Investor Presentation: The Hartford Overview...The Hartford’s 2015 Annual Report on Form 10-K, and...

Copyright © 2016 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.

Investor Presentation: The Hartford Overview

The Hartford Financial Services Group, Inc.

March 2016


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-looking 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 news release issued on February 4, 2016, The Hartford’s Quarterly Reports on Form 10-Q, The Hartford’s 2015 Annual Report on Form 10-K, and other filings we make with the U.S. 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 (GAAP). Information regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, is provided in the news release issued on February 4, 2016 and The Hartford’s Investor Financial Supplement for fourth quarter 2015 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

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Copyright © 2016 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 3

The Hartford’s primary operational and financial goals

Achieve profitable growth in P&C, Group Benefits and Mutual Funds

businesses by focusing on five principal areas

Efficiently manage the run-off of and return of capital from Talcott

while maintaining its capital self-sufficiency

Redeploy the excess capital generated by our business to create greater

shareholder value

1. Denotes financial measure not calculated based on generally accepted accounting principles (GAAP)

2. Return on equity

3. Accumulated other comprehensive income

Continue to expand core earnings ROE1, 2, excluding Talcott, and generate

average total value creation of at least 9% as measured by common dividends

paid plus growth in book value per diluted share, excluding AOCI1,3


Is continuing on the path to superior shareholder return

Has a solid financial foundation and is generating significant excess cash flow

Is delivering profitable growth through a clear strategic plan

Has a portfolio of businesses with attractive characteristics

and strong competitive advantages

4

The Hartford:


The Hartford’s businesses

– Have strong market positions

– Have good margins and generate

excess capital

– Have low capital markets sensitivity

• Commercial Lines: Leader in the highly

attractive small and middle market segments

• Personal Lines: Unique 30+ year

partnership with AARP

• Group Benefits: A leading provider of life

and disability protection through employers

• Mutual Funds: A high return business

with consistent cash flows

• Talcott Resolution: Continued

runoff of the annuity blocks and return

of capital to the holding company

THE HARTFORD TODAY

Our businesses have attractive characteristics and strong competitive advantages

1. Denotes financial measure not calculated based on generally accepted accounting principles

2. Corporate core losses, which included interest expenses, were $234 million, and P&C Other

core losses, which included prior accident year development (PYD) on asbestos and

environmental (A&E), were $243 million in 2015

Mutual Funds

4% Group Benefits

10% Personal

Lines 10%

Commercial Lines 52%

Talcott Resolution

24%

2015 Core Earnings1 excluding Corporate and P&C Other2


THE HARTFORD TODAY

P&C – The Hartford is a leading P&C insurer with strong competitive advantages and leading market positions

Core Earnings1

($ in millions)

1. Full year results

2. Per A.M. Best, based on 2014 direct written premiums

• Leader in highly-attractive small commercial segment

• Broad and deep commercial distribution partnerships

• Longstanding Personal Lines partnership with AARP

• Leading choice among agents

• Best-in-class technology

• Recognized for claims excellence

• Leading share in P&C Small Commercial

• #2 in Workers’ Compensation2

• #4 in Commercial Multi-Peril2

• #4 in Direct Personal Lines2

• #9 overall in P&C Commercial2

Leading Market

Positions

Strong Competitive Advantages

$1,021

$1,095 $1,131

Property & Casualty

2013 2014 2015

+41%


THE HARTFORD TODAY

Commercial Lines – The Hartford is an industry leader

Diversified Premium Mix

2015 Earned Premium by Product

47%

10%

9%

19%

9% 3% 3%

Workers’ Compensation

Property

Auto

Package

Liability Professional Liability

Bond

Strong Agent Relationships

95.0

94.7 95.2

98.1

93.4 92.6

2013 2014 2015

Industry Average* The Hartford

Combined Ratio

*Per Conning’s Report 4Q15 P&C Forecast and Analysis reported industry combined ratio

Improving Underwriting, Strong Profitability

Source: March 2015 blind study with The Hartford appointed agents

Best-in-Class Technology


Market Leading Position

Unique Competitive Advantage Best-in-Class Product for AARP Customers

Superior Underwriting with Strong Profitability

THE HARTFORD TODAY

Personal Lines – Long-standing relationship with AARP

30+ year exclusive marketing

partnership with AARP

~3M

~27M

Policies in force AARP Members

Opportunity to further penetrate AARP membership

Major Direct

Personal Lines

Company (per A.M. Best, 2014)

#4

98.4 99.4

100.3

96.9 95.5

97.0

2013 2014 2015

Industry Average* The Hartford

Combined Ratio

*Per Conning’s Report 4Q15 P&C Forecast and Analysis reported industry Combined Ratio

AARP Policies AARP Members

1

1. Of total ~38 million

AARP members,

The Hartford estimates

eligible policyholders

of ~27 million


$3.0 $3.0

2013 2014 2015

Premium2

($ in billions)

9

Leading Provider of Group Life and Disability

Strong Profitability Pivoting to Top-line Growth; Opportunities

in the Voluntary and Small Case Market

Group Benefits Underwriting Complements The Hartford’s Workers’ Compensation Expertise

THE HARTFORD TODAY

Group Benefits – A market leader in group life and disability that complements our P&C businesses

Leader in Group

Disability (in-force premium as of

6/30/15, per LIMRA)

#4

Strong Market

Position in Group Life (in-force premium as of

6/30/15, per LIMRA)

#7

4.3%

5.2% 5.6%

2013 2014 2015

1. Denotes financial measure not calculated based on GAAP; Excludes buyout premiums

Core Earnings Margin1

2. Fully insured ongoing premium, excluding buyout premiums, excluding Association –

Financial Institutions

79.3

77.4 77.4

2013 2014 2015

Loss Ratio

(Excluding Association – Financial Institutions)

$3.1


THE HARTFORD TODAY

Mutual Funds – A successful stand-alone operation generating strong performance and consistent cash flow to the holding company

Delivering on Solid Long-term Fund Performance

Consistent Cash Flow to Holding Company

72% 72% 74% 67%

44% 33%

2013 2014 2015

Equity Fixed Income

% Mutual Funds2 Outperforming Morningstar Peers

Five Year Basis

2. Mutual Fund AUM only on Morningstar net of fees basis as of Dec. 31, 2015

$15.2 $15.2 $17.5

($19.7) ($16.6) ($16.0)

($4.5)

($1.4)

$1.5

Sales

Redemptions

Net Flows

Mutual Fund1 Sales and Redemptions ($ in billions)

$114

$71 $75

2013 2014 2015

Mutual Funds Dividends to Holding Company ($ in millions)

Strong Trend in Sales and Net Flows

$10.9

$2.4 $0.3

$8.6 P&C

Group Benefits

Mutual Funds

Talcott Resolution

Equity by Business 2015YE ($ in billions)

ROE3

37.5%

With Only $300 Million of Equity, Our Highest Return Business

2013 2014 2015

1. Mutual funds sold through retail, bank trust, registered investment advisor and 529 plan channels and excludes Talcott mutual fund assets (company-sponsored mutual fund assets that are held in separate accounts supporting variable insurance and investment products)

3. 2015 Year-End ROE last twelve months


$44.2

$8.1 $15.1

$40.3

Assets Under Management1 ($ in billions)

Variable annuity

Fixed annuity

Institutional

Private PlacementLife Insurance

11

• Annuity assets under management decreasing steadily

through natural runoff and some contractholder

initiatives

• Separate operating entities from other businesses that

are capital self-sufficient in stress scenarios

• Returning significant capital for investment or

return to shareholders

– $1.5 billion of dividends paid in 2015-1H16, additional

$250 planned in 2H16

• The Hartford is committed to the runoff of Talcott

Resolution, and will consider opportunities to maximize

shareholder value through sale or other actions if it is

economic

THE HARTFORD TODAY

Talcott Resolution – Focused on running off annuity blocks and returning significant capital to the holding company

$1,469

$1,000

$500

$250

2014 2015 2016E

Talcott Resolution Return of Capital

2014-2016E ($ in millions)

774 674 603

170

139 128

2013 2014 2015

Variable Annuity Fixed Annuity

944

813 731

Individual Annuity Contract Count (in thousands)

Down

23%

1. As of Dec.31, 2015;

excludes assets associated

with reinsured businesses



Has a solid financial foundation and generating significant excess cash flow




12

The Hartford:


PILLARS OF PROFITABLE GROWTH

The Hartford’s strategy is focused on five principal areas to

drive profitable growth

13

PR

OD

UC

T Achieve Profitable Growth

and Total Shareholder Return

DIS

TR

IBU

TIO

N

CU

ST

OM

ER

EX

PE

RIE

NC

E

OP

ER

AT

ING

CA

PA

BIL

ITIE

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NT

Supported by a Solid Balance Sheet and Capital Generation from our Businesses


• Commercial Lines

– Extending our capabilities in industry verticals, such as construction, auto parts manufacturing and

hospitality

– Expanding our product and underwriting capabilities in Small Commercial to accommodate both

larger accounts and broader coverage on our platform

– Rolling out a new risk management platform for National Accounts, allowing customers better access

to claim data and other information needed by risk managers

• Personal Lines

Product development focused on maximizing value of our long-term partnership with AARP

Leverage the agency channel to target AARP members and other customer segments that value the

expertise of agents who actively seek the benefits of our product suite and value our service model

Open Road has completed its roll out in 2015 and is now available in 44 states. This new auto

product increases pricing flexibility and market responsiveness, and continues to be refined based

on experience

• Group Benefits

Expanding voluntary products, including critical illness and accident; we expect to add Hospital

Indemnity in the first quarter of 2017

Further penetrating the small case market; announced renewal rights agreement with AIG

for its small-case group benefits policies in Oct. 2015

Participating in 7 healthcare exchanges and pursuing more


Product Expansion – Becoming a broader and deeper risk

player to support our distribution partners and policyholders


Commercial Lines

• Our technology and service capabilities make

us a leading choice among agents

• National company with a local presence in

more than 100 locations across the country

• Expanding sales and underwriting presence

in key geographies

– Hired 24 new Middle Market underwriters since 4Q14

with expansion into Midwest and Western U.S.

– Deepening agent relationships in Middle Market as we

strengthen our risk capabilities and deploy additional

underwriting resources to targeted regions

• Multi-year sponsorship of Major League Baseball

(MLB) launched in 2015

– Exclusive business insurance, homeowners

insurance and employee benefits partner of MLB


Commercial Lines Distribution – Enhancing our relationships

with more than ~11,000 partners in ~20,000 locations


Personal Lines

• 30+ year relationship with AARP;

contract through Jan. 1, 2023

• AARP Agency a growth driver,

with 14% net written premium growth

in 2015 over 2014

• Enhancing effectiveness of Agency

distribution by cultivating agents that

market our value proposition

• Expanding small businesses coverage

to AARP

– Offering Small Commercial products to

AARP members in all states, effective

April 2015


Personal Lines Distribution – Enhancing our AARP relationship


Group Benefits

• Strong relationships with multi-line distributors

• Expanded representatives focused on

small businesses (<500 employees)

• Leveraging data to target highest potential

producers and pursue targeted accounts

• Participating on private exchange platforms – Currently on 7 active exchanges and pursuing more

• Leadership position with group benefit specialists

• Investing in enhanced producer analytics

and increased field resources in targeted

growth markets

• Strong support and focus on ability through

sponsorship of U.S. Paralympics – For over 20 years, The Hartford has been a proud

sponsor of athletes with disabilities

– Founding partner of U.S. Paralympics

– Programs promoting value that employees with

disabilities bring to workplace


Group Benefits Distribution –

Enhancing the channel to the customer



Customer Experience –

Keeping the customer at the center of everything we do

• Focus on continuous improvement initiatives to enhance the customer experience,

which will improve retention, increase new business and optimize expenses

• Digital access, including:

Self-service

Quoting

Mobile sales

• Online policy change features

– Agency customers can now quote and make policy changes

– Policyholders can now calculate the premium impact of changes to

their auto policy and process the change online or with the assistance

of a customer service representative or agent

– Providing channel of choice options to customers, leading to higher

customer satisfaction and increased retention

– Reducing the need for policy change phone calls, which average 11 minutes each

• Online auto quote tool

Named a gold medal winner in the latest P&C Insurance Monitor Awards Report;

The Hartford recognized as a standout for providing bundled auto and home quoting options

Online customer service center received honorable mention for user experience enhancements

launched in 2014. The improved service experience is noted as “organized and thorough”

with a “clean design” that is “easy to navigate.”



Customer Experience – Recognition for excellence

J.D. Power Recognition1

• “Highest Customer Satisfaction Among Auto

Insurers in the Mid-Atlantic Region and Florida” (J.D. Power, 6/20/2014)

• The Hartford’s Small Business Call Centers were

recognized in September 2015 by J.D. Power by

providing “An Outstanding Customer Service

Experience” with its Live Phone Channel for the

fourth consecutive year (J.D. Power, 9/16/2015)

• Ranked among top 3 auto insurers in providing a

satisfying purchase experience (J.D. Power, 4/27/2015)

1. For J.D. Power Contact Center Certificate Program information, visit www.jdpower.com

http://www.jdpower.com


• Investing in market-leading back-office support

– Policy administration system

– Claims system

– Predictive analytics

• Significant technology investments to improve

efficiency and customer/partner experience

• Driving efficiency through a culture of continuous

improvement

– Since inception, almost 15,000 ideas have been

submitted by employees and Lean Six Sigma process

redesign efforts have resulted in savings of

approximately $40 million

• Integrating data and analytics in the underwriting

and claims process


Operating Capabilities –

Investing to enhance competitive advantages



Talent – Attracting, developing and retaining great talent

• Investing in our employees and working to attract,

retain and develop the best talent in the industry to support

our expansion into new industry verticals

– Investing in contemporary work practices

– Expanding in key locations across the US-enabling career

growth within major cities

• Focus on employee engagement and improvement,

which drives improved productivity

– Achieved top quartile employee engagement scores

benchmarked against U.S. companies for the last three years

• Striving for a diverse and inclusive environment

– A diverse and multigenerational workforce is more

engaged and productive

– Focus on attracting Millennials to the insurance industry

– Ensure an inclusive work environment by leveraging our 8

employee diversity resource groups

• Competitive compensation and benefits

– All employees participate in a bonus plan tied

to performance



Has a solid financial foundation and generating significant

excess cash flow




22

The Hartford:


490%

550%

Hartford Life andAccident

Hartford LifeInsurance Company(Talcott Resolution)

2015 Year-End RBC Ratios

23

STRONG FINANCIAL FOUNDATION AND EXCESS CAPITAL GENERATION

The Hartford’s operating and financial leverage has improved and the balance sheet is strong

Reducing Leverage Ratio Over Time

28.0 27.0

Low 20s

Dec. 31, 2014 Dec. 31, 2015 Target

Rating Agency Adjusted Debt Ratio1

Financial Strength Recognized in 2015

A.M. Best

Hartford Fire Insurance Company

Standard

& Poor’s

Moody’s

May 1, 2015

April 17, 2015

April 23, 2015

Strong Life Company RBC Levels

1. Based on Moody’s methodology



Reserve adequacy position increased over the past several years

2.6%

3.5%

4.1%

2013 2014 2015

• Total recorded net reserves, excluding asbestos

and environmental (A&E), were approximately

4.1% above the actuarial indication at year end

2015

– By comparison, reserve position was 1.8% in 2011

• Annual ground-up A&E reserve study performed

during second quarter 2015

– Reserve strengthening of $198 million, before tax,

in 2015 was down from $239 million in 2014

– Asbestos reserve strengthening reflected lower than

projected improvement in new mesothelioma claims

for a small number of peripheral accounts, less than

20 out of more than 1,100

o Remaining accounts have largely trended in line

with reserve assumptions

Recorded Net Reserves Above

Actuarial Indication

$140 $239

$198

$52

$52

2013 2014 2015

A&E All Other

$192

$228 $250

($11)

Prior Year Development ($ in millions)



The Hartford generates strong cash flow to holding company

Actual and Estimated Sources of

Holding Company Cash

2014-2016 ($ in billions)

• $2.3 billion cash flow to the holding

company in 2015, including special

dividends from Talcott of $1.0 billion

• Approximately $2.1 billion in expected

cash flows to the holding company in

2016

• 2016 holding company cash

needs of approximately $0.7 billion,

including interest expense and

common dividends

• Estimated additional 2016 holding

company cash uses of about $1.8

billion, including $1.3 billion for share

repurchases and $0.5 billion for debt

• Strong holding company resources

of approximately $1.7 billion at

Dec. 31, 2015

25

$1.1 $0.9 $1.1

$1.5

$1.0 $0.8

$0.4

$0.4 $0.2

2014 2015 2016E

Other sources

Talcott Resolution dividends

Talcott Resolution sale proceeds (Japan)

P&C, Group Benefits, Mutual Funds

$3.0

$2.3 $2.1



The Hartford continues to return significant capital to shareholders

• $5.8 billion in capital management 2014-16 – $4.375 billion for equity repurchases

– $1.431 billion for debt management

• Equity repurchases – $3.3 billion as of Feb. 24, 2016, leaving

approximately $1.1 billion under current plan

to be used through the end of 2016

• Debt management – $1.0 billion in debt management through Feb.

24, 2016, leaving approximately $455 million

under current plan to be used through the end of

2016

• Increased quarterly dividend by

17% to $0.21 per share of common

stock in 3Q15 – Paid approximately $0.7 billion in common

dividends since Jan. 1, 2014 through Jan. 4,

2016

$1.8

$1.3 $1.3

$0.2

$0.8 $0.5

$0.3 $0.3

$0.31

2014 2015 2016 E

Dividends Paid on Common Stock

Amount Spent on Debt Management

Share Repurchases

Capital Management Actions

($ in billions)

1. Includes 1/4/16 dividend and estimated dividends for remainder of the year at current

quarter dividend rate


• Going forward, The Hartford’s

priority for its excess capital

is to invest in the businesses,

organically or through

acquisitions, to drive

profitable growth

– Investment opportunities

must meet financial and

strategic targets

• In the absence of attractive

opportunities to redeploy

excess capital in the

businesses, management will

continue to return capital to

shareholders


Capital Management Priorities

27

Excess Capital

Priorities

Acquisitions

Debt

Repayment

Investing in our

Businesses

Common

Dividend

Share

Repurchases



Has a solid financial foundation and generating significant excess cash flow




28

The Hartford:


CREATE TOTAL SHAREHOLDER RETURN

The Hartford is focused on achieving total shareholder return

-5

0

5

10

15

20

25

30

35

S&P P&C The Hartford S&P 500

1. Source: Bloomberg; Total shareholder return, assuming dividends reinvested in security

Total Shareholder Return1 %

6/30/14 Completed the sale of Japan business

7/30/14 Expanded capital plan by

$1.275 billion Dividend increased from

$0.15 to $0.18

7/27/15 Expanded capital plan by $1.6 billion

Dividend increased from $0.18 to $0.21

+ 26%

+ 20%

+ 9%

12/31/13 – 2/29/16 12/31/14 – 2/29/16 12/31/15 – 2/29/16

The Hartford 20% 3% (3%)

S&P P&C Index 26% 9% (1%)

S&P 500 Index 9% (4%) (5%)



The Hartford continues to trade at a discount compared with peers1

1. Allstate, AIG, Cincinnati Financial, Chubb (formerly ACE), Hanover, Progressive, Travelers

2. Current book value per share, excluding accumulated other comprehensive income (AOCI), as of December 31, 2015 ; Denotes financial measure not calculated based on generally accepted

accounting principles; Stock prices as of Feb. 26, 2016

Price to Book Value2

vs. Peers

YE 2012 Current

0.6x

1.0x 1.0x

1.3x

HIG Peers



The Hartford’s P&C, Group Benefits and Mutual Funds businesses are generating double-digit ROEs

2015 Core Earnings ROE1 • The Hartford is focused on creating

shareholder value through profitable

growth in the P&C, Group Benefits and

Mutual Funds businesses

– These businesses are generating ROEs in

the low double-digit range

• Talcott Resolution, generating mid single-

digit ROEs, reduces the consolidated ROE

– Its impact on ROE will continue to decline as

the business runs off

• We expect to continue to run off Talcott

organically, but will evaluate opportunities

1. 12 month trailing core earnings return on equity, excluding AOCI, levered

13.5%

10.3% 10.9%

6.2%

9.2%


• With the financial and strategic transformation

essentially complete, The Hartford is now

growing shareholders’ equity through net income

in excess of dividends and share repurchases

• Growing book value per diluted share combined

with dividends is the key driver of shareholder

value creation over time

• Our goal is to generate average total value

creation of at least 9%, as measured by

common dividends paid plus

growth in book value per

diluted share, excluding

AOCI


The Hartford is growing book value per share

Book Value Per Diluted Share

ex. AOCI

$39.30 $40.71

$43.76

2013 2014 2015

$1,419 $1,548

$1,650

$176

$798

$1,682

2013 2014 2015

Core Earnings Up 16% Since 2013

Net Income Up 856% Since 2013

Core Earnings and Net Income, 2013 – 2015

($ in millions)


The Hartford’s primary operational and financial goals

Achieve profitable growth in P&C, Group Benefits and Mutual Funds

businesses by focusing on five principal areas

Efficiently manage the run-off of and return of capital from Talcott

while maintaining its capital self-sufficiency

Redeploy the excess capital generated by our business to create greater

shareholder value

1. Denotes financial measure not calculated based on generally accepted accounting principles (GAAP)

2. Return on equity

3. Accumulated other comprehensive income

Continue to expand core earnings ROE1, 2, excluding Talcott, and generate

average total value creation of at least 9% as measured by common dividends

paid plus growth in book value per diluted share, excluding AOCI1,3

Investor Presentation: The Hartford Overview...The Hartford’s 2015 Annual Report on Form 10-K, and...

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Transcript of Investor Presentation: The Hartford Overview...The Hartford’s 2015 Annual Report on Form 10-K, and...