The Hartford Financial Services Group, Inc.

Transcription

1 Fourth Quarter 2013 Presentation The Hartford Financial Services Group, Inc. February 3, 2014

2 Safe Harbor Statement Certain statements made in this presentation should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of These include statements about The Hartford s future results of operations. We caution investors that these forwardlooking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ, including those discussed in The Hartford s press release issued on February 3, 2014, our Quarterly Reports on Form 10-Q, our 2012 Annual Report on Form 10-K and other filings we make with the Securities and Exchange Commission. We assume no obligation to update this presentation, which speaks as of today s date. The discussion in this presentation of The Hartford s financial performance includes financial measures that are not derived from generally accepted accounting principles, or GAAP. Information regarding these non-gaap financial measures, including reconciliations to the most directly comparable GAAP financial measures, is provided in the press release issued on February 3, 2014 and The Hartford s Investor Financial Supplement for fourth quarter 2013 which is available at the Investor Relations section of The Hartford s website at From time to time, The Hartford may use its website to disseminate material company information. Financial and other important information regarding The Hartford is routinely accessible through and posted on our website at In addition, you may automatically receive alerts and other information about The Hartford when you enroll your address by visiting the Alerts section at 2

3 4Q13 Core Earnings 1 Rose 78% to $456 million Core Earnings (Loss) By Segment ($ in millions except per diluted share amounts) 4Q12 4Q13 Change P&C Commercial $26 $229 NM 4 Consumer Markets NM P&C Other Operations % Group Benefits % Mutual Funds % Sub-total $109 $375 NM Talcott Resolution (14%) Corporate (55) (92) (67%) Core earnings $256 $456 78% Net realized capital gains (loss) 3 (282) (177) (37%) Unlock benefit % Restructuring and other (costs) (58) (10) (83%) Income (loss) from disc. operations (1) (2) 100% Net income (loss) ($46) $314 NM 4Q13 core earnings of $456 million, up 78% Lower catastrophe losses (CATs) and improved Property & Casualty (P&C), Group Benefits and Mutual Funds results Core earnings per diluted share 1 of $0.94, up 81% over 4Q12 Weighted average diluted shares declined 1% as 2013 share repurchases was largely offset by dilutive impact of warrants and stock compensation due to 61% stock price appreciation in 2013 Net income of $314 million versus 4Q12 net loss of $46 million Core earnings per diluted share $0.52 $ % Wtd. avg. diluted common shares (1%) 1. Denotes financial measure not calculated based on generally accepted accounting principles 2. In millions 3. Net realized capital gains (loss), net of tax and deferred acquisition costs (DAC), not in core earnings 4. 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 3

4 Excluding 4Q12 Items, 4Q13 Core Earnings Per Diluted Share Rose 22% Items Included in Core Earnings 4Q12 4Q13 Individual Life and Retirement Plans core earnings $43 $- CAY catastrophes (above) below outlook (174) 24 Favorable (unfavorable) PYD (6) (10) Other items 1 17 (14) Items included in core earnings ($120) $0 Per diluted share ($0.25) $ Other items in 4Q12 relate to a retiree prescription drug tax benefit. Other items in 4Q13 relate to a tax adjustment Items including CATs below outlook, prior year loss reserve development (PYD) and an unfavorable tax adjustment had no net impact on 4Q13 core earnings 4Q12 included net unfavorable items totaling $120 million ($0.25 per diluted share), principally Storm Sandy losses Included $43 million of core earnings from businesses sold in January 2013 Excluding these items from both periods, core earnings per diluted share rose 22% 4Q13 income from limited partnerships and other alternative investments were $52 million, after-tax, versus $29 million, after-tax, in 4Q12 Annualized limited partnerships yield, before tax, of 11% in 4Q13 versus 6% in 4Q12 4

5 includes the resolution of an item under the spin-off agreement with The Hartford s former parent and an insurance recovery from the company s insurers for past legal expenses associated with closed litigation in 3Q13, partially offset by an unfavorable tax adjustment in 4Q13 Full Year 2013 Core Earnings of $1.7 billion, up 26% ($ in millions except per diluted share amounts; after tax) Net income (loss) ($38) $176 Net realized capital gains (loss), net of tax and DAC, excluded from core earnings 5 (410) (701) Unlock benefit (charge) 28 (525) Loss on extinguishment of debt (587) (138) Income (loss) from disc. operations 62 (134) Restructuring and other costs (129) (44) Net reinsurance gain (loss) on dispositions (388) (24) Core earnings $1,386 $1,742 Core earnings per diluted share $2.85 $3.55 Weighted average diluted shares Items Included In Core Earnings: Individual Life and Retirement Plans core earnings $164 $-- CAY catastrophes (above) below outlook (210) 103 Favorable (unfavorable) PYD 3 (125) Other Items included in core earnings (26) 19 Per diluted share ($0.05) $0.04 Full year core earnings of $1,742 million, up 26% from 2012 Core earnings per diluted share of $3.55, up 25% over 2012 P&C, Group Benefits and Mutual Funds core earnings rose 41% over 2012 due to higher margins and lower CATs Talcott Resolution core earnings were down 9% due to variable annuity (VA) runoff and loss of earnings from businesses sold in January core earnings per diluted share increased 21%, excluding PYD, CATs below (above) outlook, sold businesses and other items in 2013 and 2012 Net income of $176 million versus a net loss of $38 million in 2012

6 4Q13 Book Value Per Diluted Share, ex-aoci, of $39.30 Book Value Per Diluted Share, ex. AOCI $40.00 $39.09 $38.44 $38.91 $39.30 After-Tax Net Unrealized Gain on Investment Portfolio Versus 10 Year Treasury $3, % $2, % 2.52% $1, % 3.04% $1,135 $1,083 Net unrealized gains on investment portfolio 10-year U.S. Treasury Rate $39.30 book value per diluted share (BVPS), excluding accumulated other comprehensive income (AOCI) 1, at Dec. 31, 2013 Down 2% from Dec. 31, 2012; up 1% since Sept. 30, 2013 Reduction since Dec. 31, 2012 due to net realized capital losses (principally international VA hedging), unlock charge, loss from discontinued operations, and loss on extinguishment of debt $39.14, including AOCI, at Dec. 31, 2013 Down 15% from $45.80 at Dec. 31, 2012; up 1% since Sept. 30, 2013 Net unrealized gains on investment portfolio totaled $1.1 billion at Dec. 31, 2013, down from $3.8 billion at Dec. 31, 2012 due to higher interest rates and sold businesses Equity repurchases totaled $225 million in 4Q13 and $633 million for full year 2013 Average price of $31.20 per common share for 2013 repurchases, 20% below year-end BVPS, ex. AOCI 6 1. Denotes financial measure not calculated based on generally accepted accounting principles

7 Full Year 2013 Core Earnings ROE Improved to 9.0% 12 Month Trailing Core Earnings Return on Equity core ROE of 9.0%, up from 9.0% 7.0% in % 7.2% 7.6% 8.0% 2013 core earnings ROE excluding certain items was 8.6% Items include favorable CATs, PYD and other items as well as an adjustment for higher returns on limited partnerships and other alternative investments relative to 6% plan (slide 5) 7 1. Denotes financial measure not calculated based on generally accepted accounting principles

8 Capital Resources Rose $1.1 Billion Since Year-End 2012 Capital Resources: ($ in billions) Totals may not add due to rounding Dec Dec U.S. P&C subsidiaries $7.7 $8.0 U.S. Life subsidiaries U.S. statutory surplus $14.1 $14.7 HLIKK 1 statutory capital Insurance company capital $15.2 $15.9 Holding company resources Total capital resources $16.6 $17.7 Capital resources totaled $17.7 billion at Dec. 31, 2013, a $1.1 billion increase over Dec. 31, 2012 $2.3 billion of debt payments, equity repurchases, common and preferred stock dividends, and interest expense, before tax made in 2013 U.S. Life statutory surplus up $0.2 billion to $6.6 billion primarily due to the January 2013 business, net of dividends to the holding company Holding company resources increased $0.5 billion, totaling $1.9 billion at Dec. 31, Japan HLIKK capital is calculated according to Japanese GAAP (JGAAP) 2. Cash and investments 8

9 2013 GAAP and Statutory VA Impacts Consolidated GAAP Basis (before tax and DAC) ($ in millions) 1Q13 2Q13 3Q13 4Q13 FY13 (Increase) decrease in GMWB net liability 1 $404 $163 $378 $185 $1,130 (Increase) decrease in SOP 03-1 reserves Increase (decrease) in fair value of hedge assets 1 (613) (983) (511) (581) (2,688) Net GAAP impact ($128) ($784) ($105) ($358) ($1,375) GMWB & SOP 03-1 reserves at end of period $1,446 $1,190 $790 $554 $554 Consolidated U.S. Statutory Basis (before tax) ($ in millions) (Increase) decrease in VACARVM liability 2 $900 $236 $289 $378 $1,803 Increase (decrease) in fair value of hedge assets 3 (587) (997) (484) (551) (2,619) Net U.S. statutory impact $313 ($761) ($195) ($173) ($816) Total statutory VA reserves 2,4 $2,114 $1,823 $1,517 $1,078* $1,078* Market Levels at End of Quarter 1Q13 2Q13 3Q13 4Q13 FY 13 S&P Year Treasury 1.87% 2.52% 2.64% 3.04% 3.04% Yen/$ Includes HLIKK (Japan) hedges; change in value included in GAAP but not in U.S. statutory; HLIKK is not a U.S. statutory entity. 1Q13 has been restated to exclude UK 2. 1Q13 through 4Q13 include US VA reserves of $614, $589, $373, and $257, respectively, and Japan VA reserves of $759, $548 $475, and $213, respectively 3. 1Q13 through 3Q13 include UK 4. 1Q13 through 4Q13 include HLIKK JGAAP reserves of $741, $686, $669, $608*; reserves are net of cash surrender value in the separate account (* preliminary estimate) 9

10 Fourth Quarter 2013 Presentation P&C (Combined)

11 4Q13 P&C (Combined) 1 Core Earnings of $300 Million $2,314 P&C (Combined) Written Premiums ($ in millions) $2,523 $2,501 $2,556 $2,349 P&C (Combined) Combined Ratio Breakdown CATs and PYD Combined ratio, ex-cats and PYD 4Q13 P&C (Combined) core earnings were $300 million versus $54 million in 4Q12 Lower CATs and improved current accident year (CAY) results versus 4Q12, which included Storm Sandy losses of $228 million, after-tax Written premiums increased 2% over 4Q12 1% growth in P&C Commercial 3% growth in Consumer Markets Combined ratio improved 14.3 points to 94.9 principally due to lower CAY CATs, slightly offset by higher PYD; 1.1 points of CAY CATs in 4Q13 versus 13.5 points in 4Q12 PYD of 0.6 points in 4Q13 versus 0.4 in 4Q12 Improved combined ratio, ex-cats and PYD 2, of 93.2, 2.2 points better than 4Q13 Improvement in P&C Commercial slightly reduced by lower Consumer Markets underwriting margins P&C (Combined) consists of the P&C Commercial, Consumer Markets and P&C Other segments 2. Denotes financial measure not calculated based on generally accepted accounting principles

12 Fourth Quarter 2013 Presentation P&C Commercial

13 4Q13 P&C Commercial Underwriting Margins Improved P&C Commercial Combined Ratio 4Q13 combined ratio of 93.7 improved 18.6 points versus 4Q12 due to: Better CAY underwriting results; CAY CATs and PYD Figures may not add due to rounding Combined ratio, ex-cats and PYD 93.7 Decreased CAY CATs of 12.9 points, largely due to Storm Sandy in 4Q12; and Reduced unfavorable PYD; 4Q13 included unfavorable PYD of only 0.8 points Combined ratio, ex-cats and PYD, improved 5.3 points versus 4Q12, reflecting margin improvement in all three business lines Small Commercial improved 6.9 points to 85.9 Middle Market improved 4.2 points to 94.8 Specialty improved 10.6 points to

14 Stable Pricing in 4Q13 With Strong Retention $1,454 $195 $545 $705 P&C Commercial Written Premiums $1,645 $248 $546 ($ in millions) $1,533 $1,567 $219 $248 $186 $518 $570 $555 $842 $787 $740 $715 Small Commercial Middle Market Specialty $1,463 Standard Commercial 1 Renewal Written Pricing 8% 8% 8% 8% 8% Strong renewal pricing continued in 4Q13 Achieved renewal pricing increases of 8% in Standard Commercial 1, stable with the last five quarters 8% average for full year 2013 Written premiums rose 1% versus 4Q12: Small Commercial rose 1% Middle Market rose 2% Specialty decreased 5% due to non-renewals and cancellations in programs business Policy retention remained solid in Standard Commercial Small Commercial policy retention was 82% in 4Q13 versus 83% in 4Q12 Middle Market policy retention was 79% in 4Q13, stable with 4Q Standard Commercial includes Small Commercial and Middle Market business lines

15 Small Commercial: 4Q13 Results Driven by Sustained Pricing and Underwriting Initiatives Small Commercial Written Premiums & Retention $842 ($ in millions) $787 $740 $705 $134 $715 $125 $109 $115 $111 83% % New Business Retention Small Commercial Combined Ratio Breakdown % 81% 82% Written premiums increased 1% over 4Q12 Aggregate renewal written price increase of 8%; workers compensation and commercial auto were up 7% and 11%, respectively New business premium totaled $111 million, up 2% versus 4Q12 Policy count retention strong at 82% Small Commercial continued to deliver outstanding underwriting results in 4Q13 Continued improvement in combined ratio to 85.8 for 4Q13 versus in 4Q12 driven by lower CATs and strong CAY underwriting results Combined ratio, ex-cats and PYD, of 85.9 improved 6.9 points from 92.8 in 4Q12, driven by better workers compensation and non-cat property results CATs and PYD Combined ratio, ex-cats and PYD 15

16 Middle Market: Improved Margins and Product Mix Middle Market Written Premiums & Retention $545 $80 $97 79% $546 77% ($ in millions) $518 $116 $570 $555 $107 $102 79% 80% 79% New Business Retention Middle Market Combined Ratio Breakdown (4.2) CATs and PYD Combined ratio, ex-cats and PYD Middle Market 4Q13 written premiums rose 2% over 4Q12 due to new business growth in property and general liability Renewal written price increase of 7%; workers compensation and property up 8% and commercial auto up 10% Policy count retention of 79%, stable with 4Q12 New business premium rose to $102 million, up 28% compared with 4Q12 Continued to broaden product mix Workers compensation represented 30% of new business in 4Q13 down from versus 38% in 4Q11 4Q13 margin expansion worth lower CATs and improved workers compensation results 4Q13 combined ratio of 97.1, down 20 points from 4Q12, driven by lower CAY CATs Combined ratio, ex-cats and PYD, of 94.8 improved 4.2 points versus 4Q12 16

17 Specialty: Aggressive Actions Continued to Drive Margin Improvement in 4Q13 $195 Specialty Written Premiums ($ in millions) Specialty continues to deliver underwriting margin improvements $248 $219 $248 $186 Specialty Combined Ratio Breakdown (6.3) CATs and PYD Combined ratio, ex-cats and PYD Q13 combined ratio of 102.4, down 2.5 points from 4Q12, reflects improved underwriting results, ex-cats and PYD 4Q13 combined ratio, ex-cats and PYD, of improved 10.6 points versus 4Q12, principally driven by margin improvement in National Accounts Specialty continues to focus on targeted rate and underwriting actions All transportation programs have been exited Written premiums decreased 5% versus 4Q12 as non-renewal and pricing actions in Captives and Programs (~40% decline) were offset by growth in National Accounts (~30% increase) 17

18 Fourth Quarter 2013 Presentation Consumer Markets

19 Consumer Markets: Top Line Growth Continued in 4Q13 With Strong Pricing And Retention $11 Core Earnings and Combined Ratio 1 $73 ($ in millions) $15 $ $49 $107 $30 $77 Core Earnings Combined ratio, ex-cats and PYD New Business Premium ($ in millions) $135 $127 $117 $35 $34 $30 $100 $93 $87 $126 $32 $94 Auto Home Strong sales momentum, up 18% with new business growth in all channels; new business premium over 4Q12 18% growth in AARP Direct, 43% in AARP Agency, and 7% in Other Agency Net written premiums increased 3% due to steady retention, strong new business growth and sustained renewal written pricing increases Combined ratio, ex-cats and PYD, of 93.6, 3.6 points higher than 4Q12 Modest CAY adjustments in auto liability Increase due to non-cat weather in homeowners returning to more normal levels versus favorable levels in 4Q12 Both auto and homeowners retention were stable at 86% in 4Q Excludes CATs and PYD and denotes a financial measure not calculated based on generally accepted accounting principles

20 4Q13 Auto Written Premiums Up 2% Auto Combined Ratio Auto written premiums increased 2% over 4Q12 due to a 22% increase in new business and stable retention Auto Renewal Written Price Increases and Policy Count Retention 5% 5% 5% 5% 5% 86% 86% 86% 86% 86% Auto combined ratio, ex-cats and PYD, increased 2.2 points versus 4Q12 Included 2.4 points for prior quarter CAY adjustments in auto liability, driven by increasing frequency trends in second half compared to favorable first half level Adjusted for prior quarter CAY adjustments, 4Q13 auto margins essentially stable with 4Q12 Renewal written price increases and policy retention remained steady 5% renewal written price increases and 86% policy count retention stable to prior quarter and full year Renewal Price Increases Policy Count Retention Excludes CATs and PYD and denotes a financial measure not calculated based on generally accepted accounting principles

21 Homeowners Top Line Growth Continues in 4Q Homeowners Renewal Written Price Increases and Policy Count Retention 8% 8% 6% 6% Homeowners Combined Ratio 1 Homeowners written premiums up 5% over 4Q12 on renewal pricing increase 70.6 and continued strong retention 7% 88% 87% 87% 86% 86% Renewal Price Increases Policy Count Retention New business premium rose 7% over 4Q12 4Q13 homeowners combined ratio, ex- CATs and PYD, increased 4.9 points from 4Q12 4Q13 weather and non-weather severity returned to a more normal level compared with favorable 4Q12 levels Renewal written price increases rose to 8% from 6% in 4Q12 Continued focus on rate increases in homeowners to incorporate higher CAT experience Modest impact on policy count retention, at 86% in 4Q13 versus 88% in 4Q Excludes CATs and PYD and denotes a financial measure not calculated based on generally accepted accounting principles

22 Fourth Quarter 2013 Presentation Group Benefits

23 Group Benefits: 41% 4Q13 Core Earnings Increase Reflects Pricing Actions and Improving Loss Trends $39 3.8% Core Earnings & After-Tax Margin 1 ($ in millions) $30 3.2% $37 $36 3.9% 3.9% Fully Insured Ongoing Premiums 1 & Loss Ratio 1 ($ in millions) $55 5.9% Core earnings After-Tax Margin $ % 77.4% $812 $822 $817 $ % 76.7% 72.7% 4Q13 core earnings of $55 million rose 41% from 4Q12 Loss ratio improved 4.3 points from 4Q12 to 72.7% reflecting: Improved long-term disability recoveries; Lower incidence trends; and Improved pricing 4Q13 core earnings after-tax margin was 5.9% Full year 2013 core earnings after-tax margin of 4.3% Fourth quarter results reflect favorable seasonal trends 4Q13 fully insured sales of $58 million rose 4% from 4Q12 Premiums Loss Ratio Excludes buyout premiums

24 Fourth Quarter 2013 Presentation Mutual Funds

25 Mutual Funds: Higher Core Earnings And Improved Net Flows $16 $61.6 Mutual Funds Core Earnings & AUM 1 Core earnings of $20 million, up 25% $20 $20 $20 $18 from $16 million in 4Q12 due to higher revenue driven by 15% increase over $65.8 $63.6 $66.8 $70.9 4Q12 in Mutual Funds assets under management (AUM), excluding annuity, to $70.9 billion $26.0 $26.6 $25.9 $25.6 $25.8 Annuity AUM MF AUM Core earnings Mutual Funds Sales & Net Flows ($ in millions) $3,153 ($1,057) $4,104 $(498) $3,726 $3,787 $3,555 $(2,939) $(645) $(442) Fund performance remains solid, particularly for equity funds 74%, 68% and 67% of equity funds beat peers on a 1-, 3- and 5-year basis, respectively 2 Sales of $3.6 billion, up 13% over 4Q12 Up 28% for full year 2013 Net outflows of $0.4 billion, improved from $1.1 billion in 4Q12 ($4,210) 4Q12 ($4,602) ($4,432) ($6,665) 1Q13 2Q13 3Q13 Sales Redemptions Net Flows ($3,997) 4Q Core earnings $ in millions and AUM $ in billions 2. Hartford Mutual Funds (HMF) only on Morningstar net of fees basis

26 Fourth Quarter 2013 Presentation Talcott Resolution

27 Talcott Resolution: Reducing Size and Risk Core Earnings (Loss) ($ in millions) 4Q12 4Q13 Change U.S. Annuity $96 $81 (16)% International Annuity % Institutional and other (53)% Core earnings $202 $173 (14)% Unlock benefit Restructuring and other costs (14) Income (loss) from discontinued operations Net realized gains (losses) and other, after tax and DAC, excluded from core earnings (2) (375) (233) Net income (loss) $(148) $(15) NM Core earnings declined 14% in 4Q13 to $173 million due to runoff of U.S. and Japan VA blocks and loss of earnings from sold businesses Partially offset by lower amortization expense as a result of Japan DAC write-off in 1Q13 and higher income on limited partnerships and other alternative investments ESV costs totaled $3 million, aftertax and DAC, in 4Q13 27

28 4Q13 Japan VA Full Annualized Surrender Rate Exceeds 40% Japan VA Retained NAR 3 & Annualized Full Surrender Rates ($ in billions) 34.8% 41.5% 4Q13 Japan VA full surrender rate of 41.5% versus 30.8% in 3Q13 and 3.7% in 4Q12 $4.8 $ % $2.5 $1.3 $1.8 $0.9 $1.2 $0.5 $0.6 $0.1 GMDB Retained NAR GMIB Retained NAR Full Surrender Rate 411, % Japan VA Policy Counts 400,000-26% 368, % 341, ,000 Policy count decreased 26% during 2013, a permanent reduction in risk Full year 2013 full surrender rate of 28.8% versus 3.4% in 2012 due to improved moneyness 1 and aging of block Moneyness has continued to improve and the percentage of the block beyond the surrender charge period has increased 80% of GMIB contracts out-the-money 2, improved from 53% in 3Q13 and 3% in 4Q12 Average moneyness of 3% for contracts inthe-money, versus 5% in 3Q13 and 12% in 4Q12 76% of Japan block beyond surrender charge period at Dec. 31, 2013 versus 62% at Dec. 31, Amount by which a contract is in- or out-of-the-money 2. Those contracts whose current account value exceeds the guarantee level 3. Retained net amount at risk (NAR) the difference between the guarantee and the account value for all in-the-money (ITM) accounts at a point in time, net of reinsurance but excluding hedging impacts

29 95% Of U.S. VA GMWB Contracts Out-Of-The-Money U.S. VA Retained NAR & Annualized Full Surrender Rates ($ in billions) $ % $1.5 $1.5 $1.2 $1.0 $0.5 $0.3 $0.3 $0.2 $0.1 GMDB Retained NAR GMWB Retained NAR Full Surrender Rate 904, % 873, % 20.3% U.S. VA Policy Counts -14% 839, , % 774,000 U.S. VA full surrender rates were 14.5% in 4Q13 versus 20.3% in 3Q13 and 10.4% in 4Q12 Reduced surrenders from Enhanced Surrender Value (ESV) program and other initiatives in 4Q13; added 1.4 points to 4Q13 surrender rate versus 6.0 points in 3Q13 Cumulative ESV program acceptance rate of 38% Policy count declined 14% year-over-year, a permanent reduction in risk Full year 2013 full surrender rates of 16.7% versus 11.1% in 2012 due to improved moneyness and aging of the block and the impact of ESV and other initiatives Moneyness has continued to improve and the percentage of the block beyond the surrender charge period has increased 95% of GMWB contracts out-of-the-money, improved from 91% in 3Q13 and 77% in 4Q12 Average moneyness of 12% for contracts in-themoney 88% of U.S. block beyond surrender charge period versus 85% at Dec. 31, 2012

30 Fourth Quarter 2013 Presentation 2014 Outlook

31 2014 Core Earnings Outlook Of $1.65 Billion to $1.75 Billion Key Drivers 2013 Actual 2014 Outlook 2014 core earnings outlook of $1.65 billion to $1.75 billion Consolidated core earnings $1,742 $1,650 - $1,750 Key Business Metrics: P&C Commercial combined ratio Consumer Markets combined ratio P&C Catastrophe loss ratio 2 3.2% 4.7% Group Benefits after-tax margin 4.3% 4.5% - 5.0% Talcott Resolution core earnings $735 $560 - $580 Annualized investment portfolio yield 3 4.3% 4.1% Key Market Metrics: S&P 500 annualized return 29.6% 4.0% 10 Year Treasury yield, at year-end 3.0% 3.2% 2014 outlook reflects: Margin improvements in P&C and Group Benefits Higher CAT outlook than 2013 results Talcott Resolution core earnings of $560 to $580 million Limited partnerships and other alternative investments yield of 6%, versus 10% result in outlook up modestly over 2013, adjusted for CATs, PYD, limited partnership investment income and other items on slide 5 1. Excludes catastrophes and PYD and is a financial measure not calculated based on generally accepted accounting principles 2. Outlook includes P&C catastrophe ratio budget of 2.5% in P&C Commercial and 8.3% in Consumer Markets 3. Yields calculated using annualized net investment income (excluding income related to equity securities, trading) divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding equity securities, trading, repurchase agreement and dollar roll collateral, and consolidated variable interest entity non-controlling interests 31