Goldman Sachs Financial Services Conference Liam E. McGee Chairman, President and Chief Executive Officer The Hartford Financial Services Group, Inc. December 10, 2013
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 1995. 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 releases, 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 October 28, 2013 and The Hartford s Investor Financial Supplement for third quarter 2013 which is available at the Investor Relations section of The Hartford s website at http://ir.thehartford.com. 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 http://ir.thehartford.com. In addition, you may automatically receive email alerts and other information about The Hartford when you enroll your email address by visiting the Email Alerts section at http://ir.thehartford.com. 2
2013 Has Been an Important Year for The Hartford Woodbury Financial, Individual Life and Retirement Plans closed by early January Statutory capital benefit of more than $2 billion Progress in reducing the size and risk of variable annuity (VA) blocks Expanded Japan VA hedging program Talcott Resolution now capital-self sufficient 3
Japan Variable Annuity Risk is Very Manageable Japan VA Annualized Full Surrender Rates 34.8% 30.8% 37.0% Favorable markets and aging of the block have driven significant surrender increases in 2013 Number of contracts down 22% in 2013 through Nov. 30, 2013 9.6% 3.7% 4Q12 1Q13 2Q13 3Q13 4Q13 1 Annualized full surrender rate of 37% in the first two months of 4Q13 Up from 30.8% in 3Q13 and 34.8% in 2Q13 411,000 Japan VA Policy Counts -22% 400,000 368,000 341,000 319,000 Continue to evaluate opportunities to reduce size and risk of the block Will evaluate transactions that permanently transfer risk and have attractive economics 4Q12 1Q13 2Q13 3Q13 Nov. 30, 2013 1. Through November 30, 2013 4
Meaningful Reduction in Size and Risk of U.S. VA Block U.S. VA Annualized Full Surrender Rates U.S. variable annuity contracts decreased 13% in 2013 through Nov. 30, 2013 10.4% 14.5% 17.5% 20.3% 16.1% Contract decline driven in part by the Enhanced Surrender Value (ESV) program ESV cumulative acceptance rate of 38% 1 4Q12 1Q13 2Q13 3Q13 4Q13 U.S. VA Policy Counts -13% 904,000 873,000 839,000 802,000 782,000 1 Annualized full surrender rate of 16% in the first two months of 4Q13 Decline from 3Q13 reflects completion of ESV program Plan to introduce additional customer initiatives in 2014 Expect U.K. VA sale to close this week 4Q12 1Q13 2Q13 3Q13 Nov. 30, 2013 1. Through November 30, 2013 5
2013 Has Been an Important Year for The Hartford Significant capital management actions in 2013 Increased dividend 50% Reduced debt by over $800 million On track to complete the $1.25 billion equity repurchase plan by year-end 2014; $563 million repurchased through Dec. 6 Property & Casualty, Group Benefits and Mutual Funds delivering substantially improved results Expect these businesses 2013 core earnings to grow almost 40% over 2012 Significant improvements in margins due to pricing and underwriting actions 6
P&C, Group Benefits and Mutual Funds Expected to Continue to Improve In 2014 Expect 2014 Property & Casualty, Group Benefits and Mutual Funds core earnings growth to offset approximately 20% decline in Talcott core earnings from 2013 Investing in and managing these businesses to drive growth, improve margins and generate higher returns Plan to invest about $1.0 billion through 2016 in areas such as technology, product, distribution and claims Focus on continuing to be a preferred provider to agents and brokers 7
Driving Profitable Growth In Commercial Markets P&C Commercial Market-leading new business platform (ICON) and broadening product portfolio driving core margin improvement 96.1 Combined Ratio 1 2.9 pts 93.2 YTD 12 YTD 13 Group Benefits Meaningful turnaround in profitability, new business pipeline growing Core Earnings Margin 2.0% 1.7 pts 3.7% YTD 12 YTD 13 2.5 point improvement in P&C Small Commercial combined ratio, excluding catastrophes (CATs) and prior year development (PYD), for the first nine months of 2013 Best-in-class new business platform, ICON, driving new business growth P&C Middle Market achieving strong renewal written price increases and a 3.8 point improvement in the combined ratio, ex-cats and PYD, for the first nine months of 2013 Diversifying product portfolio key to profitable growth and partnering with agents and brokers New business growth up 25% in 3Q13 Group Benefits profitability increasing, driven by pricing discipline and improved group disability loss ratios 1. Excluding catastrophes and prior year development (PYD.) Denotes a financial measure not calculated based on generally accepted accounting principles. Year-to-date (YTD) figures through Sept. 30, 3013 8
Profitable Growth In Consumer Markets and Mutual Funds Consumer Markets Focused on margin expansion and growth; AARP Agency a key growth driver New Business Premium $379 $342 11% Mutual Funds Fund performance and marketing initiatives improving sales and net flows Total Mutual Funds Sales $8,688 34% $11,617 Consumer Markets underwriting gain, ex-cats and PYD, increased 18% for the first nine months of 2013, with written premiums growing 2.3% AARP partnership at core of Consumer business AARP Agency has significant growth potential, with new business up 40% YTD in 2013 Mutual Funds goal is to grow through fund performance, increased sales, positive net flows and expense management 60% of funds beat their Morningstar peers over the past year Positive sales trends continuing in 4Q13 YTD 12 YTD 13 YTD figures through Sept. 30, 3013 $ in millions YTD 12 YTD 13 9
4Q13 and 2013 Update 4Q13 core earnings expected to be at the low end of $0.87-$0.92 per diluted share range provided in October Includes catastrophes from the Midwest tornadoes and the recent ice storms 2013 core earnings outlook should approach $1.7 billion, above April 2013 outlook Will provide detailed 2014 core earnings outlook with 4Q13 financial results in February 2014 Optimistic about capital generation in 2014 and beyond In February, will also provide capital management update for 2014 and 2015, including capital return from Talcott 10
Positive Momentum Heading Into 2014 Delivering earnings growth while successfully reducing risk profile Well-positioned to generate profitable growth and superior shareholder value over the next several years 11
Goldman Sachs Financial Services Conference Questions & Answers The Hartford Financial Services Group, Inc.