The Hartford Insurance Group, Inc. · NYSE:HIG

The Hartford Insurance — The Hartford Financial Services Group — FY2013 Earnings Presentation

38 slides from The Hartford Insurance's earnings presentation, Feb 4, 2014

  1. Slide 1: 2013 Results and 2014 Outlook Presentation

    2013 Results and 2014 Outlook Presentation The Hartford Financial Services Group, Inc. February 4, 2014 Copyright © 2014 by The Hartford. All rights reserved

  2. Slide 2: Safe Harbor Statement

    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 forward-

  3. Slide 3: Liam E. McGee, Chairman, President and CEO

    2013 Results and 2014 Outlook Presentation The Hartford Financial Services Group, Inc. Liam E. McGee Chairman, President and Chief Executive Officer Copyright © 2014 by The Hartford. All rights reserved

  4. Slide 4: 4Q13 A Strong Finish to an Outstanding Year

    4Q13 A Strong Finish to an Outstanding Year Executed on strategy and delivered strong results for shareholders in 2013 – Core earnings1 in P&C, Group Benefits and Mutual Funds increased 41% – Significantly reduced size and risk of Talcott Resolution; Japan and U.S. variable annuity (VA) policy count

  5. Slide 5: A Consistent Strategy

    A Consistent Strategy Drive Further Increase Greater Financial Profitable + Reduce Size & + Efficiency and = Strength and Growth Risk of Talcott Effectiveness Flexibility Shareholder Value Creation Copyright © 2014 by The Hartford. All rights reserved

  6. Slide 6: Momentum Continues in 2014

    Momentum Continues in 2014 • Core earnings outlook $1.65 billion to $1.75 billion − Growth from P&C, Group Benefits and Mutual Funds offsets decline in Talcott Resolution − Competitive advantage in Small Commercial, Middle Market and Consumer Markets − VA surrenders expected to remain elevated − Gro

  7. Slide 7: Commercial Markets

    2013 Results and 2014 Outlook Presentation Commercial Markets Doug Elliot President, Commercial Markets Copyright © 2014 by The Hartford. All rights reserved

  8. Slide 8: P&C Commercial 2013: Significant Margin Improvement

    P&C Commercial 2013: Significant Margin Improvement Core Earnings $827 • Strong finish to 2013 with significant ($ in millions) underlying margin improvement across the three businesses $511 – Core earnings up 62% over 2012 $389 – Combined ratio, excluding catastrophes (CATs) and prior year loss res

  9. Slide 9: Small Commercial 2013 Results: Top-Line Growth and Improved Margins

    Small Commercial 2013 Results: Top-Line Growth and Improved Margins Written Premiums and Policy Count Retention • Written premiums grew 2% in 2013 ($ in millions) $3,084 $3,017 − Renewal written pricing increase of 7%, well $2,887 ahead of loss cost trends 83% 83% 81% − New business totaled $485 mil

  10. Slide 10: Middle Market 2013 Results: Improved Margins and Better Product Mix

    Middle Market 2013 Results: Improved Margins and Better Product Mix Written Premiums and Policy Count Retention • Top line stable versus 2012; product mix ($ in millions) $2,280 continuing to improve $2,195 $2,189 − Written premium trends benefiting from solid retention 78% 77% 79% − New business pr

  11. Slide 11: Specialty 2013 Results: Pricing Actions Driving Margin Improvement

    Specialty 2013 Results: Pricing Actions Driving Margin Improvement Written Premiums • Strong top-line performance in National ($ in millions) $973 $964 Accounts $901 – National Accounts written premiums increased 8%; nearly four new accounts written for every one lost – Strong National Accounts rete

  12. Slide 12: Group Benefits 2013: Multi-Year Pricing Initiative Driving Turnaround

    Group Benefits 2013: Multi-Year Pricing Initiative Driving Turnaround Core Earnings1 & Loss Ratio • Core earnings improved 56% to $158 ($ in millions) $158 million in 2013, well ahead of outlook • Loss ratio improved 3.9 points to 75.6% in $101 2013 $86 − Driven by strong disability loss ratios 79.5

  13. Slide 13: P&C Commercial 2014 Outlook

    P&C Commercial 2014 Outlook Combined Ratio • Investing heavily in our capabilities 102.9 ‒ Addressing product development opportunities 96.1 92.5–94.5 ‒ Building more efficient business platforms ‒ Creating easy-to-use technology applications • Strong market strategy in each business ‒ Small Commerc

  14. Slide 14: Group Benefits 2014 Outlook: Core Earnings Margin Expected to Improve

    Group Benefits 2014 Outlook: Core Earnings Margin Expected to Improve Core Earnings After-Tax Margin1 • Core earnings after-tax margin expected in the range of 4.5% to 5.0% compared to 4.3% in 2013 4.5%-5.0% 4.3% • Persistency on National and Middle Market accounts renewing in January 2014 expected

  15. Slide 15: Consumer Markets

    2013 Results and 2014 Outlook Presentation Consumer Markets Andy Napoli President, Consumer Markets Copyright © 2014 by The Hartford. All rights reserved

  16. Slide 16: Consumer Markets Continued Profitable Growth and Sustained Margins in 2013

    Consumer Markets Continued Profitable Growth and Sustained Margins in 2013 Core Earnings $205 • Core earnings grew 29% in 2013 due to ($ in millions) lower CATs and a modest improvement in $159 the expense ratio − Combined ratio of 95.2 improved 2.2 points from 97.4 in 2012, principally due to lower

  17. Slide 17: Consumer Markets 2014 Outlook

    Consumer Markets 2014 Outlook Combined Ratio • Expect progress in 2014 toward strategic 97.4 objective to achieve above average 95.2 95.3-98.3 industry growth and 92.0 combined ratio 6.6 4.6 8.3 − Written premium growth of 2% to 4% in 2014 − Combined ratio, ex-CATs and PYD, of 87.0 to 90.0 • AARP Au

  18. Slide 18: Christopher J. Swift, EVP and Chief Financial Officer

    2013 Results and 2014 Outlook Presentation The Hartford Financial Services Group, Inc. Christopher J. Swift Executive Vice President and Chief Financial Officer Copyright © 2014 by The Hartford. All rights reserved

  19. Slide 19: Mutual Funds 2013 Results and 2014 Outlook

    Mutual Funds 2013 Results and 2014 Outlook Mutual Funds Core Earnings & AUM1 • Core earnings rose 5% to $78 million $98 • Net outflows of $4.5 billion in 2013 roughly flat versus 2012, but improved $74 $78 over the course of the year $57.9 $61.6 $70.9 − Improvement in net flow performance being driv

  20. Slide 20: Talcott Resolution: Reduction In Size and Risk Continues in 2014

    Talcott Resolution: Reduction In Size and Risk Continues in 2014 $944 Core Earnings • Talcott core earnings down 9% from ($ in millions) $810 2012 to $735 million $222 $735 − Decline due to runoff of VA businesses $192 $85 and loss of earnings from sold businesses; partially offset by lower DAC amor

  21. Slide 21: Corporate Core Loss Reduced in 2013

    Corporate Core Loss Reduced in 2013 • Corporate core loss totaled $250 million Corporate Core Loss ($ in millions) in 2013 – Improvement related to a reduction in interest expense – Corporate segment benefited by $41 million in 2013 from insurance recoveries, settlements and tax-related items, parti

  22. Slide 22: 2013 Core Earnings of $1.7 Billion, Up 26%

    2013 Core Earnings of $1.7 Billion, Up 26% ($ in millions except per diluted share amounts; after tax) 2012 2013 • 2013 core earnings of $1,742 million Core earnings $1,386 $1,742 rose 26% over 2012 Core earnings per diluted share $2.85 $3.55 • 2013 core earnings per diluted share Core earnings ROE1

  23. Slide 23: 2014 Core Earnings Outlook of $1.65 Billion to $1.75 Billion

    2014 Core Earnings Outlook of $1.65 Billion to $1.75 billion 2013 2014 • 2014 core earnings outlook of Key Drivers Actual Outlook $1.65 billion to $1.75 billion $1,650 - − Core ROE in the range of 8.7% to Consolidated core earnings $1,742 $1,750 9.2% Key Business Metrics: − 2014 outlook up slightly

  24. Slide 24: $2.656 Billion Capital Management Plan for 2014 – 2015

    $2.656 Billion Capital Management Plan for 2014 – 2015 • $2.656 billion capital management plan for 2014 and 2015 − Plan reflecting strong capital position, financial flexibility and improved operating performance − Continued philosophy of balanced capital management • $2 billion of equity repurchas

  25. Slide 25: Talcott's VA Market Consistent Value Totals a Net Asset of $1.7 Billion

    Talcott’s VA Market Consistent Value Totals a Net Asset of $1.7 Billion at Year-End 2013 • Dec. 31, 2013 market consistent Market Consistent Value Mar. 2013E Dec. 2013E valuation1 (MCV) of Talcott Resolution’s ($ in billions) Asset (Liability) Asset (Liability) U.S. and Japan VA blocks improved U.S.

  26. Slide 26: Base Scenario VA Cash Flows are Positive $3.0 Billion, Net of Hedges

    Base Scenario VA Cash Flows are Positive $3.0 Billion, Net of Hedges Base Scenario Cash Flows ($ in billions, Dec.31, 2013) • Present value (PV) of cumulative cash flows from U.S. and Japan VA blocks total $3.0 billion, before tax, asset in base scenario − U.S. VA positive $2.4 billion, up from $2.0

  27. Slide 27: Capital Resources Rose $1.1 Billion Since Year-End 2012

    Capital Resources Rose $1.1 Billion Since Year-End 2012 Capital Resources: Dec. 2012 Dec. 2013 • Capital resources totaled $17.7 billion ($ in billions) at Dec. 31, 2013, a $1.1 billion U.S. P&C subsidiaries $7.7 $8.0 increase from Dec. 31, 2012 U.S. Life subsidiaries 6.4 6.6 • Holding company resou

  28. Slide 28: Capital Margins Remain Strong, Including Full Execution of New Capital Management Plan

    Capital Margins Remain Strong, Including Full Execution of New Capital Management Plan Projected Dec. 31, 2015 Capital Margins1 ($ in billions) Base Favorable Stress Scenario Scenario Scenario December 2015 $7.6 $8.1 $2.0 Capital margins include execution of 2014 and 2015 capital management plan Tal

  29. Slide 29: 1Q14 Outlook

    1Q14 Outlook 1Q14 core earnings expected in the range of $450 million to $475 million, or $0.94 to $0.99 per diluted share – Assumes catastrophe losses of $57 million, after-tax – PYD for workers’ compensation discount of $6 million, after-tax – Limited partnership and other alternative investment y

  30. Slide 30: Appendix

    2013 Results and 2014 Outlook Presentation Appendix The Hartford Financial Services Group, Inc. Copyright © 2014 by The Hartford. All rights reserved

  31. Slide 31: What is Market Consistent Value (MCV)?

    What is Market Consistent Value (MCV)? What is Included in Calculation of MCV? • MCV1 is similar to FAS 133/157 fair value for guaranteed minimum withdrawal benefits (GMWB) Average of present value of cash flows from >5,000 stochastic scenarios  accounting but applied to all VA guarantees, includin

  32. Slide 32: Market Scenarios Used in Cash Flow and Capital Margin Projections

    Market Scenarios Used in Cash Flow and Capital Margin Projections Dec 31, 2013 Actual Base Favorable Stress Interest • 10yr Treasury 3.04% • 10yr Treasury 3.44% • Follows forward rates + 50 • 0 – 165bps decrease Rate • 10yr JGB1 0.74% • 10yr JGB1 0.89% bps (US / EU / UK) across term structure in • F

  33. Slide 33: Net Present Value of Cash Flows Include VA Fees, Claims, Expenses and Hedge Gains

    Net Present Value of Cash Flows Include VA Fees, Claims, Expenses and Hedge Gains (Losses) What is Included in Cash Flows? Present Value (PV) of cash flows for one scenario with explicit assumptions for: • Interest rates • Equity returns • FX  • Volatility • Dynamic policyholder behavior Base contr

  34. Slide 34: PV Cash Flows is $3.2 Billion in Favorable Scenario

    PV Cash Flows is $3.2 Billion in Favorable Scenario Favorable Market Scenario Cash Flows ($ in billions, Dec.31, 2013) • In favorable market scenario, cash flows are higher than base case by $0.2 billion, as increased fees and lower expenses are offset by higher hedge losses • In this scenario, Japa

  35. Slide 35: PV Cash Flows is $1.8 Billion in Stress Scenario

    PV Cash Flows is $1.8 Billion in Stress Scenario Adverse Market (SPX 1100) Scenario Cash Flows • In stress scenario, cash flows ($ in billions, Dec.31, 2013) are a positive $1.8 billion • U.S. is $1.5 billion while Japan is $0.3 billion • Hedge gains total $2.1 billion, more than offsetting negative

  36. Slide 36: Positive Total Net Cash Flows in Favorable and Stress Scenarios

    Positive Total Net Cash Flows in Favorable and Stress Scenarios – Dec. 31, 2013 U.S. Japan Total Favorable Stress Favorable Stress Favorable Stress ($ in billions) PV of fees and expenses $4.1 $2.7 $0.7 $0.9 $4.8 $3.5 PV of claims (0.4) (1.8) (0.0) (2.0) (0.4) (3.8) Net cumulative cash flows, before

  37. Slide 37: Talcott Resolution: Non-VA Profile

    Talcott Resolution: Non-VA Profile Private Placement Life Insurance (PPLI) Non-VA Account Value  Account value: $38.7 billion $68.8 Billion as of Dec. 31, 2013  Variable COLI and High Net Worth  Mortality exposure, mitigated by reinsurance and experience rating U.S. Fixed Institutional 15%  Incl

  38. Slide 38: Questions & Answers

    2013 Results and 2014 Outlook Presentation Questions & Answers The Hartford Financial Services Group, Inc. Copyright © 2014 by The Hartford. All rights reserved

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