The Hartford Hosts Investor Day in Boston, Releases 2006 Earnings Guidance

HARTFORD, Conn., Dec. 12 /PRNewswire-FirstCall/ -- The Hartford Financial Services Group, Inc. , one of the nation's largest financial services and insurance companies, will release its 2006 earnings guidance today at an Investor Day in Boston. Many members of the investment community are expected to attend today's event, at which The Hartford's Chairman, President and CEO, Ramani Ayer, and other members of the senior management team will discuss the company's 2005 operating performance and 2006 financial outlook. The event also commemorates The Hartford's 10th anniversary as a publicly traded company on the New York Stock Exchange.

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The company expects earnings per diluted share to be $8.30 to $8.60 in 2006, up from the 2005 expected range of $7.30 to $7.60. These guidance ranges exclude realized capital gains or losses and any unusual or unpredictable benefits or charges that might occur during the remainder of 2005 or in 2006. The balance of this press release describes important assumptions incorporated in this guidance. "Over the past ten years we have produced strong financial results and achieved industry-leading market positions," said Ayer. "During this time, we have generated returns in excess of long-term goals and created superior shareholder value for our investors. As reflected by our guidance, we expect this momentum to continue into 2006."

Management is recommending that the Board of Directors increase the company's 2006 common dividends to approximately $500 million, up from approximately $350 million in 2005. "Our strong financial results have generated sufficient capital to allow us to significantly increase our dividend in 2006," Ayer said. "This is a testament to our commitment to maximizing shareholder value."

REVIEW OF BUSINESS UNIT OUTLOOKS Property and Casualty Operations

"Our property-casualty business is poised to deliver another year of strong operating results," Ayer said. "Despite continuing market pressures, we should be able to achieve moderate growth in net written premium and profit margins that are above long-term targets. The focus for 2006 will be to exercise underwriting discipline while introducing new products and increasing distribution to generate new business growth."

Net written premiums for 2006 in property-casualty operations are expected to grow by mid-single-digits above 2005 levels. The 2006 ongoing operations combined ratio excluding catastrophes and prior-year development is expected to be in the low 90s. The assumed catastrophe ratio for 2006 for ongoing operations is 3 percent of earned premiums. Total property-casualty 2006 net investment income is expected to grow mid-single-digits.

Business Insurance

Full year 2006 net written premiums in business insurance are expected to grow in the high single-digits driven by continued strong growth in small commercial. Net written premium growth for small commercial is expected to be in the low double-digits, while middle market net written premiums are expected to grow in the low single-digits. Full year 2006 business insurance combined ratio excluding catastrophes and prior year development is projected to be in the low 90s.

Personal Lines

In personal lines, full year 2006 net written premiums are expected to grow in the mid-single-digits, driven by growth in AARP and agency sales. Auto premiums are expected to grow mid- single-digits, while homeowners premiums are expected to grow in the low double-digits. The combined ratio excluding catastrophes and prior year development for personal lines is projected to be in the high 80s in 2006.

Specialty Commercial

Specialty Commercial 2006 full year net written premiums are expected to decline in the mid-single-digits, largely reflecting the exit from one specialty program. The combined ratio excluding catastrophes and prior-year development is projected to be in the low 90s.

Other Operations

The 2006 outlook assumes other operations, which contain the run-off property-casualty business, generate expenses and adverse development of $160 million.

Life Operations

"In our life operations, we are building on our industry leading market positions while also focusing on new products and markets to support growth," Ayer said. "While the life insurance industry remains challenging, demographic trends and customer needs will continue to fuel demand for our products. As a result of the company's initiatives, 2006 operating earnings are expected to grow at an impressive double-digit pace."

U.S. equity markets are assumed to produce an annualized total return in 2006 of 9 percent (7.2 percent stock price appreciation and 1.8 percent dividends). This assumed stock price appreciation is from the Sept. 30, 2005 S&P 500 level of 1229. The interest rate environment is assumed to remain at the current levels.

Retail Products Group

For the fourth quarter 2005, individual variable annuity sales are expected to be in a range of $2.4 to $2.5 billion and net outflows are expected to be $800 to $900 million. For full year 2006, individual variable annuity sales are expected to be in a range of $10 to $11 billion with net outflows of $2.7 to $3.7 billion. Individual annuity return on assets is expected to be slightly above 50 basis points (bps) in 2006.

In other retail products, mutual fund sales for full year 2006 are expected to be in a range of $6.3 to $6.8 billion, while net flows are anticipated to be in a range of $1.4 to $1.9 billion. Return on assets for mutual funds are expected to be in a range from 16 to 18bps. 401(k) 2006 sales/deposits are expected to be in a range of $3.7 to $4.1 billion while net flows are expected to be between $2.0 and $2.4 billion. Return on assets related to 401(k) products is expected to be in a range of 40 to 42bps.

Institutional Solutions Group

The Institutional Solutions Group is expected to generate sales/deposits in a range of $4.8 to $5.5 billion and net asset flows of $1.2 to $1.9 billion in 2006. Return on assets for this segment is assumed to be in a range of 22 to 24bps.

Individual Life

Individual life sales are anticipated to grow 9 percent to 11 percent from 2005 levels, while operating income is expected to grow 6 percent to 8 percent compared to 2005.

Group Benefits

Group benefits fully insured sales are expected to grow 12 percent to 14 percent over 2005, while fully insured premiums are expected to grow 8 percent to 10 percent. Operating income for group benefits is expected to grow 9 percent to 12 percent, compared to 2005.

Japan

Full year 2006 Japan variable annuity sales are anticipated to be in a range of 990 billion to 1.2 trillion yen, while net flows are expected to be in a range of 880 billion to 1.1 trillion yen. Return on assets for Japan individual annuities are assumed to be in a range of 55 to 57 bps.

Guidance Assumptions

The 2005 guidance range does not provide for any new expense arising from further developments in connection with any of the regulatory matters described in our 10-Q filing of Nov. 3, 2005. The company expects to make such an expense accrual during the fourth quarter but it is not able to estimate the amount at this time. This accrual could cause actual reported results to be below the 2005 guidance range described above.

The company's actual experience in 2006 will almost certainly differ from many of the assumptions described above and the company's expectations for these and a large number of other factors will probably change. 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 pricing and loss-cost trends in the property and casualty businesses, costs arising from resolution of regulatory investigations, catastrophe losses at levels different from expectations and developments emerging as a result of changes in estimates arising from the company's regular review of its prior-period loss reserves for all lines of insurance, including reviews of long-term latent casualty exposures.

Investor Day

The Hartford's Investor Day in Boston will be Webcast live at http://www.thehartford.com/ir for those unable to attend. Replays of the session will be available on the company's Web site for at least two weeks following the event.

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 company's operating performance for the periods presented herein. Because The Hartford's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing The Hartford's non-GAAP and other financial measures to those of other companies. The 2005 and 2006 guidance presented in this release is based on the financial measure operating income. The Hartford uses the non-GAAP financial measure operating income as an important measure of the company's operating performance. Operating income is net income, before the after-tax effect of net realized capital gains and losses and the cumulative effect of accounting changes. The company believes operating income provides investors with a valuable measure of the performance of the company's ongoing businesses because it excludes the effect of realized capital gains and losses, which tend to be highly variable from period to period and are primarily based on market conditions unrelated to the company's insurance operations. Net income is the most directly comparable GAAP measure. A quantitative reconciliation of The Hartford's net income to operating income 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.

Some of the 2006 property-casualty guidance presented in this release is based on the financial measure written premiums. Written premiums is a statutory accounting financial measure used by The Hartford as an important indicator of the operating performance of the company's property and casualty operations. Because written premiums 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 Hartford's sale of property and casualty insurance products. Earned premiums, the most directly comparable GAAP measure, represents all premiums that are recognized as revenues during a fiscal period. The difference between written premiums and earned premiums is attributable to the change in unearned premium reserves.

The Hartford is one of the nation's largest financial services and insurance companies, with 2004 revenues of $22.7 billion. As of September 30, 2005, The Hartford had total assets of $280.5 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-casualty insurance. International operations are located in Japan, Brazil and the United Kingdom. The Hartford's Internet address is http://www.thehartford.com/.

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 company's 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 company's statutory capital levels; the inability to effectively mitigate the impact of equity market volatility on the company's financial position and results of operations arising from obligations under annuity product guarantees; the difficulty in predicting the company's 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, including the possibility that terrorism reinsurance legislation is not extended or renewed beyond 2005; the potential effect of domestic and foreign regulatory developments, including those which could increase the company's business costs and required capital levels; the possibility of general economic and business conditions that are less favorable than anticipated; the company's ability to distribute its products through distribution channels, both current and future; the uncertain effects of emerging claim and coverage issues; the effect of assessments and other surcharges for guaranty funds and second-injury funds and other mandatory pooling arrangements; a downgrade in the company's claims- paying, financial strength or credit ratings; the ability of the company's 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 Daryl Richard Greg Schroeter 860/547-5624 860/547-9140 daryl.richard@thehartford.com gregory.schroeter@thehartford.com