Basis of Presentation and Accounting Policies

Hartford Life Insurance Company (together with its subsidiaries, “HLIC”, “Company”, “we” or “our”) is a provider of insurance and investment products in the United States (“U.S.”) and is a wholly-owned subsidiary of Hartford Life and Accident Insurance Company (“HLA”). The Hartford Financial Services Group, Inc. (together with its subsidiaries, “The Hartford”) is the ultimate parent of the Company.

On March 21, 2012, The Hartford announced the completion of an evaluation of its businesses and strategy evaluation. As a result of this review, The Hartford 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 of The Hartford.

On April 26, 2012, The Hartford announced that 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 Hartford 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 Hartford 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 a reinsurance agreement.

On September 27, 2012, The Hartford 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 differs materially from the accounting practices prescribed by various insurance regulatory authorities. For a description of the Company’s significant accounting policies, see Note 1 of the Notes to Consolidated Financial Statements included in the Company’s 2011 Form 10-K Annual Report. These Condensed Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s 2011 Form 10-K Annual Report. The results of operations for 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. All amounts presented for prior reporting periods related to the adoption of this standard have been revised accordingly. As a result of this accounting change, stockholder’s equity as of January 1, 2011, decreased by approximately $0.8 billion, after-tax from $8.2 billion, as previously reported, to $7.4 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.

1. Basis of Presentation and Accounting Policies (continued)

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



	December 31, 2011
	As previously reported		Effect of change			As currently reported
Deferred policy acquisition costs and present value of future profits	$	4,598	$	(1,150	)	$	3,448
Deferred income taxes, net	$	1,606	$	400		$	2,006
Retained earnings (accumulated deficit)	$	555	$	(874	)	$	(319	)
Accumulated other comprehensive income, net of tax	$	829	$	124		$	953
Total stockholder's equity	$	9,661	$	(750	)	$	8,911



	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	$	280		$	(67	)	$	213
Insurance operating costs and other expenses	$	2,308		$	38		$	2,346
Income (loss) before income taxes	$	(848	)	$	29		$	(819	)
Income tax expense (benefit)	$	(323	)	$	7		$	(316	)
Net income (loss)	$	(525	)	$	22		$	(503	)
Net income (loss) attributable to Hartford Life Insurance Company	$	(521	)	$	22		$	(499	)



	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	$	542		$	(121	)	$	421
Insurance operating costs and other expenses	$	2,904		$	111		$	3,015
Income (loss) before income taxes	$	(277	)	$	10		$	(267	)
Income tax expense (benefit)	$	(315	)	$	(3	)	$	(318	)
Net income	$	38		$	13		$	51
Net income attributable to Hartford Life Insurance Company	$	40		$	13		$	53

Reclassifications

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

Income Taxes

In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances known at each interim period. On a quarterly basis, the estimated effective tax rate is adjusted, as appropriate, based upon changed facts and circumstances, if any, as compared to those forecast at the beginning of the fiscal year and each interim period thereafter.

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,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Tax expense at the U.S. federal statutory rate	$	92		$	(287	)	$	250		$	(93	)
Dividends-received deduction	(26		)	(40		)	(87		)	(165		)
Foreign related investments	(5		)	15			(11		)	5
Valuation allowance	(4		)	(5		)	(17		)	(65		)
Other	2			1			2			—
Income tax expense (benefit)	$	59		$	(316	)	$	137		$	(318	)

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 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 $61 as of September 30, 2012 and $78 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.