	%)
Net investment income	38			46			(17	%)	122			145			(16	%)
Net realized capital gains (losses)	2			(10		)	NM		7			(12		)	NM
Other expenses	(13		)	(8		)	(63	%)	(39		)	(153		)	75	%
Income (loss) before income taxes	139			(30		)	NM		216			(143		)	NM
Income tax expense (benefit)	45			(14		)	NM		64			(63		)	NM
Net income (loss)	$	94		$	(16	)	NM		$	152		$	(80	)	NM
	Three Months Ended September 30,								Nine Months Ended September 30,
Written Premiums	2012			2011			Change		2012			2011			Change
Product Line
Automobile	$	650		$	657		(1	%)	$	1,919		$	1,963		(2	%)
Homeowners	310			307			1	%	852			854			—	%
Total	$	960		$	964		—	%	$	2,771		$	2,817		(2	%)
Earned Premiums
Product Line
Automobile	$	632		$	649		(3	%)	$	1,894		$	1,978		(4	%)
Homeowners	280			281			—	%	831			847			(2	%)
Total	$	912		$	930		(2	%)	$	2,725		$	2,825		(4	%)



	Three Months Ended September 30,						Nine Months Ended September 30,
Premium Measures	2012			2011			2012			2011
Policies in-force end of period
Automobile							2,029,078			2,106,385
Homeowners							1,321,149			1,358,162
Total policies in-force end of period							3,350,227			3,464,547
New business written premium
Automobile	$	84		$	80		$	255		$	221
Homeowners	$	32		$	26		$	87		$	68
Policy count retention
Automobile	85		%	83		%	85		%	82		%
Homeowners	87		%	84		%	86		%	83		%
Renewal written pricing increase
Automobile	4		%	4		%	4		%	5		%
Homeowners	6		%	8		%	6		%	8		%
Renewal earned pricing increase
Automobile	4		%	6		%	5		%	6		%
Homeowners	6		%	9		%	7		%	9		%

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	Three Months Ended September 30,								Nine Months Ended September 30,
Ratios and Supplemental Data	2012			2011			Change		2012			2011			Change
Loss and loss adjustment expense ratio
Current accident year before catastrophes	68.9			71.3			2.4		65.9			67.3			1.4
Current accident year catastrophes	—			12.2			12.2		9.4			15.1			5.7
Prior accident years	(5.4		)	(1.0		)	4.4		(4.7		)	(2.1		)	2.6
Total loss and loss adjustment expense ratio	63.5			82.5			19.0		70.6			80.4			9.8
Expense ratio	24.5			24.2			(0.3	)	25.2			24.5			(0.7	)
Combined ratio	87.9			106.7			18.8		95.8			104.8			9.0
Catastrophe ratio
Current year	—			12.2			12.2		9.4			15.1			5.7
Prior years	(0.7		)	—			0.7		(1.1		)	1.0			2.1
Total catastrophe ratio	(0.7		)	12.2			12.9		8.3			16.1			7.8
Combined ratio before catastrophes	88.6			94.5			5.9		87.5			88.7			1.2
Combined ratio before catastrophes and prior accident years development	93.3			95.5			2.2		91.1			91.8			0.7
Other revenues [1]	$	37		$	35		6	%	$	109		$	111		(2	%)
Product Line Combined Ratios
Automobile	93.9			99.4			5.5		93.7			94.1			0.4
Homeowners	74.5			124.1			49.6		100.6			130.1			29.5
Total	87.9			106.7			18.8		95.8			104.8			9.0


[1]	Represents servicing revenues.

Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

Net income (loss) improved relative to the comparable prior periods, due to lower current accident year catastrophes and more favorable prior accident year reserve development and, for the nine-month period, a $73 after-tax charge in 2011, related to the write off of capitalized costs associated with a policy administration software project that was discontinued.

Current accident year catastrophe losses for the three months ended September 30, 2012 were $0, pre-tax. Losses that resulted from Hurricane Isaac in the Southeast and thunderstorms in the Midwest, were offset by reserve releases for catastrophes from prior quarters of 2012. For the nine months ended September 30, 2012, pre-tax catastrophes of $255 included severe tornadoes and thunderstorms in the Midwest, the South and Colorado, as well as tornadoes and thunderstorms spanning from the Ohio Valley to the Mid-Atlantic. In 2011, catastrophes primarily included Hurricane Irene in the Northeast and thunderstorms in the Midwest, and for the nine-month period, severe tornadoes and wind storms in the Midwest and South, and winter storms in the Northeast and Midwest.

For information regarding prior accident years reserve development, see the Property and Casualty Insurance Product Reserves, Net of Reinsurance section within Critical Accounting Estimates.

Earned premiums decreased in auto and were down modestly for homeowners, as a decline in renewal written premium more than offset an increase in new business written premium. Compared to 2011, the number of policies in-force as of September 30, 2012 decreased for both auto and home, driven by non-renewals. Policy count retention for auto and home increased as moderating renewal written price increases improved the Company's price competitiveness. Changes in underwriting practices and service operations have also contributed to the improvement in retention.

Auto and home new business written premium increased primarily due to more competitive new business pricing in AARP Direct and an increase in the sale of the AARP auto product through independent agents. The lower auto and homeowners renewal earned pricing in the three month and nine months ended September 30, 2012 was primarily due to lower rate increases. For both auto and homeowners, an increase in earned pricing was partially offset by a shift in the mix of business by territory, class plan and pricing tier to policies with lower average earned premium, such that increases in average earned premium were less than the increases in earned pricing.

Current accident year losses and loss adjustment expenses before catastrophes decreased primarily due to lower earned premiums and a decrease in the overall current accident year loss and loss adjustment expense ratio before catastrophes. For the three and nine months ended September 30, 2012 the current accident year loss and loss adjustment expense ratio before catastrophes decreased primarily due to a decrease in home, partially offset by an increase in auto. The decrease for home was primarily due to earned pricing increases and a decrease in the frequency of non-catastrophe weather claims. The increase for auto was primarily due to higher loss cost severity for first party physical damage and third party property damage claims, largely offset by the effect of earned pricing increases.

Net realized capital gains increased primarily due to gains on derivatives as a result of credit spreads tightening. For additional information, see the Investment Results section within Key Performance Measures and Ratios.

Table of Contents

INDIVIDUAL LIFE



	Three Months Ended September 30,									Nine Months Ended September 30,
Operating Summary	2012			2011			Change			2012			2011			Change
Fee income and other	$	235		$	269		(13		)%	$	738		$	739		—		%
Earned premiums	(28		)	(25		)	(12		)%	(84		)	(74		)	(14		)%
Net investment income	124			115			8		%	372			341			9		%
Net realized capital gains (losses)	(6		)	28			NM			13			4			NM
Total revenues	325			387			(16		)%	1,039			1,010			3		%
Benefits, losses and loss adjustment expenses	230			260			(12		)%	657			622			6		%
Amortization of DAC	10			87			(89		)%	77			146			(47		)%
Insurance operating costs and other expenses	74			63			17		%	222			191			16		%
Total benefits, losses and expenses	314			410			(23		)%	956			959			—		%
Income (loss) before income taxes	11			(23		)	NM			83			51			63		%
Income tax expense (benefit)	—			(14		)	100		%	17			(4		)	NM
Net income (loss)	$	11		$	(9	)	NM			$	66		$	55		20		%
Account Values
Individual variable universal life insurance										$	5,873		$	5,259		12		%
Universal life, interest sensitive whole life, modified guaranteed life insurance and other										7,184			6,549			10		%
Total account values										$	13,057		$	11,808		11		%
Individual Life Insurance In-force
Variable universal life insurance										$	66,310		$	70,926		(7		)%
Universal life, interest sensitive whole life, modified guaranteed life insurance										67,525			62,052			9		%
Term life										83,185			80,249			4		%
Total life insurance in-force										$	217,020		$	213,227		2		%
Net Investment Spread	146 bps			157 bps			(11) bps			151 bps			159 bps			(8) bps
Death Benefits	$	113		$	108		$	5		$	331		$	315		$	16

Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

Net income, as compared to prior year periods, increased for the three and nine months ended September 30, 2012 primarily due to increased net investment income and lower Unlock charges in both periods, offset by unfavorable mortality and increases in operating costs and other expenses. For further discussion of Unlocks, see MD&A – Critical Accounting Estimates.

The announced sale of this business has had a negative impact on sales of individual life products. Insurance operating costs and other expenses, as compared to prior periods, increased for the three and nine months ended September 30, 2012 primarily due to restructuring and other costs of $18 and $25, respectively, associated with the Company's plan to pursue the sale of the Individual Life business. For further discussion of the Company's March 2012 announcement regarding its business and strategy evaluation, see MD&A – Outlooks.

While net investment income, as compared to prior year periods, increased modestly due to higher invested assets for the three and nine months ended September 30, 2012 , income on limited partnerships and other alternative investments was lower in 2012 compared to 2011 as a result of greater price appreciation experienced in the underlying funds in 2011 .

Net investment spread decreased by 11 bps for the three months ended September 30, 2012 , as compared to the prior year period, driven by lower yields of 17 bps, partially offset by lower crediting rates of 6 bps. Net investment spread decreased by 8 bps for the nine months ended September 30, 2012 , as compared to the prior year period, driven by lower yields of 16 bps, partially offset by lower crediting rates of 8 bps.

Individual Life’s effective tax rate for 2012 and 2011 differs from the statutory rate of 35% primarily due to permanent differences for separate account DRD and the 2011 release of the investment valuation allowance. See Note 1 of the Notes to Condensed Consolidated Financial Statements for a reconciliation of the consolidated tax provision at the U.S. federal statutory rate to the consolidated provision for income taxes.

Table of Contents

RETIREMENT PLANS



	Three Months Ended Three Months Ended September 30,								Nine Months Ended September 30,
Operating Summary	2012			2011			Change		2012			2011			Change
Fee income and other	$	89		$	92		(3	)%	$	276		$	285		(3	)%
Earned premiums	2			1			100	%	5			6			(17	)%
Net investment income	105			100			5	%	312			299			4	%
Net realized capital losses	(3		)	(2		)	(50	)%	(1		)	—			—	%
Total revenues	193			191			1	%	592			590			—	%
Benefits, losses and loss adjustment expenses	87			81			7	%	251			228			10	%
Amortization of DAC	21			50			(58	)%	31			74			(58	)%
Insurance operating costs and other expenses	106			106			—	%	323			321			10	%
Total benefits, losses and expenses	214			237			(10	)%	605			623			(3	)%
Loss before income tax benefit	(21		)	(46		)	54	%	(13		)	(33		)	61	%
Income tax benefit	(14		)	(23		)	39	%	(22		)	(42		)	48	%
Net income (loss)	$	(7	)	$	(23	)	70	%	$	9		$	9		—	%
Assets Under Management
401(k) account values									$	23,238		$	19,769		18	%
403(b)/457 account values									13,754			12,072			14	%
401(k)/403(b)/457 mutual funds									18,268			17,844			2	%
Total assets under management									$	55,260		$	49,685		11	%
Assets Under Management Roll Forward
Assets under management, beginning of period									$	52,302		$	52,518		—	%
Net flows									(2,065		)	1,247			NM
Transfers in and reclassifications									—			267			(100	)%
Change in market value and other									5,023			(4,347		)	NM
Assets under management, end of period									$	55,260		$	49,685		11	%
Net Investment Spread	76 bps			84 bps			(8) bps		86 bps			110 bps			(24) bps

Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

Net loss, as compared to the prior period, decreased for the three months ended September 30, 2012 primarily due to a lower Unlock charge in 2012. Net income, as compared to the prior period, remained flat for the nine months ended September 30, 2012 . For further discussion of Unlocks see MD&A – Critical Accounting Estimates.

The announced sale of this business has had a negative impact on sales of retirement plan products and surrender rates. In addition, insurance operating costs and other expenses includes restructuring costs for the three and nine months ended September 30, 2012 of $10 and $14, respectively, related to the Company's plan to pursue the sale of the Retirement Plans business. For further discussion of the Company's March 2012 announcement regarding its business and strategy evaluation, see MD&A – Outlooks.

Net investment income, as compared to prior year periods, increased modestly for the three and nine months ended September 30, 2012 although portfolio yields, particularly on limited partnership investments, were lower in 2012 . Net investment spread decreased by 8 bps for the three months ended September 30, 2012 , as compared to the prior year period, driven by lower yields of 20 bps, partially offset by lower crediting rates of 12 bps. Net investment spread decreased by 24 bps for the nine months ended September 30, 2012 , as compared to the prior year period, driven by lower yields of 30 bps, partially offset by lower crediting rates of 6 bps.

Retirement Plans’ effective tax rate for 2012 and 2011 differs from the statutory rate of 35% primarily due to permanent differences for separate account DRD and the 2011 release of the investment valuation allowance. See Note 1 of the Notes to Condensed Consolidated Financial Statements for a reconciliation of the consolidated tax provision at the U.S. federal statutory rate to the consolidated provision for income taxes.

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MUTUAL FUNDS



	Three Months Ended September 30,							Nine Months Ended September 30,
Operating Summary	2012			2011		Change		2012			2011			Change
Fee income and other	$	148		$	153	(3	)%	$	447		$	506		(12	)%
Net investment loss	(1		)	—		NM		(2		)	(2		)	—	%
Net realized capital gains	1			—		NM		—			1			(100	)%
Total revenues	148			153		(3	)%	445			505			(12	)%
Amortization of DAC	8			12		(33	)%	26			36			(28	)%
Insurance operating costs and other expenses	113			105		8	%	333			348			(4	)%
Total benefits, losses and expenses	121			117		3	%	359			384			(7	)%
Income before income taxes	27			36		(25	)%	86			121			(29	)%
Income tax expense	9			12		(25	)%	30			42			(29	)%
Net income	$	18		$	24	(25	)%	$	56		$	79		(29	)%
Assets Under Management
Retail mutual fund assets								$	42,475		$	39,258		8	%
Investment Only mutual fund assets								7,533			6,625			14	%
529 College Savings Plan assets								1,792			1,424			26	%
Total non-proprietary assets								51,800			47,307			9	%
Proprietary mutual fund assets								36,321			35,494			2	%
Total mutual fund assets under management								$	88,121		$	82,801		6	%
Non-Proprietary AUM Roll Forward
Non-Proprietary Mutual Fund AUM, beginning of period								$	48,768		$	56,884		(14	)%
Net flows								(2,652		)	(2,584		)	(3	)%
Change in market value and other								5,684			(6,993		)	NM
Non-Proprietary Mutual Fund AUM, end of period								$	51,800		$	47,307		9	%
Proprietary Mutual Fund AUM Roll Forward
Proprietary Mutual Fund AUM, beginning of period								$	36,770		$	43,602		(16	)%
Net flows								(4,584		)	(4,355		)	(5	)%
Change in market value								4,135			(3,753		)	NM
Proprietary Mutual Fund AUM, end of period								$	36,321		$	35,494		2	%

Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

Net income, as compared to prior year periods, decreased for the three and nine months ended September 30, 2012 primarily due to lower fee income and other driven by lower average AUM in 2012 compared to 2011. During the three and nine months ended September 30, 2012 AUM increased modestly compared to December 31, 2011 and June 30, 2012 reflecting a significant improvement in equity market performance and lower redemption rates although new business deposit activity continued to trend lower.

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LIFE OTHER OPERATIONS



	Three Months Ended September 30,								Nine Months Ended September 30,
Operating Summary	2012			2011			Change		2012			2011			Change
Fee income and other	$	586		$	607		(3	)%	$	1,717		$	1,883		(9	)%
Earned premiums	7			59			(88	)%	75			167			(55	)%
Net investment income (loss):
Securities available-for-sale and other	401			443			(9	)%	1,276			1,337			(5	)%
Equity securities trading [1]	710			(1,889		)	NM		1,888			(1,683		)	NM
Total net investment income (loss)	1,111			(1,446		)	NM		3,164			(346		)	NM
Net realized capital gains (losses)	91			660			(86	)%	(342		)	367			NM
Total revenues	1,795			(120		)	NM		4,614			2,071			123	%
Benefits, losses and loss adjustment expenses	513			900			(43	)%	1,444			1,923			(25	)%
Benefits, losses and loss adjustment expenses – returns credited on international variable annuities [1]	710			(1,889		)	NM		1,888			(1,683		)	NM
Amortization of DAC	205			534			(62	)%	340			823			(59	)%
Insurance operating costs and other expenses	178			204			(13	)%	548			606			(10	)%
Total benefits, losses and expenses	1,606			(251		)	NM		4,220			1,669			153	%
Income before income taxes	189			131			44	%	394			402			(2	)%
Income tax expense (benefit)	44			26			69	%	50			(37		)	NM
Net income	$	145		$	105		38	%	$	344		$	439		(22	)%
Assets Under Management [2]
Variable annuity account values									$	97,330		$	98,154		(1	)%
Fixed MVA annuity and other account values [3]									15,541			16,740			(7	)%
Institutional annuity account values [4]									18,204			19,477			(7	)%
Private Placement Life Insurance (“PPLI”)									37,277			35,989			4	%
Account Value Roll Forward
Variable Annuities
Account value, beginning of period									$	99,922		$	116,520		(14	%)
Net flows									(10,191		)	(10,564		)	4	%
Change in market value and other									7,903			(9,397		)	NM
Effect of currency translation									(304		)	1,595			NM
Account value, end of period									$	97,330		$	98,154		(1	%)
Net Investment Spread	30 bps			27 bps			3 bps		39 bps			29 bps			10 bps
Expense Ratios
General insurance expense ratio	2.2 bps			2.3 bps					7.5 bps			7.1 bps
DAC amortization ratio	52.0		%	80.3		%			46.3		%	67.2		%
Less: Effect of realized capital gains (losses) on DAC amortization	8.6		%	72.0		%			12.9		%	34.3		%
Less: Effect of Unlocks on DAC amortization	3.8		%	(32.7		)%			(4.0		%)	(5.7		%)
DAC amortization ratio, core earnings, excluding Unlock	39.6		%	41.0		%			37.4		%	38.6		%


[1]	Includes investment income and mark-to-market effects of equity securities, trading, supporting the international variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within benefits, losses and loss adjustment expenses.


[2]	International and institutional annuities were transferred retrospectively from Individual Annuity; PPLI was transferred retrospectively from Individual Life.


[3]	Includes approximately $2.0 billion and $2.7 billion related to the triggering of the guaranteed minimum income benefit for the 3 Win product as of September 30, 2012 and 2011 , respectively. This account value is not expected to generate material future profit or loss to the Company.


[4]	Included in the balance is approximately $1.3 billion as of September 30, 2012 and $1.5 billion as of September 30, 2011 related to an intra-segment funding agreement which is eliminated in consolidation.

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Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

Net income, as compared to the prior year period, increased for the three months ended September 30, 2012 primarily due to a lower Unlock charge in 2012. In addition, benefits, losses and loss adjustment expenses, as compared to the prior year period, decreased for the three months ended September 30, 2012 reflecting an improvement in equity market performance. Net income, as compared to the prior year period, decreased for the nine months ended September 30, 2012 primarily due to higher net realized capital losses, offset by an Unlock benefit in 2012 . In addition, benefits, losses and loss adjustment expenses, as compared to the prior year period, decreased for the nine months ended September 30, 2012 reflecting an improvement in equity market performance. For further discussion of the Unlock see MD&A – Critical Accounting Estimates.

The net decrease in realized capital gains for the three months ended September 30, 2012 , as compared to the prior year period, was primarily due to losses in the international variable annuity hedge program. International variable annuity hedge program losses for the three months ended September 30, 2012 were $167 compared to gains of $1,132 for the three months ended September 30, 2011 . The net increase in realized capital losses for the nine months ended September 30, 2012 , as compared to the prior year period, was primarily due to losses in the variable annuity hedge program. Variable annuity hedge program losses for the nine months ended September 30, 2012 were $ 474 compared to gains of $ 571 for the nine months ended September 30, 2011 . For further discussion of the results of the variable annuity hedge program, see MD&A – Investment Results, Net Realized Capital Gains (Losses) within Key Performance Measures and Ratios.

Life Other Operations effective tax rate for 2012 and 2011 differs from the statutory rate of 35% primarily due to permanent differences for separate account DRD, the 2011 release of the investment valuation allowance, changes in the foreign valuation allowance and varying country tax rates.

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PROPERTY & CASUALTY OTHER OPERATIONS



	Three Months Ended September 30,							Nine Months Ended September 30,
Operating Summary	2012		2011			Change		2012			2011			Change
Earned Premium	$	—	$	—		—	%	$	(2	)	$	—		NM
Net investment income	35		37			(5	%)	113			113			—	%
Net realized capital gains (losses)	4		(5		)	NM		12			(4		)	NM
Total revenues	39		32			22	%	123			109			13	%
Benefits, losses and loss adjustment expenses	1		21			(95	%)	60			311			(81	%)
Insurance operating costs and other expenses	7		5			40	%	19			18			6	%
Total benefits, losses and expenses	8		26			(69	%)	79			329			(76	%)
Income (loss) before income taxes	31		6			NM		44			(220		)	NM
Income tax expense (benefit)	7		(2		)	NM		8			(85		)	NM
Net income (loss)	$	24	$	8		NM		$	36		$	(135	)	NM

Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

The net income (loss) in Property & Casualty Other Operations improved for the three and nine months ended September 30, 2012 , as compared to the prior year periods. For the three months ended September 30, 2012 , benefits, losses and loss adjustment expenses decreased, due to the strengthening of net environmental reserves by $19, pre-tax in the prior year period. For the nine months ended September 30, 2012 , the Company strengthened its net asbestos reserves by $48, pre-tax, and environmental reserves by $8, pre-tax, as compared to $290, pre-tax, and $21, pre-tax, respectively, in the prior year period.

For information on net asbestos and environmental reserves, see Property & Casualty Other Operations Claims within the Property and Casualty Insurance Product Reserves, Net of Reinsurance section in Critical Accounting Estimates.

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CORPORATE



	Three Months Ended September 30,								Nine Months Ended September 30,
Operating Summary	2012			2011			Change		2012			2011			Change
Fee income [1]	$	45		$	55		(18	%)	$	142		$	161		(12	%)
Net investment income	8			1			NM		5			30			(83	%)
Net realized capital gains (losses)	9			(51		)	NM		41			(56		)	NM
Total revenues	62			5			NM		188			135			39	%
Benefits, losses and loss adjustment expenses	1			(6		)	NM		—			(4		)	100	%
Insurance operating costs and other expenses	74			57			30	%	250			182			37	%
Loss on extinguishment of debt	—			—			—	%	910			—			NM
Interest expense	109			128			(15	%)	348			384			(9	%)
Total benefits, losses and expenses	184			179			3	%	1,508			562			168	%
Loss from continuing operations before income taxes	(122		)	(174		)	30	%	(1,320		)	(427		)	NM
Income tax benefit	(44		)	(62		)	29	%	(468		)	(153		)	NM
Loss from continuing operations, net of tax	(78		)	(112		)	30	%	(852		)	(274		)	NM
Income (loss) from discontinued operations, net of tax [2]	—			5			(100	%)	—			(70		)	100	%
Net loss	$	(78	)	$	(107	)	27	%	$	(852	)	$	(344	)	(148	%)


[1]	Fee income includes the income associated with the sales of non-proprietary insurance products in the Company’s broker-dealer subsidiaries that has an offsetting commission expense in insurance operating costs and other expenses.


[2]	Represents the income (loss) from operations and sale of Federal Trust Corporation. For additional information, see Note 12 of the Notes to Condensed Consolidated Financial Statements.

Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

The net loss in Corporate improved for the three months ended September 30, 2012 and deteriorated for the nine months ended September 30, 2012 , as compared to the prior year. In both periods, net realized capital gains (losses) increased, primarily due to gains on derivatives as a result of credit spreads tightening. For additional information on net realized capital gains, see the Investment Results section within Key Performance Measures and Ratios. This was partially offset by an increase in insurance operating costs and other expenses, as a result of restructuring and other costs related to the Company’s implementation of its strategic initiatives. See Note 16 of the Notes to Condensed Consolidated Financial Statements for additional information on restructuring and other costs.

In addition, for the nine months ended September 30, 2012 , the net loss in Corporate increased primarily due to a loss on extinguishment of debt recognized in the second quarter of 2012 related to the repurchase of all outstanding 10% fixed-to-floating rate junior subordinated debentures due 2068 with a $1.75 billion aggregate principal amount held by Allianz. The loss consisted of the premium associated with repurchasing the 10% Debentures at an amount greater than the face amount, the write-off of the unamortized discount and debt issuance costs related to the 10% Debentures and other costs related to the repurchase transaction.

See Note 1 of the Notes to Condensed Consolidated Financial Statements for a reconciliation of the tax provision at the U.S. Federal statutory rate to the provision (benefit) for income taxes.

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ENTERPRISE RISK MANAGEMENT

The Company has an enterprise risk management function (“ERM”) that is charged with providing analysis of the Company’s risks on an individual and aggregated basis and with ensuring that the Company’s risks remain within its risk appetite and tolerances. The Company has established the Enterprise Risk and Capital Committee (“ERCC”) that includes the Company’s CEO, Chief Financial Officer (“CFO”), Chief Investment Officer (“CIO”), Chief Risk Officer, the divisional Presidents and the General Counsel. The ERCC is responsible for managing the Company’s risks and overseeing the enterprise risk management program.

The Company categorizes its main risks as follows:


•	Insurance Risk


•	Operational Risk


•	Financial Risk

Refer to the MD&A in The Hartford’s 2011 Form 10-K Annual Report for an explanation of the Company’s Operational Risk.

Insurance Risk Management

Reinsurance for Catastrophes

The Company has several catastrophe reinsurance programs, including reinsurance treaties that cover property and workers' compensation losses aggregating from single catastrophe events. The following table summarizes the primary catastrophe treaty reinsurance coverage's that the Company has in place as of October 1, 2012:



Coverage	Treaty term	% of layer(s) reinsured	Per occurrence limit				Retention
Principal property catastrophe program covering property catastrophe losses from a single event	1/1/2012 to 1/1/2013	90%	$	750		$		350
Reinsurance with the FHCF covering Florida Personal Lines property catastrophe losses from a single event	6/1/2012 to 6/1/2013	90%		145	[1]			55
Workers compensation losses arising from a single catastrophe event [2]	7/1/2012 to 7/1/2013	95%		350				100


[1]	The per occurrence limit on the FHCF treaty is $145 for the 6/1/2012 to 6/1/2013 treaty year based on the Company's election to purchase the required coverage from FHCF. Coverage is estimated based on the best available information until FHCF releases updated figures in October 2012.


[2]	In addition, to the limit shown above, the workers compensation reinsurance includes a non-catastrophe, industrial accident layer, 80% of $30 excess a $20 retention.

Refer to the MD&A in The Hartford's 2011 Form 10-K Annual Report for further explanation of the Company's Insurance Risk Management strategy.

Financial Risk Management

The Company identifies the following categories of financial risk:


•	Liquidity Risk


•	Interest Rate Risk


•	Equity Risk


•	Foreign Currency Exchange Risk


•	Credit Risk

Financial risks include direct, and indirect risks to the Company’s financial objectives coming from events that impact market conditions or prices. Financial risk also includes exposure to events that may cause correlated movement in multiple risk factors. The primary source of financial risks are the Company’s general account assets and the liabilities which those assets back, together with the guarantees which the company has written over various liability products, particularly its portfolio of variable annuities. The Company assesses its financial risk on a U.S. GAAP, statutory and economic basis. The Hartford has developed a disciplined approach to financial risk management that is well integrated into the Company’s underwriting, pricing, hedging, claims, asset and liability management, new product, and capital management processes. Consistent with its risk appetite, the Company establishes financial risk limits to control potential loss. Exposures are actively monitored, and mitigated where appropriate. The Company uses various risk management strategies, including reinsurance and over-the-counter and exchange traded derivatives to transfer risk to well-established and financially secure counterparties. The Company’s Chief Market Risk Officer has enterprise responsibility for establishing and maintaining the framework, principles, and guidelines of The Hartford’s financial risk management program.

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Liquidity Risk

Liquidity risk is the risk to current or prospective earnings or capital arising from the Company’s inability or perceived inability to meet its contractual cash obligations at the legal entity level when they come due over given horizons without incurring unacceptable costs and without relying on uncommitted funding sources. Liquidity risk includes the inability to manage unplanned increases or accelerations in cash outflows, decreases or changes in funding sources, and changes in market conditions that affect the ability to liquidate assets quickly to meet obligations with minimal loss in value. Components of liquidity risk include funding risk, transaction risk and market liquidity risk. Funding risk is the gap between sources and uses of cash under normal and stressed conditions taking into consideration structural, regulatory and legal entity constraints. Changes in institution-specific conditions that affect the Company’s ability to sell assets or otherwise transact business without incurring a significant loss in value is transaction risk. Changes in general market conditions that affect the institution’s ability to sell assets or otherwise transact business without incurring a significant loss in value is market liquidity risk.

The Company has defined ongoing monitoring and reporting requirements to assess liquidity across the enterprise. The Company measures and manages liquidity risk exposures and funding needs within prescribed limits and across legal entities, business lines and currencies, taking into account legal, regulatory and operational limitations to the transferability of liquidity. The Company also monitors internal and external conditions, identifies material risk changes and emerging risks that may impact liquidity. The Company’s CFO has primary responsibility for liquidity risk.

For further discussion on liquidity see the section on Capital Resources and Liquidity.

Interest Rate Risk

Interest rate risk is the risk of financial loss due to adverse changes in the value of assets and liabilities arising from movements in interest rates. Interest rate risk encompasses exposures with respect to changes in the level of interest rates, the shape of the term structure of rates and the volatility of interest rates. Interest rate risk does not include exposure to changes in credit spreads. The Company has exposure to interest rates arising from its fixed securities, interest sensitive liabilities and discount rate assumptions associated with the Company’s pension and other post retirement benefit obligations.

An increase in interest rates from current levels is generally a favorable development for the Company. Rate increases are expected to provide additional net investment income, reduce the cost of the variable annuity hedging program, limit the potential risk of margin erosion due to minimum guaranteed crediting rates in certain Wealth Management and Life Other Operations products and, if sustained, could reduce the Company’s prospective pension expense. Conversely, a rise in interest rates will reduce the fair value of the investment portfolio, increase interest expense on the Company’s variable rate debt obligations and, if long-term interest rates rise dramatically within a six to twelve month time period, certain Wealth Management and Life Other Operations businesses may be exposed to disintermediation risk. Disintermediation risk refers to the risk that policyholders will surrender their contracts in a rising interest rate environment requiring the Company to liquidate assets in an unrealized loss position. In conjunction with the interest rate risk measurement and management techniques, certain of Life Other Operation’s fixed income products have market value adjustment provisions at contract surrender. An increase in interest rates may also impact the Company’s tax planning strategies and in particular its ability to utilize tax benefits associated with certain previously recognized realized capital losses.

A decline in interest rates results in certain mortgage-backed securities being more susceptible to paydowns and prepayments. During such periods, the Company generally will not be able to reinvest the proceeds at comparable yields. Lower interest rates will also likely result in lower net investment income, increased hedging cost associated with variable annuities and, if declines are sustained for a long period of time, it may subject the Company to reinvestment risks, higher pension costs expense and possibly reduced profit margins associated with guaranteed crediting rates on certain Wealth Management and Life Other Operations products. Conversely, the fair value of the investment portfolio will increase when interest rates decline and the Company’s interest expense will be lower on its variable rate debt obligations.

The Company manages its exposure to interest rate risk by constructing investment portfolios that maintain asset allocation limits and asset/liability duration matching targets which may include the use of derivatives. The Company analyzes interest rate risk using various models including parametric models and cash flow simulation under various market scenarios of the liabilities and their supporting investment portfolios, which may include derivative instruments. Measures the Company uses to quantify its exposure to interest rate risk inherent in its invested assets and interest rate sensitive liabilities include duration, convexity and key rate duration. Duration is the price sensitivity of a financial instrument or series of cash flows to a parallel change in the underlying yield curve used to value the financial instrument or series of cash flows. For example, a duration of 5 means the price of the security will change by approximately 5% for a 100 basis point change in interest rates. Convexity is used to approximate how the duration of a security changes as interest rates change in a parallel manner. Key rate duration analysis measures the price sensitivity of a security or series of cash flows to each point along the yield curve and enables the Company to estimate the price change of a security assuming non-parallel interest rate movements.

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The Company is also exposed to interest rate risk based upon the discount rate assumption associated with the Company’s pension and other postretirement benefit obligations. The discount rate assumption is based upon an interest rate yield curve comprised of bonds rated Aa with maturities primarily between zero and thirty years. For further discussion of interest rate risk associated with the benefit obligations, see the Critical Accounting Estimates Section of the MD&A under Pension and Other Postretirement Benefit Obligations and Note 17 of the Notes to Consolidated Financial Statements in The Hartford’s 2011 Form 10-K Annual Report. In addition, management evaluates performance of certain Wealth Management and Life Other Operations products based on net investment spread which is, in part, influenced by changes in interest rates. For further discussion, see the Individual Life, Retirement Plans, and Life Other Operations sections of the MD&A.

Equity Risk

Variable Product Guarantee Risks and Risk Management

The Company’s variable products are significantly influenced by the U.S., Japanese, and other equity markets. Increases or declines in equity markets impact certain assets and liabilities related to the Company’s variable products and the Company’s earnings derived from those products. The Company’s variable products include variable annuity contracts, mutual funds, and variable life insurance.

Generally, declines in equity markets will:


•	reduce the value of assets under management and the amount of fee income generated from those assets;


•	reduce the value of equity securities trading supporting the international variable annuities, the related policyholder funds and benefits payable, and the amount of fee income generated from those variable annuities;


•	increase the liability for GMWB benefits resulting in realized capital losses;


•	increase the value of derivative assets used to hedge product guarantees resulting in realized capital gains;


•	increase the costs of the hedging instruments we use in our hedging program;


•	increase the Company’s net amount at risk for GMDB and GMIB benefits;


•	decrease the Company’s actual gross profits, resulting in increased DAC amortization;


•	increase the amount of required assets to be held backing variable annuity guarantees to maintain required regulatory reserve levels and targeted risk based capital ratios; and


•	decrease the Company’s estimated future gross profits. See Estimated Gross Profits Used in the Valuation and Amortization of Assets and Liabilities Associated with Variable Annuity and Other Universal Life-Type Contracts within the Critical Accounting Estimates section of the MD&A for further information.

Generally, increases in equity markets will reduce the value of the dynamic hedge program and macro hedge derivative assets, resulting in realized capital losses, and will generally have the inverse impact of those listed above. See section on Variable Annuity Hedging Program for more information.

Variable Annuity Guaranteed Benefits

The majority of the Company’s U.S., Japan, and U.K. variable annuities include optional living benefit and guaranteed minimum death benefit features. The net amount at risk (“NAR”) is generally defined as the guaranteed minimum benefit amount in excess of the contractholder’s current account value. Variable annuity account values with guarantee features were $ 97.3 billion and $ 99.8 billion as of September 30, 2012 and December 31, 2011 , respectively.

The following table summarizes the account values of the Company’s U.S., Japan and U.K. variable annuities with guarantee features and the NAR split between various guarantee features (retained net amount at risk does not take into consideration the effects of the variable annuity hedge programs currently in place):



Total Variable Annuity Guarantees
As of September 30, 2012
($ in billions)	Account Value		Gross Net Amount at Risk		Retained Net Amount at Risk		% of Contracts In the Money [4]		% In the Money[5]
U. S. Variable Annuity [1]
GMDB [2]	$	66.7	$	7.2	$	2.5	53	%	12	%
GMWB	34.8		0.8		0.6		26	%	9	%
Japan Variable Annuity [1]
GMDB	28.7		9.1		7.9		99	%	24	%
GMIB [3]	26.9		6.1		6.1		98	%	19	%
U.K. Variable Annuity [1]
GMDB	1.9		—		—		100	%	2	%
GMWB	1.7		—		—		29	%	7	%

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Total Variable Annuity Guarantees
As of December 31, 2011
($ in billions)	Account Value		Gross Net Amount at Risk		Retained Net Amount at Risk		% of Contracts In the Money [4]		% In the Money[5]
U. S. Variable Annuity [1]
GMDB [2]	$	68.7	$	12.0	$	5.1	77	%	15	%
GMWB	36.6		1.9		1.6		45	%	12	%
Japan Variable Annuity [1]
GMDB	29.2		10.9		9.4		99	%	27	%
GMIB [3]	27.3		7.5		7.5		99	%	22	%
UK Variable Annuity [1]
GMDB	1.9		0.08		0.08		100	%	4	%
GMWB	1.8		0.07		0.07		57	%	3	%

[1]

Policies with a guaranteed living benefits (a GMWB in the US or UK, or a GMIB in Japan) also have a guaranteed death benefit. The net amount at risk (“NAR”) for each benefit is shown; however these benefits are not additive. When a policy terminates due to death, any NAR related to GMWB or GMIB is released. Similarly, when a policy goes into benefit status on a GMWB or, by contract, the GMDB NAR is reduced to $0. When a policy goes into benefit status on a GMIB, its GMDB NAR is released


[2]	Excludes group annuity contracts with GMDB benefits.


[3]	Includes small amount of GMWB and GMAB


[4]	Excludes contracts that fully reinsured.


[5]	For all contracts that are “in the money”, this represents the percentage by which the average contract was in the money.

Many policyholders with a GMDB also have a GMWB in the U.S. or GMIB in Japan. Policyholders that have a product that offer both guarantees can only receive the GMDB or the GMIB benefit in Japan or the GMDB or GMWB in the U.S. The GMDB NAR disclosed in the above tables is a point in time measurement and assumes that all participants utilize the GMDB benefit on that measurement date. The GMIB NAR calculation disclosed in the above tables, represents a series of payments over the annuitization period and is not discounted to present value. For additional information on the Company’s GMDB liability, see Note 7 of the Notes to Condensed Consolidated Financial Statements.

The Company expects to incur these payments in the future only if the policyholder has an “in the money” GMWB at their death or their account value is reduced to a specified level, through contractually permitted withdrawals and/or market declines. If the account value is reduced to the specified level, the contract holder will receive an annuity equal to the guaranteed remaining benefit (“GRB”) . For the Company’s “life-time” GMWB products, this annuity can continue beyond the GRB. As the account value fluctuates with equity market returns on a daily basis and the “life-time” GMWB payments can exceed the GRB, the ultimate amount to be paid by the Company, if any, is uncertain and could be significantly more or less than the Company’s current carried liability. For additional information on the Company’s GMWB liability, see Note 4 of the Notes to Condensed Consolidated Financial Statements.

For GMIB contracts, in general, the policyholder has the right to elect to annuitize benefits, beginning (for certain products) on the tenth or fifteenth anniversary year of contract commencement, receive lump sum payment of the then current account value, or remain in the variable sub-account. For GMIB contracts, if the policyholder makes the election, the policyholder is entitled to receive the original investment value over a 10- to 15- year annuitization period. A small percentage of the contracts will first become eligible to elect annuitization beginning in 2013. The remainder of the contracts will first become eligible to elect annuitization from 2014 to 2022. Because policyholders have various contractual rights to defer their annuitization election, the period over which annuitization election can take place is subject to policyholder behavior and therefore indeterminate. In addition, upon annuitization the contractholder surrenders access to the account value and the account value is transferred to the Company’s general account where it is invested and the additional investment proceeds are used towards payment of the original investment value. If the original investment value exceeds the account value upon annuitization then the contract is “in the money”. As of September 30, 2012 , 65% of retained NAR is reinsured to an affiliate of The Hartford. For additional information on the Company’s GMIB liability, see Note 7 of the Notes to Condensed Consolidated Financial Statements.

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The following table represents the timing of account values eligible for annuitization under the Japan GMIB as of September 30, 2012 , as well as the NAR. The account values reflect 100% annuitization at the earliest point allowed by the contract and no adjustments for future market returns and policyholder behaviors. Future market returns, changes in the value of the Japanese yen and policyholder behaviors will impact account values eligible for annuitization in the years presented.



	GMIB [1]
($ in billions)	Account Value		Net Amount at Risk
2013	$	0.3	$	—
2014	4.4		0.7
2015	7.2		1.7
2016	2.4		0.6
2017	2.8		0.8
2018 & beyond [2]	6.9		1.5
Total	$	24.0	$	5.3


[1]	Excludes certain non-GMIB living benefits of $ 2.9 billion of account value and $ 0.8 billion of NAR.


[2]	In 2018 & beyond, $ 2.7 billion of the $ 6.9 billion is primarily associated with account value that is eligible in 2021.

Variable Annuity Market Risk Exposures

The following table summarizes the broad Variable Annuity Guarantees offered by the Company and the market risks to which the guarantee is most exposed from a U.S. GAAP accounting perspective.



Variable Annuity Guarantees [1]	U.S. GAAP Treatment [1]	Primary Market Risk Exposures [1]
U.S. Variable Guarantees
GMDB	Accumulation of the portion of fees required to cover expected claims, less accumulation of actual claims paid	Equity Market Levels
GMWB	Fair Value	Equity Market Levels / Implied Volatility / Interest Rates
For Life Component of GMWB	Accumulation of the portion of fees required to cover expected claims, less accumulation of actual claims paid	Equity Market Levels
International Variable Guarantees
GMDB & GMIB	Accumulation of the portion of fees required to cover expected claims, less accumulation of actual claims paid	Equity Market Levels / Interest Rates / Foreign Currency
GMWB	Fair Value	Equity Market Levels / Implied Volatility / Interest Rates / Foreign Currency
GMAB	Fair Value	Equity Market Levels / Implied Volatility / Interest Rates / Foreign Currency


[1]	Each of these guarantees and the related U.S. GAAP accounting volatility will also be influenced by actual and estimated policyholder behavior.

Risk Hedging

Variable Annuity Hedging Program

The Company’s variable annuity hedging is primarily focused on reducing the economic exposure to market risks associated with guaranteed benefits that are embedded in our global VA contracts through the use of reinsurance and capital market derivative instruments. The variable annuity hedging also considers the potential impacts on Statutory accounting results.

Reinsurance

The Company uses reinsurance for a portion of contracts with GMWB riders issued prior to the third quarter of 2003 and GMWB risks associated with a block of business sold between the third quarter of 2003 and the second quarter of 2006. The Company also uses reinsurance for a majority of the GMDB issued in the U.S. and a portion of the GMDB issued in Japan.

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Capital Market Derivatives

GMWB Hedge Program

The Company enters into derivative contracts to hedge market risk exposures associated with the GMWB liabilities that are not reinsured. These derivative contracts include customized swaps, interest rate swaps and futures, and equity swaps, options, and futures, on certain indices including the S&P 500 index, EAFE index, and NASDAQ index.

Additionally, the Company holds customized derivative contracts to provide protection from certain capital market risks for the remaining term of specified blocks of non-reinsured GMWB riders. These customized derivative contracts are based on policyholder behavior assumptions specified at the inception of the derivative contracts. The Company retains the risk for differences between assumed and actual policyholder behavior and between the performance of the actively managed funds underlying the separate accounts and their respective indices.

While the Company actively manages this dynamic hedging program, increased U.S. GAAP earnings volatility may result from factors including, but not limited to: policyholder behavior, capital markets, divergence between the performance of the underlying funds and the hedging indices, changes in hedging positions and the relative emphasis placed on various risk management objectives.

Macro Hedge Program

The Company’s macro hedging program uses derivative instruments such as options and futures on equities and interest rates to provide protection against the statutory tail scenario risk arising from U.S., GMWB and GMDB liabilities, on the Company’s statutory surplus. These macro hedges cover some of the residual risks not otherwise covered by specific dynamic hedging programs. Management assesses this residual risk under various scenarios in designing and executing the macro hedge program. The macro hedge program will result in additional U.S. GAAP earnings volatility as changes in the value of the macro hedge derivatives, which are designed to reduce statutory reserve and capital volatility, may not be closely aligned to changes in U.S. GAAP liabilities.

International Hedge Programs

The Company enters into derivative contracts to hedge market risk exposures associated with the guaranteed benefits which are embedded in the international variable annuity contracts. These derivative contracts include foreign currency forwards and options, interest rate swaps and futures, and equity swaps, options, and futures on certain broadly traded global equity indices including the S&P500 index, Nikkei 225 index, Topix index, FTSE 100 index, Euro Stoxx 50 and DAX 30 index.

While the Company actively manages these dynamic hedging programs, increased U.S. GAAP earnings volatility may result from factors including, but not limited to: focus on reducing the economic exposure to market risks associated with guaranteed benefits, capital markets, changes in hedging positions and the relative emphasis placed on various risk management objectives.

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Variable Annuity Hedging Program Sensitivities

The following table presents the accounting treatment of the underlying guaranteed living benefits and the related hedge assets by hedge program.



U.S. Programs				International Programs
GMWB		Macro		Japan/UK
Hedge Assets	Liabilities	Hedge Assets	Liabilities	Hedge Assets	Liabilities [1]
Fair Value	Fair Value	Fair Value	Not Fair Value	Fair Value	Not Fair Value


[1]	The liabilities for international variable annuity are primarily not measured on a fair value basis. However there is an immaterial portion of the international variable annuity with a GMWB or GMAB which is measured on a fair value basis.

The following table presents our estimates of the potential instantaneous impacts from sudden market stresses related to equity market prices, interest rates, implied market volatilities, and foreign currency exchange rates. The sensitivities below represent: (1) the net estimated difference between the change in the fair value of GMWB liabilities and the underlying hedge instruments and (2) the estimated change in fair value of the hedge instruments for the macro and international hedge programs, before the impacts of amortization of DAC, and taxes. As noted in the table above, certain hedge assets are used to hedge liabilities that are not carried at fair value and will not have a liability offset in the U.S. GAAP sensitivity analysis. All sensitivities are measured as of September 30, 2012 , and are related to the fair value of liabilities and hedge instruments in place as of that date for the Company’s variable annuity hedge programs. The impacts presented in the table below are estimated individually as of September 30, 2012 , and performed without consideration of any correlation among market risk factors.



U.S. GAAP Sensitivity Analysis (pre Tax/DAC) [1]	U.S. Programs																		International Programs
	GMWB									Macro									Japan/UK
Equity Market Return	-20		%	-10		%	+10		%	-20		%	-10		%	+10		%	-20		%	-10		%	+10		%
Potential Net Fair Value Impact	$	(130	)	$	(58	)	$	38		$	301		$	70		$	(28	)	$	974		$	488		$	(435	)
Interest Rates	-50 bps			-25 bps			+25 bps			-50 bps			-25 bps			+25 bps			-50 bps			-25 bps			+25 bps
Potential Net Fair Value Impact	$	(48	)	$	(24	)	$	27		$	2		$	1		$	(1	)	$	256		$	131		$	(196	)
Implied Volatilities	+10		%	+2		%	-10		%	+10		%	+2		%	-10		%	+10		%	+2		%	-10		%
Potential Net Fair Value Impact	$	(399	)	$	(78	)	$	364		$	83		$	16		$	(64	)	$	122		$	23		$	(107	)
Yen Strengthens +/ Weakens -	+20		%	+10		%	-10		%	+20		%	+10		%	-10		%	+20		%	+10		%	-10		%
Potential Net Fair Value Impact	N/A			N/A			N/A			N/A			N/A			N/A			$	1,933		$	778		$	(412	)


[1]	These sensitivities are based on the following key market levels as of September 30, 2012 : 1) S&P of 1,441.0 ; 2) 10yr US swap rate of 1.76% ; 3) S&P 10yr volatility of 26.65% and 4) FX rates of USDJPY @ 77.96 and EURJPY @ 100.21 .

The above sensitivity analysis is an estimate and should not be used to predict the future financial performance of the Company’s variable annuity hedge programs. The actual net changes in the fair value liability and the hedging assets illustrated in the above table may vary materially depending on a variety of factors which include but are not limited to:


•	The sensitivity analysis is only valid as of the measurement date and assumes instantaneous changes in the capital market factors and no ability to rebalance hedge positions prior to the market changes;


•	Changes to the underlying hedging program, policyholder behavior, and variation in underlying fund performance relative to the hedged index, which could materially impact the liability; and


•	The impact of elapsed time on liabilities or hedge assets, any non-parallel shifts in capital market factors, or correlated moves across the sensitivities.

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Foreign Currency Exchange Risk

Foreign currency exchange risk is defined as the risk of financial loss due to changes in the relative value between currencies. The Company’s foreign currency exchange risk is related to non-U.S. dollar denominated liability contracts, including its GMDB, GMAB, GMWB and GMIB benefits associated with its Japanese and U.K. variable annuities, the investment in and net income of the Japanese and U.K. operations, non-U.S. dollar denominated investments, which primarily consist of fixed maturity investments, and a yen denominated individual fixed annuity product. In addition, the Company’s Life Other Operations issued non-U.S. dollar denominated funding agreement liability contracts. A portion of the Company’s foreign currency exposure is mitigated through the use of derivatives.

Liabilities

The Company manages the market risk, including foreign currency exchange risk, associated with the guaranteed benefits related to the Japanese and U.K. variable annuities through its comprehensive International Hedge Program. For more information on the International Hedge Program, including the foreign currency exchange risk sensitivity analysis, see the Variable Product Guarantee Risks and Risk Management section.

The yen denominated individual fixed annuity product was written by Hartford Life Insurance K.K. (“HLIKK”), a wholly-owned Japanese subsidiary of Hartford Life, Inc. (“HLI”), and subsequently reinsured to Hartford Life Insurance Company, a U.S. dollar based wholly-owned indirect subsidiary of HLI. During 2009, the Company suspended new sales of the Japan business and has subsequently confirmed that it is closed to new business. The underlying investment involves investing in U.S. securities markets, which offer favorable credit spreads. The yen denominated fixed annuity product (“yen fixed annuities”) is recorded in the consolidated balance sheets with invested assets denominated in dollars while policyholder liabilities are denominated in yen and converted to U.S. dollars based upon the December 31 yen to U.S. dollar spot rate. The difference between U.S. dollar denominated investments and yen denominated liabilities exposes the Company to currency risk. The Company manages this currency risk associated with the yen fixed annuities primarily with pay variable U.S. dollar and receive fixed yen currency swaps.

The Company’s Wealth Management operations issued non-U.S. dollar denominated funding agreement liability contracts. The Company hedges the foreign currency risk associated with these liability contracts with currency rate swaps.

Fixed Maturity Investments

The risk associated with the non-U.S. dollar denominated fixed maturities relates to potential decreases in value and income resulting from unfavorable changes in foreign exchange rates. In order to manage currency exposures, the Company enters into foreign currency swaps to hedge the variability in cash flows as the fair value associated with certain foreign denominated fixed maturities decline. These foreign currency swaps are structured to match the foreign currency cash flows of the hedged foreign denominated securities.

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Financial Risk on Statutory Capital

Statutory surplus amounts and risk-based capital (“RBC”) ratios may increase or decrease in any period depending upon a variety of factors and may be compounded in extreme scenarios or if multiple factors occur at the same time. At times the impact of changes in certain market factors or a combination of multiple factors on RBC ratios can be counterintuitive. Factors include:

•

In general, as equity market levels and interest rates decline, the amount and volatility of both our actual potential obligation, as well as the related statutory surplus and capital margin for death and living benefit guarantees associated with U.S. variable annuity contracts can be materially negatively affected, sometimes at a greater than linear rate. Other market factors that can impact statutory surplus, reserve levels and capital margin include differences in performance of variable subaccounts relative to indices and/or realized equity and interest rate volatilities. In addition, as equity market levels increase, generally surplus levels will increase. RBC ratios will also tend to increase when equity markets increase. However, as a result of a number of factors and market conditions, including the level of hedging costs and other risk transfer activities, reserve requirements for death and living benefit guarantees and RBC requirements could increase with rising equity markets, resulting in lower RBC ratios. Non-market factors, which can also impact the amount and volatility of both our actual potential obligation, as well as the related statutory surplus and capital margin, include actual and estimated policyholder behavior experience as it pertains to lapsation, partial withdrawals, and mortality.

•

Similarly, for guaranteed benefits (GMDB, GMIB, and GMWB) reinsured from our international operations to our U.S. insurance subsidiaries, the amount and volatility of both our actual potential obligation, as well as the related statutory surplus and capital margin can be materially affected by a variety of factors, both market and non-market. Market factors include declines in various equity market indices and interest rates, changes in value of the yen versus other global currencies, difference in the performance of variable subaccounts relative to indices, and increases in realized equity, interest rate, and currency volatilities. Non-market factors include actual and estimated policyholder behavior experience as it pertains to lapsation, withdrawals, mortality, and annuitization. Risk mitigation activities, such as hedging, may also result in material and sometimes counterintuitive impacts on statutory surplus and capital margin. Notably, as changes in these market and non-market factors occur, both our potential obligation and the related statutory reserves and/or required capital can increase or decrease at a greater than linear rate.


•	As the value of certain fixed-income and equity securities in our investment portfolio decreases, due in part to credit spread widening, statutory surplus and RBC ratios may decrease.


•	As the value of certain derivative instruments that do not get hedge accounting decreases, statutory surplus and RBC ratios may decrease.

•

The life insurance subsidiaries’ exposure to foreign currency exchange risk exists with respect to non-U.S. dollar denominated assets and liabilities. Assets and liabilities denominated in foreign currencies are accounted for at their U.S. dollar equivalent values using exchange rates at the balance sheet date. As foreign currency exchange rates vary in comparison to the U.S. dollar, the remeasured value of those non-dollar denominated assets or liabilities will also vary, causing an increase or decrease to statutory surplus.

•

Our statutory surplus is also impacted by widening credit spreads as a result of the accounting for the assets and liabilities in our fixed market value adjusted (“MVA”) annuities. Statutory separate account assets supporting the fixed MVA annuities are recorded at fair value. In determining the statutory reserve for the fixed MVA annuities, we are required to use current crediting rates in the U.S. and Japanese LIBOR in Japan. In many capital market scenarios, current crediting rates in the U.S. are highly correlated with market rates implicit in the fair value of statutory separate account assets. As a result, the change in statutory reserve from period to period will likely substantially offset the change in the fair value of the statutory separate account assets. However, in periods of volatile credit markets, such as we have experienced, actual credit spreads on investment assets may increase sharply for certain sub-sectors of the overall credit market, resulting in statutory separate account asset market value losses. As actual credit spreads are not fully reflected in the current crediting rates in the U.S. or Japanese LIBOR in Japan, the calculation of statutory reserves will not substantially offset the change in fair value of the statutory separate account assets resulting in reductions in statutory surplus. This has resulted and may continue to result in the need to devote significant additional capital to support the product.


•	With respect to our fixed annuity business, sustained low interest rates may result in a reduction in statutory surplus and an increase in National Association of Insurance Commissioners (“NAIC”) required capital.

Most of these factors are outside of the Company’s control. The Company’s financial strength and credit ratings are significantly influenced by the statutory surplus amounts and RBC ratios of our insurance company subsidiaries. In addition, rating agencies may implement changes to their internal models that have the effect of increasing or decreasing the amount of statutory capital we must hold in order to maintain our current ratings.

The Company has reinsured approximately 16% of its risk associated with U.S. GMWB and 66% of its risk associated with the aggregate U.S. GMDB exposure. These reinsurance agreements serve to reduce the Company’s exposure to changes in the statutory reserves and the related capital and RBC ratios associated with changes in the capital markets. The Company also continues to explore other solutions for mitigating the capital market risk effect on surplus, such as internal and external reinsurance solutions, modifications to our hedging program, changes in product design, increasing pricing and expense management.

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Credit Risk

Credit risk is defined as the risk of financial loss due to uncertainty of obligor’s or counterparty’s ability or willingness to meet its obligations in accordance with agreed upon terms. The majority of the Company’s credit risk is concentrated in its investment holdings but is also present in reinsurance and insurance portfolios. Credit risk is comprised of three major factors: the risk of change in credit quality, or credit migration risk; the risk of default; and the risk of a change in value of a financial instrument due to changes in credit spread that are unrelated to changes in obligor credit quality. A decline in creditworthiness is typically associated with an increase in an investment’s credit spread, potentially resulting in an increase in other-than-temporary impairments and an increased probability of a realized loss upon sale.

The objective of the Company’s enterprise credit risk management strategy is to identify, quantify, and manage credit risk on an aggregate portfolio basis and to limit potential losses in accordance with an established credit risk appetite. The Company manages to its risk appetite by primarily holding a diversified mix of investment grade issuers and counterparties across its investment, reinsurance, and insurance portfolios. Potential losses are also limited within portfolios by diversifying across geographic regions, asset types, and sectors.

The Company manages a credit exposure from its inception to its maturity or sale. Both the investment and reinsurance areas have formulated procedures for counterparty approvals and authorizations. Although approval processes may vary by area and type of credit risk, approval processes establish minimum levels of creditworthiness and financial stability. Eligible credits are subjected to prudent and conservative underwriting reviews. Within the investment portfolio, private securities, such as commercial mortgages, and private placements, must be presented to their respective review committees for approval.

Credit risks are managed on an on-going basis through the use of various processes and analyses. At the investment, reinsurance, and insurance product levels, fundamental credit analyses are performed at the issuer/counterparty level on a regular basis. To provide a holistic review within the investment portfolio, fundamental analyses are supported by credit ratings, assigned by nationally recognized rating agencies or internally assigned, and by quantitative credit analyses. The Company utilizes an economic credit VaR to measure default and migration risk on a monthly basis. Issuer and security level risk measures are also utilized. In the event of deterioration in credit quality, the Company maintains watch lists of problem counterparties within the investment and reinsurance portfolios. The watch lists are updated based on regular credit examinations and management reviews. The Company also performs quarterly assessments of probable expected losses in the investment portfolio. The process is conducted on a sector basis and is intended to promptly assess and identify potential problems in the portfolio and to recognize necessary impairments.

Credit risk policies at the enterprise and operation level ensure comprehensive and consistent approaches to quantifying, evaluating, and managing credit risk under expected and stressed conditions. These policies define the scope of the risk, authorities, accountabilities, terms, and limits, and are regularly reviewed and approved by senior management and ERM. Aggregate counterparty credit quality and exposure is monitored on a daily basis utilizing an enterprise-wide credit exposure information system that contains data on issuers, ratings, exposures, and credit limits. Exposures are tracked on a current and potential basis. Credit exposures are reported regularly to the ERCC and to the Finance, Investment and Risk Management Committee (“FIRMCo”). Exposures are aggregated by ultimate parent across investments, reinsurance receivables, insurance products with credit risk, and derivative counterparties. The credit database and reporting system are available to all key credit practitioners in the enterprise.

The Company exercises various and differing methods to mitigate its credit risk exposure within its investment and reinsurance portfolios. Some of the reasons for mitigating credit risk include financial instability or poor credit, avoidance of arbitration or litigation, future uncertainty, and exposure in excess of risk tolerances. Credit risk within the investment portfolio is most commonly mitigated through the use of derivative instruments or asset sales. Counterparty credit risk is mitigated through the practice of entering into contracts only with highly creditworthy institutions and through the practice of holding and posting of collateral. Systemic credit risk is mitigated through the construction of high-quality, diverse portfolios that are subject to regular underwriting of credit risks. For further discussion of the Company’s investment and derivative instruments, see the Investment Management section and Note 5 of the Notes to Condensed Consolidated Financial Statements. Further discussion on managing and mitigating credit risk from the use of reinsurance via an enterprise security review process, see the Reinsurance section.

As of September 30, 2012 , the Company’s only exposure to any credit concentration risk of a single issuer greater than 10% of the Company’s stockholders’ equity, other than the U.S. government and certain U.S. government securities, was the Government of Japan, which represented $ 2.9 billion, or 12% of stockholders’ equity, and 2% of total invested assets. For further discussion of concentration of credit risk, see the Concentration of Credit Risk section in Note 5 of the Notes to Consolidated Financial Statements in The Hartford’s 2011 Form 10-K Annual Report.

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Derivative Instruments

The Company utilizes a variety of over-the-counter and exchange traded derivative instruments as a part of its overall risk management strategy, as well as to enter into replication transactions. Derivative instruments are used to manage risk associated with interest rate, equity market, credit spread, issuer default, price, and currency exchange rate risk or volatility. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that would otherwise be permissible investments under the Company’s investment policies. For further information on the Company’s use of derivatives, see Note 5 of the Notes to Condensed Consolidated Financial Statements.

Derivative activities are monitored and evaluated by the Company’s compliance and risk management teams and reviewed by senior management. In addition, the Company monitors counterparty credit exposure on a monthly basis to ensure compliance with Company policies and statutory limitations. The notional amounts of derivative contracts represent the basis upon which pay or receive amounts are calculated and are not reflective of credit risk. Downgrades to the credit ratings of The Hartford’s insurance operating companies may have adverse implications for its use of derivatives including those used to hedge benefit guarantees of variable annuities. In some cases, downgrades may give derivative counterparties the unilateral contractual right to cancel and settle outstanding derivative trades or require additional collateral to be posted. In addition, downgrades may result in counterparties becoming unwilling to engage in additional over-the-counter (“OTC”) derivatives or may require collateralization before entering into any new trades. This will restrict the supply of derivative instruments commonly used to hedge variable annuity guarantees, particularly long-dated equity derivatives and interest rate swaps. Under these circumstances, the Company’s operating subsidiaries could conduct hedging activity using a combination of cash and exchange-traded instruments, in addition to using the available OTC derivatives.

The Company uses various derivative counterparties in executing its derivative transactions. The use of counterparties creates credit risk that the counterparty may not perform in accordance with the terms of the derivative transaction. The Company has derivative counterparty exposure policies which limit the Company’s exposure to credit risk. The Company’s policies with respect to derivative counterparty exposure establishes market-based credit limits, favors long-term financial stability and creditworthiness of the counterparty and typically requires credit enhancement/credit risk reducing agreements. The Company minimizes the credit risk of derivative instruments by entering into transactions with high quality counterparties primarily rated A or better, which are monitored and evaluated by the Company’s risk management team and reviewed by senior management. The Company also generally requires that derivative contracts, other than exchange traded contracts, certain forward contracts, and certain embedded and reinsurance derivatives, be governed by an International Swaps and Derivatives Association ("ISDA") Master Agreement, which is structured by legal entity and by counterparty and permits right of offset.

The Company has developed credit exposure thresholds which are based upon counterparty ratings. Credit exposures are measured using the market value of the derivatives, resulting in amounts owed to the Company by its counterparties or potential payment obligations from the Company to its counterparties. For purposes of daily derivative collateral maintenance, credit exposures are generally quantified based on the prior business day’s market value and collateral is pledged to and held by, or on behalf of, the Company to the extent the current value of the derivatives exceed the contractual thresholds. In accordance with industry standard and the contractual agreements, collateral is typically settled on the next business day. The Company has exposure to credit risk for amounts below the exposure thresholds which are uncollateralized, as well as for market fluctuations that may occur between contractual settlement periods of collateral movements.

For the Company’s domestic derivative programs, the maximum uncollateralized threshold for a derivative counterparty governed by an ISDA Master Agreement for a single legal entity is $ 10 . The Company currently transacts OTC derivatives in five legal entities and therefore the maximum combined threshold for a single counterparty across all legal entities that use derivatives is $ 50 . In addition, the Company may have exposure to multiple counterparties in a single corporate family due to a common credit support provider. As of September 30, 2012 , for the company’s domestic derivative programs, the maximum combined threshold for all counterparties under a single credit support provider across all legal entities that use derivatives is $ 100 . Based on the contractual terms of the collateral agreements, these thresholds may be immediately reduced due to a downgrade in either party’s credit rating. Beginning in the fourth quarter of 2011, the Company began hedging its Japan exposures within the legal entity HLIKK. The counterparty credit exposures at HLIKK generally follow the maximum uncollateralized threshold of the domestic program, however, for three counterparties, maximum uncollateralized exposures are higher. These three counterparties maintain credit ratings of A3 or better, and the Company actively monitors their credit standing. For further discussion, see the Derivative Commitments section of Note 9 of the Notes to Condensed Consolidated Financial Statements.

For the three and nine months ended September 30, 2012 , the Company has incurred no losses on derivative instruments due to counterparty default.

In addition to counterparty credit risk, the Company may also introduce credit risk through the use of credit default swaps that are entered into to manage credit exposure. Credit default swaps involve a transfer of credit risk of one or many referenced entities from one party to another in exchange for periodic payments. The party that purchases credit protection will make periodic payments based on an agreed upon rate and notional amount, and for certain transactions there will also be an upfront premium payment. The second party, who assumes credit risk, will typically only make a payment if there is a credit event as defined in the contract and such payment will be typically equal to the notional value of the swap contract less the value of the referenced security issuer’s debt obligation. A credit event is generally defined as default on contractually obligated interest or principal payments or bankruptcy of the referenced entity.

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The Company uses credit derivatives to purchase credit protection and to assume credit risk with respect to a single entity, referenced index, or asset pool. The Company purchases credit protection through credit default swaps to economically hedge and manage credit risk of certain fixed maturity investments across multiple sectors of the investment portfolio. The Company also enters into credit default swaps that assume credit risk as part of replication transactions. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that would be permissible investments under the Company’s investment policies. These swaps reference investment grade single corporate issuers and baskets, which include customized diversified portfolios of corporate issuers, which are established within sector concentration limits and may be divided into tranches which possess different credit ratings.

Investment Portfolio Risks and Risk Management

Investment Portfolio Composition

The following table presents the Company’s fixed maturities, AFS, by credit quality. The ratings referenced below are based on the ratings of a nationally recognized rating organization or, if not rated, assigned based on the Company’s internal analysis of such securities.



Fixed Maturities by Credit Quality
	September 30, 2012						December 31, 2011
	Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
United States Government/Government agencies	$	11,869	$	12,458	14.4	%	$	8,901	$	9,364	11.4	%
AAA	8,534		9,128		10.5	%	9,631		10,113		12.4	%
AA	15,118		16,305		18.8	%	15,471		15,844		19.4	%
A	19,602		21,923		25.3	%	19,501		21,053		25.7	%
BBB	20,899		22,665		26.1	%	20,972		21,760		26.6	%
BB & below	4,668		4,247		4.9	%	4,502		3,675		4.5	%
Total fixed maturities	$	80,690	$	86,726	100	%	$	78,978	$	81,809	100	%

The movement in the overall credit quality of the Company’s portfolio was primarily attributable to an increase in U.S. Government/Government agencies, which included the Company entering into certain repurchase and dollar roll transactions. For further information on repurchase and dollar roll agreements, see Note 5 of the Notes to the Condensed Consolidated Financial Statements. Fixed maturities, FVO, are not included in the above table. For further discussion on fair value option securities, see Note 4 of the Notes to Condensed Consolidated Financial Statements.

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The following table presents the Company’s AFS securities by type, as well as fixed maturities, FVO.



Securities by Type
	September 30, 2012											December 31, 2011
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Total Fair Value		Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Total Fair Value
Asset-backed securities (“ABS”)
Consumer loans	$	2,259	$	36	$	(138	)	$	2,157	2.5	%	$	2,688	$	34	$	(208	)	$	2,514	3.1	%
Small business	365		5		(89		)	281		0.3	%	418		1		(123		)	296		0.4	%
Other	292		28		—			320		0.4	%	324		20		(1		)	343		0.4	%
CDOs
Collateralized loan obligations (“CLOs”)	2,274		—		(99		)	2,175		2.5	%	2,334		—		(181		)	2,153		2.6	%
CREs	448		34		(103		)	379		0.4	%	485		16		(167		)	334		0.4	%
Other [1]	557		16		(15		)	518		0.6	%	—		—		—			—		—	%
CMBS
Agency backed [2]	933		81		—			1,014		1.2	%	637		40		—			677		0.8	%
Bonds	4,625		268		(225		)	4,668		5.4	%	5,992		182		(487		)	5,687		7.0	%
Interest only (“IOs”)	556		54		(19		)	591		0.7	%	563		49		(25		)	587		0.7	%
Corporate
Basic industry [1]	3,746		395		(25		)	4,116		4.7	%	3,690		309		(19		)	3,979		4.9	%
Capital goods	2,986		400		(5		)	3,381		3.9	%	3,327		331		(33		)	3,625		4.4	%
Consumer cyclical	2,277		284		(6		)	2,555		2.9	%	2,277		206		(8		)	2,475		3.0	%
Consumer non-cyclical	5,520		789		(13		)	6,296		7.3	%	5,985		644		(13		)	6,616		8.1	%
Energy	3,682		503		(4		)	4,181		4.8	%	3,338		381		(15		)	3,704		4.5	%
Financial services	7,115		566		(285		)	7,396		8.5	%	7,763		334		(526		)	7,571		9.3	%
Tech./comm.	3,931		561		(18		)	4,474		5.2	%	4,357		443		(61		)	4,739		5.8	%
Transportation	1,383		167		(2		)	1,548		1.8	%	1,285		123		(6		)	1,402		1.7	%
Utilities	8,092		1,082		(32		)	9,142		10.5	%	8,236		857		(38		)	9,055		11.2	%
Other [1]	300		47		(3		)	344		0.4	%	903		33		(20		)	845		1.0	%
Foreign govt./govt. agencies	4,019		202		(5		)	4,216		4.9	%	2,030		141		(10		)	2,161		2.6	%
Municipal Taxable	2,191		226		(18		)	2,399		2.8	%	1,688		120		(51		)	1,757		2.1	%
Tax-exempt	10,748		1,146		(2		)	11,892		13.7	%	10,869		655		(21		)	11,503		14.1	%
RMBS
Agency	5,927		311		—			6,238		7.2	%	4,436		222		—			4,658		5.7	%
Non-agency	2		—		—			2		—	%	62		—		(2		)	60		0.1	%
Alt-A	45		—		(6		)	39		—	%	115		5		(21		)	99		0.1	%
Sub-prime	1,408		26		(236		)	1,198		1.4	%	1,348		25		(433		)	940		1.1	%
U.S. Treasuries	5,009		213		(16		)	5,206		6.0	%	3,828		203		(2		)	4,029		4.9	%
Fixed maturities, AFS	80,690		7,440		(1,364		)	86,726		100	%	78,978		5,374		(2,471		)	81,809		100	%
Equity securities
Financial services	352		13		(50		)	315				479		10		(187		)	302
Other	513		64		(14		)	563				577		58		(16		)	619
Equity securities, AFS	865		77		(64		)	878				1,056		68		(203		)	921
Total AFS securities	$	81,555	$	7,517	$	(1,428	)	$	87,604			$	80,034	$	5,442	$	(2,674	)	$	82,730
Fixed maturities, FVO								$	1,355										$	1,328


[1]	Gross unrealized gains (losses) exclude the fair value of bifurcated embedded derivative features of certain securities. Changes in value are recorded in net realized capital gains (losses).


[2]	Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.

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The Company continues to invest in a diversified portfolio with purchases focused on investment grade corporate and additional investments into agency RMBS and U.S. Treasuries as a part of certain repurchase and dollar roll transactions. The Company also reinvested short-term investments into foreign government securities to generate an additional return in support of Japan-related liabilities. In addition, the Company continued to prudently manage exposure to riskier assets through selective sales of CMBS and European exposures. The Company’s AFS net unrealized position improved primarily as a result of improved security valuations largely due to credit spread tightening and declining interest rates. Fixed maturities, FVO, represents Japan government securities supporting the Japan fixed annuity product, as well as securities containing an embedded credit derivative for which the Company elected the fair value option. The underlying credit risk of the securities containing credit derivatives are primarily CRE CDOs and a subordinated position on a basket of corporate bonds. For further discussion on fair value option securities, see Note 4 of the Notes to Condensed Consolidated Financial Statements.

European Exposure

Many economies within Europe continue to experience significant adverse economic conditions which have been precipitated in part by high unemployment rates and government debt levels. As a result, issuers in several European countries have experienced credit deterioration and rating downgrades and a reduced ability to access capital markets and/or higher borrowing costs. The concerns regarding the European countries have impacted the capital markets which, in turn, has made it more difficult to contain the European financial crisis. Austerity measures aimed at reducing sovereign debt levels, along with steps taken by the European Central Bank to provide liquidity and credit support to certain countries issuing debt, have helped to stabilize markets recently. However, risks remain elevated.

The Company manages the credit risk associated with the European securities within the investment portfolio on an on-going basis using several processes which are supported by macroeconomic analysis and issuer credit analysis. For additional details regarding the Company’s management of credit risk, see the Credit Risk section of this MD&A. The Company considers alternate scenarios, including a base-case and both a positive and negative “tail” scenario that includes a partial or full break-up of the Eurozone. The outlook for key factors is evaluated, including the economic prospects for key countries, the potential of greater contagion effect, and the likelihood that policymakers and politicians pursue sufficient fiscal discipline and introduce appropriate backstops. Given the inherent uncertainty in the outcome of developments in the Eurozone, however, the Company has been focused on controlling both absolute levels of exposure and the composition of that exposure through both bond and derivative transactions.

The Company has limited direct European exposure, totaling only 5% of total invested assets as of September 30, 2012 . The following tables present the Company’s European securities included in the Securities by Type table above. The Company identifies exposures with the issuers’ ultimate parent country of domicile, which may not be the country of the security issuer. Certain European countries were separately listed below, Greece, Italy, Ireland, Portugal and Spain (“GIIPS”), because of the current significant economic strains persisting in these countries. The criteria used for identifying the countries separately listed includes credit default spreads that exceed the iTraxx SovX index level, an S&P credit quality rating lower than BBB+ and a gross domestic product ("GDP") greater than $200 billion.

The following tables present the Company’s European securities included in the Securities by Type table above.



September 30, 2012
	Corporate & Equity, AFS Non-Finan. [1]				Corporate & Equity, AFS Financials				Foreign Govt./ Govt. Agencies				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Italy	$	10	$	10	$	—	$	—	$	—	$	—	$	10	$	10
Spain [3]	53		50		20		20		—		—		73		70
Ireland	163		167		—		—		—		—		163		167
Portugal	15		15		—		—		—		—		15		15
Greece	—		—		—		—		—		—		—		—
Higher risk	241		242		20		20		—		—		261		262
Europe excluding higher risk	3,966		4,487		1,160		1,156		757		827		5,883		6,470
Total Europe	$	4,207	$	4,729	$	1,180	1,176		$	757	827		$	6,144	$	6,732
Europe exposure net of credit default swap protection [2]													$	5,613	$	6,731

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December 31, 2011
	Corporate & Equity, AFS Non-Finan. [1]				Corporate & Equity, AFS Financials				Foreign Govt./ Govt. Agencies				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Italy	$	314	$	255	$	—	$	—	$	—	$	—	$	314	$	255
Spain [3]	191		189		20		19		—		—		211		208
Ireland	163		162		—		—		—		—		163		162
Portugal	15		15		—		—		—		—		15		15
Greece			—		—		—		—		—		—		—
Higher risk	683		621		20		19		—		—		703		640
Europe excluding higher risk	4,277		4,695		1,255		1,135		901		970		6,433		6,800
Total Europe	$	4,960	$	5,316	$	1,275	$	1,154	$	901	$	970	$	7,136	$	7,440
Europe exposure net of credit default swap protection [2]													$	6,439	$	7,467


[1]	Includes amortized cost and fair value of $ 71 as of September 30, 2012 and $ 67 as of December 31, 2011 related to limited partnerships and other alternative investments, the majority of which is domiciled in the United Kingdom.


[2]	Includes a notional amount and fair value of $ 531 and $ (1) , respectively, as of September 30, 2012 and $ 697 and $ 27 , respectively, as of December 31, 2011 related to credit default swap protection. This includes a notional amount of $ 74 and $ 89 as of September 30, 2012 and December 31, 2011 , respectively, related to single name corporate issuers in the financial services sector.


[3]	The Company has credit default swap protection with a notional amount of $ 20 related to the corporate and Equity, AFS Financial Services.

The Company’s European investment exposure largely relates to corporate entities which are domiciled in or generated a significant portion of its revenue within the United Kingdom, Germany, the Netherlands and Switzerland. As of September 30, 2012 and December 31, 2011 , exposure to the United Kingdom totaled approximately 2% of total invested assets. The majority of investments are U.S. dollar-denominated, and those securities that are pound and euro-denominated are hedged to U.S. dollars or support foreign-denominated liabilities. For a discussion of foreign currency risks, see the Foreign Currency Exchange Risk section of this MD&A. The Company does not hold any sovereign exposure to the higher risk countries and does not hold any exposure to issuers in Greece. As of September 30, 2012 and December 31, 2011 , the Company’s unfunded commitments associated with its investment portfolio was immaterial, and the weighted average credit quality of European investments was A- and A, respectively.

As of September 30, 2012 and December 31, 2011 , the Company’s total credit default swaps that provide credit protection had a notional amount of $ 531 and $ 697 , respectively, and a fair value of $ (1) and $ 27 , respectively. Included in those notional amounts as of September 30, 2012 and December 31, 2011 were $ 531 and $ 407 , respectively, on credit default swaps that reference single name corporate and financial European issuers, of which $ 109 and $ 125 , respectively, related to the higher risk countries. The maturity dates of credit defaults swaps are primarily consistent with the hedged bonds. In addition, as of December 31, 2011, credit default swaps had a notional amount of $ 290 that referenced a standard basket of European corporate and financial issuers. For further information on the use of the Company’s credit derivatives and counterparty credit quality, see Derivative Instruments within the Credit Risk section of this MD&A.

Included in the Company’s equity securities, trading, portfolio are investments in World Government Bond Index Funds (“WGBI funds”). The fair value of the WGBI funds at September 30, 2012 and December 31, 2011 was $ 12.1 billion and $ 12.5 billion, respectively. Because several of these funds are managed by third party asset managers, the Company does not have access to detailed holdings; however, the WGBI funds' investment mandate follows the Citigroup non-Japan World Government Fund Index (“the index”) and includes allocations to certain European sovereign debt. The estimated fair value of the European allocation based upon the index benchmark allocation was $ 5.1 billion and $ 5.4 billion as of September 30, 2012 and December 31, 2011 , respectively. Included in this estimated European exposure were investments in Ireland, Italy, Portugal and Spain with an estimated fair value of $ 1.6 billion and $ 1.7 billion as of September 30, 2012 and December 31, 2011 , respectively. The index guidelines allow investment in issuers rated BBB- or higher by Standard and Poors or Baa3 or higher by Moodys. Should an issuer’s credit rating fall below both of these rating levels they will be removed from the Index and the holdings will be liquidated. Because these assets support the international variable annuity business, changes in the value of these investments are reflected in the corresponding policyholder liabilities. The Company’s indirect exposure to these holdings is through any guarantees issued on the underlying variable annuity policies. For a discussion of the Company’s reinsurance arrangements, see Note 6 of the Notes to Consolidated Financial Statements included in The Hartford’s 2011 Form 10-K Annual Report.

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Financial Services

The Company’s exposure to the financial services sector is predominantly through banking and insurance institutions. The following table presents the Company’s exposure to the financial services sector included in the Securities by Type table above.



	September 30, 2012							December 31, 2011
	Amortized Cost		Fair Value		Net Unrealized			Amortized Cost		Fair Value		Net Unrealized
AAA	$	48	$	50	$	2		$	240	$	245	$	5
AA	1,050		1,138		88			1,698		1,675		(23		)
A	3,461		3,639		178			3,664		3,685		21
BBB	2,482		2,445		(37		)	2,335		1,998		(337		)
BB & below	426		439		13			305		270		(35		)
Total	$	7,467	$	7,711	$	244		$	8,242	$	7,873	$	(369	)

Domestic financial companies continued to stabilize in 2012 due to improved earnings performance, strengthening asset quality and capital generation. However, spread volatility remains high due to concerns around European sovereign risks and potential contagion effects, as well as regulatory pressures. Financial institutions remain vulnerable to these concerns, as well as ongoing stress in the real estate markets which could adversely impact the Company’s net unrealized position.

Commercial Real Estate

The commercial real estate market continued to show signs of improving fundamentals during the first nine months of 2012 , such as increases in transaction activities, more readily available financing and new issuances. While delinquencies still remain at historically high levels, they are expected to move lower.

The following table presents the Company’s exposure to commercial mortgage backed-securities (“CMBS”) bonds by current credit quality and vintage year, included in the Securities by Type table above. Credit protection represents the current weighted average percentage of the outstanding capital structure subordinated to the Company’s investment holding that is available to absorb losses before the security incurs the first dollar loss of principal and excludes any equity interest or property value in excess of outstanding debt.

CMBS – Bonds [1]



September 30, 2012
	AAA				AA				A				BBB				BB and Below				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
2003 & Prior	$	233	$	238	$	106	$	107	$	65	$	63	$	5	$	5	$	43	$	40	$	452	$	453
2004	181		190		73		82		36		35		24		23		26		21		340		351
2005	451		491		77		79		136		136		175		154		84		65		923		925
2006	701		778		239		251		94		93		238		217		338		264		1,610		1,603
2007	298		324		387		404		99		97		31		29		190		155		1,005		1,009
2008	55		65		—		—		—		—		—		—		—		—		55		65
2009	28		30		—		—		—		—		—		—		—		—		28		30
2010	18		21		—		—		—		—		—		—		—		—		18		21
2011	121		134		—		—		—		—		—		—		—		—		121		134
2012	73		77		—		—		—		—		—		—		—		—		73		77
Total	$	2,159	$	2,348	$	882	$	923	$	430	$	424	$	473	$	428	$	681	$	545	$	4,625	$	4,668
Credit protection	30.0%				25.1%				23.3%				15.9%				8.2%				23.8%

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December 31, 2011
	AAA				AA				A				BBB				BB and Below				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
2003 & Prior	$	408	$	415	$	148	$	144	$	83	$	81	$	16	$	13	$	33	$	30	$	688	$	683
2004	333		349		68		75		45		41		30		28		26		21		502		514
2005	520		556		101		96		178		151		177		138		71		57		1,047		998
2006	713		762		516		493		180		159		362		298		430		302		2,201		2,014
2007	245		267		296		275		123		97		166		130		195		149		1,025		918
2008	55		60		—		—		—		—		—		—		—		—		55		60
2009	28		29		—		—		—		—		—		—		—		—		28		29
2010	29		31		—		—		—		—		—		—		—		—		29		31
2011	417		440		—		—		—		—		—		—		—		—		417		440
Total	$	2,748	$	2,909	$	1,129	$	1,083	$	609	$	529	$	751	$	607	$	755	$	559	$	5,992	$	5,687
Credit protection	27.3%				22.7%				19.7%				13.8%				8.2%				21.6%


[1]	The vintage year represents the year the pool of loans was originated.

The Company also has AFS exposure to commercial real estate (“CRE”) collateralized debt obligations (“CDOs”) with an amortized cost and fair value of $ 448 and $ 379 , respectively, as of September 30, 2012 and $ 485 and $ 334 respectively, as of December 31, 2011 . These securities are comprised of diversified pools of commercial mortgage loans or equity positions of other CMBS securitizations. Although the Company does not plan to invest in this asset class going forward, we continue to monitor these investments as economic and market uncertainties regarding future performance impact market liquidity and security premiums.

In addition to CMBS bonds and CRE CDOs, the Company has exposure to commercial mortgage loans as presented in the following table. These loans are collateralized by a variety of commercial properties and are diversified both geographically throughout the United States and by property type. These loans may be either in the form of a whole loan, where the Company is the sole lender, or a loan participation. Loan participations are loans where the Company has purchased or retained a portion of an outstanding loan or package of loans and participates on a pro-rata basis in collecting interest and principal pursuant to the terms of the participation agreement. In general, A-Note participations have senior payment priority, followed by B-Note participations and then mezzanine loan participations. As of September 30, 2012 , loans within the Company’s mortgage loan portfolio that have had extensions or restructurings other than what is allowable under the original terms of the contract are immaterial.

Commercial Mortgage Loans



	September 30, 2012							December 31, 2011
	Amortized Cost [1]		Valuation Allowance			Carrying Value		Amortized Cost [1]		Valuation Allowance			Carrying Value
Agricultural	$	162	$	(7	)	$	155	$	268	$	(19	)	$	249
Whole loans	6,140		(11		)	6,129		4,892		(17		)	4,875
A-Note participations	265		—			265		265		—			265
B-Note participations	271		(65		)	206		296		(66		)	230
Mezzanine loans	108		—			108		109		—			109
Total	$	6,946	$	(83	)	$	6,863	$	5,830	$	(102	)	$	5,728


[1]	Amortized cost represents carrying value prior to valuation allowances, if any.

Since December 31, 2011 , the Company funded $ 1.4 billion of commercial whole loans with a weighted average loan-to-value (“LTV”) ratio of 62 % and a weighted average yield of 3.8 %. The Company continues to originate commercial whole loans within primary markets, office, industrial and multi-family, focusing on loans with strong LTV ratios and high quality property collateral. As of September 30, 2012 , the Company had mortgage loans held-for-sale with a carrying value and valuation allowance of $ 57 and $ 4 , respectively, and $ 74 and $ 4 , respectively, as of December 31, 2011 .

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Municipal Bonds

The Company holds investments in securities backed by states, municipalities and political subdivisions (“municipal”) with an amortized cost and fair value of $ 12.9 billion and $ 14.3 billion, respectively, as of September 30, 2012 and $ 12.6 billion and $ 13.3 billion, respectively, as of December 31, 2011 . The Company’s municipal bond portfolio primarily consists of high quality essential service revenue and general obligation bonds. As of September 30, 2012 , the largest issuer concentrations were the states of California , Illinois and Massachusetts , which each comprised less than 4 % of the municipal bond portfolio and were primarily comprised of general obligation bonds . As of December 31, 2011 , the largest issuer concentrations were the states of California , Massachusetts and Illinois , which each comprised less than 3 % of the municipal bond portfolio and were primarily comprised of general obligation bonds .

Limited Partnerships and Other Alternative Investments

The following table presents the Company’s investments in limited partnerships and other alternative investments which include hedge funds, mortgage and real estate funds, mezzanine debt funds, and private equity and other funds. Hedge funds include investments in funds of funds and direct funds. These hedge funds invest in a variety of strategies including global macro and long/short credit and equity. Mortgage and real estate funds consist of investments in funds whose assets consist of mortgage loans, mortgage loan participations, mezzanine loans or other notes which may be below investment grade, as well as equity real estate and real estate joint ventures. Mezzanine debt funds include investments in funds whose assets consist of subordinated debt that often incorporates equity-based options such as warrants and a limited amount of direct equity investments. Private equity and other funds primarily consist of investments in funds whose assets typically consist of a diversified pool of investments in small to mid-sized non-public businesses with high growth potential.



	September 30, 2012				December 31, 2011
	Amount		Percent		Amount		Percent
Hedge funds	$	1,303	42.9	%	$	896	35.4	%
Mortgage and real estate funds	514		16.9	%	479		18.9	%
Mezzanine debt funds	113		3.7	%	118		4.7	%
Private equity and other funds	1,109		36.5	%	1,039		41	%
Total	$	3,039	100	%	$	2,532	100	%

Since December 31, 2011 , the increase in hedge funds relates to additional investments in the type of fund strategies that the Company expects to generate attractive risk-adjusted returns over time, and are less correlated to long credit and equity returns.

Available-for-Sale Securities — Unrealized Loss Aging

The total gross unrealized losses were $ 1.4 billion as of September 30, 2012 , which have improved $ 1.2 billion, or 47% , from December 31, 2011 due to credit spread tightening and lower interest rates. As of September 30, 2012 , $ 620 of the gross unrealized losses were associated with securities depressed less than 20% of cost or amortized cost.

The remaining $ 808 of gross unrealized losses were associated with securities depressed greater than 20%, which includes $150 associated with securities depressed over 50% for twelve months or more. These securities are backed primarily by commercial and residential real estate that have market spreads that continue to be wider than the spreads at the security’s respective purchase date. The unrealized losses remain largely due to the continued market and economic uncertainties surrounding residential and certain commercial real estate and less liquidity. Based upon the Company’s cash flow modeling and current market and collateral performance assumptions, these securities have sufficient credit protection levels to receive contractually obligated principal and interest payments. Also included in the gross unrealized losses depressed greater than 20% are financial services securities that have a floating-rate coupon and/or long-dated maturities.

As part of the Company’s ongoing security monitoring process, the Company has reviewed its AFS securities in an unrealized loss position and concluded that there were no additional impairments as of September 30, 2012 and that these securities are temporarily depressed and are expected to recover in value as the securities approach maturity or as real estate related market spreads continue to improve. For these securities in an unrealized loss position where a credit impairment has not been recorded, the Company’s best estimate of expected future cash flows are sufficient to recover the amortized cost basis of the security. Furthermore, the Company neither has an intention to sell nor does it expect to be required to sell these securities. For further information regarding the Company’s impairment analysis, see Other-Than-Temporary Impairments in the Investment Portfolio Risks and Risk Management section of this MD&A.

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The following table presents the Company’s unrealized loss aging for AFS securities by length of time the security was in a continuous unrealized loss position.



	September 30, 2012								December 31, 2011
Consecutive Months	Items	Cost or Amortized Cost		Fair Value		Unrealized Loss [1]			Items	Cost or Amortized Cost		Fair Value		Unrealized Loss [1]
Three months or less	876	$	2,834	$	2,735	$	(99	)	855	$	3,933	$	3,672	$	(261	)
Greater than three to six months	326	285		266		(19		)	485	2,617		2,517		(100		)
Greater than six to nine months	120	235		222		(13		)	224	1,181		1,097		(84		)
Greater than nine to eleven months	39	64		62		(2		)	42	106		95		(11		)
Twelve months or more	830	9,731		8,397		(1,295		)	943	11,613		9,324		(2,218		)
Total	2,191	$	13,149	$	11,682	$	(1,428	)	2,549	$	19,450	$	16,705	$	(2,674	)


[1]	Unrealized losses exclude the fair value of bifurcated embedded derivative features of certain securities as changes in value are recorded in net realized capital gains (losses).

The following tables present the Company’s unrealized loss aging for AFS securities continuously depressed over 20% by length of time (included in the table above).



	September 30, 2012								December 31, 2011
Consecutive Months	Items	Cost or Amortized Cost		Fair Value		Unrealized Loss [1]			Items	Cost or Amortized Cost		Fair Value		Unrealized Loss [1]
Three months or less	100	$	146	$	107	$	(39	)	206	$	1,823	$	1,289	$	(500	)
Greater than three to six months	61	146		111		(35		)	134	1,749		1,205		(544		)
Greater than six to nine months	20	36		27		(9		)	42	406		269		(137		)
Greater than nine to eleven months	10	25		16		(9		)	9	1		—		(1		)
Twelve months or more	222	2,065		1,349		(716		)	239	1,806		1,057		(749		)
Total	413	$	2,418	$	1,610	$	(808	)	630	$	5,785	$	3,820	$	(1,931	)

The following tables present the Company’s unrealized loss aging for AFS securities continuously depressed over 50% by length of time (included in the tables above).



	September 30, 2012								December 31, 2011
Consecutive Months	Items	Cost or Amortized Cost		Fair Value		Unrealized Loss [1]			Items	Cost or Amortized Cost		Fair Value		Unrealized Loss [1]
Three months or less	22	$	56	$	27	$	(29	)	50	$	152	$	55	$	(97	)
Greater than three to six months	13	18		7		(11		)	26	110		46		(64		)
Greater than six to nine months	11	2		—		(2		)	7	33		11		(22		)
Greater than nine to eleven months	5	11		5		(6		)	5	5		1		(4		)
Twelve months or more	37	240		90		(150		)	54	227		71		(156		)
Total	88	$	327	$	129	$	(198	)	142	$	527	$	184	$	(343	)

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Other-Than-Temporary Impairments

The following table presents the Company’s impairments recognized in earnings by security type.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
ABS	$	—	$	13	$	25	$	23
CRE CDOs	7		26		10		41
CMBS
Bonds	19		2		24		16
IOs	1		—		1		3
Corporate	4		19		28		40
Equity	4		—		65		10
RMBS sub-prime	2		—		10		3
Other	—		—		—		2
Total	$	37	$	60	$	164	$	138

Three and nine months ended September 30, 2012

For the three and nine months ended September 30, 2012 , impairments recognized in earnings were comprised of credit impairments of $ 14 and $ 40 , respectively, impairments on equity securities of $ 4 and $ 63 , respectively, and securities that the Company intends to sell of $ 19 and $ 61 , respectively.

For the three and nine months ended September 30, 2012, credit impairments were primarily concentrated in structured securities associated with residential and commercial real estate, as well as ABS small business for the nine months ended September 30, 2012. The structured securities were impaired primarily due to actual performance or property-specific deterioration of the underlying collateral. The Company calculated these impairments utilizing both a top down modeling approach and a security-specific collateral review. The top down modeling approach used discounted cash flow models that considered losses under current and expected future economic conditions. Assumptions used over the current period included macroeconomic factors, such as a high unemployment rate, as well as sector specific factors such as property values, delinquency levels, servicer behavior and severity rates. The macroeconomic assumptions considered by the Company did not materially change for the three and nine months ended September 30, 2012 , and, as such, the credit impairments recognized were primarily driven by actual collateral deterioration, largely as a result of the Company’s security-specific collateral review.

The security-specific collateral review is performed to estimate potential future losses. This review incorporates assumptions about expected future collateral cash flows, including projected default rates and severities. The results of the security-specific collateral review allowed the Company to estimate the expected timing of a security’s first loss, if any, and the probability and severity of potential ultimate losses. The Company then discounted these anticipated future cash flows at the security’s book yield prior to impairment.

Impairments on equity securities were largely comprised of downgraded preferred equity securities of financial institutions. Impairments on securities for which the Company has the intent to sell primarily related to European corporate debt where the Company would like the ability to reduce certain exposures, as well as high risk CMBS bonds and ABS collateralized by student loans.

In addition to the credit impairments recognized in earnings, the Company recognized non-credit impairments in other comprehensive income of $ 22 and $ 37 , respectively, for the three and nine months ended September 30, 2012 , predominantly concentrated in corporate financial services and RMBS. These non-credit impairments represent the difference between fair value and the Company’s best estimate of expected future cash flows discounted at the security’s effective yield prior to impairment, rather than at current market implied credit spreads. These non-credit impairments primarily represent increases in market liquidity premiums and credit spread widening that occurred after the securities were purchased, as well as a discount for variable-rate coupons which are paying less than at purchase date. In general, larger liquidity premiums and wider credit spreads are the result of deterioration of the underlying collateral performance of the securities, as well as the risk premium required to reflect future uncertainty in the real estate market.

Future impairments may develop as the result of changes in intent to sell of specific securities or if actual results underperform current modeling assumptions, which may be the result of, but are not limited to, macroeconomic factors and security-specific performance below current expectations. Ultimate loss formation will be a function of macroeconomic factors and idiosyncratic security-specific performance.

Three and nine months ended September 30, 2011

Impairments recognized in earnings were comprised of credit impairments of $ 42 and $ 103 , respectively, impairments on equity securities of $ 0 and $ 10 , respectively, and securities that the Company intended to sell of $ 18 and $25 , respectively. Credit impairments primarily related to structured securities as a result of continued property-specific deterioration of the underlying collateral. The remaining credit impairments were primarily direct private equity investments that were impaired due to the likelihood of a disruption in contractual principal and interest payments due to the restructuring of the debtor’s obligation. Impairments on equity securities related to preferred stock associated with these direct private equity investments, and impairments on securities that the Company intended to sell consisted of corporate financial services securities and ABS collateralized by aircraft.

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CAPITAL RESOURCES AND LIQUIDITY

The following section discusses the overall financial strength of The Hartford and its insurance operations including their ability to generate cash flows from each of their business segments, borrow funds at competitive rates and raise new capital to meet operating and growth needs over the next twelve months.

Liquidity Requirements and Sources of Capital

The Hartford Financial Services Group, Inc. (Holding Company)

The liquidity requirements of the holding company of The Hartford Financial Services Group, Inc. (“HFSG Holding Company”) have been and will continue to be met by HFSG Holding Company’s fixed maturities, short-term investments and cash of $1.3 billion at September 30, 2012 , dividends from its insurance operations, as well as the issuance of common stock, debt or other capital securities and borrowings from its credit facilities. Expected liquidity requirements of the HFSG Holding Company for the next twelve months include interest on debt of approximately $470 , repayment of 5.25% senior notes of $320 , common stockholder dividends, subject to the discretion of the Board of Directors, of approximately $180 , and preferred stock dividends of approximately $32 .

During the nine months ended September 30, 2012 , the Company completed a $500 stock repurchase program authorized by the Board of Directors that permitted for purchases of common stock, as well as warrants and other equity derivative securities. In 2011, the Company repurchased 3.2 million common shares for $51, and in 2012, repurchased 8.0 million common shares for $149 , as well as all outstanding Series B and Series C warrants held by Allianz for $300 . For additional information see Note 15 of the Notes to Condensed Consolidated Financial Statements.

In addition, in 2010 The Hartford entered into an intercompany liquidity agreement that allows for short-term advances of funds among the HFSG Holding Company and certain affiliates of up to $2.0 billion for liquidity and other general corporate purposes. The Connecticut Insurance Department granted approval for certain affiliated insurance companies that are parties to the agreement to treat receivables from a parent, including the HFSG Holding Company, as admitted assets for statutory accounting purposes.

Dividends

On October 25, 2012, The Hartford’s Board of Directors declared a quarterly dividend of $0.10 per common share payable on January 2, 2013 to common shareholders of record as of December 3, 2012 and a dividend of $18.125 on each share of Series F preferred stock payable on January 2, 2013 to shareholders of record as of December 17, 2012.

Debt

Senior Notes

On April 5, 2012, the Company issued $1.55 billion aggregate principal amount of senior notes. The issuance consisted of $325 of 4.000% senior notes due 2017, $800 of 5.125% senior notes due 2022 and $425 of 6.625% senior notes due 2042 (collectively, the “Senior Notes”) for net proceeds of approximately $1.5 billion, after deducting underwriting discounts and offering expenses. The Senior Notes bear interest at their respective rate, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2012.

Junior Subordinated Debentures

On April 5, 2012, the Company issued $600 aggregate principal amount of 7.875% fixed-to-floating rate junior subordinated debentures due 2042 (the “Debentures”) for net proceeds of approximately $586, after deducting underwriting discounts and offering expenses. The Company financed the repurchase of the 10% Debentures through the issuance of the Senior Notes and the Debentures. The Debentures bear interest from the date of issuance to but excluding April 15, 2022 at an annual rate of 7.875%, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, commencing on July 15, 2012, to and including April 15, 2022. Commencing on April 15, 2022 the Debentures bear interest at an annual rate equal to three-month LIBOR, reset quarterly, plus 5.596%, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, commencing on July 15, 2022.

For additional information regarding debt, see Note 14 of the Notes to Condensed Consolidated Financial Statements. For additional information regarding the warrants, see Note 15 of the Notes to Condensed Consolidated Financial Statements.

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Pension Plans and Other Postretirement Benefits

While the Company has significant discretion in making voluntary contributions to the Plan, the Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006 and further amended by the Worker, Retiree, and Employer Recovery Act of 2008, and Internal Revenue Code regulations mandate minimum contributions in certain circumstances. The Company does not have a required minimum funding contribution for the U.S. qualified defined benefit pension plan for 2012 and the funding requirements for all of the pension plans is expected to be immaterial. The Company contributed approximately $120 to its pension plans in July 2012 , and presently anticipates contributing approximately $80 during the remainder of 2012, based upon certain economic and business assumptions. These assumptions include, but are not limited to, equity market performance, changes in interest rates and the Company’s other capital requirements.

Dividends from Insurance Subsidiaries

Dividends to the HFSG Holding Company from its insurance subsidiaries are limited by state regulation. The payment of dividends by Connecticut-domiciled insurers, including dividends associated with the proceeds from a sale of any of our life businesses, is limited under the insurance holding company laws of Connecticut. These laws require notice to and approval by the state insurance commissioner for the declaration or payment of any dividend, which, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of the insurer’s policyholder surplus as of December 31 of the preceding year or (ii) net income (or net gain from operations, if such company is a life insurance company) for the twelve-month period ending on the thirty-first day of December last preceding, in each case determined under statutory insurance accounting principles. In addition, if any dividend of a Connecticut-domiciled insurer exceeds the insurer’s earned surplus, it requires the prior approval of the Connecticut Insurance Commissioner. The insurance holding company laws of the other jurisdictions in which The Hartford’s insurance subsidiaries are incorporated (or deemed commercially domiciled) generally contain similar (although in certain instances somewhat more restrictive) limitations on the payment of dividends. Dividends paid to HFSG Holding Company by its life insurance subsidiaries are further dependent on cash requirements of HLI and other factors. The Company’s property-casualty insurance subsidiaries are permitted to pay up to a maximum of approximately $1.4 billion in dividends to HFSG Holding Company in 2012 without prior approval from the applicable insurance commissioner. The Company’s life insurance subsidiaries are permitted to pay up to a maximum of approximately $625 in dividends to HLI in 2012 without prior approval from the applicable insurance commissioner. The aggregate of these amounts is the maximum the insurance subsidiaries could pay to HFSG Holding Company in 2012 without prior approval from the applicable insurance commissioner. In addition to statutory limitations on paying dividends, the Company also takes other items into consideration when determining dividends from subsidiaries. These considerations include, but are not limited to expected earnings and capitalization of the subsidiary, regulatory capital requirements and liquidity requirements of the individual operating company. For the nine months ended September 30, 2012 , HFSG Holding Company and HLI received no dividends from the life insurance subsidiaries, and HFSG Holding Company received $722 in dividends from its property-casualty insurance subsidiaries, including dividends of $122 to fund interest payments on an intercompany note between Hartford Holdings, Inc. and Hartford Fire Insurance Company.

Other Sources of Capital for the HFSG Holding Company

The Hartford endeavors to maintain a capital structure that provides financial and operational flexibility to its insurance subsidiaries, ratings that support its competitive position in the financial services marketplace (see the “Ratings” section below for further discussion), and shareholder returns. As a result, the Company may from time to time raise capital from the issuance of equity, equity-related debt or other capital securities and is continuously evaluating strategic opportunities. The issuance of common equity, equity-related debt or other capital securities could result in the dilution of shareholder interests or reduced net income due to additional interest expense.

Shelf Registrations

On August 4, 2010, The Hartford filed with the Securities and Exchange Commission (the “SEC”) an automatic shelf registration statement (Registration No. 333-168532) for the potential offering and sale of debt and equity securities. The registration statement allows for the following types of securities to be offered: debt securities, junior subordinated debt securities, preferred stock, common stock, depositary shares, warrants, stock purchase contracts, and stock purchase units. In that The Hartford is a well-known seasoned issuer, as defined in Rule 405 under the Securities Act of 1933, the registration statement went effective immediately upon filing and The Hartford may offer and sell an unlimited amount of securities under the registration statement during the three-year life of the registration statement.

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Contingent Capital Facility

The Hartford is party to a put option agreement that provides The Hartford with the right to require the Glen Meadow ABC Trust, a Delaware statutory trust, at any time and from time to time, to purchase The Hartford’s junior subordinated notes in a maximum aggregate principal amount not to exceed $500. Under the Put Option Agreement, The Hartford will pay the Glen Meadow ABC Trust premiums on a periodic basis, calculated with respect to the aggregate principal amount of Notes that The Hartford had the right to put to the Glen Meadow ABC Trust for such period. The Hartford has agreed to reimburse the Glen Meadow ABC Trust for certain fees and ordinary expenses. The Company holds a variable interest in the Glen Meadow ABC Trust where the Company is not the primary beneficiary. As a result, the Company did not consolidate the Glen Meadow ABC Trust. As of September 30, 2012 , The Hartford has not exercised its right to require Glen Meadow ABC Trust to purchase the Notes. As a result, the Notes remain a source of capital for the HFSG Holding Company.

Commercial Paper and Revolving Credit Facility

The table below details the Company’s short-term debt programs and the applicable balances outstanding.



	Effective	Expiration	Maximum Available as of September 30,				Outstanding as of September 30,
Description	Date	Date	2012		2011		2012		2011
Commercial Paper
The Hartford	11/10/1986	N/A	$	2,000	$	2,000	$	—	$	—
Revolving Credit Facility
4-year revolving credit facility	1/6/2012	1/6/2016	1,750		N/A		—		—
5-year revolving credit facility [1]	8/9/2007	8/9/2012	N/A		1,900		—		—
Total Commercial Paper and Revolving Credit Facility			$	3,750	$	3,900	$	—	$	—


[1]	Terminated in January 2012.

Commercial Paper

While The Hartford’s maximum borrowings available under its commercial paper program are $2.0 billion, the Company is dependent upon market conditions to access short-term financing through the issuance of commercial paper to investors.

Revolving Credit Facilities

In January 2012, the Company entered into a senior unsecured revolving credit facility (the “Credit Facility”) that provides for borrowing capacity up to $1.75 billion (which is available in U.S. dollars, and in Euro, Sterling, Canadian dollars and Japanese Yen) through January 6, 2016. Of the total availability under the Credit Facility, up to $250 is available to support letters of credit issued on behalf of the Company or subsidiaries of the Company. Under the Credit Facility, the Company must maintain a minimum level of consolidated net worth of $14.9 billion. The definition of consolidated net worth under the terms of the Credit Facility, excludes AOCI and includes the Company’s outstanding junior subordinated debentures and perpetual preferred securities, net of discount. In addition, the Company’s maximum ratio of consolidated total debt to consolidated total capitalization is 35%, and the ratio of consolidated total debt of subsidiaries to consolidated total capitalization is limited to 10%. As of September 30, 2012 , the Company was in compliance with all financial covenants under the Credit Facility.

The Hartford’s Japan operations also maintain two lines of credit in support of operations. Both lines of credit are in the amount of approximately $63, or ¥5 billion, and individually have expiration dates of January 4, 2013 and September 30, 2013.

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Derivative Commitments

As of September 30, 2012 , the aggregate notional amount and fair value of derivative relationships that could be subject to immediate termination in the event of rating agency downgrades to (1) either BBB+ or Baa1 was $ 6.1 billion and $ 202 , respectively, or (2) both BBB+ and Baa1 was $ 14.2 billion and $ 455 , respectively, which includes the amounts in scenario (1). The notional and fair value amounts include a customized GMWB derivative with a notional amount of $ 4.1 billion and a fair value of $ 149 , for which the Company has a contractual right to make a collateral payment in the amount of approximately $ 41 to prevent its termination. This customized GMWB derivative contains an early termination trigger such that if the unsecured, unsubordinated debt of the counterparty’s related party guarantor is downgraded one or more levels below the current rating by S&P, the counterparty could terminate all transactions under the applicable International Swaps and Derivatives Association Master Agreement. As of September 30, 2012 , the gross fair value of all affected derivative contracts is $ 150 , which would approximate the settlement value.

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Insurance Operations

Current and expected patterns of claim frequency and severity or surrenders may change from period to period but continue to be within historical norms and, therefore, the Company’s insurance operations’ current liquidity position is considered to be sufficient to meet anticipated demands over the next twelve months, including any obligations related to the Company’s restructuring activities. For a discussion and tabular presentation of the Company’s current contractual obligations by period, refer to Off-Balance Sheet Arrangements and Aggregate Contractual Obligations within the Capital Resources and Liquidity section of the MD&A included in The Hartford’s 2011 Form 10-K Annual Report.

The principal sources of operating funds are premiums, fees earned from assets under management and investment income, while investing cash flows originate from maturities and sales of invested assets. The primary uses of funds are to pay claims, claim adjustment expenses, commissions and other underwriting expenses, to purchase new investments and to make dividend payments to the HFSG Holding Company.

The Company’s insurance operations consist of property and casualty insurance products (collectively referred to as “Property & Casualty Operations”) and life insurance products (collectively referred to as “Life Operations”).

Property & Casualty Operations

Property & Casualty Operations holds fixed maturity securities including a significant short-term investment position (securities with maturities of one year or less at the time of purchase) to meet liquidity needs.

The following table summarizes Property & Casualty Operations’ fixed maturities, short-term investments, and cash, as of September 30, 2012 :



Fixed maturities	$	26,498
Short-term investments	705
Cash	155
Less: Derivative collateral	(209		)
Total	$	27,149

Liquidity requirements that are unable to be funded by Property & Casualty Operation’s short-term investments would be satisfied with current operating funds, including premiums received or through the sale of invested assets. A sale of invested assets could result in significant realized losses.

Life Operations

Life Operations’ total general account contractholder obligations are supported by $78 billion of cash and total general account invested assets, excluding equity securities, trading, which includes a significant short-term investment position to meet liquidity needs.

The following table summarizes Life Operations’ fixed maturities, short-term investments, and cash, as of September 30, 2012 :



Fixed maturities	$	60,999
Short-term investments	3,351
Cash	2,550
Less: Derivative collateral	(1,698		)
Cash associated with Japan variable annuities	(677		)
Total	$	64,525

Capital resources available to fund liquidity, upon contract holder surrender, are a function of the legal entity in which the liquidity requirement resides. Generally, obligations of Group Benefits will be funded by Hartford Life and Accident Insurance Company; obligations of Individual Life and individual annuity and private placement life insurance products will be generally funded by both Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company; obligations of Retirement Plans and institutional investment products will be generally funded by Hartford Life Insurance Company; and obligations of the Company’s international annuity subsidiaries will be generally funded by the legal entity in the country in which the obligation was generated.

Hartford Life Insurance Company (“HLIC”), an indirect wholly-owned subsidiary, is a member of the Federal Home Loan Bank of Boston (“FHLBB”). Membership allows HLIC access to collateralized advances, which may be used to support various spread-based businesses or to enhance liquidity management. FHLBB membership requires HLIC to own member stock and borrowings require the purchase of activity-based stock in an amount (generally between 3% and 4.5% of the principal balance) based upon the term of the outstanding advances. FHLBB stock held by HLIC is classified within equity securities, available-for-sale in the Condensed Consolidated Balance Sheets.

State law limits HLIC's ability to pledge, hypothecate or otherwise encumber its assets. The amount of advances that can be taken by HLIC are dependent on the assets pledged by HLIC to secure the advances, and are therefore subject to this legal limit. The pledge limit is recalculated annually based on statutory admitted assets and capital and surplus. For 2012, HLIC's pledge limit is $1.48 billion. HLIC would need to seek prior written approval from the Connecticut Department of Insurance in order to exceed this limit.

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Contractholder Obligations	September 30, 2012
Total Life contractholder obligations	$	241,042
Less: Separate account assets [1]	(148,369		)
International statutory separate accounts [1]	(29,938		)
General account contractholder obligations	$	62,735
Composition of General Account Contractholder Obligations
Contracts without a surrender provision and/or fixed payout dates [2]	$	27,866
Fixed MVA annuities [3]	9,037
International Fixed MVA annuities	2,327
Guaranteed investment contracts (“GIC”) [4]	252
Other [5]	23,253
General account contractholder obligations	$	62,735

[1]

In the event customers elect to surrender separate account assets or international statutory separate accounts, Life Operations will use the proceeds from the sale of the assets to fund the surrender, and Life Operations’ liquidity position will not be impacted. In many instances Life Operations will receive a percentage of the surrender amount as compensation for early surrender (surrender charge), increasing Life Operations’ liquidity position. In addition, a surrender of variable annuity separate account or general account assets (see below) will decrease Life Operations’ obligation for payments on guaranteed living and death benefits.


[2]	Relates to contracts such as payout annuities or institutional notes, other than guaranteed investment products with an MVA feature (discussed below) or surrenders of term life, group benefit contracts or death and living benefit reserves for which surrenders will have no current effect on Life Operations’ liquidity requirements.

[3]

Relates to annuities that are held in a statutory separate account, but under U.S. GAAP are recorded in the general account as Fixed MVA annuity contract holders are subject to the Company’s credit risk. In the statutory separate account, Life Operations is required to maintain invested assets with a fair value equal to the MVA surrender value of the Fixed MVA contract. In the event assets decline in value at a greater rate than the MVA surrender value of the Fixed MVA contract, Life Operations is required to contribute additional capital to the statutory separate account. Life Operations will fund these required contributions with operating cash flows or short-term investments. In the event that operating cash flows or short-term investments are not sufficient to fund required contributions, the Company may have to sell other invested assets at a loss, potentially resulting in a decrease in statutory surplus. As the fair value of invested assets in the statutory separate account are generally equal to the MVA surrender value of the Fixed MVA contract, surrender of Fixed MVA annuities will have an insignificant impact on the liquidity requirements of Life Operations.

[4]

GICs are subject to discontinuance provisions which allow the policyholders to terminate their contracts prior to scheduled maturity at the lesser of the book value or market value. Generally, the market value adjustment reflects changes in interest rates and credit spreads. As a result, the market value adjustment feature in the GIC serves to protect the Company from interest rate risks and limit Life Operations’ liquidity requirements in the event of surrender.

[5]

Surrenders of, or policy loans taken from, as applicable, these general account liabilities, which include the general account option for Individual Annuity’s individual variable annuities and Individual Life variable life contracts, the general account option for Retirement Plans’ annuities and universal life contracts sold by Individual Life may be funded through operating cash flows of Life Operations, available short-term investments, or Life Operations may be required to sell fixed maturity investments to fund the surrender payment. Sales of fixed maturity investments could result in the recognition of significant realized losses and insufficient proceeds to fully fund the surrender amount. In this circumstance, Life Operations may need to take other actions, including enforcing certain contract provisions which could restrict surrenders and/or slow or defer payouts.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Off-Balance Sheet Arrangements

There have been no material changes to the Company’s off-balance sheet arrangements since the filing of the Company’s 2011 Form 10-K Annual Report.

Aggregate Contractual Obligations

Since December 31, 2011, the Company issued $1.55 billion aggregate principal amount of senior notes and $600 aggregate principal amount of junior subordinated debentures. For additional information, see MD&A – Liquidity Requirements and Sources of Capital – Debt and Note 14 of Notes to Condensed Consolidated Financial Statements.

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Capitalization

The capital structure of The Hartford as of September 30, 2012 and December 31, 2011 consisted of debt and stockholders’ equity, summarized as follows:



	September 30, 2012			December 31, 2011			Change
Short-term debt (includes current maturities of long-term debt)	$	320		$	—		—	%
Long-term debt	6,806			6,216			9	%
Total debt [1]	7,126			6,216			15	%
Stockholders’ equity excluding accumulated other comprehensive income (loss), net of tax (“AOCI”)	20,075			20,235			(1	)%
AOCI, net of tax	3,295			1,251			163	%
Total stockholders’ equity	$	23,370		$	21,486		9	%
Total capitalization including AOCI	$	30,496		$	27,702		10	%
Debt to stockholders’ equity	30		%	29		%
Debt to capitalization	23		%	22		%


[1]	Total debt of the Company excludes $190 and $314 of consumer notes as of September 30, 2012 and December 31, 2011 , respectively .

The Hartford’s total capitalization increased $2.8 billion , or 10% , from December 31, 2011 to September 30, 2012 due to increases in total debt and AOCI, net of tax, partially offset by decreases in stockholders' equity, excluding AOCI. The decrease in stockholders’ equity, excluding AOCI, was primarily due the repurchase of outstanding warrants held by Allianz for $300 .

Total debt increased primarily due to the issuance of $1.55 billion in senior notes and $600 in junior subordinated debentures in April 2012, partially offset by the repurchase of $1.75 billion in junior subordinated debentures in April 2012.

AOCI, net of tax, improved primarily due to improvements in the Company’s net unrealized position on available-for-sale securities of $1.9 billion primarily as a result of improved security valuations largely due to credit spread tightening and declining interest rates.

For additional information on debt and the repurchase of warrants, see MD&A – Liquidity Requirements and Sources of Capital and Note 14 and Note 15 of the Notes to Condensed Consolidated Financial Statements. For additional information on equity and AOCI, net of tax, see Notes 15 and 16, respectively, of the Notes to Consolidated Financial Statements in The Hartford’s 2011 Form 10-K Annual Report.

Cash Flows



	Nine Months Ended September 30,
	2012			2011
Net cash provided by operating activities	$	2,212		$	1,624
Net cash used for investing activities	$	(1,862	)	$	(896	)
Net cash used for financing activities	$	(217	)	$	(239	)
Cash – end of period	$	2,705		$	2,589

Cash provided by operating activities increased primarily due to income taxes received of $448 in 2012 , compared to income taxes paid of $245 in 2011 , as well as lower paid losses on property and casualty insurance products, and to a lesser extent, higher net investment income on available-for-sale securities, excluding limited partnerships and other investments.

Cash used for investing activities in 2012 primarily relates to net purchases of derivatives of $1.6 billion, net purchases of mortgage loans of $1.1 billion, and net purchases of partnerships of $604, partially offset by net proceeds of available for sale securities of $1.5 billion. Cash used for investing activities in 2011 primarily relates to net purchases of mortgage loans of $1.1 billion, net purchases of fixed maturities, fair value option of $624 and net purchases of available-for-sale securities of $459, partially offset by net receipts on derivatives of $1.6 billion.

Cash used for financing activities in 2012 consists primarily of net outflows on investment and universal life-type contracts of $1.0 billion, repurchase of warrants of $300, as well as share repurchases and dividends paid on common and preferred stock. These were partially offset by net increases in securities loaned or sold of $1.6 billion. Cash used for financing activities in 2011 consists primarily of net outflows on investment and universal life-type contracts and dividends paid on common and preferred stock.

Operating cash flows for the nine months ended September 30, 2012 and 2011 have been adequate to meet liquidity requirements.

Equity Markets

For a discussion of the potential impact of the equity markets on capital and liquidity, see the Enterprise Risk Management section of the MD&A.

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Ratings

Ratings impact the Company’s cost of borrowing and its ability to access financing and are an important factor in establishing competitive position in the insurance and financial services marketplace. There can be no assurance that the Company’s ratings will continue for any given period of time or that they will not be changed. In the event the Company’s ratings are downgraded, the Company’s cost of borrowing and ability to access financing, as well as the level of revenues or the persistency of its business may be adversely impacted.

The following table summarizes The Hartford’s significant member companies’ financial strength ratings from the major independent rating organizations as of October 26, 2012 .



Insurance Financial Strength Ratings:	A.M. Best	Fitch	Standard & Poor’s	Moody’s
Hartford Fire Insurance Company	A	A+	A	A2
Hartford Life Insurance Company	A	A-	A-	A3
Hartford Life and Accident Insurance Company	A	A-	A-	A3
Hartford Life and Annuity Insurance Company	A	A-	BBB+	A3
Other Ratings:
The Hartford Financial Services Group, Inc.:
Senior debt	bbb+	BBB	BBB	Baa3
Commercial paper	AMB-2	F2	A-2	P-3

These ratings are not a recommendation to buy or hold any of The Hartford’s securities and they may be revised or revoked at any time at the sole discretion of the rating organization.

The agencies consider many factors in determining the final rating of an insurance company. One consideration is the relative level of statutory surplus necessary to support the business written. Statutory surplus represents the capital of the insurance company reported in accordance with accounting practices prescribed by the applicable state insurance department.

Statutory Surplus

The table below sets forth statutory surplus for the Company’s insurance companies. The statutory surplus amount as of December 31, 2011 in the table below is based on actual statutory filings with the applicable regulatory authorities. The statutory surplus amount as of September 30, 2012 is an estimate, as the third quarter 2012 statutory filings have not yet been made.



	September 30, 2012		December 31, 2011
U.S. life insurance subsidiaries, includes domestic captive insurance subsidiaries	$	7,567	$	7,388
Property and casualty insurance subsidiaries	7,746		7,412
Total	$	15,313	$	14,800

Total statutory capital and surplus for the U.S. life insurance subsidiaries, including domestic captive insurance subsidiaries, increased by $179 primarily due to deferred tax impact of $143, capital contributions of $30, and statutory income from non-variable annuity business of $19 partially offset by other surplus changes of $14 and variable annuity surplus impacts of $13.

Total statutory capital and surplus for property and casualty increased by $334, primarily due to net income of $611, unrealized gains of $253, additional deferred tax assets of $36, capital contributions of $9 and an increase of statutory admitted assets of $25, partially offset by dividends to HFSG Holding Company of $600. Both net income and dividends are net of interest payments and dividends, respectively, on an intercompany note between Hartford Holdings, Inc. and Hartford Fire Insurance Company.

The Company also holds regulatory capital and surplus for its operations in Japan. Under the accounting practices and procedures governed by Japanese regulatory authorities, the Company’s statutory capital and surplus was $1.3 billion as of September 30, 2012 and December 31, 2011 , respectively. The statutory surplus amount as of September 30, 2012 is an estimate, as the September 30, 2012 statutory filings have not yet been made.

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Contingencies

Legal Proceedings – For a discussion regarding contingencies related to The Hartford’s legal proceedings, please see the information contained under “Litigation” in Note 9 of the Notes to Condensed Consolidated Financial Statements and Part II, Item 1 Legal Proceedings, which are incorporated herein by reference.

Legislative Developments

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) was enacted on July 21, 2010, mandating changes to the regulation of the financial services industry. The Dodd-Frank Act may affect our operations and governance in ways that could adversely affect our financial condition and results of operations.

In particular, the Dodd-Frank Act vests a newly created Financial Services Oversight Council ("FSOC") with the power to designate “systemically important” financial institutions, which will be subject to special regulatory supervision and other provisions intended to prevent, or mitigate the impact of, future disruptions in the U.S. financial system. Systemically important institutions are limited to large bank holding companies and nonbank financial companies that are so important that their potential failure could “pose a threat to the financial stability of the United States.” The FSOC finalized its rule for designating systemically important nonbank financial institutions in April 2012, but has not yet indicated when it will begin its consideration of such companies. Based on its most current financial data, The Hartford does not meet the initial quantitative metrics that will be used to determine which nonbank companies merit consideration. The FSOC has indicated it will review on a quarterly basis whether non-bank financial institutions meet the metrics for further review.

If we are designated as a systemically important institution, The Hartford could be subject to higher capital requirements and additional regulatory oversight imposed by The Federal Reserve, as well as to post-event assessments imposed by the Federal Deposit Insurance Corporation (“FDIC”) to recoup the costs associated with the orderly liquidation of other systemically important institutions in the event one or more such institutions fails. Further, the FDIC is authorized to petition a state court to commence an insolvency proceeding to liquidate an insurance company that fails in the event the insurer’s state regulator fails to act. In addition, the Dodd-Frank Act may restrict us from sponsoring and investing in private equity and hedge funds, which would limit our discretion in managing our general account.

Other provisions in the Dodd-Frank Act that may impact us include: the requirement for central clearing of, and/or new margin and capital requirements on, derivatives transactions, which we expect will increase the costs of our hedging program; a new “Federal Insurance Office” within Treasury; discretionary authority for the SEC to impose a harmonized standard of care for investment advisers and broker-dealers who provide personalized advice about securities to retail customers; possible adverse impact on the pricing and liquidity of the securities in which we invest resulting from the proprietary trading and market making limitation of the Volcker Rule; possible prohibition of certain asset-backed securities transactions that could adversely impact our ability to offer insurance-linked securities; and enhancements to corporate governance, especially regarding risk management.

FY 2013, Budget of the United States Government

On February 13, 2012, the Obama Administration released its “FY 2013, Budget of the United States Government” (the “Budget”). Although the Administration has not released proposed statutory language, the Budget includes proposals that if enacted, would affect the taxation of life insurance companies and certain life insurance products. In particular, the proposals would change the method used to determine the amount of dividend income received by a life insurance company on assets held in separate accounts used to support products, including variable life insurance and variable annuity contracts, which are eligible for the dividends received deduction (“DRD”). The DRD reduces the amount of dividend income subject to tax and is a significant component of the difference between the Company’s actual tax expense and expected amount determined using the federal statutory tax rate of 35%. If this proposal were enacted, the Company’s actual tax expense could increase, reducing earnings.

IMPACT OF NEW ACCOUNTING STANDARDS

For a discussion of accounting standards, see Note 1 of the Notes to Consolidated Financial Statements included in The Hartford’s 2011 Form 10-K Annual Report and Note 1 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information contained in the Financial Risk Management section of Management’s Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference.

Item 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The Company’s principal executive officer and its principal financial officer, based on their evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) have concluded that the Company’s disclosure controls and procedures are effective for the purposes set forth in the definition thereof in Exchange Act Rule 13a-15(e) as of September 30, 2012 .

Changes in internal control over financial reporting

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s current fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Litigation

Asbestos and Environmental Claims – As discussed in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Property and Casualty Insurance Product Reserves, Net of Reinsurance - Property & Casualty Other Operations Claims, The Hartford continues to receive asbestos and environmental claims that involve significant uncertainty regarding policy coverage issues. Regarding these claims, The Hartford continually reviews its overall reserve levels and reinsurance coverages, as well as the methodologies it uses to estimate its exposures. Because of the significant uncertainties that limit the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid losses and related expenses, particularly those related to asbestos, the ultimate liabilities may exceed the currently recorded reserves. Any such additional liability cannot be reasonably estimated now but could be material to The Hartford’s consolidated operating results, financial condition and liquidity.

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Item 1A. RISK FACTORS

Investing in The Hartford involves risk. In deciding whether to invest in The Hartford, you should carefully consider the risk factors disclosed in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 and in Item 1A of Part II of the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012 and June 30, 2012, any of which could have a significant or material adverse effect on the business, financial condition, operating results or liquidity of The Hartford. This information should be considered carefully together with the other information contained in this report and the other reports and materials filed by The Hartford with the SEC.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

The following table summarizes the Company’s repurchases of its common stock for the three months ended September 30, 2012 :



Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
						(in millions)
July 1, 2012-July 31, 2012	73	[1]	$	17.82	—	$	—
August 1, 2012-August 31, 2012	2,524	[1]	$	17.01	—	$	—
September 1, 2012-September 30, 2012	203	[1]	$	17.52	—	$	—
Total	2,800		$	17.07	—	N/A


[1]	Primarily represents shares acquired from employees of the Company for tax withholding purposes in connection with the Company’s stock compensation plans.

Item 6. EXHIBITS



See Exhibits Index on page	138 .

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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 hereunto duly authorized.



		The Hartford Financial Services Group, Inc.
		(Registrant)

Date:	November 1, 2012	/s/ Robert H. Bateman
		Robert H. Bateman
		Senior Vice President and Controller
		(Chief accounting officer and duly authorized signatory)

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

FOR THE QUARTER ENDED SEPTEMBER 30, 2012

FORM 10-Q

EXHIBITS INDEX



Exhibit No.		Description
2.01		Purchase and Sale Agreement by and among Massachusetts Mutual Life Insurance Company, Hartford Life, Inc. and The Hartford Financial Services Group, Inc. dated as of September 4, 2012.**

2.02		Purchase and Sale Agreement by and among Hartford Life, Inc., Prudential Financial, Inc. and The Hartford Financial Services Group, Inc. dated as of September 27, 2012.**

15.01		Deloitte & Touche LLP Letter of Awareness.**

31.01		Certification of Liam E. McGee pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

31.02		Certification of Christopher J. Swift pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

32.01		Certification of Liam E. McGee pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.02		Certification of Christopher J. Swift pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101.INS		XBRL Instance Document.**

101.SCH		XBRL Taxonomy Extension Schema.**

101.CAL		XBRL Taxonomy Extension Calculation Linkbase.**

101.DEF		XBRL Taxonomy Extension Definition Linkbase.**

101.LAB		XBRL Taxonomy Extension Label Linkbase.**

101.PRE		XBRL Taxonomy Extension Presentation Linkbase.**

*		Management contract, compensatory plan or arrangement.

**		Filed with the Securities and Exchange Commission as an exhibit to this report.

138

Exhibit 2.01

PURCHASE AND SALE AGREEMENT
BY AND AMONG
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,
HARTFORD LIFE, INC.,
AND

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(solely for purposes of Sections 8.4, 8.5, 14.2, 14.3, 14.4, 14.5, 14.6, 14.7, 14.8, 14.9, 14.10,
14.11, 14.12, 14.13, 14.14 and 14.15 and to the extent applicable to such Sections, Article I)

Dated as of: September 4, 2012

Exhibit 2.01

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS

Section 1.1 Definitions 1

ARTICLE II

PURCHASE AND SALE

Section 2.1 Purchase and Sale; Assignment and Assumption 25

Section 2.2 Purchase Price; Ceding Commission 25


Section 2.3	Statement of Net Flows; Statement of General Account Net Settlement; Statement of Separate Accounts; Statement of Net Worth; Master

Settlement Statement 26

Section 2.4 Review of Closing Statements and Calculations 29

ARTICLE III
CLOSING

Section 3.1 Closing Date 33

Section 3.2 Payment on the Closing Date 33

Section 3.3 Reinsurance Transaction 33

Section 3.4 Buyer’s Closing Date Deliveries 34

Section 3.5 Seller’s Closing Date Deliveries 34

ARTICLE IV

REPRESENTATIONS AND WARRANTIES REGARDING SELLER, HFSG AND THE
SELLER PARTIES

Section 4.1 Organization and Standing 36

Section 4.2 Authority; Conflicts 36

ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING HRS AND THE BUSINESS

Section 5.1 Organization and Standing 37

Section 5.2 Limited Liability Company Power 38

Section 5.3 Capital Structure 38

Section 5.4 Financial Information; Business Records 39

Exhibit 2.01

Section 5.5 Investment Assets 40

Section 5.6 Actuarial Report; Reserves 41

Section 5.7 Certain Changes 42

Section 5.8 Taxes 42

Section 5.9 Seller Permits 44

Section 5.10 Ownership of Assets 44

Section 5.11 Real Property 45

Section 5.12 Environmental Matters 46

Section 5.13 Intellectual Property 46

Section 5.14 Compliance with Applicable Law, Litigation or Regulatory Action 48

Section 5.15 Material Contracts 50

Section 5.16 Material Distributors 53

Section 5.17 Mutual Fund Organizations 54

Section 5.18 Employee Benefits and Agreements 54

Section 5.19 Employees and Employee Relations 55

Section 5.20 No Brokers 56

Section 5.21 Insurance Product-Related Matters 56

Section 5.22 Facts Affecting Regulatory Approvals 61

Section 5.23 Settlement Agreement 61

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER

Section 6.1 Organization and Standing 62

Section 6.2 Authority; Conflicts 62

Section 6.3 Litigation or Regulatory Action 63

Section 6.4 Financial Statements 63

Section 6.5 Buyer Permits; Compliance with Applicable Law 63

Section 6.6 Availability of Funds 64

Section 6.7 No Brokers 64

Section 6.8 Facts Affecting Regulatory Approvals 64

Section 6.9 Investment Representations 64

ARTICLE VII
ACTIONS PRIOR TO THE CLOSING DATE

Section 7.1 Operations Prior to the Closing Date 64

Section 7.2 Access to Information 68

Section 7.3 Notifications 68

Section 7.4 Efforts and Actions to Cause the Closing to Occur 69

Section 7.5 Shared Contracts 72

Section 7.6 Multiparty Contracts 73

Section 7.7 Separate Accounts 73

Section 7.8 Master Assignment Agreement Pre-Closing Actions 73

Section 7.9 Real Property Arrangements 73

Exhibit 2.01

Section 7.10 Copies of Investment Asset Materials 73

ARTICLE VIII
ADDITIONAL AGREEMENTS

Section 8.1 Employee Matters 73

Section 8.2 Insurance 82

Section 8.3 Use of Seller’s Trademarks; Corporate Names 82

Section 8.4 Non-Competition 83

Section 8.5 Covenants Not to Hire Employees 86

Section 8.6 Termination of Certain Affiliate Agreements and Obligations; Certain

Assets and Liabilities of HRS 87

Section 8.7 Confidentiality 87

Section 8.8 Residual Information 88

Section 8.9 Further Action 89

Section 8.10 Ancillary Agreements 89

Section 8.11 Transfer and Maintenance of Business Records 89

Section 8.12 Post-Closing Receipts 91

Section 8.13 Waivers; Releases 91

Section 8.14 Cooperation/Integration 92

Section 8.15 Exclusivity 93

Section 8.16 Seller Confidentiality Agreements 93

Section 8.17 Resignations 93

Section 8.18 Bank Accounts 93

Section 8.19 Electronic Data Room 94

Section 8.20 Investment Assets 94

Section 8.21 Replacement Assets and Contracts. 96

ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

Section 9.1 Representations and Warranties; Covenants 99

Section 9.2 Governmental Consents 99

Section 9.3 No Restraint. 99

Section 9.4 No Material Adverse Effect 100

ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

Section 10.1 Representations and Warranties; Covenants 100

Section 10.2 Governmental Consents 100

Section 10.3 No Restraint 101

Section 10.4 No Adverse Buyer Event 101

Exhibit 2.01

ARTICLE XI
INDEMNIFICATION

Section 11.1 Indemnification; Remedies 101

Section 11.2 Notice of Claim; Defense 103

Section 11.3 No Duplication; Exclusive Remedy 105

Section 11.4 Limitation on Set-off 106

Section 11.5 Mitigation 106

Section 11.6 Recovery by Indemnified Party 106

Section 11.7 Right to Indemnification 107

Section 11.8 Reserves 107

Section 11.9 Transfer or Funding of Indemnification Obligations 107

Section 11.10 Cost of Enforcement 109

ARTICLE XII
TAX MATTERS

Section 12.1 Transfer Taxes 109

Section 12.2 Tax Returns and Covenants 109

Section 12.3 Tax Characterizations of Adjustments 112

Section 12.4 Tax Indemnification and Parties’ Responsibility 112

Section 12.5 Tax Refunds 113

Section 12.6 Purchase Price Allocation 113

ARTICLE XIII
TERMINATION

Section 13.1 Termination 114

Section 13.2 Notice of Termination 115

Section 13.3 Exclusive Remedies; Effect of Termination 115

ARTICLE XIV
GENERAL PROVISIONS

Section 14.1 Survival of Representations and Warranties 116

Section 14.2 Remedies 116

Section 14.3 Governing Law 116

Section 14.4 Jurisdiction; Venue 116

Section 14.5 Jury Waiver 117

Section 14.6 Notices 117

Section 14.7 Successors and Assigns; No Third-Party Beneficiaries 119

Section 14.8 Entire Agreement; Amendments 119

Section 14.9 Interpretation 120

Exhibit 2.01

Section 14.10 HFSG Guaranty. 121

Section 14.11 Waivers 123

Section 14.12 Expenses 123

Section 14.13 Partial Invalidity 123

Section 14.14 Execution in Counterparts 124

Section 14.15 No Public Announcement 124

Section 14.16 Disclosure Schedules 124

Schedules

Schedule 1.1(a) Acquired Assets

Schedule 1.1(b) Assigned Leases

Schedule 1.1(c) Assumed Liabilities

Schedule 1.1(d) Enterprise Contracts

Schedule 1.1(e) Excluded Assets

Schedule 1.1(f) General Account Net Settlement Methodologies

Schedule 1.1(g) Investment Assets

Schedule 1.1(h) Form of Master Settlement Statement

Schedule 1.1(i) Material Distributors

Schedule 1.1(j) Net Flow Methodologies

Schedule 1.1(k) Plans Discontinued or Lapsed as of December 31, 2011

Schedule 1.1(l) Net Worth Methodologies

Schedule 1.1(m) Other Transferred Contracts

Schedule 1.1(n) Pro Forma Master Settlement Statement

Schedule 1.1(o) Pro Forma Statement of General Account Net Settlement

Schedule 1.1(p) Pro Forma Statement of Net Flows

Schedule 1.1(q) Pro Forma Statement of Net Worth

Schedule 1.1(r) Significant Mutual Fund Organizations

Exhibit 2.01

Schedule 1.1(s) Significant Plans

Schedule 1.1(t) Form of Statement of General Account Net Settlement

Schedule 1.1(u) Form of Statement of Net Flows

Schedule 1.1(v) Form of Statement of Net Worth

Schedule 1.1(w) Form of Statement of Separate Accounts

Schedule 1.1(x) Real Property Arrangements

Schedule 1.1(y) Transferred Information Technology Contracts

Schedule 3.3(b) Selection of Investment Assets Methodologies

Schedule 8.11(a) Business Records Principles

Schedule 9.2 Required Regulatory Consents

Exhibits

Exhibit A Form of Administrative Services Agreement

Exhibit B Form of Hold Harmless and Indemnification Agreement

Exhibit C Form of Intercompany Agreement

Exhibit D Form of Master Assignment Agreement

Exhibit E Form of Patent Assignment

Exhibit F Form of Patent License Agreement

Exhibit G Form of Reinsurance Agreement

Exhibit H Form of Services Agreement

Exhibit I Form of Software License Agreement

Exhibit J Form of Trademark Assignment

Exhibit K Form of Trademark License Agreement

Exhibit L Form of Transition Services Agreement

Exhibit 2.01

Exhibit M Form of Transitional Trademark License Agreement

Exhibit N Form of Trust Agreement

Exhibit O Form of Bill of Sale

Exhibit P Form of Assignment and Assumption Agreement

Seller Disclosure Schedule Business Disclosure Schedule Buyer Disclosure Schedule

Exhibit 2.01

PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT, dated as of September 4, 2012 (this “Agreement”), is by and among MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, a mutual life insurance company domiciled in the Commonwealth of Massachusetts (“Buyer”), HARTFORD LIFE, INC., a Delaware corporation (“Seller”), and, solely for purposes of Sections 8.4, 8.5, 14.2, 14.3, 14.4, 14.5, 14.6, 14.7, 14.8, 14.9, 14.10, 14.11, 14.12, 14.13, 14.14 and 14.15 and to the extent applicable to such Sections, Article I, of this Agreement, THE HARTFORD FINANCIAL SERVICES GROUP, INC., a Delaware corporation (“HFSG”).

PRELIMINARY STATEMENT:

WHEREAS, Seller operates, indirectly through its Affiliates, the Business;

WHEREAS, Seller indirectly owns one hundred percent (100%) of the issued and outstanding Equity Interest of Hartford Retirement Services, LLC (“HRS”) (such Equity Interest, the “Transferred Equity Interests”); and

WHEREAS, Seller desires to sell and assign, or cause to be sold and assigned, to Buyer, and Buyer desires to purchase and assume, or cause to be purchased and assumed, from Seller, certain assets and liabilities comprising the Business, by means of certain reinsurance and administration arrangements and a transfer of the Transferred Equity Interests, the Acquired Assets and the Assumed Liabilities, on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, it is hereby agreed as follows:

ARTICLE I
DEFINITIONS

Section 1.1 Definitions. In this Agreement, the following terms have the

meanings specified or referred to in this Section 1.1.

“2012 Bonus Pool” has the meaning specified in Section 8.1(g)(i).

“401(k) Programs” means retirement programs that relate to employee benefit plans described in Section 401(k) of the Code.

“403(b) Programs” means retirement programs that relate to tax deferred annuities and other employee benefit plans or arrangements described in Section 403(b) of the Code.

“457 Programs” means retirement programs that relate to deferred compensation arrangements described in Section 457 of the Code.

“Accounting Firm” has the meaning specified in Section 2.4(f)(i).

Exhibit 2.01

“Acquired Assets” means all of Seller’s and its Affiliates’ (other than HRS’) right, title and interest in, to or under the following assets, properties, Contracts and rights: (a) the assets, properties and rights that are set forth on Schedule 1.1(a) and (b) the Transferred Contracts, in each case, excluding (i) the Excluded Assets and (ii) the Ancillary Agreement Covered Contracts; provided, however, that Acquired Assets shall include any asset, property, Contract or right which becomes an Acquired Asset following the Closing in accordance with Section 8.21.

“Acquired Business” has the meaning specified in Section 8.4(c)(iv). “Acquisition Proposal” has the meaning specified in Section 8.15.

“Action” means any claim, litigation, action, suit, investigation, inquiry, hearing, charge, complaint, demand, arbitration or proceeding by or before any Governmental Body.

“Actuarial Report” has the meaning specified in Section 5.6(a).

“Adjusted Net Worth” means the amount set forth on the line item “Adjusted Net Worth” reflected on the Pro Forma Master Settlement Statement, the Estimated Master Settlement Statement, the Closing Master Settlement Statement or the Final Master Settlement Statement, as applicable.

“Adjustment Dispute” has the meaning specified in Section 2.4(f).

“Administrative Services Agreement” means the Administrative Services Agreement between Cedant and Buyer, substantially in the form attached hereto as Exhibit A.

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person. As used in this definition, the term “controls” (including the terms “controlled by” and “under common control with”) means the relevant Person has possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by Contract or otherwise, it being understood that in no event shall any investment fund sponsored or advised by Seller or its Affiliates be deemed an Affiliate of Seller. For purposes of Sections 2.4, 8.4 and 8.5, references to Affiliates shall not include any stockholder of HFSG or of any successor entity to HFSG.

“Affiliated Group” means any affiliated group within the meaning of Section 1504(a) of the Code or any similar group defined under a similar provision of state, local or foreign law.

“Agreement” has the meaning specified in the first paragraph of this Agreement. “Allocable Amount” has the meaning specified in Section 12.6(a).

“Allocation Schedule” has the meaning specified in Section 12.6(a). “Alternate Bidder” has the meaning specified in Section 8.15.

Exhibit 2.01

“Ancillary Agreement Covered Contracts” means the following Contracts to which Seller or any of its Affiliates is a party: (a) the Covered Insurance Policies; (b) the Mutual Fund Agreements; (c) the Distribution Contracts; and (d) Contracts with any Plan sponsor, Plan trustee or non-affiliated third-party administrator acting on behalf of a Plan.

“Ancillary Agreements” means the Reinsurance Agreement, the Administrative Services Agreement, the Bill of Sale, the Trust Agreement, the Assignment and Assumption Agreement, the Transition Services Agreement, the Trademark Assignment, the Transitional Trademark License Agreement, the Trademark License Agreement, the Patent Assignment, the Patent License Agreement, the Software License Agreement, the Initial Leases, the Sublease Agreements, the Assignment of Lease Agreements, the Real Property Licenses (if any), the Hold Harmless and Indemnification Agreement, the Master Assignment Agreement, the Services Agreement and the Intercompany Agreement.

“Applicable Law” means any law, treaty, convention, code, statute, ordinance, directive, rule, regulation, common law, decree, agency requirement, Governmental Permit or Governmental Order of, or any Regulatory Agreement with, any Governmental Body applicable to the Person, place or situation in question.

“Assigned Leases” means the real property leases of Seller and its Affiliates that are set forth on Schedule 1.1(b), including all amendments, extensions, renewals, guaranties and other agreements with respect to such leases.

“Assignment and Assumption Agreement” has the meaning specified in Section

2.1(d).

“Assignment of Lease Agreements” has the meaning specified in Schedule 1.1(x).

“Assumed Liabilities” means the Liabilities of Seller and its Affiliates (other than HRS) that are set forth on Schedule 1.1(c) solely to the extent related to or arising from the Business, other than, for the avoidance of doubt, (a) the Excluded Liabilities and (b) the Reinsured Liabilities, which, in the case of this clause (b), shall be subject to the terms, conditions and limitations of the Reinsurance Agreement.

“Bill of Sale” has the meaning specified in Section 2.1(d).

“Business” means (a) the business operated by HRS as conducted as of the date hereof and (b) Seller’s and its Affiliates’ business of selling, marketing, underwriting, issuing, insuring and administering the Business Products and Services; provided that “Business” shall not include: (i) the business of managing investments for 401(k) Programs, 403(b) Programs, 457 Programs or other retirement benefit programs and their sponsors (other than any recordkeeping services provided by HFSG’s Retirement Plans Group in connection therewith); (ii) any issuers of any securities or other assets held by any Separate Account or custodial account for the benefit of Plan participants, including the Hartford mutual fund platform; (iii) HFIC’s Investment and Savings Plan or any other Employee Benefit Plan offered by Seller and its Affiliates for their respective employees and any services provided with respect thereto (other than the HFIC Individual Retirement Account Plan for Employees and any services provided with respect thereto); or (iv) the business of selling, marketing and administering any individual

Exhibit 2.01

or group life or disability insurance products offered by HFSG’s Group Benefits Division, including to participants, beneficiaries or sponsors of 401(k) Programs, 403(b) Programs, 457 Programs or other similar retirement benefit programs.

“Business Day” means any day that is not a Saturday, Sunday, legal holiday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to be closed.

“Business Disclosure Schedule” has the meaning specified in Article V.

“Business Employees” means, collectively, (a) those individuals employed by Seller or any of its Affiliates who are providing substantial services to the Business as of the date hereof (exclusive, subject to clause (c) of this sentence, of individuals designated by Seller or its Affiliates as an individual in employment tiers 1 through 3), as listed in Section 8.1(a)(i) of the Business Disclosure Schedule, (b)those individuals who, subsequent to the date hereof, start to provide substantial services to the Business and (c) provided that they are actively employed by Seller or any of its Affiliates on the Closing Date, such additional individuals who may be mutually agreed by Buyer and Seller prior to the Closing. An individual shall be deemed to provide “substantial services” if such individual provides services to the Business for at least eighty percent (80%) of the total business time during which he or she provides services to Seller or any of its Affiliates. For the avoidance of doubt, “Business Employees” shall include Inactive Business Employees.

“Business Premises” means the premises that are the subject of any of the Assigned Leases or Sublease Agreements, excluding, for the avoidance of doubt, any Excluded Business Premises.

“Business Products and Services” means the following products and services: (a) bundled, semi-bundled and unbundled retirement plan program services, including the 401(k) Programs, 403(b) Programs, 457 Programs, Individual Retirement Accounts and similar bundled, semi-bundled and unbundled retirement plan programs, to and for employee plan sponsors, including the administrative, recordkeeping, actuarial and consulting services provided by Cedant, HRS or other Affiliates of Seller for defined contribution retirement plans, non-qualified deferred compensation plans and defined benefit plans; (b)the Covered Insurance Policies; and (c) any other products or services provided by Cedant, HRS or other Affiliates of Seller pursuant to the Ancillary Agreement Covered Contracts. For the avoidance of doubt, a retirement plan program is “bundled” or “semi-bundled” if (i) recordkeeping services or other administrative or optional services and (ii) investment alternatives are being provided by Cedant, HRS or other Affiliates of Seller in connection therewith.

“Business Records” means originals or copies of (a) all books and records, data and information (in each case, in any form or medium) in the possession or control of Seller or its Affiliates to the extent relating to the assets, liabilities, properties, business, conduct and operations of HRS, the Investment Assets deposited to the Trust Account at the Closing pursuant to Section 3.3(b) or the Acquired Assets and Assumed Liabilities, including all Governmental Permits held by HRS, all organizational, corporate and ownership records of HRS and, with respect to each Transferred Employee, (i) census data (including full name, job title, start date,

Exhibit 2.01

service time, regularly scheduled hours, regular work week, part-time or full-time status, designation of exempt or non-exempt status, annual salary, hourly rate (if applicable), bonus opportunity, benefit plan enrollment (other than medical and dental plan enrollment, to the extent Seller and its Affiliates are prohibited or restricted from providing such information under Applicable Law), tier, work address, work phone, home address, state of residence), Form I-9 and job description, and (ii) for each such employee who is on a formal flexible work arrangement or is on a leave of absence, a statement of the terms (e.g., days and/or hours off) of such flexible work arrangement or the dates, type (e.g., military, medical, personal) and, if available, expected return to work date of such leave of absence, as applicable, and whether such employee has any licenses in connection with his or her work and the expiration date of such licenses and (b) to the extent relating to the Business, all customer lists, lists of Plan participants, insurance contract forms, administrative and pricing manuals, marketing materials, claim records, litigation and arbitration files, sales records, underwriting records, accounting records and work papers and actuarial reports and analyses (in each case, in any form or medium) in the possession or control of Seller or its Affiliates; provided, that “Business Records” shall not include any such item to the extent such item constitutes Excluded Business Records.

“Business Records Plan” has the meaning specified in Section 8.11(a). “Buyer” has the meaning specified in the first paragraph of this Agreement.

“Buyer Annual Statutory Statements” has the meaning specified in Section 6.4. “Buyer Disclosure Schedule” has the meaning specified in Article VI.

“Buyer Indemnified Persons” has the meaning specified in Section 11.1(a).

“Buyer Party” means each Affiliate of Buyer (other than HRS) that is, or is contemplated by this Agreement to become at the Closing, a party to one or more Ancillary Agreements.

“Buyer Permit” has the meaning specified in Section 6.5.

“Buyer Quarterly Statements” has the meaning specified in Section 6.4. “Buyer Releasor” has the meaning specified in Section 8.13(b).

“Buyer Specified Representations” has the meaning specified in Section 10.1(b). “Buyer Statutory Statements” has the meaning specified in Section 6.4. “Cedant” means HLIC.

“Cedant Annual Statutory Statements” has the meaning specified in Section

5.4(b).

“Cedant Quarterly Statements” has the meaning specified in Section 5.4(b).

Exhibit 2.01

“Cedant Statutory Statements” has the meaning specified in Section 5.4(b).

“Ceding Commission” means an amount equal to (a) four hundred million dollars ($400,000,000); minus (b) if the Net Flows with respect to the Government Business from and after January 1, 2012 until the Effective Time are less than negative five hundred million dollars ($(500,000,000)), an amount equal to the lesser of (i) the product obtained by multiplying (A) the amount by which such Net Flows are less than negative five hundred million dollars ($(500,000,000)) by (B) one and one-quarter percent (1.25%) and (ii) six million two hundred fifty thousand dollars ($6,250,000); minus (c) if the Net Flows with respect to the Non-Government Business from and after January 1, 2012 until the Effective Time are less than negative one billion five hundred million dollars ($(1,500,000,000)), an amount equal to the lesser of (i) the product obtained by multiplying (A) the amount by which such Net Flows are less than negative one billion five hundred million dollars ($(1,500,000,000)) by (B) three percent (3.00%) and (ii) forty-five million dollars ($45,000,000).

“Change of Control” of a Person (the “COC Person”) means the occurrence of one of the following events: (a) if any Person shall acquire beneficial ownership of more than fifty percent (50%) of the voting securities of such COC Person then issued and outstanding, (b) the consummation of a merger, consolidation, share exchange or other business combination of such COC Person into or with another Person in which the equityholders of such COC Person immediately prior to the consummation of such transaction shall own less than fifty percent (50%) of the voting securities of the surviving Person (or the parent of the surviving Person where the surviving Person is wholly owned by the parent Person) immediately following the consummation of such transaction or (c) the consummation of the sale, transfer, lease or other disposition (but not including a transfer, lease or other disposition by pledge or mortgage to a bona fide lender) of all or substantially all of the assets of such COC Person.

“Claim Notice” has the meaning specified in Section 11.2(a).

“Closing” has the meaning specified in Section 3.1.

“Closing Date” has the meaning specified in Section 3.1.

“Closing FMV Calculation” has the meaning specified in Section 2.3(b)(iv).

“Closing Master Settlement Statement” has the meaning specified in Section

2.3(b)(v).

“Closing Statement of General Account Net Settlement” has the meaning specified in Section 2.3(b)(ii).

“Closing Statement of Net Flows” has the meaning specified in Section 2.3(b)(i). “Closing Statement of Net Worth” has the meaning specified in Section 2.3(b)(iii).

“Closing Statement of Separate Accounts” has the meaning specified in Section

2.3(a)(iii).

Exhibit 2.01

“Closing Statements” has the meaning specified in Section 2.3(c).

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985,

as amended.

“Code” means the Internal Revenue Code of 1986, as amended.

“Comparable Position” means, with respect to any Business Employee, employment with Buyer or one of its Affiliates in a position with the same or similar duties (exclusive of reporting relationships) as those applicable to such Business Employee’s employment with Seller or its Affiliates immediately prior to the Closing Date, with the same base salary as provided immediately prior to the Closing Date, with target bonus and long-term incentive compensation opportunity (determined without regard to equity-based compensation) provided to similarly situated employees of Buyer and its Affiliates from time to time, and with employee benefits (which shall include medical, dental, life, disability and 401(k) benefits) that are substantially as favorable in the aggregate as those provided to the Business Employee immediately prior to the Closing Date pursuant to the Employee Benefit Plans listed on Section 5.18(a) of the Business Disclosure Schedule (determined without regard to any equity-based or pension benefits), in each case, in a location no more than fifty (50) miles from the Business Employee’s principal work location immediately prior to the Closing Date; provided that the target bonus opportunity offered by Buyer to any Business Employee shall not be less than (a) such Business Employee’s target bonus opportunity immediately prior to the Closing Date, minus (b) three percent (3%) of such Business Employee’s base salary immediately prior to the Closing Date.

“Compensation” means all commissions, expense allowances, benefit credits and other fees or amounts payable or remittable to Distributors in connection with the Business.

“Competing Business” has the meaning specified in Section 8.4(a).

“Confidentiality Agreement” means that certain letter agreement, dated May 4, 2012, between HFSG and Buyer.

“Contract” means any contract, agreement, purchase order, license, note, bond, mortgage, indenture, commitment, undertaking, lease or other instrument or obligation or arrangement, whether written or oral.

“Copyleft License” means any Software license that, by its terms, (a) requires that the licensed Software, or other Software that uses, links to, is derived from, or is otherwise based on the licensed Software, be distributed or otherwise made available in source code form; (b) requires the licensee to license any other Software or Intellectual Property Rights of the licensee; or (c) imposes or results in any other requirements or restrictions on the licensee with respect to any other Software or Intellectual Property Rights of the licensee. Copyleft Licenses include licenses such as (by way of example only) the GNU General Public License and GNU Lesser General Public License (or any license that is a variant of or derived from any such license).

“Copyrights” has the meaning specified in the definition of “Intellectual Property

Rights.”

Exhibit 2.01

“Covered Insurance Policies” has the meaning specified in the Reinsurance

Agreement.

“Data Privacy Laws” has the meaning specified in Section 5.13(e).

“De Minimis Claim” has the meaning specified in Section 11.1(c)(ii)(A).

“Disclosure Schedule” means the Seller Disclosure Schedule, the Business Disclosure Schedule or the Buyer Disclosure Schedule, as applicable.

“Disqualified Investment Asset” has the meaning specified in Section 8.20(f).

“Distribution Contracts” means Contracts between Seller or its Affiliates, on the one hand, and a Distributor, on the other hand, pursuant to which such Distributor markets or sells the Business Products and Services.

“Distributor” means any broker, broker-dealer, insurance agent, producer, distributor or other Person (in each case, other than any employee of Seller or its Affiliates) who markets or sells the Business Products and Services.

“Effective Hire Date” has the meaning specified in Section 8.1(a).

“Effective Time” means 11:59:59 p.m., New York City time, on the Closing Date. “Eligible Assets” has the meaning specified in the Reinsurance Agreement.

“Employee Benefit Plans” means each “employee benefit plan” within the meaning of Section 3(3) of ERISA, and each stock option or other equity based, bonus, longterm incentive, deferred compensation or severance plan, arrangement or agreement, in each case: (a) that is maintained, contributed to or required to be contributed to by Seller or its Affiliates or any Person that, together with Seller or its Affiliates, is treated as a single employer under Section 414(b), (c) or (m) of the Code and in which there exists any Liability with respect to Business Employees or former employees who would be Business Employees if they were currently employed by Seller or its Affiliates, or (b) in respect of which HRS has or could have any Liability, contingent or otherwise, with respect to the employees of Seller or its Affiliates.

“Encumbrance” means any mortgage, deed of trust, pledge, hypothecation, security interest, encumbrance, option, conditional sale or other title retention agreement, defect in title, right-of-way, easement, encroachment, claim, lien (including environmental and Tax liens), assessment, lease, judgment, license or charge of any kind.

“Enforceability Exceptions” has the meaning specified in Section 4.2(a).

“Enterprise Contract” means any Shared Contract of the type set forth on Schedule 1.1(d).

“Environmental Claim” means any claim, action, cause of action, suit, proceeding, order, or written demand or notice by any Person alleging actual or potential Liability (including

Exhibit 2.01

actual or potential Liability for investigatory costs, cleanup or cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, attorneys’ fees or penalties) arising out of, based on, resulting from or relating to (a) the presence, or release into the environment, of, or exposure to, any Materials of Environmental Concern, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.

“Environmental Laws” means all Applicable Laws relating to pollution, protection of human health from exposure to Materials of Environmental Concern or protection of the environment (including ambient air, surface water, ground water, land surface or subsurface strata, and natural resources), including Laws relating to (a) emissions, discharges, releases or threatened releases of, or exposure to, Materials of Environmental Concern, (b) the manufacture, processing, distribution, use, treatment, generation, storage, containment (whether above ground or underground), disposal, transport or handling of Materials of Environmental Concern, (c) recordkeeping, notification, disclosure and reporting requirements regarding Materials of Environmental Concern, (d) endangered or threatened species of fish, wildlife and plant and the management or use of natural resources, (e) the preservation of the environment or mitigation of adverse effects on or to human health or the environment or (f) emissions or control of greenhouse gases.

“Equity Interest” means any capital stock, partnership interests, membership interest, unit interest, beneficial interest or other type of equity or ownership interest in a Person or any securities convertible or redeemable into, or exercisable or exchangeable for, any capital stock, partnership interests, membership interest, unit interest, beneficial interest or other type of equity or ownership interest in a Person.

“ERISA” means the Employee Retirement Income Security Act of 1974, as

amended.

“Estimated Master Settlement Statement” has the meaning specified in Section

2.3(a)(vi).

“Estimated Premium Increase” has the meaning specified in Section 11.6(a).

“Estimated Statement of General Account Net Settlement” has the meaning specified in Section 2.3(a)(ii).

“Estimated Statement of Net Flows” has the meaning specified in Section

2.3(a)(i).

“Estimated Statement of Net Worth” has the meaning specified in Section

2.3(a)(iv).

“Examination Reports” has the meaning specified in Section 5.14(e). “Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Assets” means all of Seller’s and its Affiliates’ right, title and interest in, to or under the following assets, properties, Contracts and rights: (a) the assets, properties and

Exhibit 2.01

rights that are set forth on Schedule 1.1(e); (b) the Excluded Contracts; (c) Governmental Permits (other than those held by HRS); (d) any Tax refunds or credits (or rights thereto) that are attributable to the Business or HRS in respect of Pre-Closing Tax Periods (or portions thereof); (e) any real property owned by Seller and its Affiliates (other than the real property that is the subject of Schedule 1.1(x)); (f) the Excluded Business Records; and (g) any assets, properties or rights included within the definition of “Acquired Assets” that are disposed of in the Ordinary Course of Business prior to the Closing Date; provided, however, that any asset, property, Contract or right which becomes an Acquired Asset or Transferred Contract following the Closing in accordance with Section 8.21 shall cease to be an Excluded Asset at such time.

“Excluded Business Premises” has the meaning specified in Schedule 1.1(x).

“Excluded Business Records” means any items that would otherwise constitute Business Records to the extent that any such item: (a) is prohibited or restricted from being transferred or disclosed under any Applicable Law; provided that Seller shall (i) notify Buyer in writing upon identifying any such item, (ii) reasonably consult with Buyer in determining whether such item may be transferred or disclosed to Buyer without contravening Applicable Law and (iii) use its reasonable best efforts to enable such item to be transferred to Buyer without contravening Applicable Law; (b) is subject to the attorney-client privilege, the work product immunity or any other applicable legal privilege or similar doctrine available to Seller and its Affiliates (other than HRS), it being understood that Seller shall (i) notify Buyer in writing upon identifying any such item, (ii) reasonably consult with Buyer in determining whether such item may be transferred or disclosed to Buyer without jeopardizing privilege and (iii) use its reasonable best efforts to enable any such item to be transferred to Buyer without so jeopardizing privilege, including by entering into a customary joint defense agreement or common interest agreement with Buyer; (c) is part of the personnel files or related records of any Business Employee, other than the information described in clauses (a)(i) and (ii) of the definition of Business Records; (d) relates to Taxes of Seller or its Affiliates or is part of any Tax Return of Seller or its Affiliates, except to the extent solely related to HRS; (e) is part of the trading and clearing records maintained by HSD; (f) is part of any internal Investment Asset approval memoranda, internal Investment Asset review, internal Investment Asset valuation or evaluation or other materials prepared by Seller or its Affiliates in connection with underwriting, evaluating or approving any Investment Asset, it being understood that, subject to clause (g), any materials prepared by third parties that were created in connection with and included in any of the foregoing shall not constitute “Excluded Business Records” for purposes of this clause (f); (g) is part of any report prepared by any third party in connection with the servicing of any Real Estate Loan, other than any servicing report with respect to any Real Estate Loan prepared during the twelve (12) month period preceding the date hereof and any such servicing reports received following the date hereof; or (h) relates to the Excluded Assets or the Excluded Liabilities.

“Excluded Contracts” means Contracts included within the definition of “Transferred Contracts” that: (a) are terminated on or prior to the Closing Date pursuant to Section 8.6(a); or (b) are terminated in the Ordinary Course of Business prior to the Closing Date.

“Excluded Environmental Liabilities” means any and all Liabilities under Environmental Laws existing as of the Effective Time or arising out of or relating to events, acts

Exhibit 2.01

or omissions occurring, or disclosures made, prior to the Effective Time, relating to the pre-Closing operations of, and any assets (other than the Investment Assets deposited into the Trust Account at Closing pursuant to Section 3.3(b)) or properties owned, leased or operated by, HRS or any of its pre-Closing Affiliates. For the avoidance of doubt, any Liability under Environmental Laws arising out of or relating to events, acts or omissions occurring, or disclosures made, following the Effective Time in connection with the management, operation or conduct of the Business by Buyer and its Affiliates (including HRS) (other than any action pursuant to Section 11.5) shall not be an Excluded Environmental Liability, even if such event, act, omission or disclosure is consistent with the practices and procedures followed by Seller and its Affiliates (including HRS) prior to the Effective Time.

“Excluded Liabilities” means: (a) any and all Liabilities of HRS either (i) existing as of the Effective Time or (ii) arising out of or relating to events, acts or omissions occurring, or disclosures made, prior to the Effective Time, except, in each case, to the extent that any such Liability is specifically recorded as a liability on the Final Master Settlement Statement and up to the amount so recorded thereon; (b)any and all Liabilities of Seller and any of its Affiliates (other than HRS), including any Liabilities arising out of or relating to (i) the Excluded Assets or (ii) events, acts or omissions occurring, or disclosures made, prior to the Effective Time, whether relating to the Business or otherwise, other than any such Liabilities expressly assumed by Buyer or any Buyer Party pursuant to the express terms and conditions of this Agreement or any Ancillary Agreement; (c) Excluded Environmental Liabilities; and (d) Pre-Closing Taxes. For the avoidance of doubt, (A) any Liability arising out of or relating to the Investment Assets deposited to the Trust Account at Closing pursuant to Section 3.3(b) shall not be an Excluded Liability; and (B) any Liability arising out of or relating to events, acts or omissions occurring, or disclosures made, following the Effective Time in connection with the management, operation or conduct of the Business by Buyer and its Affiliates (including HRS) (other than any action pursuant to Section 11.5) shall not be an Excluded Liability under clause (a)(ii) or (b)(ii) above, even if such event, act, omission or disclosure is consistent with the practices and procedures followed by Seller and its Affiliates (including HRS) prior to the Effective Time.

“Expenses” means any reasonable and documented out-of-pocket expenses incurred in connection with defending or asserting any Action incidental to any matter indemnified against hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees and reasonable and documented fees and disbursements of legal counsel, expert witnesses, accountants and other professionals).

“Fair Market Value” means fair market value, as determined in accordance with the General Account Net Settlement Methodologies.

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by Seller from three (3) federal funds brokers of recognized standing selected by it.

Exhibit 2.01

“Final Allocation” has the meaning specified in Section 12.6(a).

“Final FMV Calculation” has the meaning specified in Section 2.4(g).

“Final Master Settlement Statement” has the meaning specified in Section 2.4(g).

“Final Statement of General Account Net Settlement” has the meaning specified in Section 2.4(g).

“Final Statement of Net Flows” has the meaning specified in Section 2.4(g).
“Final Statement of Net Worth” has the meaning specified in Section 2.4(g).

“FINRA” means the Financial Industry Regulatory Authority, its predecessor, the National Association of Securities Dealers, Inc., and any successor thereto.

“Fixtures and Equipment” means fixtures, furniture, furnishing, machinery and other equipment and other interests in tangible personal property, excluding in all cases Information Technology and any Intellectual Property Rights covering, embodied in or connected to any of the foregoing.

“GAAP” means, with respect to any entity and any financial statements, United States generally accepted accounting principles, consistently applied by such entity, as in effect at the date of such financial statements.

“General Account Net Settlement Methodologies” means the methodologies, procedures, judgments, assumptions and estimates described on Schedule 1.1(f).

“Government Business” means the Business, solely as it relates to selling, marketing, underwriting, issuing, insuring and administering 457 Programs, including with respect to Covered Insurance Policies for governmental Plan sponsors.

“Governmental Body” means any foreign, federal, state, local or other governmental, legislative, judicial, administrative or regulatory authority, agency, commission, board, body, court or entity or any instrumentality thereof or any self-regulatory body or arbitral body or arbitrator.

“Governmental Consent” means any approval, authorization, consent, order, license, permission, permit or qualification of, or exemption, waiver or other action by, or filing or registration with or notification to, any Governmental Body.

“Governmental Order” means any judgment, order, writ, injunction, stipulation, determination, award or decree entered by or with any Governmental Body.

“Governmental Permit” means any qualification, license, franchise, permit, variance, exemption, privilege, immunity, order, approval, registration or other authorization from a Governmental Body.

Exhibit 2.01

“ HFIC” means Hartford Fire Insurance Company.

“HFSG” has the meaning specified in the first paragraph of this Agreement. “HLIC” means Hartford Life Insurance Company.

“Hold Harmless and Indemnification Agreement” means the Hold Harmless and Indemnification Agreement between HFIC and Buyer, substantially in the form attached hereto as Exhibit B.

“HRS” has the meaning specified in the recitals.

“HRS Owned Intellectual Property” has the meaning specified in Section 5.13(a). “HRS Releasee” has the meaning specified in Section 8.13(a).

“HSD” means Hartford Securities Distribution Company, Inc.

“Inactive Business Employee” means any Business Employee who is on an approved paid or unpaid leave of absence, such as a military, maternity or medical leave of absence, or leave under the Family and Medical Leave Act, on the Closing Date; provided that, except as otherwise provided by Applicable Law, in order to be considered an Inactive Business Employee, any Business Employee who is on a paid or unpaid leave of absence other than military leave must be released to return to active employment within one (1) year of the Closing Date.

“Indebtedness” means, with respect to a Person, (a) all indebtedness for borrowed money, (b) all indebtedness for the deferred purchase price of property or services (other than trade payables, other expense accruals and deferred compensation items arising in the Ordinary Course of Business), (c) all obligations evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations under leases that have been or are required to be, in accordance with GAAP or SAP, as applicable, recorded as capital leases, (f) all reimbursement, payment or similar obligations, contingent or otherwise, under acceptance, letter of credit or similar facilities, (g) any Liability of others described in clauses (a) through (f) above that the Person has guaranteed or that is otherwise its legal liability and (h) all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any lien upon or in property (including accounts and contract rights) owned by a Person, even though the Person may not have assumed or become liable for the payment of such indebtedness, and including in clauses (a) through (h) above any accrued and unpaid interest or penalties thereon.

“Indemnified Party” has the meaning specified in Section 11.2(a).

“Indemnifying Party” has the meaning specified in Section 11.2(a).

Exhibit 2.01

“Information Technology” means Software and any tangible or digital computer systems (including computers, servers, workstations, routers, hubs, switches, networks, data communications lines and hardware), data or information subscription or access agreements, and telecommunications systems.

“Initial Ceding Commission” has the meaning specified in Section 2.2(b). “Initial Leases” has the meaning specified on Schedule 1.1(x).

“Initial Purchase Price” has the meaning specified in Section 2.2(a).

“Intellectual Property Rights” means all United States and foreign (a) patents, patent applications, provisional patent applications, including any and all divisions, continuations, continuations-in-part, divisionals, re-examinations, extensions and reissues thereof (“Patents”); (b) trademarks, trade names, trade dress, logos, service marks, domain names and design rights (including registrations and applications therefor) and any goodwill associated therewith, any and all common law rights therein, and registrations and applications for registration thereof, and all reissues, extensions and renewals of any of the foregoing (“Trademarks”); (c) copyrightable works and copyrights, whether or not registered, and registrations and applications for registration thereof (“Copyrights”); (d) Trade Secrets; and (e) all rights and remedies against past, present and future infringement, misappropriation or other violation of any of the foregoing; provided that the rights described in the foregoing clauses (a) through (e) shall not include rights in Software.

“Intercompany Agreement” means the Intercompany Services Agreement between HLIC and HSD, in substantially the form attached hereto as Exhibit C.

“Intercompany Payables” means all account, note or loan payables and all advances (cash or otherwise) or any other extensions of credit that are payable by HRS, on the one hand, to Seller or any of its Affiliates (other than HRS), on the other hand.

“Intercompany Receivables” means all account, note or loan payables and all advances (cash or otherwise) or any other extensions of credit that are receivable by HRS, on the one hand, from Seller or any of its Affiliates (other than HRS), on the other hand.

“Investment Asset Transfer Documents” has the meaning specified in Section

8.20(d).

“Investment Assets” means the investment assets of Cedant set forth on Schedule 1.1(g), as adjusted from time to time in accordance with Section 8.20.

“Investment Assets List” has the meaning specified in Section 2.3(a)(v).

“Investment Company Act” means the Investment Company Act of 1940, as

amended.

“Investment Guidelines” means the investment guidelines set forth on Exhibit C to the Reinsurance Agreement.

Exhibit 2.01

“Knowledge of Buyer” means, as to a particular matter, the actual knowledge of any of the individuals listed in Section 1.1(a) of the Buyer Disclosure Schedule after reasonable inquiry.

“Knowledge of Seller” means, as to a particular matter, the actual knowledge of any of the individuals listed in Section 1.1(a) of the Seller Disclosure Schedule after reasonable inquiry.

“Liabilities” means any and all debts, liabilities, expenses, commitments and obligations of any kind, character or description, whether direct or indirect, fixed or unfixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, asserted or unasserted, known or unknown, disputed or undisputed, joint or several, secured or unsecured, determined, determinable or otherwise, whenever or however arising (including whether arising out of any contract or tort based on negligence or strict liability) and whether or not the same would be required by GAAP or SAP to be reflected in financial statements or disclosed in the notes thereto.

“Losses” means any and all losses, costs, charges, settlement payments, awards, judgments, fines, penalties, damages, Expenses, liabilities, claims or deficiencies of any kind; provided, that Losses shall only include special, indirect, incidental, consequential or opportunity cost damages or lost profits to the extent that any such damages or lost profits are (a) payable to a third party not affiliated with the relevant Indemnified Party or (b) reasonably foreseeable; provided, further, that Losses shall not include punitive or exemplary damages, other than such damages that are payable to a third party not affiliated with the relevant Indemnified Party. For purposes of this definition, “reasonably foreseeable” shall be determined solely by reference to the conduct of the Business as currently conducted and shall not take into account any current or future plans for the expansion, reduction, modification, improvement or alteration of the Business following the Closing, regardless of whether any such plans are communicated to or otherwise known by Seller or its Affiliates.

“Master Assignment Agreement” means the Master Assignment Agreement among HLIC, HSD, Buyer, an Affiliate of Buyer which is not a broker-dealer to be identified by Buyer, an Affiliate of Buyer which is a broker-dealer to be identified by Buyer and HRS, in substantially the form attached hereto as Exhibit D.

“Master Settlement Statement” means a master settlement statement prepared, as of a given date, (a) in the format of the Master Settlement Statement attached as Schedule 1.1(h) and (b) in accordance with the Net Flow Methodologies, the General Account Net Settlement Methodologies and the Net Worth Methodologies.

“Material Adverse Effect” means (a) a material adverse effect on the business, assets, liabilities, results of operations or condition (financial or otherwise) of HRS and the Business, taken as a whole; provided that any adverse effect to the extent arising from any of the following shall not be taken into account in determining whether a Material Adverse Effect has occurred or is reasonably expected to occur: (i) any failure, in and of itself, of the Business to meet any internal or published projections, forecasts or revenue or earnings predictions (provided that the facts and circumstances underlying any such failure shall not be excluded pursuant to

Exhibit 2.01

this clause (i) in determining whether a Material Adverse Effect has occurred or is reasonably expected to occur); (ii) the identity of Buyer; (iii) conditions generally affecting the United States retirement products and services industry or United States annuity industry; (iv) changes in the securities or capital markets generally, or the occurrence of other events or developments affecting economic, business or regulatory conditions in the United States generally; (v) political conditions (including the commencement or continuation of a war, armed hostilities, acts of terrorism or any other calamity) or natural disasters (including hurricanes, earthquakes or floods); (vi) any change or prospective change in accounting requirements or principles (including SAP and GAAP) and any change or prospective change in Applicable Law or the enforcement or interpretation thereof; or (vii) the taking of any action required by the terms of this Agreement; provided that notwithstanding the foregoing, with respect to clauses (iii), (iv), (v) and (vi) above, any such fact, circumstance, change, effect or event shall be taken into account in determining whether a Material Adverse Effect has occurred or is reasonably expected to occur solely to the extent such fact, circumstance, change, effect or event disproportionately adversely affects HRS and the Business, taken as a whole, compared to the business of other participants in the industries in which the Business operates; or (b) a fact, circumstance, change, effect or event that would prohibit or materially impair or delay the ability of Seller and the Seller Parties, as the case may be, to perform their material obligations under this Agreement and the Ancillary Agreements, including consummation of the transactions contemplated hereby or thereby.

“Material Contract” has the meaning specified in Section 5.15(a).

“Material Distributor” means each of the Distributors listed on Schedule 1.1(i).

“Materials of Environmental Concern” means chemicals, pollutants, contaminants, wastes, toxic or hazardous substances, materials or wastes, petroleum and petroleum products, greenhouse gases, asbestos or asbestos-containing materials or products, polychlorinated biphenyls, lead or lead-based paints or materials, radon, fungus, mold, mycotoxins or other substances for which Liability can be imposed under any Environmental Law.

“Milestone Employees” has the meaning specified in Section 8.1(j)(i)(A).

“Multiparty Contract” means any Contract to which (a) HRS, (b) Seller or any of its Affiliates (other than HRS), and (c) a third party are each a party thereto or by which their respective properties or assets are subject or bound, other than any Ancillary Agreement Covered Contract.

“Mutual Fund Agreement” means any Contract between Seller and its Affiliates, on the one hand, and any mutual fund organization, on the other hand, providing for the use of such organization’s mutual funds as investment options and the payment to Seller or its Affiliates of distribution services fees, administrative services fees, shareholder services fees or other payments related to the offering of such mutual funds as investment options in connection with the Business.

“Net Flow Methodologies” means the methodologies, procedures, judgments, assumptions and estimates described on Schedule 1.1(j).

Exhibit 2.01

“Net Flows” means, with respect to the Government Business or the Non-Government Business, as applicable, for any period, an amount equal to (a) the net flows in respect of assets under management for Plans (including assets under management related to Covered Insurance Policies) with respect thereto for the specified period (excluding any such net flows attributable to discontinuance or lapse notifications with respect to the Plans set forth on Schedule 1.1(k)), minus (b) an amount equal to the aggregate assets under management for Plans (including assets under management related to Covered Insurance Policies) with respect thereto as of the last day of such specified period that are the subject of outstanding written discontinuance or lapse notifications as of such date (other than, solely for purposes of the Closing Statements, any such discontinuance or lapse notifications that have been rescinded in writing in accordance with the terms of the applicable Plan’s Covered Insurance Policy or other Contract with Seller or its Affiliates on or prior to the ninetieth (90th) day following the Closing Date, but only to the extent so rescinded). “Net Flows” shall be determined in accordance with the Net Flow Methodologies.

“Net Settlement Amount” means the amount set forth on the line item “Net Settlement Amount” reflected on the Pro Forma Master Settlement Statement, the Estimated Master Settlement Statement, the Closing Master Settlement Statement or the Final Master Settlement Statement, as applicable.

“Net Transfer Amount” means the amount set forth on the line item “Net Transfer Amount” reflected on the Pro Forma Master Settlement Statement, the Estimated Master Settlement Statement, the Closing Master Settlement Statement or the Final Master Settlement Statement, as applicable, which amount shall be equal to the Net Settlement Amount less the Ceding Commission, in each case, as reflected in the applicable statement.

“Net Worth Methodologies” means the methodologies, procedures, judgments, assumptions and estimates described on Schedule 1.1(l).

“Non-Government Business” means the Business, other than the Government

Business.

“Notice of Disagreement” has the meaning specified in Section 2.4(a). “Obligations” has the meaning specified in Section 14.10(a).

“Offer of Employment” has the meaning specified in Section 8.1(a).

“One Year Simsbury Lease” has the meaning specified in Schedule 1.1(x). “One Year Simsbury Space” has the meaning specified in Schedule 1.1(x). “One Year Windsor Lease” has the meaning specified in Schedule 1.1(x). “One Year Windsor Space” has the meaning specified in Schedule 1.1(x).

“Ordinary Course of Business” means, with respect to a Person, the ordinary course of business of such Person, consistent with past practice, and that does not and would not

Exhibit 2.01

require the approval of the board of directors, board of managers, managing member or similar governing body of such Person and, with respect to HRS, the sole member of HRS, in each case, pursuant to Applicable Law or the governing documents of such Person or based on past practice.

“Other Transferred Contracts” means the Contracts set forth on Schedule 1.1(m). “Owned Intellectual Property” has the meaning specified in Section 5.13(a).

“Party” means each of Buyer, Seller and, solely for purposes of Sections 8.4, 8.5, 14.2, 14.3, 14.4, 14.5, 14.6, 14.7, 14.8, 14.9, 14.10, 14.11, 14.12, 14.13, 14.14 and 14.15 and to the extent applicable to such Sections, Article I, HFSG.

“Patent Assignment” means the Patent Assignment between Buyer and HFIC, in substantially the form attached hereto as Exhibit E.

“Patent License Agreement” means the Patent License Agreement between Buyer and HFIC, in substantially the form attached hereto as Exhibit F.

“Patents” has the meaning specified in the definition of “Intellectual Property

Rights.”

“Permitted Acquisition” has the meaning specified in Section 8.4(c)(iv).

“Permitted Encumbrances” means (a) liens for Taxes and other governmental charges and assessments that are not yet due and payable or that are being contested in good faith by appropriate proceedings, (b) liens of landlords, carriers, warehousemen, mechanics, repairmen and materialmen and other like liens imposed by Applicable Law and arising in the Ordinary Course of Business for sums not yet due and payable or that are being contested in good faith by appropriate proceedings, (c) pledges and deposits made in the Ordinary Course of Business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations, (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the Ordinary Course of Business, (e) defects of title, easements, rights-of-way, restrictions and other similar charges or encumbrances not detracting in any material respect from the value of real property or interfering in any material respect with the ordinary conduct of the Business, (f) Encumbrances that have been placed by any landlord’s financing sources on real property over which Seller and/or its Affiliates have a leasehold interest, (g) zoning, building and other generally applicable land use restrictions, (h) liens resulting from any facts or circumstances relating to Buyer or its Affiliates and (i) liens incurred or deposits made to a Governmental Body in connection with any Governmental Permit.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or Governmental Body or other entity.

“Plan” means any employee plan or program sponsored or maintained by any employee plan sponsor in connection with the Business.

Exhibit 2.01

“Policy Forms” has the meaning specified in Section 5.21(a).

“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and the portion of any Straddle Period ending on and including the Closing Date.

“Pre-Closing Taxes” means all liability for Taxes (a) of HRS or of Seller or its Affiliates (other than HRS) in respect of the Business or the Acquired Assets for Pre-Closing Tax Periods, (b) resulting by reason of any joint and several liability of HRS pursuant to Treasury Regulations Section 1.1502-6 or any analogous Applicable Law (including any comparable state, local or foreign Tax law) or by reason of HRS having been a member of any consolidated, combined or unitary group on or prior to the Closing Date, (c) resulting by reason of HRS ceasing to be a member of the Affiliated Group that includes Seller and (d) for Pre-Closing Tax Periods incurred by Seller or its Affiliates (including HRS) as a result of being a transferee or successor under any indemnification agreement, Tax Sharing Arrangement or Tax assumption agreement or by operation of law with respect to such period.

“Pro Forma Master Settlement Statement” means the Pro Forma Master Settlement Statement attached as Schedule 1.1(n), which was prepared, as of June 30, 2012, in accordance with the Net Flow Methodologies, the General Account Net Settlement Methodologies and the Net Worth Methodologies.

“Pro Forma Statement of General Account Net Settlement” means the Pro Forma Statement of General Account Net Settlement attached as Schedule 1.1(o), which was prepared, as of June 30, 2012, in accordance with the General Account Net Settlement Methodologies.

“Pro Forma Statement of Net Flows” means the Pro Forma Statement of Net Flows attached as Schedule 1.1(p), which was prepared, as of June 30, 2012, in accordance with the Net Flow Methodologies.

“Pro Forma Statement of Net Worth” means the Pro Forma Statement of Net Worth attached as Schedule 1.1(q), which was prepared, as of June 30, 2012, in accordance with the Net Worth Methodologies.

“Property Taxes” has the meaning specified in Section 12.2(c).

“Purchase Price” has the meaning specified in Section 2.2(a).

“Purchase Price Adjustment Amount” has the meaning specified in Section 2.3(d). “Real Estate Leases” has the meaning specified in Section 5.11(a).

“Real Estate Loan” has the meaning specified in Section 5.5(b).

“Real Estate Loan Documents” has the meaning specified in Section 5.5(b). “Real Estate Loan Transfer” has the meaning specified in Section 8.20(e). “Real Property License” has the meaning specified in Schedule 1.1(x).

Exhibit 2.01

“Reference Date Financial Statements” has the meaning specified in Section

5.4(a).

“Regulatory Agreement” means any written agreement, consent agreement or memorandum of understanding with, or any commitment letter or similar undertaking to, or any order by, or any supervisory letter from, any Governmental Body.

“Reinsurance Agreement” means the Reinsurance Agreement between Cedant and Buyer, in substantially the form attached hereto as Exhibit G.

“Reinsurance Settlement Adjustment Amount” has the meaning specified in Section 2.3(e) .

“Reinsured Liabilities” has the meaning specified in the Reinsurance Agreement.

“Representative” of a Person means the directors, officers, employees, advisors, agents, consultants, independent accountants, investment bankers, counsel or other representatives of such Person and of such Person’s Affiliates.

“Required Balance” has the meaning specified in the Reinsurance Agreement.

“Residual Information” means skills, information or know-how retained in the unaided memory of personnel (without conscious memorization or subsequent reference to any material which is written or stored in electronic or physical form) who have had access to information of a Party or its Affiliates prior to the Closing Date.

“SAP” means, with respect to any insurance or reinsurance company and any statutory financial statements, the statutory accounting practices prescribed or permitted in writing by the insurance regulatory authorities of the jurisdiction in which such company is domiciled (other than accounting practices permitted for use by a particular insurance company, but that are not generally prescribed or permitted for use by other similarly situated insurance companies), consistently applied by such company, as in effect on the date of such statutory financial statements.

“SEC” means the United States Securities and Exchange Commission. “Secondment Period” has the meaning specified in Section 8.1(j)(i)(A). “Securities Act” means the Securities Act of 1933, as amended.

“Securities Documents” means, with respect to each Investment Asset, to the extent in the possession or control of Seller and its Affiliates, (a) all prospectuses, private placement memoranda or other offering documents, (b) all notes, bonds or other instruments evidencing ownership thereof, (c) all indentures, trust agreements or other documents governing the terms or holdings thereof, and (d) all financial statements, compliance certificates and other documents delivered by the issuer of any such security.

“Seller” has the meaning specified in the first paragraph of this Agreement.

Exhibit 2.01

“Seller Annual Incentive Plan” means HFSG’s 2012 Annual Incentive Plan. “Seller Confidentiality Agreement” has the meaning specified in Section 8.15. “Seller Disclosure Schedule” has the meaning specified in Article IV.

“Seller Indemnified Persons” has the meaning specified in Section 11.1(b). “Seller Name and Marks” has the meaning specified in Section 8.3(a).

“Seller Party” means each Affiliate of Seller (excluding HRS) that is, or is contemplated by this Agreement to become at the Closing, a party to one or more Ancillary Agreements.

“Seller Permits” has the meaning specified in Section 5.9(a). “Seller Releasee” has the meaning specified in Section 8.13(b). “Seller Releasor” has the meaning specified in Section 8.13(a).

“Seller Sales Incentive Plan” means any incentive compensation plan based on sales results (including any discretionary portion of such plan) sponsored by Seller or its Affiliates applicable to a Business Employee and identified in Section 5.18(a) of the Business Disclosure Schedule.

“Seller Severance Plan” means the severance pay plan and practices of Seller or its Affiliates applicable to a Business Employee, as set forth in Section 8.1(e).

“Seller Specified Representations” has the meaning specified in Section 9.1(b). “Separate Account” has the meaning specified in the Reinsurance Agreement.

“Separate Account Liabilities” has the meaning specified in the Reinsurance

Agreement.

“Separate Account Statement” has the meaning specified in Section 5.4(c). “Service Agreement Forms” has the meaning specified in Section 5.21(a).

“Services Agreement” means the Amended and Restated Intercompany Services Agreement between HRS and HSD, in substantially the form attached hereto as Exhibit H.

“Settlement Agreement” has the meaning specified in Section 5.23.

“Shared Contracts” means, other than Ancillary Agreement Covered Contracts and Multiparty Contracts, (a) Contracts pursuant to which Seller or one or more of its Affiliates provides to a non-affiliated third party both material services or benefits in respect of the Business and other services or benefits not in respect of the Business and (b)Contracts pursuant to which a non-affiliated third party provides material services or benefits to Seller or one or

Exhibit 2.01

more of its Affiliates in respect of both the Business and other services or benefits not in respect of the Business.

“Significant Mutual Fund Organization” means each of the mutual fund organizations listed on Schedule 1.1(r).

“Significant Plan” means each of the Plans listed on Schedule 1.1(s). “Simsbury” has the meaning specified on Schedule 1.1(x).

“Software” means all computer software, including assemblers, applets, compilers, source code, object code, binary libraries, development tools, design tools, user interfaces, in any form or format, however fixed, and all associated documentation.

“Software License Agreement” means the Software License Agreement between Buyer and HFIC, in substantially the form attached hereto as Exhibit I.

“Specified Representations” has the meaning specified in Section 11.1(c)(i).

“Statement of General Account Net Settlement” means a general account net settlement statement prepared, as of a given date, (a) in the format of the Statement of General Account Net Settlement attached as Schedule 1.1(t) and (b) in accordance with the General Account Net Settlement Methodologies.

“Statement of Net Flows” means a statement of Net Flows prepared, as of a given date, (a) in the format of the Statement of Net Flows attached as Schedule 1.1(u) and (b) in accordance with the Net Flow Methodologies.

“Statement of Net Worth” means a statement of net worth statement prepared, as of a given date, (a) in the format of the Statement of Net Worth attached as Schedule 1.1(v) and (b) in accordance with the Net Worth Methodologies.

“Statement of Separate Accounts” means a separate account statement prepared, as of a given date, (i) in the format of the Separate Account Statement attached as Schedule 1.1(w) and (ii) in accordance with the General Account Net Settlement Methodologies.

“Statutory Book Value” has the meaning specified in the Reinsurance Agreement.

“Straddle Period” means any taxable period that includes (but does not end on) the Closing Date.

“Straddle Tax Return” means any Tax Return relating to a Straddle Period. “Sublease Agreements” has the meaning specified in Schedule 1.1(x).

“Subsidiary” of any Person means any corporation, general or limited partnership, joint venture, limited liability company, limited liability partnership or other Person that is a legal entity, trust or estate of which (or in which) (a) the issued and outstanding Equity Interest

Exhibit 2.01

having ordinary voting power to elect a majority of the board of directors (or a majority of another body performing similar functions) of such corporation or other Person (irrespective of whether at the time Equity Interest of any other class or classes of such corporation or other Person shall or might have voting power upon the occurrence of any contingency), (b) more than fifty percent (50%) of the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) more than fifty percent (50%) of the beneficial interest in such trust or estate, is at the time of determination directly or indirectly beneficially owned or controlled by such Person; it being understood that in no event shall any investment fund sponsored or advised by Seller or its Affiliates be deemed a Subsidiary of Seller.

“Tax” (and, with correlative meaning, “Taxes”) means any and all federal, state, county, local or foreign tax (including Transfer Taxes), charge, fee, levy, impost, duty or other assessment, including income, gross receipts, premium, retaliatory, real property, personal property, sales, use, license, excise, franchise, employment, social security (or similar), disability, payroll, profit, withholding, recording, severance, documentary, stamp duty, title or registration, occupation, windfall profits, guaranty fund assessment, alternative or add-on minimum, ad valorem, estimated, value added, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, and any obligation to indemnify or otherwise assume or succeed to the Tax Liability of any other Person, imposed or required to be withheld by any Tax Authority, or imposed as a result of any indemnification agreement or Tax Sharing Arrangement, including, in all cases, any estimated payments or prepayments relating thereto and any interest, penalties and additions imposed thereon or with respect thereto, whether disputed or not.

“Tax Authority” means any Governmental Body having jurisdiction over the assessment, determination, collection, administration or other imposition of any Taxes.

“Tax Benefit” has the meaning specified in Section 12.4(d). “Tax Cost” has the meaning specified in Section 12.4(d).

“Tax Return” means any return, report (including declarations, disclosures, schedules, estimates and information returns or statements), claim for refund or statement, including any schedules or attachments thereto or amendments thereof and other information required to be supplied to a Tax Authority relating to Taxes.

“Tax Sharing Arrangement” means any written or unwritten agreement or arrangement providing for the allocation or payment of Tax Liabilities or payment for Tax benefits between or among members of any group of corporations filing Tax Returns that files, will file or has filed Tax Returns on a combined, consolidated or unitary basis.

“Termination Date” has the meaning specified in Section 13.1(e). “Third-Party Claim” has the meaning specified in Section 11.2(a).

“Third-Party Consent” means any approval, authorization, agreement, consent, non-objection, license or permission of, or waiver or other action by, any non-affiliated third party (other than a Governmental Body).

Exhibit 2.01

“Towers Watson” has the meaning specified in Section 5.6(a).

“Trade Secrets” means trade secrets as defined by the Connecticut Uniform Trade Secret Act, Conn. Genl. Stat. Secs. 35-50 et seq.

“Trademark Assignment” means the Trademark Assignment between Buyer and HFIC, in substantially the form attached hereto as Exhibit J.

“Trademark License Agreement” means the Hartford Trademark License Agreement between HFIC and Buyer, in substantially the form attached hereto as Exhibit K.

“Trademarks” has the meaning specified in the definition of “Intellectual Property

Rights.”

“Transfer Taxes” means all stamp, transfer, recordation, documentary, goods and services, harmonized sales, sales and use, value added, registration and other similar Taxes and fees (including any interest, penalties and additions imposed with respect thereto, whether disputed or not).

“Transferred Contracts” means: (a) the Assigned Leases; (b) the Transferred Information Technology Contracts; and (c) the Other Transferred Contracts; provided that Transferred Contracts shall not include (i) any Excluded Contracts or (ii) any Ancillary Agreement Covered Contracts; provided, however, that Transferred Contracts shall include any Contract transferred or assigned to Buyer following the Closing in accordance with Section 8.21(a)(iii).

“Transferred Employee” has the meaning specified in Section 8.1(a). “Transferred Equity Interests” has the meaning specified in the recitals.

“Transferred Information Technology Contracts” means the Contracts set forth on Schedule 1.1(y), pursuant to which Seller or its Affiliates (other than HRS) license or sublicense Software or lease or sublease other Information Technology from non-affiliated third parties.

“Transferred Owned Intellectual Property” has the meaning specified in Schedule

1.1(a).

“Transition Period Business Employees” has the meaning specified in Section

8.1(a).

“Transition Services Agreement” means the Transition Services Agreement between HFIC and Buyer, in substantially the form attached hereto as Exhibit L.

“Transitional Trademark License Agreement” means the Hartford Transitional Trade Name and Trademark License Agreement between HFIC and Buyer, in substantially the form attached hereto as Exhibit M.

Exhibit 2.01

“Treasury Regulations” means the Treasury Regulations (including temporary regulations) promulgated by the United States Department of the Treasury with respect to the Code or other United States federal Tax statutes.

“Trust Account” has the meaning specified in the Trust Agreement.

“Trust Agreement” means the Reserve Trust Agreement among Cedant, Buyer and the Trustee, in substantially the form attached hereto as Exhibit N.

“Trustee” has the meaning specified in the Trust Agreement. “Windsor” has the meaning specified on Schedule 1.1(x).

ARTICLE II

PURCHASE AND SALE

Section 2.1 Purchase and Sale; Assignment and Assumption. On the terms and subject to the conditions set forth in this Agreement, at the Closing:

(a) Seller shall cause Hartford Financial Services, LLC, its indirect wholly owned Subsidiary, to sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase, acquire and accept from Hartford Financial Services, LLC, all of its right, title and interest in and to the Transferred Equity Interests, free and clear of all Encumbrances;

(b) Seller shall, and shall cause its Affiliates to, sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller and its Affiliates, all of Seller’s and such Affiliates’ right, title and interest in and to the Acquired Assets (subject to Section 8.11(a)), free and clear of all Encumbrances, except for any Permitted Encumbrances on the Assigned Leases, the Fixtures and Equipment set forth on Schedule 1.1(a) or the tangible Information Technology set forth on Schedule 1.1(a);

(c) Seller shall, and shall cause its Affiliates to, assign to Buyer, and Buyer shall assume, the Assumed Liabilities; and

(d) Buyer and Seller shall execute and deliver a bill of sale in substantially the form attached hereto as Exhibit O (the “Bill of Sale”) and an assignment and assumption agreement in substantially the form attached hereto as Exhibit P (the “Assignment and Assumption Agreement”) and such other documents and instruments as may be necessary in order to effect the conveyance of the Acquired Assets to Buyer and Buyer’s assumption of the Assumed Liabilities as contemplated hereby.

Section 2.2 Purchase Price; Ceding Commission.

(a) The aggregate consideration for the Transferred Equity Interests, Assumed Liabilities and the Acquired Assets shall be an amount in cash equal to the Adjusted

Exhibit 2.01

Net Worth, as determined by reference to the Estimated Master Settlement Statement (the “Initial Purchase Price”), which consideration, if positive, shall be payable by Buyer to Seller, or, if negative, shall be payable by Seller to Buyer, in each case, at the Closing by wire transfer of immediately available funds to an account or accounts designated by the Party to whom such amounts are payable in writing at least three (3) Business Days prior to the Closing Date. The Initial Purchase Price shall be subject to adjustment after the Closing in accordance with Section 2.3 and Section 2.4 (as so adjusted, the “Purchase Price”). The Parties acknowledge and agree that the payment of the Initial Purchase Price by Buyer to Seller shall be for the account, credit and benefit of Hartford Financial Services, LLC in the case of the Transferred Equity Interests and Seller or the applicable Seller Affiliate, as applicable, in the case of the transfer of an Assumed Liability or Acquired Asset.

(b) The aggregate ceding commission payable by Buyer to Cedant in consideration for the transactions contemplated by the Reinsurance Agreement shall be equal to the Ceding Commission determined by reference to the Estimated Master Settlement Statement (the “Initial Ceding Commission”), which amount shall be paid as a deduction from the amount otherwise payable by Cedant at Closing in accordance with Section 3.3(b). The Initial Ceding Commission shall be subject to adjustment after the Closing in accordance with Section 2.3 and Section 2.4. Notwithstanding anything to the contrary in this Agreement or the Reinsurance Agreement, the Parties hereby acknowledge that no portion of the Ceding Commission is being allocated to the Covered Insurance Policy, dated as of March 1, 1982, issued by Cedant to HFIC for the benefit of certain employees of Seller and its Affiliates.

Section 2.3 Statement of Net Flows; Statement of General Account Net

Settlement; Statement of Separate Accounts; Statement of Net Worth; Master Settlement Statement.

(a) Seller shall cause to be prepared and delivered to Buyer at least seven (7) Business Days prior to the Closing Date:

(i) a Statement of Net Flows setting forth Seller’s good faith estimate of the Net Flows with respect to the Government Business and the Net Flows with respect to the Non-Government Business, in each case during the period from and after January 1, 2012 through the Effective Time (such statement, the “Estimated Statement of Net Flows”);

(ii) a Statement of General Account Net Settlement setting forth Seller’s good faith estimate of the Ceding Commission, Net Settlement Amount and Net Transfer Amount, in each case, as of the Effective Time (such statement, the “Estimated Statement of General Account Net Settlement”);

(iii) a Statement of Separate Accounts setting forth (A) a complete and accurate list of all Separate Accounts and the assets held in each such Separate Account and (B) Seller’s good faith estimate of (1) the statutory carrying value of the assets held in each Separate Account and (2) the Separate Account Liabilities of each Separate Account, in each case, as of the Effective Time (such statement, the “Closing Statement of Separate Accounts”);

Exhibit 2.01

(iv) a Statement of Net Worth setting forth Seller’s good faith estimate of the Adjusted Net Worth as of the Effective Time (such statement, the “Estimated Statement of Net Worth”);

(v) a list of the Investment Assets to be deposited on the Closing Date by Cedant, on behalf of Buyer, to the Trust Account pursuant to Section 3.1(a) of the Reinsurance Agreement, including the Fair Market Value thereof, determined as of the close of business (New York City time) on the last day of the calendar month immediately preceding the month in which the Closing Date occurs (the “Investment Assets List”);

(vi) a Master Settlement Statement including the calculations contained in the Estimated Statement of Net Flows, the Estimated Statement of General Account Net Settlement and the Estimated Statement of Net Worth and the Fair Market Value of the Investment Assets set forth on the Investment Assets List (such statement, the “Estimated Master Settlement Statement”); and

(vii) a certificate of the Chief Executive Officer, Chief Financial Officer, Controller or Chief Accounting Officer of Seller, or such other executive officer of Seller whose primary responsibility relates to financial matters, certifying that (A) the Estimated Statement of Net Flows was prepared, as of the Effective Time, (1) in the format of the Pro Forma Statement of Net Flows and (2) in accordance with the Net Flow Methodologies, (B) the Estimated Statement of General Account Net Settlement was prepared, as of the Effective Time, (1) in the format of the Pro Forma Statement of General Account Net Settlement and (2) in accordance with the General Account Net Settlement Methodologies, (C) the Closing Statement of Separate Accounts was prepared, as of the Effective Time, (1) in the format of the Separate Account Statement and (2) in accordance with the General Account Net Settlement Methodologies, (D) the Estimated Statement of Net Worth was prepared, as of the Effective Time, (1) in the format of the Pro Forma Statement of Net Worth and (2) in accordance with the Net Worth Methodologies, and (E) the Estimated Master Settlement Statement was prepared, as of the Effective Time, (1) in the format of the Pro Forma Master Settlement Statement and (2) in accordance with the Net Flow Methodologies, the General Account Net Settlement Methodologies and the Net Worth Methodologies.

(b) On or before the date that is one hundred and eighty (180) days following the Closing Date, Buyer shall cause to be prepared and delivered to Seller:

(i) a Statement of Net Flows setting forth Buyer’s calculation of the Net Flows with respect to the Government Business and the Net Flows with respect to the Non-Government Business, in each case during the period from and after January 1, 2012 through the Effective Time (such statement, the “Closing Statement of Net Flows”);

Exhibit 2.01

(ii) a Statement of General Account Net Settlement setting forth Buyer’s calculation of the Ceding Commission, Net Settlement Amount and Net Transfer Amount, in each case as of the Effective Time (such statement, the “Closing Statement of General Account Net Settlement”);

(iii) a Statement of Net Worth setting forth Buyer’s calculation of the Adjusted Net Worth as of the Effective Time (such statement, the “Closing Statement of Net Worth”);

(iv) a calculation of the Fair Market Value of Investment Assets that were deposited on the Closing Date by Cedant, on behalf of Buyer, to the Trust Account pursuant to Section 3.1(a) of the Reinsurance Agreement, determined as of the close of business (New York City time) on the Closing Date (the “Closing FMV Calculation”); and

(v) a Master Settlement Statement including the calculations contained in the Closing Statement of Net Flows, the Closing Statement of General Account Net Settlement, the Closing Statement of Net Worth and the Closing FMV Calculation (such statement, the “Closing Master Settlement Statement”).

(c) After the Closing Date and until any disputes with respect to the Closing Statement of Net Flows, Closing Statement of General Account Net Settlement, Closing Statement of Net Worth, Closing FMV Calculation and Closing Master Settlement Statement (collectively, the “Closing Statements”) are finally resolved in accordance with this Section 2.3 and Section 2.4, Buyer shall provide Seller and its Representatives, upon the prior written request of Seller, reasonable access to Buyer’s work papers and any work papers of Buyer’s independent accountants, in each case, to the extent used in the preparation of the Closing Statements, and Buyer shall make reasonably available to Seller and its Representatives relevant Buyer personnel responsible for the preparation of the Closing Statements, in each case, to the extent reasonably necessary for, and for the sole purpose of, assisting in Seller’s review of the Closing Statements; provided that the independent accountants of Buyer shall not be obligated to make any work papers available to Seller unless and until Seller has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to such independent accountants.

(d) The “Purchase Price Adjustment Amount” shall be an amount equal to (i) the Adjusted Net Worth determined by reference to the Final Master Settlement Statement (after any disputes with respect thereto have been finally resolved in accordance with this Section 2.3 and Section 2.4) minus (ii) the Initial Purchase Price. For the avoidance of doubt, the Purchase Price Adjustment Amount may be either positive or negative.

(e) The “Reinsurance Settlement Adjustment Amount” shall be an amount equal to (i) the Net Transfer Amount determined by reference to the Final Master Settlement Statement (after any disputes with respect thereto have been finally resolved in accordance with this Section 2.3 and Section 2.4) minus (ii) the Fair Market Value of Investment Assets that were deposited on the Closing Date by Cedant, on behalf of Buyer, to the Trust

Exhibit 2.01

Account pursuant to Section 3.1(a) of the Reinsurance Agreement, determined as of the close of business (New York City time) on the Closing Date as reflected in the Final Master Settlement Statement (after any disputes with respect thereto have been finally resolved in accordance with this Section 2.3 and Section 2.4). For the avoidance of doubt, the Reinsurance Settlement Adjustment Amount may be either positive or negative.

(f) Within five (5) Business Days following the applicable date of final determination of the Final Master Settlement Statement in accordance with Section 2.4:

(i) if the Purchase Price Adjustment Amount is a positive amount, then Buyer shall cause an amount in cash equal to the Purchase Price Adjustment Amount, plus interest thereon from the Closing Date to the date of payment at the Federal Funds Rate, to be paid to Seller by wire transfer of immediately available funds to an account or accounts designated by Seller in writing at least three (3) Business Days prior to the date of such payment;

(ii) if the Purchase Price Adjustment Amount is a negative amount, then Seller shall cause an amount in cash equal to the absolute value of the Purchase Price Adjustment Amount, plus interest thereon from the Closing Date to the date of payment at the Federal Funds Rate, to be paid to Buyer by wire transfer of immediately available funds to an account or accounts designated by Buyer in writing at least three (3) Business Days prior to the date of such payment;

(iii) if the Reinsurance Settlement Adjustment Amount is a positive amount, then Seller shall cause Cedant to transfer to Buyer cash in an amount equal to the Reinsurance Settlement Adjustment Amount, plus interest thereon from the Closing Date to the date of payment at the Federal Funds Rate, by wire transfer of immediately available funds to an account or accounts designated by Buyer in writing at least three (3) Business Days prior to the date of such payment; and

(iv) if the Reinsurance Settlement Adjustment Amount is a negative amount, then Buyer shall transfer to Cedant cash in an amount equal to the absolute value of the Reinsurance Settlement Adjustment Amount, plus interest thereon from the Closing Date to the date of payment at the Federal Funds Rate, by wire transfer of immediately available funds to an account or accounts designated by Seller in writing at least three (3) Business Days prior to the date of such payment.

Section 2.4 Review of Closing Statements and Calculations.

(a) If Seller has any objection to any of the Closing Statements, Seller shall deliver a written statement of its objection (the “Notice of Disagreement”) to Buyer within sixty (60) days of receipt thereof. The Notice of Disagreement shall only set forth objections based on (i) manifest arithmetic error, (ii) in the case of the Closing Statement of Net Flows, such Closing Statement of Net Flows not being prepared (A) in the format of the Pro Forma Statement of Net Flows and (B) in accordance with the Net Flow Methodologies, (iii) in the case

Exhibit 2.01

of the Closing Statement of Net Worth, such Closing Statement of Net Worth not being prepared (A) in the format of the Pro Forma Statement of Net Worth and (B) in accordance with the Net Worth Methodologies, (iv) in the case of the Closing Statement of General Account Net Settlement, such Closing Statement of General Account Net Settlement not being prepared (A) in the format of the Pro Forma Statement of General Account Net Settlement and (B) in accordance with the General Account Net Settlement Methodologies, (v) in the case of the Closing FMV Calculation, the Fair Market Value of Investment Assets that were deposited on the Closing Date by Cedant, on behalf of Buyer, to the Trust Account pursuant to Section 3.1(a) of the Reinsurance Agreement, determined as of the close of business (New York City time) on the Closing Date, not being determined in accordance with the General Account Net Settlement Methodologies, or (vi) in the case of the Closing Master Settlement Statement, such Closing Master Settlement Statement not being prepared (A) in the format of the Pro Forma Master Settlement Statement and (B) in accordance with the Net Flow Methodologies, the General Account Net Settlement Methodologies and the Net Worth Methodologies.

(b) The Notice of Disagreement shall set forth in reasonable detail (i) the particular line item or items to which Seller is objecting, (ii) the specific dollar amount proposed by Seller for each such line item or items, (iii) a description of the basis for each of Seller’s objection(s) and (iv) the corresponding adjustment(s) to the applicable Closing Statement that Seller requests to be made.

(c) Seller shall only be entitled to object to the Closing Statements on the bases allowed in Section 2.4(a) and shall be conclusively deemed to have accepted the Closing Statements except as and to the extent that Seller has objected thereto in accordance with Section 2.4(a) and Section 2.4(b).

(d) The Parties shall resolve any disagreements or disputes related to or arising from the Closing Statements in the manner provided by Section 2.4(a) and Section 2.4(b), and no such dispute shall be referred to dispute resolution as provided under Section 14.4.

(e) Buyer and Seller shall cooperate in good faith to resolve any objections identified in the Notice of Disagreement. If any or all of the objections are resolved between Buyer and Seller, the resolution of those objections, as applicable, shall be final and binding upon Buyer and Seller.

(f) To the extent that, for any reason, Buyer and Seller are unable to reach a final resolution on any of Seller’s objections in the Notice of Disagreement within thirty (30) days after Buyer has received Seller’s Notice of Disagreement, either Buyer or Seller may submit any unresolved objections still in dispute (the “Adjustment Dispute”) to binding and final arbitration pursuant to the Commercial Arbitration Rules of the American Arbitration Association then in force, except as modified herein.

(i) The arbitration shall be conducted by a jointly selected internationally recognized accounting firm that is not the auditor or independent accounting firm of any of the parties or their respective Affiliates and is otherwise independent and impartial (the “Accounting Firm”), which firm shall, within ten (10) days of the Accounting Firm’s selection by Buyer and Seller, or as soon as

Exhibit 2.01

practicable thereafter, select an independent and impartial partner from such Accounting Firm, who is a certified public accountant, to act as the sole arbitrator. If Buyer and Seller are unable for any reason to select such Accounting Firm within fifteen (15) days after the date of dispatch of the request for arbitration pursuant to Section 2.4(f), or if such Accounting Firm is unable for any reason to select an independent and impartial partner to serve as sole arbitrator within fifteen (15) days of its selection by Buyer and Seller, either Buyer or Seller may request the American Arbitration Association to appoint, within ten (10) days from the date of such request or as soon as practicable thereafter, a partner in an internationally recognized accounting firm, who is a certified public accountant, that is not the auditor or independent accounting firm of any of the parties or their respective Affiliates, and is independent and impartial, to act as sole arbitrator.

(ii) Within ten (10) days of the appointment of the Accounting Firm, Buyer and Seller shall each provide the Accounting Firm with a copy of the Closing Statements (as modified by any adjustments agreed to by the parties) and shall each deliver to the Accounting Firm the Notice of Disagreement together with a copy of the Closing Statement or Closing Statements, as applicable, marked to indicate those line items that remain in dispute, and any additional supporting materials or documents that such Party elects to provide.

(iii) Buyer and Seller agree to enter into an engagement letter with the Accounting Firm. The Accounting Firm’s review and award shall be limited to matters properly objected to by Seller in the Notice of Disagreement and shall determine, in the manner provided in Section 2.4(a) and Section 2.4(b), whether and to what extent (if any) the Closing Statements require adjustment. With respect to each disputed line item, the Accounting Firm shall select an amount within the range of amounts advocated by Seller in the Notice of Disagreement and Buyer in the applicable Closing Statement.

(iv) The arbitration shall be held, and the award shall be rendered, in New York, New York.

(v) Buyer and Seller agree that the Adjustment Dispute, and any arbitration arising thereunder, shall be confidential, and Buyer and Seller agree, on behalf of themselves and their respective Representatives, not to disclose to any third party the existence or status of the arbitration and all information made known and documents produced in the arbitration not otherwise in the public domain, and all awards arising from the arbitration, except and to the extent that disclosure is required by Applicable Law or is required to protect or pursue a legal right.

(vi) Buyer and Seller shall reasonably cooperate with, and provide information and documentation, including any accountants’ work papers, to assist the Accounting Firm; provided that the independent accountants of Buyer and Seller shall not be obligated to make any work papers available to the Accounting Firm unless and until the Accounting Firm has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable

Exhibit 2.01

to such independent accountants. Any information and documentation provided by Buyer or Seller to the Accounting Firm shall concurrently be provided to the other Party to the extent not already so provided; provided that Buyer or Seller, as applicable, shall not be obligated to make accountants’ work papers available to the other Party unless and until the other Party has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to the applicable accounting firm. Neither Buyer nor Seller shall disclose to the Accounting Firm, and the Accounting Firm shall not consider for any purpose, any settlement discussions or settlement offer made by Buyer or Seller with respect to any objection under this Section 2.4, unless otherwise agreed in writing by Buyer and Seller.

(vii) The Accounting Firm’s award shall include a reasonably detailed accounting of any required change to the Closing Statements. Buyer and Seller shall use their reasonable best efforts to cause the Accounting Firm to provide its determination within thirty (30) days after its appointment, and otherwise as soon as practicable. The award of the Accounting Firm, which shall be governed by the Federal Arbitration Act, 9 U.S.C. §1 et seq., as amended, shall be set forth in writing and shall be final and binding upon Buyer and Seller and may be enforced in the federal or state courts located within the State of New York as well as any other court of competent jurisdiction; provided, however, that within five (5) Business Days after the transmittal of the Accounting Firm’s award, Buyer or Seller may request in writing to the Accounting Firm, with a copy thereof provided to the other Party in accordance with Section 14.6, that the Accounting Firm correct solely any clerical, typographical or arithmetic errors in such award. The other Party shall have five (5) Business Days to respond to the Accounting Firm in writing to the request, with a copy thereof provided to the other Party in accordance with Section 14.6. The Accounting Firm shall dispose of the request, if no response was received during such five (5) Business Day period from the other Party, within seven (7) Business Days after receiving such request or, if such a response was received during such period, within three (3) Business Days of its receipt of such a response.

(viii) Buyer, on the one hand, and Seller, on the other hand, shall each bear the respective fees and costs incurred by it in connection with the matters set forth in this Section 2.4, except that the fees and disbursements of the Accounting Firm shall be paid by Buyer or Seller in proportion to those matters submitted to the Accounting Firm that are resolved against Buyer or Seller, as applicable, as such fees and disbursements are allocated by the Accounting Firm pursuant to the foregoing.

(g) The “Final Statement of Net Flows,” “Final Statement of Net Worth,” “Final Statement of General Account Net Settlement,” “Final FMV Calculation” and “Final Master Settlement Statement” shall mean the Closing Statement of Net Flows, Closing Statement of Net Worth, Closing Statement of General Account Net Settlement, Closing FMV Calculation and Closing Master Settlement Statement, respectively, in each case together with any revisions thereto made pursuant to this Section 2.4, including, if necessary, the determination of the Accounting Firm.

Exhibit 2.01

ARTICLE III
CLOSING

Section 3.1 Closing Date. The closing of the transactions contemplated by this

Agreement (the “Closing”) shall take place at the offices of Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019 at 10:00 a.m., New York City time, on the last Business Day of the month in which the last of the conditions set forth in Article IX and Article X has been satisfied or waived in accordance with the terms of this Agreement (excluding conditions that, by their terms, cannot be satisfied until the Closing, but subject to the satisfaction or waiver of those conditions as of the Closing); provided, however, that if the last of the conditions set forth in Article IX and Article X (excluding conditions that, by their terms, cannot be satisfied until the Closing) are satisfied or waived on a day that is within the last three (3) Business Days of a month-end, then the Closing shall occur on the last Business Day of the immediately following month; provided further that, on such date, all of the conditions set forth in Article IX and Article X continue to be and are satisfied or waived. Notwithstanding the foregoing, the Closing may take place at such other time and place as may be agreed upon by Buyer and Seller, subject to the satisfaction or waiver of the conditions set forth in Article IX and Article X. The time and date on which the Closing is actually held is referred to herein as the “Closing Date.” The transactions contemplated hereby shall be deemed to have been consummated and become effective for all purposes as of the Effective Time.

Section 3.2 Payment on the Closing Date. Pursuant to Section 2.2(a), at the

Closing, Buyer or Seller, as applicable, shall pay to the other Party the Initial Purchase Price by wire transfer of immediately available funds to an account or accounts designated by such other Party in writing at least three (3) Business Days prior to the Closing Date.

Section 3.3 Reinsurance Transaction.

(a) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, (i) Buyer shall, and Seller shall cause Cedant to, enter into the Reinsurance Agreement, the Trust Agreement and the Administrative Services Agreement and (ii) Buyer shall establish the Trust Account with the Trustee pursuant to the Trust Agreement, naming Cedant as sole beneficiary thereof.

(b) In connection with and at the Closing, in accordance with the Reinsurance Agreement, Seller shall cause Cedant to deposit, on behalf of Buyer, to the Trust Account Investment Assets, which shall be selected in the manner described in Schedule 3.3(b), with an estimated Fair Market Value equal to the Net Transfer Amount determined by reference to the Estimated Statement of General Account Net Settlement. The Investment Assets deposited by Cedant shall, at the time so deposited, be free and clear of all Encumbrances, other than Encumbrances created by the Trust Agreement or arising from acts of Buyer or its Affiliates or the Trustee.

(c) To the extent that the estimated Fair Market Value of the Investment Assets deposited or required to be deposited on the Closing Date to the Trust Account pursuant to Section 3.3(b) is less than the Required Balance as of the Closing Date, Buyer shall, on the

Exhibit 2.01

Closing Date, deposit Eligible Assets with a Statutory Book Value equal to such deficiency to the Trust Account.

Section 3.4 Buyer’s Closing Date Deliveries. At the Closing, Buyer shall

deliver or cause to be delivered to Seller the following:

(a) the certificate contemplated by Section 10.1(c), duly executed by a duly authorized officer of Buyer;

(b) if the Initial Purchase Price is payable by Seller pursuant to Section 2.2(a), an executed cross receipt for the Initial Purchase Price paid at the Closing pursuant to Section 3.2;

(c) original counterparts of each Ancillary Agreement to which Buyer or any Buyer Party is a party, each duly executed on behalf of Buyer or such Buyer Party;

(d) evidence that the Governmental Consents referenced in Section 10.2 that were to be made or obtained by Buyer or its Affiliates have been so made or obtained, as applicable; and

(e) all such other documents, agreements, instruments, writings and certificates as Seller may reasonably request and as are necessary for Buyer or its Affiliates, as the case may be, to satisfy their respective obligations hereunder.

Section 3.5 Seller’s Closing Date Deliveries. At the Closing, Seller shall

deliver or cause to be delivered to Buyer the following:

(a) the certificate contemplated by Section 9.1(c), duly executed by a duly authorized officer of Seller;

(b) one or more certificates representing all of the Transferred Equity Interests duly endorsed in blank or accompanied by an instrument of transfer duly endorsed in blank, with all appropriate Tax transfer stamps affixed;

(d) the Real Estate Loan Documents and the other documents, allonges, endorsements and instruments described in Section 8.20(e);

(e) if the Initial Purchase Price is payable by Buyer pursuant to Section 2.2(a), an executed cross receipt for the Initial Purchase Price paid at the Closing pursuant to Section 3.2;

(f) original counterparts of each Ancillary Agreement to which Seller, HRS or any Seller Party is a party, each duly executed on behalf of Seller, HRS or such Seller Party;

Exhibit 2.01

(g) evidence that the Governmental Consents referenced in Section 9.2 that were to be made or obtained by Seller or its Affiliates have been so made or obtained, as applicable;

(h) duly executed letters of resignation of each of the managers of HRS identified by Buyer to Seller in writing at least five (5) Business Days prior to the Closing Date, effective as of the Closing;

(i) copies of any amendments to the Multiparty Contracts and other documentation required to be obtained by Seller or its Affiliates pursuant to Section 7.6;

(j) copies of any Seller Confidentiality Agreements being assigned to Buyer or HRS pursuant to Section 8.16;

(k) evidence of the termination of all intercompany Contracts pursuant to Section 8.6(a);

(l) evidence that all Intercompany Payables and Intercompany Receivables have been settled, discharged, offset or paid in full pursuant to Section 8.6(b);

(m) the Business Records that are required to be delivered to Buyer at the Closing in accordance with Section 8.11(a);

(n) a FIRPTA affidavit, in form and substance reasonably satisfactory to Buyer, pursuant to Section 1445(b)(2) of the Code and Treasury Regulations Section 1.1445- 2(b)(2) certifying that, as of the Closing Date, Seller is not a “foreign person;” and

(o) all such other documents, agreements, instruments, writings and certificates as Buyer may reasonably request and as are necessary for Seller or its Affiliates, as the case may be, to satisfy their respective obligations hereunder.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES REGARDING SELLER, HFSG AND THE
SELLER PARTIES

Except as set forth in the corresponding sections or subsections of the disclosure schedule delivered by Seller to Buyer prior to entering into this Agreement (the “Seller Disclosure Schedule”) (it being understood that disclosure of any item in any section or subsection of the Seller Disclosure Schedule shall be deemed disclosed with respect to another enumerated section or subsection of the Seller Disclosure Schedule to which the relevance of such item is reasonably apparent on its face; provided, however, that the disclosure set forth in Sections 5.7(b), 7.1(a), 7.1(a)(xxv) and 7.8 of the Business Disclosure Schedule shall not be deemed disclosed with respect to any other section or subsection of the Business Disclosure Schedule unless expressly disclosed in such other section or subsection of the Business Disclosure Schedule), Seller hereby represents and warrants to Buyer as of the date hereof and as of the Closing Date as follows:

Exhibit 2.01

Section 4.1 Organization and Standing. Seller is a corporation duly organized,

validly existing and in good standing under the laws of the State of Delaware. HFSG is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each Seller Party is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized.

Section 4.2 Authority; Conflicts.

(a) Each of Seller, HFSG and each Seller Party has the full power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it is or will be a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and such Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby by Seller, HFSG and each Seller Party have been duly and validly authorized and approved by all requisite corporate or other similar action on the part of Seller, HFSG and each Seller Party and, in the case of HFSG, no action by its stockholders is required in connection with the execution, delivery and performance of this Agreement and such Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby by Seller, HFSG and each Seller Party. Hartford Financial Services, LLC has duly and validly obtained all required board and member approvals necessary to transfer the Transferred Equity Interests to Buyer at the Closing. This Agreement has been duly and validly authorized, executed and delivered by Seller and HFSG, and (assuming the valid authorization, execution and delivery of this Agreement by Buyer) is the legal, valid and binding obligation of Seller and HFSG, enforceable in accordance with its terms, and each of the Ancillary Agreements to which Seller or any Seller Party is or will be a party has been duly and validly authorized by Seller or such Seller Party and, upon execution and delivery by Seller or such Seller Party, will be (assuming the valid authorization, execution and delivery by the other party or parties thereto who are not Affiliates of Seller) a legal, valid and binding obligation of Seller or such Seller Party enforceable in accordance with its terms, subject in each case to bankruptcy, reorganization, insolvency, moratorium, rehabilitation, liquidation, fraudulent conveyance and similar laws relating to or affecting creditors’ rights generally and to general equity principles (regardless of whether enforceability is considered in a proceeding in equity or at law) (such exceptions, the “Enforceability Exceptions”).

(b) The execution and delivery by Seller, HFSG or any Seller Party of this Agreement or any of the Ancillary Agreements, the performance and consummation by Seller, HFSG or any Seller Party of the transactions contemplated hereby or thereby or compliance by Seller, HFSG or any Seller Party with or fulfillment by Seller, HFSG or any Seller Party of the terms, conditions and provisions hereof or thereof will not, with or without the giving of notice or passage of time or both:

(i) assuming that the Governmental Consents set forth on Section 4.2(b)(iii)(A) of the Seller Disclosure Schedule are made or obtained, as applicable, result in a breach or violation of the terms, conditions or provisions of (A) the charter, bylaws, certificate of formation or other applicable organizational documents of Seller, HFSG, HRS or any Seller Party or any effective resolution of any of their respective directors or shareholders or members, as applicable, or

Exhibit 2.01

(B) any Applicable Law affecting Seller, HFSG, HRS or any Seller Party or any of their respective properties or assets;

(ii) result in a breach or violation, in any material respect, of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination, modification or cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance on the Equity Interests of HRS or any of the Acquired Assets or Investment Assets under, any (A) Material Contract, Transferred Contract or any other material Contract to which HRS is a party or by which any of its properties or assets is subject or bound, or (B) any other Contract to which Seller, HFSG or any Seller Party is a party or by which any of their respective properties or assets is subject or bound, except, in the case of this clause (B), for any such breaches, violations, creations or losses that, individually or in the aggregate, would not be reasonably expected to prohibit or materially impair or delay the ability of Seller, HFSG or any of the Seller Parties to perform its material obligations under this Agreement and the Ancillary Agreements; or

(iii) require any (A) Governmental Consent or (B) Third-Party Consent (other than any Third-Party Consents required in connection with the transactions contemplated by the Transition Services Agreement) to be made or obtained, as applicable, by Seller or its Affiliates, except for those Governmental Consents set forth on Section 4.2(b)(iii)(A) of the Seller Disclosure Schedule and those Third-Party Consents set forth on Section 4.2(b)(iii)(B) of the Seller Disclosure Schedule.

ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING HRS AND THE BUSINESS

Except as set forth in the corresponding sections or subsections of the disclosure schedule delivered by Seller to Buyer prior to entering into this Agreement (the “Business Disclosure Schedule”) (it being understood that (a) disclosure of any item in any section or subsection of the Business Disclosure Schedule shall be deemed disclosed with respect to another enumerated section or subsection of the Business Disclosure Schedule to which the relevance of such item is reasonably apparent on its face and (b) if any section or subsection of the Business Disclosure Schedule contains a cross-reference to a second section or subsection of the Business Disclosure Schedule which itself contains a cross-reference to a third section or subsection of the Business Disclosure Schedule, the matters set forth in such third section or subsection shall not be deemed disclosed with respect to such first section or subsection unless stated in full therein), Seller hereby represents and warrants to Buyer as of the date hereof and as of the Closing Date as follows:

Section 5.1 Organization and Standing. HRS is a limited liability company

duly organized, validly existing and in good standing under the laws of the State of Delaware.

Exhibit 2.01

Section 5.2 Limited Liability Company Power.

(a) HRS has all requisite limited liability company power and authority to carry on its business as presently conducted and as conducted as of the Closing. HRS is duly qualified or licensed as a foreign entity to do business and, to the extent legally applicable, is in good standing in each jurisdiction where the character of its owned, operated or leased properties or the conduct of its business makes such qualification necessary. HRS (i) is not the subject of any supervision, conservation, rehabilitation, liquidation, receivership, insolvency, bankruptcy or similar proceeding and (ii) has not received any written notice from any Governmental Body or other Person threatening to seek to initiate any such proceeding.

(b) True, accurate and complete copies of the certificate of formation, limited liability company agreement (and other organizational documents), in each case, as amended through the date of this Agreement, of HRS have been made available to Buyer prior to the date hereof.

Section 5.3 Capital Structure.

(a) Hartford Financial Services, LLC, a Delaware limited liability company that is an indirect, wholly owned Subsidiary of Seller, is the sole record and beneficial owner of the Transferred Equity Interests and has good and valid title to the Transferred Equity Interests, free and clear of any Encumbrance. Seller, through Hartford Financial Services, LLC, has the full and unrestricted power to sell, assign, transfer and deliver the Transferred Equity Interests to Buyer in accordance with the terms and conditions of this Agreement and, at the Closing, assuming Buyer has the requisite power and authority to be the lawful owner of the Transferred Equity Interests, good and valid title to the Transferred Equity Interests will pass to Buyer, free and clear of any Encumbrance other than those arising solely from acts of Buyer or its Affiliates.

(b) The Transferred Equity Interests have been duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or subscription rights or in violation of any Applicable Law, Contract or organizational document of HRS. Other than this Agreement, there are no preemptive or other outstanding rights, options, calls, puts, tag-alongs, drag-alongs, warrants, conversion rights or voting trusts, membership agreements, proxies or other rights, agreements or commitments of any character relating to any Equity Interest of HRS, or debt securities or other securities that are convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any Equity Interest of HRS, and no such securities or obligations evidencing such rights are outstanding. There are no obligations, contingent or otherwise, to repurchase, redeem (or establish a sinking fund with respect to redemption) or otherwise acquire any Equity Interest of HRS. There are no bonds, debentures, notes or other Indebtedness of HRS having voting rights. There are no capital appreciation rights, phantom stock plans, securities with participation rights or features, or similar obligations and commitments of HRS.

(c) HRS (i) does not have any Subsidiaries, (ii) does not own, directly or indirectly, any Equity Interest in any Person or have any direct or indirect equity or ownership

Exhibit 2.01

interest in any business and (iii) is not a member of or participant in any partnership, joint venture or other entity.

Section 5.4 Financial Information; Business Records.

(a) Section 5.4(a) of the Business Disclosure Schedule sets forth (i) the unaudited balance sheets of the Business as of June 30, 2012 and December 31, 2011, in each case, including pro forma adjustments to reflect the transactions contemplated hereby and by the Ancillary Agreements, and the related unaudited statements of operations of the Business for the period ended June 30, 2012 and the year ended December 31, 2011, and (ii) the unaudited balance sheets of HRS as of June 30, 2012 and December 31, 2011, and the related unaudited statements of operations of HRS for the period ended June 30, 2012 and the year ended December 31, 2011 (collectively, the “Reference Date Financial Statements”). The Reference Date Financial Statements have been derived from the Business Records (and, to the extent applicable, the Excluded Business Records) and have been prepared in accordance with GAAP, as modified by the principles and methodologies specified in Section 5.4(a) of the Business Disclosure Schedule, subject in the case of June 30, 2012 financial statements to normal recurring year-end adjustments that are not material in amount or effect, and fairly present, in all material respects, the financial condition and the results of operations of the Business or HRS, as applicable, as of the respective dates thereof and for the periods indicated therein.

(b) Prior to the date hereof, Seller has made available to Buyer true, accurate and complete copies of the following statutory financial statements, in each case, as filed with the Connecticut Insurance Department, together with the exhibits, schedules and notes thereto and any affirmations, certifications or opinions filed therewith: (i) the unaudited annual statutory financial statements of Cedant as of and for the years ended December 31, 2010 and December 31, 2011; (ii) the audited annual statutory financial statements of Cedant as of and for the years ended December 31, 2010 and December 31, 2011 (the statements referenced in (i) and (ii), the “Cedant Annual Statutory Statements”); and (iii) the unaudited quarterly statutory financial statements of Cedant as of and for the quarters ended March 31, 2012 and June 30, 2012 (the “Cedant Quarterly Statements” and, collectively with the Cedant Annual Statutory Statements, the “Cedant Statutory Statements”). The Cedant Statutory Statements (A) have been derived from the Business Records (and, to the extent applicable, the Excluded Business Records), (B) have been prepared in accordance with SAP (subject, in the case of the Cedant Quarterly Statements, to normal recurring year-end adjustments that are not material in amount or effect), and (C) fairly present, in all material respects, the statutory financial position, results of operations, changes in statutory surplus and cash flows of Cedant as of the respective dates of, and for the periods referred to in, the Cedant Statutory Statements. No material deficiency has been asserted by any Governmental Body with respect to any Cedant Statutory Statements that remains unresolved prior to the date hereof.

(c) Section 5.4(c) of the Business Disclosure Schedule sets forth a true and complete list of all Separate Accounts, the assets held in each such Separate Account and the statutory carrying value thereof, in each case, as of June 30, 2012 (the “Separate Account Statement”).

Exhibit 2.01

(d) There are no policy loans associated with the Covered Insurance Policies.

(e) The Business Records and those Excluded Business Records relating to the Business have been maintained in all material respects in accordance with Applicable Law and Seller’s or its applicable Affiliates’ policies and procedures.

(f) To the extent related to the Business, Seller and its applicable Affiliates maintain proper and adequate internal accounting controls that provide reasonable assurance that: (i) transactions are executed with management’s authorization; (ii) transactions are recorded as necessary to permit preparation of such Person’s financial statements and to maintain accountability for such Person’s assets; (iii) access to such Person’s assets is permitted only in accordance with management’s authorization; (iv) the reporting of such Person’s assets is compared with existing assets at regular intervals; and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis.

(g) None of HRS or any of its Representatives or, to the extent related to the Business, Seller or its applicable Affiliates (other than HRS) or any of their respective Representatives, has received any written non-frivolous complaint, allegation, assertion or claim regarding the accounting, reserving or auditing practices, procedures, methodologies or methods used in connection with the Business or their respective internal accounting controls, in each case, that has not been remedied as of the date of this Agreement.

Section 5.5 Investment Assets.

(a) Cedant holds good and valid title to the Investment Assets, free and clear of all Encumbrances, other than interests of nominees, custodians or similar intermediaries. As of July 31, 2012, none of the Investment Assets are in default in the payment of principal or interest or dividends.

(b) Section 5.5(b) of the Business Disclosure Schedule sets forth a true and complete list as of the date hereof of all commercial mortgage loans, mezzanine loans and B notes or interests in commercial mortgage loans, mezzanine loans and B notes that are included in the Investment Assets (each, a “Real Estate Loan”). Seller has made available to Buyer prior to the date hereof (or, with respect to clause (v) below only, prior to the Closing Date), to the extent in the possession of Seller or its Affiliates, true and complete copies of (i) all loan documents delivered by or on behalf of the related borrower in connection with the closing of each Real Estate Loan, including, to the extent applicable, copies of any notes and allonges, the originals of which are in the possession of Seller, copies of any mortgage or deed of trust, security agreement, third party inspection report, survey and title insurance policy (but excluding in any event (A) any internal loan approval memoranda, internal loan reviews, internal loan valuations or evaluations or other materials prepared by Seller or its Affiliates in connection with underwriting, evaluating or approving any Real Estate Loan, other than, subject to clause (B), any materials prepared by third parties that were created in connection with and included in any of the foregoing, and (B) any report prepared by any third party in connection with the servicing of any Real Estate Loan, other than any servicing report with respect to any Real Estate Loan

Exhibit 2.01

prepared during the twelve (12) month period preceding the date hereof), together with any supplements, modifications or amendments thereto, (ii) the most recently received rent rolls and property operating and financial statements with respect to each Real Estate Loan, (iii) all applicable servicing, pooling, intercreditor, participation and/or co-lender or similar agreements relating to each Real Estate Loan, (iv) any written notices received or given by or on behalf of Seller or its Affiliates providing notice of the occurrence of any event of default with respect to any Real Estate Loan and (v) without duplication of any items in clause (iv) above, all material correspondence files relating to each Real Estate Loan, including all correspondence with the borrower and servicer(s) under each Real Estate Loan and, if applicable, other lenders or holders of any interest in any structured loan or “debt stack” of which a Real Estate Loan is a part (such documents referred to in the foregoing clauses (i) - (v), the “Real Estate Loan Documents”). The Real Estate Loans are fully drawn with no obligations on behalf of the holder thereof for future advances. Neither Seller nor any of its Affiliates has received written notice of any Action challenging the perfection of the mortgage or other lien securing the repayment of any of the Real Estate Loans.

(c) As of July 31, 2012, no payment of principal or interest is more than fifteen (15) days past due with respect to any Real Estate Loan. Seller and its Affiliates have not given any written notices with respect to any Real Estate Loans providing notice of the occurrence of any default in the payment of principal or interest thereon, or any other event of default with respect thereto, in each case, which remains uncured.

(d) Seller has made available to Buyer prior to the date hereof, to the extent in the possession or control of Seller and its Affiliates, with respect to all Investment Assets that are securities, (i) all prospectuses, private placement memoranda or other offering documents and (ii) all indentures, trust agreements or other documents governing the terms or holdings thereof, other than, in the case of this clause (ii), with respect to securities that are traded on an exchange or cleared through a registered clearing agency such as DTC, Euroclear or Clearstream.

(e) From July 1, 2012 through and including the date of this Agreement, Seller and its Affiliates have conducted asset and liability management with respect to the Business consistent with the asset and liability management practices and procedures followed by Seller and its Affiliates from January 1, 2012 through and including June 30, 2012 with respect to the Business, including the objective of maintaining investment assets equal to or in excess of insurance liabilities at all times.

Section 5.6 Actuarial Report; Reserves.

(a) Seller has made available to Buyer prior to the date hereof a true, accurate and complete copy of the “Actuarial Appraisal of Retirement Plans Group as of December 31, 2011” prepared by Towers Watson Pennsylvania Inc. (“Towers Watson”), together with all attachments, opinions, certifications, addenda, supplements and modifications thereto (collectively, the “Actuarial Report”). The factual information and data furnished by Seller and its Affiliates in connection with the preparation of the Actuarial Report was complete and accurate in all material respects and was derived from the Business Records (and, to the extent applicable, the Excluded Business Records), in each case, as of the date provided. In

Exhibit 2.01

connection with the preparation of the Actuarial Report, Seller provided to Towers Watson a representative sample of Covered Insurance Policies in force that was accurate in all material respects as of the date provided.

(b) Section 5.6(b) of the Business Disclosure Schedule lists all actuarial reports that (i) were prepared since January 1, 2009 (other than the Actuarial Report), (ii) relate in whole or in part to the Business and (iii) were prepared by external actuaries or, to the extent made available to any Governmental Body, by internal actuaries. Seller has made available to Buyer prior to the date hereof true, accurate and complete copies of all such actuarial reports to the extent related to the Business, together with all attachments, opinions, certifications, addenda, supplements and modifications thereto.

(c) The reserves, provisions for losses and other liability amounts in respect of Covered Insurance Policies set forth on the Pro Forma Statement of General Account Net Settlement (i) were computed in all material respects in accordance with generally accepted actuarial standards consistently applied, (ii) met the requirements of the insurance law of the State of Connecticut and (iii) were computed on the basis of assumptions consistent with those used in computing the corresponding items in the statutory annual statements of Cedant as of and for the period ended December 31, 2011, in each case, except as otherwise noted in the Pro Forma Statement of General Account Net Settlement.

Section 5.7 Certain Changes.

(a) Since December 31, 2011, there has not occurred any fact, circumstance, change, effect or event that has had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) Since December 31, 2011 to the date of this Agreement, the Business has been conducted in the Ordinary Course of Business.

Section 5.8 Taxes.

(a) HRS has duly and timely (including all applicable extensions) filed or participated in the filing of all Tax Returns required to have been filed by or with respect to HRS (all such Tax Returns being true, correct and complete in all material respects as they relate to HRS).

(b) Seller has duly and timely (including all applicable extensions) filed or participated in the filing of all Tax Returns required to have been filed in respect of the Acquired Assets and the Business (all such Tax Returns being true, correct and complete in all respects as they relate to the Acquired Assets and the Business), except where the failure to file any such Tax Returns has not had, and is not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

(c) All Taxes, whether or not shown as owing on any Tax Returns that have been filed relating to periods ending on or before the Closing Date owed by HRS or in respect of the Business or the Acquired Assets have been paid.

Exhibit 2.01

(d) No written waiver of any statute of limitations or assessment of Taxes in respect of any Tax Returns of HRS, or Tax Returns in respect of the Business or the Acquired Assets, is currently in effect.

(e) There is no Action pending (i) for which HRS has been notified in writing in respect of any Tax for which HRS may be liable or (ii) in respect of the Business or the Acquired Assets for which Seller has been notified in writing in respect of any Tax for which Seller may be liable.

(f) All deficiencies asserted in writing or assessments made in writing as a result of any examination of the Tax Returns described in subsections (a) and (b) of this Section 5.8 by a Tax Authority have been paid in full, and no other audits or investigations by any Tax Authority relating to any such Tax Returns are in progress, except those that are being contested in good faith through appropriate proceedings and for which adequate reserves are being maintained.

(g) There is no written claim pending from any Tax Authority in any jurisdiction (i) where HRS does not file Tax Returns that HRS is or may be subject to taxation by that jurisdiction or (ii) where Seller does not file Tax Returns in respect of the Business or the Acquired Assets that the Business or the Acquired Assets is or may be subject to taxation by that jurisdiction.

(h) There are no Encumbrances for Taxes (other than Permitted Encumbrances) upon the Acquired Assets or upon any of the assets of HRS.

(i) HRS is not and has not been a party to any “reportable transaction” as defined in Treasury Regulations Section 1.6011-4.

(j) Other than the Tax Allocation Agreement, dated December 31, 2009, among HRS, HFSG and certain of its Affiliates, HRS is not a party to any Tax Sharing Arrangement.

(k) Seller, in respect of HRS, is not required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Tax law) executed on or prior to the Closing Date, (iii) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding similar provision of state, local or foreign Tax law), (iv) installment sale or open transaction disposition made on or prior to the Closing Date or (v) prepaid amount received on or prior to the Closing Date.

(l) HRS, or Seller in respect of HRS, has adequate accruals and reserves on the financial statements of HRS, or Seller in respect of HRS, for all Taxes payable by HRS, or Seller in respect of HRS, for all taxable periods and portions thereof through the date of such financial statements.

Exhibit 2.01

(m) There are no (i) Tax rulings, technical advice memoranda, requests for rulings, closing agreements or similar agreements or rulings (including any request for permission with respect to a change in any accounting method) in effect with any Tax Authority relating to HRS, or Seller in respect of HRS, or (ii) powers of attorney that are currently in effect or have been granted by or with respect to HRS, or Seller in respect of HRS, with respect to any matter relating to Taxes.

(n) HRS has at all times since its formation been a “disregarded entity” for U.S. federal income tax purposes. No election has been filed by or on behalf of HRS to cause it to be treated as an association taxable as a corporation for U.S. federal income tax purposes.

Section 5.9 Seller Permits.

(a) Seller and its Affiliates (including HRS) presently hold and maintain in full force and effect (i) all Governmental Permits that are necessary to conduct the Business as presently conducted and to own or use their respective assets and properties, in the case of Seller and its Affiliates other than HRS, as such assets and properties are presently owned and used in connection with the Business, and (ii) all material Governmental Permits necessary to use or occupy the Business Premises, in the case of Seller and its Affiliates other than HRS, as such Business Premises are presently used or occupied in connection with the Business (the Governmental Permits described in the preceding clauses (i) and (ii) to be collectively referred to herein as the “Seller Permits”). Seller and its Affiliates (including HRS) are in compliance, in all material respects, with the terms and conditions of the Seller Permits.

(b) A true and complete list of all Seller Permits presently held by HRS or, to the extent related to the Business, Seller or its Affiliates (other than HRS), is set forth in Section 5.9(b) of the Business Disclosure Schedule. None of Seller or its Affiliates (including HRS) has received, at any time since January 1, 2009, any written notice or other written communication from any Governmental Body regarding (i) any actual or alleged violation of, or failure to comply with, any term or requirement of any Seller Permit or (ii) any actual or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to, or any Action to declare invalid, any Seller Permit, in each case, that has not been remedied as of the date of this Agreement. All applications required to have been filed for the renewal of Seller Permits have been duly filed on a timely basis with, and the applicable fees paid to, the appropriate Governmental Body, or the applicable Seller Permit nevertheless has been renewed, re-issued or otherwise resolved without material adverse consequence to the Business, and all other filings (and payment of fees in connection therewith) required to have been made with respect to each Seller Permit have been duly made on a timely basis with the appropriate Governmental Body, or if not filed on a timely basis, the lapse did not cause a material adverse consequence to the Business.

Section 5.10 Ownership of Assets.

(a) Immediately following the Closing, after giving effect to the transactions contemplated by this Agreement and the Ancillary Agreements, Buyer and its Affiliates will own, possess, license, lease, or otherwise have control of, access to, or rights to

Exhibit 2.01

use all assets (including pursuant to Contracts) necessary to conduct the Business, in all material respects, as presently conducted.

(b) Seller or one or more of its Affiliates holds good, valid and marketable title to, or has valid leases, licenses or rights to use, all tangible Acquired Assets, in each case, free and clear of any Encumbrances, except for Permitted Encumbrances, other than assets and property that are disposed of between the date of this Agreement and the Closing Date in the Ordinary Course of Business.

(c) Section 5.10(c) of the Business Disclosure Schedule sets forth a true and complete list of all tangible Information Technology included in the Acquired Assets, which for the avoidance of doubt, shall not include Software.

Section 5.11 Real Property.

(a) Section 5.11(a) of the Business Disclosure Schedule sets forth a true and complete list of all leases and subleases, including all amendments, extensions, renewals, guaranties and other agreements with respect to such leases or subleases, for real property that will be subleased by Buyer or its Affiliates as of the Closing Date pursuant to a Sublease Agreement (the “Real Estate Leases”), including the date and parties to each such Real Estate Lease and the address of the leased real property. Schedule 1.1(b) sets forth a true and complete list of all Assigned Leases, including the date and parties to each such Assigned Lease and the address of the leased real property. Seller or an Affiliate thereof, as applicable, has a valid and enforceable leasehold interest in each Assigned Lease and each Real Estate Lease, subject to any Permitted Encumbrances, and each Assigned Lease and each Real Estate Lease is in full force and effect and enforceable by Seller or its Affiliates, as applicable, in accordance with its terms, subject to the Enforceability Exceptions. True, accurate and complete copies of each Assigned Lease and Real Estate Lease have been made available to Buyer prior to the date hereof. Each of Seller and its Affiliates, and to the Knowledge of Seller, each other party to each Assigned Lease and Real Estate Lease, is in compliance in all material respects with such Assigned Lease or Real Estate Lease. Neither Seller nor any of its Affiliates, and to the Knowledge of Seller, no other party to any Assigned Lease or Real Estate Lease, is in breach in any material respect of such Assigned Lease or Real Estate Lease or in default thereunder, and neither Seller nor any of its Affiliates has received notice that it is in breach in any material respect or has defaulted under any Assigned Lease or Real Estate Lease. Neither Seller nor any of its Affiliates has assigned its interest in any Assigned Lease or any Real Estate Lease.

(b) HRS does not own or lease, and has never owned, any real property and does not hold any option to acquire or lease any real property.

(c) There are no subleases, licenses, concessions or other agreements, written or oral, granting to any third party or parties the right of use or occupancy of any of the space (i) leased by Seller or its Affiliates under any Assigned Lease, (ii) leased by Seller or its Affiliates and used by HRS under any Real Estate Lease or (iii) owned by Seller or its Affiliates and used by HRS.

Exhibit 2.01

Section 5.12 Environmental Matters.

(a) HRS and, to the extent related to the Business or the Acquired Assets, Seller and each of its Affiliates (other than HRS) are in compliance in all material respects with all applicable Environmental Laws (which compliance includes the possession by HRS of all permits and other governmental authorizations required under applicable Environmental Laws and compliance, in all material respects, with the terms and conditions thereof). Neither Seller nor any of its Affiliates (including HRS) has received any written notice, whether from a Governmental Body, citizens group, employee or other Person, that alleges that HRS or, to the extent related to the Acquired Assets, Seller or any of its Affiliates (other than HRS) is not in such compliance.

(b) There is no Environmental Claim pending or, to the Knowledge of Seller, threatened against (i) HRS or any of its properties or assets or (ii) Seller or its Affiliates (other than HRS) to the extent material and related to the Real Estate Leases or the Assigned Leases.

(c) To the Knowledge of Seller, there are no past or present events, circumstances, conditions or incidents relating to compliance with Environmental Laws or the release, emission, discharge, presence or disposal of any Materials of Environmental Concern, that form, or are reasonably expected to form, the basis of an Environmental Claim against, or otherwise result in any material Liabilities under Environmental Law to, (A) HRS or any Person whose Liability for any Environmental Claim HRS has retained or assumed either contractually or by operation of law or (B) Seller or its Affiliates (other than HRS) to the extent material and related to the Acquired Assets.

(d) Seller has made available to Buyer prior to the date hereof all material assessments, reports, data, results of investigations, audits or other materials or information in the possession of Seller and its Affiliates (including HRS) regarding environmental matters pertaining to (i) the environmental condition of the Acquired Assets, (ii) any real property which is the subject of any Assigned Lease, Real Estate Lease or Real Estate Loan or (iii) the compliance (or noncompliance) by HRS or, to the extent related to the Acquired Assets or the Investment Assets, Seller or its Affiliates (other than HRS) with any Environmental Laws.

Section 5.13 Intellectual Property.

(a) Section 5.13(a) of the Business Disclosure Schedule contains a true and complete list of all registrations and applications for registrations of Intellectual Property Rights that are owned by HRS (“HRS Owned Intellectual Property”) and all registrations and applications for registration of Intellectual Property Rights that are either (i) included in the Transferred Owned Intellectual Property or (ii) licensed by Seller or its Affiliates to Buyer pursuant to the Trademark License Agreement or the Transitional Trademark License Agreement (collectively, including HRS Owned Intellectual Property, “Owned Intellectual Property”).

(b) To the Knowledge of Seller: (i) the Business does not infringe or violate any Intellectual Property Rights of any non-affiliated third party, and (ii) there is no

Exhibit 2.01

pending or threatened Action before any Governmental Body alleging that the Business infringes or violates the Intellectual Property Rights of any non-affiliated third party or challenging the ownership, validity or enforceability of the Owned Intellectual Property. To the Knowledge of Seller, no Person is engaging in any activity that infringes upon, misappropriates or violates the Owned Intellectual Property and that would reasonably be expected to adversely affect the Business in any material respect.

(c) Seller or an Affiliate of Seller is the sole and exclusive beneficial owner of the HRS Owned Intellectual Property and the Transferred Owned Intellectual Property. To the Knowledge of Seller, all HRS Owned Intellectual Property and Transferred Owned Intellectual Property consisting of registered Trademarks or issued Patents is subsisting, valid and enforceable. To the Knowledge of Seller, Seller has not received any written notice from any Person challenging the validity or enforceability of any unregistered Trademark included in the Acquired Assets.

(d) To the Knowledge of Seller, there has not been any disclosure of any material Trade Secret used in the Business to any Person in a manner that has resulted or is likely to result in the loss of trade secret protection or other rights in and to such information.

(e) Seller and its Affiliates (including HRS) have implemented and currently have in place policies and procedures designed to comply with Applicable Laws relating to privacy, data protection and the collection and use of personal information collected, used or held for use by Seller and its Affiliates in the Business (“Data Privacy Laws”). In connection with the Business, there are no Actions pending or, to the Knowledge of Seller, threatened against Seller or any of its Affiliates (including HRS) alleging a violation of any Person’s privacy or personal information or data rights under Data Privacy Laws, and the consummation of the transactions contemplated hereby will not breach or otherwise cause any violation of any Data Privacy Laws.

(f) The consummation of the transactions contemplated by this Agreement will not in itself result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, HRS’ right to own, use or hold for use any of the material Intellectual Property Rights as owned, used or held for use in connection with the Business.

(g) With respect to the Software (i) owned by HRS or (ii) owned by Seller and its Affiliates and that either is included in the Acquired Assets or will be licensed to Buyer pursuant to the Software License Agreement: (A) there is no pending or threatened Action before any Governmental Body challenging the ownership thereof or the validity or enforceability of Seller’s and its Affiliates’ Patent, Trademark, Copyright or Trade Secret rights therein; (B) to the Knowledge of Seller, no Person is engaging in any activity that infringes upon, misappropriates or violates Seller’s and its Affiliates’ Patent, Trademark, Copyright or Trade Secret rights in such Software; (C) Seller or an Affiliate of Seller is the sole and exclusive beneficial owner thereof; (D) the consummation of the transactions contemplated by this Agreement will not in itself result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, HRS’ right to own, use or hold for use any such Software; (E) to the Knowledge of Seller, no such Software

Exhibit 2.01

contains any device or feature designed to disrupt, disable, or otherwise impair the functioning of any Software, other than ordinary security features; and (F) to the Knowledge of Seller, neither Seller nor any of its Affiliates has distributed, used or modified any Software licensed pursuant to a Copyleft License in any manner that would require such Software to be disclosed or distributed in source code form or made available at no charge in any way that adversely affects the Business in any material respect. Neither Seller nor any Affiliate of Seller (including HRS) has delivered, licensed or made available, and neither Seller nor any Affiliate of Seller (including HRS) has any duty or obligation (whether present, contingent, or otherwise) to deliver, license or make available, the source code for any Software owned by HRS to any escrow agent or other Person who is not, as of the date hereof, an employee of Seller or any of its Affiliates (including HRS).

(h) To the Knowledge of Seller: (i) the Business does not infringe or violate any Patent, Trademark, Copyright or Trade Secret rights of any non-affiliated third party in any Software; and (ii) there is no pending or threatened Action before any Governmental Body alleging that the Business infringes or violates the Patent, Trademark, Copyright or Trade Secret rights of any non-affiliated third party in any Software.

(i) With respect to (i) the Software owned by HRS, (ii) the Software owned by Seller and its Affiliates and that either is included in the Acquired Assets or will be licensed to Buyer pursuant to the Software License Agreement and (iii) the Information Technology included in the Acquired Assets, no capital expenditures are necessary to complete pending development or deployment projects other than capital expenditures that are not reasonably anticipated to exceed one hundred thousand dollars ($100,000) in the aggregate.

(j) Other than the Patents included in the Acquired Assets, Seller and its Affiliates own no Patents that read on the products or services sold or distributed by the Business.

Section 5.14 Compliance with Applicable Law, Litigation or Regulatory Action.

(a) HRS is in compliance in all material respects with each Applicable Law that is applicable to it or the conduct or operation of its business or ownership or use of any of its assets or properties, and is not restricted under Securities and Exchange Commission Rule 206(4)-5 and similar “pay-to-play” laws from engaging in or receiving compensation for carrying on any portion of the Business. To the extent related to the Business, Seller and its Affiliates (other than HRS) are in compliance in all material respects with each Applicable Law, and are not restricted under Securities and Exchange Commission Rule 206(4)-5 and similar “pay-to-play” laws from engaging in or receiving compensation for carrying on any portion of the Business. Since January 1, 2009, HRS has not received any written notification or, to the Knowledge of Seller, oral notification of any asserted past or present failure to comply with Applicable Law that has not been remedied as of the date of this Agreement. Since January 1, 2009, to the extent related to the Business, none of Seller or its Affiliates (other than HRS) has received any written notification or, to the Knowledge of Seller, oral notification of any asserted past or present failure to comply with Applicable Law that has not been remedied as of the date of this Agreement. To the Knowledge of Seller, HRS has not violated or failed to comply with any Applicable Law that may be reasonably expected to result in any penalty, fine, loss of

compensation from government contracts, suspension, restriction or loss of any Seller Permit or other adverse or remedial action that would interfere with the conduct of its business as presently conducted.

Exhibit 2.01

To the Knowledge of Seller, to the extent related to the Business, none of Seller or its Affiliates (other than HRS) has violated or failed to comply with any Applicable Law that may be reasonably expected to result in any penalty, fine, suspension, loss of compensation from government contracts, restriction or loss of any Seller Permit or other adverse or remedial action that would interfere with the conduct of the Business as presently conducted.

(b) There are no material Actions pending or, to the Knowledge of Seller, threatened against (i) HRS, any of its properties or assets or any Acquired Assets or (ii) to the extent related to the Business, Seller or its Affiliates (other than HRS) or any of their respective properties or assets.

(c) Section 5.14(c) of the Business Disclosure Schedule sets forth a true and complete list of all material Actions pending as of the date hereof that were commenced by any of (i) HRS or (ii) to the extent related to the Business, Seller or its Affiliates (other than HRS).

(d) Neither Seller nor any of its Affiliates is subject to any outstanding Governmental Order or Regulatory Agreement, in each case, relating to the Business or HRS, nor has Seller or any of its Affiliates been advised in writing since January 1, 2009 by any Governmental Body that it is considering issuing or requesting any such Governmental Order or Regulatory Agreement relating to the Business or HRS.

(e) Seller has made available to Buyer prior to the date hereof true, accurate and complete copies of all reports or findings (or all relevant or applicable portions thereof) related to HRS or the Business from any audits, examinations or investigations (including the reports or findings from any financial, market conduct and similar examinations, or drafts of such reports or findings if the final report or findings are not yet available) performed with respect to HRS or the Business by or on behalf of any Governmental Body since January 1, 2009 (the “Examination Reports”), together with all material written correspondence or written responses relating thereto. All material deficiencies or violations that have been asserted by or on behalf of any Governmental Body in any such Examination Report, to the extent related to HRS or the Business, have been resolved prior to the date of this Agreement to the satisfaction of the Governmental Body that noted such deficiencies or violations. No audits, examinations or investigations are currently being performed or, to the Knowledge of Seller, are scheduled to be performed on HRS or with respect to the Business by any Governmental Body.

(f) Seller and its Affiliates and any of their respective officers and employees who are required to be registered or licensed as (i) a broker-dealer or (ii) a registered principal, registered representative or insurance agent with any Governmental Body in connection with the Business are duly registered or licensed as such, or are in the process of being registered or licensed as such within the time periods required by Applicable Law, except, in each case, for any failures to be so registered or licensed that would not reasonably be expected, individually or in the aggregate, to be material to the Business.

Exhibit 2.01

(g) HSD: (i) is conducting the Business in compliance in all material respects with all Applicable Laws; (ii) is in compliance with all Seller Permits necessary to permit it to conduct the Business as presently conducted by HSD; (iii) has timely filed all material applications, registrations, declarations, reports, notices, forms and other documents (and all amendments or supplements thereto) required to be filed with the SEC, FINRA, any clearing agency (as defined in Section 3(a)(23) of the Exchange Act) or any other Governmental Body to permit it to conduct the Business as presently conducted by HSD, and such filings are in full force and effect in all material respects and were prepared in all material respects in accordance with Applicable Law, and all material fees and assessments due and payable in connection therewith have been paid in a timely manner; and (iv) is not and, to the Knowledge of Seller, none of HSD’s “associated persons” are, subject to a “statutory disqualification” (as such terms are defined in the Exchange Act), and there is no investigation (A) pending or, to the Knowledge of Seller, threatened against HSD, or (B) to the Knowledge of Seller, pending or threatened against any of HSD’s associated persons, in each case, whether formal or informal, that would reasonably be expected to result in a statutory disqualification or that would be a basis for censure, limitations on the activities, functions or operations of, or suspension or revocation of the registration of HSD under Section 15, Section 15B or Section 15C of the Exchange Act.

(h) Seller and its Affiliates (other than HRS), in each case, to the extent related to the Business, and HRS have in place a written anti-money laundering program and a written customer identification program in compliance in all material respects with Applicable Law, and each of Seller and each of its Affiliates (including HRS) are in compliance in all material respects with the terms of such programs.

Section 5.15 Material Contracts.

(a) Section 5.15(a) of the Business Disclosure Schedule contains a true and complete list of each Material Contract as of the date hereof. For the purposes of this Agreement, each of the following Contracts to which HRS, or, to the extent relating to the Business, Seller or any of its Affiliates (other than HRS) is a party shall be deemed to constitute a “Material Contract”:

(i) with respect to (x) each Significant Plan, each Contract relating to such Significant Plan for the provision of administrative services, recordkeeping services or other similar services by Seller or its Affiliates to any Significant Plan and (y) each Significant Plan that does not receive benefits under a Covered Insurance Policy, (A) each Contract pursuant to which a securities account is established for such Significant Plan with Seller or its Affiliates and (B) each Contract for the provision of custodial services related to such securities account;

(ii) each Mutual Fund Agreement with a Significant Mutual Fund Organization;

(iii) each Distribution Contract to which a Material Distributor is a party;

Exhibit 2.01

(iv) any Contract pursuant to which a non-affiliated third party licenses (as licensor or licensee) Intellectual Property Rights (other than Intellectual Property Rights in Information Technology) to or from Seller or its Affiliates (including HRS) (A) involving aggregate payments in connection with the Business in the twelve (12) months ended December 31, 2011 in excess of two hundred and fifty thousand dollars ($250,000) or (B) with respect to any Contract entered into on or after November 1, 2011, involving aggregate payments in connection with the Business in any six (6) month period during 2012 in excess of one hundred and twenty five thousand dollars ($125,000);

(v) any Contract pursuant to which a non-affiliated third party licenses (as licensor or licensee) Information Technology to or from Seller or its Affiliates (including HRS) (other than any such agreement for off-the-shelf, commercially available Software that has not been customized by or on behalf of Seller or its Affiliates) (A) involving aggregate payments in connection with the Business in the twelve (12) months ended December 31, 2011 in excess of two hundred and fifty thousand dollars ($250,000) or (B) with respect to any Contract entered into on or after November 1, 2011, involving aggregate payments in connection with the Business in any six (6) month period during 2012 in excess of one hundred and twenty five thousand dollars ($125,000);

(vi) any Contract pursuant to which Seller or its Affiliates (including HRS) is restricted in its rights to use, enforce or register any material Intellectual Property Rights in connection with the Business;

(vii) any Shared Contract (other than any Enterprise Contracts) (A) involving aggregate payments in connection with the Business in the twelve (12) months ended December 31, 2011 in excess of two hundred and fifty thousand dollars ($250,000) or (B) with respect to any Contract entered into on or after November 1, 2011, involving aggregate payments in connection with the Business in any six (6) month period during 2012 in excess of one hundred and twenty five thousand dollars ($125,000);

(viii) any Transferred Contract (A) involving aggregate payments in connection with the Business in the twelve (12) months ended December 31, 2011 in excess of two hundred and fifty thousand dollars ($250,000) or (B) with respect to any Contract entered into on or after November 1, 2011, involving aggregate payments in connection with the Business in any six (6) month period during 2012 in excess of one hundred and twenty five thousand dollars ($125,000);

(ix) any Multiparty Contract (A) involving aggregate payments in connection with the Business in the twelve (12) months ended December 31, 2011 in excess of two hundred and fifty thousand dollars ($250,000) or (B) with respect to any Contract entered into on or after November 1, 2011, involving aggregate payments in connection with the Business in any six (6) month

Exhibit 2.01

period during 2012 in excess of one hundred and twenty five thousand dollars ($125,000);

(x) any Contract (other than Ancillary Agreement Covered Contracts) with a third party that (A) calls for the payment by or on behalf of HRS or the Business in excess of two hundred and fifty thousand dollars ($250,000) during the remaining term thereof, or the delivery by HRS or the Business of goods or services with a fair market value in excess of two hundred and fifty thousand dollars ($250,000), during the remaining term thereof or (B) provides for HRS or the Business to receive any payments in excess of, or any property with a fair market value in excess of, two hundred and fifty thousand dollars ($250,000) during the remaining term thereof;

(xi) any Contract whereby HRS is or may become obligated to assume, grant, guarantee, endorse or otherwise becomes responsible for, the Liabilities of any other Person or make any loans, advances or capital contributions to, or investments in, any other Person;

(xii) any Contract whereby HRS has granted a power of attorney;

(xiii) any Contract that involves Indebtedness in respect of HRS;

(xiv) any limited liability company, partnership, joint venture or other similar Contract relating to the formation, creation, operation, management or control of any partnership or joint venture in respect of the Business or HRS;

(xv) any Contract providing for the acquisition or disposition of any asset or property of HRS or any asset or property that presently constitutes, or at the Closing would constitute, part of the Business (whether by merger, sale or purchase of stock, sale or purchase of assets, bulk reinsurance or otherwise), other than (A) any such Contract entered into in the Ordinary Course of Business and (B) Contracts providing for the acquisition or disposition of any Investment Assets;

(xvi) any employment or consulting Contract with any Business Employee;

(xvii) any Contract for the provision of personal services to the Business by consultants who are natural persons;

(xviii) any Contract containing any covenant or provision that would prohibit HRS from engaging in any line or type of business, soliciting customers on behalf of Buyer or competing with or obtaining goods or services from any Person;

Exhibit 2.01

(xix) any Transferred Contract or Contract of HRS including a “most favored nation” or comparable right in favor of any Person other than, after giving effect to the Closing, Buyer or its Affiliates (including HRS);

(xx) any Transferred Contract or Contract of HRS that has an unexpired term exceeding one (1) year and that may not be canceled upon ninety (90) days’ or less notice without any liability, penalty or premium;

(xxi) any reinsurance, retrocession or similar Contract to which Cedant is a party (either as a ceding company or assuming company) covering risks included within the Business or under which Cedant has any existing rights, obligations or Liabilities related to the Business; and

(xxii) any Contract that contains a commitment or obligation to enter into any of the foregoing;

provided that no Covered Insurance Policies, Assigned Leases or any other lease agreements or sublease agreements for real property shall be considered to be “Material Contracts” hereunder.

(b) Seller has made available to Buyer prior to the date hereof a true, accurate and complete copy of each Material Contract, including all amendments and supplements thereto and assignments and extensions thereof. Seller or each applicable Affiliate of Seller has performed in all material respects all obligations required to be performed by it to date under each Material Contract to which it is a party, and there has been no violation or breach in any material respect of, or default under, or claim of such violation, breach or default, by it or, to the Knowledge of Seller, by any other party thereto, under any provision thereof, and no event has occurred which, with or without notice, the passage of time or both, would constitute such a violation or breach in any material respect or default by it, or, to the Knowledge of Seller, any other party thereto, under any provision thereof or that would permit modification, acceleration, suspension or termination of any Material Contract by any party thereto. Each Material Contract is a legal, valid and binding obligation of each of Seller or each applicable Affiliate of Seller that is a party thereto, and, to the Knowledge of Seller, is a legal, valid and binding obligation of each other party thereto, and is in full force and effect and enforceable by Seller or each applicable Affiliate of Seller that is a party thereto against each other party thereto in accordance with its terms, subject to the Enforceability Exceptions. Neither Seller nor any of its Affiliates has received any written notice of a cancellation or termination of or an intent to cancel or terminate any Material Contract.

Section 5.16 Material Distributors.

(a) Each Distribution Contract with any Material Distributor that is a broker-dealer includes a provision or provisions requiring that such Material Distributor complies in all material respects with all Applicable Laws relating to the offer or sale of shares, units or equity interests in investment funds or other investment entities in connection with its activities relating to the Business. Seller and its applicable Affiliates do not have any plan or

Exhibit 2.01

program for the payment of compensation to any Distributor, except for commissions and trail Compensation.

(b) Since March 31, 2012, no Material Distributor has notified Seller or its applicable Affiliates in writing of its intent to terminate its relationship with Seller or its applicable Affiliates with respect to the Business.

Section 5.17 Mutual Fund Organizations. Other than as expressly set forth in the applicable Mutual Fund Agreement, there are no fees paid to Seller or its Affiliates or other business arrangements that benefit Seller or its Affiliates that are a condition of or inducement for inclusion of any mutual fund as an investment option for Plan sponsors to make available to Plan participants.

Section 5.18 Employee Benefits and Agreements.

(a) None of the Employee Benefit Plans is sponsored by HRS. Section 5.18(a) of the Business Disclosure Schedule lists (i) all material Employee Benefit Plans, (ii) all Seller Sales Incentive Plans and (iii) all retention agreements covering any Business Employee, including the aggregate amount that could become payable pursuant to such retention agreements on each of September 30, 2012, March 31, 2013 and September 30, 2013.

(b) None of Buyer nor any of its Affiliates will, as a result of the transactions contemplated by this Agreement, assume by operation of Applicable Law or otherwise (i) any Liability with respect to (w) a “multiemployer plan” (within the meaning of Section 3(37) of ERISA), (x) a “multiple employer plan” (within the meaning of Section 413(c) of the Code), (y) any single employer plan or other pension plan subject to Title IV or Section 302 of ERISA or Section 412 of the Code, or (z) any employee benefit plan, program or arrangement that provides for medical, life insurance or other welfare-type benefits after termination of employment (other than as required to avoid an excise Tax under Section 4980B of the Code or other similar Applicable Law), or (ii) except as provided for in Section 8.1, any Employee Benefit Plan.

(c) Each Employee Benefit Plan has been established, maintained and administered in all material respects in accordance with its terms, and in compliance with the applicable provisions of ERISA, the Code and other Applicable Law. There are no pending or, to the Knowledge of Seller, threatened claims by, against or on behalf of any of the Employee Benefit Plans or otherwise involving any Employee Benefit Plan (other than routine claims for benefits), except as would not give rise to any Liability of Buyer or any of its Affiliates, including, after the Closing, HRS.

(d) Except as contemplated by this Agreement, no Employee Benefit Plan exists that, as a result of the execution of this Agreement or the transactions contemplated by this Agreement, alone or together with any other event, could reasonably be expected to

(i) result in severance pay or any increase in severance pay of any Business Employee, or

(ii) accelerate the time of payment or vesting or result in any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable under,

Exhibit 2.01

or result in any other material obligation pursuant to, any of the Employee Benefit Plans in respect of any Business Employee.

(e) Each Employee Benefit Plan from which Buyer or its Affiliates will accept direct rollovers that is intended to be “qualified” within the meaning of Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service as to its qualification and, to the Knowledge of Seller, no event has occurred that is reasonably expected to result in disqualification of such Employee Benefit Plan.

(f) Each Employee Benefit Plan is exempt from, or complies in form and has been operated in compliance in all material respects with, the requirements of Section 409A of the Code, except as would not give rise to any Liability of Buyer or any of its Affiliates including, after the Closing HRS.

(g) The transactions contemplated by this Agreement, whether alone or together with any other event, will not give rise to any payment or benefit whose value is not deductible in whole or part by reason of Section 280G of the Code for which Buyer or any of its Affiliates could have Liability.

Section 5.19 Employees and Employee Relations.

(a) HRS has no, and since January 1, 2009 has not had any, employees.

(b) (i) There are no collective bargaining agreements, labor agreements, work rules or practices or any other labor-related agreements or arrangements with any labor union or labor organization to which Seller or its Affiliates (including HRS) are parties with respect to any Business Employees and (ii) to the Knowledge of Seller, (A) there are no formal organizational campaigns, petitions or other material unionization activities seeking recognition of a bargaining unit in the Business, (B) there are no material strikes, lockouts, slowdowns or work stoppages pending or, to the Knowledge of Seller, threatened with respect to any Business Employees and (C) no strike, lockout, slowdown or work stoppage with respect to any Business Employees has occurred within the three (3) years preceding the date of this Agreement.

(c) There are no actual or, to the Knowledge of Seller, threatened material arbitrations, material written grievances or material labor disputes involving any labor union or labor organization against or affecting the Business.

(d) Seller and its Affiliates are in compliance in all material respects with all Applicable Laws respecting employment and employment practices relating to the Business, including all laws respecting terms and conditions of employment, health and safety, wages and hours, child labor, immigration, employment discrimination, disability rights or benefits, equal opportunity, plant closures and layoffs, affirmative action, workers’ compensation, labor relations, employee leave issues and unemployment insurance relating to the Business.

(e) Since January 1, 2009, to the extent related to the Business, Seller and its Affiliates have not received: (i) written notice of any unfair labor practice charge or complaint pending or threatened against them before the National Labor Relations Board or any other similar Governmental Body responsible for labor relations, (ii) written notice of any charge

Exhibit 2.01

or complaint with respect to or relating to them pending before the Equal Employment Opportunity Commission or any other Governmental Body responsible for the prevention of unlawful employment practices, (iii) written notice of the intent of any Governmental Body responsible for the enforcement of labor, employment, wages and hours of work, child labor, immigration, or occupational safety and health laws to conduct an investigation with respect to or relating to them or written notice that such investigation is in progress, or (iv) written notice of any complaint, lawsuit or other proceeding pending or threatened in any forum by or on behalf of any present or former Business Employee or any applicant for employment as a Business Employee alleging breach of any express or implied contract of employment, any Applicable Law governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship, in the case of each of (i) through (iv), that has not been resolved as of the date of this Agreement.

(f) To the Knowledge of Seller, no Business Employee is in any material respect in violation of any term of any employment agreement, nondisclosure agreement, common law nondisclosure obligation, fiduciary duty, noncompetition agreement, restrictive covenant or other obligation (i) to a former employer of any such employee relating (A) to the right of any such employee to be employed by Seller or its Affiliates or (B) to the knowledge or use of trade secrets or proprietary information or (ii) to Seller or its Affiliates.

(g) Seller and its Affiliates are in compliance in all material respects with all notice and other requirements under the Workers’ Adjustment and Retraining Notification Act and any similar foreign, state or local law relating to plant closings and layoffs relating to the Business.

(h) HRS is not (i) a “contractor” or “subcontractor” (as defined by Executive Order 11246), (ii) required to comply with Executive Order 11246 or (iii) required by federal law to maintain an affirmative action plan relating to the Business.

(i) No Business Employee requires a “green card” or other similar employment authorization document under Applicable Law to perform work as of the Closing Date.

(j) Seller and its Affiliates have properly classified each Distributor as an independent contractor, and not an employee, for all purposes and have properly withheld and paid all applicable Taxes (if any) and made all required filings in connection with services provided by, and compensation paid to, such Distributors.

Section 5.20 No Brokers. Except with respect to the fees of Greenhill & Co., LLC and Goldman, Sachs & Co., for which Seller or an Affiliate of Seller (other than HRS) is solely responsible, neither Seller nor any Person acting on its behalf has paid or become obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement or any Ancillary Agreement.

Section 5.21 Insurance Product-Related Matters.

(a) To the extent required under Applicable Law, all policy forms and certificates used in the Business, and all amendments, endorsements and riders thereto

Exhibit 2.01

(collectively, “Policy Forms”), and all applications, brochures and marketing materials pertaining thereto, have been, in all material respects, approved by all applicable Governmental Bodies or filed with and not objected to by such Governmental Bodies within the period provided by Applicable Law for objection. All Policy Forms complied, in all material respects, with Applicable Law when issued. All Policy Forms currently being issued, and substantially all Policy Forms on which Covered Insurance Policies in force on the date of this Agreement were issued, as well as the forms of any Contracts pursuant to which administrative services, recordkeeping services or other similar services are provided by Seller or its Affiliates to Plans in connection with any Covered Insurance Policy (collectively, “Service Agreement Forms”), have been made available to Buyer prior to the date hereof. Each Covered Insurance Policy in force on the date of this Agreement conforms in all material respects to one of the Policy Forms, and each Contract in force on the date of this Agreement pursuant to which administrative services, recordkeeping services or other similar services are provided by Seller or its Affiliates to Plans in connection with any Covered Insurance Policy conforms in all material respects to one of the Service Agreement Forms so provided.

(b) All benefits claimed by any Person, and all cash, values, charges and other amounts required to have been paid, under any Covered Insurance Policy have, in all material respects, since January 1, 2009, been paid (or provision for payment thereof has been made) in accordance with the terms of the Covered Insurance Policy under which they arose and with all Applicable Laws, and any such payments were not delinquent in any material respect, except for any such claim for benefits for which Cedant reasonably believes or believed that there is a reasonable basis to contest payment and is taking such action.

(c) Each Covered Insurance Policy that is provided under or in connection with any Plan subject to ERISA, to the extent supported by assets of the Cedant’s general account, is a “guaranteed benefit policy” within the meaning of Section 401(b)(2) of ERISA.

(d) Each of the Separate Accounts of Cedant has been duly and validly established under, and maintained in accordance with, Applicable Law, and that portion of the assets of each Separate Account equal to the reserves and other contract liabilities with respect to each such Separate Account is not chargeable with Liabilities arising out of any other business that Cedant may conduct. Each Separate Account has been operated and is presently operating in compliance in all material respects with Applicable Law and applicable Seller Permits.

(e) Each private placement memorandum, prospectus, offering document, sales brochure, sales literature or advertising material, as amended or supplemented, relating to any Separate Account (other than Separate Accounts required to be registered under the Securities Act with the SEC), as of their respective mailing dates or dates of use, (i) complied in all material respects with Applicable Law and (ii) did not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading that could reasonably be expected to result in any Liability to any contract holder of a Covered Insurance Policy or any Plan participant. No examinations, investigations, inspections and formal or informal inquiries, including periodic regulatory examinations of the Separate Accounts’ affairs and condition, civil investigative demands and market conduct

Exhibit 2.01

examinations, by any Governmental Body are being conducted as of the date hereof. No notice has been received from, and, to the Knowledge of Seller, no investigation, inquiry or review is pending or threatened by, any Governmental Body that has jurisdiction over the Separate Accounts with respect to any alleged (i) violation in any material respect by Cedant of any Applicable Law in connection with the operation of the business of the Separate Accounts or (ii) failure to have, or any threatened revocation of, any Governmental Consent required in connection with the operation of the business of the Separate Accounts.

(f) (i) Each Separate Account that is not registered with the SEC as an “investment company” (as such term is defined in the Investment Company Act) is not required to be registered in reliance on Section 3(c)(11) of the Investment Company Act; (ii) each Separate Account that is required to be registered with the SEC as a unit investment trust, management investment company or otherwise under the Investment Company Act is so registered and each such registration is in full force and effect; (iii) each registered Separate Account has been operated and is presently operating in compliance in all material respects with the Investment Company Act and with applicable regulations, rules, releases and orders of the SEC; (iv) interests in each registered Separate Account or the variable contracts through which such interests are issued have been sold pursuant to an effective registration statement filed under the Securities Act and any applicable state securities laws; (v) no registration statement pertaining to any registered Separate Account, at the time such registration statement became effective, contained any untrue statement of material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements made therein not misleading that could reasonably be expected to result in any Liability to any contract holder of a Covered Insurance Policy or any Plan participant; (vi) each prospectus or statement of additional information, as amended or supplemented, relating to any registered Separate Account and all supplemental advertising material, sales brochures and sales literature relating to any registered Separate Account, as of their respective mailing dates or dates of use, (A) complied in all material respects with Applicable Law and (B) did not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading that could reasonably be expected to result in any Liability to any contract holder of a Covered Insurance Policy or any Plan participant; and (vii) all material advertising or marketing materials relating to each Separate Account that were required to be filed with any Governmental Body have been or will be timely filed therewith.

(g) Cedant has filed and/or amended all reports and registration statements pertaining to the Covered Insurance Policies funded by the Separate Accounts to the extent required by Applicable Laws. Cedant has obtained all exemptive relief necessary or appropriate for the operation of the Separate Accounts that are registered under the Securities Act as contemplated by and described in the applicable registration statement filed with the SEC. Any exemptive orders upon which the Separate Accounts operate or rely are in full force and effect and the Separate Accounts have complied and are in compliance with the terms of and conditions of such orders.

(h) Cedant and each of its registered Separate Accounts complies, in all material respects, with all applicable provisions of Section 26 of the Investment Company Act. Cedant and its Separate Accounts, as financial intermediaries under Rule 22c-2 of the Investment

Exhibit 2.01

Company Act, have systems and procedures in place whereby Cedant and its Separate Accounts can fulfill obligations under the shareholder information agreements entered into with underlying funds.

(i) There are no reinsurance, retrocession or other similar Contracts under which any risks under any Covered Insurance Policy have been or are being ceded or reinsured.

(j) The Tax treatment under the Code of each Covered Insurance Policy is not less favorable to the purchaser, policyholder, other holder, owner or beneficiary thereof, than the Tax treatment under the Code (i) that was purported to apply in materials provided at the time of issuance, exchange, modification or purchase or (ii) for which such Covered Insurance Policy was treated as qualifying at the time of issuance, assumption, exchange, modification or purchase. For purposes of this Section 5.21(j), the provisions of the Code relating to the Tax treatment of such Covered Insurance Policies shall include, but not be limited to, Sections 401, 403(a), 403(b), 408 and 457 of the Code.

(k) Neither Seller nor any of its Affiliates acknowledge or accept, under the terms of any Contracts related to the Business, the status of, or responsibility as, a “fiduciary” (as such term is defined under Section 3(21)(A) of ERISA or any parallel provision of the Code) with respect to any Plan or Covered Insurance Policy. Neither Seller nor any of its Affiliates acknowledge or accept, under the terms of any Contracts related to the Business, the status of, or responsibility as, a “fiduciary” (as such term is defined under any applicable state law similar to ERISA) with respect to any Plan that is a “governmental plan” (as defined under Section 3(32) of ERISA) or a “church plan” (as defined under Section 3(33) of ERISA), or a Covered Insurance Policy.

(l) Each Covered Insurance Policy that was represented to the purchaser, policyholder, other holder, owner or beneficiary thereof as satisfying the requirements of Section 401, 403(a), 403(b), 408 or 457 or any other applicable Section of the Code contains (and has contained since issuance) all of the provisions required for qualification under such Sections of the Code, has been administered by Seller or its Affiliates, as the case may be, in accordance with the requirements of such Sections of the Code, and satisfies the requirements of such Sections of the Code. Other than representations relating to the issuance or existence of favorable opinions or advisory letters described in Section 5.21(s), neither Seller nor any of its Affiliates has represented to the sponsor of any Plan that such Plan or any of its constituent documents, other than a Covered Insurance Policy, satisfies the requirements of Section 401, 403(a), 403(b), 408 or 457 or any other applicable Section of the Code, or has acknowledged or assumed, under the terms of any Contracts related to the Business, responsibility for ensuring that a Plan or any of its constituent documents, other than a Covered Insurance Policy, satisfies the requirements under any such Sections of the Code.

(m) The Covered Insurance Policies that are provided under or in connection with any Plan have been administered by Seller or its Affiliates and otherwise are in compliance with the requirements of ERISA and the Code, as applicable to such Covered Insurance Policies. Without limitation of the foregoing, neither Seller nor any of its Affiliates has engaged in any non-exempt prohibited transaction described in Section 406 of ERISA or

Section 4975 of the Code in connection with any Covered Insurance Policies and, except for such transactions that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, neither Seller nor any of its Affiliates has otherwise engaged in any non-exempt

Exhibit 2.01

prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code in connection with any Plans. In addition, if and to the extent that Seller or any of its Affiliates has, or has had, any fiduciary duties under Section 404 of ERISA or comparable provisions of applicable state law with respect to any Covered Insurance Policies, neither Seller nor any of its Affiliates has failed to satisfy such fiduciary duties to the extent applicable to the Covered Insurance Policies and, except for such failures that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, neither Seller nor any of its Affiliates has otherwise failed to satisfy any fiduciary duties with respect to any Plans imposed on Seller or any of its Affiliates under Section 404 of ERISA or comparable provisions of applicable state late. The transactions contemplated by this Agreement and the Ancillary Agreements will not, with respect to Seller or its Affiliates, as the case may be, constitute or result in any non-exempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code.

(n) The systems and procedures utilized by Seller and its Affiliates in administering the Business are reasonably designed to prevent (to the extent that Seller or any of its Affiliates are obligated or responsible therefor) non-exempt prohibited transactions described in Section 406 of ERISA or Section 4975 of the Code or violations of Section 404 of ERISA.

(o) Seller and its Affiliates have (i) complied in all material respects with all Applicable Laws relating to reporting, withholding, and disclosure requirements under the Code and ERISA that are applicable to the Covered Insurance Policies or that are applicable to Seller and its Affiliates as a result of providing services in connection with any Covered Insurance Policies or Plans, (ii) in all material respects, duly and timely withheld from amounts due and payable by each of Seller and its Affiliates to any purchaser, policyholder, other holder, owner or beneficiary thereof, and paid over to appropriate Tax Authorities, all amounts required to be withheld and paid over, and (iii) in particular, but without limitation, have reported distributions under such Covered Insurance Policies in compliance in all material respects with all applicable requirements of the Code, Treasury Regulations and forms or guidance issued by the Internal Revenue Service or United States Department of the Treasury.

(p) Neither Seller nor any of its Affiliates has entered into any settlement agreement, closing agreement or other agreement, nor is involved in any discussions or negotiations with the Internal Revenue Service or any other Tax Authority regarding such agreements, with respect to any potential failure of any Covered Insurance Policy or Plan to meet the requirements of Section 401, 403(a), 403(b), 408 or 457 or any other applicable Section of the Code, as applicable to such Covered Insurance Policies or Plan. In addition, neither Seller nor any of its Affiliates is a party to or has received notice of any pending federal, state, local or foreign audit or other administrative or judicial action with regard to the Tax treatment of any Covered Insurance Policies or any Plan maintained in connection with any Covered Insurance Policy, or of any claims by the purchasers of the Covered Insurance Policies regarding the Tax treatment of the Covered Insurance Policies or the plan or arrangement in connection with which such Covered Insurance Policies were issued. Neither Seller nor any of its Affiliates is aware of any rulings, requests for rulings or requests for waivers with respect to any potential or actual

failure of any Covered Insurance Policy or Plan to meet any applicable requirements of the Code (including the requirements of Section 401, 403(a), 403(b), 408 or 457).

Exhibit 2.01

(q) Neither Seller nor any of its Affiliates is a party to any “hold harmless,” Tax Sharing Arrangement or Tax indemnification agreement regarding the Tax qualification or treatment of any Covered Insurance Policy (whether developed by, administered by, or reinsured with any unrelated party).

(r) None of the Covered Insurance Policies were issued, marketed, or sold by Seller or its Affiliates as life insurance policies intended to qualify as such under Section 7702 of the Code or as contracts that provide for annuity benefits intended to be taxed to the policyholder pursuant to Section 72(s) of the Code.

(s) All master and prototype plans and volume submitter plans that are intended to be qualified under Section 401(a) of the Code and are marketed, sold or issued in connection with the Business are the subject of a favorable opinion or advisory letter, as applicable, from the Internal Revenue Service in accordance with Revenue Procedure 2007-44 or as otherwise applicable to confirm that such plans comply with “EGGTRA” (as defined in Revenue Procedure 2007-44). All required amendments to such master and prototype plans and volume submitter plans, all required opinion letters and determination letters, all required notices and other communications, and any required amendments and/or supplements thereto have been timely submitted to all adopting employers required to receive such plan documentation and communications.

Section 5.22 Facts Affecting Regulatory Approvals. As of the date hereof, neither Seller nor any of its Affiliates has received written notification from any Governmental Body that such Governmental Body would oppose the transactions contemplated hereby or refuse to grant or issue its consent or approval, if required, with respect to the transactions contemplated hereby.

Section 5.23 Settlement Agreement. Seller and its Affiliates are in compliance with their respective obligations under the Settlement Agreement and Release (the “Settlement Agreement”), dated February 11, 2010, relating to a class action filed against HFSG, HLIC and Neuberger Berman Management, Inc. by Phones Plus, Inc., as sponsor and plan administrator of the Phones Plus Retirement Savings Plan, captioned Phones Plus, Inc., et al. v. Hartford Life Insurance Co., et al., Civ. No. 3:06-cv-01835 (D. Conn.), including the timely implementation of the structural changes to the Business described in Section IV of the Settlement Agreement.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER

Except as set forth in the corresponding sections or subsections of the disclosure schedule delivered by Buyer to Seller prior to entering into this Agreement (the “Buyer Disclosure Schedule”) (it being understood that disclosure of any item in any section or subsection of the Buyer Disclosure Schedule shall be deemed disclosed with respect to another enumerated section or subsection of the Buyer Disclosure Schedule to which the relevance of

Exhibit 2.01

such item is reasonably apparent on its face), Buyer hereby represents and warrants to Seller as of the date hereof and as of the Closing Date as follows:

Section 6.1 Organization and Standing. Buyer is a mutual life insurance

company duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts. Each Buyer Party is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized.

Section 6.2 Authority; Conflicts.

(a) Each of Buyer and each Buyer Party has the full power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it is or will be a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and such Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby by Buyer and each Buyer Party have been duly and validly authorized and approved by all requisite corporate or other similar action on the part of Buyer and each Buyer Party. This Agreement has been duly and validly authorized, executed and delivered by Buyer, and (assuming the valid authorization, execution and delivery of this Agreement by Seller) is the legal, valid and binding obligation of Buyer, enforceable in accordance with its terms, and each of the Ancillary Agreements to which Buyer or any Buyer Party is or will be a party has been duly and validly authorized by Buyer or such Buyer Party and, upon execution and delivery by Buyer or such Buyer Party, will be (assuming the valid authorization, execution and delivery by the other party or parties thereto who are not Affiliates of Buyer) a legal, valid and binding obligation of Buyer or such Buyer Party enforceable in accordance with its terms, subject in each case to the Enforceability Exceptions.

(b) The execution and delivery by Buyer or any Buyer Party of this Agreement or any of the Ancillary Agreements, the consummation by Buyer or any Buyer Party of the transactions contemplated hereby or thereby or compliance by Buyer or any Buyer Party with or fulfillment by Buyer or any Buyer Party of the terms, conditions and provisions hereof or thereof will not, with or without the giving of notice or passage of time or both:

(i) assuming that the Governmental Consents set forth on Section 6.2(b)(iii)(A) of the Buyer Disclosure Schedule are made or obtained, as applicable, result in a breach or violation of the terms, conditions or provisions of (A) the charter, bylaws, certificate of formation or other applicable organizational documents of Buyer or any Buyer Party or any effective resolution of any of their respective directors or shareholders or (B) any Applicable Law affecting Buyer or any Buyer Party or any of their respective properties or assets;

Exhibit 2.01

their respective properties or assets are subject or bound, except for any such breaches, violations, creations or losses that, individually or in the aggregate, would not reasonably be expected to prohibit or materially impair or delay the ability of Buyer and any of the Buyer Parties to perform its material obligations under this Agreement and the Ancillary Agreements; or

(iii) require any (A) Governmental Consent or (B) Third-Party Consent (other than any Third-Party Consents required in connection with the transactions contemplated by the Transition Services Agreement) to be made or obtained, as applicable, by Buyer or its Affiliates, except for those Governmental Consents set forth on Section 6.2(b)(iii)(A) of the Buyer Disclosure Schedule.

Section 6.3 Litigation or Regulatory Action. As of the date hereof, there are

no material Actions pending or, to the Knowledge of Buyer, threatened against Buyer or its Affiliates that seek to enjoin or impede, or would reasonably be expected to have the effect of preventing, delaying, making illegal or otherwise prohibiting, the transactions contemplated by this Agreement or any of the Ancillary Agreements.

Section 6.4 Financial Statements. Prior to the date hereof, Buyer has made available to Seller true, accurate and complete copies of the following statutory financial statements, in each case, as filed with the Massachusetts Division of Insurance, together with the exhibits, schedules and notes thereto and any affirmations, certifications or opinions filed therewith: (a) the unaudited annual statutory financial statements of Buyer as of and for the years ended December 31, 2010 and December 31, 2011; (b) the audited annual statutory financial statements of Buyer as of and for the years ended December 31, 2010 and December 31, 2011 (the statements referenced in (a) and (b), the “Buyer Annual Statutory Statements”); and (c) the unaudited quarterly statutory financial statements of Buyer as of and for the quarters ended March 31, 2012 and June 30, 2012 (the “Buyer Quarterly Statements” and, collectively with the Buyer Annual Statutory Statements, the “Buyer Statutory Statements”). The Buyer Statutory Statements (i) have been prepared in accordance with SAP (subject, in the case of the Buyer Quarterly Statements, to normal recurring year-end adjustments that are not material in amount or effect), and (ii) fairly present, in all material respects, the statutory financial position, results of operations, changes in statutory surplus and cash flows of Buyer as at the respective dates of, and for the periods referred to in, the Buyer Statutory Statements. No material deficiency has been asserted by any Governmental Body with respect to any Buyer Statutory Statements that remains unresolved prior to the date hereof.

Section 6.5 Buyer Permits; Compliance with Applicable Law. Buyer and each Buyer Party presently holds and maintains in full force and effect all material Governmental Permits that are necessary to conduct their respective businesses as presently conducted and that will be required to perform their respective material obligations under this Agreement and each Ancillary Agreement (each, a “Buyer Permit”), including all insurance licenses required for Buyer to reinsure the Covered Insurance Policies under the Reinsurance Agreement. Buyer and each Buyer Party is (a) in compliance in all material respects with all Applicable Laws and (b) in compliance with the terms of all applicable Buyer Permits, except, in each case for any noncompliance that, individually or in the aggregate, would not reasonably be expected to prevent it from performing its respective material obligations under this Agreement and the Ancillary

Exhibit 2.01

Agreements. No Buyer Permit is subject to any pending or, to the Knowledge of Buyer, threatened administrative or judicial proceeding to revoke, cancel, suspend, modify or declare such Buyer Permit invalid in any material respect, except for any such revocation, cancellation, suspension, modification or declaration that, individually or in the aggregate, would not reasonably be expected to prevent it from performing its respective material obligations under this Agreement and the Ancillary Agreements.

Section 6.6 Availability of Funds. Buyer has, and will have as of the Closing,

sufficient funds or investment assets available on an unconditional basis for Buyer to pay the Purchase Price pursuant to Section 3.2 and make the deposit contemplated by Section 3.3(c). Buyer acknowledges and agrees that the obligations of Buyer and the Buyer Parties to effect the transactions contemplated by this Agreement and the Ancillary Agreements are not conditioned upon the availability to Buyer or any of its Affiliates of any debt, equity or other financing in any amount whatsoever.

Section 6.7 No Brokers. Except with respect to the fees of Barclays Capital Inc., for which Buyer or an Affiliate thereof is solely responsible, neither Buyer nor any Person acting on its behalf has paid or become obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement or any Ancillary Agreement.

Section 6.8 Facts Affecting Regulatory Approvals. As of the date hereof, neither Buyer nor any of its Affiliates has received written notification from any Governmental Body that such Governmental Body would oppose the transactions contemplated hereby or refuse to grant or issue its consent or approval, if required, with respect to the transactions contemplated hereby.

Section 6.9 Investment Representations. Buyer is acquiring the Transferred

Equity Interests for its own account, for investment and without any intention of distributing such interests in violation of the Securities Act or any applicable state securities law.

ARTICLE VII

ACTIONS PRIOR TO THE CLOSING DATE Section 7.1 Operations Prior to the Closing Date.

(a) From the date of this Agreement to the Closing Date, except as otherwise expressly required by this Agreement or any Ancillary Agreement, for matters identified on Section 7.1(a) of the Business Disclosure Schedule or with the prior written approval of Buyer (which shall not be unreasonably withheld, conditioned or delayed), Seller (x) shall, and shall cause its Affiliates to, operate and carry on the Business in the Ordinary Course of Business, including using reasonable best efforts to (A) preserve the relationships and goodwill of the Business and HRS with Governmental Bodies, employees, policyholders, contractholders, beneficiaries, customers, Distributors, mutual fund organizations and others having business relations with the Business and (B) keep available the services of the Business Employees and (y) shall not, and shall cause its Affiliates not to:

Exhibit 2.01

(i) permit any change or amendment (whether by merger, consolidation or otherwise) to the organizational documents of HRS;

(ii) sell, transfer, pledge, dispose of or encumber any Equity Interest in HRS or permit HRS to issue Equity Interests or securities of HRS or grant options, warrants, calls or other rights to purchase or otherwise acquire any Equity Interest or securities of HRS;

(iii) effect any recapitalization, reclassification or other change in the capitalization of HRS;

(iv) (A) declare, set aside or pay any non-cash dividends, or make any other non-cash distributions, in respect of any Equity Interest or other securities of HRS or (B) declare, set aside or pay any cash dividends or make any cash distributions in respect of any Equity Interest or other securities of HRS except, solely in the case of this clause (B), (1) in compliance with Applicable Law and all Contracts to which HRS is a party and (2) following written notice by Seller to Buyer of its intention to take such action at least three (3) Business Days prior to the declaration, setting aside or payment of any such cash dividends or making of any such cash distributions;

(v) repurchase, redeem, repay or otherwise acquire any Equity Interest or other securities of HRS;

(vi) make any capital contribution or investment in HRS;

(vii) permit HRS to incur any Indebtedness or permit HRS to assume, grant, guarantee, endorse or otherwise become responsible for, the Liabilities of any other Person or make any loans, advances or capital contributions to, or investments in, any other Person, in each case, other than intercompany obligations in the Ordinary Course of Business that will be settled at or prior to the Closing in accordance with Section 8.6(b);

(viii) enter into, or amend or modify any material terms or conditions of, or waive any rights under, any Material Contract (or any Contract that, if entered into prior to the date of this Agreement, would have been a Material Contract), or consent to the termination of (other than at its stated expiry date) any Material Contract;

(ix) institute any new or increase or accelerate the vesting or payment of any amounts or benefits under any Employee Benefit Plan, other than (A) as required by the terms of any such Employee Benefit Plan in effect on the date hereof or Applicable Law, (B) such actions that do not affect any Business Employees, or (C) such actions in the Ordinary Course of Business that apply to substantially all similarly situated employees of Seller and its Affiliates;

(x) increase the base salary, incentive compensation or benefits of any Business Employee, other than changes for Business Employees

Exhibit 2.01

below the Assistant Vice President level in the Ordinary Course of Business or changes made pursuant to contractual commitments in effect on the date hereof;

(xi) hire any Business Employee with a title of Assistant Vice President or more senior or, other than in the Ordinary Course of Business, terminate the employment of any Business Employee having a title of Assistant Vice President or more senior, other than for cause;

(xii) settle or compromise any Action relating to the Business or otherwise against HRS, other than any such settlement or compromise that is solely a monetary settlement; provided that Seller promptly provides Buyer with reasonable notice prior to any such settlement or compromise;

(xiii) waive any claim or rights of, or cancel any debts to, HRS or, to the extent related to the Business, Seller or its Affiliates (other than HRS), in each case, other than in the Ordinary Course of Business;

(xiv) pay, discharge, compromise or satisfy any Assumed Liabilities, other than (A) payment, discharge, compromise or satisfaction in the Ordinary Course of Business or (B) payment, discharge or satisfaction in accordance with the terms of the Assumed Liabilities to the extent specifically recorded as a liability in the Reference Date Financial Statements;

(xv) voluntarily subject any Acquired Asset or the assets of HRS to any Encumbrance or voluntarily permit or suffer such to exist, other than, in each case, Permitted Encumbrances;

(xvi) (A) acquire or dispose of any asset or property of HRS or any asset or property that presently constitutes, or at Closing would constitute, part of the Acquired Assets, other than in the Ordinary Course of Business, or (B) make any capital expenditure with respect to any such asset or property for which the aggregate consideration paid or payable in any individual transaction is in excess of fifty thousand dollars ($50,000) or in the aggregate for all such transactions in excess of two hundred and fifty thousand dollars ($250,000);

(xvii) enter into any reinsurance, retrocession or other similar Contract under which any risks under a Covered Insurance Policy would be ceded or reinsured;

(xviii) in respect of HRS, the Business or the Acquired Assets (A) make, revoke or change any material Tax election or settle or compromise any material Tax Liability, claim or assessment or agree to an extension or waiver of the limitation period to any material Tax claim or assessment or grant any power of attorney with respect to Taxes or enter into any material closing agreement with respect to any Tax or surrender any material right to claim a Tax refund, (B) adopt or materially change any accounting method for Tax purposes or otherwise, or (C) file any amended U.S. federal, state, or foreign income Tax Return or any other

Exhibit 2.01

material amended Tax Return, in each case, except to the extent required after the date hereof by any concurrent change in Applicable Law;

(xix) in respect of HRS, the Business or the Acquired Assets (A) make any changes in any material respect in, or waive the application in any material respect of, the methods, policies or principles in effect on the date hereof with respect to reserving, hedging, underwriting, investing, risk management, reinsurance, marketing or claims administration or (B) adopt any new reserving, hedging, underwriting, investing, risk management, reinsurance, marketing or claims administration methods, policies or principles, in each case, except to the extent required after the date hereof by any concurrent change in Applicable Law, SAP or GAAP, as applicable;

(xx) make any changes in any material respect in, or waive the application in any material respect of, the methods, policies, practices or principles (A) of HRS or (B) used in connection with the Business, in each case, in effect on the date hereof with respect to accounting methodology, except to the extent required after the date hereof by any concurrent change in Applicable Law, SAP or GAAP, as applicable;

(xxi) make any filing with any Governmental Body relating to (A) the withdrawal or surrender of any Seller Permit or (B) the withdrawal by Cedant from any lines or kinds of business relating to the Business;

(xxii) cease providing or materially modify (including as to timing, form and amount) any material services to HRS or the Business that are provided to HRS or the Business as of the date hereof;

(xxiii) amend or modify any terms or conditions of, or consent to the termination of (other than at its stated expiry date), any Assigned Lease;

(xxiv) except as otherwise expressly required by Applicable Law or in the Ordinary Course of Business, amend any Covered Insurance Policies or related Contracts in connection with any Plan;

(xxv) undertake any of the actions set forth on Section 7.1(a)(xxv) of the Business Disclosure Schedule; or

(xxvi) agree or commit to do any of the foregoing.

(b) Nothing in this Section 7.1 shall be deemed to: (i) limit the transfer of Excluded Assets or Excluded Liabilities; (ii) limit the transfer of investment assets beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by HRS from HRS to Seller or its other Affiliates prior to the Closing; or (iii) other than Section 7.1(a)(xxv), prohibit Seller and its Affiliates from entering into, amending, or waiving any rights under any Contract (other than a Material Contract or any Contract that, if entered into prior to the date of this Agreement, would have been a Material Contract) between Seller and its Affiliates (including HRS), on the one hand, and any Plan sponsor, Plan trustee or other non-affiliated

Exhibit 2.01

third-party administrator on behalf of a Plan, on the other hand, in the Ordinary Course of Business.

Section 7.2 Access to Information.

(a) Prior to the Closing, Seller shall, and shall cause its Affiliates to, give Buyer and its authorized Representatives upon reasonable notice and during regular business hours, reasonable access to all Business Records (other than any Form I-9 of any Transferred Employee) and, to the extent applicable, the Excluded Business Records, personnel, officers and other facilities and properties relating to the Business; provided that any such access shall be conducted in accordance with Applicable Law (including any Applicable Law relating to antitrust, competition, employment or privacy issues) and in such a manner as to not unreasonably interfere with the normal operations of Seller and its Affiliates.

(b) Notwithstanding anything in Section 7.2(a) to the contrary, but subject to the last sentence of this Section 7.2(b), Seller shall not have any obligation to make available to Buyer or its Representatives, or provide Buyer or its Representatives with, (i) any Tax Return filed by Seller or any of its Affiliates (other than HRS) or predecessors, or any related material, (ii) access to or copies of any personnel files or related records of any Business Employee, other than the information described in clauses (a)(i) and (ii) (except for any Form I-9 of any Transferred Employee) of the definition of Business Records, (iii) any trading and clearing records maintained by HSD, (iv) any internal Investment Asset approval memoranda, internal Investment Asset review, internal Investment Asset valuation or evaluation or other materials prepared by Seller or its Affiliates in connection with underwriting, evaluating or approving any Investment Asset (excluding, subject to clause (v) of this Section 7.2(b), any materials prepared by third parties that were created in connection with and included in any of the foregoing), (v) any report prepared by any third party in connection with the servicing of any Real Estate Loan, other than any servicing report with respect to any Real Estate Loan prepared during the twelve (12) month period preceding the date hereof and any such servicing reports received following the date hereof or (vi) any information to the extent that Seller determines, based on the advice of counsel, that making such information available would (A) jeopardize any attorney-client privilege, the work product immunity or any other legal privilege or similar doctrine or (B) contravene any Applicable Law (it being understood that Seller shall, and shall cause its Affiliates to, use reasonable best efforts to enable such information to be furnished or made available to Buyer or its Representatives without so jeopardizing privilege or contravening such Applicable Law, including by entering into a customary joint defense agreement or common interest agreement with Buyer). Notwithstanding the foregoing, in the case of each of clauses (i) through (v) above, Seller shall make available to Buyer or its Representatives, or provide Buyer or its Representatives with, such information as reasonably required by Buyer or its Representatives for the purpose of complying with Applicable Law or inquiry, investigation or request for documents or information by, or filing or submission with, any Governmental Body.

Section 7.3 Notifications. From the date hereof through the Closing Date, each

Party shall promptly notify the other Party and keep it advised of, to the Knowledge of Seller or to the Knowledge of Buyer, as applicable, the occurrence of any of the following:

Exhibit 2.01

(a) any pending or threatened Action that challenges or seeks to restrain or enjoin the consummation of any of the transactions contemplated hereby;

(b) any representation or warranty made by it in this Agreement becoming untrue or inaccurate in any material respect or it failing to comply with or satisfy in any material respect any covenant or agreement to be complied with or satisfied by it under this Agreement;

(c) in the case of Seller, the occurrence of any fact, circumstance, change, effect or event that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(d) any other event that would reasonably be expected to result in any of the conditions set forth in Article IX or Article X, as applicable, not being capable of being fulfilled by the Termination Date;

(e) any written notice received by such Party from a Governmental Body or third party seeking to restrain or prohibit the transactions contemplated by this Agreement; or

(f) the commencement of any material Action against such Party or its Affiliates that would adversely affect the ability of such Party or its Affiliates to consummate the transactions contemplated by this Agreement and the Ancillary Agreements.

No notification made pursuant to this Section 7.3 shall have the effect of satisfying any condition set forth in Article IX or Article X, nor shall any such notification or failure to make any such notification have any effect for the purposes of determining the right of any Party or Indemnified Party to claim or obtain indemnification under this Agreement or otherwise enforce its rights and remedies under this Agreement.

Section 7.4 Efforts and Actions to Cause the Closing to Occur. (a) Governmental Consents.

(i) Prior to Closing, upon the terms and subject to the conditions of this Agreement, each Party shall: (A) promptly prepare and file all forms, applications, registrations, notices and other materials that may be or may become reasonably necessary to be filed by such Party or its Affiliates with any Governmental Body to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements; (B) use its reasonable best efforts promptly to obtain all Governmental Consents that may be or become necessary in connection with such Party’s or its Affiliates’ authorization, execution, delivery and performance of this Agreement and each Ancillary Agreement and the consummation of the transactions contemplated hereby and thereby; and (C) use its reasonable best efforts to take or cause to be taken, all actions and do all things necessary, proper or advisable under Applicable Laws or otherwise to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

Exhibit 2.01

(ii) Prior to Closing, if any Party or an Affiliate thereof receives an inquiry or request for information or documentary material from any Governmental Body with respect to this Agreement or any Ancillary Agreement or any of the transactions contemplated hereby or thereby, then such Party shall use its reasonable best efforts to provide, or cause to be provided, to such Governmental Body, as promptly as practicable and after consultation with the other Party, an appropriate response to such inquiry or request.

(iii) Prior to Closing, the Parties shall keep each other reasonably apprised of the status of matters relating to the completion of the transactions contemplated by this Agreement and the Ancillary Agreements and work reasonably cooperatively in connection with obtaining the requisite Governmental Consents, including:

(A) reasonably cooperating with each other in connection with any requisite Governmental Consents in respect of the transactions contemplated by this Agreement and the Ancillary Agreements;

(B) promptly notifying each other of any communications from or with any Governmental Body with respect to the transactions contemplated by this Agreement or the Ancillary Agreements;

(C) furnishing each other with such necessary information and reasonable assistance as the other may reasonably request in connection with its preparation of all necessary filings, submissions, amendments or responses to any Governmental Body;

(E) not participating in any substantive meeting, discussion or conversation with any Governmental Body in connection with the transactions contemplated by this Agreement or the Ancillary Agreements, unless it consults with the other Party in advance to the extent it is reasonably practicable to do so, and, to the extent permitted by such Governmental Body, gives the other Party the opportunity to attend and participate therein; and

(F) consulting and cooperating with one another in connection with all analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of either Party hereto in connection with any Governmental Consents related to the transactions contemplated by this Agreement or the Ancillary Agreements.

Exhibit 2.01

(b) Third-Party Consents.

(i) Seller and Buyer shall, and shall cause their respective Affiliates to, use reasonable best efforts to (i) identify any Third-Party Consents and any notifications to non-affiliated third parties (other than Governmental Bodies) that may be or become reasonably required to be made, obtained or delivered (as applicable) by Seller, Buyer or their respective Affiliates to consummate and make effective the transactions contemplated by the Transition Services Agreement as promptly as practicable following the date hereof and (ii) obtain any Third-Party Consents and deliver any notifications to non-affiliated third parties (other than Governmental Bodies) that may be or may become reasonably required to be made or obtained (as applicable) by Seller, Buyer or their respective Affiliates to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements, other than any Third-Party Consents and notifications contemplated under the Master Assignment Agreement, which shall be subject to the terms thereof. Seller shall provide or cause to be provided to Buyer copies of any such notifications delivered to third parties pursuant to this Section 7.4(b)(i). The Parties agree that any costs and expenses payable to third parties (other than the respective Representatives of the Parties) in connection with the procurement of any such Third-Party Consents and delivery of any such notifications required for the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, including any Third-Party Consents for, and notifications in connection with, the assignment or transfer to Buyer of the Acquired Assets or for the provision of services under the Transition Services Agreement, or in connection with the entry into a new Contract in lieu of the assignment or transfer of any Contract which would otherwise be a Transferred Contract, if requested by the applicable vendor or other counterparty thereto, shall be borne equally by Seller, on the one hand, and Buyer on the other hand.

(ii) To the extent that any Acquired Asset may not, without resulting in a breach thereof, be transferred or assigned to Buyer, or a Sublease Agreement may not, without resulting in a breach of any applicable overlying lease, be entered into, in each case without a Third-Party Consent that has not been obtained by the Closing, this Agreement shall not constitute an agreement to transfer or assign, or enter into, as applicable, the same. If, on the Closing Date, any such Third-Party Consent is not obtained, then Seller shall use its reasonable best efforts to secure an arrangement reasonably satisfactory to Buyer under which Buyer would, in compliance with Applicable Law, obtain the benefits and assume the obligations and bear the economic burdens (solely to the extent such obligations and burdens would otherwise constitute Assumed Liabilities hereunder) associated with such Acquired Asset or Sublease Agreement in accordance with this Agreement, and Seller or its Affiliates would enforce for the benefit (and, subject to Article XI, at the expense) of Buyer any and all of their respective rights against any non-affiliated third party associated with such Acquired Asset or Sublease Agreement, including the right to terminate or not renew any Contract constituting any such Acquired Asset, in accordance with the terms hereof, in each case, on the prior written direction of Buyer, and Seller would promptly pay, or cause its

Exhibit 2.01

Affiliates to pay, to Buyer when received all monies received by Seller or its Affiliates in connection with any such Acquired Asset. From and after the Closing Date, the Parties shall continue to use their reasonable best efforts to obtain, as promptly as practicable, any such required Third-Party Consents that have not been obtained as of the Closing Date, and any costs and expenses payable to third parties (other than the respective Representatives of the Parties) in connection with the procurement of any such Third-Party Consents shall be subject to Section 7.4(b)(i).

(iii) To the extent that any Contract, the use of which is required to provide services to Buyer pursuant to the Transition Services Agreement, may not, without resulting in a breach thereof, be so used without a Third-Party Consent that has not been obtained by the Closing, neither this Agreement nor the Transition Services Agreement shall constitute an agreement to use the same. If Seller is unable to obtain a Third-Party Consent prior to the date the relevant services requiring such Third-Party Consent were otherwise due to be performed under the Transition Services Agreement, then Seller and its Affiliates shall not be obligated to provide the relevant services until such appropriate consents or approvals are obtained. In the event that Seller is unable to obtain any such Third-Party Consent within the above referenced timing, Seller and Buyer shall use their reasonable best efforts to agree upon a commercially reasonable alternative arrangement. From and after the Closing Date, the Parties shall continue to use their reasonable best efforts to obtain, as promptly as practicable, any such required Third-Party Consents that have not been obtained as of the Closing Date, and any costs and expenses payable to third parties (other than the respective Representatives of the Parties) in connection with the procurement of any such Third-Party Consents shall be subject to Section 7.4(b)(i).

Section 7.5 Shared Contracts.

(a) From and after the Closing Date and for so long as the Transition Services Agreement remains in effect, Seller shall, and shall cause its Affiliates to, cooperate with Buyer to the extent reasonably requested by Buyer to cause the counterparty to any Shared Contract that is not a Transferred Contract to enter into a new agreement with Buyer as of the Closing with respect to the matters addressed by such Shared Contract that are related to the Business; provided that, subject to Section 7.4(b)(i), Seller shall not be required to compromise any right, asset or benefit or expend any amount or incur any Liabilities or provide any other consideration in connection therewith.

(b) From and after the Closing Date and for so long as the Transition Services Agreement remains in effect, Buyer shall, and shall cause its Affiliates to, cooperate with Seller to the extent reasonably requested by Seller to cause the counterparty to any Shared Contract that is a Transferred Contract to enter into a new agreement with Seller or its Affiliates as of the Closing with respect to the matters addressed by such Shared Contract that are not related to the Business; provided that, subject to Section 7.4(b)(i), Buyer shall not be required to compromise any right, asset or benefit or expend any amount or incur any Liabilities or provide any other consideration in connection therewith.

Exhibit 2.01

Section 7.6 Multiparty Contracts. Prior to the Closing, Seller shall, and shall

cause its applicable Affiliates to, use its and their reasonable best efforts to revise, amend or modify each Multiparty Contract so that, effective as of the Closing, (a) HRS, on the one hand, and Seller or any of its Affiliates (other than HRS), on the other hand, are no longer party to the same Contract, (b) HRS continues to retain the same benefits and obligations under such Contract insofar as applicable to HRS or the Business, (c) HRS has no outstanding or future liability under such Multiparty Contract and (d) HRS is irrevocably released and discharged from all Liabilities under such Multiparty Contract; provided that any documentation relating to clauses (a) through (d) above shall be in form and substance reasonably satisfactory to Buyer.

Section 7.7 Separate Accounts. Seller shall cause the assets held in each

Separate Account calculated on a fair value basis, as of the Effective Time, to equal the Separate Account Liabilities of each such Separate Account calculated on a fair value basis as of the Effective Time.

Section 7.8 Master Assignment Agreement Pre-Closing Actions. Prior to the Closing, except as otherwise agreed by the Parties, each Party shall, and shall cause its respective Affiliates to, cooperate with the other and use its reasonable best efforts to promptly take, or cause to be taken, prior to the Closing, the actions set forth on Section 7.8 of the Business Disclosure Schedule in order to effect the transactions contemplated by the Master Assignment Agreement.

Section 7.9 Real Property Arrangements. Prior to the Closing, except as otherwise agreed by the Parties, each Party shall, and shall cause its respective Affiliates to, negotiate in good faith to enter into the Initial Leases, the Sublease Agreements, the Assignment of Lease Agreements and the Real Property Licenses contemplated by Schedule 1.1(x) on the respective terms and subject to the respective conditions set forth on Schedule 1.1(x). The terms and conditions of Schedule 1.1(x) relating to the One Year Simsbury Lease and the One Year Windsor Lease shall remain in effect following the Closing.

Section 7.10 Copies of Investment Asset Materials. Within thirty (30) days

after the date hereof, Seller shall make available to Buyer, to the extent in the possession or control of Seller and its Affiliates, with respect to all Investment Assets that are securities, copies of all indentures, trust agreements or other documents governing the terms or holdings of any such Investment Asset that has not been made available to Buyer prior to the date hereof.

ARTICLE VIII

ADDITIONAL AGREEMENTS Section 8.1 Employee Matters.

(a) Comparable Position. Not less than five (5) Business Days prior to the Closing, Seller shall, subject to the written consent of Buyer, which consent shall not be unreasonably withheld, conditioned or delayed, update Section 8.1(a)(i) of the Business Disclosure Schedule to add any individuals who become Business Employees after the date hereof and remove any individuals who have ceased to be Business Employees after the date

Exhibit 2.01

hereof. Within sixty (60) days after the date of this Agreement or, if later, within thirty (30) days of the date that Section 8.1(a)(i) of the Business Disclosure Schedule is updated pursuant to the preceding sentence (but not later than five (5) days prior to the Closing Date), Buyer or its Affiliates shall extend to each Business Employee a written offer of employment, effective as of the Closing Date (or such later date as is set forth (A) in the Master Assignment Agreement with respect to those Business Employees identified as “Transition Period Business Employees” in Section 8.1(a)(i) of the Business Disclosure Schedule (the “Transition Period Business Employees”); (B) below with respect to those Business Employees employed by Seller or any of its Affiliates who are Inactive Business Employees; and (C) in Section 8.1(j) with respect to Milestone Employees), that constitutes a Comparable Position with Buyer or its Affiliates (an “Offer of Employment”). Buyer shall offer Seller a reasonable opportunity to consult with Buyer in connection with the preparation of each form of Offer of Employment, and shall give due consideration to any reasonable comments provided by Seller with respect to any such form of Offer of Employment. Buyer shall provide Seller with a final copy of each such form at or prior to the time Offers of Employment using such form are made to any Business Employee. Each Offer of Employment shall set forth the position and compensation each such Business Employee will have with Buyer or its Affiliates following the Business Employee’s Effective Hire Date and (as applicable) acknowledge that each such Business Employee will have duties immediately following the Business Employee’s Effective Hire Date substantially similar to those performed immediately prior to the Business Employee’s Effective Hire Date. Except as set forth (x) in the Master Assignment Agreement with respect to Transition Period Business Employees, (y) below with respect to Inactive Business Employees and (z) in Section 8.1(j)(i) with respect to Milestone Employees, the employment relationship of each Business Employee with Seller or its applicable Affiliate shall terminate effective as of the Effective Time. Each Business Employee who actually commences employment with Buyer or one of its Affiliates (including HRS) following the Closing Date shall be referred to herein as a “Transferred Employee.” Each Transition Period Business Employee shall remain employed by Seller or Seller’s Affiliate, as the case may be, until the date on which such Transition Period Business Employee’s employment relationship with Seller or its applicable Affiliate is terminated pursuant to the Master Assignment Agreement, and shall become a Transferred Employee in accordance with the Master Assignment Agreement (provided that the Transition Period Business Employee actually commences employment with Buyer or one of its Affiliates). At the Closing, Seller shall deliver to Buyer a list identifying each Business Employee who is an Inactive Business Employee as of the Closing, along with the reason such Business Employee is listed as an Inactive Business Employee and, if known to Seller, the date such Business Employee is expected to cease to be an Inactive Business Employee. Inactive Business Employees shall remain employed by Seller or Seller’s Affiliate, as the case may be, until the earlier of the date the Inactive Business Employee returns to active employment, or the expiration of the Inactive Business Employee’s leave under Seller’s or such applicable Affiliate’s policies; such Inactive Business Employee shall become a Transferred Employee (if at all) on the first (1st) day of the Inactive Business Employee’s actual return to work from the leave. The date on which a Business Employee commences employment with Buyer or its Affiliates will be referred to as the “Effective Hire Date” which, for purposes of clarification, means: (i) 12:00:01 a.m., New York City time, on the first (1st) day immediately following the Closing Date for all Business Employees other than Transition Period Business Employees, Inactive Business Employees and Milestone Employees (provided that the Business Employees actually

Exhibit 2.01

commence employment with Buyer or one of its Affiliates on such date or, if not a Business Day, on the next following Business Day, or on such other later date, if any, as provided by the last sentence of this Section 8.1(a)); (ii) for any Transition Period Business Employee, the date and time specified in the Master Assignment Agreement (provided that the Transition Period Business Employee actually commences employment with Buyer or one of its Affiliates); (iii) for any Inactive Business Employee, 12:00:01 a.m., New York City time, on the first (1st) day of such Inactive Business Employee’s actual return to work from leave; and (iv) for any Milestone Employee, the date and time specified in Section 8.1(j). A Business Employee who reports for work (which may include a remote location for those Business Employees who are authorized to work remotely) on the day reasonably expected in accordance with Seller’s or its applicable Affiliate’s standard procedures (for example, if a Business Employee is not an Inactive Business Employee but is on vacation, out sick or otherwise unable to report to work on the first Business Day immediately following the Closing Date), or otherwise agreed to by Buyer or its applicable Affiliate and the applicable Business Employee, as such Business Employee’s first day of active work following the Closing (in each case, taking into account the transactions contemplated by Section 8.1(j) and the Master Assignment Agreement and any Inactive Business Employee’s approved leave, as applicable), shall be deemed to have actually commenced employment with Buyer or its applicable Affiliate as of his or her Effective Hire Date.

(b) Employee Communications. During the period from the date hereof through the Closing Date, Buyer and Seller will reasonably cooperate to communicate to the Business Employees the details of the proposed terms and conditions of their employment with Buyer or its Affiliates, and Buyer shall reasonably consult with Seller regarding and prior to material communications from Buyer or its Affiliates to Business Employees prior to Closing.

(c) Employment Terms. From a Transferred Employee’s Effective Hire Date through the first (1st) anniversary of the Closing Date or such earlier date on which such Transferred Employee’s employment with Buyer and its Affiliates terminates or the Transferred Employee accepts a new position with Buyer or any of its Affiliates, Buyer shall, or shall cause its Affiliates to, provide such Transferred Employee with terms and conditions of employment that constitute a Comparable Position. In no event shall Buyer or any of its Affiliates be liable for severance payable in respect of any Business Employee (or any other employee of Seller or any of its Affiliates) who does not become a Transferred Employee and, in respect of Transferred Employees, severance shall be payable by Buyer or its Affiliates only in accordance with Section 8.1(e) and only in respect of terminations of employment that occur after the commencement of the Transferred Employee’s employment with Buyer or one of its Affiliates.

(d) Work Permits. Buyer shall, subject to Applicable Law, take, or cause its Affiliates to take, all necessary steps to sponsor, or transfer sponsorship of, the work permits for all Transferred Employees who are foreign nationals, and agrees to so sponsor, or cause its Affiliates to so sponsor, such foreign national Transferred Employees. Seller shall cooperate as necessary to effect Buyer’s or its Affiliates’ sponsorship or transfer of sponsorship of all such foreign national Transferred Employees.

(e) Employee Benefits. Buyer and its Affiliates shall waive, or shall cause to be waived, any waiting period, probationary period, pre-existing condition exclusion, evidence of insurability requirement, or similar condition with respect to initial participation

Exhibit 2.01

under any plan, program, or arrangement established, maintained, or contributed to by Buyer or any of its Affiliates to provide health insurance, life insurance, or disability benefits with respect to each Transferred Employee who has, prior to the Effective Hire Date, satisfied, under Seller’s or its Affiliates’ comparable plans, the comparable eligibility, insurability or other requirements referred to in this sentence. To the extent required by Applicable Law, Seller shall be responsible for providing COBRA continuation coverage in respect of all Business Employees. If the Closing Date occurs prior to December 1, 2012, for the period during 2012 on or following a Transferred Employee’s Effective Hire Date, Seller shall, or shall cause its Affiliates to, provide the Transferred Employee with COBRA coverage in respect of medical (but not dental) benefits, and Buyer shall (i) pay, on behalf of such Transferred Employee, the excess of the applicable COBRA premium amount for such Transferred Employee for the level of such COBRA coverage for which such Transferred Employee is eligible on the Closing Date, over the active employee premium (which shall be paid by the Transferred Employee), and (ii) reimburse Seller for any reasonable and documented out-of-pocket costs and expenses, not to exceed fifty thousand dollars ($50,000), incurred by Seller and its Affiliates in connection with administering the collection of the active employee premium payable by the Transferred Employees. If a Business Employee described in the final sentence of Section 8.1(a) does not actually commence employment with Buyer or its Affiliates in the manner contemplated by the final sentence of Section 8.1(a), Seller shall reimburse Buyer promptly upon demand for the amount paid by Buyer in respect of such Business Employee pursuant to the preceding sentence. Each Transferred Employee shall, for purposes of determining such Transferred Employee’s eligibility to participate in, vesting, and calculating the benefit accrual for paid time off and severance, under all employee benefit plans, programs and arrangements of Buyer and its Affiliates, be credited with the service of such Transferred Employee with Seller or its Affiliates or entities that become Seller’s Affiliates up to the Effective Hire Date, to the same extent as if such service had been performed for Buyer or any of its Affiliates. In addition to the foregoing, Buyer shall, or shall cause one or more of its Affiliates to:

(i) from the Closing Date to the first (1st) anniversary of the Closing Date, provide Transferred Employees with the greater of (x) the cash severance payments and welfare benefits continuation to which the Transferred Employee would have been entitled under the applicable Seller Severance Plan covering the Transferred Employee immediately prior to the Effective Hire Date (which payments and benefits are limited to periodic cash severance payments, sixty (60) days’ paid notice and continued participation in medical, dental, life, accidental death and dismemberment, health care reimbursement and dependent day care reimbursement plans until the end of the month in which the Transferred Employee receives his or her last periodic severance payment) and (y) the severance payments and benefits the Transferred Employee would be entitled to under the plan, policy, practice or agreement of Buyer or its Affiliates applicable to its similarly situated employees at such time, taking into account the Transferred Employee’s length of service with Seller and its Affiliates as provided in this Section 8.1(e);

(ii) cause the defined contribution plan(s) maintained by Buyer or its Affiliates to accept a direct rollover in cash or cash equivalents of the account of any Transferred Employee in the investment and savings plan of Seller or Seller’s Affiliate or any other Tax-qualified retirement plan of Seller or Seller’s

Exhibit 2.01

Affiliate, that a Transferred Employee elects to make as a direct rollover, and, to the extent necessary, amend such defined contribution plan(s) prior to the Closing in order to carry out the intent of this Section 8.1(e);

(iii) if the Closing occurs in 2012, during the remainder of 2012, provide each Transferred Employee with unpaid time off in an amount equal to the unused paid time off accrued by such Transferred Employee as of such Transferred Employee’s Effective Hire Date and paid out by Seller or its Affiliates in accordance with Section 8.1(f); provided that the amount of unpaid time off provided under this Section 8.1(e)(iii) shall not exceed five (5) Business Days for any Transferred Employee;

(iv) from the Closing Date through the first (1st) anniversary of the Closing Date, provide the Transferred Employees with the vacation and paid time off accrual rate and maximum accrual the Transferred Employee would be eligible to receive under the plan, policy or agreement of Buyer or its Affiliates applicable to such Transferred Employee following the Effective Hire Date; provided that such vacation and paid time off accrual rate and maximum accrual shall not be decreased as a result of the obligation set forth in Section 8.1(e)(iii); and

(v) reimburse Transferred Employees for education courses for which such Transferred Employees registered prior to the Effective Hire Date; provided that Transferred Employees have not already been reimbursed therefor, to the extent that Seller’s or its Affiliates’ policies would provide for such reimbursement if such Transferred Employees had continued to be employed by Seller or its Affiliates.

(f) Paid Time Off. Seller shall, or shall cause its Affiliates to, pay to each Transferred Employee the amount of compensation due in respect of the unused paid time off accrued by such Transferred Employee as of the date such Transferred Employee’s employment with Seller or its Affiliates is terminated in accordance with Section 8.1(a).

(g) Annual Incentive Bonus, Sales Incentive Plans and Long-Term Incentive Awards.

(i) Seller shall, or shall cause one or more of its Affiliates to, pay the bonus for the 2012 year under Seller’s Annual Incentive Plan to Transferred Employees who were covered under that plan immediately prior to the Closing and who (A) continue to be employed by Buyer or its Affiliates as of March 15, 2013, or (B) whose employment with Buyer or its Affiliates is involuntarily terminated (other than for cause) prior to March 15, 2013. The amount to be so paid by Seller or its Affiliates to all such Transferred Employees (the “2012 Bonus Pool”) shall be an amount equal to (1) the greater of (x) one hundred percent (100%), and (y) a bonus funding factor, as determined by Seller or its Affiliates in good faith taking into account the performance of the Business and other factors comparable to those taken into account by Seller or its Affiliates in determining bonuses under the Seller Annual Incentive Plan for participants in other businesses, multiplied by (2)

Exhibit 2.01

the target bonus pool applicable to the Transferred Employees under the Seller Annual Incentive Plan, based on such Transferred Employees’ tier and pay immediately prior to the Closing. In the event that the Closing Date occurs prior to December 31, 2012, Buyer or its Affiliates shall reimburse Seller for the portion of the 2012 Bonus Pool that is solely attributable to the period following the Closing Date. The 2012 Bonus Pool shall be distributed by Seller or its Affiliates in their discretion among such Transferred Employees. In the event that the Closing Date occurs on or after March 15, 2013, Seller shall, or shall cause one or more of its Affiliates to, pay bonuses to Business Employees for the 2012 year under Seller’s Annual Incentive Plan in accordance with its normal practices; provided that the total amount paid to Business Employees shall not be less than one hundred percent (100%) of the target bonus pool under the Seller Annual Incentive Plan applicable to such Business Employees; Seller or its Affiliates shall distribute such bonus pool in their discretion among eligible Business Employees. Buyer or its Affiliates shall provide an incentive bonus covering the entire 2013 calendar year, consistent with Section 8.1(c).

(ii) Buyer shall, or shall cause one or more of its Affiliates to, assume each Seller Sales Incentive Plan and all retention agreements entered into by Seller or its Affiliates with Transferred Employees that, by their terms, are not required to be fully satisfied as of the Closing Date or in connection with the Closing (each as identified in Section 5.18(a) of the Business Disclosure Schedule), and shall or shall cause its Affiliates to perform the obligations of Seller and its Affiliates thereunder.

(h) Buyer and Seller shall reasonably cooperate, and cause their respective Affiliates to reasonably cooperate, as appropriate to carry out the provisions of this Section 8.1.

(i) No Amendment of Plans; No Third Party Beneficiaries. Notwithstanding anything in this Agreement to the contrary, no provision of this Agreement (i) is intended to, or does, constitute the establishment or adoption of, or amendment to, any employee benefit plan (within the meaning of Section 3(3) of, or subject to, ERISA), and no Person (or his or her dependents or beneficiaries) participating in any such employee benefit plan maintained by either Seller or its Affiliates or Buyer or its Affiliates, shall have, directly or indirectly, any claim or cause of action, under ERISA or otherwise, in respect of any provision of this Agreement as it relates to any such employee benefit plan or otherwise, or (ii) is intended to or shall confer upon any current or former director, employee or consultant (or his or her dependents or beneficiaries) of the Business any right to employment or continued employment for any period of time by reason of this Agreement or any Ancillary Agreement, or any right to a particular term or condition of employment.

Exhibit 2.01

(j) Milestone Employees.

(i) Secondment of Milestone Employees.

(A) Secondment Period. Seller agrees to second to Buyer and Buyer agrees to accept those employees identified on Section 8.1(a)(i) of the Business Disclosure Schedule as “Milestone Employees” (the “Milestone Employees”) for the period commencing as of the Closing Date and ending, for each Milestone Employee, on the date set forth on Section 8.1(a)(i) of the Business Disclosure Schedule in respect of such Milestone Employee (each, a “Secondment Period”).

(B) Employment Relationship. This secondment arrangement shall not affect the employment relationship that exists between each Milestone Employee and Seller or its applicable Affiliate during the respective Secondment Periods. Accordingly, each Milestone Employee shall remain an employee of Seller or its applicable Affiliate during the respective Secondment Periods, and no Milestone Employee will be considered to be in an employer-employee relationship with Buyer or any of its Affiliates during the respective Secondment Periods. Notwithstanding the foregoing and subject to Section 8.1(j)(i)(C), Seller agrees that it will not terminate the employment of any Milestone Employee or transfer any Milestone Employee to another position at Seller or any of its Affiliates during the respective Secondment Periods, in each case, without Buyer’s prior written consent, which consent may be withheld for any reason, and Buyer may inform Seller at any time that it no longer wishes to second one or more of the Milestone Employees due to poor performance or lack of work in which case the Secondment Period shall end and Buyer shall have no further obligations with respect to such Milestone Employee except as set forth in Section 8.1(j)(iv)(A).

(C) Offer of Employment to Milestone Employees. Milestone Employees shall be considered Business Employees, and Buyer or its Affiliates shall extend to each Milestone Employee a written Offer of Employment at the same time and on the same terms and conditions as the other Business Employees; provided, however, that such offer shall be effective as of, and the respective “Effective Hire Date” of each Milestone Employee shall be, 12:00:01 a.m., New York City time, following the last day of the respective Secondment Period. Notwithstanding anything in this Agreement to the contrary, the employment relationship of each Milestone Employee with Seller or its applicable Affiliate shall continue through, and terminate effective as of, 11:59 p.m., New York City time, on the last day of the respective Secondment Periods (unless terminated earlier through the resignation of any Milestone Employee); provided that Seller may terminate any Milestone Employee (1) who ceases to be seconded by Buyer in accordance with Section 8.1(j)(i)(B) or (2) for cause, after reasonable consultation with Buyer. Each Milestone Employee who actually commences employment with Buyer or its Affiliates on the respective Effective Hire Date shall be considered a Transferred Employee for purposes of

Exhibit 2.01

this Agreement as of his or her Effective Hire Date; provided, however, that a Milestone Employee shall be deemed to have actually commenced employment with Buyer or its applicable Affiliate as of his or her Effective Hire Date (x) if such date is not a Business Day and the respective Milestone Employee commences employment on the next Business Day or (y) the respective Milestone Employee reports to work (which may include a remote location for those Milestone Employees who are authorized to work remotely) on the day reasonably expected in accordance with Seller’s or its applicable Affiliate’s standard procedures (for example, if a Milestone Employee is not an Inactive Business Employee but is on vacation, out sick or otherwise unable to report to work on the respective Effective Hire Date), or otherwise agreed to by Buyer or its applicable Affiliate and the applicable Milestone Employee, as such Milestone Employee’s first day of active work following the Secondment Period (in each case, taking into account the transactions contemplated by the Master Assignment Agreement and any Inactive Business Employee’s approved leave, as applicable).

(D) FINRA Registration. With respect to any Milestone Employees who are FINRA registered representatives, such employees’ registrations will transfer to Buyer’s selected broker-dealer at Closing in the same way as the securities registrations of the Transferred Employees who are registered representatives transferred at the Closing. During their respective Secondment Periods, such Milestone Employees will be registered representatives of Buyer’s broker-dealer Affiliate under an independent contractor model.

(ii) Services to be Performed. The Milestone Employees shall perform services for Buyer and its Affiliates as directed by Buyer or any of its Affiliates. During the respective Secondment Periods, Buyer and its Affiliates shall have the sole discretion to provide supervision, control and direction to the Milestone Employees, and shall have the sole discretion to decide work assignments.

(iii) Compensation for Milestone Employees. During the respective Secondment Periods, Seller shall pay, or shall cause to be paid, to each Milestone Employee any and all wages, bonuses and commissions, and Seller shall cause each Milestone Employee to be eligible to continue to participate in, and to receive benefits and credit under, any employee benefit plan, program or arrangement maintained by Seller or its Affiliates, as applicable, to the same extent he or she would participate in such plan, program or arrangement if the services performed by such individual for Buyer were services performed for Seller. In addition, Seller shall withhold, or cause to be withheld, all relevant employee-paid taxes and other employee-paid items, and shall file, or cause to be filed, all reports and maintain all records in connection therewith, during the respective Secondment Periods.

(iv) Secondment Fee.

(A) Subject to Section 8.1(j)(iii), Buyer shall pay to Seller a secondment fee equal to the cash compensation and the fringe benefit rate

Exhibit 2.01

(which, for the avoidance of doubt, equals thirty one and one-half percent (31.5%) of the respective Milestone Employee’s base salary as in effect immediately before the Closing Date) applicable to the Milestone Employees (excluding any amounts with respect to equity grants, bonus payments for the 2012 year under Seller’s Annual Incentive Plan and any amounts with respect to post-retirement benefits) paid or provided to the Milestone Employees to the extent not in excess of the level of compensation payable to and the fringe benefit rate applicable to the Milestone Employees as in effect immediately prior to the Closing; provided, however, that Buyer shall only be responsible for severance benefits arising from the termination of the employment of a Milestone Employee as a result of a request by Buyer to end such Milestone Employee’s secondment for reasons which, if asserted by Seller or its Affiliates, would give rise to an obligation to pay severance under the Seller Severance Plan as in effect as of the date of this Agreement (in which case Seller shall, and shall cause its Affiliates to, include Buyer and its Affiliates as released parties in any release obtained from the Milestone Employee in connection with such severance).

(B) Buyer shall pay or cause to be paid the fees described in Section 8.1(j)(iv)(A) to Seller on or before the thirtieth (30 ^th ) day after receipt by Buyer of a monthly invoice listing the total cost from Seller.

(v) Compliance with Applicable Law.

(A) Seller covenants that, during the respective Secondment Periods, it will, and will cause its Affiliates to, comply in all material respects with any and all provisions of Applicable Law with respect to the Milestone Employees. Subject to Section 8.1(j)(iv) regarding the payment of a secondment fee by Buyer to Seller, Seller shall pay, or shall cause to be paid, all taxes and levies, assessments and charges imposed on Seller or its Affiliates under Applicable Law with respect to the Milestone Employees, any services provided by the Milestone Employees to Buyer, or any compensation or benefits paid or payable to or received or receivable by the Milestone Employees. Additionally, during the respective Secondment Periods, Seller will maintain, or cause to be maintained, in effect any and all insurance and similar coverages (including workers’ compensation) that are required to be maintained by Applicable Law and any liability insurance amounts maintained by Seller or its Affiliates with respect to the Milestone Employees immediately prior to the respective Secondment Periods.

(B) Buyer covenants that, during the respective Secondment Periods, it will, and will cause its Affiliates to comply in all material respects with any and all provisions of Applicable Law that are applicable to Buyer or any of its Affiliates (if any) with respect to the Milestone Employees.

Exhibit 2.01

(vi) Indemnification.

(A) Buyer shall indemnify, defend and hold harmless the Seller Indemnified Persons from and against any Losses imposed on, sustained, incurred or suffered by any of the Seller Indemnified Persons to the extent arising from, relating to or in connection with (x) any act or omission by any Milestone Employee during his or her Secondment Period in providing the services contemplated by Section 8.1(j)(ii) or at the direction of Buyer or its Affiliates, or (y) any act or omission by Buyer or any of its Affiliates with respect to any Milestone Employee during his or her Secondment Period, including any termination of a Milestone Employee’s employment due to Buyer’s request for removal pursuant to Section 8.1(j)(i)(B), in each case, exclusive of any acts or omissions taken by, or at the direction of, Seller or its Affiliates.

(B) Seller shall indemnify, defend and hold harmless the Buyer Indemnified Persons from and against any Losses imposed on, sustained, incurred or suffered by any of the Buyer Indemnified Persons to the extent arising from, relating to or in connection with (x) any act or omission by any Milestone Employee during his or her Secondment Period taken at the direction of Seller or its Affiliates; or (y) any act or omission by Seller or any of its Affiliates with respect to any Milestone Employee during his or her Secondment Period (other than termination of a Milestone Employee’s employment due to Buyer’s request for removal pursuant to Section 8.1(j)(i)(B)).

Section 8.2 Insurance. Buyer acknowledges and agrees that, effective

immediately as of the Effective Time, HRS and the Business will cease to be insured by any insurance policies of Seller and its Affiliates, including with respect to any insurable events occurring prior to the Effective Time.

Section 8.3 Use of Seller’s Trademarks; Corporate Names.

(a) Buyer, for itself and its Affiliates, acknowledges and agrees that, other than the Transferred Owned Intellectual Property, the common law Trademarks included in the Acquired Assets or the HRS Owned Intellectual Property, and other than as contemplated in the Ancillary Agreements, Buyer is not purchasing, acquiring or otherwise obtaining any right, title or interest in or to any Intellectual Property Rights of Seller or its Affiliates (excluding HRS), including the name “Hartford” and any Trademarks of Seller and its Affiliates (excluding HRS) (including all registrations and applications relating thereto) (collectively, the “Seller Name and Marks”), and, except as otherwise expressly provided in any Ancillary Agreement, neither Buyer nor any of its Affiliates (including, after the Closing, HRS) shall have any rights in the Seller Name and Marks.

(b) Buyer agrees that, except as otherwise provided in any Ancillary Agreement, in connection with historical references to the Business or for purposes of making regulatory filings or in connection with regulatory investigations or inquiries, following the Closing Date, Buyer and its Affiliates (including HRS) shall cease and discontinue all uses of the Seller Name and Marks, either alone or in combination with other words and all Trademarks

Exhibit 2.01

confusingly similar to any of the foregoing. Buyer, for itself and its Affiliates (including, following the Closing, HRS), agrees that the rights of HRS to the Seller Name and Marks pursuant to the terms of any pre-existing Trademark agreements between HRS on the one hand, and Seller and its Affiliates (excluding HRS) on the other hand, shall terminate on the Closing Date.

(c) Buyer’s rights and obligations with respect to its use of the Seller Name and Marks shall be as set forth in the Transitional Trademark License Agreement and the Trademark License Agreement.

Section 8.4 Non-Competition.

(a) For purposes of this Section 8.4, “Competing Business” means the business of selling, marketing, underwriting, issuing, insuring, reinsuring or administering (i) bundled, semi-bundled or unbundled retirement plan programs, including any 401(k) Programs, 403(b) Programs, 457 Programs or similar bundled, semi-bundled or unbundled retirement plan programs, including any administrative, recordkeeping, actuarial and consulting services for defined contribution retirement plans, non-qualified deferred compensation plans and defined benefit plans, or (ii) group annuity contracts or group funding agreements offered or sold to any plan or program sponsored or maintained by any employee plan sponsor. A retirement plan program is “bundled” or “semi-bundled” if (x) recordkeeping services or other administrative or optional services and (y) investment alternatives are being provided in connection therewith. Notwithstanding the foregoing, “Competing Business” shall not include:

(i) any of the following activities or businesses engaged in by Seller or its Affiliates as of the date hereof outside of HFSG’s Retirement Plans Group:

(A) selling, marketing or providing proprietary investment products (or any lifetime income or longevity product in connection with, or as a component part of, a proprietary investment product) on an investment-only or limited service basis to, or managing investments for, 401(k) Programs, 403(b) Programs, 457 Programs or other similar retirement benefit programs and their sponsors; provided that neither HFSG nor any Affiliate of HFSG provides bundled or semi-bundled retirement plan services in connection with such 401(k) Programs, 403(b) Programs, 457 Programs or other similar retirement benefit programs;

(B) issuing any securities or other assets held by any Separate Account or custodial account for the benefit of Plan participants;

(C) administering HFSG’s Investment and Savings Plan or any other retirement plans offered by Seller or its Affiliates for their respective employees;

(D) providing investment management or similar services to Seller or its Affiliates or any non-affiliated third party;

Exhibit 2.01

(E) selling and/or underwriting insurance products (other than insurance products of the type sold or underwritten by the Business) or providing any services relating thereto;

(F) reinsuring and/or assuming insurance products (other than insurance products of the type sold or underwritten by the Business) or providing any services relating thereto;

(G) conducting the mutual fund business carried on by Seller and its Affiliates, including the offering of mutual funds as an investment option in connection with any retirement program;

(H) selling, marketing or providing individual fixed or variable annuities to any 401(k) Programs, 403(b) Programs, 457 Programs or other similar retirement benefit programs and their participants, beneficiaries or sponsors; provided that the issuer of any such product and its Affiliates do not provide bundled or semi-bundled retirement plan services in connection with such 401(k) Programs, 403(b) Programs, 457 Programs or other similar retirement benefit programs; and

(I) selling, marketing or administering any individual or group life or disability insurance products offered by HFSG’s Group Benefits Division, including to participants, beneficiaries or sponsors of 401(k) Programs, 403(b) Programs, 457 Programs or other similar retirement benefit programs; or

(ii) any activities expressly contemplated by this Agreement or the Ancillary Agreements (including the Reinsurance Agreement and Administrative Services Agreement).

(b) Subject to the limitations set forth in Sections 8.4(c) and (d) below, during the thirty (30) month period following the Closing Date, neither HFSG nor any of its current or future Affiliates shall, directly or indirectly, (i) engage in or own an Equity Interest in a Competing Business in any county, state, territory or province of the United States or (ii) renew any of the Business Products and Services for their own or any of their Affiliate’s account (except as expressly contemplated by this Agreement or the Ancillary Agreements).

(c) Notwithstanding anything to the contrary contained in this Section 8.4, nothing in this Section 8.4 shall prohibit HFSG or any of its current or future Affiliates from:

(i) making investments in the Ordinary Course of Business, including in a general or separate account of an insurance company or in an investment fund or other investment vehicle, in Persons engaging in a Competing Business; provided that each such investment is a passive investment where neither HFSG nor any of its current or future Affiliates: (A) intends to or has the right to influence or direct the operation or management of any such Person; or (B) is a participant with any other Person in any group with such intention or right;

Exhibit 2.01

(ii) acquiring not more than ten percent (10%) of the total issued and outstanding Equity Interests of any Person engaging in a Competing Business as a result of the exercise of contractual remedies by HFSG or any of its current or future Affiliates as the holder of a debt instrument; provided that following the exercise of any such contractual remedies, such Competing Business is not conducted under the “Hartford” name;

(iii) making investments in Buyer and its Affiliates;

(iv) acquiring (and thereafter, owning and operating) any Person or business (an “Acquired Business”) where such Acquired Business derived less than twenty-five percent (25%) of its net operating revenue on a consolidated basis for its most recent fiscal year from a Competing Business (a “Permitted Acquisition”); provided that following the consummation of a Permitted Acquisition, no Competing Business undertaken by such Acquired Business shall represent, in any fiscal quarter during the thirty (30) month period following the Closing Date, more than twenty-five percent (25%) of the net operating revenue on a consolidated basis of the Acquired Business, and such Competing Business shall in no event be conducted under the “Hartford” name;

(v) selling any of its assets or businesses to a Person that is itself, or has Affiliates that are, engaged in lines of business that compete with a Competing Business; provided that none of the Business Records are used in connection with a Competing Business; or

(vi) managing, controlling, advising or providing administrative or similar services (which shall not include bundled or semi-bundled retirement plan services in connection with 401(k) Programs, 403(b) Programs, 457 Programs or other similar retirement benefit programs) to investment funds or other investment vehicles in connection with passive investments made by such investment funds or vehicles in Persons engaging in a Competing Business, so long as such investments are in the Ordinary Course of Business.

(d) Notwithstanding anything to the contrary contained herein, this Section 8.4, other than the proviso in Section 8.4(c)(v) and Section 8.4(e): (i) shall cease to apply to any Person from and after such time as such Person ceases to be an Affiliate of HFSG;

(ii) shall not apply to any Person that purchases or receives assets, operations or a business from HFSG or one of its Affiliates, so long as such Person is not an Affiliate of HFSG after such transaction is consummated; and (iii) shall cease to apply if a controlling interest in HFSG or all or substantially all of its assets are sold to, or HFSG merges with or into, a Person that was not, immediately prior thereto, an Affiliate of HFSG; provided, that in the case of clauses (i), (ii) and

(iii) above, none of HFSG, its then current or former Affiliates or any such acquiring Person nor any of its Affiliates shall carry on a Competing Business in the United States using the name “Hartford” during the time period set forth in Section 8.4(b).

(e) Following the Closing Date, none of HFSG, its then current or former Affiliates (other than HRS) or any Person who becomes an Affiliate of HFSG or any of

Exhibit 2.01

its Affiliates by virtue of a direct or indirect Change of Control of HFSG shall, directly or indirectly, utilize any Plan sponsor information, Plan participant information or other customer information obtained, derived or extrapolated from the Business Records in connection with the offering, marketing, selling, endorsing or issuing of any insurance or financial product, except, in each case, as specifically contemplated by the Ancillary Agreements.

(f) Each of HFSG and Seller acknowledges that the covenants set forth in this Section 8.4 are an essential element of this Agreement and that, but for these covenants, Buyer would not have entered into this Agreement. Each of HFSG and Seller acknowledges that this Section 8.4 constitutes an independent covenant and shall not be affected by performance or nonperformance of any other provision of this Agreement or any Ancillary Agreement by Buyer.

(g) The Parties acknowledge that the type and periods of restriction imposed in the provisions of this Section 8.4 are fair and reasonable and are reasonably required for the protection of the Parties. If any of the restrictions or covenants in this Section 8.4 are hereafter construed to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid portions. If any of the restrictions or covenants contained in this Section 8.4, or any portion thereof, are deemed to be unenforceable because such covenant or restriction is held to cover a geographic area or to be of such duration as is not permitted under Applicable Law, the Parties agree that the court making such determination shall have the power to reduce the duration and/or areas of such provision and, in its reduced form, said provision shall then be enforceable.

Section 8.5 Covenants Not to Hire Employees.

(a) During the thirty (30) month period following the Closing Date, HFSG shall not, and shall cause its Affiliates not to, without Buyer’s prior written consent, directly or indirectly, seek to employ or employ any Transferred Employee, or contract for the services of such Transferred Employee, or induce or attempt to induce any such individual to leave his or her employment or employment relationship with Buyer or its Affiliates (including HRS); provided, however, that this restriction shall not prohibit HFSG or its Affiliates from (i) making general solicitations for employment contained in a newspaper or other periodical or on a website or blog not directed at such persons, or (ii) hiring any such individual whose employment with Buyer or the applicable Affiliate was terminated by Buyer or the applicable Affiliate at least three (3) months prior to such hiring.

(b) During the thirty (30) month period following the Closing Date, Buyer shall not, and shall cause its Affiliates not to, without Seller’s prior written consent, directly or indirectly, seek to employ or employ any employee of Seller or its Affiliates who directly provides transition services to Buyer in connection with the Business pursuant to the Transition Services Agreement, or contract for the services of any such individual, or induce or attempt to induce any such individual to leave his or her employment or employment relationship with Seller or its Affiliates; provided, however, that this restriction shall not prohibit Buyer or its Affiliates from (i) making general solicitations for employment contained in a newspaper or other periodical or on a website or blog not directed at such persons, (ii) hiring any such individual whose employment with Seller or the applicable Affiliate was terminated by Seller or the applicable Affiliate at least three (3) months prior to such hiring or (iii) hiring any Transition

Exhibit 2.01

Period Business Employee as of the “Effective Date” (as such term is used in the Master Assignment Agreement).

(c) The Parties acknowledge that the covenants set forth in this Section 8.5 are an essential element of this Agreement and that, but for these covenants, the Parties would not have entered into this Agreement. The Parties to this Agreement acknowledge that this Section 8.5 constitutes an independent covenant and shall not be affected by performance or nonperformance of any other provision of this Agreement or any Ancillary Agreement by the Parties.

(d) The Parties acknowledge that the type and periods of restriction imposed in the provisions of this Section 8.5 are fair and reasonable and are reasonably required for the protection of the Parties. If any of the restrictions or covenants in this Section 8.5 are hereafter construed to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid portions. If any of the restrictions or covenants contained in this Section 8.5, or any portion thereof, are deemed to be unenforceable because such covenant or restriction is held to cover a geographic area or to be of such duration as is not permitted under Applicable Law, the Parties agree that the court making such determination shall have the power to reduce the duration and/or areas of such provision and, in its reduced form, said provision shall then be enforceable.

Section 8.6 Termination of Certain Affiliate Agreements and Obligations; Certain Assets and Liabilities of HRS.

(a) Except (i) as otherwise contemplated by the Ancillary Agreements or (ii) as set forth in Section 8.6(a) of the Business Disclosure Schedule, Seller shall, and shall cause its Affiliates (including HRS) to, take such action as may be necessary to terminate, prior to or concurrently with the Closing, all Contracts solely between Seller or one or more of its Affiliates (other than HRS), on the one hand, and HRS, on the other hand.

(b) Except for intercompany obligations arising from Contracts set forth in Section 8.6(b) of the Business Disclosure Schedule, Seller shall, and shall cause its Affiliates to, take such action and make such payments as may be necessary so that, prior to or concurrently with the Closing, HRS, on the one hand, and Seller and its Affiliates (other than HRS), on the other hand, shall settle, discharge, offset, pay or repay in full all Intercompany Payables and Intercompany Receivables, regardless of their maturity, for the amount due (including any accrued and unpaid interest to but excluding the date of payment), fees and other amounts due or outstanding thereunder.

(c) Seller shall, and shall cause its Affiliates to, transfer the Excluded Assets and Excluded Liabilities from HRS to Seller or its other Affiliates prior to the Closing pursuant to an irrevocable assignment.

Section 8.7 Confidentiality.

(a) The Parties agree that the terms of the Confidentiality Agreement shall continue in full force and effect until the Closing. From and after the Closing, all of the obligations of Buyer under the Confidentiality Agreement shall terminate, except for

Exhibit 2.01

(i) confidentiality obligations of Buyer (and related remedies of Seller in the event Buyer breaches such obligations) with respect to any “Evaluation Materials” (as such term is defined in the Confidentiality Agreement) that are not related to the Business and (ii) except as provided in Section 8.1(a), non-solicitation obligations of Buyer (and related remedies of Seller in the event Buyer breaches such obligations) set forth therein, which obligations (and related remedies) shall continue in full force and effect in accordance with terms of the Confidentiality Agreement.

(b) From and after the Closing, (i) Seller shall, and shall cause its Affiliates and Representatives to, maintain in confidence any written, oral or other information relating to or obtained from Buyer and its Affiliates (including HRS and, to the extent relating to the Business, the Business Records) and (ii) Buyer shall, and shall cause its Affiliates and Representatives to, maintain in confidence any written, oral or other information relating to or obtained from Seller or its Affiliates, other than to the extent relating to HRS or the Business, except that the foregoing requirements of this Section 8.7(b) shall not apply to the extent that (1) any such information is or becomes generally available to the public other than (A) in the case of Seller, as a result of disclosure by Seller or any of its Affiliates or Representatives in violation of this Section 8.7(b) and (B) in the case of Buyer, as a result of disclosure by Buyer or any of its Affiliates or Representatives in violation of this Section 8.7(b) or the Confidentiality Agreement (as modified pursuant to Section 8.7(a)) or (2) any such information is required by Applicable Law or a Governmental Body to be disclosed, provided that, to the extent permitted by Applicable Law or Governmental Body, the disclosing Party (A) gives prior notice of such required disclosure to the other Party as soon as practicable, (B) cooperates with the other Party, at such other Party’s sole cost and expense, to preserve the confidentiality of such information consistent with the requirements of such Applicable Law or Governmental Body, and (C) uses its reasonable best efforts to limit any such disclosure to the minimum disclosure necessary or required to comply with such Applicable Law or Governmental Body. Each of the Parties hereto shall instruct its Affiliates and Representatives having access to the information described in this Section 8.7(b) of the foregoing obligation of confidentiality and shall be liable for any breach of this Section 8.7(b) by any of its Affiliates or Representatives.

(c) Notwithstanding anything to the contrary in Section 8.7(b), nothing in this Section 8.7 shall prohibit Seller or any of its Affiliates from using from and after the Closing any information of the type described in Section 8.7(b)(i) to the extent solely relating to the Business to the extent reasonably required and solely for the purpose of (i) the performance by Seller or its Affiliates of their obligations under this Agreement and the Ancillary Agreements,

(ii) the preparation and reporting of financial statements of Seller and its Affiliates, (iii) the preparation of Tax Returns or regulatory filings and Tax reporting, (iv) complying with Applicable Law, (v) matters relating to the Excluded Assets or Excluded Liabilities, or (vi) for any other reasonable business purpose that does not adversely affect in any material respect Buyer or any of its Affiliates (including HRS or the Business).

Section 8.8 Residual Information. From and after the Closing, (a) Seller and

its Affiliates may use in their businesses for any and all purposes any Residual Information of Seller’s and its Affiliates’ personnel that relates to the Business, and (b) Buyer and its Affiliates may use in the Business and in their other businesses for any and all purposes any Residual Information of Transferred Employees that relates to Seller’s and its Affiliates’ businesses, in each case, subject to the confidentiality obligations of Seller and Buyer pursuant to Section 8.7;

Exhibit 2.01

provided, that no license is granted hereby to any Patents, Copyrights or Trade Secrets owned by a Party or its Affiliates. For the avoidance of doubt, none of Buyer, Seller or any of their respective Affiliates shall have any obligation under this Section 8.8 to provide any Residual Information or embodiments thereof to the other Party or its Affiliates.

Section 8.9 Further Action.

(a) From and after the Closing Date, each of the Parties shall execute and deliver such documents, instruments of conveyance and transfer and other papers and take such further actions as may reasonably be required or appropriate from time to time to carry out the provisions of this Agreement and the Ancillary Agreements and give effect to the transactions contemplated hereby and thereby. Without limiting the foregoing, but subject to the terms of this Agreement, from and after the Closing Date (i) Seller shall, and shall cause its Affiliates to, do all things necessary, proper or advisable under Applicable Law as reasonably requested by Buyer to put Buyer or an Affiliate thereof as designated by Buyer in effective possession, ownership and control of the Transferred Equity Interests and the Acquired Assets, and Buyer shall cooperate with Seller for such purpose, and (ii) Buyer shall, and shall cause its Affiliates to, do all things necessary, proper or advisable under Applicable Law as reasonably requested by Seller to assure that Buyer or an Affiliate thereof as designated by Buyer, rather than Seller or any of its Affiliates, is the obligor in respect of, and is responsible for performing, all Assumed Liabilities, and Seller shall cooperate with Buyer for such purposes.

(b) During the period between the date hereof and the Closing, the Parties agree to negotiate in good faith and reasonably cooperate in preparing, supplementing and finalizing any schedules or exhibits to the Ancillary Agreements. Notwithstanding any provision to the contrary herein, the finalized schedules and exhibits to each of the Ancillary Agreements shall be attached to the applicable forms of Ancillary Agreements to be executed and delivered by the Parties at the Closing; provided that, with respect to any Software owned by Seller or its Affiliates that is made available to, or operated for the benefit of, Buyer or its Affiliates pursuant to the Transition Services Agreement, the term for the corresponding Service under the Transition Services Agreement shall be a period reasonably requested by Buyer.

(c) From and after the date hereof, Seller shall, and shall cause its Affiliates to, use their reasonable best efforts to obtain as promptly as practicable true and complete copies of, and provide to Buyer true and complete copies of, those Contracts listed in item five (5) of Section 5.15(b) of the Business Disclosure Schedule and item forty-eight (48) of Section 4.2(b)(ii) of the Seller Disclosure Schedule.

Section 8.10 Ancillary Agreements. On the Closing Date, Buyer shall, and shall cause each Buyer Party to, and Seller shall, and shall cause HRS and each Seller Party to, execute and deliver each of the Ancillary Agreements to which it is a party if such Ancillary Agreement has not been executed prior to the date hereof.

Section 8.11 Transfer and Maintenance of Business Records.

(a) Within sixty (60) days of the date of this Agreement, but in any event not later than five (5) Business Days prior to the Closing Date, Seller and Buyer shall work

Exhibit 2.01

together in good faith and shall use their reasonable best efforts to develop and implement a plan that will result in the delivery or transfer, subject to compliance with Applicable Law, of the Business Records to Buyer at the Closing (or at such later time as the Parties may agree in writing) in a manner consistent with the principles, procedures and guidelines set forth on Schedule 8.11(a) (the “Business Records Plan”). The Business Records Plan shall also address the treatment of the Excluded Business Records. From the date hereof until the Closing or such later time as the applicable Business Records are transferred and delivered to Buyer in accordance with the Business Records Plan, Seller shall, and shall cause its Affiliates to, maintain such Business Records in accordance with Applicable Law and in the same manner and with the same care that the Business Records have been maintained prior to the execution of this Agreement.

(b) After the Closing, each of the Parties shall, and shall cause its respective Affiliates (including HRS in the case of Buyer) to, preserve, until such date as may be required by such Party’s standard document retention policies (or such later date as may be required by Applicable Law), all pre-Closing Date records related to the Business possessed or permitted to be possessed by such Person (including, in the case of Seller, the Excluded Business Records). During such period, upon any written request meeting the requirements of the penultimate sentence of this Section 8.11(b) from a Party or its Representatives, the Party in possession or control of such records (including, in the case of Seller, the Excluded Business Records) shall (i) provide to the requesting Party or its Representatives reasonable access to such records (including, in the case of Seller, the Excluded Business Records) during normal business hours; provided that such access shall not unreasonably interfere with the conduct of the business of the Party in possession or control of such records, and (ii) permit the requesting Party or its Representatives to make copies of such records, in each case, at no cost to the requesting Party or its Representatives (other than for reasonable out-of-pocket expenses). Nothing herein shall require either Party to disclose (A) any information to the other if such disclosure would jeopardize any attorney-client privilege, the work product immunity or any other legal privilege or similar doctrine or contravene any Applicable Law (it being understood that the disclosing Party shall, and shall cause its Affiliates to, use reasonable best efforts to enable such information to be furnished or made available to the requesting Party or its Representatives without so jeopardizing privilege or contravening such Applicable Law, including by entering into a customary joint defense agreement or common interest agreement with the requesting Party); (B) except as provided in Section 12.2(e), such Party’s Tax records (except for Tax records of, or with respect to, HRS); or (C) any personnel files or related records of the type that constitute Excluded Business Records, in the case of each of clauses (B) and (C), except to the extent access to such information is reasonably required by the requesting Party or its Representatives for the purpose of complying with Applicable Law or any inquiry, investigation or request for documents or information by, or filing or submission with, any Governmental Body. Nothing herein shall require Seller to disclose (I) any internal Investment Asset approval memoranda, internal Investment Asset review, internal Investment Asset valuation or evaluation or other materials prepared by Seller or its Affiliates in connection with underwriting, evaluating or approving any Investment Asset (excluding, subject to clause (II) of this Section 8.11(b), any materials prepared by third parties that were created in connection with and included in any of the foregoing); (II) any report prepared by any third party in connection with the servicing of any Real Estate Loan, other than any servicing report with respect to any Real Estate Loan prepared during the twelve (12) month period preceding the date hereof and any such servicing reports

Exhibit 2.01

received following the date hereof; or (III) any trading and clearing records maintained by HSD, in the case of each of clause (I) through (III), except to the extent access to such information is reasonably required by Buyer or its Representatives for the purpose of complying with Applicable Law or any inquiry, investigation or request for documents or information by, or filing or submission with, any Governmental Body. Such records (including, in the case of Seller, the Excluded Business Records) may be requested under this Section 8.11(b) to the extent reasonably required in connection with (i) the performance by a Party or its Affiliates of their obligations under this Agreement and the Ancillary Agreements or (ii) accounting, actuarial, litigation, federal securities disclosure, governmental or regulatory inquiry, investigation, filing, submission or request for documents or information, or other similar purpose (other than for purposes relating to claims between Seller and Buyer or any of their respective Affiliates under this Agreement or any Ancillary Agreement). Notwithstanding the foregoing, any and all such records may be destroyed by a Party if such destroying Party sends to the other Party hereto written notice of its intent to destroy such records, specifying in reasonable detail the contents of the records to be destroyed; such records may then be destroyed after the sixtieth (60th) day following such notice unless the other Party notifies the destroying Party that such other Party desires to obtain possession of such records, in which event the destroying Party shall transfer the records to such requesting Party and such requesting Party shall pay all reasonable expenses of the destroying Party in connection therewith.

Section 8.12 Post-Closing Receipts. To the extent that, after the Closing, (a) Buyer or any of its Affiliates (including HRS) receives any mail for Seller or its Affiliates, or any payment or instrument that is for the account of Seller or any of its Affiliates according to the express terms of this Agreement or any Ancillary Agreement, Buyer shall promptly deliver such mail, amount or instrument to Seller, and (b) Seller or any of its Affiliates receives any mail for Buyer or its Affiliates, or any payment or instrument that is for the account of Buyer or any of its Affiliates (including HRS) according to the express terms of this Agreement or any Ancillary Agreement, Seller shall promptly deliver such mail, amount or instrument to Buyer.

Section 8.13 Waivers; Releases.

(a) Effective as of the Closing, Seller, for itself and on behalf of its Affiliates (other than HRS) and each of its and their successors, heirs and executors (each, a “Seller Releasor”), hereby irrevocably, knowingly and voluntarily releases, discharges and forever waives and relinquishes all claims, demands, Liabilities, defenses, affirmative defenses, setoffs, counterclaims, actions and causes of action of whatever kind or nature, whether known or unknown, which any Seller Releasor has, may have or might have or may assert now or in the future, against HRS or any of its successors, assigns, heirs, executors, officers, directors, partners, managers and employees (in each case in their capacity as such) (each, an “HRS Releasee”), arising out of, based upon or resulting from any Contract, transaction, event, circumstance, action, failure to act or occurrence of any sort or type, whether known or unknown, and which occurred, existed, was taken, permitted or begun prior to the Closing; provided, however, that nothing contained in this Section 8.13(a) shall release, discharge, waive or otherwise affect the rights or obligations of any party to the extent arising under this Agreement or any Ancillary Agreement, including with respect to Article XI hereof. Seller shall, and shall cause each Seller Releasor to, refrain from, directly or indirectly, asserting any claim or demand or commencing, instituting or maintaining, or causing to be commenced, any legal or arbitral proceeding of any

Exhibit 2.01

kind against any HRS Releasee based upon any matter released pursuant to this Section 8.13(a). The parties hereto hereby acknowledge and agree that the execution of this Agreement shall not constitute an acknowledgment of or an admission by any Seller Releasor or HRS Releasee of the existence of any such claims or of Liability for any matter or precedent upon which any Liability may be asserted.

(b) Effective as of the Closing, Buyer, for itself and on behalf of HRS, its Affiliates and each of their successors, heirs and executors (each, a “Buyer Releasor”), hereby irrevocably, knowingly and voluntarily releases, discharges and forever waives and relinquishes all claims, demands, Liabilities, defenses, affirmative defenses, setoffs, counterclaims, actions and causes of action of whatever kind or nature, whether known or unknown, which any Buyer Releasor has, may have or might have or may assert now or in the future, against Seller or any of its Affiliates (other than HRS) and their respective successors and assigns (each, a “Seller Releasee”), arising out of, based upon or resulting from any Contract, transaction, event, circumstance, action, failure to act or occurrence of any sort or type, whether known or unknown, and which occurred, existed, was taken, permitted or begun prior to the Closing; provided, however, that with respect to the Buyer Releasors that are not HRS or any of its successors or assigns, nothing in this Section 8.13(b) shall release, discharge, waive, relinquish or otherwise affect the rights or obligations of any Buyer Releasor (other than HRS) to the extent such rights or obligations do not arise out of or relate to any claims, demands, Liabilities, defenses, affirmative defenses, setoffs, counterclaims, actions or causes of action HRS may have had against any Seller Releasee prior to the Closing; and provided further that nothing contained in this Section 8.13(b) shall release, discharge, waive or otherwise affect the rights or obligations of any party to the extent arising under this Agreement or any Ancillary Agreement, including with respect to Article XI hereof. Buyer shall, and shall cause each Buyer Releasor to, refrain from, directly or indirectly, asserting any claim or demand or commencing, instituting or maintaining, or causing to be commenced, any legal or arbitral proceeding of any kind against any Seller Releasee based upon any matter released pursuant to this Section 8.13(b). The parties hereto hereby acknowledge and agree that the execution of this Agreement shall not constitute an acknowledgment of or an admission by any Buyer Releasor or Seller Releasee of the existence of any such claims or of Liability for any matter or precedent upon which any Liability may be asserted.

(c) Without limiting the generality of Section 8.13(a), if the Closing occurs, Seller, for itself and on behalf of the Seller Releasors, hereby irrevocably and forever waives and releases any right to indemnification, contribution, reimbursement, set-off or other rights to recovery that the Seller Releasors might otherwise have against any HRS Releasee with respect to representations and warranties made, and the covenants, obligations and agreements to be performed at or prior to the Closing, by HRS under this Agreement and the certificate delivered at the Closing pursuant to Article IX.

Section 8.14 Cooperation/Integration. During the period from the date of this Agreement until the Closing Date, each Party shall, and shall cause its respective Affiliates to, (a) make available their respective employees to serve as members of one or more transition teams to plan transition matters and attend regular meetings to discuss planning and implementation of transition plans and (b) reasonably cooperate with the other Party to assist in the development and implementation of transition plans in anticipation of the Closing Date.

Exhibit 2.01

Section 8.15 Exclusivity. From and after the date of this Agreement, Seller shall not, and shall cause its Affiliates and its and its Affiliates’ respective Representatives not to, directly or indirectly, (a) solicit, initiate, encourage or facilitate any inquiry, indication of interest, proposal or offer from any Person other than Buyer or its Representatives (an “Alternate Bidder”) relating to or in connection with a proposal or offer for a merger, consolidation, amalgamation, business combination, sale or transfer of properties or assets (other than to the extent expressly permitted under Section 7.1(a)(xvi)(A)) (including any reinsurance transaction), sale of Equity Interests (including by way of a tender or exchange offer), or similar transaction involving HRS or any part of the Business (an “Acquisition Proposal”), (b) participate in or attend any discussions or negotiations or enter into any agreement, arrangement or understanding, whether or not legally binding, with, or provide or confirm any information to, any Alternate Bidder relating to or in connection with any Acquisition Proposal by such Alternate Bidder or (iii) accept any proposal or offer from any Alternate Bidder relating to a possible Acquisition Proposal or otherwise commit to, or enter into or consummate any transaction contemplated by any Acquisition Proposal with any Alternate Bidder. In the event that Seller or any of its Affiliates or any of its or its Affiliates’ respective Representatives receives an Acquisition Proposal, Seller shall promptly notify Buyer of such proposal and provide a copy thereof (if in written or electronic form) or, if in oral form, a written summary of the terms and conditions thereof, including the names of the interested parties. Seller shall promptly request that all Alternate Bidders who executed a confidentiality agreement with HFSG or its Affiliates in connection with the consideration of a possible Acquisition Proposal (each a “Seller Confidentiality Agreement”) return, or destroy, all confidential information heretofore furnished to such Alternate Bidder by or on behalf of Seller or its Affiliates subject to the terms of such Seller Confidentiality Agreement.

Section 8.16 Seller Confidentiality Agreements. At the Closing, Seller or its applicable Affiliates shall assign to Buyer or, if designated by Buyer, HRS, all of their rights under any Seller Confidentiality Agreement relating to confidentiality obligations of any Alternate Bidder (and related remedies in the event such Alternate Bidder breaches such obligations) with respect to any “Evaluation Materials” (as such term is defined in the Confidentiality Agreement) that are related to HRS or the Business, to the extent such rights are assignable or the assignment thereof would not violate any confidentiality provision of any such Confidentiality Agreement. Following the Closing, to the extent such rights are not assignable to Buyer or, if designated by Buyer, HRS, or the assignment thereof would violate any confidentiality provision thereunder, Seller shall promptly notify Buyer in writing in the event it becomes aware of a breach of any Seller Confidentiality Agreement, and, if so directed by Buyer, shall enforce its rights under such Seller Confidentiality Agreement for Buyer’s benefit, at Buyer’s sole expense.

Section 8.17 Resignations. Seller shall cause the managers of HRS, as specified in writing by Buyer at least five (5) Business Days prior to the Closing Date, to resign such positions, effective as of the Closing.

Section 8.18 Bank Accounts. Prior to the Closing, Seller and its Affiliates shall change, effective as of the Closing, the individuals authorized to draw on or having access to the bank, savings, deposit or custodial accounts and safe deposit boxes maintained by HRS to the

Exhibit 2.01

individuals designated in writing by Buyer at least ten (10) Business Days prior to the Closing Date.

Section 8.19 Electronic Data Room. From and after the Closing, Seller and its Affiliates and their respective Representatives shall cease to have access to the virtual data site at https://datasite.merrillcorp.com ; provided, however, that Seller’s legal department shall be permitted to (a) retain, solely for archival purposes, one CD-ROM containing the contents of such virtual data site as of the Closing Date and (b) subject to Section 8.4(e), utilize the contents of such CD-ROM to the extent relating to any Claim Notice by a Buyer Indemnified Person for indemnification pursuant to Article XI or Section 12.4.

Section 8.20 Investment Assets.

(a) Notwithstanding anything in this Section 8.20 to the contrary, from the date of this Agreement to the Closing Date, Seller shall not permit Cedant to sell or otherwise dispose of Investment Assets except (i) to fund cash and cash equivalent requirements arising out of the operation of the Business, (ii) to effect the transactions contemplated by this Agreement, (iii) to manage the credit risk related to an Investment Asset to the extent Seller or its Affiliates reasonably determines that such Investment Asset has or may be subject to credit-related impairments or credit-related losses in value or (iv) to cause the Investment Assets to be in compliance with the requirements of the Investment Guidelines and Applicable Law. All sales or other dispositions of Investment Assets contemplated by clauses (i) and (ii) of this Section 8.20(a) shall be effected in accordance with the procedures and guidelines set forth on Section 8.20(a) of the Business Disclosure Schedule. Subject to Section 8.20(b), all sales or other dispositions of Investment Assets contemplated by clauses (iii) and (iv) of this Section 8.20(a) shall be effected with the objective of maintaining the credit quality and effective duration of the Investment Asset portfolio as existed on the date of this Agreement.

(b) In order for any investment asset of Cedant acquired after the date of this Agreement to qualify as an Investment Asset eligible for deposit by Cedant, on behalf of Buyer, to the Trust Account pursuant to Section 3.3(b), such investment asset shall be required to meet the criteria set forth on Section 8.20(b) of the Business Disclosure Schedule. Notwithstanding anything in this Section 8.20 to the contrary, in no event shall Seller permit Cedant to take any action with respect to the Investment Assets that would result in the failure of the Investment Assets to be deposited on the Closing Date by Cedant, on behalf of Buyer, to the Trust Account pursuant to Section 3.1(a) of the Reinsurance Agreement to meet the requirements of the Investment Guidelines as of the Closing.

(c) Seller shall, within ten (10) Business Days following the end of
each calendar month during the period from the date of this Agreement to the Closing Date, deliver to Buyer (i) a list of the Investment Assets to be deposited on the Closing Date by Cedant, on behalf of Buyer, to the Trust Account pursuant to Section 3.1(a) of the Reinsurance Agreement, including the Fair Market Value thereof, determined as of the close of business (New York City time) on the last day of the preceding calendar month, (ii) a list of the Investment Assets sold or otherwise disposed of during the preceding month and a description of the basis for such sale or disposition, and (iii) a list of the Investment Assets acquired by Cedant during the preceding month.

Exhibit 2.01

(d) In connection with the matters contemplated by Section 3.3(b) and to effect the deposit of Investment Assets to the Trust Account at the Closing, Seller shall cause Cedant to (i) transfer all book-entry securities pursuant to the book-entry system and (ii) for all non-book-entry securities, (A) execute and deliver such customary documents, bond powers, endorsements, instruments, certificates, assignments, UCC-3 filings and other writings, in each case, without representations, warranties or recourse (other than as expressly provided in this Agreement), including the original promissory note or other instrument evidencing such security, in each case pursuant to documentation in form and substance reasonably satisfactory to Buyer (collectively, the “Investment Asset Transfer Documents”), and (B) take or cause to be taken, in consultation with Buyer, such other reasonable and customary actions necessary, proper or advisable under Applicable Laws, in consultation with Buyer, or otherwise to consummate and make effective the transfer of such non-book-entry securities. In connection with the foregoing, at the Closing Seller shall cause Cedant to transfer to Buyer all Business Records relating to the foregoing Investment Assets, including all Securities Documents. Seller shall, and shall cause its Affiliates to, use reasonable best efforts to cause all such Investment Assets described in Section 8.20(d)(i) to be registered or recorded, as applicable, in the name of the Trustee in its capacity as such under the Trust Agreement, or otherwise as directed by Buyer in accordance with the terms of the Trust Agreement, effective as of the Closing. Following the Closing, Seller shall, and shall cause its Affiliates to, use reasonable best efforts to cause such registration or recording to be completed for all such Investment Assets not so registered or recorded as of the Closing. With respect all Investment Assets described in Section 8.20(d)(ii), Buyer shall, and shall cause its Affiliates to, use reasonable best efforts to cause such Investment Assets to be registered or recorded, as applicable, in the name of the Trustee in its capacity as such under the Trust, or as otherwise determined by Buyer in accordance with the terms of the Trust Agreement, and Seller shall cooperate with Buyer in registering or recording, as applicable, such Investment Assets, as soon as reasonably practicable after the Closing. All costs and expenses in connection with the transfer of the Investment Assets pursuant to this Section 8.20(d) and Section 8.20(e) shall be borne by Seller, including any costs and expenses incurred by Buyer, provided that such costs and expenses shall be limited to Buyer’s reasonable and documented out-of-pocket expenses and shall not include costs and expenses of outside counsel.

(e) In connection with the matters contemplated by Section 3.3(b), and to effect the deposit of Investment Assets to the Trust Account at the Closing, Seller shall cause Cedant to sell, assign, transfer, convey and deliver, on behalf of Buyer, to the Trustee under the Trust Agreement, with a copy to Buyer, in such capacity, or otherwise as directed by Buyer in accordance with the terms of the Trust Agreement, all of Cedant’s right, title and interest, as Lender, in and to each of the Real Estate Loans and the Real Estate Loan Documents (the “Real Estate Loan Transfer”). In connection with such Real Estate Loan Transfer, Seller shall cause Cedant to: (i) execute and deliver such reasonable and customary documents, allonges, endorsements, instruments, certificates, assignments and other writings, in each case, in recordable form (as applicable) and without representations, warranties or recourse (other than as expressly provided in this Agreement), including: (A) the original promissory note or other instrument; (B) allonges; (C) an assignment of mortgage or deed of trust, as applicable, in proper recordable form for the jurisdiction in which the mortgaged property is located; (D) an assignment of the non-recordable documents; and (E) UCC-3 filings; (ii) furnish and provide, on behalf of Buyer, to the Trustee under the Trust Agreement, in such capacity, or otherwise as directed by Buyer in accordance with the terms of the Trust Agreement, originals or copies, as

Exhibit 2.01

applicable, of all other Real Estate Loan Documents in Cedant’s or its Affiliates’ possession or control; (iii) cause all recordable assignments of mortgages or deeds of trust and UCC-3 filings to be recorded or filed, as applicable, in the jurisdiction in which the mortgaged property is located or other applicable filing office; and (iv) take or cause to be taken, in consultation with Buyer, all such other reasonable and customary actions necessary, proper or advisable under Applicable Laws or otherwise to consummate and make effective the Real Estate Loan Transfer. Except for (1) the agreements identified in Section 5.5(a) of the Business Disclosure Schedule and (2) any servicing agreements that Buyer, prior to the Closing, requests to Seller not to be terminated, Seller shall cause all servicing agreements relating to the Real Estate Loans to be terminated as of the Closing. Seller shall, and shall cause Cedant to, satisfy all applicable transfer requirements and procedures under the Real Estate Loan Documents in connection with the Real Estate Loan Transfer, which shall include sending notices of the transfer of each Real Estate Loan to the applicable obligor and any other parties entitled to such notice.

(f) Not later than four (4) Business Days following Buyer’s receipt of the Investment Assets List pursuant to Section 2.3(a)(v), Buyer shall be permitted to require Seller to cause Cedant to substitute any Investment Asset that would, in Buyer’s reasonable judgment, which is developed in consultation with KPMG LLP (or, if applicable, such other nationally recognized accounting firm that has replaced KPMG LLP), result in a reduction in Buyer’s statutory surplus immediately after giving effect to the Closing as a result of a credit-related impairment to such Investment Asset or its associated interest maintenance reserves (a “Disqualified Investment Asset”) with cash or short-term investment assets with a Statutory Book Value equal to the Statutory Book Value on Cedant’s statutory statements of the investment asset being so replaced and that meets the requirements of the Investment Guidelines, in which event Seller shall cause Cedant to so substitute such Disqualified Investment Asset prior to the Closing. Notwithstanding anything herein to the contrary, (i) in determining whether any Investment Asset meets the criteria of a Disqualified Investment Asset, the Parties shall not be permitted to take into account facts or circumstances existing on or prior to the date of this Agreement, (ii) any substitutions pursuant to this Section 8.20(f) shall be effected prior to the selection of Investment Assets pursuant to Section 3.3(b) and (iii) any failure to satisfy the duration requirements of the Investment Guidelines due to a substitution required under this Section 8.20(f) shall not be considered a failure to meet the Investment Guidelines.

Section 8.21 Replacement Assets and Contracts.

(a) Notwithstanding any other provision of this Agreement to the contrary, including Section 7.4(b) and Schedule 1.1(a) but subject to Section 8.21(b), the costs and expenses (including applicable Taxes and delivery charges) of Buyer and its Affiliates procuring the following Information Technology, Software and Contracts shall be borne equally by Seller, on the one hand, and Buyer on the other hand:

(i) Tangible Information Technology procured by Buyer or its Affiliates to replace tangible Information Technology owned or leased by Seller or its Affiliates, used in connection with the Business during the twelve (12) months prior to the Closing and that is not included in the Acquired Assets; provided that (A) Buyer shall consult with Seller and provide Seller with at least thirty (30) days prior written notice of its intention to replace such tangible Information Technology and

Exhibit 2.01

Seller shall have no obligation to bear any such costs and expenses if, within such thirty (30) day period, Seller transfers such tangible Information Technology to Buyer at no additional cost or expense to Buyer (provided that such transferred tangible Information Technology is of a level of quality and performance at least equivalent to the level of quality and performance used in connection with the Business in the twelve (12) months prior to the date of this Agreement), in which event such transferred tangible Information Technology shall be an Acquired Asset for all purposes hereunder, (B) such replacement tangible Information Technology procured by Buyer or its Affiliates is of a level of quality and performance not materially superior, when compared with other tangible Information Technology commercially available for the same purposes at the time it is procured, to the level of quality and performance of the replaced tangible Information Technology, when compared with other tangible Information Technology commercially available for the same purposes at the time it was acquired by Seller or its Affiliates, and (C) Seller shall have no obligation to bear any such costs and expenses if the tangible Information Technology included in the Acquired Assets at the Closing or transferred to Buyer pursuant to this Section 8.21(a)(i) provides Buyer and its Affiliates with at least equivalent aggregate capacity, functionality, quality and performance as was used in connection with the Business during the twelve (12) months prior to the date of this Agreement;

(ii) Software procured or licensed by Buyer or its Affiliates to replace Software owned by Seller or its Affiliates, used in connection with the Business during the twelve (12) months prior to the Closing and that is not included in the Acquired Assets or licensed to Buyer pursuant to the Software License Agreement; provided that (A) Buyer shall consult with Seller and provide Seller with at least thirty (30) days prior written notice of its intention to replace such Software, and Seller shall have no obligation to bear any such costs and expenses if, within such thirty (30) day period, Seller notifies Buyer in writing that Seller elects, and Buyer agrees (such agreement not to be unreasonably withheld, conditioned or delayed), to license to Buyer pursuant to the Software License Agreement, at no additional cost or expense to Buyer, the Software to be replaced and the Software License Agreement is amended to include the license of such Software to Buyer on the same terms and conditions as the other Software licensed pursuant to the Software License Agreement, and (B) the costs and expenses to be borne by Seller and Buyer shall include the costs and expenses paid by Buyer to any third Person to permit the use in connection with the Business of any Software otherwise used by Buyer or its Affiliates in the operation of their other respective businesses as a replacement for any Software owned by Seller or its Affiliates that is the subject of this Section 8.21(a)(ii); and

(iii) Contracts entered into by Buyer or its Affiliates to replace an Enterprise Contract or a Contract to which Seller or an Affiliate is, or during the twelve (12) months prior to the Closing was, a party and that is not a Transferred Contract, in each case, pursuant to which products and services were provided to or in support of the Business during the twelve (12) months prior to the Closing; provided, in each case, that (A) Buyer shall consult with Seller and provide

Exhibit 2.01

Seller with at least thirty (30) days prior written notice of its intention to replace such Enterprise Contract or other Contract, including any such Contract that expires in accordance with its terms during the period referenced in Section 8.21(b)(ii), and Seller shall have no obligation to bear any such costs and expenses if, within such thirty (30) day period, Seller notifies Buyer in writing that Seller elects, and Buyer agrees (such agreement not to be unreasonably withheld, conditioned or delayed), to transfer or assign such Enterprise Contract or other Contract to Buyer at no additional cost or expense to Buyer and such Enterprise Contract or other Contract is actually transferred or assigned to Buyer, in which event such Enterprise Contract or other Contract shall be deemed a Transferred Contract for all purposes hereunder, and (B) the costs and expenses to be borne by Seller and Buyer shall include the costs and expenses paid by Buyer to the applicable vendor under the Enterprise Contract or other Contract to permit the use in connection with the Business of any products and services under an existing Contract between Buyer or its Affiliates and such vendor as a replacement for any products and services provided under an Enterprise Contract or other Contract that is the subject of this Section 8.21(a)(iii).

(b) Seller’s obligation to bear costs and expenses pursuant to Section 8.21(a) is subject to the following limitations:

(i) Seller’s obligation is limited to costs and expenses arising out of the procurement, license or lease by Buyer or its Affiliates and does not extend to (A) any costs or expenses incurred by Buyer or its Affiliates in connection with implementing and/or integrating such tangible Information Technology, Software, product, service or asset into the Business or Buyer’s or its Affiliates’ operations, and (B) ongoing license, lease, maintenance or other fees or charges paid or payable by Buyer or its Affiliates for the use or receipt of such tangible Information Technology, Software, product, service or asset;

(ii) Buyer must identify any tangible Information Technology, Software, product, service or asset for which it intends to seek reimbursement from Seller in connection with the replacement thereof within twelve (12) months after the expiration or termination of the Transition Services Agreement; and

(iii) Seller shall not be obligated to bear any costs and expenses incurred in connection with the procurement, license or lease by Buyer or its Affiliates with respect to tangible Information Technology, Software, products, services and assets used in connection with the Business during the twelve (12) months prior to the Closing if, and only to the extent that, such tangible Information Technology, Software, products, services or assets in connection with Business has been used exclusively in connection with providing any Excluded Services (as defined in the Transition Services Agreement).

(c) To the extent that any Third Party Consent is required in connection with the transfer or assignment of any of the assets or Contracts described in Section 8.21(a), the

Exhibit 2.01

Parties agree that any costs and expenses payable to third parties in connection with the procurement of any such Third-Party Consents shall be subject to Section 7.4(b)(i).

ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

The obligations of Buyer under this Agreement to consummate the Closing shall be subject to the satisfaction or waiver (by Buyer), at or prior to the Closing, of the following conditions:

Section 9.1 Representations and Warranties; Covenants.

(a) Each of the covenants, agreements and obligations in this Agreement to be performed or complied with by Seller or its Affiliates at or prior to the Closing shall have been performed or complied with in all material respects.

(b) (i) Each of the representations and warranties of Seller contained in Sections 4.1, 4.2(a), 5.1, 5.2(a), 5.3(a), 5.3(b) and 5.3(c)(i) (collectively, the “Seller Specified Representations”) shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date as though made on the Closing Date; and (ii) each of the representations and warranties of Seller contained in this Agreement (other than the Seller Specified Representations) shall be true and correct (without regard to any references to “material” or “Material Adverse Effect” or any other similar qualifier) on and as of the date hereof and on and as of the Closing Date as though made on the Closing Date (except for such representations and warranties that are made as of a specific date, which shall speak only as of such date), except where the failures of such representations and warranties referenced in clause (ii) to be true and correct, taken together, have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(c) Seller shall have delivered to Buyer a certificate, dated the Closing Date and signed on behalf of Seller by a duly authorized executive officer of Seller, certifying the satisfaction of the conditions in Section 9.1(a) and Section 9.1(b) (which certificate shall not impose any personal liability on such officer).

Section 9.2 Governmental Consents. All Governmental Consents required to be made or obtained prior to the Closing that are set forth in Schedule 9.2 shall have been made or obtained, as applicable, shall be in full force and effect, and, if applicable, any applicable waiting period in respect thereof shall have expired or been terminated without disapproval thereof.

Section 9.3 No Restraint.

(a) No Governmental Body of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Applicable Law restraining, enjoining, impeding or otherwise prohibiting or making unlawful the Closing or the transactions contemplated by this Agreement or the Ancillary Agreements.

Exhibit 2.01

(b) There shall not be any pending Action by any Governmental Body challenging or seeking to restrain, enjoin, impede or otherwise prohibit the Closing or the transactions contemplated by this Agreement or the Ancillary Agreements.

Section 9.4 No Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any fact, circumstance, change, effect or event that has had, or would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

The obligations of Seller under this Agreement to consummate the Closing shall be subject to the satisfaction or waiver (by Seller), on or prior to the Closing Date, of the following conditions:

Section 10.1 Representations and Warranties; Covenants.

(a) Each of the covenants, agreements and obligations in this Agreement to be performed or complied with by Buyer or its Affiliates at or prior to the Closing shall have been performed or complied with in all material respects.

(b) (i) Each of the representations and warranties of Buyer contained in Sections 6.1 and 6.2(a) (collectively, the “Buyer Specified Representations”) shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date as though made on the Closing Date; and (ii) each of the representations and warranties of Buyer contained in this Agreement (other than the Buyer Specified Representations) shall be true and correct (without regard to any references to “material” or any other similar qualifier) on and as of the date hereof and on and as of the Closing Date as though made on the Closing Date (except for such representations and warranties that are made as of a specific date, which shall speak only as of such date), except where the failures of such representations and warranties referenced in clause (ii) to be true and correct, taken together, would not reasonably be expected to prevent Buyer and its Affiliates from performing their material obligations under this Agreement and the Ancillary Agreements.

(c) Buyer shall have delivered to Seller a certificate, dated the Closing Date and signed on behalf of Buyer by a duly authorized executive officer of Buyer, certifying the satisfaction of the conditions in Section 10.1(a) and Section 10.1(b) (which certificate shall not impose any personal liability on such officer).

Section 10.2 Governmental Consents. All Governmental Consents required to be made or obtained prior to the Closing that are set forth in Schedule 9.2 shall have been made or obtained, as applicable, shall be in full force and effect, and, if applicable, any applicable waiting period in respect thereof shall have expired or been terminated without disapproval thereof.

Exhibit 2.01

Section 10.3 No Restraint.

Section 10.4 No Adverse Buyer Event. Since the date hereof, neither of the following shall have occurred or, solely in the case of clause (a), shall be reasonably expected to occur: (a) Buyer shall have become insolvent or been placed into liquidation, rehabilitation, conservation, supervision, receivership or similar proceedings (whether voluntary or involuntary), or proceedings shall have been instituted against Buyer for the appointment of a receiver, liquidator, rehabilitator, conservator or trustee in bankruptcy to take possession of its assets or assume control of its operations; or (b) Buyer’s RBC Ratio (as defined in the Reinsurance Agreement) shall have fallen below three hundred percent (300%) as of a quarter-end and Buyer shall not have cured such shortfall as of the forty-fifth (45th) calendar day following such quarter-end.

ARTICLE XI

INDEMNIFICATION

Section 11.1 Indemnification; Remedies.

(a) From and after the Closing, Seller shall indemnify, defend and hold harmless Buyer, its Affiliates, and their respective Representatives and their respective successors and permitted assignees (collectively the “Buyer Indemnified Persons”) from and against any Losses imposed on, sustained, incurred or suffered by any of the Buyer Indemnified Persons to the extent arising from, relating to or in connection with:

(i) any inaccuracy in or breach of (determined without regard to any references to “material” or “Material Adverse Effect” or any other similar qualifiers, other than with respect to Section 5.7(a), as to which this parenthetical shall not apply) any of Seller’s representations and warranties contained in this Agreement (other than any inaccuracy in or breach of the representations and warranties contained in Section 5.8, which shall be subject to indemnification in accordance with Section 12.4(a)) or any certificate or instrument delivered hereunder;

(ii) any breach of or failure by Seller or HFSG to perform or comply with any of the covenants or agreements of Seller or HFSG, respectively, contained in this Agreement (other than any breach of or failure to perform any of the covenants contained in Section 7.1(a)(xviii) or Article XII, which shall be subject to indemnification in accordance with Section 12.4(a)); or

Exhibit 2.01

(iii) any Excluded Liabilities (other than Pre-Closing Taxes, which shall be subject to indemnification in accordance with Section 12.4(a)).

(b) From and after the Closing, Buyer shall indemnify, defend and hold harmless Seller, its Affiliates, and their respective Representatives and their respective successors and permitted assignees (collectively the “Seller Indemnified Persons”) from and against any Losses imposed on, sustained, incurred or suffered by any of the Seller Indemnified Persons to the extent arising from, relating to or in connection with:

(i) any inaccuracy in or breach of (determined without regard to any references to “material” or any other similar qualifier) any of Buyer’s representations and warranties contained in this Agreement or any certificate or instrument delivered hereunder;

(ii) any breach of or failure by Buyer to perform or comply with any of the covenants or agreements of Buyer contained in this Agreement (other than any breach of or failure to perform the covenants contained in Article XII, which shall be subject to indemnification in accordance with Section 12.4(b));

(iii) any Assumed Liabilities; or

(iv) any Liability of HRS specifically recorded as a liability on the Final Master Settlement Statement and up to the amount so recorded, except as otherwise subject to indemnification by Seller under Section 11.1(a).

(c) Seller’s and Buyer’s indemnification obligation under Section 11.1(a) and Section 11.1(b), respectively, shall be subject to each of the following limitations:

(i) With respect to indemnification for Losses arising out of any breach of any representation or warranty contained in this Agreement (other than (x) (A) with respect to Seller, the Seller Specified Representations and Section 5.20, and (B) with respect to Buyer, the Buyer Specified Representations and Section 6.7 (collectively with the representations and warranties described in clause (A), the “Specified Representations”), which shall survive the Closing Date indefinitely or until the latest date permitted by Applicable Law, and (y) with respect to Seller, the representations and warranties made in (A) Section 5.18, which shall survive until the third (3rd) anniversary of the Closing Date, and (B) Section 5.13(j), which shall survive for twenty-five (25) years following the Closing Date), such obligation to indemnify shall terminate on the eighteen (18) month anniversary of the Closing Date unless, before such date, Seller or Buyer, as applicable, has provided the other Party with an applicable Claim Notice;

(ii) Except with respect to any Specified Representation, there shall be no obligation to indemnify, with respect to Seller, under Section 11.1(a)(i) or, with respect to Buyer, under Section 11.1(b)(i):

(A) for any claim (or series of related claims arising

from the same underlying facts, events or circumstances) where the aggregate

Exhibit 2.01

Losses relating thereto are less than fifty thousand dollars ($50,000) (any such claim or series of related claims, a “De Minimis Claim”);

(B) until the aggregate of all Losses (other than in respect of De Minimis Claims) for which, but for this clause (B), Seller would be liable under Section 11.1(a)(i) or Buyer would be liable under Section 11.1(b)(i), as applicable, exceeds on a cumulative basis an amount equal to six million dollars ($6,000,000), and then only to the extent of such excess; and

(iii) Notwithstanding anything contained in this Agreement to the contrary, in the event that any fact, event or circumstance results in payment to Buyer of a Purchase Price Adjustment Amount pursuant to Section 2.3(f) and/or a Reinsurance Settlement Adjustment Amount pursuant to Section 2.3(f), and such fact, event or circumstance would also constitute a breach of or inaccuracy in any of Seller’s representations or warranties under this Agreement, Seller shall have no obligation to indemnify any Buyer Indemnified Person with respect to such breach or inaccuracy to the extent of such Purchase Price Adjustment Amount payment and/or Reinsurance Settlement Adjustment Amount payment, as applicable; and

(iv) Each Loss shall be reduced by: (A) the net amount of any insurance proceeds actually received by Buyer or any Buyer Indemnified Person or Seller or any Seller Indemnified Person, as the case may be, with respect to such Loss (calculated net of any out-of-pocket expenses incurred by such Person in collecting such amount and net of the amount of any increase in such Person’s and its Affiliates’ next annual insurance premium arising out of such Loss); provided that nothing in this Section 11.1(c)(iv) shall obligate either Party to maintain any insurance); (B) the net amount of any indemnity payment, contribution or other similar payment Buyer or any Buyer Indemnified Person or Seller or any Seller Indemnified Person, as the case may be, actually received from any third party not affiliated with such Indemnified Party with respect to such Loss; and (C) any cash Tax Benefit attributable to such Loss that is actually realized by the Indemnified Party (up to, but not in excess of, the amount of such indemnification payment) in the year of such Loss and in the succeeding year after such indemnification payment is made; provided that each Loss shall be increased to take account of any cash Tax Costs attributable to such indemnification payment that is actually realized by the Indemnified Party in the year of such indemnification and in the succeeding year after such indemnification.

Section 11.2 Notice of Claim; Defense.

(a) If (i) any non-affiliated third party or Governmental Body institutes, threatens or asserts any Action that may give rise to Losses for which a Party (an “Indemnifying Party”) may be liable for indemnification under this Article XI (a “Third-Party Claim”) or (ii) any Person entitled to indemnification under this Agreement (an “Indemnified Party”) shall have

Exhibit 2.01

a claim to be indemnified by an Indemnifying Party that does not involve a Third-Party Claim, then the Indemnified Party shall promptly send to the Indemnifying Party a written notice specifying the nature of such claim and to the extent practicable based on then-available information, a good faith estimate of the amount of all related Losses (a “Claim Notice”); provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its indemnification obligations under this Article XI except to the extent that the Indemnifying Party is actually prejudiced by the failure of the Indemnified Parties to provide a timely and adequate Claim Notice. Any Claim Notices in respect of a breach of a representation or warranty must be delivered prior to the expiration of any applicable survival period specified in Section 11.1(c)(i) for such representation or warranty; provided that if, prior to such applicable date, the Indemnified Party shall have notified the Indemnifying Party in accordance with the requirements of this Section 11.2(a) of a claim for indemnification under this Article XI (whether or not formal legal action shall have been commenced based upon such claim), such claim shall continue to be subject to indemnification in accordance with this Article XI notwithstanding the passing of such applicable date. Nothing in this Agreement shall impose any time limitation on the delivery of a Claim Notice in respect of a breach or failure to perform a covenant or obligation of a Party hereunder.

(b) The Indemnifying Party shall not be entitled to assume or maintain control of the defense of any Third-Party Claim and shall pay the reasonable fees and expenses of counsel retained by the Indemnified Party if (i) the Third-Party Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation against the Indemnified Party or (ii) the Third-Party Claim would reasonably be expected to result in an injunction or equitable relief against the Indemnified Party that would, in each case, have a material effect on the operation of the business of such Indemnified Party or any of its Affiliates.

(c) Subject to Section 11.2(b), in the event of a Third-Party Claim, the Indemnifying Party may elect to assume, at its own expense, the defense of a Third-Party Claim and retain counsel reasonably acceptable to the Indemnified Parties to represent such Indemnified Parties in connection with such Third-Party Claim. Subject to Section 11.2(b), the Indemnified Parties may participate, at their own expense and through separate legal counsel of their choice, in the defense of any such Third-Party Claim; provided, however, that the Indemnifying Party shall (i) control the defense of the Indemnified Parties in connection with such Action and (ii) bear the reasonable fees, costs and expenses of such separate counsel if an actual or potential conflict of interest makes representation by the same counsel inappropriate. The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnified Party for any period during which the Indemnifying Party has not assumed the defense of a Third-Party Claim to the extent that such Third-Party Claim is subject to indemnification by the Indemnifying Party under this Article XI. If the Indemnifying Party chooses to assume the defense of any Third-Party Claim, Seller or Buyer (as the case may be) shall, and shall cause each of its Affiliates and Representatives to, reasonably cooperate (including, upon the reasonable request of the other Party, making reasonably available books, records and personnel with respect to the subject matter of such Third-Party Claim) with the Indemnifying Party in the defense of such Third-Party Claim. All costs and expenses incurred in connection with such reasonable cooperation shall be borne by the Indemnifying Party. If the Indemnifying Party has assumed the defense of any Third-Party Claim, the Indemnifying Party shall not, without the prior written consent of the Indemnified Party, consent to a settlement,

Exhibit 2.01

compromise or discharge of, or the entry of any judgment arising from, any Third-Party Claim; provided, however, that no such consent shall be required if (i) such settlement, compromise, discharge or entry of any judgment (A) does not involve any finding or admission of any violation of Applicable Law or admission of any wrongdoing or any violation of the rights of any Person and does not include a statement or admission of fault, culpability or failure to act by or on behalf of any Indemnified Party and (B) does not subject the Indemnified Party to any injunctive relief or other equitable remedy and does not encumber any of the assets of any Indemnified Party or result in any restriction or condition that would apply to or affect any Indemnified Party or the conduct of any Indemnified Party’s business and (ii) (A) the Indemnifying Party pays or causes to be paid all amounts arising out of such settlement or judgment concurrently with the effectiveness of such settlement or judgment (unless otherwise provided in such settlement or judgment) and (B) such settlement, compromise, discharge or entry of judgment includes a complete and unconditional release of each Indemnified Party from any and all Liabilities in respect of such Third-Party Claim. If the Indemnifying Party has assumed the defense of a Third-Party Claim, and is in compliance with its obligations under this Section 11.2(c), the Indemnified Party shall not settle, compromise or consent to the entry of any judgment with respect to such Third-Party Claim or admit to any liability with respect to such Third-Party Claim without the prior written consent of the Indemnifying Party (which shall not be unreasonably withheld, delayed or conditioned). If the Indemnifying Party elects not to defend the Indemnified Party against a Third-Party Claim, then the Indemnified Party shall have the right to assume its own defense (without in any way waiving or otherwise affecting the Indemnified Party’s rights to indemnification pursuant to this Agreement), and the fees, charges and disbursements of no more than one such counsel per jurisdiction selected by the Indemnified Party shall be reimbursed by the Indemnifying Party. Under no circumstances will the Indemnifying Party have any liability in connection with any settlement of any Action that is entered into without its prior written consent (not to be unreasonably withheld, conditioned or delayed).

(d) If there shall be any conflicts between the provisions of this Section 11.2 and Section 12.2(g) (relating to Tax contests), the provisions of Section 12.2(g) shall control with respect to Tax contests.

Section 11.3 No Duplication; Exclusive Remedy.

(a) Any Liability for indemnification hereunder and under any Ancillary Agreement shall be determined without duplication of recovery by reason of the same Loss.

(b) Except as provided under (i) the provisions of Section 2.4, (ii) the provisions of Article XII (relating to Tax matters), (iii) the provisions hereof providing for equitable remedies or (iv) the provisions of any Ancillary Agreement, from and after the Closing, the exclusive remedy of Seller, the Seller Indemnified Persons, Buyer and the Buyer Indemnified Persons in connection with a breach of this Agreement (and any certificate or instrument delivered hereunder) and the transactions contemplated hereby (whether under this Agreement or arising under Applicable Law) shall be, in the absence of willful misconduct, willful and material breach or fraud, as provided in this Article XI.

Exhibit 2.01

Section 11.4 Limitation on Set-off. Neither Buyer nor Seller shall have any right to set off any unresolved indemnification claim pursuant to this Article XI against any payment due pursuant to Article II or Article III or any Ancillary Agreement.

Section 11.5 Mitigation. If an Indemnifying Party shall, following receipt of a Claim Notice, request in writing that an Indemnified Party take steps to mitigate its Losses subject to indemnification hereunder by such Indemnifying Party, such Indemnified Party shall use its reasonable best efforts to take, or to cause its Affiliates to take, in consultation with and as directed by such Indemnifying Party, reasonable steps to mitigate such Losses, so long as and to the extent the Indemnifying Party promptly reimburses the Indemnified Party for any reasonable, out-of-pocket costs and expenses incurred by the Indemnified Party in taking such mitigation steps hereunder. In the event that such a written request is not made by an Indemnifying Party and an Indemnified Party determines to mitigate its Losses that are subject to indemnification hereunder by the Indemnifying Party, the Indemnified Party shall be entitled to prompt reimbursement for any reasonable, out-of-pocket costs and expenses incurred by such Indemnified Party in providing its mitigation actions. Notwithstanding anything to the contrary herein or under Applicable Law, no Buyer Indemnified Person shall be required to take any action, or omit to take any action, in connection with the potential mitigation of any Loss imposed on, sustained, incurred or suffered by any such Buyer Indemnified Person to the extent arising from, relating to in connection with any Excluded Liability unless Seller advances such Buyer Indemnified Person’s costs and expenses in connection with any such mitigation actions.

Section 11.6 Recovery by Indemnified Party.

(a) In any case where an Indemnified Party recovers from a third party not affiliated with such Indemnified Party any amount in respect of any Loss for which an Indemnifying Party has actually reimbursed it pursuant to this Article XI, such Indemnified Party shall promptly pay over to the Indemnifying Party the amount so recovered (net of any out-of-pocket expenses incurred by such Indemnified Party in collecting such amount and net of such Indemnified Party’s estimated increase in such Person’s and its Affiliates’ next annual insurance premium arising out of such Loss (the “Estimated Premium Increase”), but not in excess of (x) the sum of (i) any amount previously paid by the Indemnifying Party to or on behalf of the Indemnified Party in respect of such claim and (ii) any amount expended by the Indemnifying Party in pursuing or defending any claim arising out of such matter, minus (y) the amount of the Estimated Premium Increase. If a payment by an Indemnified Party to an Indemnifying Party is made pursuant to the immediately preceding sentence and the actual increase in such Indemnified Party’s and its Affiliates’ next annual insurance premium arising out of the applicable Loss is more than or less than the amount of the Estimated Premium Increase, the Indemnifying Party or the Indemnified Party, respectively, shall pay to the other the amount by which the actual increase exceeds, or is less than, as applicable, the Estimated Premium Increase.

(b) If any portion of Losses to be reimbursed by the Indemnifying Party pursuant to this Article XI would reasonably be expected to be recoverable from a third party not affiliated with the relevant Indemnified Party (including under any applicable third-party insurance coverage) based on the underlying claim or demand asserted against such Indemnifying Party, then the Indemnified Party shall reasonably promptly after becoming aware of such fact give notice thereof to the Indemnifying Party and, upon the request of the

Exhibit 2.01

Indemnifying Party, shall use its reasonable best efforts as directed by the Indemnifying Party to collect the amount recoverable from such third party, in which event the Indemnifying Party shall reimburse the Indemnified Party for all costs and expenses incurred in connection with such collection. If any portion of Losses actually paid by the Indemnifying Party pursuant to this Article XI would reasonably be expected to have been recoverable from a third party not affiliated with the relevant Indemnified Party (including under any applicable third-party insurance coverage) based on the underlying claim or demand asserted against such Indemnifying Party, then the Indemnified Party shall transfer, to the extent transferable, such of its rights to proceed against such third party as are necessary to permit the Indemnifying Party to recover from such third party any amount actually paid by the Indemnifying Party pursuant to this Article XI.

Section 11.7 Right to Indemnification. Notwithstanding any other provision in this Agreement to the contrary, the rights of the Indemnified Parties under this Article XI and Article XII (relating to tax matters) shall not be affected by any investigation conducted, or any knowledge acquired (or capable of being acquired), at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, including with respect to any information provided under Section 7.3 and, with respect to the accuracy or inaccuracy of or compliance with, any of the representations and warranties set forth in this Agreement. The waiver of any condition based on the accuracy of any representation or warranty set forth in this Agreement, or on the performance of or compliance with any covenant, agreement, condition and obligation set forth in this Agreement, shall not affect the right to indemnification or other remedy based on such representations, warranties, covenants, agreements, conditions and obligations.

Section 11.8 Reserves. Notwithstanding anything to the contrary contained herein, neither Seller nor any of its Affiliates makes any representation or warranty with respect to, and nothing contained in this Agreement, the Ancillary Agreements or any other agreement, document or instrument to be delivered in connection with the transactions contemplated hereby or thereby is intended or shall be construed to be a representation or warranty (express or implied) of Seller or any of its Affiliates, for any purpose of this Agreement, the Ancillary Agreements or any other agreement, document or instrument to be delivered in connection with the transactions contemplated hereby or thereby, with respect to: (a) the adequacy or sufficiency of any of the reserves with respect to the Business, (b) other than as set forth in Section 5.6(c), whether or not such reserves were determined in accordance with any actuarial, statutory or other standard, (c) the future profitability of the Business or (d) the effect of the adequacy or sufficiency of such reserves on any “line item” or asset, liability or equity amount.

Section 11.9 Transfer or Funding of Indemnification Obligations. In the event that at any time from the Closing Date through and including the sixth (6th) anniversary thereof, an Indemnifying Party: (a) consolidates with or amalgamates, combines or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation, amalgamation, combination or merger; or (b) sells, transfers, pledges or otherwise disposes of all or substantially all of its properties, assets (including investment assets) or capital stock of its Subsidiaries (whether in one transaction or a series of related transactions) to one or more Persons, then, and in each such case, such Indemnifying Party shall, at its option and after reasonable prior written notice to, and reasonable consultation with, the other Party:

Exhibit 2.01

(i) cause such Person(s) to assume by a written instrument entered into for the benefit of, and enforceable by, the Indemnified Parties the obligations of such Indemnifying Party set forth in this Article XI and Section 12.4, subject to the terms and conditions set forth herein, which obligations of the assuming Person shall expire on the sixth (6 ^th ) anniversary of the Closing Date, other than with respect to any matter that is the subject of a Claim Notice provided by an Indemnified Party on or prior to such sixth (6 ^th ) anniversary, it being understood and agreed that after the expiration of any such obligations, the Indemnifying Party who so assigned such obligations shall continue to be responsible therefor;

(ii) cause an Affiliate of such Indemnifying Party with a senior debt or financial strength rating by any rating agency that assigned a rating to such Indemnifying Party as of the Closing Date that is at least equal to the senior debt or financial strength rating assigned to such Indemnifying Party by such rating agency as of the Closing Date to assume by a written instrument entered into for the benefit of, and enforceable by, the Indemnified Parties the obligations of such Indemnifying Party set forth in this Article XI and Section 12.4, subject to the terms and conditions set forth herein, which obligations of the assuming Person shall expire on the sixth (6 ^th ) anniversary of the Closing Date, other than with respect to any matter that is the subject of a Claim Notice provided by an Indemnified Party on or prior to such sixth (6 ^th ) anniversary, it being understood and agreed that after the expiration of any such obligations, the Indemnifying Party who so assigned such obligations shall continue to be responsible therefor; or

(iii) establish and maintain an escrow account with a United States bank or trust company for the benefit of the Indemnified Parties to secure performance by such Indemnifying Party of its obligations under this Article XI and Section 12.4 and deposit into such account an amount equal to the greater of (A) (1) five (5) multiplied by the aggregate amount paid by the Indemnifying Party to all Indemnified Parties pursuant to this Article XI and Section 12.4 during the twenty-four (24) months immediately preceding the closing date of such transaction plus (2) the aggregate amount of all pending indemnification claims made against such Indemnifying Party by or on behalf of all Indemnified Parties pursuant to this Article XI and Section 12.4, and (B) twenty five million dollars ($25,000,000). Such escrow account shall terminate on the sixth (6th) anniversary of the Closing Date, at which time any funds remaining therein shall be released to such Indemnifying Party; provided that if any claims for indemnification under this Article XI or Section 12.4 are pending as of such termination date, then an amount equal to the aggregate amount of such pending claim(s) shall remain in the escrow account, with the amount of any excess funds remaining in the escrow account being released to such Indemnifying Party upon the resolution of each claim in accordance with the terms and conditions set forth in this Article XI or Section 12.4, as applicable. Notwithstanding anything in this Agreement to the contrary, the escrow account described in this Section 11.9(iii) shall not be deemed to be the sole and exclusive remedy of any Indemnified Party pursuant to this Article XI or Section 12.4.

Exhibit 2.01

Section 11.10 Cost of Enforcement. If any claim for indemnification is brought by a Party to this Agreement under this Article XI or Section 12.4, the prevailing Party in any such claim for indemnification shall be reimbursed by the other Party for all of its reasonable attorneys’ fees and costs and expenses incurred in connection with enforcement of such claim, in addition to any other relief to which such prevailing Party may be entitled. For purposes of the foregoing, (a) “prevailing Party” means (i) in the case of the Party initiating the enforcement of rights or remedies, that it recovered substantially all of its claims, and (ii) in the case of the Party defending against such enforcement, that it successfully defended substantially all of the claims made against it, and (b) if neither Party is a “prevailing Party” within the meaning of the foregoing, then neither Party will be entitled to recover its reasonable attorneys’ fees, costs and expenses from the other Party.

ARTICLE XII
TAX MATTERS

Section 12.1 Transfer Taxes. All Transfer Taxes imposed by any Tax Authority in connection with this Agreement and any other transactions contemplated hereby shall be borne equally by Buyer and Seller, whether levied on Seller, Buyer or their respective Affiliates.

Section 12.2 Tax Returns and Covenants.

(a) Seller shall prepare and file all Tax Returns with the appropriate federal, state, local and foreign Tax Authorities relating to HRS for all Pre-Closing Tax Periods and shall pay all Taxes due with respect to such Tax Returns. Seller shall include the income of HRS (including any deferred items triggered into income by Treasury Regulations Section 1.1502-13 and any excess loss accounts taken into income under Treasury Regulations Section 1.1502-19) on Seller’s consolidated federal income Tax Returns for all Pre-Closing Tax Periods and pay any federal income Taxes attributable to such income. Buyer shall cause HRS to furnish Tax information to Seller for the period that includes the Closing Date in accordance with Seller’s past custom and practice. The income of HRS shall be apportioned to the Pre-Closing Tax Period and the period after the Closing Date by closing the books of HRS as of the end of the Closing Date.

(b) Buyer shall prepare and file, or cause to be prepared and filed, all Straddle Tax Returns required to be filed by HRS and shall cause HRS to pay the Taxes shown to be due thereon; provided that Seller shall promptly reimburse Buyer for the portion of such Tax that relates to a Pre-Closing Tax Period. Seller will furnish to Buyer all information and records reasonably requested by Buyer for use in preparation of any Straddle Tax Returns. Buyer shall allow Seller to review, comment upon and reasonably approve without undue delay any Straddle Tax Return at any time during the sixty (60) day period immediately preceding the filing of such Tax Return. Buyer and Seller agree to cause HRS to file all Tax Returns for any Straddle Period on the basis that the relevant taxable period ended as of the close of business on the Closing Date, unless the relevant Tax Authority will not accept a Tax Return filed on that basis.

Exhibit 2.01

(c) In the case of any Straddle Period, (i) real, personal and intangible property Taxes (“Property Taxes”) with respect to the Acquired Assets or the assets of HRS for the Pre-Closing Tax Period shall be equal to the amount of such Property Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that are in the Pre-Closing Tax Period and the denominator of which is the number of days in the Straddle Period; and (ii) the Taxes of HRS (other than Property Taxes) for the portion of the Straddle Period that constitutes a Pre-Closing Tax Period shall be computed as if such taxable period ended as of the close of business on the Closing Date (and, for such purpose, the taxable period of any partnership or other pass-through entity in which HRS holds a beneficial interest shall be deemed to terminate at such time).

(d) Seller will cause any Tax Sharing Arrangement involving HRS to be terminated effective prior to or as of the Closing Date, to the extent any such arrangement relates to HRS, and after the Closing Date HRS shall have no obligation under any such arrangement for any past, present or future period. To the extent any payments are due under any Tax Sharing Arrangement described above, such payments shall be settled prior to the Closing Date.

(e) Seller and Buyer shall furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to HRS, the Business and the Acquired Assets (including access to books and records as well as the timely provision of powers of attorney or similar authorizations) as is reasonably necessary for the filing of all Tax Returns, the making of any election related to Taxes, the preparation for any audit, and the prosecution or defense of any audit, proposed adjustment or deficiency, assessment, claim, suit or other proceeding relating to any Taxes or Tax Return. Seller and Buyer shall reasonably cooperate with each other in the conduct of any audit or other proceeding related to Taxes and all other Tax matters relating to HRS. For the avoidance of doubt, nothing herein shall require Seller to provide Buyer access to any federal, state or local consolidated income Tax Return that includes Seller or its Affiliates (other than as such information solely relates to HRS). Any information obtained under this Section 12.2(e) shall be kept confidential, except as otherwise reasonably may be necessary in connection with the filing of Tax Returns or claims for refund or in conducting any Tax audit, dispute or contest.

(f) Without the prior written consent of Seller (which consent shall not be unreasonably withheld, conditioned or delayed), none of Buyer or its Affiliates shall, to the extent it may affect Seller and its relevant Subsidiaries with respect to Pre-Closing Tax Periods, make or change any Tax election, change any annual Tax accounting period, adopt or change any method of Tax accounting, file any amended Tax Return, enter into any closing agreement or any other agreement or arrangement with any Tax Authority, settle any Tax claim or assessment, surrender any right to claim a Tax refund, offset or other reduction in Tax liability or consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment. This Section 12.2(f) shall not apply to any action in the Ordinary Course of Business to the extent consistent with the most recent past practices of Seller or its relevant Subsidiaries.

(g) (i) Buyer shall promptly notify Seller in writing upon receipt by Buyer, any of its Affiliates or, after the Closing Date, HRS, of notice of any pending or threatened federal, state, local or foreign Tax audits or assessments relating to any taxable period

Exhibit 2.01

ending on or before the Closing Date or any Straddle Period or relating to a Tax for which Seller may be liable pursuant to this Agreement, provided that failure to comply with this provision shall not affect Buyer’s right to indemnification hereunder except to the extent such failure directly results in an increase in the amount for which Seller is liable under Section 12.4(a). Seller shall promptly notify Buyer in writing upon receipt by Seller, any of its Affiliates or, prior to the Closing Date, HRS, of notice of any pending or threatened federal, state, local or foreign Tax audits or assessments relating to the Business or the Acquired Assets for any taxable period beginning after the Closing Date or any Straddle Period or relating to a Tax for which Buyer may be liable pursuant to this Agreement, provided that failure to comply with this provision shall not affect Seller’s right to indemnification hereunder except to the extent such failure directly results in an increase in the amount for which Buyer is liable under Section 12.4(b).

(ii) Seller shall have the sole right to represent HRS’ interests in any Tax audit or administrative or court proceeding relating to a taxable period ending on or before the Closing Date or relating to a Tax for which Seller otherwise may be liable pursuant to this Agreement, and to employ counsel of Seller’s choice at Seller’s expense; provided that Buyer shall be permitted, at Buyer’s expense, to be present at, and to participate in, any such audit or proceeding. Notwithstanding the foregoing, Seller shall not be entitled to settle after the Closing Date, either administratively or after the commencement of litigation, any claim for Taxes which would adversely affect in any material respect the liability for Taxes of Buyer or of HRS relating to any taxable period ending after the Closing Date for which Buyer must indemnify Seller pursuant to Section 12.4(b) without the prior written consent of Buyer. Such consent shall not be unreasonably withheld, and shall not be necessary to the extent that Seller has indemnified Buyer against the effects of any such settlement.

(iii) Buyer shall have the sole right to represent HRS’ interest in any Tax audit or administrative or court proceeding relating to a taxable period beginning after the Closing Date or relating to a Tax for which Buyer otherwise may be liable pursuant to this Agreement, and to employ counsel of Buyer’s choice at Buyer’s expense; provided that Seller shall be permitted at Seller’s expense, to be present at, and to participate in, any such audit or proceeding. Notwithstanding the foregoing, Buyer shall not be entitled to settle after the Closing Date, either administratively or after the commencement of litigation, any claim for Taxes which would adversely affect in any material respect the liability for Taxes of Seller or of HRS relating to any taxable period for which Seller must indemnify Buyer pursuant to Section 12.4(a) without the prior written consent of Seller. Such consent shall not be unreasonably withheld, and shall not be necessary to the extent that Buyer has indemnified Seller against the effects of any such settlement.

(iv) Buyer shall have the sole right to represent HRS’ interest in any Tax audit or administrative or court proceeding relating to any Straddle Period, and to employ counsel of Buyer’s choice at Buyer’s expense; provided that Seller shall be permitted at Seller’s expense, to be present at, and to participate in, any such audit or proceeding. Notwithstanding the foregoing, Buyer shall not be entitled to settle after the Closing Date, either administratively or after

Exhibit 2.01

the commencement of litigation, any claim for Taxes which would adversely affect in any material respect the liability for Taxes of Seller or of HRS relating to any taxable period for which Seller must indemnify Buyer pursuant to Section 12.4(a) without the prior written consent of Seller. Such consent shall not be unreasonably withheld, and shall not be necessary to the extent that Buyer has indemnified Seller against the effects of any such settlement.

Section 12.3 Tax Characterizations of Adjustments. Seller and Buyer agree to treat, and to cause their respective Affiliates to treat, all payments made either to or for the benefit of the other under any indemnity provisions of this Agreement and for any misrepresentations or breach of representations and warranties or covenants as adjustments to the Purchase Price and the Ceding Commission for all Tax purposes and that such treatment shall govern for purposes hereof.

Section 12.4 Tax Indemnification and Parties’ Responsibility.

(a) Seller and its relevant Subsidiaries are and shall remain solely responsible for, and shall jointly and severally indemnify and hold harmless each Buyer Indemnified Person from and against (i) all Pre-Closing Taxes (or the non-payment thereof), (ii) Seller’s portion of any Taxes as determined in Section 12.1 and (iii) all Taxes or Losses imposed on or with respect to Buyer or its Affiliates or HRS, arising from or relating to any breach by Seller or its Affiliates of any covenant under this Article XII or Section 7.1(a)(xviii) or any representation or warranty under Section 5.8 (determined without regard to any references to “material” or “Material Adverse Effect” or any other similar qualifiers). To the extent there are Tax assets or attributes of HRS generated during a taxable period (or portion thereof) ending on or before the Closing Date that are permitted, under Applicable Law, to reduce Taxes imposed on or with respect to Seller, a Subsidiary of Seller or HRS for taxable periods (or portions thereof) ending on or before the Closing Date, such Tax assets or attributes shall be used to reduce such Taxes.

(b) Buyer and its relevant Subsidiaries shall be solely responsible for, and shall jointly and severally indemnify and hold harmless each Seller Indemnified Person from and against (i) all Taxes imposed on or with respect to HRS, the Acquired Assets or the Business, as applicable (A) for taxable periods beginning after the Closing Date and (B) with respect to Straddle Periods, for the portion of such Taxes allocable to the period beginning after the Closing Date (as determined under Section 12.2(c)), (ii) Buyer’s portion of any Taxes as determined in Section 12.1, and (iii) all Taxes imposed on or with respect to Seller or its Affiliates, HRS, the Acquired Assets or the Business, arising from or relating to any breach by Buyer or its Affiliates of any covenant under this Article XII.

(c) The indemnities provided for in the preceding Section 12.4(a) and Section 12.4(b) shall survive until thirty (30) days following the expiry of the applicable statute of limitations in respect of the Taxes subject to indemnification as provided herein.

(d) Amounts indemnifiable under this Section 12.4 shall be (i) reduced by any cash Tax Benefit attributable to any adjustment that gives rise to such indemnifiable amount that is actually realized by the indemnified party (up to, but not in excess of, the amount

Exhibit 2.01

of such indemnification payment) in the year of the loss and in the succeeding year after such indemnification payment is made, and (ii) increased by any cash Tax Costs attributable to such indemnified amount that is actually realized by the Indemnified Party in the year of indemnification and in the succeeding year after such indemnification. For purposes of this Section 12.4(d) and Section 11.1(c)(iv), a “Tax Benefit” means the amount by which the Tax liability of an indemnified party or compensated party is reduced on an actually realized basis (through a reduction in current cash Tax Liability), and “Tax Cost” means the amount by which the Tax liability of an indemnified party or compensated party is increased on an actually realized basis (through an increase in current cash Tax Liability).

Section 12.5 Tax Refunds.

(a) Any Tax refund (including any interest in respect thereof) received by Buyer or HRS, and any amounts credited against Tax to which Buyer or HRS becomes entitled (including by way of any amended Tax Returns or any carryback filing), that relate to any taxable period, or portion thereof, for which Seller is liable pursuant to Section 12.4(a), shall be for the account of Seller, and Buyer shall pay over to Seller any such refund or the amount of any such credit within ten (10) days after receipt of such credit or entitlement thereto. Buyer shall pay Seller interest at the rate prescribed under Section 6621(a)(1) of the Code, compounded daily, on any amount not paid when due under this Section 12.5(a).

(b) Any Tax refund (including any interest in respect thereof) received by Seller, and any amounts credited against Tax to which Seller becomes entitled (including by way of any amended Tax Returns or any carryback filing), that relate to any taxable period, or portion thereof, for which Buyer is liable pursuant to Section 12.4(b), shall be for the account of Buyer and Seller shall pay over to Buyer any such refund or the amount of any such credit within thirty (30) days after receipt of such credit or entitlement thereto. Seller shall pay Buyer interest at the rate prescribed under Section 6621(a)(1) of the Code, compounded daily, on any amount not paid when due under this Section 12.5(b).

Section 12.6 Purchase Price Allocation.

(a) The Parties agree that the Purchase Price (including, for these purposes, any other consideration paid to Seller hereunder, including any Assumed Liabilities and the Ceding Commission) (the “Allocable Amount”) shall be allocated for all Tax purposes among the Transferred Equity Interests, the Covered Insurance Policies and the Acquired Assets in respect of the Business in accordance with the fair market values of the Transferred Equity Interests, the Covered Insurance Policies and the Business as mutually agreed between Seller and Buyer and reflected on an allocation schedule (the “Allocation Schedule”). The Allocation Schedule shall be reasonable and shall be prepared in accordance with Section 1060 of the Code and the Treasury Regulations thereunder. Buyer and Seller shall use their reasonable best efforts to negotiate and agree on a final allocation of the Allocable Amount (the “Final Allocation”) within one-hundred and twenty (120) days following the Closing. Buyer and Seller each agrees to file Internal Revenue Service Form 8594 (or any successor form), and all federal, state, local and foreign Tax Returns, in accordance with the Final Allocation, as finally agreed by Buyer and Seller or as determined under Section 12.6(b). Buyer and Seller each agrees to provide the other promptly with any other information required to complete Form 8594 (or any successor form).

Exhibit 2.01

(b) If for any reason Seller and Buyer are unable to agree on the Final Allocation in accordance with Section 12.6(a), then Seller and Buyer may submit their disagreement concerning the Final Allocation to final and binding arbitration in the same manner provided for Adjustment Disputes by Section 2.4(f) above, except as modified herein. Either Buyer or Seller may submit such disagreement if, for any reason, Buyer and Seller are unable to agree on a Final Allocation within one-hundred and twenty (120) days following the Closing, as provided in Section 12.6(a). The sole arbitrator, a partner at an Accounting Firm appointed pursuant to Section 2.4(f)(i) above, shall, based solely on information provided by Seller and Buyer, and not by independent review, resolve only those issues in dispute with respect to the Final Allocation. The decision of the sole arbitrator shall be final and binding, shall be in accordance with the provisions of this Section 12.6 and shall be the exclusive remedy of the Parties with respect to any disputes arising with respect to the Final Allocation. In the event the sole arbitrator concludes that one Party was correct as to sixty-five percent (65%) or more (by dollar amount) of the disputed items, then the other Party shall pay the Accounting Firm’s fees, costs and expenses. In the event the sole arbitrator fails to make such conclusion, then each Party shall pay one-half the Accounting Firm’s fees, costs and expenses. Any subsequent allocations necessary as a result of payments made pursuant to this Agreement shall be made in a manner consistent with the Final Allocation as finally determined pursuant to this Section 12.6. For all Tax purposes, Seller and Buyer agree to (i) report, and cause their respective Affiliates to report, the transactions contemplated by this Agreement in a manner consistent with the Final Allocation, which shall be binding upon Seller and Buyer and their respective Affiliates, and (ii) not take any position inconsistent therewith in any Tax Return, Tax filing, audit, refund claim or otherwise.

ARTICLE XIII
TERMINATION

Section 13.1 Termination. This Agreement may be terminated at any time prior to the Closing Date:

(a) by the mutual written consent of Buyer and Seller;

(b) by Buyer if Seller (i) breaches or fails to perform or comply with any covenants, agreements, conditions or obligations in this Agreement that are required to be performed or complied with by it prior to the date of such termination, or (ii) breaches any of its representations or warranties contained herein or if any such representations or warranties become inaccurate, in each case, such that would reasonably be expected to result in the conditions to the Closing set forth in Section 9.1(a) or Section 9.1(b) not being satisfied; provided that, if curable, Seller shall have failed to cure such breach within thirty (30) days after receipt of written notice from Buyer requesting such breach to be cured (or such lesser period if such 30-day period would otherwise lapse beyond the Termination Date);

(c) by Seller if Buyer (i) breaches or fails to perform or comply with any covenants, agreements, conditions or obligations in this Agreement that are required to be performed or complied with by it prior to the date of such termination, or (ii) breaches any of its representations or warranties contained herein or if any such representations or warranties

Exhibit 2.01

become inaccurate, in each case, such that would reasonably be expected to result in the conditions to the Closing set forth in Section 10.1(a) or Section 10.1(b) not being satisfied; provided that, if curable, Buyer shall have failed to cure such breach within thirty (30) days after receipt of written notice from Seller requesting such breach to be cured (or such lesser period if such 30-day period would otherwise lapse beyond the Termination Date);

(d) by Buyer or Seller if any Governmental Body of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Applicable Law or non-appealable Governmental Order restraining, enjoining, impeding or otherwise prohibiting or making unlawful the Closing or the transactions contemplated by this Agreement or the Ancillary Agreements; or

(e) by Buyer or Seller if the Closing shall not have occurred on or before May 1, 2013 (the “Termination Date”); provided, however, that if the last of the conditions set forth in Article IX and Article X (excluding conditions that, by their terms, cannot be satisfied until the Closing) are satisfied or waived on any of the last three (3) Business Days of April 2013, then the Termination Date will be extended until June 3, 2013.

Notwithstanding anything in this Section 13.1 to the contrary, neither Party may terminate this Agreement pursuant to subsections (b), (c), (d) or (e) above if its failure to perform or comply with any of its covenants, agreements, conditions or obligations, or the breach or inaccuracy of any of its representations or warranties, under this Agreement has been the principal cause of, or has resulted in, the event or condition purportedly giving rise to a right to terminate this Agreement under such subsection.

Section 13.2 Notice of Termination. Any Party desiring to terminate this Agreement pursuant to Section 13.1 (other than Section 13.1(a)) shall give written notice of such termination to the other Party to this Agreement.

Section 13.3 Exclusive Remedies; Effect of Termination.

(a) Without limiting the remedies available to the Parties following the termination of this Agreement pursuant to Section 13.3(b), prior to the earlier of the Closing or the termination of this Agreement, the sole and exclusive remedy of each Party for any breach or inaccuracy of any representation or warranty of the other Party contained in this Agreement or any certificate or instrument delivered by the other Party hereunder shall be refusal to close the transactions contemplated hereunder in accordance with Section 9.1(b) or Section 10.1(b), as applicable, and termination of this Agreement in accordance with this Article XIII; provided, however, that nothing in this Section 13.3(a) will relieve any Party hereto from Liability arising out of any willful misconduct, willful and material breach or fraud by such Party of any of its representations, warranties, covenants or other agreements contained in this Agreement.

(b) In the event that this Agreement shall be terminated pursuant to this Article XIII, this Agreement shall forthwith become null and void and of no further force and effect and no Party shall have any Liability to any other Party hereto or their respective Affiliates, shareholders, directors, officers, partners, managers, employees, representatives, agents or controlling persons (within the meaning of Section 15 of the Securities Act and

Exhibit 2.01

Section 20 of the Exchange Act); provided, however, that nothing in this Article XIII will relieve any Party hereto from Liability arising out of any willful misconduct, willful and material breach or fraud by such Party of any of its representations, warranties, covenants or other agreements contained in this Agreement; provided further that Article I, this Section 13.3, Article XIV (other than Section 14.1 and Section 14.2) and any confidentiality obligations of the Parties (arising under this Agreement or under the Confidentiality Agreement) shall remain in full force and effect and shall survive the termination of this Agreement.

ARTICLE XIV
GENERAL PROVISIONS

Section 14.1 Survival of Representations and Warranties. All representations and warranties contained in this Agreement, other than Specified Representations, shall survive the consummation of the transactions contemplated by this Agreement through the period during which claims for indemnification may be made for such representations and warranties pursuant to Article XI or Section 12.4, as applicable (at which time such representations and warranties shall terminate, except as otherwise provided in Section 11.2(a)). All Specified Representations shall survive indefinitely or until the latest date permitted by Applicable Law.

Section 14.2 Remedies. Each Party agrees that any failure to perform, or breach of its obligations under this Agreement will result in irreparable injury to the other Party, that the remedies available to such other Party at law alone will be an inadequate remedy for such failure or breach and that, in addition to any other legal or equitable remedies that such other Party may have, such other Party may seek to enforce its rights in court by an Action for specific performance and the Parties expressly waive the defense that a remedy in damages will be adequate or that an award of specific performance is not an appropriate remedy for any reason at law or equity. Any Party seeking an order or injunction to prevent or cure breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction. The Parties further agree that (a) by seeking any remedy provided for in this Section 14.2, a Party shall not in any respect waive its right to seek any other form of relief that may be available to such Party under this Agreement and (b) nothing contained in this Section 14.2 shall require any Party to institute any action for (or limit any Party’s right to institute any action for) specific performance under this Section 14.2 before exercising any other right under this Agreement.

Section 14.3 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York (without regard to conflict of laws principles that might lead to the application of the laws of another jurisdiction); provided, however, for the avoidance of doubt, Sections 5-1401 and 5-1402 of the General Obligations Law shall apply.

Section 14.4 Jurisdiction; Venue. Subject to Sections 2.4 and 12.6(b), each of the Parties hereto irrevocably agrees that any and all Actions arising out of, relating to or in connection with this Agreement or the transactions contemplated by this Agreement or the formation, breach, termination or validity of this Agreement brought by any other Party or its

Exhibit 2.01

successors or assigns, shall be brought and determined exclusively in the courts of the United States of America for the Southern District of New York or, in the event that such courts do not have subject matter jurisdiction over such Action, in the courts of the State of New York located in the Borough of Manhattan, The City of New York. Each of the Parties agrees that mailing of process or other papers in connection with any such Action in the manner provided in Section 14.6, or in such other manner as may be permitted by Applicable Law, will be valid and sufficient service thereof. Each of the Parties hereby irrevocably submits with regard to any such Action for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any Action relating to this Agreement or any of the transactions contemplated by this Agreement in any court or tribunal other than the aforesaid courts. Each of the Parties hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any Action with respect to this Agreement or the transactions contemplated by this Agreement or the formation, breach, termination or validity of this Agreement (a) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve process in accordance with this Agreement, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by Applicable Law, any claim that (i) the Action should be dismissed on the basis of forum non conveniens , (ii) the venue of such Action is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

Section 14.5 Jury Waiver. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND WHETHER MADE BY CLAIM, COUNTERCLAIM, THIRD-PERSON CLAIM OR OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS IN THIS SECTION 14.5.

Section 14.6 Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of service if served personally on the Party to whom notice is to be given, (b) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and telephonic confirmation of receipt is obtained promptly after completion of transmission, (c) on the day of transmission if sent via electronic mail to the email address given below, and telephonic confirmation of receipt is obtained promptly after completion of transmission, or (d) on the second Business Day after delivery to an overnight courier (such as Federal Express) or an overnight mail service (such as the Express Mail service) maintained by the United States Postal Service, to the Party as follows:

Exhibit 2.01

(a) If to Buyer, to:

Massachusetts Mutual Life Insurance Company 1295 State Street

Springfield, Massachusetts 01111

Attention: Elaine Sarsynski

Facsimile: 413-744-1177

Email: esarsynski@massmutual.com

with copies to (which shall not constitute notice):

Massachusetts Mutual Life Insurance Company 1295 State Street

Springfield, Massachusetts 01111

Attention: General Counsel

Facsimile: 413-226-4134

Email: mroellig49@massmutual.com

Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square

New York, New York 10036 Attention: Robert J. Sullivan

Todd E. Freed

Facsimile: 212-735-2000


Email:	robert.sullivan@skadden.com todd.freed@skadden.com


(b)	If to Seller, to:

Hartford Life, Inc.

c/o The Hartford Financial Services Group One Hartford Plaza

Hartford, Connecticut 06155

Attention: General Counsel

Facsimile: 860-547-4721

Email: alan.kreczko@thehartford.com

with a copy to (which shall not constitute notice):

Sidley Austin LLP

One South Dearborn

Chicago, Illinois 60603

Attention: Perry J. Shwachman

Sean M. Keyvan

Facsimile: 312-853-7036

Email: pshwachman@sidley.com

Exhibit 2.01

skeyvan@sidley.com

The Hartford Financial Services Group One Hartford Plaza

Hartford, Connecticut 06155

Attention: General Counsel

Facsimile: 860-547-4721

Email: alan.kreczko@thehartford.com

with a copy to (which shall not constitute notice):

Sidley Austin LLP

One South Dearborn

Chicago, Illinois 60603

Attention: Perry J. Shwachman Sean M. Keyvan

Facsimile: (312) 853-7036

Email: pshwachman@sidley.com

skeyvan@sidley.com

or to such other address as such Party may indicate by a notice delivered to the other Parties hereto in accordance with this Section 14.6.

Section 14.7 Successors and Assigns; No Third-Party Beneficiaries.

(a) The rights and obligations of a Party under this Agreement shall not be assignable or delegable by such Party without the written consent of the other Parties.

(b) Except as otherwise provided in Section 8.4(d), this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their successors and permitted assigns. Except as otherwise provided in Article XI and Article XII, nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon any Person other than the Parties and their respective successors and assigns permitted by this Section 14.7 any right, remedy or claim under or by reason of this Agreement.

Section 14.8 Entire Agreement; Amendments.

(a) This Agreement, the Exhibits and Schedules referred to herein, the documents delivered pursuant hereto, the Confidentiality Agreement and the Ancillary Agreements contain the entire understanding of the Parties hereto with regard to the subject matter contained herein or therein, and supersede all other prior representations, warranties, agreements, understandings or letters of intent between or among any of the Parties, which representations, warranties, agreements, understandings or letters of intent shall be of no force or effect for any purpose, and shall be interpreted without reference to any prior drafts hereof.

Exhibit 2.01

(b) Except for the representations and warranties expressly set forth in Article IV and Article V, any certificate or instrument delivered hereunder by Seller and any Ancillary Agreement, (i) Buyer has not relied on any representation or warranty from Seller or any other Person in determining to enter into this Agreement and (ii) neither Seller nor any other Person has made any representation or warranty, express or implied, as to the Business (or the value or future thereof), the Acquired Assets, the Assumed Liabilities, HRS, the Covered Insurance Policies or the accuracy or completeness of any information regarding any of the foregoing that Seller or any other Person furnished or made available to Buyer and its Representatives (including any projections, estimates, budgets, offering memoranda, management presentations or due diligence materials).

(c) Except for the representations and warranties expressly set forth in Article VI, any certificate or instrument delivered hereunder by Buyer and any Ancillary Agreement, (i) Seller has not relied on any representation or warranty from Buyer or any other Person in determining to enter into this Agreement and (ii) neither Buyer nor any other Person has made any representation or warranty, express or implied, as to the accuracy or completeness of any information furnished or made available to Seller and its Representatives (including, as applicable, any projections, estimates, budgets, offering memoranda, management presentations or due diligence materials).

(d) Except for updates to Section 8.1(a)(i) of the Business Disclosure Schedule in compliance with Section 8.1(a) hereof, this Agreement may not be amended, modified or supplemented except by a written instrument signed by an authorized Representative of each of the Parties or their respective successors in interest.

Section 14.9 Interpretation. The table of contents, articles, titles and headings to sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Unless the context otherwise requires, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. Subject to Section 14.6, all references to “written notice” herein shall include notice by print, fax or electronic mail. All references to a “willful and material breach” refer to an action or omission that the breaching Party takes or omits to take with the intent of breaching this Agreement. The definitions in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine genders of such term. Except as otherwise set forth herein, any agreement or instrument defined or referred to herein or any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or supplemented, including by waiver or consent, and references to all attachments thereto and instruments incorporated therein. Any statute or regulation referred to herein means such statute or

Exhibit 2.01

regulation as amended, modified, supplemented or replaced from time to time (and, in the case of any statute, includes any rules and regulations promulgated under such statute), and references to any section of any statute or regulation include any successor to such section. Any agreement referred to herein shall include reference to all Exhibits, Schedules and other documents or agreements attached thereto. References to dollars or “$” shall mean U.S. dollars. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted. Each representation, warranty, covenant, agreement and condition contained in this Agreement shall have independent significance. Notwithstanding anything in this Agreement or any of the Ancillary Agreements to the contrary, (a) the listing or inclusion of any item, matter, agreement, document or instrument in the Seller Disclosure Schedule, the Business Disclosure Schedule or in any Schedule or Exhibit to this Agreement or in any written agreement or documentation or certificate delivered pursuant hereto and (b) any action taken or not taken in connection with this Agreement, any of the Ancillary Agreements or otherwise, shall not limit or restrict Seller’s indemnification obligations under Article XI or Article XII with respect to Excluded Liabilities.

Section 14.10 HFSG Guaranty.

(a) HFSG hereby unconditionally, absolutely and irrevocably guarantees, undertakes and promises to cause Seller to fully and promptly pay, perform and observe all of Seller’s obligations under, with respect to, in connection with or otherwise arising out of or relating to this Agreement (collectively, the “Obligations”), whether according to the present terms hereof, or pursuant to any change in the terms, covenants and conditions hereof at any time hereafter made or granted, including pursuant to any amendments, waivers, extensions or renewals affecting this Agreement and the transactions contemplated hereby. In the event that Seller fails in any manner whatsoever to pay, perform, discharge or observe any of the Obligations, HFSG will itself duly and promptly pay, perform, discharge or observe, as the case may be, such Obligations, or cause the same to be duly and promptly paid, performed, discharged or observed, in each case as if HFSG were itself Seller with respect to such Obligations.

(b) In regards to monetary obligations, HFSG agrees that its guarantee under this Section 14.10 constitutes a guarantee of payment when due and not of collection. Notwithstanding anything in this Agreement to the contrary, Buyer may proceed to enforce this Section 14.10 against HFSG without first pursuing or exhausting any right or remedy that Buyer or any of its successors or assigns may have against Seller, any of its successors or assigns (or any Affiliates thereof) or any other Person. Any payment by HFSG pursuant to this Section 14.10 will, to the extent of actual receipt by Buyer of such payment as it relates to any Obligation under this Agreement, discharge such Obligation of Seller to Buyer under this Agreement.

(c) To the fullest extent permitted by Applicable Law, HFSG waives: (i) any defense based on or arising out of any defense of Seller on account of lack of power or authority by Seller to execute, deliver or perform this Agreement; (ii) any right to require Seller, as a condition of payment or performance by HFSG, to (A) proceed against any other guarantor of the Obligations or any other Person or (B) pursue any other remedy whatsoever; (iii) promptness, diligence and any requirement that Buyer protect, secure, perfect or insure any security interest or lien or any property subject thereto; (iv) notices, demands, presentments,

Exhibit 2.01

protests, notices of protest, notices of dishonor and notices of any action or inaction, notices of any renewal, extension or modification of the Obligations or any agreement related thereto and notices of any of the matters referred to in this Section 14.10(c) and any right to consent to any thereof; and (v) any other legal or equitable defense available to a surety or guarantor under Applicable Law. Buyer may, at its election, foreclose on any security held by it, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with Seller or exercise any other right or remedy available to it against Seller, without affecting or impairing in any way the liability of HFSG under this Section 14.10 except to the extent the Obligations have been paid in full in cash or otherwise satisfied in full. To the fullest extent permitted by Applicable Law, HFSG waives any defense arising out of any such election even though such election operates, pursuant to Applicable Law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of HFSG against Seller or any security.

(d) The obligations of HFSG under this Section 14.10 shall be valid and enforceable and shall not be discharged, terminated, reduced or impaired or otherwise affected by, whether or not HFSG shall have had notice or knowledge of any of them, (i) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of this Agreement or any other agreement, (ii) the release of, or any impairment of or failure to perfect any lien on or security interest in, any security held by Buyer for the Obligations or any of them, (iii) any default, failure or delay, willful or otherwise, in the payment or performance of the Obligations or (iv) any other act or omission that may or might in any manner or to any extent vary the risk of HFSG or otherwise operate as a discharge of HFSG as a matter of law or equity. HFSG expressly authorizes Buyer to take and hold security for the payment and performance of the Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in its sole discretion or to release or substitute any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of HFSG under this Section 14.10.

(e) Notwithstanding the provisions of this Section 14.10, HFSG shall have the rights, remedies and legal or equitable defenses that are available to Seller under the terms of this Agreement or Applicable Law with respect to the Obligations.

(f) The obligations of HFSG under this Section 14.10 shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any change, restructuring or termination of the corporate structure or existence of Seller, or any dissolution, insolvency, liquidation, conservation, rehabilitation, bankruptcy, reorganization, receivership, supervision, arrangement or similar statutory, administrative, judicial or delinquency proceeding of or affecting Seller or any other guarantor of the Obligations or by any defense which Seller or any other guarantor of the Obligations may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding unless also stayed in connection with the insolvency, bankruptcy or reorganization of HFSG.

(g) Subject to Section 14.10(j), HFSG agrees that its guarantee under this Section 14.10 shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored upon the insolvency, bankruptcy or reorganization of Seller or otherwise.

Exhibit 2.01

(h) HFSG agrees that it shall have no right of subrogation, reimbursement, contribution or indemnity with respect to payments made under this Section 14.10 until such time as all Obligations have been paid in full. If an amount shall be paid to HFSG on account of such rights at any time in violation of the preceding sentence, such amount shall be held in trust for the benefit of Buyer and shall forthwith be paid to Buyer to be credited and applied to the obligations under this Section 14.10.

(i) Notwithstanding the provisions of Section 11.10, HFSG agrees to pay on demand all expenses of Buyer (including the reasonable fees and expenses of its counsel) for the protection or enforcement of the rights of Buyer against HFSG under this Section 14.10.

(j) HFSG’s guarantee of the Obligations under this Section 14.10 shall expire on and be of no further force and effect following the third (3rd) anniversary of the Closing Date, other than with respect to (i) any matter that is the subject of a Claim Notice provided by a Buyer Indemnified Person on or prior to such third (3rd) anniversary and (ii) if not yet paid on or prior to such third (3rd) anniversary, any obligation of Seller to pay or cause to be paid the Purchase Price Adjustment Amount or the Reinsurance Settlement Adjustment Amount.

Section 14.11 Waivers. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, in writing at any time by the Party or Parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement if, as to any Party, it is authorized in writing by an authorized Representative of such Party. The failure of any Party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any Party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any preceding or subsequent breach.

Section 14.12 Expenses. Except as otherwise expressly set forth in this Agreement and the Ancillary Agreements, each Party hereto will pay all costs and expenses incident to its negotiation and preparation of this Agreement and the Ancillary Agreements and to its performance and compliance with all agreements and conditions contained herein or therein on its part to be performed or complied with, including the fees, expenses and disbursements of its counsel and independent public accountants, whether or not the Closing shall have occurred. Seller acknowledges and agrees that none of the costs and expenses incurred in the establishment and maintenance of the virtual data site at https://datasite.merrillcorp.com and in the negotiation and preparation of this Agreement or the Ancillary Agreements or the performance and compliance with the agreements and conditions contained herein or therein shall be borne or payable by HRS.

Section 14.13 Partial Invalidity. Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under Applicable Law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, so long as the economic or legal substance of the transactions contemplated by this Agreement is

Exhibit 2.01

not affected in any manner adverse to any Party. Upon such determination that any provision is invalid, illegal or unenforceable, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the greatest extent possible. Nothing in this Section 14.13 shall affect either Party’s right to terminate this Agreement pursuant to Section 13.1. Section 8.4(g) and Section 8.5(d) supersede this Section 14.13 solely with respect to Section 8.4 and Section 8.5, respectively.

Section 14.14 Execution in Counterparts. This Agreement may be executed in one or more counterparts, including by facsimile or by electronic delivery in .pdf format, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed and delivered by each of the Parties hereto.

Section 14.15 No Public Announcement. Neither Seller or its Affiliates nor Buyer or its Affiliates shall issue or cause the publication of any press release or other public announcement concerning the transactions contemplated by this Agreement or any Ancillary Agreement without the prior written consent of the other (which consent shall not be unreasonably withheld, conditioned or delayed), except for: (a) such publication, announcement or communication as may be required by Applicable Law or applicable securities exchange rules, in which case the Party hereto required to publish such press release or public announcement shall allow the other Party hereto a reasonable opportunity to comment on such press release or public announcement in advance of such publication, to the extent practicable in the circumstance; (b) disclosures necessary to implement the provisions of this Agreement; or (c) any complaint, crossclaim, counterclaim or other filing or submission with, by or to any Governmental Body relating to or in connection with the enforcement or defense of the rights of a Party hereto or remedies arising under this Agreement or an applicable Ancillary Agreement and any such publication, announcement or communication as may be required by Applicable Law or applicable securities exchange rules related to the subject matter of this clause (c).

Section 14.16 Disclosure Schedules. Matters reflected in any section of a Disclosure Schedule are not necessarily limited to matters required by this Agreement to be so reflected. Such additional matters are set forth for informational purposes and do not necessarily include other matters of a similar nature. No reference to or disclosure of any item or other matter in any Section of a Disclosure Schedule shall be construed as an admission or indication that such item or other matter is material or that such item or other matter is required to be referred to or disclosed in this Agreement. Without limiting the foregoing, no such reference to or disclosure of a possible breach or violation of any Contract, Applicable Law or order of any Governmental Body shall be construed as an admission or indication that a breach or violation exists or has actually occurred.

[Remainder of Page Intentionally Left Blank - Signature Page Follows]

Exhibit 2.01

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the day and year first above written.

HARTFORD LIFE, INC.

By: /s/ David Levenson

Name: David Levenson

Title: CEO

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Exhibit 2.01

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

By: /s/ Roger W. Crandall

Name: Roger W. Crandall

Title: Chairman, President and

Chief Executive Officer

[Signatures Continue onto Next Page]

Exhibit 2.01

Solely for purposes of Sections 8.4, 8.5, 14.2,

14.3, 14.4, 14.5, 14.6, 14.7, 14.8, 14.9, 14.10, 14.11, 14.12, 14.13, 14.14 and 14.15 and to the extent applicable to such Sections, Article I:

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

By: /s/ Christopher J. Swift _ Name: Christopher J. Swift Title: Chief Financial Officer

Exhibit 2.01

Below is a list of omitted schedules (or similar attachments) from the Purchase and Sale Agreement by and among Massachusetts Mutual Life Insurance Company, Hartford Life, Inc. and The Hartford Financial Services Group, Inc. dated as of September 4, 2012. The registrant agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.

Schedule 1.1(a) Acquired Assets

Schedule 1.1(b) Assigned Leases

Schedule 1.1(c) Assumed Liabilities

Schedule 1.1(d) Enterprise Contracts

Schedule 1.1(e) Excluded Assets

Schedule 1.1(f) General Account Net Settlement Methodologies

Schedule 1.1(g) Investment Assets

Schedule 1.1(h) Form of Master Settlement Statement

Schedule 1.1(i) Material Distributors

Schedule 1.1(j) Net Flow Methodologies

Schedule 1.1(k) Plans Discontinued or Lapsed as of December 31, 2011

Schedule 1.1(l) Net Worth Methodologies

Schedule 1.1(m) Other Transferred Contracts

Schedule 1.1(n) Pro Forma Master Settlement Statement

Schedule 1.1(o) Pro Forma Statement of General Account Net Settlement

Schedule 1.1(p) Pro Forma Statement of Net Flows

Schedule 1.1(q) Pro Forma Statement of Net Worth

Schedule 1.1(r) Significant Mutual Fund Organizations

Schedule 1.1(s) Significant Plans

Schedule 1.1(t) Form of Statement of General Account Net Settlement

Schedule 1.1(u) Form of Statement of Net Flows

Schedule 1.1(v) Form of Statement of Net Worth

Schedule 1.1(w) Form of Statement of Separate Accounts

Schedule 1.1(x) Real Property Arrangements

Schedule 1.1(y) Transferred Information Technology Contracts

Schedule 3.3(b) Selection of Investment Assets Methodologies

Schedule 8.11(a) Business Records Principles

Schedule 9.2 Required Regulatory Consents

Exhibit A Form of Administrative Services Agreement

Exhibit B Form of Hold Harmless and Indemnification Agreement

Exhibit C Form of Intercompany Agreement

Exhibit D Form of Master Assignment Agreement

Exhibit E Form of Patent Assignment

Exhibit F Form of Patent License Agreement

Exhibit G Form of Reinsurance Agreement

Exhibit H Form of Services Agreement

Exhibit I Form of Software License Agreement

Exhibit J Form of Trademark Assignment

Exhibit K Form of Trademark License Agreement

Exhibit L Form of Transition Services Agreement

Exhibit M Form of Transitional Trademark License Agreement

Exhibit N Form of Trust Agreement

Exhibit O Form of Bill of Sale

Exhibit P Form of Assignment and Assumption Agreement

Seller Disclosure Schedule Business Disclosure Schedule Buyer Disclosure Schedule

Exhibit 2.02

PURCHASE AND SALE AGREEMENT
BY AND AMONG
HARTFORD LIFE, INC.,
PRUDENTIAL FINANCIAL, INC.
AND

THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(solely for purposes of Section 8.4, Section 8.5 and Section 14.16)

Dated September 27, 2012

Exhibit 2.02

Page

ARTICLE I

DEFINITIONS

Section 1.1 Definitions 1

ARTICLE II

PURCHASE AND SALE

Section 2.1 Purchase and Sale; Assignment and Assumption 21

Section 2.2 Purchase Price; Ceding Commission 22

Section 2.3 Reinsurance Statements and General Account Net Settlement 22

Section 2.4 Review of the Closing Date Balance Sheets, the Closing Statement of General

Account Net Settlement and the Closing Investment Assets List. 24

Section 2.5 Purchase Price Allocation. 25

Section 2.6 Working Capital and Suspense Related Accounts. 26

ARTICLE III
CLOSING

Section 3.1 Closing Date 27

Section 3.2 Payment on the Closing Date 27

Section 3.3 Reinsurance Transaction 28

Section 3.4 Buyer’s Additional Closing Date Deliveries 28

Section 3.5 Seller’s Closing Date Deliveries 28

ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING SELLER

Section 4.1 Organization and Standing 29

Section 4.2 Authority of Seller; Conflicts 29

ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING THE BUSINESS

Section 5.1 Financial Information; Reserves; Business Records. 30

Section 5.2 Eligible Assets 32

Section 5.3 Actuarial Report. 33

Section 5.4 Changes in Business 33

Section 5.5 No Undisclosed Liabilities 33

Section 5.6 Taxes. 34

Section 5.7 Material Seller Permits. 35

Section 5.8 Ownership and Sufficiency of Assets 35

Exhibit 2.02

Section 5.9 Real Property. 35

Section 5.10 Intellectual Property. 36

Section 5.11 No Violation, Litigation or Regulatory Action. 37

Section 5.12 Material Contracts. 39

Section 5.13 Material Distributors. 40

Section 5.14 Employee Benefits and Agreements 41

Section 5.15 Employee Relations 42

Section 5.16 Insurance 43

Section 5.17 No Brokers 43

Section 5.18 Reinsurance 43

Section 5.19 Insurance Product-Related Matters. 43

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER

Section 6.1 Organization and Standing 45

Section 6.2 Authority of Buyer; Conflicts. 46

Section 6.3 No Violation, Litigation or Regulatory Action. 47

Section 6.4 Financial Statements 47

Section 6.5 No Undisclosed Liabilities 47

Section 6.6 Compliance with Laws 48

Section 6.7 Availability of Funds 48

Section 6.8 Facts Affecting Regulatory Approvals 48

Section 6.9 No Brokers 48

Section 6.10 Exclusivity of Representations and Warranties 48

ARTICLE VII
ACTIONS PRIOR TO THE CLOSING DATE

Section 7.1 Operations Prior to the Closing Date 49

Section 7.2 Access to Information; Financial Information. 51

Section 7.3 Notifications 52

Section 7.4 Efforts and Actions to Cause the Closing to Occur 53

Section 7.5 Shared Contracts. 56

Section 7.6 Transition Services Planning; Certain Intellectual Property Matters. 57

Section 7.7 Fortis Transaction 57

Section 7.8 Retained Business ASA 57

Section 7.9 Group Conversion 57

Section 7.10 Cash Flow Testing 58

ARTICLE VIII
ADDITIONAL AGREEMENTS

Section 8.1 Employee Matters. 58

Section 8.2 Insurance; Risk of Loss 64

Section 8.3 Intellectual Property; Use of Seller’s Trademarks; Corporate Names 64

Section 8.4 Non-Competition 65

Section 8.5 Covenants Not to Solicit Employees. 67

Exhibit 2.02

(continued)

Page

Section 8.6 Confidentiality. 68

Section 8.7 Further Action. 69

Section 8.8 HESCO Licensing; Transitioning. 69

Section 8.9 Ancillary Agreements 70

Section 8.10 Transfer and Maintenance of Books and Records 70

Section 8.11 Reserved. 71

Section 8.12 Post-Closing Receipts 71

Section 8.13 Existing Reinsurance Agreements 71

Section 8.14 Bulk Sales 72

Section 8.15 Deletion of Software 72

Section 8.16 Residual Information. 72

Section 8.17 Discovered Policies 73

Section 8.18 Investment Assets with a Payment Default 73

Section 8.19 AG-38 Cooperation 73

Section 8.20 Specified Action 73

Section 8.21 Group Conversion Retrocession Agreement 73

ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

Section 9.1 No Misrepresentation or Breach of Covenants and Warranties. 74

Section 9.2 Governmental Consents 74

Section 9.3 No Restraint 74

Section 9.4 No Material Adverse Effect 74

Section 9.5 Recapture of Certain Existing Reinsurance Agreements 75

Section 9.6 Third-Party Consents 75

ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

Section 10.1 No Misrepresentation or Breach of Covenants and Warranties. 75

Section 10.2 Governmental Consents 75

Section 10.3 No Restraint 75

Section 10.4 No Triggering Event 76

ARTICLE XI
INDEMNIFICATION

Section 11.1 Indemnification; Remedies. 76

Section 11.2 Notice of Claim; Defense. 78

Section 11.3 No Duplication; Exclusive Remedy. 79

Section 11.4 Limitation on Set-off 80

Section 11.5 Mitigation 80

Section 11.6 Recovery by Indemnified Party 80

Section 11.7 Reserves 81

Section 11.8 Reservation of Rights 81

Exhibit 2.02

ARTICLE XII
TAX MATTERS

Section 12.1 Transfer Taxes 81

Section 12.2 Tax Returns and Covenants. 81

Section 12.3 Tax Characterizations of Adjustments 83

Section 12.4 Tax Indemnification and Parties’ Responsibility. 83

Section 12.5 Tax Refunds 84

Section 12.6 Indemnification for Product Tax Non-Compliance 84

Section 12.7 Changes to Final Closing Date Tax Reserves. 88

ARTICLE XIII
TERMINATION

Section 13.1 Termination 89

Section 13.2 Notice of Termination 90

Section 13.3 Effect of Termination 90

ARTICLE XIV
GENERAL PROVISIONS

Section 14.1 Survival of Representations and Warranties and Covenants 90

Section 14.2 Remedies 90

Section 14.3 Governing Law 90

Section 14.4 Jurisdiction; Venue 91

Section 14.5 Jury Waiver 91

Section 14.6 Notices 91

Section 14.7 Successors and Assigns; No Third-Party Beneficiaries 92

Section 14.8 Entire Agreement; Amendments 93

Section 14.9 Interpretation 93

Section 14.10 Waivers 93

Section 14.11 Expenses 93

Section 14.12 Partial Invalidity 94

Section 14.13 Execution in Counterparts 94

Section 14.14 No Public Announcement 94

Section 14.15 Disclosure Schedules 94

Section 14.16 HFSG Guarantee 94

Exhibits

Exhibit A Form of Administrative Services Agreements

Exhibit B Form of Hold Harmless and Indemnification Agreement

Exhibit C Forms of Lease Agreements

Exhibit D Form of Patent Assignment

Exhibit E Form of Patent License Agreement

Exhibit F Form of Reinsurance Agreements

Exhibit G Form of Software License Agreement

Exhibit H Form of Sublease Agreements

Exhibit 2.02

Exhibit I Form of Trademark Assignment

Exhibit J Form of Trademark License Agreement

Exhibit K Form of Transition Services Agreement

Exhibit L Form of Trust Agreements and GUL Trust Agreements

Exhibit M Form of Wholesaling Agreements

Exhibit N Form of Bill of Sale

Exhibit O Form of Assignment and Assumption Agreement

Exhibit P Form of License Agreement

Exhibit Q Group Conversion Term Sheet

Exhibit R GUL Term Sheet

Exhibit S Retained Business ASA Term Sheet

Exhibit 2.02

TABLE OF CONTENTS
(continued)

Schedules

Schedule 1.1(a) Acquired Assets

Schedule 1.1(b) Assigned Leases

Schedule 1.1(c) Business Premises Shared Common Space

Schedule 1.1(d) Cedant Separate Accounts

Schedule 1.1(e)(i) Covered Insurance Policies

Schedule 1.1(e)(ii) Excluded Insurance Policies

Schedule 1.1(f) Excluded Assets

Schedule 1.1(g) Excluded Contracts

Schedule 1.1(h) Excluded Liabilities

Schedule 1.1(i) HLPP Insurance Policies

Schedule 1.1(j) Overhead and Shared Services

Schedule 1.1(k) Separate Accounts

Schedule 1.1(l) Transferred Contracts

Schedule 1.1(m) Transferred Information Technology Contracts

Schedule 1.1(n) Premises of Subleases and Leases

Schedule 2.3(a) Reinsurance Statement Methodology

Schedule 2.3(a)(i) Statement of General Account Net Settlement

Schedule 2.3(a)(ii) Pro Forma Statement of General Account Net Settlement

Schedule 2.3(b)(i) Reference Balance Sheet Methodology

Schedule 2.3(b)(ii) Transfer Balance Sheet Methodology

Schedule 3.3(b) Investment Asset Identification Methodology

Schedule 12.7(c) Changes to Final Closing Date Tax Reserves

Seller Disclosure Schedule Business Disclosure Schedule Buyer Disclosure Schedule

-vi‑

Exhibit 2.02

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT, dated September 27, 2012 (this “Agreement”), is by and among HARTFORD LIFE, INC., a Delaware corporation (“Seller”), PRUDENTIAL FINANCIAL, INC., a New Jersey corporation (“Buyer”) and, solely for purposes of Section 8.4, Section 8.5 and Section 14.16 of this Agreement, THE HARTFORD FINANCIAL SERVICES GROUP, INC., a Delaware corporation (“HFSG”).

PRELIMINARY STATEMENT:

WHEREAS, Seller operates, indirectly through its Affiliates, the Business; and

WHEREAS, Seller desires to sell and assign, or cause to be sold and assigned, to Buyer, and Buyer desires to purchase and assume, or cause to be purchased and assumed, from Seller, the Business, by means of certain reinsurance and administration arrangements and a transfer of the Acquired Assets and the Assumed Liabilities, on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, it is hereby agreed as follows:

ARTICLE I
DEFINITIONS

Section 1.1 Definitions. In this Agreement, the following terms have the meanings

specified or referred to in this Section 1.1.

“2012 Bonus Pool” has the meaning specified in Section 8.1(g)(i). “Accounting Firm” has the meaning specified in Section 2.4(b).

“Accrued Investment Income” means, with respect to each Cedant, the amount set forth on the line item “Accrued Investment Income” reflected on the Statement of General Account Net Settlement, the Pro Forma Statement of General Account Net Settlement, the Estimated Statement of General Account Net Settlement or the Closing Statement of General Account Net Settlement, as applicable to such Cedant. For clarity, the Accrued Investment Income in the Closing Statement of General Account Net Settlement shall be drawn from the Closing Investment Asset List.

“Acquired Assets” means all of Seller’s and its Affiliates’ right, title and interest in, to or under (a) all assets, properties, Contracts and rights Related to the Business (other than (i) Contracts related to real property and (ii) any Intellectual Property Right other than Contracts related to Intellectual Property Rights) and (b) to the extent not otherwise included in clause (a), the following assets, properties, Contracts and rights: (i) the assets, properties and rights that are set forth on Schedule 1.1(a) hereto and (ii) the Transferred Contracts, in each case of (a) and (b), excluding the Excluded Assets.

“Acquired Business” has the meaning specified in Section 8.4(c)(iv). “Acquirer” has the meaning specified in Section 8.16(b).

Exhibit 2.02

“Action” means any claim, litigation, action, audit, suit, investigation, binding arbitration or proceeding by or before any Governmental Body.

“Actuarial Report” has the meaning specified in Section 5.3(a).

“Administrative Services Agreements” means the three (3) Administrative Services Agreements, each of which is between one of the Cedants and Reinsurer or its Affiliate, in the forms attached hereto as Exhibit A.

“Affiliated Group” means any affiliated group within the meaning of Section 1504(a) of the Code or any similar group defined under a similar provision of state, local or foreign law.

“AG-38” means NAIC Actuarial Guideline 38 “The Application of the Valuation of Life Insurance Policies Model Regulation,” commonly known as “AXXX”.

“AG-38 Business” means the Covered Insurance Policies subject to AG-38. “AG 38 Cost” has the meaning specified in Section 8.19.

“Agreement” has the meaning specified in the first paragraph of this Agreement.

“Ancillary Agreement Assumed Liabilities” means Liabilities (including the Reinsured Liabilities) to be ceded or transferred by or from Seller or a Seller Party to, or otherwise assumed by Buyer or a Buyer Party pursuant to the Ancillary Agreements (excluding for this purpose the Assignment and Assumption Agreement).

“Ancillary Agreement Covered Contracts” means the following Contracts to which Seller or any of its Affiliates is a party: (a) the Covered Insurance Policies; (b) the Existing Reinsurance Agreements; (c) Mutual Fund Agreements; and (d) any Distribution Contracts.

“Ancillary Agreements” means the Reinsurance Agreements, the Administrative Services Agreements, the Bill of Sale, the Trust Agreements, GUL Trust Agreements, the Assignment and Assumption Agreement, the Transition Services Agreement, the Trademark Assignment, the Trademark License Agreement, the Patent Assignment, the Patent License Agreement, the Software License Agreement, the Lease Agreements, the Sublease Agreements, the License Agreements, the Group Conversion Retrocession Agreement, Retained Business ASA, the Wholesaling Agreements, the Investment Management Agreements and the Hold Harmless and Indemnification Agreement.

“Applicable Law” means any law, treaty, convention, code, statute, ordinance, directive, rule, regulation or common law imposed by any Governmental Body applicable to the Person, place and situation in question.

“Asset Allocation Schedule” has the meaning specified in Section 2.5(a).

Exhibit 2.02

“Assigned Leases” means the real property leases and subleases of Seller and its Affiliates that are set forth on Schedule 1.1(b).

“Assignment and Assumption Agreement” has the meaning specified in Section 2.1.

“Assumed Liabilities” means (a) all Liabilities of Seller or its Affiliates under the express terms of the Transferred Contracts first arising on or after the Closing Date, other than (i) any Liabilities resulting from a breach by Seller or its Affiliates of any Transferred Contract and (ii) the Ancillary Agreement Assumed Liabilities (which shall be subject to the terms of the applicable Ancillary Agreement(s)), and (b) as long as the applicable Reinsurance Agreement has not been terminated and the business ceded thereunder recaptured, any “Reinsurer Extra-Contractual Obligations” (as such term is defined in the Reinsurance Agreements).

“Bill of Sale” has the meaning specified in Section 2.1.

“Business” means the business of Seller and its Affiliates of issuing, underwriting, selling, distributing, marketing, delivering, cancelling, reinsuring and administering the Covered Insurance Policies, in each case as conducted by HFSG’s Individual Life Division on or prior to the date hereof; provided, that “Business” shall not include the HLPP Business or the business of Hartford Investment Management Company.

“Business Day” means any day that is not a Saturday, Sunday, legal holiday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.

“Business Disclosure Schedule” has the meaning specified in Article V.

“Business Employees” means, collectively, those individuals employed by Seller or any of its Affiliates who are providing substantial services to the Business as of the date hereof, as listed in Section 8.1(a) of the Business Disclosure Schedule, as well as those individuals who, subsequent to the date hereof, are or become employed by Seller or any of its Affiliates and start to provide substantial services to the Business. An individual who provides “substantial services” means an individual who provides services to the Business for at least eighty percent (80%) of the total business time during which he or she provides services to Seller or any of its Affiliates.

“Business Premises” means the premises that are the subject of any of the Assigned Leases, Lease Agreements, License Agreements or Sublease Agreements, excluding, those portions of such premises that are identified on Schedule 1.1(c).

“Business Records” means all records of Seller or its Affiliates to the extent related to the Business, including, but not limited to, all customer lists, policy information, insurance contract forms and rating plans, application forms, disclosure and other insurance regulatory filings (including statutory filings required under Applicable Law), administrative, underwriting, claims handling, reserving, sales and pricing manuals, marketing materials, claim records, sales records, underwriting records, compliance records, reinsurance records, copies of Contracts and information and documents relating to Distributors, Information Technology records, records that relate to the Tax treatment and Tax status of the Covered Insurance Policies and financial and accounting records (in each case, in any form or medium) of Seller and its Affiliates to the extent related to the Business; provided, that for purposes of Section 8.10(a), Schedule 1.1(a) and, with respect to subparts (b) and (c) below, Section 7.2 , “Business Records” shall not include any such item to the extent (a) any Applicable Law, Court Order, Regulatory Agreement or agreement (including any confidentiality agreement to which Seller or any of its Affiliates is a party) prohibits or restricts its transfer, or it is subject to the attorney-client privilege, the work product

Exhibit 2.02

immunity or any other applicable legal privilege or similar doctrine, it being understood that Seller shall use commercially reasonable efforts to obtain waivers or make other arrangements (including redacting information or entering into joint defense agreements) that would enable any such item to be transferred to Buyer without so jeopardizing privilege or contravening any such Applicable Law, Court Order, Contract duty or agreement referenced in this clause (a), (b) it solely relates to Taxes that are Excluded Liabilities, (c) it is part of any Tax Return of Seller or its Affiliates, except to the extent solely related to Seller’s and its Affiliates’ compliance with Tax reporting, withholding or disclosure requirements applicable to the Covered Insurance Policies, (d) it is part of the personnel files or related records of any Business Employee or (e) it relates exclusively or primarily to the Excluded Assets.

“Buyer” has the meaning specified in the first paragraph of this Agreement. “Buyer Claim” means a Product Tax Claim other than a Related Claim. “Buyer Disclosure Schedule” has the meaning specified in Article VI. “Buyer Financial Statements” has the meaning specified in Section 6.4(a). “Buyer Indemnified Persons” has the meaning specified in Section 11.1(a).

“Buyer Party” means each Affiliate of Buyer that is, or is contemplated by this Agreement to become at the Closing, a party to one or more Ancillary Agreements.

“Buyer Severance Benefits” means the severance payments and benefits the Transferred Employee would be entitled to under the plan, policy, practice or agreement of Buyer or its Affiliates applicable to its similarly situated employees, taking into account the Transferred Employee’s length of service with Seller and its Affiliates.

“Buyer’s Customary Hiring Processes” shall have the meaning set forth in Section 8.1(a)(i).

“Cedant” means each of Hartford Life Insurance Company, Hartford Life and Accident Insurance Company and Hartford Life and Annuity Insurance Company, as applicable.

“Cedant Annual Statutory Statements” has the meaning specified in Section 5.1(b). “Cedant Quarterly Statements” has the meaning specified in Section 5.1(b).

“Cedant Separate Accounts” means the separate accounts of the Cedants applicable to certain of the Covered Insurance Policies as identified in Schedule 1.1(d).

“Cedant Statutory Statements” has the meaning specified in Section 5.1(b). “Ceding Commission” has the meaning specified in Section 2.2. “Champlain” means Champlain Re.

“Claim Notice” has the meaning specified in Section 11.2(a).

“Closing” has the meaning specified in Section 3.1.

“Closing Date” has the meaning specified in Section 3.1.

Exhibit 2.02

“Closing Date Balance Sheets” means, collectively, the Closing Date Reference Balance Sheet and the Closing Date Transfer Balance Sheet.

“Closing Date Reference Balance Sheet” has the meaning specified in Section 2.3(c)(ii). “Closing Date Transfer Balance Sheet” has the meaning specified in Section 2.3(c)(iii). “Closing Date Tax Reserves” has the meaning specified in Section 2.5(a).

“Closing Investment Assets List” has the meaning specified in Section 2.3(c)(v).

“Closing Statement of General Account Net Settlement” has the meaning specified in Section 2.3(c)(iv).

“COBRA” means the Consolidated Omnibus Budget Reconciliation Act. “Code” means the Internal Revenue Code of 1986, as amended.

“Comparable Position” means, with respect to any Business Employee, employment with Buyer or one of its Affiliates in a position with duties and responsibilities substantially similar to those applicable to such Business Employee’s employment with Seller or its Affiliates immediately prior to the Closing Date, with the same base salary and target bonus (the annual bonus determined as a percentage of annual base salary, based on the target bonus funding percentage established under the applicable bonus plan, policy or program of Seller or its Affiliates for the calendar year in which the Closing Date occurs or, with respect to Business Employees who are covered by a Seller Sales Incentive Plan rather than by the Seller Annual Incentive Plan, the same commission or bonus rate for sales or overrides and target percentage for discretionary bonuses) as in effect immediately prior to the Closing Date, in a location no more than fifty (50) miles from the Business Employee’s principal work location immediately prior to the Closing Date. Section 8.1(c) of the Business Disclosure Schedule sets forth the target bonus funding percentage, bonus rate and target percentages, as applicable, in effect immediately prior to the Closing Date for each Business Employee.

“Compensation” means all commissions, expense allowances, benefit credits and other fees payable or remittable to Distributors in connection with the Business.

“Competing Business” has the meaning specified in Section 8.4(a).

“Confidentiality Agreement” means that certain letter agreement dated April 27, 2012 between HFSG and Buyer.

“Consent Efforts” means commercially reasonable efforts as measured in light of the size and scope of the transactions contemplated hereunder and under the Ancillary Agreements.

“Contract” means any contract, agreement, license, note, bond, mortgage, indenture, commitment, lease or other instrument or obligation or arrangement, whether written or oral.

“Copyrights” has the meaning specified in the definition of “Intellectual Property Rights.”

“Court Order” means any judgment, order, award or decree of any foreign, federal, state, local or other court or tribunal and any award in any arbitration proceeding.

Exhibit 2.02

“Covered Insurance Policies” means (i) any and all binders, endorsements, riders, policies, certificates, and contracts of individual or group life insurance, and supplementary contracts of individual or group life insurance (including retained asset accounts and all other settlement options) issued, renewed or assumed by any Cedant in the United States, the District of Columbia, Puerto Rico or Guam and that correspond to the policy forms of the Cedant identified by form number on Schedule 1.1(e)(i) (with the group life items identified under a separate heading on such schedule), (ii) any and all binders, endorsements, riders, policies, certificates, and contracts of individual life insurance, and supplementary contracts of individual life insurance (including retained asset accounts and all other settlement options) issued in the United States, the District of Columbia, Puerto Rico or Guam reinsured by any Cedant from an Underlying Company pursuant to the Existing Reinsurance Agreements identified in Schedule 1.1(e)(i) and that correspond to the policy forms of the Cedant or its Affiliates (or the Underlying Companies), identified by form number on Schedule 1.1(e)(i), (iii) all other binders, endorsements, riders, policies, certificates, and contracts of individual life insurance, and supplementary contracts of individual life insurance (including retained asset accounts and all other settlement options) issued, renewed, assumed or reinsured by any Cedant in the United States, the District of Columbia, Puerto Rico or Guam on policy forms that are substantially similar to the policy forms identified on Schedule 1.1(e)(i), and (iv) the endorsements and riders to policies of individual or group life insurance covered by clauses (i) through (iii) above that are identified on Schedule 1.1(e)(i), in each of clauses (i) through (iv), issued, renewed, reinsured or assumed by the Cedants on or prior to the Effective Time (including those that have lapsed and terminated with unpaid claims), provided, that in each of clauses (i) through (iv) such item is reflected or otherwise taken into account in the Closing Statement of General Account Net Settlement, and (v) the New Insurance Policies; provided, that Covered Insurance Policies shall not include any policies listed on Schedule 1.1(e)(ii).

“Data Input Inaccuracies” means material inaccuracies or omissions to the extent arising from (i) the inputting of factual data utilized in the calculation of Reserves or listing of the Investment Assets or the Modco Assets, including data (and omission of data) relating to the inventory of Investment Assets, or Modco Assets or Covered Insurance Policies in force, the terms of such Covered Insurance Policies, the relevant information related to the insureds of such Covered Insurance Policies and transactions related thereto, or (ii) the coding, compilation or aggregation of such factual data in connection with such inputting, in either case other than inaccuracies or omissions in the factual data inputs resulting from reasonable judgments made by an actuary or other financial or investment professional as to the scope or accuracy of such factual data inputs (or omissions of such factual data inputs).

“Disclosure Schedule” means the Seller Disclosure Schedule, the Business Disclosure Schedule or the Buyer Disclosure Schedule, as applicable.

“Discovered Policies” has the meaning specified in Section 8.17.

“Distributor” means any broker, broker-dealer, insurance agent, producer, distributor or other Person who markets or sells Covered Insurance Policies.

“Divested Business” has the meaning specified in Section 8.16(b). “Effective Hire Date” has the meaning specified in Section 8.1(a)(iii).

Exhibit 2.02

“Effective Time” means (i) 12:01 a.m., New York City time, on the Closing Date if the Closing Date is January 2, 2012 or (ii) 11:59 p.m. New York City time, on the Closing Date if the Closing Date is not January 2, 2012.

“Eligible Assets” has the meaning specified in the applicable Reinsurance Agreement.

“Employee Benefit Plans” means each “employee benefit plan” within the meaning of Section 3(3) of ERISA, and each retirement, welfare benefit, fringe benefit, stock option or other equity-based compensation, bonus, sales or other incentive, supplemental retirement, deferred compensation, retiree health, life insurance, cafeteria, vacation, termination, retention, change in control, employment, consulting, non-competition, non-solicitation, tax gross-up, collective bargaining or severance plan, program, fund, trust, policy, arrangement or agreement, whether written or oral, in each case, that is maintained, contributed to or required to be contributed to by Seller or its Affiliates or any Person that is an ERISA Affiliate of Seller or its Affiliates in which there exists any Liability with respect to the Business or any current or former employee, director, Distributor or independent contractor of the Business or that is or could become attached to the Acquired Assets.

“Encumbrance” means any lien, claim, charge, security interest, mortgage, pledge, easement, conditional sale or other title retention agreement, defect in title or other restrictions of a similar kind.

“Enforceability Exceptions” has the meaning specified in Section 4.2(a).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means, with respect to any Person, any trade or business, whether or not incorporated, which, together with such Person, is treated as a single employer under Section 414 of the Code.

“Estimated Investment Assets List” has the meaning specified in Section 2.3(b)(iv). “Estimated Reference Balance Sheet” has the meaning specified in Section 2.3(b)(i).

“Estimated Statement of General Account Net Settlement” has the meaning specified in Section 2.3(b)(ii).

“Estimated Transfer Balance Sheet” has the meaning specified in Section 2.3(b)(ii). “Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Assets” means all of Seller’s and its Affiliates’ right, title and interest in, to or under the following assets, properties, Contracts and rights related to the Business: (a) cash and investment assets beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by Seller or its Affiliates and any Contracts related thereto; (b) the assets, properties and rights that are set forth on Schedule 1.1(f) hereto; (c) the Excluded Contracts; (d) Governmental Permits; (e) any Tax refunds or credits (or rights thereto) that are attributable to the Business in respect of Pre-Closing Tax Periods (or portions thereof); (f) any owned real property; (g) the Employee Benefit Plans and any other employee benefit and compensation plans, programs, related fund, trust, policy, arrangement or agreement sponsored or maintained by Seller or its Affiliates (other than the Seller Sales Incentive Plans and Seller Sales Guarantees); (h) any assets, properties or rights that otherwise would be included within the definition of “Acquired Assets” but are disposed of in the ordinary course of business prior to the Closing Date to the extent permitted under Section 7.1 of this Agreement; (i) all capital stock or other ownership

Exhibit 2.02

interest of Seller or any of its Affiliates; (j) all receivables not arising under the Covered Insurance Policies to the extent related to periods prior to Closing except as contemplated by the Reinsurance Agreements; (k) all claims not arising under the Covered Insurance Policies to the extent related to periods prior to Closing except as contemplated by the Reinsurance Agreements; (l) all rights with respect to insurance covering Seller or its Affiliates or their properties or employees to the extent related to periods prior to Closing; and (m) any books or records other than the Business Records that transfer pursuant to Section 8.10(a), provided, that, for the avoidance of doubt, and notwithstanding the foregoing, certain Investment Assets will be transferred by Cedants to Reinsurer pursuant to Section 3.3, but such Investment Assets shall not constitute Acquired Assets.

“Excluded Contracts” means Contracts (a) that otherwise would be included within the definition of “Transferred Contracts” but are terminated in the ordinary course of business prior to the Closing Date to the extent permitted under Section 7.1, (b) that are part of the Employee Benefit Plans, (c) set forth on Schedule 1.1(g) hereto and (d) that are this Agreement or any Ancillary Agreement.

“Excluded Liabilities” means all Liabilities of Seller or its Affiliates other than any Assumed Liabilities or Ancillary Agreement Assumed Liabilities. Excluded Liabilities shall also include, without limitation, all Liabilities of Seller or its Affiliates (other than Assumed Liabilities or Ancillary Agreement Assumed Liabilities) to the extent related to or arising from (a) Pre-Closing Taxes, (b) Taxes, with respect to any period, that are (i) not related to the Business or the ownership of the Acquired Assets or (ii) measured by or imposed on the income of Seller or any of its Affiliates; (c) payables related to Overhead and Shared Services (other than payables arising under any Transferred Contracts) arising after the Closing Date; (d) the Employee Benefit Plans and any other employee benefit and compensation plans, programs, fund, trust, policy, arrangement or agreement sponsored or maintained by Seller or its Affiliates (other than Liabilities arising on or after the Closing Date with respect to the Seller Sales Incentive Plans and Seller Sales Guarantees); (e) claims, suits, actions or litigation or violations of Applicable Law involving any Business Employee in connection with (x) the Business Employee’s employment, termination, wages, compensation, benefits or status as an employee of Seller or its Affiliates or (y) Section 8.1(n); (f) Indebtedness; (g) the items set forth on Schedule 1.1(h) hereto; and (h) as long as the applicable Reinsurance Agreement has not been terminated and the business ceded thereunder recaptured, any “Ceding Company Extra-Contractual Obligations” (as such term is defined in the Reinsurance Agreements).

“Existing Reinsurance Agreement” has the meaning specified in Section 5.18(a).

“Expenses” means any reasonable and documented out-of-pocket expense incurred in connection with investigating, defending or asserting any Action incident to any matter indemnified against hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees and reasonable and documented fees and disbursements of legal counsel, expert witnesses, accountants and other professionals).

“Final Asset Allocation Schedule” has the meaning specified in Section 2.5(b). “Final Closing Date Tax Reserves” has the meaning specified in Section 12.7(a).

“Final Determination” means (i) a decision, judgment, decree, or other order by any court of competent jurisdiction which decision, judgment, decree, or other order has become final ( e.g. , when all allowable appeals have been exhausted by both parties to the action) (provided, that a decision of a United States Court of Appeals shall be considered final without any requirement of an appeal to the United States Supreme Court); (ii) a closing agreement entered into with the IRS under Section 7121 of the Code; (iii) any final settlement agreement entered into in connection with an Action or a Related Claim;

Exhibit 2.02

or (iv) the expiration of the time for instituting a claim for refund, or if such claim was filed, the expiration of time for instituting suit with respect thereto.

“FINRA” means the Financial Industry Regulatory Authority, its predecessor, the National Association of Securities Dealers, Inc., and any successor thereto.

“GAAP Pro Forma ILD Balance Sheets” has the meaning specified in Section 5.1(a)(i).

“GAAP Pro Forma ILD Statements of P&L” has the meaning specified in Section 5.1(a)(i).

“Governmental Body” means any foreign, federal, state, local or other governmental authority or regulatory body, self-regulatory body, court or arbitral tribunal, including, for the avoidance of doubt, FINRA.

“Governmental Permit” means any license, franchise, permit, variance, exemption, privilege, immunity, order, approval, registration or other authorization from a Governmental Body.

“Group Conversion Policies” means individual life insurance policies issued pursuant to contractual commitments under certain group insurance contracts written by Hartford’s Group Benefits Division (e.g., group term conversions and other similar conversion rights contained in such group insurance programs).

“Group Conversion Retrocession Agreement” means the Retrocession Agreement between the Reinsurer, as retrocedent, and HLIC or other applicable Cedant, as retrocessionaire, with respect to the Group Conversion Policies with a policy effective date prior to the Effective Time, substantially on the terms set forth in the Group Conversion Term Sheet.

“Group Conversion Term Sheet” means the term sheet attached hereto as Exhibit Q.

“GUL Reinsurance Transaction” means the reinsurance and related transactions contemplated by the GUL Term Sheet.

“GUL Term Sheet” means the term sheet attached hereto as Exhibit R.

“GUL Trust Account” means the trust account to be established pursuant to the applicable GUL Trust Agreement.

“GUL Trust Agreements” means the GUL Trust Agreements contemplated by the Reinsurance Agreements, each of which is among one of the Cedants, Buyer and the GUL Trustee, substantially in the

Exhibit 2.02

forms attached hereto as Exhibit L, with such changes as are required to implement the terms thereof as contemplated by the applicable Reinsurance Agreement.

“GUL Trustee” means the trustee under the GUL Trust Agreements. “HESCO” means Hartford Equity Sales Company, Inc.

“HFIC” means Hartford Fire Insurance Company.

“HFSG” has the meaning specified in the first paragraph of this Agreement. “HLIC” means Hartford Life Insurance Company.

“HLPP” means Hartford Life Private Placement, LLC.

“HLPP Business” means the business of Seller and its Affiliates of issuing, underwriting, selling, marketing, delivering, cancelling, reinsuring and administering (a) variable and general account life insurance policies under which employees or former employees of a bank, corporation or other corporate entity are the insureds and such bank, corporation, trust (for the express purpose of procuring such policies) or other corporate entity (for the express purpose of procuring such policies) is the policyowner or a beneficiary and where such employer procures such policies in a broad-based program with respect to its employees, specifically including those that correspond to the policy forms identified by form number on Schedule 1.1(i), (b) group annuity Contracts issued by an Affiliate of Seller, specifically including those that correspond to the policy forms identified by form number on Schedule 1.1(i), and (c) variable life insurance policies offered in transactions intended to qualify as private placements under the Securities Act, specifically including those that correspond to the policy forms identified by form number on Schedule 1.1(i), including through HLPP.

“Hold Harmless and Indemnification Agreement” means the Hold Harmless and Indemnification Agreement between HFIC and Reinsurer in the form attached hereto as Exhibit B.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Inactive Business Employee” means any Business Employee who is on an approved paid or unpaid leave of absence, such as a military, maternity or medical leave of absence, or leave under the Family and Medical Leave Act, on the Closing Date. All Inactive Business Employees are listed on Section 8.1(a) of the Business Disclosure Schedule which Schedule shall be updated as of the Closing Date.

“Indebtedness” means (a) all indebtedness for borrowed money, (b) any other indebtedness that is evidenced by a note, bond, debenture or similar instrument, (c) all obligations under purchase money financings, (d) all obligations in respect of acceptances issued or created or (e) any guarantees of the foregoing indebtedness of any other Person. For the avoidance of doubt, “Indebtedness” shall not include amounts owed to a beneficiary that are held in a retained asset account or under another settlement option.

“Indemnified Party” has the meaning specified in Section 11.2(a). “Indemnifying Party” has the meaning specified in Section 11.2(a).

“Information Technology” means Software and any tangible or digital computer systems (including computers, servers, workstations, routers, hubs, switches, networks, data communications lines

Exhibit 2.02

and hardware), data or information subscription or access agreements, telecommunications systems and telephony systems.

“Initial Reinsurance Premium” means, with respect to each Cedant, the amount set forth on the line item “Net Settlement Amount” reflected on the Statement of General Account Net Settlement, the Pro Forma Statement of General Account Net Settlement, the Estimated Statement of General Account Net Settlement or the Closing Statement of General Account Net Settlement, as applicable to such Cedant.

“Initial Tax Ceding Commission” has the meaning specified in Section 12.7(b).

“Intellectual Property Rights” means rights with respect to the following arising under the Applicable Laws of the United States: (a) patents, patent applications, provisional patent applications (including any and all divisions, continuations, continuations-in-part and reissues thereof) (“Patents”); (b) trademarks, trade names, brand names, trade dress, logos, service marks and domain names (including registrations and applications therefor) and any goodwill associated therewith, any and all common law rights therein, and registrations and applications for registration thereof, and all reissues, extensions and renewals of any of the foregoing (“Trademarks”); (c) Trade Secrets; and (d) copyrightable works and copyrights; and, with respect to any of the foregoing, all registrations and applications for registration thereof (“Copyrights”); provided, that Intellectual Property Rights shall not include rights in Software.

“Interest Maintenance Reserve” or “IMR” means the liability reserve determined in accordance with SAP, the purpose of which is to amortize realized capital gains and losses resulting from fluctuations in interest rates.

“Investment Assets” means the Eligible Assets identified on Schedule 5.2, as adjusted from time to time in accordance with the Investment Guidelines or Section 8.18.

“Investment Asset Amount” has the meaning specified in Section 3.3(b). “Investment Guidelines” has the meaning specified in Section 7.1(a)(xvi). “Investment Management Agreements” has the meaning specified in Section 7.7. “IRS” means the U.S. Internal Revenue Service.

“June 30 Reference Balance Sheet” has the meaning specified in Section 5.1(a)(iii). “June 30 Transfer Balance Sheet” has the meaning specified in Section 5.1(a)(iii).

“Knowledge of Buyer” means, as to a particular matter, the actual knowledge, after commercially reasonable inquiry, of any of the individuals listed in Section 1.1(a) of the Buyer Disclosure Schedule as of the date hereof (with the determination of “commercially reasonable inquiry” taking into account the organizational responsibilities of each named individual).

“Knowledge of Seller” means, as to a particular matter, the actual knowledge, after commercially reasonable inquiry, of any of the individuals listed in Section 1.1(a) of the Seller Disclosure Schedule as of the date hereof (with the determination of “commercially reasonable inquiry” taking into account the organizational responsibilities of each named individual).

Exhibit 2.02

“Lease Agreements” means the Lease Agreements between HFIC, as landlord, and Reinsurer, as tenant, in the form attached hereto as Exhibit C, each with respect to the premises and reflecting the rent and term described in Schedule 1.1(n).

“Liabilities” means any and all debts, liabilities, commitments or obligations, whether direct or indirect, accrued or fixed, known or unknown, absolute or contingent, matured or unmatured or determined or determinable, whether arising in the past, present or future.

“License Agreements” means the License Agreements between HFIC, as Licensor, and Reinsurer, as Licensee, in the form attached hereto as Exhibit P, each with respect to the premises and reflecting the rent and term described in Schedule 1.1(n).

“Losses” means any and all losses, costs, settlement payments, awards, judgments, fines, penalties, damages, Expenses or reasonable corrective or remedial costs and diminution in the value of the Business as a going concern; provided, that Losses shall not include any punitive damages or any damages to the extent they are not reasonably foreseeable, other than such damages that are payable to a third party not affiliated with the relevant Indemnified Party.

“Material Adverse Effect” means (a) with respect to the Business, a fact, circumstance, change or effect that, individually or in the aggregate, has or would reasonably be expected to have, a material adverse effect on the business, assets, liabilities, operation, results of operation or condition (financial or otherwise) of the Business, taken as a whole; provided, that none of the following (or the results thereof) shall be deemed, either alone or in combination, to constitute a Material Adverse Effect, and none of the following shall be taken into account in determining whether a Material Adverse Effect has occurred or is reasonably expected to occur: any adverse fact, circumstance, change or effect arising out of, resulting from or attributable to (i) any failure, in and of itself, of the Business to meet any internal or published projections, forecasts or revenue or earnings predictions (it being understood that that facts and circumstances contributing to such failure may constitute a Material Adverse Effect); (ii) other than for purposes of Section 4.2(b), the announcement of this Agreement and the transactions contemplated hereby (including the identity of Buyer); (iii) conditions generally affecting the industries in which the Business participates; (iv) changes in the securities or capital markets generally, or the occurrence of other events or developments affecting economic, business or regulatory conditions in the United States generally; (v) political conditions (including the commencement or continuation of a war, armed hostilities, acts of terrorism or any other calamity) or natural disasters (including hurricanes, earthquakes or floods); (vi) any change or prospective change in accounting requirements or principles (including SAP and GAAP) and any change or prospective change in Applicable Law, or the enforcement or interpretation thereof; (vii) actions or omissions taken by Seller or its Affiliates as required by this Agreement (other than any obligation of Seller to operate or cause its Affiliates to operate and carry on the Business in the ordinary course to the extent not related to any rejected request of Seller to do otherwise pursuant to Section 7.1) or actions or omissions taken by Seller with the Buyer’s written consent given in accordance with the notice procedures set forth in Section 14.6, or (viii) the credit, financial strength or other ratings (other than the facts underlying any such ratings) of Seller, any Cedant or any of their respective Affiliates; provided, that, notwithstanding the foregoing, with respect to clauses (iii), (iv), (v) and (vi) above, such fact, circumstance, change or effect shall be taken into account in determining whether a Material Adverse Effect has occurred or is reasonably expected to occur to the extent such fact, circumstance, change or effect has a materially disproportionate effect on the Business, taken as a whole, compared to the business of other participants in the industries in which the Business operates; and (b) with respect to Seller or Buyer, a fact, circumstance, change or effect that would materially impair or delay the ability of Seller and the Seller Parties or Buyer and the Buyer Parties, as the case may be, to perform their material obligations under this Agreement and the Ancillary Agreements, taken as a whole, including consummation of the transactions contemplated hereby or thereby.

Exhibit 2.02

“Material Buyer Permit” has the meaning specified in Section 6.6. “Material Contract” has the meaning specified in Section 5.12(a).

“Material Distributor” means each of the twenty-five (25) most significant Distributors based on the Compensation earned by such Distributors from Seller or its Affiliates in connection with the Business during the twelve (12) months ended December 31, 2011.

“Material Negative Condition” has the meaning specified in Section 7.4(a)(ii). “Material Seller Permit” has the meaning specified in Section 5.7(a).

“Modco Assets” has the meaning specified in Section 5.2(b).

“New Insurance Policies” has the meaning given such term in the applicable Administrative Services Agreement.

“Notice of Disagreement” has the meaning specified in Section 2.4(a).
“Offer of Employment” has the meaning specified in Section 8.1(a)(i).

“Overhead and Shared Services” means any ancillary or corporate shared services that are provided to the Business by Seller or its Affiliates, including any portion of any such service provided by a non-affiliated third party under a Contract or sub-Contract with Seller or its Affiliates (other than a Transferred Contract), including: travel and entertainment; temporary labor; office supplies (including copiers and faxes); personal telecommunications (including email); computer/telecommunications maintenance and support; fleet; energy/utilities; procurement and supply arrangements; treasury; public relations, legal and risk management (including workers’ compensation); payroll; telephone/data connectivity; disaster recovery; accounting; Tax; internal audit; executive management; investor relations; human resources and employee relations management; employee benefits; credit, collections and accounts payable; property management; environmental support; and customs and excise, in each case to the extent described on Schedule 1.1(j).

“Owned Intellectual Property” has the meaning specified in Section 5.10(a).

“PAR U” means Prudential Arizona Reinsurance Universal Company, an Arizona-domiciled captive reinsurance company.

“PAR U Economic Reserves Trust Account” means the trust account to be established pursuant to the applicable PAR U Economic Reserves Trust Agreement.

Exhibit 2.02

“PAR U Economic Reserves Trust Agreement” means the PAR U Economic Reserves Trust Agreement contemplated by the Reinsurance Agreements, each of which is among one of the PLAZ, PAR U and a trustee.

“Party” means each of Buyer, Seller and, solely for purposes of Section 8.4, Section 8.5 and Section 14.16, HFSG.

“Patent Assignment” means the Patent Assignment between Buyer (or an Affiliate of Buyer) and HFIC in the form attached hereto as Exhibit D.

“Patent License Agreement” means the Patent License Agreement between Buyer (or an Affiliate of Buyer) and HFIC in the form attached hereto as Exhibit E.

“Patents” has the meaning specified in the definition of “Intellectual Property Rights.”

“Permitted Encumbrances” means, to the extent Related to the Business, (a) liens for Taxes and other charges and assessments by a Governmental Body that are not yet due and payable or delinquent or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided on the June 30” Reference Balance Sheet, (b) liens of landlords, carriers, warehousemen, mechanics, repairmen and materialmen and other like liens arising in the ordinary course of business for sums not yet due and payable or delinquent or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided on the June 30 Reference Balance Sheet, (c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations, (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business, (e) easement, rights-of-way, restrictions and other similar charges or encumbrances not materially detracting from the value of real property or materially interfering with the ordinary conduct of the Business, (f) Encumbrances that have been placed by any landlord’s financing sources on real property over which Seller and/or its Affiliates have a leasehold interest, (g) zoning, building and other generally applicable land use restrictions, (h) liens resulting solely from any facts or circumstances relating to Buyer or its Affiliates, (i) liens incurred or deposits made to a Governmental Body in connection with any Governmental Consent and (j) other Encumbrances or imperfections on property that are not material in amount and do not materially impair the existing use of the property affected; provided, that, in each case, such Encumbrance does not materially interfere with the ordinary conduct of the Business; provided further that, as applied to Eligible Assets, Modco Assets and Investment Assets, "Permitted Encumbrances" shall be limited to the Encumbrances defined in subclause (h). With respect to Trademarks, “Permitted Encumbrances” shall also include those items described in Section 5.10(c) of the Business Disclosure Schedule.

“Permitted Factors” has the meaning specified in Section 2.4(a).

“Personal Information” means: (w) any information that (i) identifies an individual (by name, signature, address, telephone number or other unique identifier), or (ii) can be used to authenticate such individual (including, without limitation, passwords or PINs, biometric data, unique identification numbers, answers to security questions, or other personal identifiers); (x) a 9-digit sequence intended to constitute an individual’s social security number, even in isolation; (y) non-public personal information as

Exhibit 2.02

defined in the Gramm-Leach-Bliley Act; and (z) “personal information” as defined in any applicable state insurance information and privacy protection law or regulation.

“Plans” has the meaning specified in Section 7.6(a).

“PLAZ” means Pruco Life Insurance Company, an Arizona-domiciled life insurance company.

“PLAZ Control Account” means an account established by PLAZ pursuant to the PLAZ Control Agreement as contemplated in the applicable Reinsurance Agreement.

“Policy Forms” has the meaning specified in Section 5.19(a).

“Policy Loans” means, with respect to each Cedant, the amount set forth on the line item “Policy Loans” reflected on the Statement of General Account Net Settlement, the Pro Forma Statement of General Account Net Settlement, the Estimated Statement of General Account Net Settlement or the Closing Statement of General Account Net Settlement, as applicable to such Cedant, in each case solely to the extent the Policy Loans relate to the Covered Insurance Policies.

“Post-Closing Three-Year Period” means the period beginning on the date after the Closing Date and ending on the date that is thirty-six (36) months after the Closing Date.

“Pre-Closing Taxes” means all liability for Taxes (a) of Seller or its Affiliates in respect of the Business or the ownership of the Acquired Assets for Pre-Closing Tax Periods or (b) incurred by Seller or its Affiliates as a result of any indemnification agreement or Tax Sharing Arrangement.

“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and the portion of any Straddle Period ending on and including the Closing Date.

“Pro Forma Statement of General Account Net Settlement” has the meaning specified in Section

2.3(a).

“Pro Forma Statements of P&L” has the meaning specified in Section 5.1(a). “Property Taxes” has the meaning specified in Section 12.2(b).

“Producer Agreement” has the meaning specified in Section 5.13(c). “Product Tax Claim” has the meaning specified in Section 12.6(c). “Product Tax Claim Notice” has the meaning specified in Section 12.6(c).

“Product Tax IT and Administration” means the Information Technology included in the Acquired Assets or subject to the Ancillary Agreements, as operated and otherwise applied in combination with the systems, processes and procedures used or placed in service by Seller or its Affiliates as of the Closing and the Product Tax IT Workarounds, that has been used or placed in service (i) to maintain the Covered Insurance Policies’ qualification under the Product Tax Law Rules, (ii) to monitor the Covered Insurance Policies for treatment as modified endowment contracts under the Product Tax Law Rules, or (iii) to facilitate compliance with the Tax reporting, withholding, and disclosure requirements applicable to the Covered Insurance Policies under the Product Tax Law Rules.

“Product Tax IT Workarounds” means the manual workarounds and other processes identified in Section 12.6(a) of the Business Disclosure Schedule as of the Closing as described in detail in Seller’s

Exhibit 2.02

written procedures attached to such Section of the Business Disclosure Schedule as of the Closing that either (i) have been implemented by Seller as of the date that is 30 days prior to the Closing or (ii) if not implemented by Seller as of the date that is 30 days prior to the Closing, have been mutually agreed to by Buyer and Seller prior to the Closing. For purposes of clause (ii) of the preceding sentence, Buyer and Seller agree to cooperate reasonably and in good faith to determine whether a manual workaround or other process shall be added to Section 12.6(a) of the Business Disclosure Schedule. For the avoidance of doubt, all manual workarounds and other processes that are described in the first sentence of this paragraph shall be treated as part of Product Tax IT and Administration for all purposes of Section 12.6 .

“Product Tax Law Rules” means the Tax laws applicable to the Covered Insurance Policies, including (i) Applicable Laws specifying the requirements for the Covered Insurance Policies to qualify for certain Tax treatment (including the monitoring of the Covered Insurance Policies for qualification for such Tax treatment) and (ii) the Tax reporting, withholding and disclosure rules applicable to the Covered Insurance Policies. For the avoidance of doubt, Product Tax Law Rules include Sections 72, 101, 817, 7702, 7702A and 7702B of the Code and the Treasury regulations promulgated thereunder, all Tax reporting, withholding, and disclosure rules applicable to the Covered Insurance Policies, and related administrative guidance and judicial interpretations.

“Product Tax Non-Compliance” means, with respect to the Covered Insurance Policies, noncompliance with any applicable Product Tax Law Rules, including, without limitation, non-compliance attributable to (i) the Policy Forms or design of the Covered Insurance Policies, (ii) the administration of the Covered Insurance Policies in accordance with the Product Tax Law Rules prior to the Closing, or (iii) the Product Tax IT and Administration. For the avoidance of doubt, non-compliance with any applicable Product Tax Law Rules will have occurred if, as of the Closing, the Product Tax IT and Administration is not effective in monitoring the Covered Insurance Policies’ compliance with the Product Tax Law Rules, without regard to whether any actual life insurance contract failures, inadvertent modified endowment contracts, or failures in Tax reporting, withholding, or disclosure have been specifically identified.

“Purchase Price” has the meaning specified in Section 2.2.

“Real Estate Leases” has the meaning specified in Section 5.9(a).

“Recapture Triggering Event” has the meaning specified in the applicable Reinsurance Agreement.

“Reference Balance Sheet Methodology” has the meaning set forth in Section 2.3(b)(i).

“Reference Balance Sheets” means the balance sheets of the Business derived from the Cedant Statutory Statements using the Reference Balance Sheet Methodology.

“Regulatory Agreement” means any written Contract, consent agreement or memorandum of understanding with, or any commitment letter or similar undertaking to, or any order by, or any supervisory letter from, any Governmental Body.

“Reinsurance Agreements” means the three (3) Reinsurance Agreements, each of which is between one of the Cedants and Reinsurer, in the forms attached hereto as Exhibit F.

“Reinsurance Settlement Amount” has the meaning specified in Section 2.3(e). “Reinsurance Statement Methodology” has the meaning specified in Section 2.3(a).

Exhibit 2.02

“Reinsured Liabilities” has the meaning specified in the applicable Reinsurance Agreement. “Reinsurer” means The Prudential Insurance Company of America.

“Reinsurer Annual Statutory Statements” has the meaning specified in Section 6.4(b). “Reinsurer Quarterly Statements” has the meaning specified in Section 6.4(b). “Reinsurer Statutory Statements” has the meaning specified in Section 6.4(b).

“Related Claim” means a claim instituted at any time against Buyer, Seller, or any of their Affiliates by any non-affiliated Third Party or Governmental Body related to actual or alleged Product Tax Non-Compliance arising at or before the Closing, or during the Post-Closing Three-Year Period, regardless of whether any Action has been instituted with respect to such claim.

“Related Claim Resolution” has the meaning specified in Section 12.6(d)(iii).

“Related to the Business” means exclusively or primarily related to or arising from, or used or held for use exclusively or primarily in connection with, the Business as conducted by Seller and its Affiliates as of June 30, 2012. For purposes of the use of this definition in this Agreement, “primarily” means (a) in the case of all tangible assets and properties, that the proportionate use thereof in connection with the Business is greater than the proportionate use thereof in connection with each of the following, viewed individually, (i) the business conducted by Woodbury Financial Services, Inc., (ii) the business conducted by HFSG’s Retirement Plans Group and (iii) any other businesses conducted by Seller or its Affiliates; (b) in the case of any Contract, that at least eighty percent (80)% of the services or benefits to be provided under such Contract are provided in respect of the Business; and (c) in the case of any other intangible asset, property or right, that at least eighty percent (80)% of the use of such item is in respect of the Business. Notwithstanding the foregoing, to the extent that any Contract or right is reasonably divisible, the portion of such Contract or right that is used in connection with the Business shall be deemed to be “Related to the Business” for purposes of this Agreement.

“Representative” of a Person means the directors, officers, employees, advisors, agents, stockholders, consultants, independent accountants, investment bankers, counsel or other representatives of such Person and of such Person’s Affiliates.

“Required Balance” has the meaning specified in the applicable Reinsurance Agreement. “Reserves” has the meaning specified in Section 5.1(e).

“Residual Information” has the meaning specified in Section 8.16.

“Retained Business ASA” means the Administrative Services Agreement between the Reinsurer, as administrator, and the applicable Cedant substantially on the terms set forth in the Retained Business ASA Term Sheet.

“Retained Business ASA Term Sheet” means the term sheet attached hereto as Exhibit S. “Revised Asset Allocation Schedule” has the meaning specified in Section 12.7(b). “Revised Closing Date Tax Reserves” has the meaning specified in Section 12.7(a). “Revised Tax Ceding Commission” has the meaning specified in Section 12.7(b).

Exhibit 2.02

“SAP” means, with respect to any insurance or reinsurance company and any statutory financial statements, the statutory accounting practices prescribed or permitted by the insurance regulatory authorities of the jurisdiction in which such company is domiciled or other applicable jurisdiction, consistently applied by such company, as in effect on the date of such statutory financial statements.

“SAP Pro Forma ILD Balance Sheets” has the meaning specified in Section 5.1(a)(ii).

“SAP Pro Forma ILD Statements of P&L” has the meaning specified in Section 5.1(a)(ii). “SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Seller” has the meaning specified in the first paragraph of this Agreement. “Seller Annual Incentive Plan” means HFSG’s 2012 Annual Incentive Plan. “Seller Disclosure Schedule” has the meaning specified in Article IV. “Seller Indemnified Persons” has the meaning specified in Section 11.1(b). “Seller Name and Marks” has the meaning specified in Section 8.3(a).

“Seller Party” means each Affiliate of Seller that is, or is contemplated by this Agreement to become at the Closing, a party to one or more Ancillary Agreements.

“Seller Sales Guarantees” means those items identified in Section 5.14(a)(i)(f) of the Business Disclosure Schedule.

“Seller Severance Benefit” means the sum of the periodic severance payments to which the Business Employees described in Schedule 8.1(e)(i) of the Business Disclosure Schedule would have been entitled under the policy, practice or agreement of Seller or its Affiliates immediately before the Closing Date (which payments shall not include sixty (60) days’ paid notice and continued participation in medical, dental, life, accidental death and dismemberment, health care reimbursement and dependent day care reimbursement plans and any other benefit other than periodic severance payments). For the avoidance of doubt, the Seller Severance Benefit shall not include the form or method of payment.

“Separate Account Annual Statements” has the meaning specified in Section 5.1(d).

“Separate Accounts” means the separate accounts of the Cedants and the Underlying Companies applicable to the Covered Insurance Policies as identified in Schedule 1.1(k).

“Separate Account Statement” has the meaning specified in Section 5.1(d). “Separation and Migration Plan” has the meaning specified in Section 7.6(a).

“Shared Contracts” means, other than Ancillary Agreement Covered Contracts, (a) Contracts pursuant to which Seller or one or more of its Affiliates provides to a non-affiliated third party both

Exhibit 2.02

services or benefits in respect of the Business and other services or benefits not in respect of the Business and (b) Contracts pursuant to which a non-affiliated third party provides both services or benefits to Seller or one or more of its Affiliates in respect of the Business and other services or benefits not in respect of the Business; including, but not limited to certain Overhead and Shared Services.

“Software License Agreement” means the Software License Agreement between Buyer (or an Affiliate) and HFIC in the form attached hereto as Exhibit G.

“Specified Action” has the meaning specified in Section 8.20

“Specified Warranty” has the meaning specified in Section 11.1(c)(i).

“Statement of General Account Net Settlement” has the meaning specified in Section 2.3(a).

“Statutory Book Value” means with respect to any Investment Asset, as of any date, the dollar amount thereof as would be set forth, as of such date, in the statement of annual condition in the statutory financial statements of the Cedants (assuming such date was the end of an annual period) determined in accordance with the SAP in the Cedants’ state of domicile, but disregarding any prescribed or permitted practices applicable to any of the Cedants.

“Straddle Period” means any taxable period that begins before and ends after the Closing Date. “Straddle Tax Return” means any Tax Return covering a Straddle Period.

“Sublease Agreement” means the Sublease Agreements between HFIC, as landlord, and Reinsurer, as tenant, in substantially the form attached hereto as Exhibit H, each with respect to the premises and reflecting the rent and term described in Schedule 1.1(n).

“Subsidiary” of any Person means any other Person of which such first Person (either alone or with any other Subsidiary) owns, directly or indirectly, a majority of the stock or other equity interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity, it being understood that in no event shall any investment fund sponsored or advised by Seller or its Affiliates be deemed a Subsidiary of Seller.

“Tax” (and, with correlative meaning, “Taxes”) means any and all federal, state, county, local or foreign tax (including Transfer Taxes), charge, fee, levy, impost, duty or other assessment, including income, gross receipts, premium, retaliatory, real property, personal property, sales, use, license, excise, franchise, employment, payroll, withholding, recording, severance, documentary, stamp, occupation, windfall profits, alternative or add-on minimum, ad valorem, estimated, value added, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, and any obligation to indemnify or otherwise assume or succeed to the Tax Liability of any other Person, imposed or required to be withheld by any Tax Authority, or imposed as a result of any indemnification agreement or Tax Sharing Arrangement, including, in all cases, any estimated payments or pre-payments relating thereto and any interest, penalties and additions imposed thereon or with respect to the payment or reporting thereof, whether disputed or not. For the avoidance of doubt, any guarantee fund assessment or escheatment obligation shall not be treated as a Tax.

Exhibit 2.02

“Tax Acquisition Provisions” means Sections 338 and 1060 of the Code and the Treasury Regulations thereunder.

“Tax Authority” means any Governmental Body having jurisdiction over the assessment, determination, collection or other imposition of any Taxes.

“Tax Gross-up Change in IMR” means the “Tax Gross-up Change in IMR” line item on the Pro Forma Statement of General Account Net Settlement, the Estimated Statement of General Account Net Settlement, or the Closing Statement of General Account Net Settlement, as applicable, calculated in accordance with the applicable footnote of the Pro Forma Statement of General Account Net Settlement.

“Tax Purchase Price” means the sum of the Purchase Price, the Ceding Commission, the Assumed Liabilities, the Ancillary Agreement Assumed Liabilities and any additional amounts required to be taken into account pursuant to the Tax Acquisition Provisions.

“Tax Sharing Arrangement” means any written or unwritten agreement or arrangement providing for the allocation or payment of Taxes.

“Termination Date” has the meaning specified in Section 13.1(e). “Third-Party Claim” has the meaning specified in Section 11.2(a).

“Third-Party Consent” means any approval, authorization, consent, license or permission of, or waiver or other action by, or notification to, any non-affiliated third party (other than a Governmental Body).

“Trademark Assignment” means the Trademark Assignment between Buyer and HFIC, HLIC, or Hartford Life and Accident Insurance Company, as the case may be, in the form attached hereto as Exhibit I.

“Trademark License Agreement” means the Trademark License Agreement between Buyer and HFIC in the form attached hereto as Exhibit J.

“Trademarks” has the meaning specified in the definition of “Intellectual Property Rights.”

“Trade Secrets” means trade secrets as defined by the Connecticut Uniform Trade Secret Act, Conn. Genl. Stat. Secs. 35-50 et seq.

“Transfer Balance Sheet Methodology” has the meaning set forth in Section 2.3(b)(ii).

“Transfer Balance Sheets” means the balance sheets of the Business derived from the Reference Balance Sheets using the Transfer Balance Sheet Methodology.

“Transferred Contracts” means (a) the Assigned Leases; (b) the Transferred Information Technology Contracts; (c) any other Contracts of Seller and its Affiliates to the extent Related to the Business (other than Contracts related to real property) and (d) the Contracts (or portion thereof as

Exhibit 2.02

specified therein) set forth on Schedule 1.1(l); provided, that Transferred Contracts shall not include any Excluded Contracts.

“Transferred Employee” has the meaning specified in Section 8.1(a)(i).

“Transferred Information Technology Contracts” means the Contracts (or portion thereof as specified therein) set forth on Schedule 1.1(m), pursuant to which Seller or its Affiliates license or sublicense Software or lease or sublease other Information Technology from non-affiliated third parties.

“Transferred Owned Intellectual Property” has the meaning specified in Schedule 1.1(a).

“Transition Services Agreement” means the Transition Services Agreement among Buyer and HFIC in the form (subject to completion of schedules as contemplated by Section 7.6) attached hereto as Exhibit K.

“Triggering Event” has the meaning specified in the applicable Reinsurance Agreement. “Trust Account” has the meaning specified in the applicable Trust Agreement.

“Trust Agreements” means the three (3) Reserve Trust Agreements, each of which is among one of the Cedants, Buyer and the Trustee, in the forms attached hereto as Exhibit L.

“Trustee” means the trustee under the Trust Agreements.

“Unaudited Buyer Financial Statements” has the meaning specified in Section 6.4(a). “Underlying Companies” has the meaning specified in the applicable Reinsurance Agreement.

“WARN Act” means the Worker Adjustment and Retraining Notification Act, as amended.

“Wholesaling Agreements” means the Wholesaling Agreements, each of which is between Seller or its Affiliates, on the one hand, and Buyer or its Affiliates, on the other hand, in the forms attached hereto as Exhibit M.

ARTICLE II
PURCHASE AND SALE

Section 2.1 Purchase and Sale; Assignment and Assumption. On the terms and

subject to the conditions set forth in this Agreement, at the Closing (a) Seller hereby agrees to, or to cause one or more of its Affiliates to, sell, assign, transfer, convey and deliver to Buyer or one or more of its Affiliates, and Buyer hereby agrees to purchase or cause one or more of its Affiliates to purchase from Seller and its Affiliates, all of Seller’s and such Affiliates’ right, title and interest in and to (subject to Section 8.10(a)) the Acquired Assets, free and clear of all Encumbrances, other than Permitted Encumbrances; and (b) Seller shall assign (or shall cause to be assigned), and Buyer or one or more of its Affiliates shall assume and agree to discharge and perform when due, the Assumed Liabilities. At the Closing, Buyer and Seller shall execute and deliver a bill of sale in the form attached hereto as Exhibit N

Exhibit 2.02

(the “Bill of Sale”) and an assignment and assumption agreement in the form attached hereto as Exhibit O (the “Assignment and Assumption Agreement”) and such other documents and instruments as may be necessary in order to effect the conveyance of the Acquired Assets to Buyer and Buyer’s assumption of the Assumed Liabilities as contemplated hereby.

Section 2.2 Purchase Price; Ceding Commission. The purchase price for the

Acquired Assets shall be $10,000,000 (the “Purchase Price”), which shall be payable by Buyer at the Closing by wire transfer of immediately available funds to an account or accounts designated by Seller in writing at least three (3) Business Days prior to the Closing Date. The aggregate ceding commission payable by Reinsurer to Cedants in consideration for the transactions contemplated by the Reinsurance Agreements shall be $605,000,000 (the “Ceding Commission”).

Section 2.3 Reinsurance Statements and General Account Net Settlement.

(a) Attached hereto as (i) Schedule 2.3(a)(i) is a form of general account net settlement statement (“Statement of General Account Net Settlement”); and (ii) Schedule 2.3(a)(ii) is a pro forma general account net settlement statement, in substantially the same form as the Statement of General Account Net Settlement (the “Pro Forma Statement of General Account Net Settlement”), setting forth the Initial Reinsurance Premium, Accrued Investment Income and Policy Loans with respect to the Covered Insurance Policies of each Cedant under the applicable Reinsurance Agreement as of June 30, 2012, which was derived from the June 30 Reference Balance Sheet and the June 30 Transfer Balance Sheet, and prepared in accordance with the methodologies, procedures, judgments, assumptions and estimates described in the footnotes to the Statement of General Account Net Settlement (the “Reinsurance Statement Methodology”).

(b) Seller shall cause to be prepared and delivered to Buyer at least five (5) Business Days prior to the Closing Date:

(i) a Reference Balance Sheet as of the last day of the calendar month immediately preceding the month in which such balance sheet is delivered (or, in the event that the Closing Date is January 2, 2013, as of November 30, 2012) (such balance sheet, the “Estimated Reference Balance Sheet”), which shall be prepared in accordance with the methodologies, procedures, judgments and estimates described on Schedule 2.3(b)(i) (the “Reference Balance Sheet Methodology”);

(ii) a Transfer Balance Sheet as of the last day of the calendar month immediately preceding the month in which such balance sheet is delivered (or, in the event that the Closing Date is January 2, 2013, as of November 30, 2012) (such balance sheet, the “Estimated Transfer Balance Sheet”), which shall be prepared in accordance with the methodologies, procedures, judgments and estimates described on Schedule 2.3(b)(ii) (the “Transfer Balance Sheet Methodology”) and which, as contemplated by the Transfer Balance Sheet Methodology, shall include Seller’s good faith estimate of the expected increase in the line items “Other Policy Claims & Benefits”, “Loss Reserves – Life” and “Unearned Premiums” (in excess of the $17,000,000 expected monthly increase in non-economic reserves) from the Estimated Transfer Balance Sheet date to the Closing Date;

(iii) a Statement of General Account Net Settlement, setting forth Seller’s good faith estimate of the Initial Reinsurance Premium, Accrued Investment Income,Policy Loans with respect to the Covered Insurance Policies and the Tax Gross-up Change in IMR of each Cedant under the applicable Reinsurance Agreement as of the last day of the calendar month immediately preceding the month in which such statement is delivered (or, in the event that the Closing Date is

Exhibit 2.02

January 2, 2013, as of November 30, 2012) (such statement, the “Estimated Statement of General Account Net Settlement”), which shall be derived from the Estimated Reference Balance Sheet and the Estimated Transfer Balance Sheet and prepared in accordance with the Reinsurance Statement Methodology; and

(iv) a list of the Investment Assets to be transferred by each Cedant to Reinsurer

pursuant to Section 3.1(a) of its Reinsurance Agreement (selected in accordance with Section 3.3(b)), including with respect to such assets the Statutory Book Value, determined as of the close of business (New York City time) on the last day of the calendar month immediately preceding the month in which the Closing occurs (or, in the event that the Closing Date is January 2, 2013, as of November 30, 2012) (the “Estimated Investment Assets List”).

cause to be prepared and delivered to Buyer:

(i) unaudited estimated statutory balance sheets of each Cedant as of the Effective Time (which shall be deemed to be 11:59 p.m. on December 31, 2012 for all purposes under this Section 2.3 and Section 2.4 in the event the Closing occurs on January 2, 2013), which shall be prepared in accordance with SAP or, if available and if the Effective Time is on the last Business Day of a quarter end, the statutory statements, in each case, as filed with the insurance department or other applicable Governmental Body in the state of domicile of the Cedants as of and for the quarterly or yearly period ended on the Effective Time, as applicable;

(ii) a Reference Balance Sheet as of the Effective Time (such balance sheet, the “Closing Date Reference Balance Sheet”), which shall be prepared in accordance with the Reference Balance Sheet Methodology;

(iii) a Transfer Balance Sheet as of the Effective Time (such Balance Sheet, the “Closing Date Transfer Balance Sheet”), which shall be prepared in accordance with the Transfer Balance Sheet Methodology;

(iv) a Statement of General Account Net Settlement, setting forth the Initial Reinsurance Premium, Accrued Investment Income, Policy Loans with respect to the Covered Insurance Policies and the Tax Gross-up Change in IMR of each Cedant under the applicable Reinsurance Agreement as of the Effective Time (such statement, the “Closing Statement of General Account Net Settlement”), which shall be derived from the Closing Date Balance Sheets and prepared in accordance with the Reinsurance Statement Methodology; and

(v) a list of the Investment Assets that were transferred by each Cedant to Reinsurer pursuant to Section 3.1(a) of its Reinsurance Agreement on the Closing Date including with respect to such assets the Statutory Book Value and the Accrued Investment Income thereon, in each case determined as of the Effective Time (the “Closing Investment Assets List”).

(d) After the Closing Date and until any disputes with respect to the Closing Date Balance

Sheets, the Closing Statement of General Account Net Settlement and the Closing Investment Assets List are finally resolved in accordance with this Section 2.3 and Section 2.4, each Party shall permit the other Party and its Representatives to review its and its Affiliates’ work papers and any work papers of their independent accountants, in each case, relating to the information to be set forth in the Closing Date Balance Sheets, the Closing Statement of General Account Net Settlement and the Closing Investment Assets List and any other items reasonably requested by the other Party in connection with its preparation or review of the Closing Date Balance Sheets, the Closing Statement of General Account Net Settlement

Exhibit 2.02

and the Closing Investment Assets List, and each Party shall, and shall cause its Affiliates to, make reasonably available to the other Party and its Representatives all relevant personnel and Representatives (including accountants) responsible for and knowledgeable about the information to be set forth in the Closing Date Balance Sheets, the Closing Statement of General Account Net Settlement and the Closing Investment Assets List in order to respond to the reasonable inquiries of the other Party; provided, that the independent accountants of any of the Parties or any of their Affiliates shall not be obligated to make any work papers available to the other Party unless and until such Party has signed a customary agreement relating to such access to work papers in form and substance reasonably acceptable to such independent accountants.

(e) For each Cedant’s reinsurance transaction pursuant to its Reinsurance Agreement, the

“Reinsurance Settlement Amount” shall be an amount equal to (i) (A) the Initial Reinsurance Premium with respect to such Cedant determined by reference to the Closing Statement of General Account Net Settlement (after any disputes with respect thereto have been finally resolved in accordance with this Section 2.3 and Section 2.4) minus (B) the Initial Reinsurance Premium with respect to such Cedant determined by reference to the Estimated Statement of General Account Net Settlement, plus (ii) (A) the Statutory Book Value of the Investment Assets as set forth on the Estimated Investment Assets List with respect to such Cedant minus (B) the Statutory Book Value of Investment Assets as set forth on the Closing Investment Assets List with respect to such Cedant (after any disputes with respect thereto have been finally resolved in accordance with this Section 2.3 and Section 2.4), plus (iii) (A) the sum of the Accrued Investment Income and Policy Loans as set forth on the Estimated Statement of General Account Net Settlement with respect to such Cedant minus (B) sum of the Accrued Investment Income and Policy Loans as set forth on the Closing Statement of General Account Net Settlement with respect to such Cedant (after any disputes with respect thereto have been finally resolved in accordance with this Section 2.3 and Section 2.4). With respect to each Reinsurance Agreement, if the Reinsurance Settlement Amount thereunder is a positive amount, then Seller shall cause an amount in cash equal to the Reinsurance Settlement Amount to be paid to Reinsurer by wire transfer of immediately available funds to an account designated by Buyer. With respect to each Reinsurance Agreement, if the Reinsurance Settlement Amount thereunder is a negative amount, then Buyer shall cause an amount in cash equal to the Reinsurance Settlement Amount to be paid to the applicable Cedant, from the applicable Trust Accounts, GUL Trust Accounts or otherwise, by wire transfer of immediately available funds to an account or accounts specified by Seller in writing to Buyer. Subject to the resolution of any dispute concerning the Closing Date Balance Sheets, Closing Statement of General Account Net Settlement or the Closing Investment Assets List in accordance with Section 2.4, the Reinsurance Settlement Amount, together with interest thereon from the Closing Date to the date of payment at an annualized rate of three percent (3%), shall be paid by the relevant Party within five (5) Business Days following the applicable date of final determination of the Closing Date Balance Sheets, Closing Statement of General Account Net Settlement and the Closing Investment Assets List in accordance with Section 2.4.

Section 2.4 Review of the Closing Date Balance Sheets, the Closing Statement of

General Account Net Settlement and the Closing Investment Assets List.

(a) If Buyer disagrees with the Closing Date Balance Sheets, the Closing Statement of

General Account Net Settlement or the Closing Investment Assets List, Buyer shall notify Seller of such disagreement within one hundred and twenty (120) days after delivery thereof (such notice, the “Notice of Disagreement”). The Notice of Disagreement shall set forth, in reasonable detail, any disagreement with, and any requested adjustment to, the Closing Date Balance Sheets, the Closing Statement of General Account Net Settlement or the Closing Investment Assets List. Matters as to which Buyer may submit a Notice of Disagreement in respect of the Closing Date Balance Sheets, the Closing Statement of General Account Net Settlement and the Closing Investment Assets List shall be limited to (i) whether the Closing Date Reference Balance Sheet was prepared in accordance with the Reference Balance Sheet

Exhibit 2.02

Methodology, (ii) whether the Closing Date Transfer Balance Sheet was prepared in accordance with the Transfer Balance Sheet Methodology, (iii) whether the Closing Statement of General Account Net Settlement and the Closing Investment Assets List were prepared on the basis of the Reinsurance Statement Methodology and (iv) whether Seller committed any arithmetic error in the line items or calculations set forth therein, as applicable (clauses (i) through (iv) being the “Permitted Factors”). If Buyer fails to deliver a Notice of Disagreement by the end of such period, Buyer shall be deemed to have accepted the Closing Date Balance Sheets, the Closing Statement of General Account Net Settlement and the Closing Investment Assets List delivered by Seller. Matters included in the calculations in the Closing Date Balance Sheets, the Closing Statement of General Account Net Settlement and the Closing Investment Assets List to which Buyer does not object in a Notice of Disagreement shall be deemed accepted by Buyer, and shall not be subject to further dispute or review.

(b) For ten (10) days after delivery of any Notice of Disagreement, Buyer and Seller shall

attempt in good faith to resolve the matters raised therein and any resolution agreed to in writing by Buyer and Seller shall be final and binding upon the Parties. If Buyer and Seller are unable to resolve any disagreement within such ten (10)-day period, Buyer and Seller shall update the Closing Date Balance Sheets, the Closing Statement of General Account Net Settlement, the Closing Investment Assets List and Notice of Disagreement to reflect any agreement, and jointly submit the matter to KPMG LLP. In the event KPMG LLP shall decline such appointment, either Party may request that a nationally recognized accounting firm be appointed by the American Arbitration Association. KPMG LLP or such other accounting firm appointed in accordance with the preceding sentence, as applicable, shall be referred to herein as the “Accounting Firm.” The Accounting Firm shall consider only those items and amounts set forth in the Closing Date Balance Sheets, the Closing Statement of General Account Net Settlement and the Closing Investment Assets List as to which any such disagreement has not been resolved. The Parties shall cooperate with the Accounting Firm in its review and shall promptly furnish such information as the Accounting Firm may reasonably request in connection therewith. No later than twenty (20) days after such submission, the Accounting Firm shall deliver to the Parties a written report setting forth the resolution of any such disagreement, determined on the basis of the Reference Balance Sheet Methodology, the Transfer Balance Sheet Methodology and the Reinsurance Statement Methodology, as applicable; provided, that each individual adjustment set forth in such report, if there are any, must be directly based upon a Permitted Factor; provided, further, that the Accounting Firm shall not make any adjustment to a line item on, calculation in, or other matter involving, the Closing Date Reference Balance Sheet, the Closing Statement of General Account Net Settlement or the Closing Investment Assets List not currently subject to a disagreement between Buyer and Seller pursuant to this Section 2.4, and the Accounting Firm’s determination shall be (i) solely in favor of Seller’s calculation of a line item, as set forth in the Closing Date Reference Balance Sheet, the Closing Statement of General Account Net Settlement or the Closing Investment Assets List, or (ii) solely in favor of Buyer’s calculation of a line item, as set forth in the Notice of Disagreement. Any such report shall be final and binding upon the Parties. In the event the Accounting Firm concludes that one Party was correct as to sixty-five percent (65%) or more (by dollar amount) of the disputed items, then the other Party shall pay the Accounting Firm’s fees, costs and expenses. In the event the Accounting Firm fails to make such conclusion, then each Party shall pay one-half the Accounting Firm’s fees, costs and expenses.

Section 2.5 Purchase Price Allocation.

(a) Within sixty (60) days following the final determination of the Closing Date Reference

Balance Sheet, the Closing Statement of General Account Net Settlement and the Closing Investment Assets List pursuant to Sections 2.3 and 2.4, Buyer shall prepare and deliver to Seller a proposed schedule allocating the Tax Purchase Price as provided in Section 2.5(b) (the “Asset Allocation Schedule”). For purposes of Buyer’s preparation of the Asset Allocation Schedule, no later than thirty (30) Business Days following the Closing Date Seller shall prepare and provide to Buyer a schedule reflecting Seller’s

Exhibit 2.02

reasonable best estimate of the life insurance reserves (within the meaning of Section 807(c) of the Code) maintained by Seller and each Cedant as of the Closing Date (immediately prior to the Closing) with respect to the Covered Insurance Policies, as determined in the manner required by Sections 801-848 of the Code and in the same manner as reflected in the consolidated federal income Tax Return filed by the Affiliated Group of which Seller is a member for the year ending December 31, 2010 (such life insurance reserves, the “Closing Date Tax Reserves”).

(b) For purposes of the Asset Allocation Schedule, the Tax Purchase Price shall be allocated among the Acquired Assets (including, for purposes of this Section 2.5, the Investment Assets transferred by each Cedant to Reinsurer pursuant to Section 3.1(a) of its Reinsurance Agreement and any other assets deemed acquired by Buyer pursuant to the Tax Acquisition Provisions) reasonably in accordance with the Tax Acquisition Provisions, and as provided in paragraph (a) of this Section 2.5. The Asset Allocation Schedule shall be deemed to be accepted by and shall be conclusive and binding on Seller except to the extent, if any, that Seller shall have delivered within thirty (30) days after the date on which the Asset Allocation Schedule is delivered to Seller, a written notice to Buyer stating each item to which Seller takes exception (it being understood that any amounts not disputed shall be final and binding). If no exception is taken to the Asset Allocation Schedule, it shall become the “Final Asset Allocation Schedule” and shall be binding upon the parties and each of Buyer and Seller shall file and cause their respective Affiliates to file all Tax Returns (including Internal Revenue Service Forms 8594 (and any comparable forms for state Tax purposes)) in accordance with the Final Asset Allocation Schedule. If a change proposed by Seller is disputed by Buyer, then Seller and Buyer shall negotiate in good faith to resolve such dispute, provided, that, notwithstanding anything to the contrary herein, neither Buyer nor Seller shall be required to disclose any proprietary methods, information or calculations to the other. If, after a period of twenty (20) days following the date on which Seller gives Buyer notice of any such proposed change, any such proposed change still remains disputed, then each of Buyer and Seller may file all their respective Tax Returns (including Internal Revenue Service Forms 8594 (and any comparable forms for state Tax purposes)) (x) in the case of Buyer, on the basis of the Asset Allocation Schedule as proposed by Buyer (as adjusted to reflect any proposed changes that shall have been agreed), and (y) in the case of Seller, on the basis of the Asset Allocation Schedule as proposed by Buyer (as adjusted to reflect any proposed changes that shall have been agreed, but reflecting Seller’s unresolved exceptions). Each of Buyer and Seller shall file and cause their respective Affiliates to file all Tax Returns in accordance with the Tax Acquisition Provisions and the allocations set forth in such schedules as described in the preceding sentence.

(c) No later than April 1 of the year following the year that includes the Closing Date, Seller shall provide to Buyer a revised schedule of the Closing Date Tax Reserves, as will be reflected on the federal income Tax Return of the Seller’s affiliated group for the taxable year that includes the Closing Date, and Buyer and Seller shall provide the other promptly with any other information reasonably requested by the other party for purposes of completing the requesting party’s Tax Returns.

Section 2.6 Working Capital and Suspense Related Accounts.

(a) Following Closing and as contemplated below, Buyer and Seller shall jointly

cooperate with respect to identifying (i) any amounts received or consumed by Buyer with respect to any of the current assets reflected in the line items from the Reference Balance Sheets removed from the Transfer Balance Sheet pursuant to item 9 of the Transfer Balance Sheet Methodology that do not constitute Acquired Assets (the “Working Capital Assets”) and (ii) any of the current liabilities reflected in the line items from the Reference Balance Sheets removed from the Transfer Balance Sheet pursuant to item 9 of the Transfer Balance Sheet Methodology that (x) constitute Excluded Liabilities or (y) that otherwise are related to the Covered Insurance Policies, have been or will be settled or paid by Buyer or any of its Affiliates and were in process at the Effective Time such that they were not taken into

Exhibit 2.02

consideration in the Estimated Statement of General Account Net Settlement or Closing Statement of General Account Net Settlement (the “Working Capital Liabilities”), in each case for the purpose of ensuring that the applicable Party entitled to receive a payment is appropriately reimbursed or receives an appropriate remittance in respect of such amounts consistent with the terms of this Agreement.

(b) For purposes of effecting the foregoing:

(i) Within twenty (20) Business Days following the Closing Date, Buyer and Seller
shall use good faith efforts to prepare a detailed listing of the Working Capital Assets and Working Capital Liabilities with a description of each item and an aging of the balance.

(ii) Upon preparation of the detailed listing, Buyer and Seller shall review such
items. In the event the Parties agree that Buyer shall purchase certain Working Capital Assets or assume certain Working Capital Liabilities, then such transfer or assumption shall be made (and Buyer or Seller shall pay to the other the net balance involved) within thirty (30) Business Days of Closing. Any such settled amounts shall no longer constitute Working Capital Assets or Working Capital Liabilities.

(iii) Within 90 days following the Closing, Buyer and Seller shall use good faith
efforts to prepare and agree upon final balances of Working Capital Assets and Working Capital Liabilities with detailed listing of the Working Capital Assets and Working Capital Liabilities and final resolution of the balance.

(iv) Within 5 days of any such agreement, a payment of the agreed net balances of
Working Capital Assets and Working Capital Liabilities shall be made by Buyer or Seller to the other, as appropriate. Any amount with respect to which Buyer and Seller are unable to agree shall remain subject to resolution in accordance with Article XI.

ARTICLE III
CLOSING

Section 3.1 Closing Date. The closing of the transactions contemplated by

Section 2.1 (the “Closing”) shall take place at the offices of Sutherland Asbill & Brennan LLP, The Grace Building, 40th Floor, 1114 Avenue of the Americas, New York, NY 10036 at 10:00 a.m., New York City time, on January 2, 2013 or, if the conditions set forth in Article IX and Article X have not been satisfied or waived in accordance with the terms of this Agreement by that date, then thereafter on the last Business Day of the month in which the last of the conditions set forth in Article IX and Article X has been satisfied or waived in accordance with the terms of this Agreement (excluding conditions that, by their terms, cannot be satisfied until the Closing Date, but subject to the satisfaction or waiver of those conditions as of the Closing), or at such other time and place as may be agreed upon by Buyer and Seller; provided, that, on either such date, all of the conditions set forth in Article IX and Article X continue to be satisfied or waived. The time and date on which the Closing is actually held is referred to herein as the “Closing Date.” The transactions contemplated hereby shall be deemed to have been consummated and become effective for all purposes as of the Effective Time.

Section 3.2 Payment on the Closing Date. At the Closing, Buyer shall pay or cause

one or more of its Affiliates to pay Seller an amount equal to the Purchase Price by wire transfer of immediately available funds to an account or accounts designated by Seller in writing at least three (3) Business Days prior to the Closing Date.

Exhibit 2.02

Section 3.3 Reinsurance Transaction.

(a) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing and simultaneously with the consummation of the transactions set forth in Section 2.1, (i) Buyer shall cause Reinsurer to, and Seller shall cause each applicable Cedant to, enter into the Reinsurance Agreements, the Trust Agreements, the GUL Trust Agreements, the Investment Management Agreements, and the Administrative Services Agreements; (ii) Buyer shall cause Reinsurer to establish the Trust Accounts with the Trustee pursuant to the Trust Agreements; (iii) Buyer shall cause Reinsurer to establish the GUL Trust Accounts with the GUL Trustee pursuant to the GUL Trust Agreements; (iv) Buyer shall cause Reinsurer, PLAZ and PAR U to enter into the transaction documents necessary for the implementation of the GUL Reinsurance Transaction on terms and conditions that are not inconsistent with the GUL Term Sheet in any material respect that would be adverse to the Seller or the Cedants; (v) Buyer shall cause PLAZ to establish the PLAZ Control Account and (vi) Buyer shall cause PAR U to establish the PAR U Economic Reserves Trust Account

(b) At the Closing in accordance with the Reinsurance Agreements, (i) Seller shall cause Cedants to transfer to the Reinsurer Investment Assets free and clear of any Encumbrances (other than Permitted Encumbrances described in subclause (h) in the definition thereof) with an aggregate Statutory Book Value equal to (A) the Initial Reinsurance Premium minus (B) the Policy Loans, minus (C) the Accrued Investment Income, minus the Tax Gross-up Change in IMR, in each case determined by reference to the Estimated Statement of General Account Net Settlement for the applicable Cedant (such amount, the “Investment Asset Amount”), (ii) the Seller shall cause Cedants to transfer to the Reinsurer cash in an amount equal to the Tax Gross-Up Change in IMR, and (iii) Buyer shall cause Reinsurer to pay to each Cedant the Ceding Commission payable by Reinsurer to such Cedant pursuant to Section 2.2 by wire transfer of immediately available funds to the accounts designated by Seller in writing at least three (3) Business Days prior to the Closing Date. The Investment Assets to be transferred by each Cedant to Reinsurer pursuant to subpart (i) of the foregoing sentence shall be selected in accordance with the methodology described on Schedule 3.3(b). At the Closing, in accordance with each Reinsurance Agreement, Buyer shall (i) cause Reinsurer to deposit into the applicable Trust Account the Eligible Assets with a Statutory Book Value (as defined in the applicable Reinsurance Agreement) equal to the Required Balance as of such date and (ii) cause Reinsurer and/or PAR U to deposit into the GUL Trust Account or the PAR U Economic Reserves Trust Account Eligible Assets with a Statutory Book Value (as defined in the applicable Reinsurance Agreement) in the aggregate equal to the GUL Net Reserve (as such term is defined in the applicable Reinsurance Agreement).

Section 3.4 Buyer’s Additional Closing Date Deliveries. At the Closing, Buyer shall

deliver or cause to be delivered to Seller all of the following:

(a) the certificate contemplated by Section 10.1(c), duly executed by a duly authorized officer of Buyer;

(b) original counterparts of each Ancillary Agreement to which Buyer or any Buyer Party is a party, each duly executed on behalf of Buyer or such Buyer Party; and

(c) such instruments of assumption and acceptance and other instruments or documents, in form and substance reasonably acceptable to Seller, as may be necessary to effect Buyer’s acquisition of the Acquired Assets and assumption of the Assumed Liabilities from Seller or its Affiliates, including the Bill of Sale and the Assignment and Assumption Agreement, in the manner contemplated by Section 2.1.

Section 3.5 Seller’s Closing Date Deliveries. At the Closing, Seller shall deliver or

cause to be delivered to Buyer each of the following:

Exhibit 2.02

(a) original counterparts of each Ancillary Agreement to which Seller or any Seller Party is a party, each duly executed on behalf of Seller or such Seller Party;

(b) such instruments of assumption and acceptance and other instruments or documents, in form and substance reasonably acceptable to Buyer, as may be necessary to effect Buyer’s acquisition of the Acquired Assets and assumption of the Assumed Liabilities from Seller or its Affiliates, including the Bill of Sale and the Assignment and Assumption Agreement, in the manner contemplated by Section 2.1;

(d) a FIRPTA affidavit in the form set forth in the regulations under Section 1445(b)(2) of the Code certifying that, as of the Closing Date, Seller is not a “foreign person.”

ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING SELLER

Except as set forth in the disclosure schedule supplied by Seller to Buyer dated the date hereof (the “Seller Disclosure Schedule”), Seller represents and warrants, as of the date hereof and as of the Closing (or as of such other date specified herein), to Buyer as follows:

Section 4.1 Organization and Standing. Seller is a corporation duly organized,

validly existing and in good standing under the laws of the State of Delaware. Each Seller Party is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized.

Section 4.2 Authority of Seller; Conflicts.

(a) Each of Seller and each Seller Party has the full power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which it is or will be a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and such Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby by Seller and each Seller Party have been duly and validly authorized and approved by all requisite corporate or other similar action on the part of Seller and each Seller Party. This Agreement has been duly and validly authorized, executed and delivered by Seller and (assuming the valid authorization, execution and delivery of this Agreement by Buyer) is the legal, valid and binding obligation of Seller, enforceable in accordance with its terms, and each of the Ancillary Agreements to which Seller or any Seller Party is or will be a party has been duly and validly authorized by Seller or such Seller Party and, upon execution and delivery by Seller or such Seller Party, will be (assuming the valid authorization, execution and delivery by the other party or parties thereto) a legal, valid and binding obligation of Seller or such Seller Party enforceable in accordance with its terms, subject in each case to bankruptcy, reorganization, insolvency, moratorium, rehabilitation, liquidation, fraudulent conveyance and similar laws relating to or affecting creditors’ rights generally and to general equity principles (regardless of whether enforceability is considered in a proceeding in equity or at law) (such exceptions, the “Enforceability Exceptions”).

(b) Except as may result from any facts or circumstances solely relating to Buyer or its Affiliates (as opposed to any other non-affiliated third party), none of the execution, delivery or performance by Seller or any Seller Party of this Agreement or any of the Ancillary Agreements, the

Exhibit 2.02

consummation by Seller or any Seller Party of any of the transactions contemplated hereby or thereby or compliance by Seller or any Seller Party with or fulfillment by Seller or any Seller Party of the terms, conditions and provisions hereof or thereof will:

(i) assuming the receipt of all necessary Governmental Consents as described in Section 4.2(b)(ii)(A), (B) and (C), violate, conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default (or an event that, with notice or lapse of time or both, would constitute a default) or an event creating rights of acceleration, termination, cancellation or prepayment of any material obligation or a loss of rights under, require the consent of any Person under, or result in the creation or imposition of any Encumbrance (other than a Permitted Encumbrance) upon the Acquired Assets, under (A) the charter, bylaws, certificate of formation or other applicable organizational documents of Seller or the applicable Seller Party, (B) any Material Contract, Existing Reinsurance Agreement, Assigned Lease or material Governmental Permit to which it is party or by which it or any of its properties or assets is bound, or (C) any Applicable Law affecting Seller or the applicable Seller Party or any of their respective assets or properties, other than, in the case of clauses (B) and (C) above, any such breaches, defaults, rights, loss of rights or Encumbrances as are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Seller or the Business, or

(ii) require any Governmental Consent, except (A) in connection, or in compliance, with the provisions of the HSR Act, (B) as set forth in Section 4.2(b)(ii) of the Seller Disclosure Schedule, and (C) Governmental Consents the failure of which to be obtained or made is not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Seller or the Business.

ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING THE BUSINESS

Except as set forth in the disclosure schedule supplied by Seller to Buyer dated the date hereof (the “Business Disclosure Schedule”), Seller represents and warrants, as of the date hereof and as of the Closing (or as of such other date specified herein), to Buyer as follows:

Section 5.1 Financial Information; Reserves; Business Records.

(a) (i) Section 5.1(a)(i) of the Business Disclosure Schedule sets forth the GAAP unaudited pro forma balance sheets of HFSG’s Individual Life Division as of and for the years ended December 31, 2009, December 31, 2010 and December 31, 2011 (the “GAAP Pro Forma ILD Balance Sheets”), and the related selected unaudited statements of profits and losses of HFSG’s Individual Life Division as of and for the years ended December 31, 2009, December 31, 2010 and December 31, 2011 (such statements of profits and losses, the “GAAP Pro Forma ILD Statements of P&L”). Except as described in Section 5.1(a)(i) of the Business Disclosure Schedule, the GAAP Pro Forma ILD Balance Sheets and GAAP Pro Forma ILD Statements of P&L were prepared in accordance with GAAP, consistently applied throughout all such periods, and presents fairly, in all material respects, the financial condition and the results of operations of HFSG’s Individual Life Division as of the date thereof and for the period indicated therein.

(ii) Section 5.1(a)(ii) of the Business Disclosure Schedule sets forth the SAP

unaudited pro forma balance sheets of HFSG’s Individual Life Division as of and for the years

Exhibit 2.02

ended December 31, 2009, December 31, 2010 and December 31, 2011 (the “SAP Pro Forma ILD Balance Sheets”), and the related selected unaudited statements of profits and losses of HFSG’s Individual Life Division as of and for the years ended December 31, 2009, December 31, 2010 and December 31, 2011 (such statements of profits and losses, the “SAP Pro Forma ILD Statements of P&L”). Except as described in Section 5.1(a)(ii) of the Business Disclosure Schedule, the SAP Pro Forma ILD Balance Sheets and SAP Pro Forma ILD Statements of P&L were prepared in accordance with SAP, consistently applied throughout all such periods, and presents fairly, in all material respects, the statutory financial position and results of operation of HFSG’s Individual Life Division as of the date thereof and for the period indicated therein.

(iii) Section 5.1(a)(iii) of the Business Disclosure Schedule sets forth (A) the

Reference Balance Sheet as of and for the quarter ended June 30, 2012 (the “June 30 Reference Balance Sheet”), and (B) the Transfer Balance Sheet as of and for the quarter ended June 30, 2012 (the “June 30 Transfer Balance Sheet”). The June 30 Reference Balance Sheet was prepared in accordance with the Reference Balance Sheet Methodology. The June 30 Transfer Balance Sheet was prepared in accordance with the Transfer Balance Sheet Methodology. Except as described in Section 5.1(a)(iii) of the Business Disclosure Schedule, the June 30 Reference Balance Sheet has been prepared in accordance with SAP (subject to normal recurring year-end adjustments) consistently applied throughout all such periods, and fairly present, in all material respects, the statutory financial position of the Business as of June 30, 2012.

(b) Seller has delivered to Buyer true and correct copies of the following statutory statements, in each case (other than the Cedant Quarterly Statement for Champlain), as filed with the insurance department or other applicable Governmental Body in the state of domicile of the Cedant or Champlain, together with the exhibits, schedules and notes thereto and any affirmations and certifications filed therewith: (i) the unaudited annual statutory statement of each Cedant and Champlain as of and for the years ended December 31, 2009, December 31, 2010 and December 31, 2011; (ii) the audited annual statutory financial statements of each Cedant and Champlain as of and for the years ended December 31, 2009, December 31, 2010 and December 31, 2011 (the statements referenced in (i) and (ii), the “Cedant Annual Statutory Statements”); and (iii) the unaudited quarterly statutory financial statements of each Cedant and Champlain as of and for the quarter ended June 30, 2012 (the “Cedant Quarterly Statements” and collectively with the Cedant Annual Statutory Statements, the “Cedant Statutory Statements”). Except as described in Section 5.1(b) of the Business Disclosure Schedule, the Cedant Statutory Statements have been prepared in accordance with SAP (subject, in the case of any quarterly statements, to normal recurring year-end adjustments) consistently applied throughout all such periods, and fairly present, in all material respects, the statutory financial position and results of operation of such Cedant or Champlain, as of the dates and for the periods indicated therein. No material deficiency has been asserted by any Governmental Body with respect to any Cedant Statutory Statements that remains unresolved prior to the date hereof.

(c) Except as described in Section 5.1(c) of the Business Disclosure Schedule, the GAAP Pro Forma ILD Balance Sheets, the GAAP Pro Forma ILD Statements of P&L, the SAP Pro Forma ILD Balance Sheets, the SAP Pro Forma ILD Statements of P&L, June 30 Reference Balance Sheet and the June 30 Transfer Balance Sheet were derived from, prepared using, and, are consistent in all material respects with, the Business Records of Seller and its Affiliates to the extent related to the Business or the Individual Life Division of HFSG and its Affiliates, as applicable. The June 30 Reference Balance Sheet has been prepared in accordance with the Reference Balance Methodology and the June 30 Transfer Balance Sheet has been prepared in accordance with the Transfer Balance Sheet Methodology, and the Pro Forma Statement of General Account Net Settlement was prepared in accordance with the Reinsurance Statement Methodology.

Exhibit 2.02

(d) Section 5.1(d) of the Business Disclosure Schedule sets forth a complete and accurate list of all Separate Accounts, the assets held in the Separate Accounts (collectively for each relevant Cedant) and the statutory carrying value thereof, in each case, as of December 31, 2009, December 31, 2010 and December 31, 2011 (the “Separate Account Statement”). Seller has delivered to Buyer true and correct copies of the following statutory statements, in each case, as filed with the Connecticut Department of Insurance or, if not filed with the Connecticut Department of Insurance, other applicable Governmental Body, together with the exhibits, schedules and notes thereto and any affirmations and certifications filed therewith: the unaudited annual statutory financial statements of each of the Separate Accounts as of and for the years ended December 31, 2009, December 31, 2010 and December 31, 2011 (the “Separate Account Annual Statements”). The Separate Account Annual Statements have been prepared in accordance with SAP, consistently applied through all such periods, and fairly present, in all material respects, the statutory financial position and results of operation of such Separate Accounts as of the dates and for the periods indicated therein.

(e) Subject to Section 11.7, the statutory policies reserves (including reserves of each Cedant for payment of benefits, losses, claims, expenses and similar purposes (including claims litigation)) required by SAP to be held by each Cedant or Champlain in respect of the Covered Insurance Policies as of June 30, 2012, as set forth in the June 30 Reference Balance Sheet (the “Reserves”): (i) were determined in all material respects in accordance with generally accepted actuarial standards consistently applied (except as otherwise noted in the June 30 Reference Balance Sheet), (ii) were fairly stated in accordance with SAP and satisfied the requirements of Applicable Law in all material respects as of June 30, 2012, and (iii) were determined in accordance with actuarial assumptions consistent with or more conservative than those called for in relevant policy and contract provisions. In addition, to the Knowledge of Seller, copies of all material work papers used as the basis for establishing such Reserves have been delivered or made available to Buyer.

(f) Except as set forth in Section 5.1(f) of the Business Disclosure Schedule, the Business Records (i) are true, complete and correct in all material respects, (ii) have been maintained in all material respects in accordance with Applicable Law and Seller’s or its applicable Affiliate’s customary business practices, (iii) accurately present and reflect in all material respects, all of the Business and all transactions and actions related thereto, (iv) to the Knowledge of Seller, have been prepared using processes and procedures for which there are no material weaknesses or significant deficiencies in internal controls over financial reporting that adversely affect the ability of Seller to accurately present and reflect in all material respects all of the Business and other transactions and actions related thereto, (v) contain no material Data Input Inaccuracies and (vi) are in material compliance with any and all record keeping maintenance requirements in applicable Contracts. All electronic data associated with the Business Records is accessible and readable using currently available technology by individuals in its current form.

(g) Except as set forth in Section 5.1(g) of the Business Disclosure Schedule, all benefits claimed by, or paid, payable, or credited to, any Person under any Covered Insurance Policies have in all material respects been paid or credited (or provision as required under Applicable SAP for payment thereof has been made) in accordance with the terms of the applicable Covered Insurance Policy under which they arose, and such payments, credits or provisions were not materially delinquent and were paid or credited (or will be paid or credited) without material fines or penalties (excluding interest).

Section 5.2 Eligible Assets.

(a) Section 5.2 of the Business Disclosure Schedule sets forth a list of the Eligible Assets

available for transfer by the applicable Cedant to Reinsurer pursuant to Section 3.3(b) of the this
Agreement, including the Statutory Book Value thereof, as of September 25, 2012. The applicable

Exhibit 2.02

Cedant holds good and valid title to such Investment Assets, free and clear of all Encumbrances, other than Permitted Encumbrances or interests of nominees, custodians or other similar intermediaries. Good and valid title to such Investment Assets as are required to be transferred to Reinsurer pursuant to Section 3.3(b) of this Agreement will pass to the Reinsurer at the Closing, free and clear of any Encumbrance, other than (a) those arising from acts of Buyer or its Affiliates or the Trustee and (b) as expressly provided in the Ancillary Agreements.

(b) Section 5.2(b) of the Business Disclosure Schedule sets forth a list, as of September 25, 2012, of (i) investment assets held in trust to support certain of the obligations under the Fortis Existing Reinsurance Agreements (as such term is defined in Section 8.13(b) of the Business Disclosure Schedule) and (ii) investment assets held in unregistered Separate Accounts related to the Covered Insurance Policies, in each case, including the Statutory Book Value thereof (collectively, the “Modco Assets”). The applicable Cedant holds good and valid title to such Modco Assets, free and clear of all Encumbrances, other than (a) Permitted Encumbrances or interests of nominees, custodians or other similar intermediaries and (b) those arising from the trust and separate account arrangements as to which they are subject.

(c) As of August 31, 2012, none of the Investment Assets or Modco Assets is in default of payment of principal or interest or dividends.

Section 5.3 Actuarial Report.

(a) Seller has delivered to Buyer a true and correct copy of the Actuarial Appraisal of the Individual Life Insurance Division as of December 31, 2011 as prepared by Towers Watson Pennsylvania, Inc. (the “Actuarial Report”). Except as set forth in Section 5.3(a) of the Business Disclosure Schedule, the factual information and data (including, without limitation, the inventory of the in-force Covered Insurance Policies) provided by Seller and its Affiliates to Towers Watson Pennsylvania, Inc. in connection with the preparation of the Actuarial Report was derived from the Business Records and complete and accurate in all material respects as of the date so provided, and, to the Knowledge of Seller, no information was omitted from such information or data which was necessary to make the Actuarial Report not misleading in any material respect. To the Knowledge of Seller, the Actuarial Report was prepared using appropriate modeling procedures and sets out the material assumptions used in determining the projections contained therein.

(b) Except as set forth in Section 5.3(b) of the Business Disclosure Schedule, as of the date of this Agreement, Towers Watson Pennsylvania, Inc. has not issued to Seller any new or revised report with respect to the Business or any errata with respect to the Actuarial Report nor has it notified Seller or any of its Affiliates in writing or, to the Knowledge of Seller, orally that the Actuarial Report is inaccurate in any material respect. As of the date of this Agreement, all corrections to the Actuarial Report received by Seller, including documentation and results, have been communicated in writing to Buyer.

Section 5.4 Changes in Business. From June 30, 2012 to the date hereof, (a) the

Business has been conducted in the ordinary course consistent with past practices, (b) there has not occurred any fact, change, circumstance or effect that has had, or is reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Business, and (c) neither Seller nor any of its Affiliates has taken any action that would have resulted in a breach of any of the covenants set forth in Section 7.1 if Seller and its Affiliates had been subject to such covenants from June 30, 2012 to the date hereof.

Section 5.5 No Undisclosed Liabilities. The Business does not have any Liabilities

required to be disclosed or reserved for on a balance sheet prepared in accordance with GAAP, except

Liabilities (a) to the extent disclosed or reserved for in the June 30 Reference Balance Sheet, (b) incurred in the ordinary course of business since the date of the June 30 Reference Balance Sheet to the extent consistent in

Exhibit 2.02

type and amount with the Liabilities disclosed or reserved for in the June 30 Reference Balance Sheet, or (c) comprising the Excluded Liabilities.

Section 5.6 Taxes.

(a) Seller and its Affiliates have duly and timely (including all applicable extensions) filed or participated in the filing of all material Tax Returns required to have been filed in respect of the Business and the ownership of the Acquired Assets (all such Tax Returns being accurate and complete in all material respects as they relate to the Business).

(b) All material Taxes in respect of the Business or the ownership of the Acquired Assets, if required to have been paid, have been paid.

(c) No written waiver of any statute of limitations in respect of any material Taxes payable in respect of the Business or the ownership of the Acquired Assets is currently in effect.

(d) There is no Action pending in respect of the Business or the ownership of the Acquired Assets for which Seller has been notified in respect of any Tax.

(e) All material deficiencies asserted in writing or assessments made in writing with respect to the Business or the ownership of the Acquired Assets by a Tax Authority have been paid in full, except those that are being contested in good faith through appropriate proceedings.

(f) There is no written claim pending from any Tax Authority in any jurisdiction where Seller does not file Tax Returns in respect of the Business that the Business is or may be subject to taxation by that jurisdiction.

(g) There are no material Encumbrances for Taxes (other than for Permitted Encumbrances) upon the Acquired Assets.

(h) Except as set forth in Section 5.6(h) of the Business Disclosure Schedule, with respect to the Business, Seller and each of its Affiliates is not and has not been a party to any “listed transaction” as defined in Section 6707A(c)(2) and Treasury Regulations Section 1.6011-4(b)(2) or to any “transaction of interest” as defined in Treasury Regulations Section 1.6011-4(b)(6).

(i) Seller’s and each Cedant’s life insurance reserves (within the meaning of Section 807(c) of the Code) with respect to the Covered Insurance Policies as reflected in the consolidated federal income Tax Return filed by the affiliated group of which Seller is a member for the year ending December 31, 2010, and since such date, have been determined and maintained in all material respects in the manner required by Sections 801-848 of the Code and other Applicable Law, and to the extent relevant to the determination and maintenance thereof, Seller’s and each Cedant’s Reserves with respect to the Covered Insurance Policies have been determined and maintained in all material respects in accordance with SAP.

(j) Except to the extent other representations and warranties in this Article V expressly relate to Taxes, this Section 5.6 and Section 5.19 contain the sole and exclusive representations and warranties with respect to matters relating to Taxes or the Product Tax IT and Administration, and nothing in this Section 5.6 shall cause Seller to be liable for any Taxes for which Seller is not expressly liable pursuant to Article XII.

Exhibit 2.02

Section 5.7 Material Seller Permits.

(a) Seller and its Affiliates (including HESCO) own, hold or possess as of the date of this Agreement and, since June 30, 2009, owned, held or possessed, all material Governmental Permits that are required to entitle it to own or lease, operate and use its assets and to carry on and conduct the Business substantially as conducted as of such relevant date (each, a “Material Seller Permit”).

(b) Each Material Seller Permit has been duly obtained, is valid and in full force and effect and is not the subject of any pending or, to the Knowledge of Seller, threatened administrative or judicial proceeding to revoke, cancel, suspend, modify or declare such Material Seller Permit invalid in any material respect.

(c) Section 5.7(c) of the Business Disclosure Schedule lists all jurisdictions in which Seller and each of its Affiliates is licensed to issue, underwrite, market, distribute and sell the Covered Insurance Policies and otherwise operate and administer the Business. Seller and each of its Affiliates engaged in the Business are in good standing (or equivalent status under Applicable Law) in each jurisdiction where such Material Seller Permits are necessary.

Section 5.8 Ownership and Sufficiency of Assets.

(a) Other than (i) the Overhead and Shared Services and (ii) the Excluded Assets, the Acquired Assets, together with the rights and benefits of Buyer and its Affiliates under this Agreement and the Ancillary Agreements (taking into account, in the case of the Transition Services Agreement, only specifically scheduled services that are provided as of the Closing Date and disregarding any rights to obtain omitted services), constitute all of Seller’s and its Affiliates’ material assets, properties and rights and all of Seller’s and its Affiliates’ material Intellectual Property Rights that (x) are used or held for use by Seller and its Affiliates to conduct the Business as of June 30, 2012 and (y) are reasonably required or necessary (and are sufficient) for the conduct by Buyer and its Affiliates immediately after the Closing of the Business as conducted as of June 30, 2012 by Seller and its Affiliates. For purposes of clause (y), Acquired Assets shall exclude any Acquired Assets that are not transferred to Buyer or one of its Affiliates under this Agreement (or the benefits of which are not otherwise made available to Buyer or one of its Affiliates in accordance with the terms hereof or the Transition Services Agreement).

(b) Seller or one or more of its Affiliates holds, in all material respects, good and valid fee title to or has valid leases, licenses or rights to use the tangible Acquired Assets, in each case, free and clear of any Encumbrances, except for Permitted Encumbrances. Good and valid title to such Acquired Assets will pass to Buyer or one of its Affiliates at the Closing, free and clear of any Encumbrance, other than Permitted Encumbrances.

Section 5.9 Real Property.

(a) Section 5.9(a)(i) of the Business Disclosure Schedule sets forth a list of all leases, and

subleases for real property that are exclusively, primarily or partially used by Seller or its Affiliates in the conduct of the Business and identifies the leases with respect to which all or a portion of the covered premises will be subleased or licensed by Reinsurer, as of the Closing Date pursuant to a Sublease Agreement or a License Agreement (the “Real Estate Leases”), including the date, real property address, whether the real property is used exclusively by the Business or is shared with other businesses operated by Seller or any Affiliate of Seller, the expiration date, and the parties to each such Real Estate Lease. Except as set forth on Section 5.9(a)(ii) of the Business Disclosure Schedule and except for the real property subject to an Assigned Lease, Real Estate Lease or Lease Agreement, there is no other real property used exclusively or primarily in the Business. As of the date of this Agreement, there are no

Exhibit 2.02

security deposits held in connection with the Assigned Leases or the Real Estate Leases. Each Assigned Lease and each Real Estate Lease is legal, valid, binding, in full force and effect and enforceable by Seller or its Affiliates, as applicable, in accordance with its terms, subject to the Enforceability Exceptions. Neither Seller nor any of its Affiliates, and to the Knowledge of Seller, no other party to any Assigned Lease or Real Estate Lease, has defaulted under, breached or violated any Assigned Lease or Real Estate Lease in any material respect. Neither Seller nor any of its Affiliates has assigned its interest in any Assigned Lease or any Real Estate Lease.

(b) Seller or an Affiliate of Seller has good, valid and fee simple title to all real property that

is the subject of any Lease Agreement, free and clear of all Encumbrances, except for Permitted Encumbrances.

Section 5.10 Intellectual Property.

(a) Section 5.10(a) of the Business Disclosure Schedule contains a true and correct list of all (i) registered Intellectual Property Rights and (ii) applications for registration of Intellectual Property Rights that are, in each case of (i) and (ii), included in the Transferred Owned Intellectual Property (collectively, “Owned Intellectual Property”).

(b) (i) The Business as conducted on the date of this Agreement does not infringe, misappropriate or otherwise violate any Intellectual Property Rights of any non-affiliated third party (including without limitation any Patents related to interactive voice response systems in connection with telephone call center technologies licensed by any of Ronald A. Katz, Ronald A. Katz Technology Licensing, L.P., A2D, LP, any of their respective Affiliates, or any other related or unrelated entity to Seller or its Affiliates), (ii) to the Knowledge of Seller, no Person is engaging in any activity that infringes, misappropriates or otherwise violates any of the Transferred Owned Intellectual Property and (iii) there is no pending or, to the Knowledge of Seller, threatened Action before any Governmental Body alleging that the Business as currently conducted infringes, misappropriates or otherwise violates the Intellectual Property Rights of any non-affiliated third party or challenging the ownership, registrability, validity or enforceability of any of the Transferred Owned Intellectual Property, nor is there any basis for any such Action or challenge.

(c) Except as set forth in Section 5.10(c) of the Business Disclosure Schedule, Seller or an Affiliate of Seller owns all right, title and interest in, to and under all Transferred Owned Intellectual Property and to all Copyrights, Patents, Trade Secrets and Software owned by Seller or one of its Affiliates licensed to Buyer pursuant to Section 8.16(b), free and clear of any Encumbrances or any material outstanding order, judgment, decree or agreement adversely affecting Seller’s or any of Seller’s Affiliates’ use thereof or rights thereto, in each case, other than Permitted Encumbrances.

(d) Seller and its Affiliates have taken commercially reasonable steps to (i) maintain and protect the ownership, enforceability and validity of the Transferred Owned Intellectual Property used in the conduct of the Business, (ii) maintain the confidentiality of all proprietary information that Seller or any of Seller’s Affiliates holds, or purports to hold, as a trade secret in connection with the Business, including taking commercially reasonable steps to cause the Business Employees to comply with a policy of maintaining the confidentiality of any confidential information that has been accessible to such employee, and (iii) cause all Persons (including all current and former employees and independent contractors) who have created or contributed to any Transferred Owned Intellectual Property to validly and irrevocably assign to Seller or one of its Affiliates in writing all of their rights in such Transferred Owned Intellectual Property that did not initially vest with Seller or such Affiliate by operation of law.

Exhibit 2.02

(e) All Information Technology (excluding Software) Related to the Business currently being used or held for use by Seller or its Affiliates is, when taken together with the systems, processes and procedures used or placed in service by Seller or its Affiliates that are made available to Buyer and its Affiliates under this Agreement or an Ancillary Agreement, adequate to perform the functions it is intended to perform and, other than with respect to the Excluded Assets and when taken together with Buyer’s and Buyer’s Affiliates’ rights under this Agreement and the Ancillary Agreements, is sufficient to conduct the Business as currently conducted. Since June 30, 2009, there have been no failures or breaches of data security with respect to any such Information Technology, other than those failures or breaches as have not had, and are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Business.

(f) (i) The Business as conducted on the date of this Agreement does not infringe, misappropriate or otherwise violate any Patent, Trademark, Copyright or Trade Secret rights of any nonaffiliated third party in any Software owned by Seller and its Affiliates, (ii) to the Knowledge of Seller, no Person is engaging in any activity that infringes, misappropriates or otherwise violates any Patent, Trademark, Copyright or Trade Secret rights of any non-affiliated third party in any Software owned by Seller and its Affiliates and used in the Business, and (iii) there is no pending or, to the Knowledge of Seller, threatened Action before any Governmental Body alleging that the Business as currently conducted infringes, misappropriates or otherwise violates the Patent, Trademark, Copyright or Trade Secret rights of any non-affiliated third party in any Software, nor is there any basis for any such Action or challenge.

(g) Neither Seller nor any of its Affiliates has purposefully introduced into any Software owned by Seller and its Affiliates and used in the Business any viruses, malware, time-bombs, key-locks or any other devices, other than ordinary security features, designed to, without the knowledge and authorization of Seller or any of its Affiliates, disrupt, disable, harm or interfere with the operation of the Business, including any Intellectual Property Rights, the integrity of the data or any information produced by such Software.

Section 5.11 No Violation, Litigation or Regulatory Action.

(a) The Business is, and at all times since June 30, 2009 has been, conducted in compliance in all material respects with (i) all Applicable Laws and (ii) all of the terms and requirements of each Court Order and Regulatory Agreement to which it or any of its assets is, or since June 30, 2009 has been, subject.

(b) Seller has delivered or made available to Buyer for inspection by Buyer all material reports, registrations, filings or submissions made by or with Seller or any of its Affiliates with respect to the Business with any Governmental Body, and material reports of financial examinations, market conduct reports and other reports issued by any such Governmental Body, in each case to the extent related to the Business since June 30, 2009. Since June 30, 2009, Seller and each of its Affiliates engaged in the Business (i) has timely filed all material reports, registrations, filings or submissions required to be filed with any Governmental Body with respect to the conduct of the Business in each jurisdiction in which it is conducting such Business, which were in all material respects true, complete and accurate when filed and (ii) with respect to any approval of a Governmental Body required in connection with any such filing, has received approval by the applicable Governmental Body in each jurisdiction requiring such approval. Except as set forth in Section 5.11(b) of the Business Disclosure Schedule, (x) all such material reports, registrations, filings or submissions were in compliance in all material respects with Applicable Law when filed or as amended or supplemented and, to the Knowledge of Seller, there were no material omissions therefrom, (y) no material deficiencies have been asserted by any Governmental Body in writing to Seller or its Affiliates with respect to such reports, statements, documents,

registrations, filings, applications or submissions that have not been satisfied and (z) to the Knowledge of Seller, all such material reports, registrations, filings or submissions with respect to Separate Accounts, contain no untrue statement of material fact and did not omit to state any material fact required to be stated therein or

Exhibit 2.02

necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading.

(c) Since June 30, 2009, Seller has not and no Affiliate of Seller that is engaged in the Business has received any written notice from any Governmental Body of any actual or alleged violation of or failure to comply by Seller of its Affiliates in any material respect with Applicable Law, Regulatory Agreement or any Court Order with respect to the Business.

(d) With respect to the Business, there is no material Action pending or, to the Knowledge of Seller, threatened against Seller or any of its Affiliates.

(e) Neither Seller nor any of its Affiliates, as of the date hereof, is subject to any material outstanding Court Order or Regulatory Agreement, in each case, relating to the Business, nor has Seller or any of its Affiliates been advised since January 1, 2012 by any Governmental Body that it is considering issuing or requesting any such material Court Order or Regulatory Agreement relating to the Business.

(f) Seller and its Affiliates and any of their respective officers, employees and, to the Knowledge of Seller, other Distributors who are required to be appointed, registered, licensed or qualified as (i) a broker-dealer or (ii) a registered principal, registered representative, insurance agent or salesperson with any Governmental Body or Cedant, in connection with the Business are duly registered as such and such registrations are in full force and effect in all material respects, or are in the process of being registered as such within the time periods required by Applicable Law, except in each case for any failures to be so appointed, registered, licensed or qualified that would not reasonably be expected, individually or in the aggregate, to be material to the Business. Seller and its Affiliates and any of their respective officers, employees and, to the Knowledge of Seller, their Distributors are in compliance in all material respects with all requirements of Applicable Law requiring any such appointment, registration, licensing or qualification, and are not subject to any material Liability or disability by reason of the failure to be so appointed, registered, licensed or qualified. To the Knowledge of Seller, since June 30, 2009, (i) except as disclosed in Section 5.11(f) of the Business Disclosure Schedule there have been no material violations by Distributors of any aspect of the Covered Insurance Policies including with respect to churning, suitability, conservation, surrender, investment or allocation of funds, market timing, late trading, replacement, fictitious bids or quotes; (ii) except as disclosed in Section 5.11(f) of the Business Disclosure Schedule, there have been no instances of Distributors having breached any material terms of agency or broker Contracts with or for the benefit of Seller or such relevant Affiliate; (iii) with respect to the Covered Insurance Policies, all Compensation paid to each such Distributor was in all material respects paid in accordance with Applicable Law; and (iv) all training and instruction manuals pertaining to the Covered Insurance Policies provided to each such Distributor by Seller or its Affiliates in connection with the marketing of the Covered Insurance Policies, were in compliance in all material respects with all Applicable Laws and Regulatory Agreements.

(g) Except as set forth on Section 5.11(g) of the Business Disclosure Schedule, with respect to the Business, Seller and each of its Affiliates engaged in the Business is, and since June 30, 2009 has been, in compliance in all material respects with all Applicable Laws and with its and their published privacy policies and internal guidelines and procedures relating to privacy and data security, including with respect to the collection, use, disclosure, maintenance, and transfer of Personal Information of policyholders, customers, consumers, employees, independent contractors and temporary employees, or benefits recipients of the Business. With respect to the Business, Seller and each of its Affiliates engaged in the Business have implemented and maintain a security plan which, in all material respects, (i) is

Exhibit 2.02

designed to implement and monitor effective and commercially reasonable administrative, electronic and physical safeguards to ensure that confidential information and Personal Information are protected against unauthorized access, disclosure, use, modification or other misuse or misappropriation thereof and (ii) prescribes notification procedures in compliance with Applicable Laws in the case of any breach of security compromising Personal Information.

Section 5.12 Material Contracts.

(a) Section 5.12(a) of the Business Disclosure Schedule contains a complete and accurate list

of each Material Contract as of the date of this Agreement. For the purposes of this Agreement, each of the following Contracts to which Seller or any of its Affiliates is a party shall be deemed to constitute a “Material Contract”:

(i) Any Mutual Fund Agreement providing for aggregate payments to Seller or its Affiliates in respect of the Business in the twelve (12) months ended December 31, 2011 in excess of $500,000;

(ii) each Distribution Contract to which any Material Distributor is a party;

(iii) any Contract pursuant to which a non-affiliated third party licenses (as licensor or licensee) Intellectual Property Rights material to the Business (other than Intellectual Property Rights in Information Technology) to or from Seller or its Affiliates involving aggregate payments in connection with the Business in the twelve (12) months ended December 31, 2011 in excess of $500,000;

(iv) any Contract pursuant to which a non-affiliated third party licenses (as licensor or licensee) Information Technology material to the Business to or from Seller or its Affiliates (other than any such agreement for off-the-shelf, commercially available Software) involving aggregate payments in connection with the Business in the twelve (12) months ended December 31, 2011 in excess of $500,000;

(v) any Contract (including any Shared Contract) with a non-affiliated third party vendor involving aggregate payments in connection with the Business in the twelve (12) months ended December 31, 2011 in excess of $500,000;

(vi) any Contract that involves Indebtedness of Seller of its Affiliates in respect of the Business;

(vii) any material indemnification agreement or guarantee in respect of the Business;

(viii) any material limited liability company, partnership, joint venture or other similar Contract relating to the formation, creation, operation, management or control of any partnership or joint venture in respect of the Business;

(ix) any written Contract with any Business Employee related to such Business Employee’s employment with Seller or its Affiliates;

(x) any Contract that relates to the Business and that contains any material restriction on the ability of Seller or any of its Affiliates (or, after consummation of the transactions contemplated hereby, Buyer or any of its Affiliates) to compete with any Person in connection

Exhibit 2.02

with the Business or to engage in the Business or to manufacture, market, sell or administer any Covered Insurance Policies;

(xi) any Contract that relates to the Business and that contains any material restriction on the ability of Seller or any of their Affiliates (or, after consummation of the transactions contemplated hereby, Buyer or any of its Affiliates) to amend or alter the terms, features, benefits, available options of any Covered Insurance Policies;

(xii) any Contract that relates to the Business and that contains any material restriction on the ability of Seller or any of its Affiliates (or, after consummation of the transactions contemplated hereby, Buyer or any of its Affiliates) to solicit specified customers or prospective customers for the purchase, renewal or lapse of Covered Insurance Policies or to alter or change their existing elections or options under the Covered Insurance Policies;

(xiii) other than with respect to Overhead and Shared Services, any inter-affiliate Contract between or among Seller and/or its Affiliates that Relates to the Business; and

(xiv) any Contract that provides for aggregate annual future payments with respect to the Business of more than $500,000, or any other Contract that is material to the Business and has an unexpired term exceeding one (1) year and that may not be canceled upon ninety (90) days’ or less notice without any liability, penalty or premium;

provided, that no Existing Reinsurance Agreements, Covered Insurance Policies, Assigned Leases or any other lease agreements or sublease agreements for real property shall be considered to be “Material Contracts” hereunder.

(b) Seller has made available to Buyer a true and correct copy of each Material Contract (other than Contracts for Overhead and Shared Services that are not Shared Contracts) as of the date of this Agreement. Each Material Contract is in full force and effect and is a valid and binding obligation of Seller and/or each of its Affiliates that is a party thereto and, to the Knowledge of Seller, each other party to such Material Contract, except for such failures to be valid and binding as have not had, and are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Business. Each Material Contract is enforceable in accordance with its terms against Seller and/or each of its Affiliates that is a party thereto and, to the Knowledge of Seller, each other party to such Material Contract, subject in each case to the Enforceability Exceptions. Neither Seller nor any of its Affiliates is in breach or default under any such Material Contract, and, to the Knowledge of Seller, no other party to any such Material Contract is in breach or default thereunder, in each case, other than those breaches or defaults as have not had, and are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Business.

(c) Section 5.12(c) of the Business Disclosure Schedule sets forth a true and complete list of all Affiliates of Seller that are life insurance companies that conduct the Business.

(d) Seller has made available to Buyer a true and correct copy of each Contract listed on Schedules 1.1(b) and 1.1(m). Section 5.12(a) of the Business Disclosure Schedule indicates which Material Contracts are Transferred Contracts.

Section 5.13 Material Distributors.

(a) Section 5.13(a) of the Business Disclosure Schedule sets forth a list of the Distributors

whose Compensation in connection with the Business during any of the last three (3) full calendar years

Exhibit 2.02

was more than $100,000. Each Distribution Contract with any Material Distributor that includes a provision or provisions requiring in substance that such Material Distributor complies in all material respects with all Applicable Laws relating to the offer or sale of insurance products, shares, units or equity interests in investment funds or other investment entities in connection with its activities relating to the Business.

(b) Seller and its applicable Affiliates do not have any plan or program for the payment of compensation to any Material Distributor, except for commissions and trail Compensation. Since June 30, 2009 no Material Distributor has notified Seller or its applicable Affiliates in writing of its intent to terminate its relationship with Seller or its applicable Affiliates with respect to the Business.

(c) Section 5.13(c) of the Business Disclosure Schedule sets forth the standard forms of agreements with Distributors (collectively, the “Producer Agreements”) utilized with respect to the Covered Insurance Policies in each of the distribution channels. Except as set forth in Section 5.13(c) of the Business Disclosure Schedule, all of the material agreements with Distributors in each such distribution channel with respect to the Business were, in all material respects, in the form of one of the Producer Agreements. As of the date hereof, there are no other material agreements with Producers other than those which use forms of agreements set forth in Section 5.13(c) of the Business Disclosure Schedule. No such Distributor currently has binding authority on behalf of Seller or any of its Affiliates with respect to the Business.

Section 5.14 Employee Benefits and Agreements.

(a) Section 5.14(a)(i) of the Business Disclosure Schedule lists all material Employee Benefit Plans that provide benefits or compensation in respect of any Business Employees or Distributors (or their beneficiaries or dependents) (the “Business Benefit Plans”). Section 5.14(a)(i)(c) of the Business Disclosure Schedule, which lists each Business Employee who has entered into a retention agreement with Seller or its Affiliates whether or not fully satisfied as of the Closing Date, shall be updated as of the Closing Date to provide the date on which each such Business Employee must be employed in order to receive a payment under such agreement. Section 5.14(a)(ii) of the Business Disclosure Schedule lists all Employee Benefit Plans that will be transferred to or assumed by the Buyer, including all Seller Sales Incentive Plans and Seller Sales Guarantees, and true and complete copies of such plans have been provided, or made available to Buyer.

(b) With respect to Employee Benefit Plans, none of Buyer nor any of its Affiliates will be subject to or assume by operation of Applicable Law any Liability with respect to (i) a “multiemployer plan” (within the meaning of Section 3(37) of ERISA), (ii) a “multiple employer plan” (within the meaning of Section 413(c) of the Code), (iii) any single employer plan or other pension plan subject to Title IV or Section 302 of ERISA or Section 412 of the Code, or (iv) any employee benefit plan, program or arrangement that provides for medical, life insurance or other welfare-type benefits after termination of employment (other than as required to avoid an excise Tax under Section 4980B of the Code or other similar Applicable Law).

(c) Except as set forth in Section 5.14(c) of the Business Disclosure Schedule, each Employee Benefit Plan has been established, maintained and administered in all material respects in accordance with its terms, and in compliance with the applicable provisions of ERISA, the Code and other Applicable Law.

(d) Except as set forth in Section 5.14(d) of the Business Disclosure Schedule, no Employee Benefit Plan exists that, as a result of the execution of this Agreement or the transactions contemplated by this Agreement, alone or together with any other event could reasonably be expected to (i) result in

severance pay or any increase in severance pay of any Business Employee or Distributor, (ii) accelerate the time of payment or vesting or result in any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable under, or result in any other material obligation pursuant to, any of the Employee Benefit Plans in respect of any Business Employee or Distributor, (iii) result in the creation or imposition of any Lien on any Acquired Assets, or (iv) result in any payment (whether in cash or property or

Exhibit 2.02

the vesting of property) to any “disqualified individual” (as such term is defined in Treasury Regulation Section 1.280G-1) that could reasonably be construed, individually or in combination with any other such payment, to constitute an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code). No Business Employee or Distributor is entitled to receive any additional payment (including any tax gross-up or other payment) from Seller or any of its Affiliates as a result of the imposition of the excise taxes required by Section 4999 of the Code or any taxes required by Section 409A of the Code.

(e) Section 5.14(e)(i) of the Business Disclosure Schedule (which is prepared as of

December 1, 2012 assuming, solely for this purpose, that each Business Employee named therein continues to be employed by Seller or its Affiliates on such date and which shall be updated, based on actual employment, as of the Closing Date) sets forth for each of the Business Employees other than the Tier 2 Business Employee, on a holder-by-holder basis: (i) the value, number and type of outstanding, unvested compensatory equity awards held by such Business Employee under Seller’s long-term incentive plan immediately prior to the date of such schedule (the “Seller Equity Awards”), (ii) the value, number and type of such Business Employee’s Seller Equity Awards that will vest immediately prior to the Closing Date (subject to the continued employment of the Business Employee through such date), as described in Section 8.1(h)(i) (the “Vested Seller Equity Awards”), (iii) the value, number and type of such Business Employee’s Seller Equity Awards that will remain unvested at the Closing Date but that would otherwise vest on February 25, 2013 or March 1, 2013 (subject to the continued employment of the Business Employee through such date)(the “2013 Unvested Seller Equity Awards”), (iv) the value, number and type of such Business Employee’s Seller Equity Awards that will remain unvested at the Closing Date, other than the 2013 Unvested Seller Equity Awards (the “Unvested Seller Equity Awards”), (v) the vesting schedule that applied to the 2013 Unvested Seller Equity Awards immediately prior to the date of such schedule (the “2013 Seller Vesting Schedule”), and (vi) the vesting schedule that applied to the Unvested Seller Equity Awards immediately prior to the date of such schedule (the “Seller Vesting Schedule”). Except as set forth in Section 5.14(e)(ii) of the Business Disclosure Schedule, other than the Seller Equity Awards described above, there are no outstanding awards of equity compensation held by any Business Employee. For the avoidance of doubt, the Vested Seller Equity Awards shall include only (x) Seller Equity Awards with respect to which at least one full year of the performance or restriction period has elapsed as of the Closing Date and that are being vested by Seller on a pro rata basis, and (y) Seller Equity Awards held by Business Employees who are eligible to retire from employment with Seller and its Affiliates, which shall also vest on a pro rata basis regardless of whether at least one full year of the performance or restriction period has elapsed as of the Closing Date.

Section 5.15 Employee Relations. As of the date hereof, (a) there are no collective

bargaining agreements to which Seller or its Affiliates are parties or by which Seller or its Affiliates are bound with respect to any Business Employees and there are no labor unions or other organizations or groups representing or, to the Knowledge of Seller, purporting to represent or attempting to represent any Business Employees, and (b) (i) to the Knowledge of Seller, there are no formal organizational campaigns, petitions or other material unionization activities seeking recognition of a bargaining unit in the Business, (ii) there are no strikes or work stoppages pending or to the Knowledge of Seller, threatened with respect to Business Employees and (iii) no such strike or work stoppage has occurred within the three (3) years preceding the date of this Agreement. Seller and each of its Affiliates are in compliance, with respect to Business Employees, in all material respects, with all Applicable Laws respecting labor, employment, fair employment practices, terms and conditions of employment, workers’ compensation,

Exhibit 2.02

occupational safety and health requirements, employment classification, the WARN Act, the FLSA, withholding of taxes, employment discrimination, equal opportunity, employee leave issues and unemployment insurance and related matters.

Section 5.16 Insurance. As of the date of this Agreement, Seller or its Affiliates, with

respect to the Business, currently maintain the insurance policies and coverages set forth in Section 5.16 of the Business Disclosure Schedule, and all such policies are in full force and effect.

Section 5.17 No Brokers. Except with respect to the fees of Greenhill & Co., LLC and Goldman, Sachs & Co., for which Seller or an Affiliate of Seller is solely responsible, neither Seller nor any Person acting on its behalf has paid or become obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement.

Section 5.18 Reinsurance.

(a) Section 5.18(a) of the Business Disclosure Schedule sets forth, as of the date of this Agreement, a true and correct list of each reinsurance Contract, including assumed and retrocessional Contracts, under which any Cedant has any existing rights, obligations or liabilities related to the Business that either (i) was reflected on Schedule S of any Cedant’s Statutory Financial Statements as of December 31, 2011 or (ii) was entered into after December 31, 2011 and would be reflected on Schedule S of any Cedant’s Statutory Financial Statements as of the date hereof (each, an “Existing Reinsurance Agreement”). Seller has made available to Buyer true and correct copies of each Existing Reinsurance Agreement.

(b) Each Existing Reinsurance Agreement is in full force and effect in accordance with its terms and is a valid and binding obligation of the applicable Cedant and, to the Knowledge of Seller, each other party to such Existing Reinsurance Agreement, except for such failures to be valid and binding as have not had, and are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Business. Each Existing Reinsurance Agreement is enforceable in accordance with its terms against the applicable Cedant and, to the Knowledge of Seller, each other party to such Existing Reinsurance Agreement, subject in each case to the Enforceability Exceptions. No Cedant is in breach or default under any such Existing Reinsurance Agreement, and, to the Knowledge of Seller, no other party to any such Existing Reinsurance Agreement is in breach or default thereunder, in each case, other than those breaches or defaults as have not had, and are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to the Business. Each Cedant has performed all of its obligations under the Existing Reinsurance Agreements in all material respects.

Section 5.19 Insurance Product-Related Matters.

(a) To the extent required under Applicable Law, all policy forms and certificates used in the

Business as of the date of this Agreement, all policy forms and certificates on which Covered Insurance Policies in force on the date of this Agreement were written and all amendments, endorsements and riders thereto (collectively, “Policy Forms”), and all applications, brochures and marketing materials pertaining thereto have been, in all material respects, approved by all applicable Governmental Bodies or filed with and not objected to by such Governmental Bodies within the period provided by Applicable Law for objection and otherwise comply in all material respects with Applicable Law. All Policy Forms currently being issued, and all Policy Forms on which Covered Insurance Policies in force on the date of this Agreement which comprise any material portion of the Business were written, have been provided previously to Buyer. Each Covered Insurance Policy in force on the date of this Agreement conforms in all material respects to one of the Policy Forms.

Exhibit 2.02

(b) Each Separate Account (i) is duly and validly established and maintained in all material respects under Applicable Law, (ii) is operating and, at all times since June 30, 2009 has been operated in compliance in all material respects with Applicable Law and the applicable Material Seller Permits and (iii) is either not an investment company as defined under the Investment Company Act or is duly registered with the SEC as an investment company under the Investment Company Act. The portion of the assets of each Separate Account equal to the Separate Account Reserves (as defined in the Reinsurance Agreements) and other contract liabilities of such Separate Account is not chargeable with Liabilities arising out of any other business Seller or any of its Affiliates may conduct or may have conducted. Any registered Separate Account has been issued and sold in compliance in all material respects with Applicable Law and have been duly authorized and validly issued and are fully paid and non-assessable. The Separate Accounts set forth in Schedule 1.1(k) are all of the Separate Accounts utilized in the Business.

(c) No examinations, investigations, inspections and formal or informal inquiries, including, without limitation, periodic regulatory examinations of the Separate Accounts’ affairs and condition, civil investigative demands and market conduct examinations, by any Governmental Body have been conducted since June 30, 2009 or are being conducted as of the date hereof.

(d) Since June 30, 2009, no notice has been received by Seller or its Affiliates from and no Action, investigation, inquiry or review is pending or, to the Knowledge of Seller, threatened by any Governmental Body which has jurisdiction over the Separate Accounts (i) which alleges any material violation (in each case, to the extent related to the Business) of any Applicable Law or (ii) which alleges any failure to have, or any threatens revocation of any Material Seller Permits required in connection with the Separate Accounts.

(e) Except as set forth in Section 5.19(e) of the Business Disclosure Schedule, the Tax treatment of each Covered Insurance Policy is not, and, since the time of issuance (or subsequent modification), has not been, less favorable to the purchaser, policyholder or intended beneficiaries thereof, than the Tax treatment (i) that was purported to apply in any written materials provided by Seller or any of its Affiliates to the purchaser (or policyholder) at the time of issuance (or any subsequent modification of such policy), or (ii) for which such policy was designed to qualify at the time of issuance (or subsequent modification). For purposes of this Section 5.19, the provisions of Applicable Law relating to the Tax treatment of such Covered Insurance Policies shall include, but not be limited to, Sections 72, 101, 817, 7702, 7702A and 7702B of the Code.

(f) Each Cedant Separate Account that is classified and treated as a corporation for federal Tax purposes has qualified as a regulated investment company under Section 851 of the Code at all times.

(g) Except as set forth in Section 5.19(e) of the Business Disclosure Schedule, (i) all Covered Insurance Policies that are subject neither to Section 101(f) nor to Section 7702 of the Code qualify as life insurance contracts for purposes of the Code, (ii) all Covered Insurance Policies that are subject to Section 101(f) of the Code satisfy the requirements of that section and otherwise qualify as life insurance contracts for purposes of the Code, and (iii) all Covered Insurance Policies that are subject to Section 7702 of the Code satisfy the requirements of Section 7702(a) of the Code and otherwise qualify as life insurance contracts for purposes of the Code.

(h) Except as set forth in Section 5.19(e) of the Business Disclosure Schedule, none of the Covered Insurance Policies is a “modified endowment contract” within the meaning of Section 7702A of the Code, except for any Covered Insurance Policy that is being administered as a “modified endowment contract” and with respect to which the policyholder either (i) consented in writing to the treatment of such policy as a “modified endowment contract” and has not acted to revoke such consent or (ii) was

informed in writing about the treatment of such policy as a “modified endowment contract,” declined to have such treatment corrected and has not subsequently requested to have such treatment corrected.

Exhibit 2.02

(i) Each Covered Insurance Policy that is subject to Section 817 of the Code complies with, and, at all times since issuance, has complied with, the diversification requirements applicable thereto, and Seller, or the applicable Cedant, is treated, for federal Tax purposes, as the owner of the assets underlying such Covered Insurance Policy.

(j) Except as set forth in Section 5.19(e) of the Business Disclosure Schedule, Seller and its Affiliates have materially complied with all Tax reporting, withholding, and disclosure requirements applicable to the Covered Insurance Policies and, in particular, but without limitation, have reported distributions under such Covered Insurance Policies in compliance in all material respects with all applicable requirements of the Code, Treasury Regulations, and forms issued by the Internal Revenue Service.

(k) Except as set forth in Section 5.19(e) of the Business Disclosure Schedule, Seller and its Affiliates have maintained the information necessary to determine the Covered Insurance Policies’ qualification for any applicable Tax treatment under the Code, to monitor the Covered Insurance Policies for treatment as “modified endowment contracts,” or to facilitate compliance with the Tax reporting, withholding, and disclosure requirements applicable to the Covered Insurance Policies in the manner required by Revenue Procedure 98-25.

(l) Except as set forth in Section 5.19(l) of the Business Disclosure Schedule, neither Seller nor any of its Affiliates has entered into any agreement or is involved in any discussions or negotiations with the Internal Revenue Service or any other Tax Authority, or otherwise has requested relief, regarding the failure of any Covered Insurance Policies to meet the requirements of the Product Tax Law Rules.

(m) Except as set forth in Section 5.19(m) of the Business Disclosure Schedule, neither Seller nor any of its Affiliates is a party to or has received notice of any federal, state, local or foreign audits or other administrative or judicial Actions with regard to the Tax treatment of any Covered Insurance Policies, or of any claims by the purchasers, holders or intended beneficiaries of the Covered Insurance Policies regarding the Tax treatment of (i) the Covered Insurance Policies or (ii) any plan or arrangement in connection with which such Covered Insurance Policies were purchased or have been administered.

(n) Neither Seller nor any of its Affiliates is a party to any “hold harmless” indemnification agreement or Tax Sharing Arrangement under which Seller or any of its Affiliates is liable for the Tax treatment of (i) the Covered Insurance Policies or (ii) any plan or arrangement in connection with which such Covered Insurance Policies were purchased or have been administered.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER

Except as set forth in the disclosure schedule supplied by Buyer to Seller dated the date hereof (the “Buyer Disclosure Schedule”), Buyer represents and warrants, as of the date hereof and as of the Closing (or as such other date specified herein), to Seller as follows:

Section 6.1 Organization and Standing. Buyer is a corporation duly organized,

validly existing and in good standing under the laws of New Jersey. Each Buyer Party is a corporation or

Exhibit 2.02

other legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized.

Section 6.2 Authority of Buyer; Conflicts.

(a) Each of Buyer and each Buyer Party has the full power and authority to execute and
deliver this Agreement and each of the Ancillary Agreements to which it is or will be a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and such Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby by Buyer and each Buyer Party have been duly and validly authorized and approved by all requisite corporate or other similar action on the part of Buyer and each Buyer Party. This Agreement has been duly and validly authorized, executed and delivered by Buyer, and (assuming the valid authorization, execution and delivery of this Agreement by Seller) is the legal, valid and binding obligation of Buyer, enforceable in accordance with its terms, and each of the Ancillary Agreements to which Buyer or any Buyer Party is or will be a party has been duly and validly authorized by Buyer or such Buyer Party and, upon execution and delivery by Buyer or such Buyer Party, will be (assuming the valid authorization, execution and delivery by the other party or parties thereto) a legal, valid and binding obligation of Buyer or such Buyer Party enforceable in accordance with its terms, subject in each case to the Enforceability Exceptions.

(b) Except as may result from any facts or circumstances solely relating to Seller or its
Affiliates (as opposed to any other non-affiliated third party), none of the execution, delivery or performance by Buyer or any Buyer Party of this Agreement or any of the Ancillary Agreements, the consummation by Buyer or any Buyer Party of any of the transactions contemplated hereby or thereby or compliance by Buyer or any Buyer Party with or fulfillment by Buyer or any Buyer Party of the terms, conditions and provisions hereof or thereof will:

(i) assuming the receipt of all necessary Governmental Consents as described in Section 6.2(b)(ii)(A), (B) and (C), violate, conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default (or an event that, with notice or lapse of time or both, would constitute a default) or an event creating rights of acceleration, termination, cancellation or prepayment of any material obligation or a loss of rights under, require the consent of any Persons under (A) the charter, bylaws, certificate of formation or other applicable organizational documents of Buyer or the applicable Buyer Party, (B) any material Contract or material financial obligation to which Buyer or the applicable Buyer Party is a party or by which any of their respective properties is subject or by which Buyer or the applicable Buyer Party is bound or (C) any Applicable Law affecting Buyer or the applicable Buyer Party or any of their respective properties, other than, in the case of clauses (B) and (C) above, any such breaches, defaults, rights or loss of rights as are not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Buyer, or

(ii) require any Governmental Consent, except (A) in connection, or in compliance, with the provisions of the HSR Act, (B) as set forth in Section 6.2(b)(ii) of the Buyer Disclosure Schedule and (C) Governmental Consents the failure of which to be obtained or made is not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Buyer.

Exhibit 2.02

Section 6.3 No Violation, Litigation or Regulatory Action.

(a) As of the date hereof, there is no material Action pending or, to the Knowledge of Buyer,
threatened against Buyer or any of its Affiliates that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Buyer.

(b) There is no Action pending or, to the Knowledge of Buyer, threatened that challenges the
legality of the transactions contemplated by this Agreement or any of the Ancillary Agreements.

(c) Neither Buyer nor any of its Affiliates, as of the date hereof, is subject to (i) any material
Court Order or (ii) any material Regulatory Agreement that relates to its capital adequacy, its credit policies, its management or its material business, nor has Buyer or its Affiliates been advised since January 1, 2012 by any Governmental Body that it is considering issuing or requesting any such material Regulatory Agreement.

Section 6.4 Financial Statements.

(a) On or prior to the date hereof, Buyer has made available to Seller true and correct copies
of (a) its audited financial statements as of and for the year ended December 31, 2011 and (b) its unaudited consolidated balance sheet as of and for the quarter ended June 30, 2012 and the related unaudited, consolidated statements of operations and cash flows for the quarter ended June 30, 2012, in each case, together with the exhibits, schedules and notes thereto (collectively, the “Unaudited Buyer Financial Statements” and, together with the December 31, 2011 financial statements, the “Buyer Financial Statements”). The Buyer Financial Statements have been prepared in accordance with GAAP (subject, in the case of the Unaudited Buyer Financial Statements, to normal recurring year-end adjustments), on a consistent basis for the respective periods covered thereby and fairly present in all material respects the consolidated financial position and results of operations of Buyer as of the dates and for the periods indicated therein. For purposes of this Section 6.4, Buyer shall be deemed to have made available any statement of financial position or statement of operations and cash flows if such balance sheet or statement of operations and cash flows shall be included in the periodic reports of Buyer or of its Affiliate filed with the SEC pursuant to the Exchange Act.

(b) Buyer has delivered or made available to Seller true and correct copies of the following
statutory statements, in each case, together with the exhibits, schedules and notes thereto and any affirmations and certifications filed therewith: (i) the annual statutory statement of Reinsurer as of and for the year ended December 31, 2011, as filed with the New Jersey; (ii) the audited annual statutory financial statements of Reinsurer as of and for the year ended December 31, 2011 (the statements referenced in (i) and (ii), the “Reinsurer Annual Statutory Statements”); and (iii) the unaudited quarterly statutory financial statements of Reinsurer as of and for the quarter ended June 30, 2012 (the “Reinsurer Quarterly Statements” and, collectively with the Reinsurer Annual Statutory Statements, the “Reinsurer Statutory Statements”). The Reinsurer Statutory Statements have been prepared in accordance with SAP (subject, in the case of the Reinsurer Quarterly Statements, to normal recurring year-end adjustments), applied on a consistent basis for the respective periods covered thereby and fairly present, in all material respects, the statutory financial position and results of operation of Reinsurer as of the dates and for the periods indicated therein. No material deficiency has been asserted by any Governmental Body with respect to any Reinsurer Statutory Statements that remains unresolved prior to the date hereof.

Section 6.5 No Undisclosed Liabilities. Neither Buyer nor Reinsurer has any

Liabilities required to be disclosed or reserved for on a balance sheet prepared in accordance with GAAP,
except Liabilities (a) to the extent disclosed or reserved for in the Buyer Financial Statements or the
Reinsurer Statutory Statements, as applicable or (b) incurred in the ordinary course of business since the

Exhibit 2.02

date of the Unaudited Buyer Financial Statements or the Reinsurer Quarterly Statements, as applicable to the extent consistent in type and amount with the Liabilities disclosed or reserved for in the Unaudited Buyer Financial Statements or the Reinsurer Quarterly Statements, as applicable.

Section 6.6 Compliance with Laws. Buyer and each Buyer Party owns, holds or

possesses all material Governmental Permits that are required for the operation of their respective businesses as currently conducted and that will be required to perform their respective obligations under this Agreement and each Ancillary Agreement (each, a “Material Buyer Permit”), including in the case of Reinsurer, all insurance licenses required for Reinsurer to reinsure the Covered Insurance Policies under the Reinsurance Agreements. Each of Buyer and each Buyer Party are (a) in compliance in all material respects with all Applicable Laws and (b) in compliance with the terms of all applicable Material Buyer Permits. No Material Buyer Permit is subject to any pending or, to the Knowledge of Buyer, threatened administrative or judicial proceeding to revoke, cancel, suspend, modify or declare such Material Buyer Permit invalid in any material respect.

Section 6.7 Availability of Funds. Buyer and Reinsurer have, and will have as of the

Closing Date, sufficient funds available on an unconditional basis for Buyer to pay the Purchase Price and for Reinsurer to pay the Ceding Commission and for Buyer and each Buyer Party to perform their respective obligations hereunder and under the Ancillary Agreements. Buyer acknowledges and agrees that the obligations of Buyer and the Buyer Parties to effect the transactions contemplated by this Agreement and the Ancillary Agreements are not conditioned upon the availability to Buyer or any of its Affiliates of any debt, equity or other financing in any amount whatsoever.

Section 6.8 Facts Affecting Regulatory Approvals. To the Knowledge of Buyer as of

the date hereof, there is no fact, event or condition applicable to Buyer or any of its Affiliates that would reasonably be expected to prevent Buyer or any of its Affiliates from securing the requisite Governmental Consents to the transactions contemplated by this Agreement or any Ancillary Agreement.

Section 6.9 No Brokers. Except with respect to the fees of Morgan Stanley & Co.

and Perella Weinberg Partners LP, for which Buyer or an Affiliate of Buyer is solely responsible, neither Buyer nor any Person acting on its behalf has paid or become obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement.

Section 6.10 Exclusivity of Representations and Warranties. Buyer acknowledges and agrees that (a) Buyer and its Representatives have been permitted access to the books and records, facilities, equipment, contracts and other properties and assets of the Business, and that it and its Representatives have had an opportunity to meet with officers and employees of Seller and its Affiliates to discuss the Business; and (b) except for the representations and warranties expressly set forth in Article IV and Article V (and, in the case of clause (iii) below, the indemnification rights of the Buyer Indemnified Persons in Section 11.1(a) in respect of such representations and warranties), (i) Buyer has not relied on any representation or warranty from Seller or any other Person in determining to enter into this Agreement, (ii) neither Seller nor any other Person has made any representation or warranty, express or implied, as to the Business (or the value or future thereof), the Acquired Assets, the Assumed Liabilities, the Investment Assets, Modco Assets, the Covered Insurance Policies or the accuracy or completeness of any information regarding any of the foregoing that Seller or any other Person furnished or made available to Buyer and its Representatives (including any projections, estimates, budgets, offering memoranda, management presentations or due diligence materials) and (iii) except in the case of fraud by Seller or its Affiliates, none of Seller, its Affiliates or any other Person shall have or be subject to any Liability to Buyer or any other Person under this Agreement resulting from the distribution to Buyer, or Buyer’s use, of any such information. Without limiting the generality of the foregoing, except as expressly set forth in the representations and warranties in Article IV and Article V, (A) THERE ARE

Exhibit 2.02

NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND (B) ANY ACQUIRED ASSETS THAT ARE TANGIBLE PERSONAL PROPERTY OR THIRD-PARTY SOFTWARE ARE BEING CONVEYED ON AN “AS IS,” “WHERE IS,” “WITH ALL FAULTS” BASIS AND WITHOUT ANY WARRANTY OF NON-INFRINGEMENT.

ARTICLE VII

ACTIONS PRIOR TO THE CLOSING DATE Section 7.1 Operations Prior to the Closing Date.

(a) From the date of this Agreement to the Closing Date, except as expressly required or

permitted by this Agreement or any Ancillary Agreement, as described in Section 7.1 of the Business Disclosure Schedule, as required by Applicable Law (including, for the applicable period, changes in enforcement or interpretations thereof by any Governmental Body) or with the written approval of Buyer (which shall not be unreasonably withheld, conditioned or delayed, provided, that Seller shall promptly notify Buyer of any such requirement), Seller (x) shall, and shall cause its Affiliates to, operate and carry on the Business in all material respects in the ordinary course consistent with past practice, including, using commercially reasonable efforts to (A) preserve the goodwill of the Business and of its customers, Distributors, Governmental Bodies and others having business relations with the Business and (B) keep available the services of the Business Employees and (y) shall not and shall cause its Affiliates not to:

(i) modify the terms of any material Indebtedness associated with the Business, other than modifications of short term Indebtedness in the ordinary course of business, or permit the Business to incur, assume or guarantee the Liabilities of any other Person or pay, discharge or satisfy any Liabilities, in each case, other than in the ordinary course of business;

(ii) enter into, or amend or modify any material terms or conditions of, any Material Contract (or any Contract that, if entered into prior to the date of this Agreement, would have been a Material Contract), or consent to the termination of (other than at its stated expiry date) any such Contract, in each case, other than in the ordinary course of business consistent with past practices; provided that after giving effect to any such amendment, modification or termination, the warranty set forth in Section 5.08(a) shall remain true and correct;

(iii) other than (x) in the ordinary course of business consistent with past practices, or (y) with respect to any actions that apply to substantially all similarly situated employees of Seller and its Affiliates, (A) establish or adopt, or promise to establish or adopt, any new employee benefit plan for the Business Employees, provided, however, that the exceptions set forth in (x) and (y) above shall not be applicable to base salary and annual bonus programs (including target bonus percentage or opportunity) or the Seller Sales Incentive Plans or Seller Sales Guarantees or (B) institute, or promise to institute, any new or increase or accelerate the vesting or payment of any amounts or benefits under any Employee Benefit Plan, other than as required by the terms of any such Employee Benefit Plan in effect on the date hereof or Applicable Law, provided, however, that the exceptions set forth in (x) and (y) above shall not be applicable to base salary and annual bonus programs (including target bonus percentage or opportunity) or the Seller Sales Incentive Plans or Seller Sales Guarantees;

Exhibit 2.02

(iv) other than in the ordinary course of business consistent with past practices, increase, or promise to increase, the base salary or target bonus percentage or opportunity of any Business Employee, other than changes made pursuant to existing contractual commitments;

(v) enter into, or promise to enter into, any employment, retention, change in control or, other than in the ordinary course consistent with past practices, any severance agreement or arrangement with any Business Employee or any collective bargaining agreement with respect to any Business Employee;

(vi) terminate the employment of any Business Employee having a title of Assistant Vice President or more senior, other than for cause;

(vii) cause any individual employed by Seller or its Affiliates to become a Business Employee, with a title of Assistant Vice President or more senior;

(viii) except as provided in Section 8.20 of the Business Disclosure Schedule, (A) settle any litigation or claim against the Business that is an Assumed Liability (other than Excluded Liabilities), other than (1) any such settlement that is solely a monetary settlement that requires payment by Seller or any of its Affiliates of less than $5,000,000 or (2) settlement of any such litigation or claim to the extent reserved against in the June 30 Reference Balance Sheet or (B) enter into, amend or modify any Regulatory Agreement to the extent related to and adversely affecting the Business;

(ix) pay, discharge or satisfy any Assumed Liabilities, other than (A) the payment, discharge or satisfaction in the ordinary course of business or (B) the payment, discharge or satisfaction in accordance with their terms of Assumed Liabilities reflected or reserved against in the June 30 Reference Balance Sheet;

(x) voluntarily subject any Acquired Asset to any Encumbrance or voluntarily suffer such to exist, other than, in each case, Permitted Encumbrances;

(xi) acquire or dispose of any asset that presently constitutes, or at Closing would constitute, part of the Acquired Assets, other than in the ordinary course of business consistent with past practices; provided that after giving effect to any such acquisition or disposition, the warranty set forth in Section 5.08(a) shall remain true and correct;

(xii) excluding any actions for which Seller would be required to indemnify any Buyer Indemnified Person in accordance with Section 12.4(a), make or change any material Tax election in respect of the Business, adopt or materially change any accounting method in respect of the Business, file any material amended Tax Return in respect of the Business, or modify the method by which Seller and its Affiliates determine life insurance reserves (within the meaning of Section 807(c) of the Code) with respect to the Covered Insurance Policies as reflected in the consolidated federal income Tax Return filed by the affiliated group of which Seller is a member;

(xiii) amend or modify any material terms or conditions of, or consent to or cause the termination (other than at its stated expiry date) or recapture of, any Existing Reinsurance Agreement, in each case, except as otherwise provided in this Agreement;

(xiv) enter into any Contract that, if entered into prior to the date of this Agreement, would have been an Existing Reinsurance Agreement, except as otherwise provided in this Agreement;

Exhibit 2.02

(xv) amend or modify any material terms or conditions of, or consent to the termination of (other than at its stated expiry date), any Assigned Lease, other than in the ordinary course of business consistent with past practices; provided that after giving effect to any such amendment, modification or termination, the warranty set forth in Section 5.08(a) shall remain true and correct;

(xvi) fail to manage the investment portfolio supporting the Reserves in respect of the Covered Insurance Policies (including the Investment Assets and Modco Assets) in accordance with the investment guidelines set forth in Section 7.1(a)(xvi) of the Business Disclosure Schedule (the “Investment Guidelines”);

(xvii) make or determine to make (other than as required by GAAP, SAP or Applicable Law) (A) any change in (1) any pricing, investment, accounting, financial reporting, underwriting or claims administration policies, practices or principles, (2) any actuarial or reserving policies, practices or principles or (3) any method of calculating any Reserves for accounting or financial reporting purposes; (B) any material addition or reduction to any Cedant’s Reserves other than as a result of new issuances, policy lapses, fund performance, policyholder withdrawal activity or premiums and deposits produced, in each case in the ordinary course of business consistent with past practice; or (C) any changes in Non-Guaranteed Elements (as defined in the Reinsurance Agreements), other than (1) as required by Applicable Law or (2) changes in accordance with Seller’s or any Cedant’s existing policies, descriptions of which have been delivered or made available to Buyer;

(xviii) Except in the ordinary course of business, consistent with past practices, other than as required by Applicable Law, make any material changes (A) in the terms or policies with respect to the appointment of Distributors or the payment of commissions, bonuses or sales incentives to any Distributors; or (B) in policies or practices relating to selling practices, cancellations, discounts or other terms of sale; or

(xix) agree or commit to do any of the foregoing.

Nothing in this Section 7.1 shall be deemed to limit the transfer of any asset other than Acquired

Assets.

Section 7.2 Access to Information; Financial Information.

(a) Prior to the Closing, Seller shall, and shall cause its Affiliates to, give Buyer, its Affiliates and its authorized Representatives, upon reasonable advance notice and during regular business hours, reasonable access to all books, records (including the Business Records), personnel, accountants and other advisors, officers and other facilities and properties of the Business; provided, that any such access shall be conducted at Buyer’s expense, in accordance with Applicable Law (including any Applicable Law relating to antitrust, competition, employment or privacy issues), under the supervision of Seller’s or its Affiliates’ personnel and in such a manner as to maintain confidentiality and not to unreasonably interfere with the normal operations of Seller and its Affiliates. From the date hereof through the Closing, Seller shall deliver to Buyer certain reports as described in the investment guidelines set forth in Section 7.1(a)(xvi) of the Business Disclosure Schedule.

(b) Notwithstanding anything to the contrary contained in this Agreement or any other agreement between Buyer and Seller executed on or prior to the date hereof, Seller shall not have any obligation to make available to Buyer, its Affiliates or its authorized Representatives, or provide Buyer, its Affiliates or its authorized Representatives with (i) access to or copies of any personnel file or related

Exhibit 2.02

records of any Business Employee, (ii) any Tax Return filed by Seller or any of its Affiliates or predecessors, or any related material, except to the extent solely related to Seller’s or its Affiliates’ compliance with Tax reporting, withholding or disclosure requirements applicable to the Covered Insurance Policies, or (iii) any other information if making such information available would (A) jeopardize any attorney-client privilege, the work product immunity or any other legal privilege or similar doctrine or (B) contravene any Applicable Law, Court Order, Regulatory Agreement or agreement (including any confidentiality agreement to which Seller or any its Affiliates is a party), it being understood that Seller shall use commercially reasonable efforts to obtain waivers or make other arrangements (including redacting information or entering into joint defense agreements) that would enable otherwise required disclosure to Buyer to occur without so jeopardizing privilege or contravening such Applicable Law, Court Order, Contract duty or agreement.

(c) Seller shall, and shall cause its Affiliates to, reasonably cooperate in connection with
Buyer or any of its Affiliates satisfying any financial reporting obligation under the Exchange Act related or arising from the transactions contemplated hereby as may be reasonably requested by Buyer, including (i) providing Buyer or any of its Affiliates reasonable assistance in the preparation of any audited or unaudited financial statements of the Business to the extent Buyer reasonably determines that such financial statements will be required in connection with its or any of its Affiliates’ post-Closing reporting obligations under the Exchange Act, and (ii) subject to Section 7.2(b), providing to Buyer and its Representatives information regarding the Business reasonably requested in connection therewith. Any reasonable and adequately documented out-of-pocket third-party costs incurred by Seller or any of its Affiliates in connection with the obligations under this Section 7.2(c) shall be reimbursed by Buyer as directed by Seller.

(d) Between the date hereof and the Closing Date, Seller shall use commercially reasonable
efforts to compile a complete list of all Transferred Contracts, which list shall be delivered to Buyer at least five (5) Business Days prior to the Closing Date.

Section 7.3 Notifications. Prior to Closing, each Party shall promptly notify the

other Party of the occurrence, to the Knowledge of Seller or to the Knowledge of Buyer, as applicable, of:

(a) any event that would reasonably be expected to result in any of the conditions set forth in Article IX or Article X, as applicable, not being capable of being fulfilled by the Termination Date;

(b) any written notice received by such Party from a Governmental Body seeking to restrain or prohibit the transactions contemplated by this Agreement; or

(c) the commencement of any material Action against such Party that would adversely affect the ability of such Party to consummate the transactions contemplated by this Agreement and the Ancillary Agreements.

The delivery of any notice pursuant to this Section 7.3 shall not limit or otherwise affect the remedies available hereunder to the Party receiving such notice. A breach of this Section 7.3 shall not be considered for purposes of determining the satisfaction of the conditions set forth in Article IX or Article X, give rise to a right of termination or give rise to a right to indemnification under this Agreement if the underlying breach or breaches would not result in the failure of the conditions set forth in Article IX or Article X to be fulfilled, the right to terminate this Agreement or the right to obtain indemnification, as the case may be.

Exhibit 2.02

Section 7.4 Efforts and Actions to Cause the Closing to Occur.

(a) Governmental Consents.

(i) Prior to Closing, upon the terms and subject to the conditions of this Agreement, each Party shall (A) promptly prepare and file all forms, applications, registrations, notices and other materials required to be filed by such Party or its Affiliates with any Governmental Body to consummate the transactions contemplated by this Agreement, the Ancillary Agreements and the GUL Term Sheet and (B) use its Consent Efforts promptly to obtain all Governmental Consents that may be or become necessary in connection with such Party’s or its Affiliates’ authorization, execution, delivery and performance of this Agreement, each Ancillary Agreement, and the GUL Term Sheet and the consummation of the transactions contemplated hereby and thereby, including by (1) seeking to prevent the initiation of, and defending, any Action by or before any Governmental Body challenging this Agreement, any Ancillary Agreement, the GUL Reinsurance Transaction or the consummation of the transactions contemplated hereby and thereby and (2) avoiding the entry of, or causing to be lifted or rescinded, any Court Order or Regulatory Agreement entered by or with any Governmental Body adversely affecting the ability of the Parties to consummate the transactions contemplated this Agreement, the Ancillary Agreements or the GUL Term Sheet. All filing and application fees payable to Governmental Bodies shall be paid or reimbursed by Buyer. Buyer shall cause the definitive documentation for the GUL Reinsurance Transaction to be prepared in accordance with the terms and conditions set forth in the GUL Term Sheet and to contain no term or condition that is inconsistent therewith in any material respect that would be adverse to Seller or the Cedants and shall give Seller a reasonable opportunity to review any portions of such documentation relevant to the rights, benefits or obligations of Seller or Cedants thereunder and provide comments on such portions of such documentation prior to the submission of such documentation to any Governmental Body. Buyer shall make the regulatory filings for the approvals described in Items 2 and 3 of Section 6.2(b)(ii) of the Buyer Disclosure Schedule with the applicable Governmental Bodies in compliance with the immediately preceding sentence and shall specifically disclose in such filings the credit and security provisions contemplated by the GUL Term Sheet and GUL Reinsurance Transaction.

(ii) If (x) any Governmental Body shall have imposed, or shall have indicated that it may impose, conditions on its approval of the transactions contemplated by this Agreement, any Ancillary Agreement or the GUL Term Sheet or shall seek, or shall have indicated that it may seek, an injunction or the enactment, entry, enforcement or promulgation of any Applicable Law restraining or prohibiting the transactions contemplated by this Agreement, any Ancillary Agreement or the GUL Term Sheet; or (y) any permanent or preliminary injunction or other order is entered or becomes reasonably foreseeable to be entered in any proceeding that would make consummation of the transactions contemplated hereby, by the Ancillary Agreements or the GUL Term Sheet in accordance with the terms hereof and thereof unlawful or that would prevent or delay consummation of the transactions contemplated by this Agreement, the Ancillary Agreements or the GUL Term Sheet, then, to the extent necessary to comply with such conditions or to prevent the taking of such action or the enactment, entry, enforcement or promulgation of any such Applicable Law or to vacate, modify or suspend any such injunction or order, Buyer shall offer to accept an order to (A) divest such portion of (1) the Business or (2) the assets and businesses of Buyer and its Affiliates, (B) terminate any existing relationships or contractual rights and obligations, (C) hold separate such assets and businesses pending such divestiture or (D) otherwise take or commit to take actions that, after the Closing Date, would limit Buyer’s or its Affiliates’ freedom of action with respect to, or ability to retain, one or more of the businesses, locations, employees, product lines or assets of Buyer and its Affiliates, in each case, so as to

Exhibit 2.02

permit the consummation of the transactions contemplated hereby, by the Ancillary Agreements and by the GUL Term Sheet on a schedule as close as possible to that contemplated by this Agreement and the Ancillary Agreements; provided, that nothing contained in this Section 7.4 or in Section 8.7 shall require any Party (y) to agree to any modification to this Agreement, any of the Ancillary Agreements or any of the agreements related to the GUL Reinsurance Transaction or (z) to take any action or agree to any condition or other requirement that, in either case, has or is reasonably expected to have a material adverse effect on the business, results of operations, condition (financial or other) of such Party and its Affiliates, taken as a whole or on the benefits reasonably expected to be derived by such Party from the transactions contemplated hereby and by the Ancillary Agreements, taken as a whole (“Material Negative Condition”).

(iii) Prior to Closing, if any Party or an Affiliate thereof receives an inquiry or request for information or documentary material from any Governmental Body with respect to this Agreement, any Ancillary Agreement or the GUL Term Sheet or any of the transactions contemplated hereby or thereby, then such Party shall use commercially reasonable efforts to provide, or cause to be provided, to such Governmental Body, as promptly as practicable and after consultation with the other Party, an appropriate response to such inquiry or request.

(iv) Prior to Closing, the Parties shall keep each other apprised of the status of matters relating to the completion of the transactions contemplated by this Agreement, the Ancillary Agreements and the GUL Term Sheet and work cooperatively in connection with obtaining the requisite Governmental Consents, including:

(A) reasonably cooperating with each other in connection with filings under the HSR Act and any other requisite Governmental Consents in respect of the transactions contemplated by this Agreement and the Ancillary Agreements;

(B) promptly notifying each other of any communications from or with any Governmental Body with respect to the transactions contemplated by this Agreement, the Ancillary Agreements or the GUL Term Sheet;

(D) providing each other with draft copies and as-filed copies of all filings, submissions, amendments or responses with Governmental Bodies and, to the extent reasonably practicable, providing each other with a reasonable opportunity to comment upon all such draft copies; provided, that each Party may redact from such copies provided to the other Party any confidential information of such Party or its Affiliates; provided, further, that in the case of filings, submissions, amendments or responses with Governmental Bodies relating to the GUL Reinsurance Transaction, Buyer shall only be required to provide Seller with portions of such filings that are relevant to the rights, benefits or obligations of Seller or Cedants thereunder;

Exhibit 2.02

Governmental Body with relating to the GUL Reinsurance Transaction, Buyer shall only be required to give Seller the opportunity to attend and participate in the portions of such meeting, discussion or conversation that are relevant to the rights, benefits or obligations of Seller or Cedants thereunder; and

(F) consulting and cooperating with one another in connection with all

analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of either Party hereto in connection with any Governmental Consents related to the transactions contemplated by this Agreement or the Ancillary Agreements; provided, that in the case of analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals relating to the GUL Reinsurance Transaction, Buyer shall only be required to consult with Seller with respect to portions of such analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals that are relevant to the rights, benefits or obligations of Seller or Cedants thereunder.

(b) Third-Party Consents.

(i) Prior to Closing, each Party shall cooperate with the other and use Consent Efforts to obtain all Third-Party Consents required for the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, including for the transfer of the Acquired Assets and the Transferred Contracts to Buyer or one of its Affiliates, including those listed in Section 7.4(b)(i) of the Business Disclosure Schedule. The first $1,000,000 of aggregate costs (including any license or other fees and expenses) associated with obtaining such Third-Party Consents or obtaining rights to replace any related assets (other than any Third-Party Consents described in Section 8.13(c), such Third-Party Consents being separately subject to Section 8.13(c)) shall be borne fifty percent (50%) by Buyer and fifty percent (50%) by Seller and any such costs in excess of $1,000,000 shall be borne exclusively by Seller, it being understood that neither Party shall be required to expend any amount in order to obtain any such Third-Party Consent in excess of such Party’s share of such costs as described in this Section 7.4(b)(i).

(ii) To the extent that any Acquired Asset (including any Transferred Contract) may not be transferred or assigned to Buyer or one of its Affiliates without a Third-Party Consent and such Third-Party Consent has not been obtained by the Closing, this Agreement shall not constitute an agreement to transfer or assign the same if an attempted transfer or assignment would constitute a breach or other contravention thereof or would be ineffective or unlawful; provided, that, for so long as the Transition Services Agreement remains in effect, Seller shall use Consent Efforts, with Buyer’s cooperation, to negotiate and obtain any such Third-Party Consent, to the extent required to permit Buyer or one of its Affiliates, on behalf of Seller, to perform Seller’s obligations so that Buyer or one of its Affiliates can be provided with the benefits of such Contract (with such cost allocated as described in Section 7.4(b)(i), and neither Party being required to expend any amount in order to obtain any such Third-Party Consent in excess of such Party’s share of such costs as described in Section 7.4(b)(i)). If, on the Closing Date, any Third-Party Consent required to effect the transfer of any Acquired Asset to Buyer or one of its Affiliates is not obtained, or if an attempted transfer or assignment thereof would be ineffective or unlawful, then Seller shall use its Consent Efforts, with Buyer’s cooperation, to implement a mutually agreeable arrangement by which Buyer or one of its Affiliates would, in compliance with Applicable Law, be able to obtain all of the benefits and assume the obligations and bear the economic burdens associated with such Acquired Asset (with any related Third-Party Consent cost allocated as described in Section 7.4(b)(i), and neither Party being required to expend any

Exhibit 2.02

amount in order to obtain any such Third-Party Consent in excess of such Party’s share of such costs as described in Section 7.4(b)(i)). Such arrangement may include (A) provision of transition services under the Transition Services Agreement, subcontracting, sublicensing or subleasing by Seller or one of its Affiliates to Buyer or one of its Affiliates, or (B) having Seller or one of its Affiliates enforce, for the benefit (and at the expense) of Buyer or one of its Affiliates any and all of their respective rights against any non-affiliated third party associated with such Acquired Asset, in which case Seller would promptly pay, or cause its Affiliates to pay, to Buyer or one of its Affiliates when received all monies received by Seller or its Affiliates in connection with any such Acquired Asset. For the avoidance of doubt, the alternative arrangements contemplated in clauses (A) and (B) of this Section 7.4(b)(ii) shall be made available for the term of the applicable Transferred Contract and charged at no additional cost to Buyer other than the those costs arising under such Transferred Contract that are passed through to Buyer. From and after the Closing Date for so long as the Transition Services Agreement remains in effect, the Parties shall continue to use Consent Efforts to obtain, as promptly as practicable, any required Third-Party Consents that have not been obtained as of the Closing Date; provided, that, except as expressly provided in this Section 7.4, neither Party shall be required to expend any amount in order to obtain any such Third-Party Consent in excess of such Party’s share of such costs as described in Section 7.4(b)(i).

Section 7.5 Shared Contracts.

(a) From and after the Closing Date and for so long as the Transition Services Agreement remains in effect, Seller shall, and shall cause its Affiliates to use commercially reasonable efforts to cause the counterparty to any Shared Contract that is not a Transferred Contract to enter into a new agreement, on substantially the same terms and conditions as those set forth in the Shared Contract, with Buyer or one of its Affiliates with respect to the matters addressed by such Shared Contract that are related to the Business; provided, that Seller shall not be required to compromise any right, asset or benefit or expend any amount or incur any Liabilities or provide any other consideration in connection therewith.

(b) From and after the Closing Date and for so long as the Transition Services Agreement remains in effect, Buyer shall, and shall cause its Affiliates to use commercially reasonable efforts to cause the counterparty to any Shared Contract that is identified on Section 7.5(b) of the Business Disclosure Schedule to enter into a new agreement, on substantially the same terms and conditions as those set forth in the Shared Contract, with Seller or its Affiliates with respect to the matters addressed by such Shared Contract that are not related to the Business; provided, that Buyer shall not be required to compromise any right, asset or benefit or expend any amount or incur any Liabilities or provide any other consideration in connection therewith.

(c) With respect to any Shared Contract that is not a Transferred Contract, until such time as Buyer or one of its Affiliates enters into a new agreement with the counterparty to the Shared Contract pursuant to Section 7.5(a), Seller shall use Consent Efforts, with Buyer’s cooperation, to implement a mutually agreeable arrangement by which Buyer or one of its Affiliates would, in compliance with Applicable Law, be able to obtain all of the benefits and assume the obligations and bear the economic burdens associated with such Shared Contract to the extent related to the Business. Such arrangement may include (A) provision of transition services under the Transition Services Agreement, or subcontracting, sublicensing or subleasing by Seller or one of its Affiliates to Buyer, or (B) having Seller or one of its Affiliates enforce, for the benefit (and at the expense) of Buyer or one of its Affiliates any and all of their respective rights against any non-affiliated third party associated with such Shared Contract to the extent related to the Business, in which case Seller would promptly pay, or cause its Affiliates to pay, to Buyer or one of its Affiliates when received all monies received by Seller or its

Exhibit 2.02

Affiliates in connection with any such Shared Contract to the extent related to the Business. For the avoidance of doubt, the alternative arrangements contemplated in clauses (A) and (B) of this Section 7.5(c) shall be made available for the term of the applicable Shared Contract and charged at no additional cost to Buyer other than the those costs arising under such Shared Contract with respect to the Business that are passed through to Buyer. The costs of obtaining any Third-Party Consents in connection with the arrangements contemplated in this Section 7.5(c) shall be allocated as described in Section 7.4(b)(i); it being understood that neither Party shall be required to expend any amount in order to obtain any such Third-Party Consent in excess of such Party’s share of such costs as provided in Section 7.4(b)(i).

Section 7.6 Transition Services Planning; Certain Intellectual Property Matters.

(a) As soon as reasonably practicable following the date hereof, but in no event longer than thirty (30) days from the date hereof, the Parties shall meet and confer to discuss and agree upon (i) the plan for “Separation” (as such term is defined in the Transition Services Agreement) and for “Migration” (as such term is defined in the Transition Services Agreement) (the “Separation and Migration Plan”); (ii) the services to be provided under the Transition Services Agreement and the completion of schedules to such agreement; (iii) the plan to transfer to Buyer knowledge with respect to such services as is reasonably necessary to permit Buyer to be able to perform such services after Migration (collectively with the Separation and Migration Plan, the “Plans”); and (iv) the integration of the systems of the Business with Buyer’s systems, including Seller’s provision to Buyer of such documents reasonably necessary to accomplish such integration, including, but not limited to architecture, design, and requirements documents currently used in connection with Seller’s systems. The Parties shall jointly develop the Plans on or before Closing. Each of Seller and Buyer shall bear its own costs under this Section 7.6(a).

(b) As soon as reasonably practicable after the Closing Date, Buyer shall, in accordance with the terms contained in the applicable Ancillary Agreements, file or cause to be filed, and thereafter use commercially reasonable efforts to pursue in the United States Patent and Trademark Office assignment documents with respect to the registered and applied-for Owned Intellectual Property listed on Section 5.10(a) of the Business Disclosure Schedule to record Buyer as the record and beneficial owner of such registered or applied-for Owned Intellectual Property in a form reasonable acceptable to Seller.

Section 7.7 Investment Management of Modco Assets. From the date hereof through

the Closing, Seller and Buyer shall cooperate in good faith to prepare one or more investment management agreements (each, an “Investment Management Agreement”), pursuant to which the Cedents will appoint the Reinsurer or one of its Affiliates as the exclusive investment manager Modco Assets for as long as the reinsurance ceded under the Reinsurance Agreements has not been recaptured. Under the Investment Management Agreements, the Reinsurer or one of its Affiliates shall manage such assets in its sole discretion, subject to Applicable Law and, if applicable, the terms of the applicable trust agreements, Covered Insurance Policy and related Existing Reinsurance Agreements.

Section 7.8 Retained Business ASA. From the date hereof through the Closing,

Seller and Buyer shall cooperate in good faith to prepare a Retained Business ASA pursuant to which Reinsurer or one of its affiliates will provide certain administrative services to Buyer and its affiliates substantially in accordance with the terms and conditions contemplated in the Retained Business ASA Term Sheet and otherwise consistent with customary terms and conditions for third-party administration agreements.

Section 7.9 Group Conversion. From the date hereof through the Closing, Seller and

Buyer shall cooperate in good faith to prepare a Group Conversion Retrocession Agreement pursuant to
which the Reinsurer, as retrocedent, will cede to HLIC or other applicable Cedant, as retrocessionaire,

Exhibit 2.02

certain liabilities related to the Group Conversion Policies substantially in accordance with the terms and conditions contemplated in the Group Conversion Term Sheet.

Section 7.10 Cash Flow Testing. Following the date of this Agreement, Seller shall

promptly complete the development of the cash flow testing model for the AG-38 Business that is designed to calculate the cash flow testing reserve of the AG-38 Business in compliance with Section 8C of AG-38 (the “Model”). Seller shall consult with Buyer and give Buyer an opportunity to review and provide input on the development of the Model. Once completed, Seller shall use the Model to calculate the cash flow testing reserve of the AG-38 Business as of December 31, 2012.

ARTICLE VIII

ADDITIONAL AGREEMENTS Section 8.1 Employee Matters.

(a) Comparable Position.

(i) Not less than five (5) Business Days prior to the Closing, Seller shall (A)

update Section 8.1(a) of the Business Disclosure Schedule to add any individuals who become Business Employees after the date hereof and remove any individuals who have ceased to be Business Employees after the date hereof and (B) deliver such updated list of Business Employees to Buyer. Within sixty (60) days after the date of this Agreement or, if later, within thirty (30) days of the date Seller reports to Buyer that an individual has become a Business Employee (but not later than five (5) days prior to the Closing Date), Buyer or its Affiliate shall extend to each Business Employee a written offer of employment, effective as of the Closing Date (or such later date as is set forth below with respect to those Business Employees employed by Seller or any of its Affiliates who are Inactive Business Employees), that constitutes a Comparable Position with Buyer or its Affiliates (an “Offer of Employment”). Prior to Buyer or its Affiliate making any Offer of Employment, (i) Seller shall provide or make available to Buyer or its Affiliate a schedule listing the then current base salary, target bonus percentage and other compensation (including any compensation for a Business Employee covered by a Seller Sales Incentive Plan) in effect for the year in which the Closing occurs and (ii) Buyer shall provide Seller with a “form of” Offer of Employment that shall set forth the job title, base salary and annual bonus opportunity a Business Employee will have with Buyer or its Affiliates following the Business Employee’s Effective Hire Date (as defined below). Each Offer of Employment shall be contingent on such Business Employee’s successful completion of Buyer’s or its Affiliate’s customary hiring processes as set forth on Section 8.1(a)(i) of the Buyer Disclosure Schedule (the “Buyer’s Customary Hiring Processes”). Buyer shall not be required to hire any Business Employee who fails to successfully complete Buyer’s Customary Hiring Processes or who does not timely accept Buyer’s Offer of Employment. Except in the case of an Inactive Business Employee who is on a military leave of absence, Offers of Employment made to Inactive Business Employees shall be contingent on the Inactive Business Employee being released to return to work within nine (9) months of the Closing Date, and Buyer shall not be required to hire any Inactive Business Employee who fails to meet that contingency.

Except as set forth below with respect to Inactive Business Employees, the employment relationship of each Business Employee with Seller or its applicable Affiliate shall terminate effective as of 11:59 p.m., New York City time, on the Closing Date. A Business Employee who successfully completes Buyer’s Customary Hiring Process, who has accepted Buyer’s Offer of

Exhibit 2.02

Employment and who performs work at his or her then applicable place of employment on the first (1st) Business Day immediately following the Closing Date (or on the first (1st) Business Day on or after the Effective Hire Date, as defined below, in the case of Inactive Business Employees) shall be considered a “Transferred Employee” for purposes of this Agreement.

(ii) Inactive Business Employees shall remain employed by Seller or its Affiliate, as the case may be, until the earlier of the date the Inactive Business Employee becomes a Transferred Employee or the expiration of the Inactive Business Employee’s leave under Seller’s or such applicable Affiliate’s policies. An Inactive Business Employee shall not become a Transferred Employee until (i) the first (1st) Business Day following the Inactive Business Employee’s release to return to work from the leave, (ii) the Inactive Business Employee accepts Buyer’s Offer of Employment, (iii) he or she successfully completes Buyer’s Customary Hiring Processes, and (iv) he or she performs work at his or her then applicable place of employment. Notwithstanding the foregoing, any Inactive Business Employee who is receiving long-term disability payments from Seller or any of Seller’s Affiliates (whether or not pursuant to an Employee Benefit Plan) at the time such Inactive Business Employee is released to return to work shall not become a Transferred Employee, and Seller shall retain all Liabilities associated with such Inactive Business Employee.

(iii) Subject to the Business Employee’s acceptance of Buyer’s Offer of Employment, the date on which a Business Employee commences employment with Buyer or its Affiliates will be referred to as the “Effective Hire Date” which, for purposes of clarification, means (x) the day immediately following the Closing Date for all Business Employees other than Inactive Business Employees, and (y) for any Inactive Business Employee, on the first (1st) Business Day immediately following the day such Inactive Business Employee becomes a Transferred Employee.

(b) Employee Communications. During the period from the date hereof through the Closing Date, Buyer and Seller will reasonably cooperate to communicate to the Business Employees the details of the proposed terms and conditions of their employment with Buyer or its Affiliates. All communications between Buyer or its Affiliates and the Business Employees shall be subject to Seller’s reasonable prior approval which shall not be unreasonably withheld.

(c) Maintenance of Terms. From a Transferred Employee’s Effective Hire Date through the first (1st) anniversary of the Closing Date or such earlier date on which such Transferred Employee’s employment with Buyer and its Affiliates terminates, Buyer shall, or shall cause its Affiliates to, provide such Transferred Employee with (i) a Comparable Position and (ii) participation in employee benefit plans, policies, practices or agreements (other than with respect to base salary and bonus opportunity) that are substantially comparable in the aggregate to the employee benefit, plans, policies, practices or agreements that are provided to similarly situated employees of Buyer and which shall include participation in Buyer’s long term incentive plan in the same manner as similarly situated employees of Buyer.

(d) Work Permits. Buyer shall take, or cause its Affiliates to take, all necessary steps to sponsor, or transfer sponsorship of, the work permits for all Transferred Employees who are foreign nationals, and agrees to so sponsor, or cause its Affiliates to so sponsor, such foreign national Transferred Employees on and after the Closing; provided, that each such foreign national Transferred Employee’s name, position, country of citizenship and type of work permit are disclosed on Section 8.1(d) of the Business Disclosure Schedule. Seller shall cooperate as necessary to effect Buyer’s or its Affiliates’ sponsorship or transfer of sponsorship of all such foreign national Transferred Employees.

Exhibit 2.02

(e) Employee Benefits. Buyer and its Affiliates shall waive, or shall cause to be waived, any

waiting period, probationary period, pre-existing condition exclusion, evidence of insurability requirement, or similar condition with respect to initial participation under any plan, program, or arrangement established, maintained, or contributed to by Buyer or any of its Affiliates to provide health insurance, life insurance, or disability benefits with respect to each Transferred Employee who has, prior to the Effective Hire Date, satisfied, under Seller’s or its Affiliates’ comparable plans, the comparable eligibility, insurability or other requirements referred to in this sentence. Buyer and its Affiliates shall recognize, or cause to be recognized, the dollar amount of all co-insurance, deductibles and similar expenses incurred by each Transferred Employee (and his or her eligible dependents) during the calendar year in which the Effective Hire Date occurs for purposes of satisfying such year’s deductible and co-payment limitations under the medical plan in which each Transferred Employee will be eligible to participate from and after the Effective Hire Date, subject to the provision by Seller or its Affiliates to the plan administrator or the third-party administrator of the applicable medical plan of Buyer of relevant information or documentation confirming the amount of such co-insurance, deductibles and similar expenses for each Transferred Employee. Each Transferred Employee shall, for purposes of determining such Transferred Employee’s eligibility to participate in, vesting and calculating the benefit accrual for paid time off and calculating severance under all employee benefit plans, programs and arrangements of Buyer and its Affiliates (other than any equity or equity based plan or retiree medical savings account), be credited with the service of such Transferred Employee with Seller or its Affiliates to the same extent as if such service had been performed for Buyer or any of its Affiliates. In addition to the foregoing, Buyer shall, or shall cause one or more of its Affiliates to:

(i) from the Closing Date to the first (1st) anniversary of the Closing Date, provide Transferred Employees with the Buyer Severance Benefits, provided, that Buyer or its Affiliates will provide Transferred Employees who are included in the categories set forth in Schedule 8.1(e)(i) of the Business Disclosure Schedule immediately before their Effective Hire Date, benefits with the greater of (x) the cash severance payments portion of the Buyer Severance Benefits and (y) the Seller Severance Benefit. For the avoidance of doubt, Transferred Employees who receive severance benefits under this paragraph also shall be eligible to receive a minimum sixty (60) day termination notice period or pay in lieu of such notice and subsidized COBRA benefits provided under the plan, practice or agreement of Buyer or its Affiliates applicable to similarly situated employees, taking into account the Transferred Employee’s length of service with Seller and its Affiliates.

(ii) cause the defined contribution plan(s) maintained by Buyer or its Affiliates to accept a direct rollover of the account balance of any Transferred Employee in the investment and savings plan of Seller or its Affiliate or any other Tax-qualified retirement plan of Seller or its Affiliate, that a Transferred Employee elects to make as a direct rollover, and, to the extent necessary, amend such defined contribution plan(s) prior to the Closing in order to carry out the intent of this Section, subject to Buyer’s receipt from Seller of a current determination letter from the Internal Revenue Service that the applicable investment and savings plan or other retirement plan is qualified under Sections 401(a) and 401(k) of the Code, and such other information as Buyer may reasonably request;

(iii) from the Closing Date through the first (1st) anniversary of the Closing, provide Transferred Employees with the greater of (i) the vacation and paid time off accrual rate and maximum accrual the Transferred Employee would have been eligible to receive under the applicable plan, policy or agreement of Seller or its Affiliates covering the Transferred Employee immediately prior to the Effective Hire Date excluding any accruals attributable to additional vacation and paid time off purchased by the Transferred Employee and (ii) the vacation and paid time off accrual rate and maximum accrual the Transferred Employee would be eligible to receive

Exhibit 2.02

under the plan, policy or agreement of Buyer or its Affiliates applicable to such Transferred Employee following the Effective Hire Date; and

(iv) reimburse Transferred Employees for education courses for which such

Transferred Employees registered prior to the Effective Hire Date; provided, that Transferred Employees have not already been reimbursed therefor, to the extent that Seller’s or its Affiliates’ policies would provide for such reimbursement if such Transferred Employees had continued to be employed by Seller or its Affiliate.

(f) Paid Time Off. Seller shall, or shall cause its Affiliates to pay to each Transferred Employee the amount of compensation due in respect of the unused paid time off accrued by such Transferred Employee as of the date such Transferred Employee’s employment with Seller or its Affiliates is terminated pursuant to Section 8.1(a).

(g) Annual Incentive Bonus and Sales Incentive Plans

(i) Seller shall, or shall cause one or more of its Affiliates to, pay, no later than March 15, 2013, the bonus for the 2012 year under Seller’s Annual Incentive Plan to Transferred Employees who were covered under that plan immediately prior to the Closing and who (A) continue to be employed by Buyer or its Affiliates as of March 15, 2013, or (B) whose employment with Buyer or its Affiliates is involuntarily terminated (other than for cause) prior to March 15, 2013. The amount to be so paid by Seller or its Affiliates to all such Transferred Employees (the “2012 Bonus Pool”) shall be an amount equal to (1) the greater of (x) one hundred percent (100%), and (y) a bonus funding factor, as determined by Seller or its Affiliates in good faith taking into account the performance of the Business and other factors comparable to those taken into account by Seller or its Affiliates in determining bonuses under the Seller Annual Incentive Plan for participants in other businesses, multiplied by (2) the target bonus pool applicable to the Transferred Employees under the Seller Annual Incentive Plan, based on such Transferred Employees’ tier and pay immediately prior to the Closing. In the event that the Closing Date occurs prior to December 31, 2012, Buyer or its Affiliates shall reimburse Seller for the portion of the 2012 Bonus Pool that is attributable to the period following the Closing Date. The 2012 Bonus Pool shall be distributed by Seller or its Affiliates in their discretion among such Transferred Employees. In the event that the Closing Date occurs on or after January 1, 2013, Seller shall, or shall cause one or more of its Affiliates to, pay bonuses to Business Employees for the 2012 year under Seller’s Annual Incentive Plan in accordance with its normal practices but no later than March 15, 2013; provided, that the total amount paid to Business Employees shall not be less than one hundred percent (100%) of the target bonus pool under the Seller Annual Incentive Plan applicable to such Business Employees; Seller or its Affiliates shall distribute such bonus pool among eligible Business Employees in accordance with Seller’s practices and policies in effect prior to the Closing Date. In the event the Closing occurs after December 31, 2012, Buyer or its Affiliates shall provide an incentive bonus covering the entire 2013 calendar year, consistent with Section 8.1(c), and Seller or its Affiliate shall reimburse Buyer for the portion of the 2013 bonus pool at Seller’s target bonus level that is attributable to the period commencing on January 1, 2013 and ending on the Closing Date to the extent such amount is not reflected on the Transfer Balance Sheet.

(ii) Buyer shall, or shall cause one or more of its Affiliates to, assume each Seller Sales Incentive Plan and shall or shall cause its Affiliates to perform the obligations of Seller and its Affiliates thereunder solely to the extent they relate to Liabilities that arise on and after the Closing Date.

Exhibit 2.02

(h) Long-Term Incentive Awards.

(i) Seller and its Affiliates shall take any and all action necessary to cause (A) the Vested Seller Equity Awards to vest immediately prior to the Closing Date and (B) the Unvested Seller Equity Awards and the 2013 Unvested Seller Equity Awards to be cancelled without payment effective as of the Closing Date. Seller shall be responsible for all payment, liabilities and obligations to which any Business Employee is entitled with respect to the Vested Seller Equity Awards and shall make all payments necessary to satisfy such Awards to the Business Employees in accordance with the terms of Seller's long term incentive plan. Buyer shall, or shall cause its Affiliates to, make all payments necessary to satisfy the 2013 Unvested Seller Equity Awards as set forth in Section 5.14(e) of the Business Disclosure Schedule for each Business Employee who becomes a Transferred Employee, provided that for purposes of calculating the value of the 2013 Unvested Seller Equity Awards, the value of Seller's common stock shall be the average of the closing prices of a share of Seller's common stock on each of the last 20 trading days of the month in which the Closing Date occurs and provided further that, Buyer may, in its discretion, make such payments in cash. Buyer and Seller agree to negotiate in good faith to enter into a side letter setting forth the parties’ obligations and responsibilities with regard to the outstanding, unvested compensatory equity awards held by the Tier 2 Business Employee.

(ii) Buyer and its Affiliates shall, grant to each Business Employee holding Unvested Seller Equity Awards who becomes a Transferred Employee (such Unvested Seller Equity Awards shall hereafter be referred to as the “Transferred Employee Unvested Seller Equity Awards”), restricted stock units (“RSUs”) under Buyer’s long-term incentive program having a value equal to the value of such Business Employee’s Unvested Seller Equity Awards (the “Replacement Equity Awards”). The value of the Transferred Employee Unvested Seller Equity Awards (the “Replacement Equity Award Value”) for purposes of the Replacement Equity Awards shall be determined, for each of such Business Employee’s Transferred Employee Unvested Seller Equity Awards, by (1) multiplying the number of RSUs subject to such Transferred Employee Unvested Seller Equity Award by (2) the average of the closing prices of a share of Seller's common stock on each of the last 20 trading days of the month in which the Closing Date occurs. The number of Buyer RSUs to be granted to a Transferred Employee as a Replacement Equity Award for a Transferred Employee Unvested Seller Equity Award shall be determined by (1) dividing the Replacement Equity Award Value by (2) the average of the closing prices of a share of Buyer's common stock on each of the last 20 trading days of the month in which the Closing Date occurs. Such Replacement Equity Awards shall vest according to the Seller Vesting Schedule, and shall otherwise be subject to the terms and conditions of Buyer’s long-term incentive plan

(i) COBRA Coverage. Seller shall be responsible for all liabilities and obligations

associated with the provision of COBRA coverage to any Business Employee or any qualifying beneficiaries who experience a qualifying event at any time prior to the Transferred Employee’s Effective Hire Date.

(j) Except as otherwise specifically provided in this Agreement, Buyer and its Affiliates

shall not assume any obligations under or Liabilities with respect to, or receive any right or interest in any trusts relating to, any assets of or any insurance, administration or other contracts pertaining to any Employee Benefit Plan or other employee compensation or benefit plan, program, policy or arrangement sponsored or maintained by Seller or any of its Affiliates.

Exhibit 2.02

(k) Notwithstanding any other provision in this Agreement, Seller and its Affiliates shall
retain all obligations under, or Liabilities with respect to, all retention agreements entered into by Seller or its Affiliates with Transferred Employees whether or not fully satisfied as of the Closing Date and Seller and its Affiliates shall not make any changes to such retention agreements, including accelerating the timing of any payments thereunder, without Buyer’s consent. No sooner than 10 days prior to each of March 31, 2013 and September 30, 2013, Seller shall provide Buyer with a written request for confirmation that the Transferred Employees who are listed on Section 5.14(a)(i)(c) of the Business Disclosure Schedule (the "Retention Employees") are actively employed by Buyer or its Affiliates on the applicable date (March 31, 2013 or September 30, 2013). Within 10 days from receipt of each such written notice, Buyer shall provide Seller with a written response indicating the Retention Employees who are actively employed. In the event a Retention Employee's employment terminates as a result of a job elimination at any time prior to October 1, 2013, Buyer will provide Seller with written notice of such Retention Employee's termination within 10 days of termination. The Buyer's obligations under this Section 8.1(k) are subject to any consent of the Retention Employee as required by Applicable Law and are applicable to the extent not otherwise prohibited by Applicable Law. Seller and its Affiliates' obligations to make payments to the Retention Employees under this Agreement shall in no way be affected by the failure of Seller or Buyer to provide any notice set forth in this Section 8.1(k).

(l) WARN Act. Seller shall be responsible for all liabilities and obligations arising under the
WARN Act on or prior to the Closing Date with respect to any Business Employee.

(m) Buyer and Seller shall cooperate, and cause their respective Affiliates to cooperate, as
appropriate to carry out the provisions of this Section 8.1. Without limiting the generality of the foregoing and in order for Buyer to satisfy its obligations under this Section 8.1, on and after the date of this Agreement, Seller and its Affiliates shall provide Buyer with (i) reasonable access to Business Employees, (ii) the information with respect to Business Employees set forth in Section 8.1(m)(i) of the Business Disclosure Schedule, (iii) if Buyer receives the consent of the Business Employee which requirement may be satisfied by means of negative consent, the information with respect to the Business Employee set forth in Section 8.1(m)(ii) and (iv) such information regarding Business Employees that Buyer may reasonably request, to ensure that Buyer can complete the transition of Business Employees prior to Closing which request Seller shall not unreasonably deny.

(n) During the period commencing on the Closing Date and ending on December 31, 2014,
with respect to any Business Employee for whom Seller is crediting service with Buyer for purposes of early retirement eligibility under The Hartford Retirement Plan for U.S. Employees and solely to the extent necessary for Seller to credit such service, Buyer will provide Seller, upon Seller’s or a Business Employee’s written request, which request shall be reasonable in nature and time, the Business Employee’s date of employment termination and whether such termination was a result of the elimination of the Business Employee’s position, subject to any consent of the Business Employee as required by Applicable Law and to the extent not otherwise prohibited by Applicable Law.

(o) No Amendment of Plans. Notwithstanding anything in this Agreement to the
contrary, no provision of this Agreement is intended to, or does, constitute the establishment or adoption of, or amendment to, any employee benefit plan (within the meaning of Section 3(3) of, or subject to, ERISA), and no Person participating in any such employee benefit plan maintained by either Seller or its Affiliates or Buyer or its Affiliates, shall have any claim or cause of action, under ERISA or otherwise, in respect of any provision of this Agreement as it relates to any such employee benefit plan or otherwise.

Exhibit 2.02

Section 8.2 Insurance; Risk of Loss. Buyer acknowledges and agrees that effective

at the time of the Closing, the Business will cease to be insured by any insurance policies of Seller and its Affiliates.

Section 8.3 Intellectual Property; Use of Seller’s Trademarks; Corporate Names.

(a) Buyer, for itself and its Affiliates, acknowledges and agrees that, other than the
Transferred Owned Intellectual Property and other than as contemplated in the Ancillary Agreements, Buyer is not purchasing, acquiring or otherwise obtaining any right, title or interest in or to any Intellectual Property Rights of Seller or its Affiliates, including the name “Hartford” and any Trademarks of Seller and its Affiliates and any visual representations thereof, monograms, tag-lines, designs, symbols, images, colors and characters, and any variation of the foregoing in this sentence and any word or design that contains, incorporates or is confusingly similar in sound or appearance to any of the foregoing (including all registrations and applications relating thereto) (collectively, the “Seller Name and Marks”), and, except as otherwise expressly provided in any Ancillary Agreement, neither Buyer nor any of its Affiliates shall have any rights in the Seller Name and Marks, and neither Buyer nor any of its Affiliates shall contest the ownership or validity of any rights of Seller or any of its Affiliates in or to the Seller Name and Marks.

(b) Buyer agrees that, except as otherwise provided in any Ancillary Agreement, or in
connection with historical references to the Business, following the Closing Date, Buyer and its Affiliates shall cease and discontinue all uses of the Seller Name and Marks, either alone or in combination with other words and all marks, trade dress, logos, monograms and other source identifiers similar to any of the foregoing or embodying any of the foregoing alone or in combination with other words, including other words in compliance with Section 8.3(c).

(c) In accordance with the terms of the Ancillary Agreements and on the date(s) specified
therein, Buyer shall, and shall cause each of its Affiliates to, (i) re-label, destroy, delete or exhaust all materials bearing the Seller Name and Marks, including signage, advertising, promotional materials, Software, packaging, inventory, electronic materials, collateral goods, stationery, business cards, web sites and other materials (except to the extent any such materials must be retained to comply with Applicable Laws or document retention notices issued by any Governmental Body), and (ii) thereafter, send a written statement to Seller verifying that it has re-labeled, destroyed, deleted or exhausted all materials bearing the Seller Name and Marks and send Seller representative samples of how Buyer is now using advertising and promotional materials that do not include Seller Name and Marks to the extent required by (i) above. Buyer shall take all necessary action to ensure that other users of the Seller Name and Marks, whose rights terminate upon the Closing pursuant to this Section 8.3, shall cease use of the Seller Name and Marks, except as expressly authorized thereafter by Seller. Buyer, for itself and its Affiliates, agrees that after the Closing Date Buyer and its Affiliates will not expressly, or by implication, do business as or represent themselves as Seller or an Affiliate of Seller.

(d) Buyer’s rights and obligations with respect to its use of the Seller Name and Marks shall
be as set forth in the Transitional Trademark License Agreement and the Trademark License Agreement.

(e) In the event Buyer or any Affiliate of Buyer violates any of its obligations under this
Section 8.3, Seller and its Affiliates may proceed against it in law or in equity for such damages or other relief as a court may deem appropriate. Buyer acknowledges that a violation of this Section 8.3 may cause Seller and its Affiliates irreparable harm, which may not be adequately compensated for by money damages. Buyer therefore agrees that in the event of any actual or threatened violation of this Section 8.3, Seller and any of its Affiliates shall be entitled, in addition to other remedies that they may have, to seek a

Exhibit 2.02

temporary restraining order and to seek preliminary and final injunctive relief against Buyer or such Affiliate of Buyer to prevent any violations of this Section 8.3, without the necessity of posting a bond.

Section 8.4 Non-Competition.

(a) For purposes of this Agreement and the Ancillary Agreements, “Competing Business”

means the business of issuing, underwriting, selling, marketing, delivering, distributing, cancelling, reinsuring and administering individual life insurance Contracts alone or with supplemental insurance benefits thereto in the United States; provided, that “Competing Business” shall not include:

(i) any activities or businesses engaged in by Seller or its Affiliates as of the date hereof outside of HFSG’s Individual Life Division set forth in Section 8.4 of the Business Disclosure Schedule;

(ii) the HLPP Business;

(iii) issuing, or contracting with another insurer to issue (A) Group Conversion Policies or (B) other individual life insurance Contracts to individuals who otherwise have a right to procure individual life insurance from Seller or its Affiliates under the terms of the Covered Insurance Policies;

(iv) selling, marketing and/or issuing any group life insurance or accidental death and dismemberment coverage;

(v) selling, marketing and/or issuing any individual life insurance or accidental death and dismemberment coverage (but excluding universal life insurance) to members of affinity associations and their dependents (even on a “direct to consumer” or “voluntary” basis) pursuant to agreements with any such affinity associations or pursuant to an employment based plan or arrangement to employers’ employees, retirees and such employees’ and retirees’ dependents, even when such selling, marketing and/or issuance is conducted on a “direct-to-consumer” or “voluntary” basis; or

(vi) any activities expressly contemplated by this Agreement or the Ancillary Agreements (including any recapture by any Cedant of the reinsurance ceded under the Reinsurance Agreements, the retaining of certain life insurance policies identified on Schedule 1.1(e)(ii) and the retaining of any policies governed by Section 8.17 that Buyer does not acquire in a reinsurance transaction).

(b) Subject to the limitations set forth in Sections 8.4(c) and (d) below, during the twenty‑

four (24) month period following the Closing Date, HFSG shall not, and shall cause its controlled Affiliates not to, directly or indirectly, engage in a Competing Business.

Section 8.4 shall prohibit HFSG or any controlled Affiliate of HFSG from:

(i) making investments in the ordinary course of business, including in a general or

separate account of an insurance company or in an investment fund or other investment vehicle, in Persons engaging in a Competing Business; provided, that each such investment is a passive investment where neither HFSG nor any of its controlled Affiliates (A) intends to or has the right to influence or direct the operation or management of any such Person; or (B) is a participant with any other Person in any group with such intention or right; provided, further, that in no event

Exhibit 2.02

shall the aggregate ownership interest held by HFSG and its Affiliates in any such Person, whether directly or indirectly, be more than fifteen percent (15%) of the aggregate voting power or issued and outstanding equity interests of such Person;

(ii) making investments in Buyer and its Affiliates;

(iii) acquiring not more than fifteen percent (15%) of the total voting power or issued and outstanding equity interests of any Person engaging in a Competing Business as a result of the exercise of remedies by HFSG or any of its Affiliates as the holder of a debt instrument; provided, that following the exercise of any such remedies, such Person does not conduct such Competing Business under the “Hartford” name;

(iv) acquiring (and thereafter, owning and operating) any Person or business that derived less than fifteen percent (15%) of its net operating revenue on a consolidated basis for its most recent fiscal year from a Competing Business;

(v) acquiring (whether by way of merger or stock or asset acquisition or otherwise), directly or indirectly, any Person or business (an “Acquired Business”) where such Acquired Business derived fifteen percent (15%) or more of its net operating revenue on a consolidated basis for its most recent fiscal year from a Competing Business; provided, that HFSG shall either (x) use commercially reasonable efforts to, or shall cause its relevant controlled Affiliate to use commercially reasonable efforts to, sell, spin off or otherwise divest itself (or enter into an agreement to sell, spin off or otherwise divest itself) of the portion of the division, unit or Person related to such Acquired Business that engages in the Competing Business within twelve (12) months of the closing of the acquisition of such Acquired Business; or (y) modify, or cause its relevant controlled Affiliate to modify, such Acquired Business such that such Acquired Business derives less than fifteen percent (15%) of its net operating revenue on a consolidated basis from a Competing Business;

(vi) selling any of its assets or businesses to a Person that is itself, or has Affiliates that are, engaged in lines of business that compete with a Competing Business;

(vii) managing, controlling, advising or providing administrative or similar services to investment funds or other investment vehicles in connection with passive investments made by such investment funds or vehicles in Persons engaging in a Competing Business, so long as such investments are in the ordinary course of business; or

(viii) providing reinsurance to any Person engaging in a Competing Business, so long as HFSG and its controlled Affiliates are not engaged in the issuing, underwriting, selling, marketing, delivering, distributing, cancelling or, in any material way, administering of such reinsured business.

(d) Notwithstanding anything to the contrary contained herein, this Section 8.4 (i) shall cease

to apply to any Person from and after such time as such Person ceases to be a controlled Affiliate of HFSG; (ii) shall not apply to any Person that purchases or receives assets, operations or a business from HFSG or one of its controlled Affiliates, so long as such Person is not a controlled Affiliate of HFSG after such transaction is consummated; and (iii) following the direct or indirect acquisition of a controlling interest in HFSG by acquisition of stock, merger or otherwise, shall apply only to HFSG and its controlled Affiliates (and shall not otherwise apply to the Person that acquires such controlling interest); provided, that none of HFSG, its controlled Affiliates nor such acquiring Person shall carry on a

Exhibit 2.02

Competing Business in the United States using the name “Hartford” during the time period set forth in Section 8.4(b).

(e) Seller acknowledges that the covenants set forth in this Section 8.4 are an essential element of this Agreement and that, but for these covenants, Buyer would not have entered into this Agreement. Seller acknowledges that this Section 8.4 constitutes an independent covenant and shall not be affected by performance or nonperformance of any other provision of this Agreement or any Ancillary Agreement by Buyer.

(f) The Parties acknowledge that the type and periods of restriction imposed in the provisions of this Section 8.4 are fair and reasonable and are reasonably required for the protection of the Parties. If any of the restrictions or covenants in this Section 8.4 are hereafter construed to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid portions. If any of the restrictions or covenants contained in this Section 8.4, or any portion thereof, are deemed to be unenforceable because such covenant or restriction is held to cover a geographic area or to be of such duration as is not permitted under Applicable Law, the Parties agree that the court making such determination shall have the power to reduce the duration and/or areas of such provision and, in its reduced form, said provision shall then be enforceable.

(g) Seller recognizes that the obligations of HFSG and its controlled Affiliates under this Section 8.4 are special, unique and extraordinary in character and that, in the event of any actual violation of any provision of this Section 8.4, Buyer shall be entitled to institute and prosecute proceedings in any court of competent jurisdiction, either in law or in equity, to obtain damages for any actual violation, enforce the specific performance and/or enjoin any actions in violation of this Section 8.4.

Section 8.5 Covenants Not to Solicit Employees.

(a) During the twenty-four (24) month period following the Closing Date, HFSG shall not,
and shall cause its Affiliates not to, without Buyer’s prior written consent, directly or indirectly, solicit for employment or for an independent contractor relationship or hire or enter into an independent contractor relationship with any Transferred Employee unless such Person has not been employed by Buyer or its Affiliates for a period of at least three (3) months prior to such solicitation or such Person’s employment has been terminated by Buyer or its Affiliates (independent of any action of HFSG or its Affiliates) prior to such solicitation; provided, that this Section 8.5(a) shall not prohibit HFSG or its Affiliates from employing or hiring or entering into an independent contractor relationship with any Person who contacts HFSG or any of its Affiliates on his or her own initiative without direct solicitation or as a result of general solicitations for employment or independent contractor relationships through advertisements or other means that are not personally directed at any such Person.

(b) During the twenty-four (24) month period following the Closing Date, Buyer shall not,
and shall cause its Affiliates not to, without Seller’s prior written consent, directly or indirectly, solicit for employment or for an independent contractor relationship or hire or enter into an independent contractor relationship with any employee of Seller or its Affiliates who provides transition services to Buyer in connection with the Business pursuant to the Transition Services Agreement unless such Person has not been employed by Seller or its Affiliates for a period of at least three (3) months prior to such solicitation or such Person’s employment has been terminated by Seller or its Affiliates (independent of any action of Buyer or its Affiliates) prior to such solicitation; provided, that this Section 8.5(b) shall not prohibit Buyer or its Affiliates from employing or hiring or entering into an independent contractor relationship with any Person who contacts Buyer or any of its Affiliates on his or her own initiative without direct solicitation or as a result of general solicitations for employment or independent contractor relationships through advertisements or other means that are not personally directed at any such Person.

Exhibit 2.02

(c) The Parties acknowledge that the covenants set forth in this Section 8.5 are an essential
element of this Agreement and that, but for these covenants, the Parties would not have entered into this Agreement. The Parties to this Agreement acknowledge that this Section 8.5 constitutes an independent covenant and shall not be affected by performance or nonperformance of any other provision of this Agreement or any Ancillary Agreement by the Parties.

(d) The Parties acknowledge that the type and periods of restriction imposed in the
provisions of this Section 8.5 are fair and reasonable and are reasonably required for the protection of the Parties. If any of the restrictions or covenants in this Section 8.5 are hereafter construed to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid portions. If any of the restrictions or covenants contained in this Section 8.5, or any portion thereof, are deemed to be unenforceable because such covenant or restriction is held to cover a geographic area or to be of such duration as is not permitted under Applicable Law, the Parties agree that the court making such determination shall have the power to reduce the duration and/or areas of such provision and, in its reduced form, said provision shall then be enforceable.

(e) Each Party recognizes that its obligations under this Section 8.5 are special, unique and
extraordinary in character and that, in the event of any actual violation of any provision of this Section 8.5, the other Party shall be entitled to institute and prosecute proceedings in any court of competent jurisdiction, either in law or in equity, to obtain damages for any actual violation, enforce the specific performance and/or enjoin any actions in violation of this Section 8.5.

Section 8.6 Confidentiality.

(a) The Parties agree that the provisions related to confidentiality and, except as
contemplated hereby, non-solicitation under the Confidentiality Agreement are incorporated by reference herein and shall continue in full force and effect until the Closing. From and after the Closing, all of the obligations of Buyer under the Confidentiality Agreement shall terminate.

(b) From and after the Closing Date, Buyer shall hold, and shall cause its Affiliates and
each of its and their respective Representatives to hold in confidence, and not use for any purpose other than as contemplated by this Agreement (including Section 8.10(b)) or any Ancillary Agreement, any confidential information received from Seller, its Affiliates or Seller’s Representatives in connection with the transaction contemplated by this Agreement (excluding the Business Records transferred pursuant to Section 8.10(a), but including any records comingled with such records that should not have transferred pursuant to Section 8.10(a)), other than as required by Applicable Law.

(c) From and after the Closing Date and until the time of any recapture under the
Reinsurance Agreements, Seller shall hold, and shall cause its Affiliates and each of its and their respective Representatives to hold in confidence, and not use for any purpose other than as contemplated by this Agreement (including Section 8.10(b)) or any Ancillary Agreement, any confidential information received from Buyer, its Affiliates or Seller’s Representatives in connection with the transaction contemplated by this Agreement or contained in the Business Records transferred pursuant to Section 8.10(a), other than as required by Applicable Law. To the extent any Business Record is an Acquired Asset, Seller and its Affiliates and their respective Representatives shall hold such Business Record in confidence and shall not use such Business Record in a Competing Business after the Closing Date.

(d) If this Agreement is terminated prior to the Closing for any reason, the
Confidentiality Agreement shall nonetheless continue in full force and effect in all respects in accordance with its terms.

Exhibit 2.02

Section 8.7 Further Action.

(a) Prior to Closing, upon the terms and subject to the conditions of this Agreement, each
Party shall use, and cause its Affiliates to use, commercially reasonable efforts to promptly take, or cause to be taken, all actions, and to do, or cause to be done, and to cooperate with the other Party in doing, all things necessary, proper or advisable to cause the conditions to the Closing to be satisfied and to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements as promptly as practicable. Subject to Section 7.4(b)(ii) and Section 7.5, from and after the Closing Date, each of the Parties shall execute and deliver such documents, instruments of conveyance and transfer and other papers and take such further actions as may reasonably be required or appropriate from time to time to carry out the provisions of this Agreement and the Ancillary Agreements and give effect to the transactions contemplated hereby and thereby. Without limiting the foregoing but subject to Section 7.4(b)(ii) and Section 7.5, from and after the Closing Date (a) Seller shall, and shall cause its Affiliates to, do all things necessary, proper or advisable under Applicable Law as reasonably requested by Buyer to put Buyer in effective possession, ownership and control of the Acquired Assets, and Buyer shall cooperate with Seller for such purpose, and (b) Buyer shall, and shall cause its Affiliates to, do all things necessary, proper or advisable under Applicable Law as reasonably requested by Seller to assure that Buyer, rather than Seller or any of its Affiliates, is the obligor in respect of, and is responsible for performing, all Assumed Liabilities (other than Excluded Liabilities), including, so long as the Transition Services Agreement remains in effect, by novating any Transferred Contract to Buyer, and Seller shall cooperate with Buyer for such purposes; provided, that, except as provided in Section 7.4 or Section 7.5, neither Party shall be required to compromise any right, asset or benefit or expend any amount or incur any Liabilities, make any accommodations or provide any other consideration (other than as contemplated hereby) in order to obtain any Governmental Consent or Third-Party Consent to the transfer of the Acquired Assets or the assumption of Assumed Liabilities. Subject to Section 7.4(b)(ii) and Section 7.5, if any Acquired Asset is not conveyed to Buyer as of the Effective Time, such Acquired Asset shall be conveyed to Buyer, free and clear of all Encumbrances other than Permitted Encumbrances, immediately upon Seller becoming aware, or Buyer notifying Seller, that such Acquired Asset was not conveyed as of the Effective Date.

(b) To the extent any asset, property or right (other than (i) any Contract, (ii) any
Excluded Asset, (iii) any Acquired Asset which is transferred to Buyer and its Affiliates at Closing or (iv) any asset, property or right that is otherwise made available to Buyer and its Affiliates as contemplated in Section 7.4(b)(ii) or otherwise pursuant to this Agreement or any Ancillary Agreement to the extent such asset is not so transferred to Buyer and its Affiliates at Closing) is used or held for use to conduct the Business as of June 30, 2012 and such asset, property or right is reasonably required or necessary for the conduct by Buyer and its Affiliates after the Closing of the Business as conducted as of June 30, 2012 by Seller and its Affiliates, Seller shall make the benefits of such asset, property or right available to Buyer and its Affiliates, pursuant to the Transition Services Agreement or pursuant to an alternative arrangement for a period of two years commencing on the Closing Date.

Section 8.8 HESCO Licensing; Transitioning.

(a) Until the completion of the transition of all the principal underwriting functions to a

duly-licensed Affiliate of Buyer as contemplated below, Seller shall cause HESCO or any other of its Affiliates who is a principal underwriter for the Covered Insurance Policies, at all times when performing its functions with respect to the Business, to be registered as a securities broker-dealer in good standing with the SEC and FINRA and licensed or registered as a securities broker-dealer in the states and other local jurisdictions that require such licensing or registration on connection with Covered Insurance Policies sales activities.

Exhibit 2.02

(b) Following the Closing and prior to the date that is eighteen months following

Closing, Buyer shall cause the principal underwriting function of HESCO or any other Affiliate of Seller who is a principal underwriter for the Covered Insurance Policies, to the extent related to the Covered Insurance Policies, to transfer to a duly-licensed Affiliate of Buyer in accordance with Applicable Law as soon as reasonably practicable. Between the Closing Date and the date of the completion of such transition, Seller shall cause HESCO and any other of its Affiliates who is a principal underwriter for the Covered Insurance Policies to continue performing principal underwriter functions for the Business in accordance with past practices. Seller shall cooperate with Buyer in connection with the transfer contemplated by this Section 8.8(b).

Section 8.9 Ancillary Agreements. On the Closing Date, Buyer shall, and shall cause

each Buyer Party to, and Seller shall, and shall cause each Seller Party to, execute and deliver each of the Ancillary Agreements to which it is a party if such Ancillary Agreement has not been executed on the date hereof.

Section 8.10 Transfer and Maintenance of Books and Records.

(a) At the Closing, all Business Records exclusively or primarily related to the Business and
located on the Business Premises or any of the other premises set forth in Section 5.9(a) of the Business Disclosure Schedules (excluding the Business Records listed in Section 8.10(a) of the Business Disclosure Schedule) shall be transferred to Buyer by possession of such premises. All other Business Records exclusively or primarily related to the Business (excluding the Business Records listed in Section 8.10(a) of the Business Disclosure Schedule) shall be transferred to Buyer as provided in the Transition Services Agreement.

(b) After the Closing, each of the Parties shall, and shall cause its respective Affiliates to,
preserve, until such date as may be required by such Party’s standard document retention policies (or such later date as may be required by Applicable Law), all pre-Closing Date records to the extent related to the Business possessed or to be possessed by such Person or to which such Person has access rights (including, in the case of Seller and its Affiliates, all Business Records not transferred to Buyer as provided in Section 8.10(a)). During such period, upon any reasonable request from a Party or its Representatives, the Party holding such records shall (a) provide to the requesting Party, its Affiliates or its authorized Representatives reasonable access to such records during normal business hours; provided, that such access shall not unreasonably interfere with the conduct of the business of the Party holding such records, and (b) permit the requesting Party or its Representatives to make copies of such records, in each case, at no cost to the requesting Party or its Representatives (other than for reasonable out-of-pocket expenses). Nothing herein shall require either Party to disclose any information to the other if such disclosure would jeopardize any attorney-client privilege, the work product immunity or any other legal privilege or similar doctrine or contravene any Applicable Law, Court Order, Regulatory Agreement or agreement (including any confidentiality agreement to which the disclosing Party or any of its Affiliates is a party) (it being understood that the disclosing Party shall use commercially reasonable efforts to obtain waivers or make other arrangements (including redacting information or entering into joint defense agreements) that would enable otherwise required disclosure to the requesting Party or its Representatives to occur without so jeopardizing privilege or contravening such Applicable Law, Court Order, Contract, duty or agreement) or (except as provided in Section 12.2(c)) require either Party to disclose its Tax records or any personnel or related records. Such records may be sought under this Section 8.10 for any reasonable purpose, including to the extent reasonably required in connection with accounting, litigation, federal securities disclosure or other similar purpose (other than for purposes relating to claims between Seller and Buyer or any of their respective Affiliates under this Agreement or any Ancillary Agreement). Notwithstanding the foregoing, any and all such records may be destroyed by a Party if such destroying party sends to the other Party hereto written notice of its intent to destroy such records, specifying in

Exhibit 2.02

reasonable detail the contents of the records to be destroyed; such records may then be destroyed after the sixtieth (60th) day following such notice unless the other Party notifies the destroying Party that such other Party desires to obtain possession of such records, in which event the destroying Party shall transfer the records to such requesting Party and such requesting Party shall pay all reasonable expenses of the destroying Party in connection therewith.

Section 8.11 Reserved.

Section 8.12 Post-Closing Receipts. To the extent that, after the Closing, (a) Buyer or

any of its Affiliates receives any mail for Seller or its Affiliates, or any payment or instrument that is for the account of Seller or any of its Affiliates according to the terms of this Agreement or any Ancillary Agreement, Buyer shall promptly deliver such mail, amount or instrument to Seller, and (b) Seller or any of its Affiliates receives any mail for Buyer or its Affiliates, or any payment or instrument that is for the account of Buyer or any of its Affiliates according to the terms of this Agreement or any Ancillary Agreement, Seller shall promptly deliver such mail, amount or instrument to Buyer.

Section 8.13 Existing Reinsurance Agreements

(a) Prior to the Closing, Seller shall cause the applicable Cedants to terminate the Existing
Reinsurance Agreements set forth on Section 8.13(a) of the Business Disclosure Schedule and to recapture in full the liabilities ceded thereunder in respect of such business. Seller shall bear all costs and expenses with respect to the termination and recapture of the Existing Reinsurance Agreements set forth on Section 8.13(a) of the Business Disclosure Schedule.

(b) Prior to Closing, Seller shall use Consent Efforts to obtain the Third-Party Consents listed
on Section 8.13(b) of the Business Disclosure Schedule. Seller shall bear all costs and expenses with respect to the termination and recapture of the Existing Reinsurance Agreements set forth on Section 8.13(b) of the Business Disclosure Schedule.

(c) Seller shall use Consent Efforts, with Buyer’s cooperation, to cause the applicable Cedant
to novate and assign all of its rights and obligations under the Existing Reinsurance Agreements listed in Section 8.13(c) of the Business Disclosure Schedule to which such Cedant is a party to Reinsurer by June 30, 2013 and to obtain any endorsements from the reinsurers or Underlying Companies thereunder, as applicable, to the extent necessary to ensure that Reinsurer is entitled to enforce such Existing Reinsurance Agreements against the reinsurers or Underlying Companies thereunder, as applicable, in its own name. The first $400,000 of aggregate administrative or similar costs and attorney’s or other advisors’ fees associated with obtaining the Third-Party Consents required for such novations shall be borne fifty percent (50%) by Buyer and fifty percent (50%) by Seller and any other costs and expenses in excess of $400,000 shall be borne exclusively by Seller, it being understood that neither Party shall be required to expend any amount in order to obtain any such Third-Party Consent in excess of such Party’s share of such costs as described in this Section 8.13(c).

(d) Prior to Closing, the Parties shall use their Consent Efforts to obtain any Third-Party
Consents, including any waivers of minimum retention requirements, that are required under Existing Reinsurance Agreements (or any ancillary agreements related thereto) in order to permit the reinsurance of the Covered Insurance Policies as contemplated by the Reinsurance Agreements. Seller shall bear all costs and expenses associated with obtaining the Third-Party Consents required by this Section 8.13(d). If in connection with seeking any such Third-Party Consents, any Existing Reinsurance Agreement is terminated or recaptured not at the direction or with the consent of Buyer or its Affiliates, then Buyer and its Affiliates shall not be responsible for any related termination fees, recapture fees or any similar fees arising from the termination or recapture of any such Existing Reinsurance Agreement. If the Parties

Exhibit 2.02

reasonably determine that a Third-Party Consent required to be obtained under this Section 8.13(d) is not likely to be obtained, then the Parties will negotiate in good faith the proposed treatment of the relevant Existing Reinsurance Agreement, including the possibility of terminating, recapturing or novating the same; provided, that Buyer shall not be required to accept any alternative arrangement that adversely affects the benefits reasonably expected to be derived by Buyer from such Existing Reinsurance Agreement.

Section 8.14 Bulk Sales. Buyer hereby waives compliance by Seller and its Affiliates with any applicable bulk sale or bulk transfer laws of any jurisdiction in connection with the transfer of the Acquired Assets to Buyer pursuant to this Agreement.

Section 8.15 Deletion of Software. In the event that after the Closing Buyer becomes

aware of any instance of any Software in its possession for which Seller or any of Seller’s Affiliates own the intellectual property rights and that is not licensed to Buyer, Buyer shall use commercially reasonable efforts to delete such instances of the Software as soon as practicable.

Section 8.16 Residual Information.

(a) Notwithstanding the confidentiality obligations set forth in Section 8.6 or anything
else set forth in this Agreement to the contrary, from and after the Effective Date (a) Seller and its Affiliates may use, and Buyer hereby grants and shall cause its Affiliates to grant to Seller and its Affiliates a license to use, in their businesses for any and all purposes the Trade Secrets and other ideas, know-how, techniques and confidential information included in the Transferred Owned Intellectual Property and (b) Buyer and its Affiliates may use, and Seller hereby grants and shall cause its Affiliates to grant to Buyer and its Affiliates a license to use, in their business for any and all purposes the Trade Secrets and other ideas, know-how, technique and confidential information of Seller and its Affiliates that, in the case of each of (a) and (b), are retained in the unaided memories ( i.e. , without conscious memorization or subsequent reference to any material which is written or stored in electronic or physical form) of personnel of Seller and its Affiliates and of any Transferred Employees, respectively (the “Residual Information”) who have had access to the Residual Information prior to the Closing Date; provided, that no license is hereby granted to Seller and its Affiliates to any Patents or Copyrights included in the Transferred Owned Intellectual Property and no license is hereby granted to Buyer and its Affiliates, except as set forth above, to any Intellectual Property Rights of Seller and its Affiliates. For the avoidance of doubt, Buyer and its Affiliates and Seller and its Affiliates shall have no obligation to provide any Residual Information or embodiments thereof to Seller or its Affiliates or Buyer and its Affiliates respectively.

(b) Seller hereby grants and causes its Affiliates to grant to Buyer, and Buyer hereby
accepts, a royalty-free, non-exclusive, perpetual right and license to use, solely in connection with the Business, all Copyrights, Patents, Trade Secrets and Software owned by Seller or one of its Affiliates and used by the Business that is not an Acquired Asset and that is not otherwise licensed to Buyer pursuant to an Ancillary Agreement. Buyer may not assign, directly, indirectly, or by operation of law, the rights under this Section 8.16(b), without prior written consent of Seller (such consent not to be unreasonably withheld, conditioned or delayed), except that Buyer may assign or sublicense its rights and obligations hereunder, in whole or in part, without Seller’s consent, to (a) any of its Affiliates or (b) any acquirer (each, an “Acquirer”) of any divested (by asset sale, stock sale, merger, spin-off or otherwise) business of Buyer (each, a “Divested Business”); provided, that, with respect to the assignment or sublicense to an Acquirer: (i) the assignment or sublicense will only be for the field of the activities of the applicable Divested Business as they exist as of the date of such Acquirer’s acquisition of the Divested Business, and any natural extensions thereof, but in no event outside the Business; and (ii) the assignment or

Exhibit 2.02

sublicense will in no event extend to the business or activities of such Acquirer or any of its Affiliates other than the acquired Divested Business.

Section 8.17 Discovered Policies. After the date hereof and until the termination of

the applicable Reinsurance Agreement, in the event that Seller or its Affiliates discover (i) any binders, endorsements, riders, policies, certificates, or contracts of individual life insurance, or supplementary contracts of individual life insurance issued, renewed or assumed by any Cedant that would have been a Covered Insurance Policy but for not having been reflected or otherwise taken into account in the Closing Statement of General Account Net Settlement (“Discovered Policies”), then the Parties will negotiate in good faith either to have Buyer or its Affiliates acquire such Discovered Policies in a reinsurance transaction or administer such Discovered Policies on Seller’s or its Affiliate’s behalf; it being agreed and acknowledged that Buyer will not unreasonably refuse to assume (or cause an Affiliate to assume) the administration of any Discovered Policies on commercially reasonable terms.

Section 8.18 Investment Assets with a Payment Default. At least ten (10) Business

Days prior to Closing, Seller shall deliver to Buyer a list of any of the Investment Assets and Modco Assets that had suffered an uncured default of payment of principal or interest or dividends as of the last day of the calendar month immediately preceding the month in which the Closing Date occurs (or, in the event that the Closing Date is January 2, 2013, as of November 30, 2012). In such event, Seller shall replace prior to Closing any of such Investment Assets or Modco Assets with other assets meeting the requirements of the Investment Guidelines (and that is not then subject to an uncured default of payment of principal or interest or dividends). Within thirty (30) Business Days following the Closing, Seller shall deliver to Buyer a list of any of the Investment Assets or Modco Assets included in the Estimated Eligible Asset list (or, in the case of the Modco Assets, retained by the Cedant) that had suffered an uncured default of payment of principal or interest or dividends as of the Effective Time. In such event, Seller shall, at Buyer’s request made within ten (10) Business Days of the delivery of such list, replace any of such Investment Assets or Modco Assets with other assets meeting the requirements of the Investment Guidelines (and that is not then subject to an uncured default of payment of principal or interest or dividends) having an equal aggregate Statutory Book Value and, in the case of the replacement of Investment Assets, amend the Estimated Eligible Asset list with such replacement.

Section 8.19 AG-38 Cooperation. In the event that the application of guidelines or

regulations under Section 8D of AG-38 to the Business or a change in such guidelines or regulations results in additional statutory reserves in excess of the basic and deficiency reserves, in each case, calculated as of the Closing Date determined by Seller according to the reserve methodology and assumptions used by Seller for the statutorily-reported reserve for the Business assuming the application of AG-38 as of December 31, 2011 (as such guidelines or regulations were in effect as of such time), Seller shall reimburse Buyer for the after-tax net economic impact on Buyer and its Affiliates of such additional reserves (treating such increase as non-economic reserves for the purposes of determining such impact) (the "AG-38 Cost"); provided, however, that to the extent the increase in statutory reserves results from a change in the guidelines or regulations under Section 8D of AG-38 from the proposed guidelines or regulations existing as of the date hereof, Seller shall only be responsible for fifty percent (50%) of the AG-38 Cost. Buyer and Seller shall jointly work in good faith to determine the AG-38 Cost.

Section 8.20 Specified Action. The Parties agree that the Specified Action shall be handled

as provided in Section 8.20 of the Business Disclosure Schedule.

Section 8.21 Group Conversion Retrocession Agreement. In connection with the

adjustment of premium rates pursuant to the terms of the Group Conversion Retrocession Agreement,
Buyer and Seller shall cause their respective Affiliates that are parties to the Group Conversion
Retrocession Agreement to set revised rates using a methodology that replicates the net economics (i.e

Exhibit 2.02

breakeven to the retrocedent) reflected in Schedule 8.21 of the Business Disclosure Schedule based on the Group Conversion Policies’ actual experience as measured by the prior annual period.

ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER

The obligations of Buyer under this Agreement to consummate the Closing shall be subject to the satisfaction or waiver (by Buyer), on or prior to the Closing Date, of the following conditions; provided, that Buyer may not rely on the failure of any condition set forth in this Article IX to be satisfied if such failure was caused by a breach of this Agreement by Buyer:

Section 9.1 No Misrepresentation or Breach of Covenants and Warranties.

(a) Each of the covenants and agreements of Seller set forth in this Agreement to be performed on or prior to the Closing shall have been performed in all material respects.

(b) (i) Each of the representations and warranties of Seller contained in Section 4.1, Section 4.2 and Section 5.17 shall be true and correct on and as of the date of this Agreement and on and as of the Closing Date; (ii) the representations and warranties of Seller contained in Section 5.2(a) and Section 5.8 shall be true and correct (without regard to any references to “material” or “Material Adverse Effect” or any other materiality qualifier) in all material respect in the aggregate on and as of the date of this Agreement and on and as of the Closing Date; and (iii) each of the other representations and warranties of Seller contained in Article IV and Article V shall be true and correct (without regard to any references to “material” or “Material Adverse Effect” or any other materiality qualifier) on and as of the date of this Agreement and on and as of the Closing Date (except for such representations and warranties that are made as of a specific date, which shall speak only as of such date), except where the failure of any such representations and warranties referenced in clause (iii) to be true and correct has not had, and is not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Seller or the Business.

(c) Seller shall have delivered to Buyer a certificate, dated the Closing Date and signed on behalf of Seller by a duly authorized officer, certifying the satisfaction of the conditions in Section 9.1(a) and Section 9.1(b) (which certificate shall not impose any personal liability on such officer).

Section 9.2 Governmental Consents. All Governmental Consents set forth in

Section 9.2 of the Buyer Disclosure Schedule shall have been obtained or the applicable waiting period in respect thereof shall have expired or been terminated without disapproval thereof, and shall not include, require, result in or have the effect of any Material Negative Condition for Buyer.

Section 9.3 No Restraint. No Court Order shall have been issued by any court of

competent jurisdiction and be in effect, and no Action shall have been instituted by any Governmental Body, in each case, that restrains or prohibits the Closing or the transactions contemplated by this Agreement or the Ancillary Agreements.

Section 9.4 No Material Adverse Effect. Since the date of this Agreement, there

shall not have occurred any Material Adverse Effect with respect to the Business that is continuing as of the Closing Date.

Exhibit 2.02

Section 9.5 Recapture of Certain Existing Reinsurance Agreements. The applicable

Cedant shall have terminated the Existing Reinsurance Agreements listed on Schedule 8.13(a) of the Business Disclosure Schedule and shall have recaptured in full all liabilities thereunder in respect of such Business.

Section 9.6 Third-Party Consents. (a) All Third-Party Consents set forth in Section

8.13(b) of the Business Disclosure Schedule shall have been obtained as of the Closing Date and (b) all Third-Party Consents set forth in Section 9.6 of the Buyer Disclosure Schedule shall have been obtained or Seller shall have made necessary arrangements in accordance with Sections 7.4(b) or 7.5(c) as applicable, so that Buyer or one of its Affiliates has the benefits of such Contracts or reasonably acceptable replacements as of the Closing Date.

ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

The obligations of Seller under this Agreement to consummate the Closing shall be subject to the satisfaction or waiver (by Seller), on or prior to the Closing Date, of the following conditions; provided, that Seller may not rely on the failure of any condition set forth in this Article X to be satisfied if such failure was caused by a breach of this Agreement by Seller:

Section 10.1 No Misrepresentation or Breach of Covenants and Warranties.

(a) Each of the covenants and agreements of Buyer set forth in this Agreement to be
performed on or prior to the Closing shall have been performed in all material respects.

(b) (i) Each of the Specified Warranties of Buyer shall be true and correct on and as of the
date of this Agreement and on and as of the Closing Date; and (ii) each of the other representations and warranties of Buyer in Article VI shall be true and correct (without regard to any references to “material” or “Material Adverse Effect” or any other materiality qualifier) on and as of the date of this Agreement and on and as of the Closing Date (except for such representations and warranties that are made as of a specific date, which shall speak only as of such date), except where the failure of any such representations and warranties referenced in clause (ii) to be true and correct has not had, and is not reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

(c) Buyer shall have delivered to Seller a certificate, dated the Closing Date and signed on
behalf of Buyer by a duly authorized officer, certifying the satisfaction of the conditions in Section 10.1(a) and Section 10.1(b) (which certificate shall not impose any personal liability on such officer).

Section 10.2 Governmental Consents. All Governmental Consents set forth in Section 10.2(a) of the Seller Disclosure Schedule shall have been obtained or the applicable waiting period in respect thereof shall have expired or been terminated without disapproval thereof, and shall not include, require, result in or have the effect of any Material Negative Condition for Seller.

Section 10.3 No Restraint. No Court Order shall have been issued by any court of competent jurisdiction and be in effect, and no Action shall have been instituted by any Governmental Body, in each case, that restrains or prohibits the Closing or the transactions contemplated by this Agreement or the Ancillary Agreements.

Exhibit 2.02

Section 10.4 No Triggering Event. Since the date of this Agreement, there shall not have occurred any event that, assuming the Reinsurance Agreements were in force, would constitute a Triggering Event or Recapture Triggering Event that is continuing as of the Closing Date (without regard to any applicable cure period provided for in the Reinsurance Agreements).

ARTICLE XI
INDEMNIFICATION

Section 11.1 Indemnification; Remedies.

(a) From and after the Closing, Seller shall indemnify, defend and hold harmless Buyer, its

Affiliates, authorized Representatives and their respective employees, officers and directors and their respective successors and permitted assignees (collectively the “Buyer Indemnified Persons”) from and against and pay and reimburse all Losses imposed on, sustained, incurred or suffered by any of the Buyer Indemnified Persons resulting from, arising out of or relating to (whether or not arising from a Third-Party Claim):

(i) any breach by Seller of any of Seller’s representations and warranties contained in this Agreement (other than any breach of the representations and warranties contained in Section 5.6 or Sections 5.19(e) – (n), which shall be subject to indemnification in accordance with Section 12.4(a)) without regard to any qualifications or references to “Material Adverse Effect”, “material” or any other materiality qualifications or references contained in any specific representation or warranty (other than as contained in Section 5.4, Section 5.12(a)(vii), Section 5.12(a)(x), Section 5.12(a)(xi), Section 5.12(a)(xii) or Section 5.12(a)(xiv);

(ii) any breach by Seller of its covenants or agreements contained in this Agreement (other than any breach of the covenants contained in Article XII, which shall be subject to indemnification in accordance with Article XII), the Bill of Sale or the Assignment and Assumption Agreement;

(iii) any Excluded Liabilities (other than Taxes that constitute Excluded Liabilities, or Losses attributable to Product Tax Non-Compliance, which shall be subject to indemnification in accordance with Article XII); or

(iv) any matter listed in Schedule 11.1(a)(iv) of the Business Disclosure Schedule.

(b) From and after the Closing, Buyer shall indemnify, defend and hold harmless Seller, its

Affiliates, Authorized Representatives and their respective employees, officers and directors and their respective successors and permitted assignees (collectively the “Seller Indemnified Persons”) from and against and pay and reimburse all Losses imposed on, sustained, incurred or suffered by any of the Seller Indemnified Persons resulting from, arising out of or relating to (whether or not arising from a Third-Party Claim):

(i) any breach by Buyer of any of Buyer’s representations and warranties contained

in this Agreement without regard to any qualifications or references to “Material Adverse Effect”, “material” or any other materiality qualifications or references contained in any specific representation or warranty;

Exhibit 2.02

(ii) any breach by Buyer of its covenants or agreements contained in this Agreement (other than any breach of the covenants contained in Article XII, which shall be subject to indemnification in accordance with Section 12.4(b)), the Bill of Sale or the Assignment and Assumption Agreement; or

(iii) any Assumed Liabilities.

Section 11.1(b), respectively, shall be subject to each of the following limitations:

(i) With respect to indemnification for Losses arising out of any breach of any

representation or warranty contained in this Agreement (other than (A)(x) with respect to Seller, Section 4.1, Section 4.2(a), Section 5.2(a), Section 5.8(b) and Section 5.17, and (y) with respect to Buyer, Section 6.1, Section 6.2(a), Section 6.9, Section 6.10 and Section 6.11 (each such Seller or Buyer representation or warranty, a “Specified Warranty”), which shall survive the Closing Date indefinitely and (B) Section 5.1(f), which shall survive for three (3) years after the Closing), such obligation to indemnify shall terminate eighteen (18) months after the Closing Date unless, before such date, Seller or Buyer, as applicable, has provided the other Party with an applicable Claim Notice;

(ii) Except with respect to any Specified Warranty, there shall be no obligation to

indemnify, with respect to Seller, under Section 11.1(a)(i) or, with respect to Buyer, under Section 11.1(b)(i):

(A) for any claim (or series of related claims arising from the same underlying facts, events or circumstances) where the Losses relating thereto are less than $50,000 (it being understood that Losses relating to such claim (or series of related claims arising from the same underlying facts, events or circumstances) shall not be aggregated for purposes of the immediately following clause (B));

(B) unless the aggregate of all Losses for which, but for this clause (B), Seller would be liable under Section 11.1(a)(i) or Buyer would be liable under Section 11.1(b)(i), as applicable, exceeds on a cumulative basis an amount equal to $8,000,000, and then only to the extent of such excess; and

(iii) Notwithstanding anything contained in this Agreement to the contrary, in the

event that any fact, event or circumstance results in payment to Reinsurer of a Reinsurance Settlement Amount pursuant to Section 2.3(e), and such fact, event or circumstance would also constitute a breach of or inaccuracy in any of Seller’s representations or warranties under this Agreement, Seller shall have no obligation to indemnify any Buyer Indemnified Person with respect to such breach or inaccuracy to the extent of such Reinsurance Settlement Amount; and

(iv) Each Loss (including Taxes or Losses subject to indemnification pursuant to

Article XII) shall be reduced by (A) the net amount of any insurance proceeds received by Buyer or any Buyer Indemnified Person or Seller or any Seller Indemnified Person, as the case may be, with respect to such Loss (calculated net of any out-of-pocket expenses incurred by such Indemnified Party in collecting such amount; provided, that, subject to Section 8.2, nothing in this Section 11.1(c)(iv) shall obligate either Party to maintain any insurance); (B) the net amount of any indemnity payment, contribution or other similar payment Buyer or any Buyer Indemnified

Exhibit 2.02

Person or Seller or any Seller Indemnified Person, as the case may be, actually received from any third party not affiliated with such Indemnified Party with respect to such Loss; and (C) an amount equal to the net amount of any reduction of Taxes attributable to such Loss that is actually realized by the Indemnified Party (or, in the case of consolidated, combined or unitary Taxes, by the Affiliated Group of which the Indemnified Party is a member) in the taxable year in which the Loss is incurred. Each Loss shall be increased by the net amount of any increase of Taxes attributable to the receipt of any indemnification payment with respect to such Loss (including Taxes attributable to the increase in the indemnification payment pursuant to this sentence) that is actually incurred by the Indemnified Party (or, in the case of consolidated, combined or unitary Taxes, by the Affiliated Group of which the Indemnified Party is a member) in the taxable year in which the payment is received or accrued.

(d) In connection with the indemnity in Section 11.1(a)(iv) with respect to microfiche, Seller
shall have the right to remediate the Business Records on Seller’s premises at its expense and in a manner that does not materially interfere with Buyer’s use and deliver such Business Records to Buyer following such remediation.

(e) Except as expressly provided herein, this Section 11.1 shall not apply with respect to
indemnification for Losses relating to Taxes or the Product Tax IT and Administration, which shall be subject to indemnification in accordance with Article XII.

Section 11.2 Notice of Claim; Defense.

(a) If (i) any non-affiliated third party or Governmental Body institutes or asserts any Action that may give rise to Losses for which a Party (an “Indemnifying Party”) may be liable for indemnification under this Article XI (a “Third-Party Claim”) or (ii) any Person that may be entitled to indemnification under this Agreement (an “Indemnified Party”) desires to make a claim not involving a Third-Party Claim to be indemnified by an Indemnifying Party, then the Indemnified Party shall promptly send to the Indemnifying Party a written notice specifying the nature of such claim and a good faith estimate of the amount of all related Losses to the extent they are ascertainable (a “Claim Notice”). The Indemnifying Party shall not be relieved from any of its indemnification obligations under this Article XI as a result of a failure of the Indemnified Party to provide a Claim Notice except to the extent that it is prejudiced by such failure, it being understood that Claim Notices in respect of a breach of a representation or warranty must be delivered prior to the expiration of any applicable survival period specified in Section 11.1(c)(i) for such representation or warranty; provided, that if, prior to such applicable date, the Indemnified Party shall have notified the Indemnifying Party in accordance with the requirements of this Section 11.2(a) of a claim for indemnification under this Article XI (whether or not formal legal action shall have been commenced based upon such claim), such claim shall continue to be subject to indemnification in accordance with this Article XI notwithstanding the passing of such applicable date.

(b) The Indemnifying Party may, by notice delivered within twenty (20) Business Days of the receipt of a Claim Notice with respect to a Third-Party Claim, assume the defense and control of such Third-Party Claim (at the expense of such Indemnifying Party). The Indemnified Party may take any actions reasonably necessary to defend any Third-Party Claim prior to the time that it receives notice from the Indemnifying Party as contemplated by the preceding sentence. The Indemnifying Party shall not be entitled to assume or maintain control of the defense of any Third-Party Claim and shall pay the reasonable fees and expenses of counsel retained by the Indemnified Party if (i) the Third-Party Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation against the Indemnified Party or (ii) the Third-Party Claim would reasonably be expected to result in an injunction or equitable relief against the Indemnified Party or the Business that would, in each

Exhibit 2.02

case, have a material effect on the operation of the business of such Indemnified Party or any of its Affiliates or the operation of the Business.

(c) Subject to Section 11.2(b), in the event of a Third-Party Claim, if the Indemnifying Party assumes the defense of a Third-Party Claim, the Indemnifying Party may elect to retain counsel reasonably acceptable to the Indemnified Parties to represent such Indemnified Parties in connection with such Action and shall pay the fees, charges and disbursements of such counsel. Subject to Section 11.2(b), if the Indemnifying Party so elects, the Indemnified Parties may participate, at their own expense and through legal counsel of their choice, in any such Action; provided, that (i) the Indemnifying Party shall control the defense of the Indemnified Parties in connection with such Action and (ii) the Indemnified Parties and their counsel shall reasonably cooperate with the Indemnifying Party and its counsel in connection with such Action. To the extent such action can be taken in a way that does not unreasonably jeopardize the attorney-client privilege: (i) the Indemnified Party’s right to participate in the defense of any Action shall include the right to attend all significant internal meetings, all meetings with representatives of plaintiffs, hearings and the like; and (ii) counsel for a Indemnified Party also shall be given a reasonable opportunity to comment upon all memoranda of law, pleadings and briefs and other documents relating to the Third-Party Claim, and the Indemnifying Party and its counsel shall give reasonable consideration to the comments of counsel for the Indemnified Party. The Indemnifying Party shall not settle any such Action without the relevant Indemnified Parties’ prior written consent, unless the terms of such settlement (A) provide for no relief other than the payment of monetary damages and do not result in a material increase to the cost of administering the Business under any of the Administrative Services Agreements for which Buyer or its Affiliate does not get compensated, (B) involve no finding or admission of any breach or violation by any Indemnified Party and (C) include an express unconditional release of each Indemnified Party from all Liability arising from such Action. Notwithstanding the foregoing, if the Indemnifying Party does not promptly retain counsel and assume control of such defense, then the Indemnified Parties may retain counsel reasonably acceptable to the Indemnifying Party in connection with such Action and assume control of the defense in connection with such Action. Under no circumstances will the Indemnifying Party have any liability in connection with any settlement of any Action that is entered into without its prior written consent (such consent not to be unreasonably withheld, delayed or conditioned).

(d) From and after the delivery of a Claim Notice involving a Third-Party Claim, at the reasonable request of the Indemnifying Party, each Indemnified Party shall grant the Indemnifying Party and its counsel, experts and Representatives full access, during normal business hours, to the books, records, personnel and properties of the Indemnified Party to the extent reasonably related to such Claim Notice at no cost to the Indemnifying Party (other than for reasonable out-of-pocket expenses of the Indemnified Parties).

(e) In the event any Indemnifying Party receives a Claim Notice from an Indemnified Party that does not involve a Third-Party Claim, the Indemnifying Party shall notify the Indemnified Party within twenty (20) Business Days following its receipt of such notice whether the Indemnifying Party disputes its liability to the Indemnified Party under this Article XI.

(f) If there shall be any conflicts between the provisions of this Section 11.2 and Section 12.2(b) (relating to Tax contests), the provisions of Section 12.2(b) shall control with respect to Tax contests.

Section 11.3 No Duplication; Exclusive Remedy.

(a) Any Liability for indemnification hereunder and under any Ancillary Agreement shall be

determined without duplication of recovery by reason of the same Loss.

Exhibit 2.02

(b) Prior to the Closing, other than in the case of fraud or intentional misrepresentation by
Seller or any of its Affiliates, the sole and exclusive remedy of Buyer for any breach or inaccuracy of any representation or warranty contained in this Agreement or any certificate or instrument delivered hereunder shall be refusal to close the transactions contemplated hereunder in accordance with Sections 9.1(a) or (b) and termination of this Agreement in accordance with Article XIII.

(c) Except with respect to claims alleging fraud and as provided under (i) the provisions of
Sections 2.4 through 2.5, (ii) the provisions of Article XII (relating to Tax matters), (iii) the provisions hereof providing for equitable remedies or (iv) the provisions of any Ancillary Agreement (other than the Bill of Sale and the Assignment and Assumption Agreement), from and after the Closing, the exclusive remedy of Seller, the Seller Indemnified Persons, Buyer and the Buyer Indemnified Persons in connection with this Agreement (and any certificate or instrument delivered hereunder) and the transactions contemplated hereby (whether under this Agreement or arising under Applicable Law) shall be as provided in this Article XI. In furtherance of the foregoing, each of Buyer, on behalf of itself and each other Buyer Indemnified Person, and Seller, on behalf of itself and each other Seller Indemnified Person, hereby waives, from and after the Closing, to the fullest extent permitted under Applicable Law, any and all rights, claims and causes of action (other than claims of, or causes of action arising from, fraud) it may have against Seller or any of its Affiliates or Representatives and Buyer or any of its Affiliates or Representatives, as the case may be, arising under or based upon this Agreement, any certificate or instrument delivered in connection herewith, the Bill of Sale or the Assignment and Assumption Agreement (whether under this Agreement or arising under common law or any other Applicable Law), except (x) pursuant to the indemnification provisions set forth in this Article XI or (y) as provided under (A) the provisions of Sections 2.4 through 2.5, (B) the provisions of Article XII (relating to Tax matters), (C) the provisions hereof providing for equitable remedies or (D) the provisions of any Ancillary Agreement (other than the Bill of Sale and the Assignment and Assumption Agreement).

Section 11.4 Limitation on Set-off. Neither Buyer nor Seller shall have any right to

set off any unresolved indemnification claim pursuant to this Article XI against any payment due pursuant to any Ancillary Agreement.

Section 11.5 Mitigation. Buyer and Seller shall cooperate with each other with

respect to resolving any claim or liability with respect to which one Party is obligated to indemnify the other Party under this Article XI, including by making commercially reasonable efforts to mitigate such claim or liability, to the extent required by Applicable Law.

Section 11.6 Recovery by Indemnified Party.

(b) If any portion of Losses to be reimbursed by the Indemnifying Party pursuant to this Article XI could be recovered from a third party not affiliated with the relevant Indemnified Party (including under any applicable third-party insurance coverage) based on the underlying claim or demand asserted against such Indemnifying Party, then the Indemnified Party shall promptly give notice thereof to the Indemnifying Party and, upon the request of the Indemnifying Party, shall use commercially

Exhibit 2.02

reasonable efforts to collect the maximum amount recoverable from such third party, in which event the Indemnifying Party shall reimburse the Indemnified Party for all reasonable costs incurred in connection with such collection. If any portion of Losses actually paid by the Indemnifying Party pursuant to this Article XI could have been recovered from a third party not affiliated with the relevant Indemnified Party (including under any applicable third-party insurance coverage) based on the underlying claim or demand asserted against such Indemnifying Party, then the Indemnified Party shall transfer, to the extent transferable, such of its rights to proceed against such third party as are necessary to permit the Indemnifying Party to recover from such third party any amount actually paid by the Indemnifying Party pursuant to this Article XI.

Section 11.7 Reserves. Notwithstanding anything to the contrary contained in this

Agreement or any Ancillary Agreement, neither Seller nor any of its Affiliates makes any representation or warranty with respect to, and nothing contained in this Agreement or any Ancillary Agreement is intended or shall be construed to be a representation or warranty (express or implied) of Seller or any of its Affiliates with respect to the adequacy or sufficiency of any of the Reserves with respect to the Business, except as provided in Section 5.6(i).

Section 11.8 Reservation of Rights. Any Indemnified Party shall be an intended third

party beneficiary of the indemnification obligations of Buyer and Seller, respectively, in this Article XI.
Neither Buyer’s nor Seller’s right to indemnity pursuant to this Article XI shall be adversely affected by

(i) any investigation conducted by or on behalf of such party or by any Knowledge of Buyer or by any Knowledge of Seller, as applicable, acquired by or on behalf of such party as a result of such investigation or otherwise, in each case, whether before or after the date of this Agreement or the Closing Date, or

(ii) its waiver of a condition to Closing set forth in Article IX or Article X.

ARTICLE XII
TAX MATTERS

Section 12.1 Transfer Taxes. All Transfer Taxes imposed by any Tax Authority in

connection with this Agreement and any other transactions contemplated hereby shall be borne fifty percent (50%) by Buyer and fifty percent (50%) by Seller. Notwithstanding Section 12.2, which shall not apply to Tax Returns relating to Transfer Taxes, any Tax Returns that must be filed in connection with Transfer Taxes shall be prepared and filed when due by the party primarily or customarily responsible under Applicable Law for filing such Tax Returns, and such party shall provide such Tax Returns to the other party at least ten (10) Business Days prior to the date such Tax Returns are due to be filed. If either party is liable under Applicable Law for payment of such Transfer Taxes, the other party shall pay the amount of its portion of such Transfer Tax to the paying party no later than seven (7) Business Days after receipt of a request for payment from the paying party. Buyer and Seller shall cooperate in the timely completion and filing of all such Tax Returns. Buyer and Seller shall reasonably cooperate to reduce or eliminate such Transfer Taxes to the extent permitted by Applicable Law.

Section 12.2 Tax Returns and Covenants.

(a) Buyer shall prepare and file, or cause to be prepared and filed, all Straddle Tax Returns

required to be filed with respect to the Business or the Acquired Assets and pay the Taxes shown to be due thereon; provided, that Seller shall promptly reimburse Buyer for the portion of such Tax that relates to a Pre-Closing Tax Period. Seller will furnish to Buyer all information and records reasonably requested by Buyer for use in preparation of any Straddle Tax Returns. Buyer shall allow Seller to review, comment upon and reasonably approve without undue delay any Straddle Tax Return at least ten

Exhibit 2.02

(10) Business Days before the filing of such Tax Return, provided, that Buyer shall use commercially reasonable efforts to provide such Tax Return to Seller at least fifteen (15) Business Days before such filing.

(b) In the case of any Straddle Period, (i) real, personal, intangible property, or other property Taxes (“Property Taxes”) with respect to the Acquired Assets for the Pre-Closing Tax Period shall be equal to the amount of such Property Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that are in the Pre-Closing Tax Period and the denominator of which is the number of days in the Straddle Period, and (ii) all other Taxes, if any, shall be apportioned on the basis of a closing of the books as of the close of business on the Closing Date.

(c) Seller and Buyer shall furnish or cause to be furnished to each other and their representatives, upon request, as promptly as practicable, such information and assistance (including access to the Product Tax IT and Administration and related personnel) relating to the Covered Insurance Policies or the Acquired Assets or the preparation of any Straddle Period Tax Returns applicable to the Business or the Acquired Assets (including access to books and records as well as the timely provision of powers of attorney or similar authorizations) as is reasonably necessary for the preparation and filing of all Tax Returns (including any disclosures under Section 6011 or 6111 of the Code or the Treasury Regulations thereunder), the making of any election related to Taxes, the identification and remediation of any Losses or potential Losses for which Seller would be liable pursuant to Section 12.4(a) or Section 12.6(a), the preparation for any audit or other Action related to Taxes, and the prosecution or defense of any audit, proposed adjustment or deficiency, assessment, claim, suit or other proceeding relating to any Taxes, Tax Return, Product Tax Claim or Related Claim. Seller and Buyer shall reasonably cooperate with each other in the conduct of any of the matters, actions, or proceedings described in the preceding sentence. For the avoidance of doubt, nothing herein shall require either party to provide the other party access to any federal, state or local consolidated income Tax Return that includes the first such party or its Affiliates. Any information obtained under this Section 12.2(c) shall be kept confidential, except as otherwise reasonably may be necessary in connection with the filing of Tax Returns or claims for refund or in conducting any Tax audit, dispute or contest.

(d) (i) Buyer shall promptly notify Seller in writing upon receipt by Buyer, any of its Affiliates of notice of any pending or threatened federal, state, local or foreign Tax audits or assessments relating to any taxable period ending on or before the Closing Date or any Straddle Period or relating to a Tax for which Seller may be liable pursuant to this Agreement, provided, that Buyer’s failure to so notify Seller shall not relieve Seller from liability pursuant to this Article XII except to the extent Seller is materially prejudiced as a consequence of such failure.

(ii) Subject to Section 12.6, Seller shall have the sole right to control the conduct of

any Tax audit or administrative or court proceeding relating to the Business or the Acquired Assets for a taxable period ending on or before the Closing Date or any Straddle Period with respect to a Tax for which Seller may be liable pursuant to this Agreement, and to employ counsel of Seller’s choice at Seller’s expense; provided that Seller agrees, in advance of assuming such control, that it will indemnify the Buyer Indemnified Persons for the Losses or liabilities resulting therefrom as provided in Section 12.4; provided further, that Buyer and its Representatives shall be permitted, at Buyer’s expense, to be present at, and participate in, any such audit or proceeding. Notwithstanding such control, Seller shall not, and shall not permit any of its Affiliates to, settle, either administratively or after the commencement of litigation, any claim for Taxes in connection with any such audit or other proceeding in a manner that would reasonably be expected to adversely affect the liability for Taxes of Buyer or its Affiliates without the express written consent of Buyer, which consent shall not unreasonably be withheld or

Exhibit 2.02

delayed. Buyer shall control all other Tax audits or administrative or court proceedings relating to the Business. Subject to such control, neither Buyer nor any Affiliate of Buyer shall be entitled to settle, either administratively or after the commencement of litigation, any claim for Taxes that could reasonably be expected to adversely affect the liability for Taxes relating to a Tax for which Seller would be liable, in whole or in part, pursuant to this Agreement (including an Excluded Liability) without the prior written consent of Seller, which consent shall not unreasonably be withheld or delayed. Seller may discharge at any time its indemnification obligation under Section 12.4(a) by paying Buyer the amount payable pursuant to Section 12.4(a), calculated on the date of such payment.

(e) For the avoidance of doubt, Sections 12.2(a) – (d) shall not apply to Taxes due in respect
of Premiums (as defined in the Reinsurance Agreements) or Tax Returns relating to such Taxes, in each case which shall be governed exclusively by the Ancillary Agreements.

Section 12.3 Tax Characterizations of Adjustments. To the extent permitted by

Applicable Law, Seller and Buyer agree to treat, and cause their respective Affiliates to treat, all payments made either to or for the benefit of the other under any indemnity provisions of this Agreement and for any misrepresentations or breach of warranty or covenants as adjustments to the Tax Purchase Price for Tax purposes and that such treatment shall govern for purposes hereof.

Section 12.4 Tax Indemnification and Parties’ Responsibility.

(a) From and after the Closing, subject to the limitations set forth in this Article XII,
except to the extent such Losses (i) are subject to indemnification by Buyer pursuant to Section 12.4(b) or (ii) result from a breach by Buyer or any of its Affiliates of the terms of any Ancillary Agreement, Seller is and shall remain solely responsible for, and shall indemnify and hold harmless each Buyer Indemnified Person from and against all Losses attributable to (x) all Taxes that constitute Excluded Liabilities (or the non-payment thereof) or (y) any breach by Seller or its Affiliates of any covenant under Section 7.1(a)(xiii) or this Article XII or any representation or warranty under Section 5.6 (other than Section 5.6(i)) or Section 5.19(e)-(n), except to the extent that such representations or warranties relate to the Product Tax IT and Administration.

(b) Except to the extent such Losses are subject to indemnification by Seller, Buyer shall
be solely responsible for, and shall indemnify and hold harmless each Seller Indemnified Person from and against all Losses attributable to (i) all Taxes imposed on or with respect to the Acquired Assets or the Business, as applicable (A) for taxable periods beginning after the Closing Date and (B) with respect to Straddle Periods, for the portion of such Taxes allocable to the period after the Closing Date (as determined under Section 12.2(c)), in each case, except to the extent such Taxes are subject to indemnity by Seller pursuant to this Article XII, and (ii) all Taxes imposed on or with respect to Seller or its Affiliates, the Acquired Assets or the Business, arising from or relating to any breach by Buyer or its Affiliates of any covenant under this Article XII.

(c) The indemnities provided for in Section 12.4(a) and Section 12.4(b) shall survive
until thirty (30) days following the expiry of the applicable statute of limitations in respect of the Taxes subject to indemnification as provided herein.

(d) Any Liability for indemnification hereunder and under any Ancillary Agreement
shall be determined without duplication of recovery by reason of the same Loss. Buyer and Seller shall cooperate with each other with respect to resolving any claim or liability with respect to which one Party is obligated to indemnify the other Party under this Article XII, including by making commercially reasonable efforts to mitigate such claim or liability. Except to the extent that representations, warranties

Exhibit 2.02

and covenants in this Agreement other than those described in Section 12.4(a) expressly relate to Taxes, the sole remedy of Buyer, its Affiliates or the Buyer Indemnified Parties under this Agreement for any claim against Seller or its Affiliates with respect to any Losses attributable to Taxes or Product Tax Non-Compliance shall be as provided in this Article XII.

Section 12.5 Tax Refunds. Seller shall retain the right to any Tax refunds or credits

that are attributable to the Business in respect of Pre-Closing Tax Periods (or portions thereof) and that are actually received by Buyer, Seller or its Affiliates (or otherwise credited against tax).

Section 12.6 Indemnification for Product Tax Non-Compliance.

(a) From and after the Closing, subject to Section 12.6(e)-(g), except to the extent such
Losses (i) result from a breach by Buyer or any of its Affiliates of the terms of any Ancillary Agreement or (ii) are attributable to (A) a modification completed, or other action taken by Buyer, that changes the Product Tax IT and Administration after the Closing Date, other than a modification or other action taken by Buyer after the Closing Date in accordance with Section 12.6(a) of the Business Disclosure Schedule as of Closing (or Seller’s written procedures attached thereto as of the Closing), (B) a failure to follow the Product Tax IT Workarounds, (C) a failure to promptly notify Seller pursuant to Section 12.6(c) or otherwise to satisfy the notice requirements of Section 12.6(c) (provided in each case that such failure shall not relieve Seller from liability pursuant to this Section 12.6 except to the extent Seller is prejudiced as a consequence of such failure), or (D) a change in Applicable Law (or a Tax Authority’s written interpretation thereof) after the Closing Date, Seller is and shall remain solely responsible for, and shall indemnify and hold harmless each Buyer Indemnified Person from and against all Losses attributable to any Product Tax Non-Compliance arising (x) at or before the Closing or (y) during the Post-Closing Three-Year Period to the extent attributable to Buyer’s reliance on the Policy Forms or design of the Covered Insurance Policies or on the Product Tax IT and Administration. For the avoidance of doubt, subject to the preceding sentence and Section 12.6(e)-(g), Seller shall indemnify each Buyer Indemnified Person for any reasonable and necessary costs, including the costs of implementing appropriate manual workarounds (which costs shall include a reasonable allocation of employee compensation), to ensure that the administration of the Covered Insurance Policies is in accordance with the Product Tax Law Rules, as well as other costs of remediation (including costs incurred in connection with obtaining remediation or other corrective relief from the IRS), and any Losses attributable to Related Claims.

(b) Disclosure in the Business Disclosure Schedule, or otherwise before the Closing, of
known Product Tax Non-Compliance or measures that are planned or recommended to address Product Tax Non-Compliance but have not been implemented prior to the Closing at Seller’s expense, shall not affect Seller’s indemnification obligations hereunder.

(c) Buyer shall promptly provide written notice to Seller of each claim of Product Tax Non‑
Compliance (a “Product Tax Claim”, and such notice, a “Product Tax Claim Notice”) that could reasonably be expected to give rise to a claim for indemnification pursuant to this Section 12.6, after the facts or circumstances providing the basis for such Product Tax Claim become known to Buyer (but, in any event, promptly after receipt of any notice of a Related Claim). A Product Tax Claim Notice shall contain (i) a summary of the facts (set forth with reasonable specificity) underlying or relating to the Product Tax Claim, (ii) any correspondence, notice or other communication received from any nonaffiliated Third Party with respect to the Product Tax Claim, and (iii) a statement that Buyer seeks indemnification for a Loss arising from the Product Tax Claim and the basis therefor.

(d) Defense of Related Claims.

Exhibit 2.02

(i) Seller and Buyer shall jointly control the defense and resolution of any Related Claim, provided that either Party may solely control such defense and resolution at its own expense by, within thirty (30) days after Seller’s receipt of the related Product Tax Claim Notice, providing to the other Party written notice of its agreement that, with respect to any Losses resulting from the resolution of such Related Claim, (A) in the case of Seller, it will indemnify the Buyer Indemnified Persons as provided in this Section 12.6, and (B) in the case of Buyer, Seller shall not have an obligation to indemnify the Buyer Indemnified Persons pursuant to this Section 12.6. If the Parties jointly control such defense and resolution, then (X) each Party shall participate in such defense and resolution at its own expense, and (Y) neither Party shall consent to the entry of judgment or admit any liability with respect to or settle, compromise, discharge, or otherwise resolve any Related Claim without the other Party’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned). The remediation of any Product Tax Non-Compliance related to a Related Claim shall be controlled as provided in Section 12.6(f).

(ii) To the extent a Party is not controlling the defense and resolution of a Related Claim pursuant to Section 12.6(d)(i), such Party shall have the right, but not the obligation, to participate in the defense and resolution of any Related Claim at its own expense and to employ counsel separate from the counsel employed by the other Party at the first Party’s own expense. The Parties shall cooperate in the defense and resolution of any Related Claim, provided that such cooperation shall not unreasonably interfere with the business or operations of either Party.

(iii) Upon a settlement, compromise, or other resolution of any Related Claim (a “Related Claim Resolution”) that causes Seller to have an indemnification obligation under Section 12.6(a), Seller shall pay (A) all indemnified amounts due to the relevant non-affiliated Third Party or Governmental Body as a result of such Related Claim Resolution within the time set forth under such Related Claim Resolution and (B) all other amounts (if any) for which Seller is required to indemnify Buyer or its Affiliates pursuant to Section 12.6(a) with respect to such Related Claim Resolution as such amounts are paid by Buyer; provided that, in respect of any amount paid by Buyer described in clause (B), Buyer shall promptly provide Seller with written notice that, and information reasonably sufficient to verify that, such payment has been made by Buyer.

(e) Buyer Claims. During the Post-Closing Three-Year Period, a Buyer Claim may be
brought by Buyer. Upon the expiration of the Post-Closing Three-Year Period, Buyer shall no longer have the right to bring, assert, claim, or otherwise pursue any Buyer Claim other than any Buyer Claim with respect to which the Product Tax Claim Notice was delivered prior to the expiration of the Post-Closing Three-Year Period. For the avoidance of doubt, the Product Tax Claim Notice referred to in the preceding sentence must describe the Buyer Claim in accordance with the notice requirements of Sections 12.6(c)(i) and (iii) in order for Buyer to have the right to bring, assert, claim, or otherwise pursue such Buyer Claim following the expiration of the Post-Closing Three-Year Period.

(f) Remediation of Product Tax Non-Compliance.

(i) With respect to any Product Tax Claim (including any Buyer Claim), Buyer

and Seller shall cooperate to determine whether there has been Product Tax Non-Compliance, and, if necessary, to develop corrective measures that are reasonable and cost effective, taking into account all of the relevant facts and circumstances then applicable (including, without limitation, obtaining remediation or other corrective relief from the IRS), in order to remediate such Product Tax Non-Compliance.

Exhibit 2.02

(ii) If Seller and Buyer agree that Product Tax Non-Compliance has occurred, and agree with respect to the appropriate corrective measures, Seller and Buyer shall cooperate to implement such corrective measures as provided in Section 12.6(f)(v) and Section 12.6(f)(vi).

(iii) If Seller and Buyer cannot agree (A) whether Product Tax Non-Compliance has occurred, or (B) with respect to the appropriate corrective measures, the dispute may be submitted to the Accounting Firm for arbitration at Buyer’s option, provided that Buyer may also opt to submit multiple disputes to the Accounting Firm for arbitration simultaneously at the end of a calendar year or at such time mutually agreed to in writing by Buyer and Seller, in which case Buyer shall promptly notify Seller of its intent to do so. In the event that a dispute has been submitted to the Accounting Firm for arbitration, Seller and Buyer shall deliver to the Accounting Firm copies of any schedules, documentation, or other materials that may reasonably be required by the Accounting Firm to make its determination. The Accounting Firm will be required to determine whether Product Tax Non-Compliance has occurred (if in dispute) and to select either the corrective measures proposed by Seller or the corrective measures proposed by Buyer, based on which proposed corrective measures are more appropriate, reasonable, and cost effective under all of the relevant facts and circumstances then applicable. The Accounting Firm shall render a determination within sixty (60) days of the referral of such matter for resolution. The determinations of the Accounting Firm shall be final and binding on all Parties for all purposes of this Agreement. Arbitration costs will be shared equally by Seller and Buyer.

(iv) Seller shall indemnify the Buyer Indemnified Persons for corrective measures attributable to a Product Tax Claim, subject to the cost-sharing provisions of Section 12.6(g), only to the extent that such corrective measures were agreed to by Seller and Buyer or were selected by the Accounting Firm, as applicable, as described in Section 12.6(f)(ii) or Section 12.6(f)(iii), respectively, provided, that if, with respect to any Product Tax Claim, Seller disagrees with Buyer that Product Tax Non-Compliance has occurred and Buyer chooses not to arbitrate, or, following arbitration, the Accounting Firm determines that no Product Tax Non-Compliance has occurred, and, as a result of a Related Claim based on the same alleged Product Tax Non-Compliance that gave rise to the Product Tax Claim, there is a Final Determination that Product Tax Non-Compliance has occurred, then Seller shall indemnify the Buyer Indemnified Persons in accordance with the provisions of Section 12.6 for the reasonable and necessary costs associated with the corrective measures undertaken to remediate such Product Tax Non-Compliance.

(v) If the corrective measures described in this Section 12.6(f) include obtaining remediation or other corrective relief from the IRS, Buyer and Seller shall jointly participate in all discussions or other proceedings with the IRS, including attendance at meetings and joint approval of all written submissions. Seller shall control the decision of whether or not to enter into a closing agreement or other arrangement with the IRS in connection with such discussions or other proceedings provided that (A) Seller agrees, in advance of entering into such closing agreement or other arrangement, that it will indemnify the Buyer Indemnified Persons for any Losses resulting therefrom in accordance with the provisions of Section 12.6, and (B) if the closing agreement or other arrangement would obligate Buyer to implement changes to its ongoing administration of the Covered Insurance Policies, then Seller may not enter into any such closing agreement or other arrangement without Buyer’s consent, which consent shall not be unreasonably withheld, conditioned or delayed. Should Buyer decide to withhold its consent to Seller’s entering into any closing agreement or other arrangement with the IRS, Buyer shall promptly communicate such decision in writing to Seller.

Exhibit 2.02

(vi) Unless otherwise provided in this Section 12.6(f), Buyer shall control the

implementation of the corrective measures described in this Section 12.6(f) to the extent that such corrective measures modify the administration of the Covered Insurance Policies in order to make such administration compliant with the Product Tax Law Rules.

(g) Cost-Sharing.

(i) Seller shall not have any obligation under this Section 12.6 to indemnify the Buyer Indemnified Persons for costs attributable to modifying the administration of the Covered Insurance Policies to make such administration compliant with the Product Tax Law Rules unless the aggregate of all such costs for which Seller would be liable under this Section 12.6 exceed $250,000 on a cumulative basis, provided that, once the aggregate amount of such costs exceeds $250,000, Seller shall be obligated to indemnify the Buyer Indemnified Persons for all such costs (without any deductible) as determined in accordance with Section 12.6(g)(ii) and Section 12.6(g)(iii).

(ii) With respect to any Product Tax Claim, the costs of implementing corrective measures to remediate Product Tax Non-Compliance described in such claim, to the extent attributable to modifying the administration of the Covered Insurance Policies to make such administration compliant with the Product Tax Law Rules (including, for the avoidance of doubt, a reasonable allocation of employee compensation attributable to such measures) shall be shared between Seller and Buyer as follows:

(A) If, pursuant to Section 12.6(f)(ii), Seller and Buyer agree to the appropriate corrective measures, then (1) with respect to a Product Tax Claim for which a Product Tax Claim Notice is delivered to Seller on or before the one-year anniversary of the Closing Date: 80 percent (80%) by Seller and 20 percent (20%) by Buyer; (2) with respect to a Product Tax Claim for which a Product Tax Claim Notice is delivered to Seller after the one-year anniversary of the Closing Date but on or before the two-year anniversary of the Closing Date: 70 percent (70%) by Seller and 30 percent (30%) by Buyer; and (3) with respect to a Product Tax Claim for which a Product Tax Claim Notice is delivered to Seller after the two-year anniversary of the Closing Date but prior to the expiration of the Post-Closing Three-Year Period: 60 percent (60%) by Seller and 40 percent (40%) by Buyer.

(B) If, pursuant to Section 12.6(f)(iii), following arbitration, the Accounting Firm selects the corrective measures proposed by Seller, then (1) with respect to a Product Tax Claim for which a Product Tax Claim Notice is delivered to Seller on or before the one-year anniversary of the Closing Date: 60 percent (60%) by Seller and 40 percent (40%) by Buyer; (2) with respect to a Product Tax Claim for which a Product Tax Claim Notice is delivered to Seller after the one-year anniversary of the Closing Date but on or before the two-year anniversary of the Closing Date: 50 percent (50%) by Seller and 50 percent (50%) by Buyer; and (3) with respect to a Product Tax Claim for which a Product Tax Claim Notice is delivered to Seller after the two-year anniversary of the Closing Date but prior to the expiration of the Post-Closing Three-Year Period: 40 percent (40%) by Seller and 60 percent (60%) by Buyer.

(C) If, pursuant to Section 12.6(f)(iii), following arbitration, the Accounting Firm selects the corrective measures proposed by Buyer, then with respect to a Product Tax Claim for which a Product Tax Claim Notice is delivered to

Exhibit 2.02

Seller prior to the expiration of the Post-Closing Three-Year Period: 100 percent (100%) by Seller.

(iii) Notwithstanding the foregoing provisions of this Section 12.6(g), Buyer’s

liability under this Section 12.6(g) shall be limited to $5 million, in the aggregate, and any excess over such amount shall be borne 100 percent (100%) by Seller. For the avoidance of doubt, this Section 12.6(g) shall apply only to the cost of corrective measures attributable to modifying the administration of the contracts to make such administration compliant with the Product Tax Law Rules. All other costs and expenses attributable to Product Tax Claims (for example, without limitation, any amounts payable to the IRS or required to be refunded to policyholders) and all Losses resulting from Related Claims shall be borne 100 percent (100%) by Seller as provided in this Section 12.6.

Section 12.7 Changes to Final Closing Date Tax Reserves.

(a) Seller shall promptly notify Buyer if, as a result of the amendment of any Tax Return, any Action, any claim or assessment by any Tax Authority (or any compromise or settlement of any such claim or assessment), any change in Reserves, or any other cause, the schedule of the Closing Date Tax Reserves provided by Seller to Buyer pursuant to Section 2.5(c) (the “Final Closing Date Tax Reserves”) no longer accurately reflects the life insurance reserves (within the meaning of Section 807(c) of the Code) maintained by Seller and each Cedant as of the Closing Date (immediately prior to the Closing) with respect to the Covered Insurance Policies, as reflected on Seller’s consolidated federal income tax return as filed, or as subsequently amended or adjusted, and shall provide Buyer an updated schedule of such life insurance reserves (the “Revised Closing Date Tax Reserves”).

(b) Upon receipt of the schedule of Revised Closing Date Tax Reserves, Buyer shall promptly provide Seller with (i) a detailed revised Asset Allocation Schedule based on the Revised Closing Date Tax Reserves (the “Revised Asset Allocation Schedule”) and (ii) separate calculations (based on the Revised Asset Allocation Schedule) reflecting Buyer’s computation, as determined under the Tax Acquisition Provisions, of the ceding commission (within the meaning of Treasury Regulation Section 1.338-11(c)(3), relating to the transactions contemplated by this Agreement and the Ancillary Agreements, using the Final Closing Date Tax Reserves (the “Initial Tax Ceding Commission”) and the Revised Closing Date Tax Reserves (the “Revised Tax Ceding Commission”). The Revised Asset Allocation Schedule (including the amounts allocated to all assets other than the insurance-in-force) shall be based on, and shall be consistent with, the Final Asset Allocation Schedule determined in accordance with Section 2.5(b); provided, that if the Parties have not agreed on the Final Asset Allocation Schedule, the Revised Asset Allocation Schedule shall be based on, and shall be consistent with, the Asset Allocation Schedule described in clause (x) of Section 2.5(b).

(c) To the extent that the Initial Tax Ceding Commission is greater than the Revised Tax Ceding Commission, Seller shall promptly pay to Buyer the amount determined in accordance with Schedule 12.7(c). To the extent that the Initial Tax Ceding Commission is less than the Revised Tax Ceding Commission, Buyer shall promptly pay to Seller the amount determined in accordance with Schedule 12.7(c).

(d) In the event that Seller disputes the accuracy of the Initial Tax Ceding Commission or the Revised Tax Ceding Commission, Seller shall promptly provide a written determination to Buyer to that effect, and Seller and Buyer shall use commercially reasonable methods to resolve such dispute. In the event that Seller and Buyer are unable to resolve the dispute in a timely manner, the matter shall be referred to the Accounting Firm for a final determination of the correct amount of the Initial Tax Ceding Commission or the Revised Tax Ceding Commission. In such event, Seller and Buyer shall deliver to the

Exhibit 2.02

Accounting Firm copies of any data, documentation, or other materials that may reasonably be required by the Accounting Firm to make such determination. Each of Seller and Buyer shall be entitled to submit to the Accounting Firm a memorandum setting forth its position with respect to any disputed issue. For the avoidance of doubt, except for amounts agreed to by the Parties pursuant to Section 2.5, the Accounting Firm may consider the accuracy of the Revised Asset Allocation Schedule in making its determination, provided, that with respect to the valuation of any of the Investment Assets transferred by Cedants to the Reinsurer pursuant to the Reinsurance Agreements, (x) the Accounting Firm must select, as the fair market value of such asset as of the Closing, either the value proposed by Buyer or the value proposed by Seller and (y) the Accounting Firm shall not reach any determination regarding the fair market value of any such Investment Asset unless the Accounting Firm shall have determined, based on the information delivered to it by Seller and Buyer, that the determination of the fair market value of such asset is necessary in order to determine the amount payable by Buyer to Seller, or Seller to Buyer, pursuant to this Section 12.7. The Accounting Firm shall render its determination within sixty (60) days of the referral of such matter for resolution. The determination of the Accounting Firm as to the correct amount of the Initial Tax Ceding Commission and the Revised Tax Ceding Commission shall be final and binding on all Parties for all purposes of this Agreement. The costs incurred in retaining the Accounting Firm shall be shared equally, fifty percent (50%) by Seller and fifty percent (50%) by Buyer.

(e) If, subsequent to the payment of any amount by Seller to Buyer (or by Buyer to Seller)
under Section 12.7(c), there is a Final Determination that results in a change in the amount of the Revised Tax Ceding Commission used to determine the payment under Section 12.7(c), Seller and Buyer agree to determine the amount (if any) appropriately payable by Seller to Buyer (or by Buyer to Seller) as a result of such change, based on the principles and procedures contained in this Section 12.7. Buyer or Seller, as the case may be, shall promptly pay to the other the amount so determined.

ARTICLE XIII
TERMINATION

Section 13.1 Termination. This Agreement may be terminated at any time prior to the

Closing Date:

(a) by the mutual written consent of Buyer and Seller;

(b) by Buyer in the event of a material breach by Seller of any of Seller’s (i) covenants or
agreements or (ii) representations or warranties contained herein that would reasonably be expected to result in the conditions to Closing set forth in Section 9.1(a) or Section 9.1(b) not being satisfied; provided, that in the case of clause (i), if curable, Seller shall have failed to cure such breach within thirty (30) days after receipt of written notice from Buyer requesting such breach to be cured;

(c) by Seller in the event of a material breach by Buyer of any of Buyer’s (i) covenants or
agreements or (ii) representations or warranties contained herein that would reasonably be expected to result in the conditions to Closing set forth in Section 10.1(a) or Section 10.1(b) not being satisfied; provided, that in the case of clause (i), if curable, Buyer shall have failed to cure such breach within thirty (30) days after receipt of written notice from Seller requesting such breach to be cured;

(d) by Buyer or Seller if any court of competent jurisdiction shall have issued a final and
non-appealable Court Order, in each case, permanently restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby or by the Reinsurance Agreements; or

Exhibit 2.02

(e) by Buyer or Seller if the Closing shall not have occurred on or before June 30, 2013 or

such later date as may be agreed to in writing by Buyer and Seller (the “Termination Date”).

Notwithstanding anything in this Section 13.1 to the contrary, neither Party may terminate this Agreement pursuant to paragraphs (b), (c), (d) or (e) above if its failure to perform any of its obligations or covenants, or the inaccuracy of any of its representations or warranties, under this Agreement has been the principal cause of, or has resulted in, the event or condition purportedly giving rise to a right to terminate this Agreement under such paragraph.

Section 13.3 Effect of Termination. In the event that this Agreement shall be

terminated pursuant to this Article XIII, all further obligations of the Parties under this Agreement (other than Section 8.6, this Section 13.3 and Article XIV (other than Section 14.1 and Section 14.2)) shall be terminated without further Liability of either Party to the other; provided, that nothing herein shall relieve either Party from Liability for fraud or intentional breach of its covenants contained in this Agreement. For this purpose, “intentional” means an action or omission that the breaching Party takes or omits to take with the intent of breaching this Agreement.

ARTICLE XIV
GENERAL PROVISIONS

Section 14.1 Survival of Representations and Warranties and Covenants. All

representations and warranties contained in this Agreement shall survive the consummation of the transactions contemplated by this Agreement through the period during which claims for indemnification may be made for such representations and warranties pursuant to Article XI or Article XII, as applicable (at which time such representations and warranties shall terminate). The covenants and agreements contained in this Agreement that by their terms apply or are to be performed in their entirety on or prior to the Closing shall survive until the date that is eighteen (18) months after the Closing Date. Any other covenant or agreement contained in this Agreement shall survive for the period provided in such covenant or agreement, if any, or otherwise, until fully performed.

Section 14.2 Remedies. Each Party agrees that any failure to perform, or breach of its

obligations under this Agreement will result in irreparable injury to the other Party, that the remedies available to such other Party at law alone will be an inadequate remedy for such failure or breach and that, in addition to any other legal or equitable remedies that such other Party may have, such other Party may enforce its rights in court by an Action for specific performance and the Parties expressly waive the defense that a remedy in damages will be adequate or that an award of specific performance is not an appropriate remedy for any reason at law or equity. Any Party seeking an order or injunction to prevent or cure breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction.

Section 14.3 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflicts of law provisions) of the State of New York (other than Sections 5-1401 and 5-1402 of the General Obligations Law, which shall apply).

Exhibit 2.02

Section 14.4 Jurisdiction; Venue. Except as contemplated by Article II,

Section 12.6(f)(iii) or Section 12.7(d), each of the Parties hereto irrevocably agrees that any and all Actions arising out of, relating to or in connection with this Agreement or its subject matter and the rights and obligations arising hereunder, or for recognition and enforcement of any settlement or judgment in respect of this Agreement and the rights and obligations arising hereunder brought by any other Party hereto or its successors or assigns, shall be brought and determined exclusively in the courts of the State of New York located in the Borough of Manhattan, The City of New York or in the courts of the United States of America for the Southern District of New York. Each of the Parties agrees that mailing of process or other papers in connection with any such Action in the manner provided in Section 14.6 or in such other manner as may be permitted by Applicable Laws, will be valid and sufficient service thereof. Each of the Parties hereto hereby irrevocably submits with regard to any such Action for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any Action relating to this Agreement or any of the transactions contemplated by this Agreement in any court or tribunal other than the aforesaid courts. Each of the Parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any Action with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder (a) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve process in accordance with this Agreement, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by Applicable Law, any claim that (i) the Action in such court is brought in an inconvenient forum, (ii) the venue of such Action is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. In order to facilitate the comprehensive resolution of related disputes, and upon request of any Party to any Action, the court may consolidate the Action with any other Action relating to this Agreement or to any Ancillary Agreement and the Parties hereby agree not to oppose any request by the other Party to consolidate any such Action with another Action relating to this Agreement or to any Ancillary Agreement.

Section 14.6 Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of service if served personally on the Party to whom notice is to be given, (b) on the day of transmission if sent via facsimile transmission to the facsimile number given below, and telephonic confirmation of receipt is obtained promptly after completion of transmission, or (c) on the Business Day after delivery to an overnight courier (such as Federal Express) or an overnight mail service (such as the Express Mail service) maintained by the United States Postal Service, to the Party as follows:

Exhibit 2.02

(a) If to Buyer, to:

Prudential Financial, Inc. 751 Broad St., 4th Floor Newark, NJ 07102

Facsimile: (973) 367-8105 Attention: Anthony F. Torre

with a copy to (which shall not constitute notice):

Prudential Financial, Inc. 751 Broad St., 21 ^st Floor Newark, NJ 07102

Facsimile: (973) 367-8105 Attention: General Counsel

Debevoise & Plimpton LLP 919 Third Avenue

New York, NY 10022

Facsimile: (212) 909-6836

Attention: John M. Vasily

(b) If to Seller or HFSG, to:

The Hartford Financial Services Group One Hartford Plaza

Hartford, Connecticut 06155

Attention: General Counsel

Facsimile: 860-547-4721

with a copy to (which shall not constitute notice):

Sutherland Asbill & Brennan LLP

999 Peachtree Street, NE

Atlanta, GA 30309

Fax: (404) 853-8806

Attention: B. Scott Burton

Bert Adams


or to such other address as such Party may indicate by a notice delivered to the other Party hereto. Section 14.7	Successors and Assigns; No Third-Party Beneficiaries.

(a) Except as otherwise provided herein (including the right of Buyer to cause one or more of
its Affiliates to acquire the Acquired Assets), the rights and obligations of either Party under this Agreement shall not be assignable or delegable by such Party hereto without the written consent of the other Party.

(b) This Agreement shall be binding upon and inure to the benefit of the Parties hereto and
their successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon any Person other than the Parties and successors and assigns permitted

Exhibit 2.02

by this Section 14.7 and the Buyer Indemnified Persons and the Seller Indemnified Persons any right, remedy or claim under or by reason of this Agreement.

Section 14.8 Entire Agreement; Amendments. This Agreement, the Exhibits and Schedules referred to herein, the documents delivered pursuant hereto, the Confidentiality Agreement and the Ancillary Agreements contain the entire understanding of the Parties hereto with regard to the subject matter contained herein or therein, and supersede all other prior representations, warranties, agreements, understandings or letters of intent between or among any of the Parties hereto which representations, warranties, agreements, understandings or letters of intent shall be of no force or effect for any purpose. Except for updates to Section 8.1(a) of the Business Disclosure Schedule, this Agreement shall not be amended, modified or supplemented except by a written instrument signed by an authorized Representative of each of the Parties hereto or their respective successors in interest.

Section 14.9 Interpretation. The table of contents, articles, titles and headings to

sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. Unless the context otherwise requires, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine genders of such term. Any agreement or instrument defined or referred to herein or any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or supplemented, including by waiver or consent, and references to all attachments thereto and instruments incorporated therein. Any statute or regulation referred to herein means such statute or regulation as amended, modified, supplemented or replaced from time to time (and, in the case of any statute, includes any rules and regulations promulgated under such statute), and references to any section of any statute or regulation include any successor to such section. Any agreement referred to herein shall include reference to all Exhibits, Schedules and other documents or agreements attached thereto. The phrase “related to the Business” shall not have the meaning attributed to “Related to the Business”.

Section 14.10 Waivers. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, in writing at any time by the Party or Parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement if, as to any Party, it is authorized in writing by an authorized Representative of such Party. The failure of any Party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any Party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any preceding or subsequent breach.

Section 14.11 Expenses. Except as otherwise expressly set forth in this Agreement and the Ancillary Agreements, each Party hereto will pay all costs and expenses incident to its negotiation and preparation of this Agreement and to its performance and compliance with all agreements and conditions contained herein or therein on its part to be performed or complied with, including the fees, expenses and disbursements of its counsel and independent public accountants.

Exhibit 2.02

Section 14.12 Partial Invalidity. Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under Applicable Law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, unless such a construction would be unreasonable.

Section 14.13 Execution in Counterparts. This Agreement may be executed in one or more counterparts, including by facsimile or by electronic delivery in .pdf format, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by each of the Parties hereto and delivered to Seller and Buyer.

Section 14.14 No Public Announcement. Neither the Parties nor any Affiliates of the Parties shall, without the approval of Buyer, in the case of Seller and its Affiliates, and Seller, in the case of Buyer and its Affiliates, in each case not to be unreasonably withheld, make any press release or other public announcement concerning the transactions contemplated by this Agreement or any Ancillary Agreement, except as and to the extent that any such Person shall be so obligated by Applicable Law or the rules of any stock exchange, in which case the non-disclosing Party shall be advised and the Parties shall use commercially reasonable efforts to cause a mutually agreeable release or announcement to be issued; provided, that the foregoing shall not preclude communications or disclosures necessary to implement the provisions of this Agreement or to comply with the accounting and the SEC disclosure obligations or the rules of any stock exchange.

Section 14.15 Disclosure Schedules. Any disclosure with respect to a Section of any Disclosure Schedule shall be deemed to be disclosed for purposes of other Sections of such Disclosure Schedule only to the extent that such disclosure sets forth facts in sufficient detail so that the relevance of such disclosure to such other Sections would be readily apparent to a reader of such disclosure. Matters reflected in any Section of a Disclosure Schedule are not necessarily limited to matters required by this Agreement to be so reflected. Such additional matters are set forth for informational purposes and do not necessarily include other matters of a similar nature. No reference to or disclosure of any item or other matter in any Section of a Disclosure Schedule shall be construed as an admission or indication that such item or other matter is material or that such item or other matter is required to be referred to or disclosed in this Agreement. Without limiting the foregoing, no such reference to or disclosure of a possible breach or violation of any Contract, Applicable Law or order of any Governmental Body shall be construed as an admission or indication that breach or violation exists or has actually occurred.

Section 14.16 HFSG Guarantee. HFSG fully, irrevocably and unconditionally

guarantees to Buyer the full, complete and timely compliance with and performance of all agreements, covenants and obligations of Seller from time to time under this Agreement (the “Obligations” and, collectively, the “Guaranty”). The Obligations shall include Seller’s obligation to satisfy all payment obligations of Seller arising in connection with this Agreement, in each case, when and to the extent that, any of the same shall become due and payable or performance of or compliance with any of the same shall be required. HFSG hereby acknowledges and agrees that the Guaranty constitutes an absolute, present, primary, continuing and unconditional guaranty of performance, compliance and payment by Seller of the Obligations when due under this Agreement and not of collection only and is in no way conditioned or contingent upon any attempt to enforce such performance, compliance or payment by a guaranteed party upon any other condition or contingency. HFSG hereby waives any right to require a proceeding first against Seller. The Obligations shall not be subject to any reduction, limitation, impairment or termination for any reason (other than by indefeasible payment or performance in full of the Obligations) and shall not be subject to (i) any discharge of Seller from any of the Obligations in a

Exhibit 2.02

bankruptcy or similar proceeding (except by indefeasible payment or performance in full of the Obligations) or (ii) any other circumstance whatsoever which constitutes, or might be construed to constitute an equitable or legal discharge of HFSG as guarantor under this Section 14.16. Notwithstanding the foregoing, HFSG’s obligations under this Section 14.16 shall terminate on the sixth (6 ^th ) anniversary the of the Closing Date unless, before such date Buyer or a Buyer Indemnified Person, as applicable, has provided to Seller or HSFG with notice of a claim (including an applicable Claim Notice under Article XI), in which case such claim shall continue to be subject to HFSG’s Guarantee in accordance with this Section 14.16 notwithstanding the passing of such applicable date.

[Remainder ofPage Intentionally Left Blank - Signature Page Follows]

Exhibit 2.02

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the day and year first above written.

HARTFORD LIFE, INC.:

By: /s/ David C. Robinson

Name: David C. Robinson

Title: Senior Vice President

PRUDENTIAL FINANCIAL, INC.

By: /s/ Thomas DePatie

Name: Thomas DePatie

Title: Senior Vice President

THE HARTFORD FINANCIAL SERVICES GROUP, INC. (solely for purposes of Section 8.4, Section 8.5 and Section 14.16) :

By: /s/ David C. Robinson

Name: David C. Robinson

Title: Senior Vice President

Exhibit 2.02

Below is a list of omitted schedules (or similar attachments) from the Purchase and Sale Agreement by and among Massachusetts Hartford Life, Inc., Prudential Financial, Inc. and The Hartford Financial Services Group, Inc. dated as of September 27, 2012. The registrant agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.

Schedule 1.1(a) Acquired Assets

Schedule 1.1(b) Assigned Leases

Schedule 1.1(c) Business Premises Shared Common Space

Schedule 1.1(d) Cedant Separate Accounts

Schedule 1.1(e)(i) Covered Insurance Policies

Schedule 1.1(e)(ii) Excluded Insurance Policies

Schedule 1.1(f) Excluded Assets

Schedule 1.1(g) Excluded Contracts

Schedule 1.1(h) Excluded Liabilities

Schedule 1.1(i) HLPP Business

Schedule 1.1(j) Overhead and Shared Services

Schedule 1.1(k) Separate Accounts

Schedule 1.1(l) Transferred Contracts

Schedule 1.1(m) Transferred Information Technology Contracts

Schedule 1.1(n) Premises of Subleases and Leases

Schedule 2.3(a) Reinsurance Statement Methodology

Schedule 2.3(a)(i) Statement of General Account Net Settlement

Schedule 2.3(a)(ii) Pro Forma Statement of General Account Net Settlement

Schedule 2.3(b)(i) Reference Balance Sheet Methodology

Schedule 2.3(b)(ii) Transfer Balance Sheet Methodology

Schedule 3.3(b) Investment Asset Identification Methodology

Schedule 12.7(c)

Exhibit A Form of Administrative Services Agreements

Exhibit B Form of Hold Harmless and Indemnification Agreement

Exhibit C Forms of Lease Agreements

Exhibit D Form of Patent Assignment

Exhibit E Form of Patent License Agreement

Exhibit F Form of Reinsurance Agreements

Exhibit G Form of Software License Agreement

Exhibit H Form of Sublease Agreements

Exhibit I Form of Trademark Assignment

Exhibit J Form of Trademark License Agreement

Exhibit K Form of Transition Services Agreement

Exhibit L Form of Trust Agreements and GUL Trust Agreements

Exhibit M Form of Wholesaling Agreements

Exhibit N Form of Bill of Sale

Exhibit O Form of Assignment and Assumption Agreement

Exhibit P Form of License Agreement

Exhibit Q Group Conversion Term Sheet

Exhibit R GUL Term Sheet

Exhibit S Retained Business ASA Term Sheet

Seller Disclosure Schedule Business Disclosure Schedule Buyer Disclosure Schedule

Exhibit 15.01

November 1, 2012

The Hartford Financial Services Group, Inc.

One Hartford Plaza

Hartford, Connecticut 06155

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of The Hartford Financial Services Group, Inc. and subsidiaries (the “Company”) for the periods ended September 30, 2012 and 2011 , as indicated in our report dated November 1, 2012 ; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 , is incorporated by reference in the following registration statements:




Form S-3 Registration No.			Form S-8 Registration Nos.

333-168532			333-12563
			333-49170
			333-34092
			033-80665
			333-105706
			333-105707 333-125489 333-157372 333-160173 333-168537

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

DELOITTE & TOUCHE LLP

Hartford, Connecticut

November 1, 2012

Exhibit 31.01

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ENACTED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Liam E. McGee, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of The Hartford Financial Services Group, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	November 1, 2012	/s/ Liam E. McGee
		Liam E. McGee
		Chairman, President and Chief Executive Officer

Exhibit 31.02

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ENACTED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christopher J. Swift, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of The Hartford Financial Services Group, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	November 1, 2012	/s/ Christopher J. Swift
		Christopher J. Swift
		Executive Vice President and Chief Financial Officer

Exhibit 32.01

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the period ended September 30, 2012 of The Hartford Financial Services Group, Inc. (the “Company”), filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned hereby certifies, pursuant to 18 U.S.C. section 1350 as enacted by section 906 of the Sarbanes-Oxley Act of 2002, that:


1)	The Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; and


2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date:	November 1, 2012	/s/ Liam E. McGee
		Liam E. McGee
		Chairman, President and Chief Executive Officer

Exhibit 32.02

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


1)	The Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; and


2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date:	November 1, 2012	/s/ Christopher J. Swift
		Christopher J. Swift
		Executive Vice President and Chief Financial Officer