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News and Information Article
Total 2005 net income is $2.3 billion, a new record for the company. Assets
under management increase 11 percent to $323 billion, also a record.
HARTFORD, Conn., Jan. 26 /-FirstCall/ -- The Hartford Financial
Services Group, Inc. (NYSE: HIG), one of the nations largest financial
services and insurance companies, today reported fourth quarter 2005 net
income of $474 million, or $1.53 per diluted share. The companys net income
reached $2.3 billion for the year, a new record for the company.
The Hartfords core earnings in the fourth quarter of 2005 were $505
million, or $1.63 per diluted share. Catastrophe losses and reinstatement
premiums during the quarter, including Hurricane Wilma, totaled $0.27 cents
per diluted share, compared with $0.06 cents per diluted share in the prior
year period. In addition, results for the quarter included an after-tax
increase to reserves related to regulatory matters of $29 million, or $0.09
cents per diluted share. The Hartfords performance for this quarter and for
full year 2005 is compared to results for the prior year periods in the table
below.
Summary
(in millions except per share data)
Quarterly Results Yearly Results
4Q 04 4Q 05 Change 2004 2005 Change
Net income $620 $474 (24%) $2,115 $2,281 8%
Net income per
diluted share 2.08 1.53 (26%) 7.12 7.46 5%
Core earnings(1) 597 505 (15%) 1,972 2,249 14%
Core earnings per
diluted share(1) 2.00 1.63 (19%) 6.64 7.36 11%
Assets under
management 291,696 322,966 11%
Book value per
share (ex. AOCI)(1) 43.55 50.44 16%
(1) Core earnings, core earnings per diluted share and book value per
share, excluding AOCI (accumulated other comprehensive income), are
not calculated based on generally accepted accounting principles
("non-GAAP"). Information regarding non-GAAP financial measures used
in this release is provided in the Discussion of Non-GAAP and Other
Financial Measures section below.
"Notwithstanding, the several unusual items that influenced our results
the last three months demonstrate that the underlying performance of The
Hartfords property and casualty and life operations was strong. This
performance is a reflection of our efforts to sustain profitable growth in a
competitive environment. Our return on equity of over 15 percent over the
last twelve months has exceeded our stated long-term goals," said Ramani Ayer,
chairman, president and CEO of The Hartford. "Actions we have taken to
broaden distribution and improve our products are driving our sales momentum."
For 2005, The Hartford reported record net income of $2.3 billion. This
compared with net income of $2.1 billion in 2004, a year which benefited from
significant tax benefits and higher net realized capital gains. Core earnings
rose 14 percent in 2005, to reach $2.2 billion.
"In December, we reached a milestone for our company as we celebrated our
10-year anniversary as an independent publicly traded company on the New York
Stock Exchange. Over the past decade, our shareholders have been well
rewarded with a 16 percent compound annual total return that handily exceeds
the performance of the Standard & Poors 500," Ayer said.
"The final days of the last quarter also saw a significant legislative
accomplishment in passage of an extension of the Terrorism Risk Insurance Act
of 2002, or TRIA. The President and Congress deserve our praise for their
careful consideration of this important issue. The Hartford, and many others
in the insurance and related industries, voiced strong support for this law
which provides a vital measure of economic security for the nation in
uncertain times.
"Our results this quarter include an accrual, in addition to that which we
set aside in the first quarter of 2005, related to regulatory matters. We are
in active discussions with regulators on several of these matters and are
working diligently to resolve them. We have cooperated fully with the ongoing
investigations, and will continue to do so. As I have said before, our job,
every day, is to live up to the highest standards of trust and integrity in
everything that we do," Ayer added.
REVIEW OF BUSINESS UNIT RESULTS
Property and Casualty Operations
Core earnings for The Hartfords property and casualty operations in the
fourth quarter of 2005 were $220 million, compared with $331 million in the
same quarter of the prior year. Core earnings for the quarter included $85
million (after-tax) in net catastrophe losses and reinstatement premiums. The
quarter also included estimated hurricane-related assessments of $32 million
(after-tax), primarily for Citizens Property Insurance Corporation of
Florida.
Net written premium for The Hartfords property and casualty operations in
the fourth quarter of 2005 was $2.6 billion, a 6 percent increase from the
fourth quarter of 2004. This net written premium growth reflected a double-
digit rise in business insurance net written premium and high single digit
growth in AARP and Agency personal lines, partially offset by lower net
written premium in specialty property and specialty casualty lines.
For the fourth quarter of 2005, ongoing operations reported a combined
ratio of 99.2 percent, or 94.6 percent before catastrophes. These combined
ratios include 1.9 points of estimated hurricane-related assessments and $61
million, or 2.4 points, of net prior year adverse reserve development
primarily related to strengthening of general liability reserves in business
insurance.
For the full year 2005, net written premium of $10.5 billion was up by 5
percent over 2004, and the companys property and casualty operations
delivered record core earnings of over $1.2 billion. "The fourth quarter
capped a tremendous year for the property and casualty business," said Ramani
Ayer. "The strategic initiatives weve implemented over the past two years
are driving our profitable growth. Together, business insurance and personal
lines net written premium totaled $8.7 billion, or over 80 percent of net
written premium for property and casualty as a whole. Going forward, we will
continue to make strategic investments in products, distribution, service and
agent technology to further differentiate The Hartford in the property and
casualty market."
Business Insurance
Business insurance reported strong premium growth in the fourth quarter of
2005. Net written premium of $1.3 billion rose 12 percent compared with the
same period in 2004. The combined ratio for business insurance before
catastrophes was 94.9 percent compared with 93.4 percent in the fourth quarter
of 2004. Included in the 94.9 percent combined ratio were estimated
hurricane-related assessments of $25 million (before-tax), which added
approximately 2.0 points. Catastrophe losses were 4.1 points in the fourth
quarter of 2005.
In small commercial insurance, new business and strong renewal retention
contributed to another quarter of double-digit growth in net written premium.
For the quarter, net written premium was up 12 percent to $638 million. In
the fourth quarter, the company continued to add sales representatives and
increase the number of appointed agents representing The Hartford. The number
of small commercial sales representatives at year-end 2005 exceeded 140, more
than 20 percent higher than one year ago.
In middle market insurance, net written premium grew 11 percent, to $655
million. During the quarter, the company continued to deepen its
relationships with key agencies, helping generate year-over-year increases in
both new business and retention. The company also generated new relationships
with members of the National Association of Wholesalers.
Personal Lines Insurance
In the fourth quarter of 2005, personal lines net written premium reached
$901 million, a 5 percent increase over the fourth quarter of 2004. Increased
marketing activities to AARP members led to net written premium growth of 9
percent in the quarter. In Agency personal lines, the company expanded its
distribution platform through added sales representatives and improved
technology capabilities. Agency net written premium increased by 8 percent
over the fourth quarter of 2004.
Excluding catastrophe losses, underwriting results for personal lines
continued to be excellent. The combined ratio before catastrophes was 91.0
percent during the fourth quarter of 2005, compared with 89.6 in the same
period last year. Included in the 91.0 percent combined ratio were estimated
hurricane-related assessments of $24 million (before-tax), which added
approximately 2.6 points. Catastrophe losses in personal lines were 0.9
points in the fourth quarter of 2005.
During the quarter, the companys AARP operations recorded a first for any
sales and services call center in the property and casualty industry, being
recognized for excellence in call center customer satisfaction through the
highly regarded J.D. Power and Associates Certified Call Center Program(SM).
Certification by J.D. Power and Associates underscores the companys ongoing
commitment to provide "An Outstanding Customer Service Experience."(2)
Specialty Commercial Insurance
The Hartfords specialty commercial insurance operations recorded $372
million in net written premium for the fourth quarter of 2005, compared with
$408 million during the prior year period. The company continued to
demonstrate underwriting discipline in specialty property and selectively
wrote business where pricing and risks were aligned with acceptable
profitability. In particular, the company reduced its writings of specialty
property business in the face of very competitive market conditions.
The combined ratio before catastrophes for The Hartfords specialty
commercial segment was 101.9 percent in the fourth quarter of 2005 compared
with the extremely favorable combined ratio of 77.6 percent in the fourth
quarter of 2004. Catastrophe losses for the fourth quarter of 2005 were 15.1
points.
Life Operations
Core earnings for The Hartfords life operations were $326 million in the
fourth quarter of 2005, compared to $308 million in the fourth quarter of
2004. Core earnings were driven by an 11 percent increase in assets under
management.
Core earnings this quarter include the following unusual items:
* $32 million in tax benefits not related to the fourth quarter of 2005;
* $29 million for an additional accrual for regulatory matters;
* $22 million for an expense for the termination of a provision of an
agreement with a mutual fund distribution partner; and
* $18 million for an accrual relating to an agreement whereby certain
annuity customers have surrendered older variable annuity contracts
that were the subject of prior litigation.
"The underlying performance of The Hartfords life operations was very
strong in both the fourth quarter and full year with double-digit core
earnings growth from nearly all segments," said Ayer. "The strategic
initiatives undertaken in the last few years are driving earnings momentum.
Weve also maintained market leadership positions in global variable
annuities, variable life and group benefits."
The $29 million additional accrual for regulatory matters is an estimate.
There may be significant developments in these matters before The Hartford
files its Annual Report on Form 10-K. In that event, the company could be
required to change this estimate and record the change in its financial
results for the fourth quarter of 2005.
Retail Products Group
Fourth quarter 2005 core earnings for the retail products group were $175
million, compared to $145 million in the fourth quarter of 2004. Core
earnings include an after-tax expense of $22 million related to the mutual
fund distribution agreement described above. Core earnings benefited by $28
million in tax benefits related to the first three quarters of 2005. During
the quarter, good equity markets and strong net flows into mutual funds pushed
assets under management for the retail products group to $146 billion, a 6
percent increase from a year ago.
Variable annuity sales and deposits were $2.5 billion in the fourth
quarter of 2005, with net outflows of $880 million. During the quarter, The
Hartford launched Lifetime Income Builder, a product feature designed to help
consumers address concerns about outliving their savings. This new rider has
been well received by the market and is being elected on approximately 20
percent of new sales. At year-end, assets under management in variable
annuities topped $105 billion.
The Hartford recorded $1.7 billion in retail mutual fund sales and
deposits during the quarter, up 39 percent from the fourth quarter of 2004.
Net sales for the fourth quarter of 2005 were $559 million. Sales momentum is
building as PLANCOs 90 wholesalers work to penetrate wirehouses, regional and
independent broker-dealers, and bank distribution. Assets under management in
retail mutual funds were $29 billion, up 15 percent over a year ago.
Retirement Plans
Beginning with this quarter, the company established a new retirement
plans segment. Retirement plans segment includes The Hartfords growing
401(k), governmental 457 plans and 403(b) plans. Core earnings in retirement
plans were $21 million for the fourth quarter of 2005, up 17 percent from the
prior year period. Assets under management in the retirement plans segment
reached $20.4 billion as of December 31, 2005.
The Hartfords 401(k) plans, one of the companys fastest growing
products, reported a 35 percent increase in sales and deposits in the fourth
quarter of 2005 compared to the prior year period. Sales and deposits reached
$827 million in the fourth quarter of 2005, and net flows were $329 million.
Sales growth has been driven by both an expanded product offering and broader
distribution. The Hartfords PLANCO wholesalers, aided by an experienced team
of 80 retirement plan specialists, are leveraging established retail
relationships to successfully cross-sell The Hartfords retirement plans.
Governmental 457 and 403(b) retirement plans sales and deposits were $278
million, up 19 percent from the fourth quarter of 2004.
Institutional Solutions Group
Fourth quarter 2005 core earnings in the institutional solutions group
were $22 million, up 22 percent from the fourth quarter of 2004. The
institutional solutions group includes institutional investment products and
variable private placement life insurance. Sales and deposits for the group
were $1.1 billion for the quarter, compared to $1.2 billion in the prior year
period. Assets under management reached $43 billion, 15 percent higher than a
year ago.
Individual Life
Individual life insurance had a record sales quarter driven by strong
growth in wirehouse and broker-dealer distribution. Sales topped $85 million
with over 40 percent of new business in variable life. Individual life
reported core earnings of $43 million, an 8 percent increase over the prior
year period. During 2005, life insurance in-force rose 8 percent to $151
billion.
Group Benefits
Sales growth was very strong in the fourth quarter of 2005 for both group
life and group disability, with fully insured sales reaching $136 million, up
70 percent from the prior year period. Fourth quarter 2005 fully insured
premiums of $955 million were up 6 percent over the prior year. Fourth
quarter 2005 core earnings of $81 million included a non-recurring tax benefit
of $9 million and were up from $65 million in the fourth quarter of 2004. The
group benefits after-tax margin, excluding the impact of the tax benefit,
expanded to 7.5 percent in the quarter, reflecting continued favorable
mortality and morbidity.
International
The rapidly growing Japan annuity business drove fourth quarter 2005 core
earnings in the newly established international segment to $33 million,
compared to $6 million during the prior year period. For The Hartfords Japan
operations, the strong performance of the Japan equity market, coupled with
net flows of $2 billion in the quarter, drove assets under management to a
record $26.1 billion.
Sales for The Hartfords Japan operations in the fourth quarter of 2005
were up 14 percent from the prior year period to 292 billion yen, or $2.5
billion. The Hartford introduced a new variable annuity product in Japan
during the fourth quarter of 2005. This product addresses a growing demand
among Japanese customers for a dependable stream of retirement income. The
product has been well received by the companys distribution partners and will
be fully launched by the end of the first quarter of 2006.
2006 GUIDANCE
Based on current information, The Hartford expects 2006 core earnings per
diluted share to be between $8.20 and $8.50. Other than recasting this
guidance for core earnings, it is unchanged from the guidance The Hartford
outlined in its press release and investor presentations of December 12. Core
earnings excludes all realized gains and losses, except for certain gains and
losses such as net periodic settlements on credit derivatives and net periodic
settlements on the Japan fixed annuity cross-currency swap. The company
estimates that core earnings in 2006 will include approximately 12 cents per
diluted share of realized capital losses that would previously have been
excluded from operating earnings.
This guidance also excludes any unusual or unpredictable benefits or
charges that might occur during the year. Historically, the company has
frequently experienced unusual or unpredictable benefits and charges that were
not anticipated in previously provided guidance. Among other assumptions,
which are substantially unchanged from those expressed on December 12, 2005,
this 2006 guidance assumes the following:
* U.S. equity markets produce an annualized return of 9 percent (7.2
percent stock price appreciation and 1.8 percent dividends) from the
S&P 500 level of 1,248 on December 30th, 2005;
* U.S. variable annuity sales of $10 to $11 billion and net outflows of
$2.7 to $3.7 billion; Japan variable annuity sales of $9 to $11 billion
and net flows of $8 to $10 billion based on a yen/dollar conversion rate
of 110;
* Mutual fund sales of $6.3 to $6.8 billion, with net flows of $1.4 to
$1.9 billion; retirement plans sales of $5.1 to $5.5 billion with net
flows of $2.5 to $2.9 billion;
* The final resolution of the previously-disclosed market timing, directed
brokerage, and single premium group annuity matters at a cost of neither
more nor less than the accrued $95 million (after-tax) (the ultimate
cost to the company of these matters could materially exceed this
amount);
* For business insurance, high-single-digit full year net written premium
growth with a 2006 combined ratio (excluding catastrophes and prior
year development) in the low 90s (2005 combined ratio excluding cats
and prior year 89.4);
* For personal lines, mid-single-digit full year written premium growth
with a 2006 combined ratio (excluding catastrophes and prior year
development) in the high 80s (2005 combined ratio excluding cats and
prior year 87.2);
* For specialty commercial, a decline of mid-single-digits in full year
written premium with a 2006 combined ratio (excluding catastrophes and
prior year development) in the low 90s (2005 combined ratio excluding
cats and prior year 93.8);
* Catastrophe losses of 3 percent of earned premium in ongoing property
and casualty operations.
These estimates are highly likely to change. The companys actual
experience in 2006 will almost certainly differ from many of the assumptions
utilized above and the companys expectations for these and a large number of
other factors will probably change, leading us to revise our estimates over
time. These factors include but are not limited to significant changes in
estimated future earnings on investment products caused by changes in the
equity markets, changes in our effective tax rate, up and down, that are
difficult to anticipate or forecast, changes in loss-cost trends in the
property and casualty businesses, catastrophe losses at levels different from
expectations and developments emerging as a result of changes in estimates
arising from the companys regular review of its prior-period loss reserves
for all lines of insurance, including annual ground-up reviews of long-term
latent casualty exposures, including asbestos and environmental claims and the
recoverability of reinsurance for these claims.
CONFERENCE CALL
The Hartford will discuss the results of the fourth quarter and full year
2005, along with 2006 guidance in a conference call on Friday, January 27,
2006, at 10:00 a.m. EST. The call, along with a slide presentation, can be
simultaneously accessed through The Hartfords Web site at
http://www.thehartford.com/ir/index.html.
More detailed financial information can be found in The Hartfords
Investor Financial Supplement and Supplemental Analysis Data for the fourth
quarter of 2005, both of which are available on The Hartfords Web site,
http://www.thehartford.com/ir/index.html.
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES
The Hartford uses non-GAAP and other financial measures in this press
release to assist investors in analyzing the companys operating performance
for the periods presented herein. Because The Hartfords calculation of these
measures may differ from similar measures used by other companies, investors
should be careful when comparing The Hartfords non-GAAP and other financial
measures to those of other companies.
The Hartford uses the non-GAAP financial measure core earnings as an
important measure of the Companys operating performance. The Company believes
the measure core earnings provides investors with a valuable measure of the
performance of the Companys ongoing businesses because core earnings excludes
the cumulative effect of accounting changes and the effect of all realized
gains and losses (net of tax and the effects of deferred policy acquisition
costs) that tend to be highly variable from period to period based on capital
market conditions. Core earnings includes net realized gains and losses such
as net periodic settlements on credit derivatives and net periodic settlements
on the Japan fixed annuity cross-currency swap because these net realized
gains and losses are directly related to an offsetting item included in the
income statement such as net investment income. Net income is the most
directly comparable GAAP measure. A reconciliation of net income to core
earnings for the three and twelve months ended December 31, 2004 and 2005 is
set forth in the operating results table. Core earnings per share is
calculated based on a non-GAAP financial measure. Net income per share is the
most directly comparable GAAP measure. A reconciliation of net income per
share to core earnings per share for the three and twelve months ended
December 31, 2004 and 2005 is set forth on page C-8 of The Hartfords Investor
Financial Supplement for the fourth quarter of 2005.
In this release, The Hartford has included the financial measure core
earnings, before tax related items. The Hartford has provided this financial
measure to enhance investor understanding of the companys ongoing businesses
by eliminating the effects of tax related items because these items are
related to prior tax years and are highly variable from period to period. Net
income is the most directly comparable GAAP measure. A reconciliation of net
income to core earnings, before tax related items, for the three and twelve
months ended December 31, 2004 and 2005 is set forth in the operating results
table. Core earnings, before tax related items, per share is calculated based
on a non-GAAP financial measure. A reconciliation of net income per share to
core earnings, before tax related items, per share for the three and twelve
months ended December 31, 2004 and 2005 is set forth on page C-8 of The
Hartfords Investor Financial Supplement for the fourth quarter of 2005.
Written premium is a statutory accounting financial measure used by The
Hartford as an important indicator of the operating performance of the
Companys property and casualty operations. Because written premium
represents the amount of premium charged for policies issued during a fiscal
period, The Hartford believes it is useful to investors because it reflects
current trends in The Hartfords sale of property and casualty insurance
products. Earned premium, the most directly comparable GAAP measure,
represents all premiums that are recognized as revenues during a fiscal
period. The difference between written premium and earned premium is
attributable to the change in unearned premium reserves. A reconciliation of
written premium to earned premium for the three and twelve months ended
December 31, 2004 and 2005 periods is set forth on page PC-2 of The Hartfords
Investor Financial Supplement for the fourth quarter of 2005.
Book value per share excluding AOCI is calculated based upon a non-GAAP
financial measure. It is calculated by dividing (a) stockholders equity
excluding AOCI, net of tax, by (b) common shares outstanding. The Hartford
provides book value per share excluding AOCI to enable investors to analyze
the amount of the companys net worth that is primarily attributable to the
companys business operations. The Hartford believes book value per share
excluding AOCI is useful to investors because it eliminates the effect of
items which typically fluctuate significantly from period to period, primarily
based on changes in interest rates. Book value per share is the most directly
comparable GAAP measure. A reconciliation of book value per share to book
value per share excluding AOCI as of December 31, 2004 and 2005 is set forth
in the operating results table.
The profitability of the Business Insurance, Personal Lines and Specialty
Commercial underwriting segments are evaluated by The Hartfords management
primarily based upon underwriting results. Underwriting results is a before-
tax measure that represents earned premiums less incurred claims, claim
adjustment expenses and underwriting expenses. Net income is the most
directly comparable GAAP measure. Underwriting results are influenced
significantly by earned premium growth and the adequacy of The Hartfords
pricing. Underwriting profitability over time is also greatly influenced by
The Hartfords underwriting discipline, which seeks to manage exposure to loss
through favorable risk selection and diversification, its management of
claims, its use of reinsurance and its ability to manage its expense ratio,
which it accomplishes through economies of scale and its management of
acquisition costs and other underwriting expenses. The Hartford believes that
underwriting results provides investors with a valuable measure of before-tax
profitability derived from underwriting activities, which are managed
separately from the Companys investing activities. Underwriting results are
presented for Ongoing Operations, Other Operations and total Property and
Casualty in The Hartfords Investor Financial Supplement. A reconciliation of
underwriting results to net income for total Property and Casualty, Ongoing
Operations and Other Operations is set forth on pages PC-2, PC-3 and PC-14 of
The Hartfords Investor Financial Supplement for the fourth quarter of 2005.
A catastrophe is a severe loss, resulting from natural or manmade events,
including risks such as fire, earthquake, windstorm, explosion, terrorism or
other similar events. Each catastrophe has unique characteristics.
Catastrophes are not predictable as to timing or loss amount in advance, and
therefore their effects are not included in earnings or claims and claim
adjustment expense reserves prior to occurrence. The Hartford believes that a
discussion of the effect of catastrophes is meaningful for investors to
understand the variability of periodic earnings.
The 2006 earnings guidance presented in this release is based on the
financial measure core earnings. Net income is the most directly comparable
GAAP measure. A quantitative reconciliation of The Hartfords net income to
core earnings is not calculable on a forward-looking basis because it is not
possible to provide a reliable forecast of realized capital gains and losses,
which typically vary substantially from period to period.
The Hartford is one of the nations largest financial services and
insurance companies, with 2005 revenues of $27.1 billion. As of December 31,
2005, The Hartford had total assets of $285.6 billion and stockholders equity
of $15.3 billion. The Hartford is a leading provider of investment products,
life insurance and group benefits; automobile and homeowners products; and
business property and casualty insurance. International operations are
located in Japan, Brazil and the United Kingdom. The Hartfords Internet
address is http://www.thehartford.com.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT (in millions except per share data)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2004 2005 Change 2004 2005 Change
LIFE
Retail Products Group
Individual Annuity $134 $183 37% $486 $618 27%
Other Retail [1] 11 (8) NM 36 4 (89%)
Total Retail Products
Group 145 175 21% 522 622 19%
Retirement Plans 18 21 17% 67 75 12%
Institutional Solutions
Group 18 22 22% 68 88 29%
Individual Life 40 43 8% 156 166 6%
Group Benefits 65 81 25% 229 272 19%
International 6 33 NM 43 96 123%
Other [2] [3] [4] 16 (49) NM 231 (112) NM
Total Life core earnings $308 $326 6% $1,316 $1,207 (8%)
Less: Tax related items
[4] - - - 190 - (100%)
Total Life core
earnings, before tax
related items $308 $326 6% $1,126 $1,207 7%
PROPERTY & CASUALTY
Ongoing Operations
Ongoing Operations
Underwriting Results
Business Insurance $63 $12 (81%) $360 $396 10%
Personal Lines 94 74 (21%) 138 460 NM
Specialty Commercial 86 (67) NM (53) (165) NM
Total Ongoing Operations
underwriting results 243 19 (92%) 445 691 55%
Net servicing income 2 9 NM 42 49 17%
Net investment income 253 285 13% 903 1,082 20%
Periodic net coupon
settlements on non-
qualifying derivatives,
before-tax 1 - (100%) 9 - (100%)
Other expenses (36) (56) (56%) (198) (202) (2%)
Income tax expense (139) (63) 55% (304) (467) (54%)
Ongoing Operations core
earnings $324 $194 (40%) $897 $1,153 29%
Less: Tax related items
[4] - - - 26 - (100%)
Ongoing Operations core
earnings, before tax
related items $324 $194 (40%) $871 $1,153 32%
Other Operations
Other Operations core
earnings $7 $26 NM $(68) $54 NM
Total Property &
Casualty core earnings $331 $220 (34%) $829 $1,207 46%
Total Property &
Casualty core earnings,
before tax related
items $331 $220 (34%) $803 $1,207 50%
CORPORATE
Total Corporate core
earnings $(42) $(41) 2% $(173) $(165) 5%
CONSOLIDATED
Core earnings, before tax
related items $597 $505 (15%) $1,756 $2,249 28%
Add: Tax related items
[4] - - - 216 - (100%)
Core earnings $597 $505 (15%) $1,972 $2,249 14%
Add: Net realized
capital gains (losses),
after-tax [5] 23 (31) NM 166 32 (81%)
Add: Cumulative effect
of accounting change,
after-tax - - - (23) - 100%
Net income $620 $474 (24%) $2,115 $2,281 8%
PER SHARE DATA
Diluted earnings per
share
Core earnings before
tax related items $2.00 $1.63 (19%) $5.91 $7.36 25%
Core earnings $2.00 $1.63 (19%) $6.64 $7.36 11%
Net income $2.08 $1.53 (26%) $7.12 $7.46 5%
Book value per share
Book value per share
(excluding AOCI) $43.55 $50.44 16%
Per share impact of AOCI $4.85 $0.29 (94%)
Book value per share
(including AOCI) $48.40 $50.73 5%
[1] Included in the year ended December 31, 2005 is an expense of $46,
after-tax, which is the termination value of a provision of an
agreement with a mutual fund distribution partner. Included in the
three months ended December 31, 2005 is an expense of $22, after-
tax, representing the final settlement of this matter.
[2] Included in the year ended December 31, 2005 is a charge of $95,
after-tax, to reserve for investigations related to market timing by
the SEC and New York Attorney Generals Office, directed brokerage
by the SEC and single premium group annuities by the New York
Attorney Generals Office and the Connecticut Attorney Generals
Office. Included in the three months ended December 31, 2005 is a
charge of $29, after-tax, to increase the reserve for
investigations.
[3] Included in the three months and year ended December 31, 2005 is an
expense of $18, after-tax, related to the settlement of certain
annuity contracts.
[4] For the year ended December 31, 2004, Life included $190 and Property
& Casualty included $26 of tax benefit related to tax years prior to
2004.
[5] Includes those net realized capital gains not included in core
earnings. See discussion of non-GAAP and other financial measures
section of this release.
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.
Some of the statements in this release should be considered forward-
looking statements as defined in the Private Securities Litigation Reform Act
of 1995. These include statements about our 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.
These important risks and uncertainties include the difficulty in
predicting the companys potential exposure for asbestos and environmental
claims and related litigation; the possible occurrence of terrorist attacks;
the response of reinsurance companies under reinsurance contracts and the
availability, pricing and adequacy of reinsurance to protect the company
against losses; changes in the stock markets, interest rates or other
financial markets, including the potential effect on the companys statutory
capital levels; the inability to effectively mitigate the impact of equity
market volatility on the companys financial position and results of
operations arising from obligations under annuity product guarantees; the
difficulty in predicting the companys potential exposure arising out of
regulatory proceedings or private claims relating to incentive compensation or
payments made to brokers or other producers and alleged anti-competitive
conduct; the uncertain effect on the company of regulatory and market-driven
changes in practices relating to the payment of incentive compensation to
brokers and other producers, including changes that have been announced and
those which may occur in the future; the possibility of more unfavorable loss
experience than anticipated; the incidence and severity of catastrophes, both
natural and man-made; stronger than anticipated competitive activity;
unfavorable judicial or legislative developments; the potential effect of
domestic and foreign regulatory developments, including those which could
increase the companys business costs and required capital levels; the
possibility of general economic and business conditions that are less
favorable than anticipated; the companys ability to distribute its products
through distribution channels, both current and future; the uncertain effects
of emerging claim and coverage issues; a downgrade in the companys claims-
paying, financial strength or credit ratings; the ability of the companys
subsidiaries to pay dividends to the company; and others discussed in our
Quarterly Reports on Form 10-Q, our 2004 Annual Report on Form 10-K and the
other filings we make with the Securities and Exchange Commission. We assume
no obligation to update this release, which speaks as of the date issued.
Contact(s):
Media Investors
Joshua King Kim Johnson
860/547-2293 860/547-6781
joshua.king@thehartford.com kimberly.johnson@thehartford.com
Debora Raymond Greg Schroeter
860/547-9613 860/547-9140
debora.raymond@thehartford.com gregory.schroeter@thehartford.com
(2) J.D. Power and Associates Certified Technology and Service Support
Program(SM), developed in conjunction with the Service & Support Professionals
Association (SSPA). For more information, visit http://www.jdpower.com or
sspa.com.
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