The Hartford Insurance Group, Inc. · NYSE:HIG
The Hartford Insurance — The Hartford Financial Services Group — FY2014 Earnings Presentation
34 slides from The Hartford Insurance's earnings presentation, Feb 3, 2015
Slide 1: 2014 Results and 2015 Outlook Presentation
The Hartford Financial Services Group, Inc. Investor Presentation February 3, 2015 2014 RESULTS AND 2015 OUTLOOK PRESENTATION Copyright © 2015 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
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-
Slide 3: Christopher J. Swift, Chief Executive Officer
Christopher J. Swift Chief Executive Officer February 3, 2015 2014 RESULTS AND 2015 OUTLOOK PRESENTATION Copyright © 2015 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 4: 2014: An outstanding year for The Hartford
2014: An outstanding year for The Hartford Continued execution of strategy and created value for shareholders: – Expanded margins and increased core earnings return on equity1 (ROE) in Property & Casualty (P&C), Group Benefits and Mutual Funds – Significantly reduced size and risk of Talcott Resolut
Slide 5: Outstanding 2014 financial results
Outstanding 2014 financial results • 2014 core earnings1 increased 9% to $1.55 billion • 2014 core earnings per diluted share of $3.36, up 16% • Increased core earnings ROE to 8.4%, a one point improvement over 2013 • 2014 P&C (Combined)2 underlying combined ratio3 of 91.5%, a 2.9 point improvement,
Slide 6: The Hartford's 2015 Outlook
The Hartford’s 2015 Outlook • 2015 core earnings outlook of $1.55 billion to $1.65 billion – Core earnings growth from P&C, Group Benefits and Mutual Funds to offset decline in Talcott Resolution • Striving for P&C margin expansion through targeted pricing actions and enhanced capabilities • Key sto
Slide 7: Doug Elliot, President: P&C and Group Benefits
Doug Elliot President February 3, 2015 P&C AND GROUP BENEFITS Copyright © 2015 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 8: P&C (Combined) 2014: another year of strong financial performance
P&C (Combined) 2014: another year of strong financial performance across-the-board Written Premiums • P&C (Combined) themes: ($ in millions) $10,244 − 2014 catastrophes (CATs) slightly higher than 2013, but below expectations $9,929 − Net investment income trending down $9,847 due to market, demands
Slide 9: Commercial Lines delivered 20% growth in core earnings
Commercial Lines delivered 20% growth in core earnings Core Earnings • Significant improvement over 2013 ($ in millions) $996 – Core earnings of $996 million, up 20% $827 driven by 4.7 point improvement in combined ratio $511 – CAY combined ratio, before CATs, of 91.5 represented 3.6 points of funda
Slide 10: Small Commercial continues to excel
Small Commercial continues to excel with unique skills in product, distribution and service • Written premiums grew 5% in 2014, Written Premiums and Policy Count Retention ($ in millions) aided by strong retentions $3,243 $3,084 − Retention of 84%, a 3 point improvement $3,017 over 2013 83% 81% 84%
Slide 11: Middle Market margin improvement
Middle Market margin improvement marks culmination of years of underwriting and pricing actions • 2014 CAY combined ratio, before CATs, Written Premiums and Policy Count Retention ($ in millions) of 94.5, an improvement of 4.5 points $2,315 $2,293 $2,271 over 2013 primarily due to margin improvement
Slide 12: Specialty Commercial
Specialty Commercial 2014 results held steady, with another solid year in National Accounts • CAY combined ratio, before CATs, of Written Premiums 100.2 increased 0.6 points due to mix $844 ($ in millions) $819 $811 shift towards National Accounts 135 94 29 173 188 • Strong top- and bottom-line 173
Slide 13: Personal Lines 2014 results
Personal Lines 2014 results: continued profitable growth and improved underlying margins • 2014 core earnings up 2% over 2013 Core Earnings ($ in millions) − Up 12% adjusted for sale of Catalyst 360 $205 $210 − Combined ratio of 95.5 improved 1.4 points $159 − CAY combined ratio, before CATs, of 90.
Slide 14: Group Benefits continues profit improvement
Group Benefits continues profit improvement driven by favorable group life and disability results • 2014 core earnings rose 14% over Core Earnings & Loss Ratio 2013, with after-tax core earnings ($ in millions) $180 $158 margin of 5.2% • Excluding Association – Financial 5.2% $101 Institutions (A-FI
Slide 15: Commercial Lines 2015 outlook
Commercial Lines 2015 outlook • Continue to invest heavily in capabilities, focused on competitive advantages in Commercial Lines Combined Ratio each business; have made extensive 98.1 progress in: 3.0 93.4 91.9 – 93.9 1.9 2.4 ‒ Product development ‒ Business metrics ‒ Easy-to-use technology for dis
Slide 16: Personal Lines 2015 outlook
Personal Lines 2015 outlook • Bringing greater focus to AARP Direct Combined Ratio business in 2015 96.5 – 98.5 96.9 95.5 ‒ New product analytics and improved 4.6 4.9 7.5 marketing capabilities to improve response and conversion • Continuing to refine AARP Agency offering 92.3 90.6 89.0 – ‒ Deeper p
Slide 17: Group Benefits 2015 outlook
Group Benefits 2015 outlook • Group Benefits positioned for top- After-Tax Core Earnings Margin line growth in 2015, with book 5.2% 5.0% - 5.5% performing well 4.3% ‒ Very strong renewal rates and new sales activity in 1Q15 to date ‒ New sales with a Jan. 1 effective date are up 60% in 2015 versus 2
Slide 18: Beth Bombara, Chief Financial Officer
Beth Bombara Chief Financial Officer February 3, 2015 2014 RESULTS AND 2015 OUTLOOK Copyright © 2015 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 19: Mutual Funds 2014 results and 2015 outlook
Mutual Funds 2014 results and 2015 outlook • Core earnings rose 17% to $91 million Mutual Funds Segment Core Earnings • Mutual Fund net outflows of $1.4 billion in $78 ($ in millions) $91 2014 improved significantly over 2013 − Includes $0.7 billion of target date fund liquidations and $0.7 billion
Slide 20: Talcott Resolution: reduction in size and risk continued in 2014
Talcott Resolution: reduction in size and risk continued in 2014 • Core earnings up 5% from 2013 to $433 Core Earnings ($ in millions) million $433 − Higher limited partnership and alternative $412 investment (LP) returns and lower contract $90 $97 holder initiative costs, partially offset by lower
Slide 21: Corporate core losses reduced in 2014
Corporate core losses reduced in 2014 • Corporate core losses totaled $251 Corporate Core Losses million in 2014, roughly flat with ($ in millions) 2013 – $41 million, after-tax, benefits in 2013 2013 2014 2015E from insurance recoveries, Interest expense, before tax $397 $376 $345 - $360 settlement
Slide 22: 2014 investment results strong, despite low rate environment
2014 investment results strong, despite low rate environment • Total annualized investment yield, Consolidated Impairments, Before Tax ($ in millions) before tax, excluding LPs, held up well in low interest rate environment, down from 4.2% to $73 4.1% $59 • 2014 P&C (Combined) investment yield, befo
Slide 23: Shareholders' equity and 2015 capital management plan
Shareholders’ equity and 2015 capital management plan • $3.9 billion capital management plan for 2014 and 2015 ‾ $2.775 billion for equity repurchases Capital Management Actions ‾ $1.156 billion for debt management ($ in millions) • Through Jan. 30, 2015, have completed: $1,996 $1,935 − $1.9 billion
Slide 24: 2014 core earnings of $1,548 million, up 9%
2014 core earnings of $1,548 million, up 9%; 2014 core earnings per diluted share up 16% • 2014 core earnings rose 9% over ($ in millions except per diluted share Change4 amounts; after tax) 2013 2014 2013 due to improved P&C, Group Core earnings $1,419 $1,548 9% Benefits and Mutual Funds margins Co
Slide 25: 2015 core earnings outlook of $1,550 million to $1,650 million
2015 core earnings outlook of $1,550 million to $1,650 million 2014 2015 • 2015 core earnings outlook of Actual Outlook 4% to 11% increase, adjusted Core earnings ($ in millions) $1,548 $1,550 - $1,650 for certain net favorable items Favorable (unfavorable) items: in 2014 CATs favorable to outlook 8
Slide 26: 2015 core earnings ROE expected to increase
2015 core earnings ROE expected to increase • 2015 core earnings ROE Core Earnings ROE versus Cost of Equity1 improvement driven by P&C, 11.7% 10.6% Group Benefits and Mutual Funds 8.7%- 9.2% 7.4% 8.4% – Unlevered core earnings ROE for P&C, Group Benefits and Mutual 1.66 Funds rises from 11.2% in 20
Slide 27: Talcott Resolution statutory surplus allocation and $1.5 billion dividend plan
Talcott Resolution statutory surplus allocation includes $1.5 billion dividend plan for 2015 and 2016 Talcott Resolution Statutory Surplus Allocation As of Dec. 31, 2014 ($ in billions) $5.6 Billion Total Statutory Surplus $1.5 54%, excluding planned dividends $2.2 17%, $0.7 excluding planned $1.2 d
Slide 28: Talcott Resolution capital margin remains above target in stress scenario
Talcott Resolution capital margin, after dividends, remains above target in stress scenario Talcott Resolution Dec. 2016 Base Favorable Stress Projected Capital Margin Scenario Scenario Scenario ($ in billions) Capital margin before dividends to holding company1 $4.3 $4.5 $1.9 Less: 2015–16 dividend
Slide 29: Key drivers of capital margin changes from base to stress
Investment-related impacts and interest rates are key drivers of capital margin changes from base to stress scenario Talcott Resolution Projected 2016 Capital Margin Favorable Stress ($ in billions) Scenario Scenario Base Scenario $2.8 $2.8 Change in projected 2016 capital margin, by product: Operat
Slide 30: Strong holding company cash flows in 2014 and 2015
Strong holding company cash flows in 2014 and 2015 • $2.9 billion positive cash flow in ($ in billions) 2014 2015E 2014, including Japan annuity sale Beginning holding company $1.9 $2.1 resources proceeds Sources of cash • Approximately $1.9 billion in Dividends from subsidiaries: expected subsidiar
Slide 31: 2014 was an outstanding year
2014 was an outstanding year • In 2014, we achieved: − Significant growth in P&C and Group Benefits margins − Substantial reduction in risk at Talcott Resolution − Continued net flow improvement in Mutual Funds • 2015 – Continued momentum − Focus on core earnings growth in P&C, Group Benefits and Mu
Slide 32: Questions and Answers
QUESTIONS AND ANSWERS Copyright © 2015 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 33: Appendix
APPENDIX Copyright © 2015 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 34: Market scenarios used in capital margin projections
Market scenarios used in capital margin projections Dec. 31, 2014 Base Favorable Stress Actual Interest 10-year Treasury • Follows forward • Follows forward rates + 50 • 0–150 bps decrease across Rate 2.17% rates bps term structure in 2015 • 10-year Treasury • 10-year Treasury 3.09% at • Follows for
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