UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~March 31,~~June 30, 2004

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period ~~from____________ to_____________~~fromto

Commission file number 001-13958

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)


Delaware		~~13-3317783~~
(State or other jurisdiction of		~~(I.R.S. Employer~~
incorporation or organization)		13-3317783 (I.R.S. Employer Identification Number)

Hartford Plaza, Hartford, Connecticut 06115-1900
(Address of principal executive offices)

(860) 547-5000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]

As of ~~April 23,~~July 26, 2004, there were outstanding ~~292,023,474~~293,188,819 shares of Common Stock, $0.01 par value per share, of the registrant.

REPORT OF INDEPENDENT ~~ACCOUNTANTS’ REVIEW REPORT~~REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
The Hartford Financial Services Group, Inc.
Hartford, Connecticut

We have reviewed the accompanying condensed consolidated balance sheet of The Hartford Financial Services Group, Inc. and subsidiaries (the “Company”) as of ~~March 31,~~June 30, 2004, and the related condensed consolidated statements of operations and comprehensive income (loss) for the second quarters and six months ended June 30, 2004 and 2003, and changes in stockholders’ equity ~~comprehensive income (loss),~~ and cash flows for the ~~first quarter~~six months ended ~~March 31,~~June 30, 2004 and 2003. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards ~~established by~~of the ~~American Institute of Certified~~ Public ~~Accountants.~~Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with ~~auditing~~ standards ~~generally accepted in~~of the ~~United States of America,~~Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with ~~auditing~~ standards ~~generally accepted in~~of the ~~United States of America,~~Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2003, and the related consolidated statements of operations, changes in stockholders’ equity, comprehensive income, and cash flows for the year then ended (not presented herein); and in our report dated February 25, 2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

DELOITTE & TOUCHE LLP
Hartford, Connecticut
~~May~~August 3, 2004

PART I. FINANCIAL INFORMATION

Item 1. ~~Financial Statements~~ FINANCIAL STATEMENTS

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Operations


	First Quarter Ended						Second Quarter Ended				Six Months Ended
	March 31,						June 30,				June 30,
(In millions, except for per share data)	2004			2003			2004		2003		2004			2003
	(Unaudited)						(Unaudited)				(Unaudited)
*Revenues*
Earned premiums	$	3,181		$	2,849		$	3,323	$	2,812	$	6,504		$	5,661
Fee income		786			617			793		656		1,579			1,273
Net investment income		1,517			788			1,158		796		2,675			1,584
Other revenues		104			122			118		147		222			269
Net realized capital gains (losses)		144			(45	)
Net realized capital gains								52		271		196			226

Total revenues		5,732			4,331			5,444		4,682		11,176			9,013

*Benefits, claims and expenses*
Benefits, claims and claim adjustment expenses		3,297			5,245			3,288		2,629		6,585			7,874
Amortization of deferred policy acquisition costs and present value of future profits		679			564			701		557		1,380			1,121
Insurance operating costs and expenses		692			538			653		584		1,345			1,122
Interest expense		66			66			62		69		128			135
Other expenses		180			143			163		214		343			357

Total benefits, claims and expenses		4,914			6,556			4,867		4,053		9,781			10,609

Income (loss) before income taxes and cumulative effect of accounting change		818			(2,225	)		577		629		1,395			(1,596	)
Income tax expense (benefit)		227			(830	)		144		122		371			(708	)

Income (loss) before cumulative effect of accounting change		591			(1,395	)		433		507		1,024			(888	)
Cumulative effect of accounting change, net of tax		(23	)		—			—		—		(23	)		—

Net income (loss)	$	568		$	(1,395	)	$	433	$	507	$	1,001		$	(888	)

*Basic earnings (loss) per share*
Income (loss) before cumulative effect of accounting change	$	2.04		$	(5.46	)	$	1.48	$	1.89		3.52		$	(3.39	)
Cumulative effect of accounting change, net of tax		(0.08	)		—			—		—		(0.08	)		—

Net income (loss)	$	1.96		$	(5.46	)	$	1.48	$	1.89	$	3.44		$	(3.39	)

*Diluted earnings (loss) per share*
Income (loss) before cumulative effect of accounting change	$	2.01		$	(5.46	)	$	1.46	$	1.88	$	3.46		$	(3.39	)
Cumulative effect of accounting change, net of tax		(0.08	)		—			—		—		(0.08	)		—

Net income (loss)	$	1.93		$	(5.46	)	$	1.46	$	1.88	$	3.38		$	(3.39	)

Weighted average common shares outstanding		289.9			255.4			292.3		268.8		291.1			262.1
Weighted average common shares outstanding and dilutive potential common shares		294.9			255.4			297.5		270.2		296.2			262.1

Cash dividends declared per share	$	0.28		$	0.27		$	0.28	$	0.27	$	0.56		$	0.54

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Balance Sheets


	March 31,			December 31,			June 30,			December 31,
(In millions, except for share data)	2004			2003			2004			2003
	(Unaudited)						(Unaudited)
*Assets*
Investments
Fixed maturities, available-for-sale, at fair value (amortized cost of $68,138 and $58,127)	$	72,814		$	61,263
Fixed maturities, available-for-sale, at fair value (amortized cost of $68,732 and $58,127)							$	70,703		$	61,263
Equity securities, held for trading, at fair value		7,831			—			8,995			—
Equity securities, available-for-sale, at fair value (cost of $557 and $505)		612			565
Equity securities, available-for-sale, at fair value (cost of $545 and $505)								584			565
Policy loans, at outstanding balance		2,655			2,512			2,650			2,512
Other investments		1,845			1,507			1,917			1,507

Total investments		85,757			65,847			84,849			65,847
Cash		638			462			695			462
Premiums receivable and agents’ balances		2,969			3,085			3,429			3,085
Reinsurance recoverables		5,968			5,958			5,655			5,958
Deferred policy acquisition costs and present value of future profits		7,511			7,599			8,086			7,599
Deferred income tax		245			845
Deferred income taxes								987			845
Goodwill		1,720			1,720			1,720			1,720
Other assets		5,315			3,704			3,961			3,704
Separate account assets		127,141			136,633			130,840			136,633

Total assets	$	237,264		$	225,853		$	240,222		$	225,853

*Liabilities*
Reserve for future policy benefits and unpaid claims and claim adjustment expenses
Property and casualty	$	20,246		$	21,715		$	20,562		$	21,715
Life		11,658			11,402			11,746			11,402
Other policyholder funds and benefits payable		45,321			26,185			46,605			26,185
Unearned premiums		4,612			4,423			4,843			4,423
Short-term debt		573			1,050			622			1,050
Long-term debt		4,580			4,613			4,304			4,613
Other liabilities		9,596			8,193			8,425			8,193
Separate account liabilities		127,141			136,633			130,840			136,633

Total liabilities		223,727			214,214			227,947			214,214

Commitments and Contingencies (Note 5)

Commitments and Contingencies (Note 9)
*Stockholders’ Equity*
Common stock - 750,000,000 shares authorized, 294,661,289 and 286,339,430 shares issued, $0.01 par value		3			3
Common stock - 750,000,000 shares authorized, 296,024,430 and 286,339,430 shares issued, $0.01 par value								3			3
Additional paid-in capital		4,419			3,929			4,494			3,929
Retained earnings		6,986			6,499			7,337			6,499
Treasury stock, at cost - 2,984,622 and 2,959,692 shares		(39	)		(38	)
Treasury stock, at cost –2,989,744 and 2,959,692 shares								(39	)		(38	)
Accumulated other comprehensive income, net of tax		2,168			1,246			480			1,246

Total stockholders’ equity		13,537			11,639			12,275			11,639

Total liabilities and stockholders’ equity	$	237,264		$	225,853		$	240,222		$	225,853

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity


	First Quarter Ended						Six Months Ended
	March 31,						June 30,
(In millions, except for share data)	2004			2003			2004			2003
	(Unaudited)						(Unaudited)
Common Stock/Additional Paid-in Capital
Balance at beginning of period	$	3,932		$	2,787		$	3,932		$	2,787
Issuance of common stock in underwritten offering		411			—			411			1,161
Issuance of equity units								—			(112	)
Issuance of shares under incentive and stock compensation plans		67			8			135			32
Tax benefit on employee stock options and awards		12			1			19			4

Balance at end of period		4,422			2,796			4,497			3,872

Retained Earnings
Balance at beginning of period		6,499			6,890			6,499			6,890
Net income (loss)		568			(1,395	)		1,001			(888	)
Dividends declared on common stock		(81	)		(69	)		(163	)		(145	)

Balance at end of period		6,986			5,426			7,337			5,857

Treasury Stock, at Cost
Balance at beginning of period		(38	)		(37	)		(38	)		(37	)
Return of shares under incentive and stock compensation plans to treasury stock		(1	)		—
Return of shares to treasury stock under incentive and stock compensation plans								(1	)		—

Balance at end of period		(39	)		(37	)		(39	)		(37	)

Accumulated Other Comprehensive Income, Net of Tax
Accumulated Other Comprehensive Income (Loss), Net of Tax
Balance at beginning of period		1,246			1,094			1,246			1,094
Change in unrealized gain/loss on securities		574			177
Change in net unrealized gain/loss on securities								(990	)		732
Cumulative effect of accounting change		292			—			292			—
Change in net gain/loss on cash flow hedging instruments		59			(23	)
Change in net gain/loss on cash-flow hedging instruments								(50	)		(38	)
Foreign currency translation adjustments		(3	)		9			(18	)		19

Total other comprehensive income		922			163
Total other comprehensive income (loss)								(766	)		713

Balance at end of period		2,168			1,257			480			1,807

Total stockholders’ equity	$	13,537		$	9,442		$	12,275		$	11,499

Outstanding Shares (in thousands)
Balance at beginning of period		283,380			255,241			283,380			255,241
Issuance of common stock in underwritten offering		6,703			—			6,703			26,377
Issuance of shares under incentive and stock compensation plans		1,619			200			2,982			581
Return of shares under incentive and stock compensation plans to treasury stock		(25	)		—
Return of shares to treasury stock under incentive and stock compensation plans								(30	)		—

Balance at end of period		291,677			255,441			293,035			282,199

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Cash Flows


	First Quarter Ended						Six Months Ended
	March 31,						June 30,
(In millions)	2004			2003			2004			2003
	(Unaudited)						(Unaudited)
*Operating Activities*
Net income (loss)	$	568		$	(1,395	)	$	1,001		$	(888	)
*Adjustments to reconcile net income (loss) to net cash provided by operating activities*
Amortization of deferred policy acquisition costs and present value of future profits		679			564			1,380			1,121
Additions to deferred policy acquisition costs and present value of future profits		(952	)		(807	)		(1,922	)		(1,568	)
Change in:
Reserve for future policy benefits and unpaid claims and claim adjustment expenses and unearned premiums		(1,022	)		4,576			(387	)		4,791
Reinsurance recoverables		151			(1,459	)		424			(1,184	)
Receivables		(904	)		(95	)		(543	)		(169	)
Payables and accruals		575			(34	)		(379	)		(217	)
Accrued and deferred income taxes		641			(839	)		680			(739	)
Net realized capital (gains) losses		(144	)		45
Net realized capital gains								(196	)		(226	)
Net increase in equity securities, held for trading		(1,611	)		—			(2,759	)		—
Net receipts from investment and universal life-type contracts credited to policyholder accounts associated with equity securities, held for trading		1,915			—
Net receipts from investment contracts credited to policyholder accounts associated with equity securities, held for trading								3,072			—
Depreciation and amortization		33			72			198			11
Cumulative effect of accounting change, net of tax		23			—			23			—
Other, net		147			39			39			404

Net cash provided by operating activities		99			667			631			1,336

*Investing Activities*
Purchase of available-for-sale investments		(4,674	)		(5,859	)		(11,498	)		(16,196	)
Sale of available-for-sale investments		4,315			3,364			9,350			8,960
Maturity of available-for-sale investments		763			931			2,478			1,928
Purchase price adjustment of business acquired								(58	)		—
Additions to property, plant and equipment, net		(18	)		(43	)		(77	)		(72	)

Net cash provided by (used for) investing activities		386			(1,607	)		195			(5,380	)

*Financing Activities*
Issuance (repayment) of short-term debt, net		(477	)		—
Repayment of short-term debt, net								(477	)		—
Issuance of long-term debt		197			—			197			918
Repayment of long-term debt		(250	)		—
Repayment/maturity of long-term debt								(450	)		(180	)
Issuance of common stock in underwritten offering		411			—			411			1,162
Net receipts from investment and universal life-type contracts charged against policyholder accounts		(164	)		1,279
Net receipts (disbursements) from investment and universal life-type contracts credited to policyholder accounts								(227	)		2,313
Dividends paid		(79	)		(69	)		(160	)		(138	)
Proceeds from issuance of shares under incentive and stock compensation plans		55			6			115			17

Net cash provided by (used for) financing activities		(307	)		1,216			(591	)		4,092

Foreign exchange rate effect on cash		(2	)		2			(2	)		4

Net increase in cash		176			278			233			52
Cash - beginning of period		462			377
Cash — beginning of period								462			377

Cash - end of period	$	638		$	655
Cash — end of period							$	695		$	429


*Supplemental Disclosure of Cash Flow Information:*

*Net Cash Paid (Received) During the Period For:*
Income taxes	$	30		$	(45	)	$	44		$	(29	)
Interest	$	55		$	48		$	137		$	133

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in millions except per share data unless otherwise stated)
~~(unaudited)~~(Unaudited)

Note 1. Basis of Presentation and Accounting Policies

Basis of Presentation

The Hartford Financial Services Group, Inc. and its consolidated subsidiaries (“The Hartford” or the “Company”) provide investment products, life insurance and ~~life~~group benefits, automobile and ~~property~~homeowners products, and ~~casualty~~business property-casualty insurance to both individual and business customers in the United States and internationally.

On December 31, 2003, the Company acquired the group life and accident, and short-term and long-term disability business of CNA Financial Corporation. Accordingly, the Company’s results of operations for the second quarter and six months ended ~~March, 31,~~June 30, 2004 reflect the inclusion of this business. ~~These results were not material to consolidated operations.~~ For further discussion of the CNA Financial Corporation acquisition, see Note 6 of these Notes to Condensed Consolidated Financial Statements and Note 18 of Notes to Consolidated Financial Statements included in The Hartford’s 2003 Form 10-K Annual Report.

The condensed consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America, which differ materially from the accounting practices prescribed by various insurance regulatory authorities. Subsidiaries in which The Hartford has at least a 20% interest, but less than a majority ownership interest, are reported ~~using~~on the equity method. All material intercompany transactions and balances between The Hartford, its subsidiaries and affiliates have been eliminated.

The accompanying condensed consolidated financial statements and the condensed notes as of ~~March 31,~~June 30, 2004, and for the ~~first quarters~~second quarter and six months ended ~~March 31,~~June 30, 2004 and 2003 are unaudited. These financial statements reflect all adjustments (consisting only of normal accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations, and cash flows for the interim periods. These condensed consolidated financial statements and condensed notes should be read in conjunction with the consolidated financial statements and notes thereto included in The Hartford’s 2003 Form 10-K Annual Report. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

Reclassifications

Certain reclassifications have been made to prior period financial information to conform to the current period classifications.

Use of Estimates

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The most significant estimates include those used in determining reserves for future policy benefits and unpaid claims and claim adjustment expenses; deferred policy acquisition costs and present value of future profits; investments; pension and other postretirement benefits; and contingencies.

Significant Accounting Policies

For a description of accounting policies, see Note 1 of Notes to Consolidated Financial Statements included in The Hartford’s 2003 Form 10-K Annual Report.

Investments

As discussed in ~~the “Adoption of New Accounting Standards” section~~Note 4 below, on January 1, 2004, the Company reclassified certain separate account assets to the general account and classified a portion of these assets as trading securities. Trading securities are recorded at fair value with ~~periodic~~subsequent changes in fair value recognized in net investment income.

~~Stock–Based~~Stock-Based Compensation

In January 2003, the Company began expensing all stock-based compensation awards granted or modified after January 1, 2003 under the fair value recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation”. The fair value of stock-based awards granted or modified during the ~~quarters~~six months ended ~~March 31,~~June 30, 2004 and 2003 was $36 and ~~$31,~~$33, after-tax, respectively. The fair value of these awards will be recognized over the awards’ vesting period, generally 3 years. ~~The expense associated with stock-based compensation awards for the first quarters ended March 31, 2004 and 2003, was $4 and $1, after-tax, respectively.~~ Prior to January 1, 2004, the Company used the Black-Scholes model to estimate the fair value of the Company’s stock-based compensation. For all awards granted or modified on or after January 1, 2004, the Company used a binomial option-pricing model that incorporates the possibility of early exercise of options into the valuation. The binomial model also incorporates the Company’s historical forfeiture and exercise experience to determine the option value. For these reasons, the Company believes the binomial model provides a fair value that is more representative of actual historical experience than the value calculated under the Black-Scholes model.

All stock-based awards granted or modified prior to January 1, 2003 continue to be valued using the intrinsic value-based provisions set forth in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”. Under the intrinsic value method, compensation expense is determined on the measurement date, which is the first date on which both the number of shares the employee is entitled to receive and the exercise price are known. Compensation expense, if any, is measured based on the award’s intrinsic value, which is the excess of the market price of the stock over the exercise price on the measurement date. The expense related to stock-based employee compensation, including non-option plans, included in the determination of net income for the ~~first quarters~~second quarter and six months ended ~~March 31,~~June 30, 2004 and 2003 is less than ~~that which would have been~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
~~(unaudited)~~(Unaudited)

Note 1. Basis of Presentation and Accounting Policies (continued)

Stock-Based Compensation (continued)

that which would have been recognized if the fair value method had been applied to all awards since the effective date of SFAS No. 123. (For further discussion of the Company’s stock compensation plans, see Note 11 of Notes to Consolidated Financial Statements included in The Hartford’s 2003 Form 10-K Annual Report.)

The following table illustrates the effect on net income (loss) and earnings (loss) per share as if the fair value method had been applied to all outstanding and unvested awards in each period. The pro forma fair values disclosed below related to awards granted prior to 2004 were calculated using the Black-Scholes option-pricing model and were not recalculated using the binomial model. The change in valuation methodology would have an ~~insignificant~~immaterial impact on the pro forma net income amounts disclosed.


	First Quarter Ended
	March 31,						Second Quarter Ended						Six Months Ended
	2004			2003			June 30,						June 30,
	(Unaudited)						2004			2003			2004			2003
Net income (loss), as reported	$	568		$	(1,395	)	$	433		$	507		$	1,001		$	(888	)
Add: Stock-based employee compensation expense included in reported net income (loss), net of related tax effects [1]		4			1			9			9			13			11
Deduct: Total stock-based employee compensation expense determined under the fair value method for all awards, net of related tax effects		(7	)		(9	)		(12	)		(17	)		(19	)		(26	)

Pro forma net income (loss) [2]	$	565		$	(1,403	)	$	430		$	499		$	995		$	(903	)

Earnings (loss) per share:
Basic – as reported	$	1.96		$	(5.46	)	$	1.48		$	1.89		$	3.44		$	(3.39	)
Basic – pro forma [2]	$	1.95		$	(5.49	)	$	1.47		$	1.86		$	3.42		$	(3.45	)
Diluted – as reported [3]	$	1.93		$	(5.46	)	$	1.46		$	1.88		$	3.38		$	(3.39	)
Diluted – pro forma [2] [3]	$	1.92		$	(5.49	)	$	1.45		$	1.85		$	3.36		$	(3.45	)

In ~~July 2003,~~June 2004, the Financial Accounting Standards ~~Executive Committee of the American Institute of Certified Public Accounts~~Board (“~~AICPA”~~FASB”) issued ~~a final~~FASB Staff Position (“FSP”) FAS 97-1, “Situations in Which Paragraphs 17(b) and 20 of FASB Statement No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments (SFAS No. 97), Permit or Require Accrual of an Unearned Revenue Liability.” The implementation of Statement of Position 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts” ~~(the “SOP”~~(“SOP 03-1”)., raised a question regarding the interpretation of the requirements of SFAS No. 97 concerning when it is appropriate to record an unearned revenue liability. This FSP clarifies that SFAS No. 97 is clear in its intent and language; it is appropriate to recognize an unearned revenue liability for amounts that have been assessed to compensate the insurer for services to be performed over future periods. SOP 03-1 describes one situation, when assessments result in profits followed by losses, where an unearned revenue liability is required. SOP 03-1 does not amend SFAS No. 97 or limit the recognition of an unearned revenue liability to the situation described in SOP 03-1. The guidance in the FSP is effective for financial statements for fiscal periods beginning after June 18, 2004. The adoption of this FSP is not expected to have a material impact on the Company’s consolidated financial condition or results of operations. (For further discussion of SOP 03-1, see Note 3.)

In July 2003, Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (“AICPA”) issued SOP 03-1. SOP 03-1 addresses a wide variety of topics, some of which have a significant impact on the Company. The major provisions of ~~the~~ SOP 03-1 require:

~~The~~ SOP 03-1 was effective for financial statements for fiscal years beginning after December 15, 2003. At the date of initial application, January 1, 2004, the cumulative effect of the adoption of ~~the~~ SOP 03-1 on net income and other comprehensive income was comprised of the following individual impacts:

~~The Company sells variable annuity contracts that offer various guaranteed death benefits. For~~With the adoption of SOP 03-1, certain guaranteed death benefits, the Company pays the greater of (1) the account value at death; (2) the sum of all premium payments less prior withdrawals; or (3) the maximum anniversary value of the contract, plus any premium payments since the contract anniversary, minus any withdrawals following the contract anniversary. For certain guaranteed death benefits sold with variable annuity contracts beginning in June of 2003, the Company pays the greater of (1) the account value at death; or (2) the maximum anniversary value; not to exceed the account value plus the greater of (a) 25% of premium payments, or (b) 25% of the maximum anniversary value of the contract.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~
~~(unaudited)~~

~~Note 1. Basis of Presentation and Accounting Policies (continued)~~

The Company currently reinsures a significant portion of these death benefit guarantees associated with its in-force block of business. As of January 1, 2004, the Company has recorded a liability for GMDB and other benefits sold with variable annuity products of $225 and a related reinsurance recoverable asset of $108. As of March 31, 2004 the liability from GMDB and other benefits sold with variable annuity products was $218 with a related reinsurance recoverable asset of $101. The determination of the GMDB liability and related reinsurance recoverable is based on models that involve a range of scenarios and assumptions, including those regarding expected market rates of return and volatility, contract surrender rates and mortality experience. The assumptions used are consistent with those used in determining estimated gross profitswere accounted for ~~purposes of amortizing deferred acquisition costs.~~

The Individual Life segment sells universal life-type contracts with certain secondary guarantees, such as a guarantee that the policy will not lapse, even if the account value is reduced to zero, as long as the policyholder makes scheduled premium payments. The cumulative effect on net income upon recording liabilities for secondary guarantees was not material. Currently there is diversity in industry practice and inconsistent guidance surrounding the application of the SOP to universal life-type contracts. An AICPA task force has been convened to develop guidance surrounding the methodology for determining reserves for universal life-type contracts and the related secondary guarantees. This may result in an adjustment to the cumulative effect of adopting the SOP and could impact future earnings but is not expected to be material to the Company’s financial position or results of operations.

~~Separate Account Presentation~~

The Company had recorded certain market value adjusted (“MVA”) fixed annuity products and modified guarantee life insurance (primarily the Company’s Compound Rate Contract (“CRC”) and associated assets) as separate account assets and liabilities through December 31, 2003. Notwithstanding the market value adjustment feature in this product, all of the investment performance of the separate account assets is not being passed to the contractholder, and it therefore, does not meet the conditions for separate account reporting under the SOP. On January 1, 2004, market value reserves included in separate account liabilities for CRC, of $10.8 billion, were revalued at current account value in the general account, to $10.1 billion. The related separate account assets of $11.0 billion were also reclassified to the general account. Fixed maturities and equity securities were reclassified to the general account, as available-for-sale securities, and will continue to be recorded at fair value, however, subsequent changes in fair value, net of amortization of deferred policy acquisition costs and income taxes, will be recorded in other comprehensive income rather than net income. On January 1, 2004, the Company recorded a cumulative effect adjustment to earnings equal to the revaluationincluding reporting of the ~~liabilities from fair value to account value plus~~spreads on the adjustment to record unrealized gains (losses) on available-for-sale invested assets, previously recorded as a component of net income, as other comprehensive income. The cumulative adjustments to earningsCompany’s MVA fixed annuities and other comprehensive income were recorded net of amortization of deferred policy acquisition costs and income taxes. Through December 31, 2003, the Company had recorded CRC assets and liabilities on a market value basis with all changes in value (market value spread) included in current earnings as a component of other revenues. Since adoption of the SOP, the components of CRC spread on a book value basis are recorded in interest income and interest credited. Realized gains and losses on investments and market value adjustments on contract surrenders are recognized as incurred.

~~The Company had also recorded its~~ variable annuity products offered in Japan on a gross basis in ~~separate account assets~~net investment income and liabilities through December 31, 2003. As the separate account arrangement in Japan is not legally insulated from the general account liabilities of the Company, it does not meet the conditions for separate account reporting under the SOP. On January 1, 2004, separate account liabilities in Japan of $6.2 billion recorded at account value in the separate account, were reclassified to the general account with nobenefits expense. This change in ~~value. The related separate account assets~~accounting resulted in increases of ~~$6.2 billion were also reclassified to~~$299 and $948 in net investment income and increases of $250 and $854 in benefits, claims and claim adjustment expenses for the ~~general account with no change in value. The investment assets were recorded at fair value in a trading securities portfolio. As of March 31,~~second quarter and six months ended June 30, 2004, ~~due to strong sales of Japan variable annuity products and positive performance of the Japanese equity markets these assets had grown to $7.8 billion.~~respectively.

~~Interests in Separate Accounts~~

As of December 31, 2003, the Company had $24 representing unconsolidated interests in its own separate accounts. These interests were recorded as available-for-sale equity securities, with changes in fair value recorded through other comprehensive income. On January 1, 2004, the Company reclassified $11 to investment in trading securities, where the Company’s proportionate beneficial interest in the separate account was less than 20%. In instances where the Company’s proportionate beneficial interest was between 20-50%, the Company reclassified $13 of its investment to reflect the Company’s proportionate interest in each of the underlying assets of the separate account. The Company has designated its proportionate interest in these equity securities and fixed maturities as available-for-sale. As of March 31, 2004, the Company had $1 of interests in separate accounts recorded as equity trading securities and $0 recorded as available-for-sale securities.

~~Sales Inducements~~

The Company currently offers enhanced crediting rates or bonus payments to contract-holders on certain of its individual and group annuity products. Through December 31, 2003, the expense associated with offering certain of these bonuses was deferred and amortized over the contingent deferred sales charge period. Others were expensed as incurred. Effective January 1, 2004, upon adopting the SOP, the expense associated with offering a bonus will be deferred and amortized over the life of the related contract in a pattern consistent with the amortization of deferred policy acquisition costs. Effective January 1, 2004, amortization

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~
~~(unaudited)~~

~~Note 1. Basis of Presentation and Accounting Policies (continued)~~

expense associated with expenses previously deferred will be recorded over the remaining life of the contract rather than over the contingent deferred sales charge period. For the quarter ended March 31, 2004, amortization of sales inducements was $6.

Future Adoption of New Accounting Standards

EITF 02-14

In ~~March~~July 2004, the Emerging Issues Task Force (“EITF”) reached a final consensus on Issue 02-14, “Whether an Investor Should Apply the Equity Method of Accounting to Investments Other Than Common Stock If the Investor Has the Ability to Exercise Significant Influence Over the Operating and Financial Policies of the Investee”. The EITF concluded that an investor should only apply the equity method of accounting when it has investments in either common stock or in-substance common stock of a corporation, provided that the investor has the ability to exercise significant influence over the operating and financial policies of the investee. The EITF defined in-substance common stock as an investment that has risk and reward characteristics that are substantially similar to common stock.

EITF 02-14 is effective for reporting periods beginning after September 15, 2004. For investments that are in-substance common stock but that were not accounted for under the equity method prior to the consensus, the effect of adoption should be reported as a change in accounting principle. For investments that are not common stock or in-substance common stock but that were accounted for under the equity method of accounting prior to the consensus, the equity method of accounting should be discontinued prospectively from the date of adoption and the investor should evaluate whether the investment should be prospectively accounted for under SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” or the cost method under APB Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock”. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial condition or results of operations.

FSP 106-2

In May 2004, the FASB issued FSP FAS No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (“FSP 106-2”), which provides guidance on accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“the Act”). The Act introduces (1) a prescription drug benefit under Medicare and (2) a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least “actuarially equivalent” to Medicare Part D. The FASB concluded that the subsidy should be treated as an actuarial gain pursuant to SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions".FSP 106-2 is effective for the first interim period or annual period beginning after June 15, 2004. If the effect of the Act is not considered a significant event, the effects of the Act should be incorporated in the next measurement of plan assets and obligations. The Company has determined that it will be entitled to the subsidy. The Company does not consider the impact of adoption of the Act to have a significant impact on net periodic postretirement benefit cost or accumulated postretirement benefit obligation and will include the effects of the Act in the Company’s next scheduled remeasurement, January 1, 2005.

EITF 03-1

In March 2004, the EITF reached a final consensus on Issue 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” ~~(“EITF 03-1”)~~. EITF 03-1 adopts a three-step impairment model for securities within its scope. The three-step model must be applied on a security-by-security basis as follows:


Step 1:		Determine whether an investment is impaired. An investment is impaired if the fair value of the investment is less than its cost basis.

Step 2:		Evaluate whether an impairment is other-than-temporary. For debt securities that cannot be contractually prepaid or otherwise settled in such a way that the investor would not recover substantially all of its cost, an impairment is deemed other-than-temporary if the investor does not have the ability and intent to hold the investment until a forecasted market price recovery or it is probable that the investor will be unable to collect all amounts due according to the contractual terms of the debt security.

Step 3:		If the impairment is other-than-temporary, recognize an impairment loss equal to the difference between the investment’s cost basis and its fair value.

Subsequent to an other-than-temporary impairment loss, a debt security should be accounted for in accordance with ~~Statement of Position (“SOP”)~~SOP 03-3, “Accounting for Loans and Certain Debt Securities Acquired in a Transfer”. EITF 03-1 does not replace the impairment guidance for investments accounted for under EITF Issue 99-20, “Recognition of Interest Income and Impairments on Purchased and Retained Beneficial Interests in Securitized Financial Assets” ~~(“EITF 99-20”)~~, however, investors will be required to determine if a security is other-than-temporarily impaired under EITF 03-1 if the security is

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 1. Basis of Presentation and Accounting Policies (continued)

Future Adoption of New Accounting Standards (continued)

determined not to be impaired under EITF 99-20. The disclosure provisions of EITF 03-1 adopted by the Company effective December 31, 2003 and included in Note 3 of the Notes to Consolidated Financial Statements included in The Hartford’s 2003 Form 10-K Annual Report will prospectively include securities subject to EITF 99-20.

In addition to the disclosure requirements adopted by the Company effective December 31, 2003, the final consensus of EITF 03-1 included additional disclosure requirements that are effective for fiscal years ending after June 15, 2004. The impairment evaluation and recognition guidance in EITF 03-1 will be applied prospectively for all relevant current and future investments, effective in reporting periods beginning after June 15, 2004. ~~Besides~~The Company continues to assess the ~~disclosure requirements adopted by~~impact of the ~~Company effective December 31, 2003, the final version of~~impairment evaluation and recognition guidance in EITF 03-1 ~~included additional disclosure requirements that are effective for fiscal years ending after June 15, 2004. The adoption of this standard is not expected to have a material impact~~ on the Company’s consolidated financial condition orand results of operations. While certain provisions of EITF 03-1 require significant judgment by management, the Company currently believes the most significant area of potential impact will be related to certain asset-backed securities supported by aircraft lease receivables that are currently accounted for under EITF 99-20. The Company’s gross unrealized loss related to these securities as of June 30, 2004 was approximately $60. The ultimate impairment recognized upon the adoption of EITF 03-1, if any, will depend on market conditions and management’s intent and ability to hold securities with unrealized losses at the time of impairment evaluation.

EITF 03-16

In March 2004, the EITF reached a final consensus on Issue 03-16, “Accounting for Investments in Limited Liability Companies” ~~(“EITF 03-16”)~~. EITF 03-16 will require investors in limited liability corporations that have specific ownership accounts to follow the equity method ~~accounting~~ for investments that are more than minor (e.g. greater than 3% ownership interest) as prescribed in SOP 78-9, “Accounting for Investments in Real Estate Ventures”, and EITF Topic No. D-46, “Accounting for Limited Partnership Investments”. Investors that do not have specific ownership accounts or minor ownership interests should follow the significant influence model prescribed in APB Opinion No. 18 ~~“Accounting for Certain Investments in Debt and Equity Securities”,~~ for corporate investments. EITF 03-16 excludes securities that are required to be accounted for as debt securities based on the guidance in paragraph 14 of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, and EITF 99-20. EITF 03-16 is effective for quarters beginning after June 15, 2004 and should be applied as a change in accounting principle. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial condition or results of operations.

Note 2. Derivatives and Hedging Activity

Derivative Instruments

The Company utilizes a variety of derivative instruments, including swaps, caps, floors, forwards, futures and options designed to achieve one of four Company-approved objectives: to hedge risk arising from interest rate, price or currency exchange rate volatility; to manage liquidity; to control transaction costs; or to enter into replication transactions.

On the date the derivative contract is entered into, the Company designates the derivative as (1) a hedge of the fair value of a recognized asset or liability (“fair value” hedge), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge), (3) a foreign-currency fair value or cash flow hedge (“foreign-currency” hedge), (4) a hedge of a net investment in a foreign operation or (5) held for other investment and risk management activities, which primarily involve managing asset or liability related risks which do not qualify for hedge accounting under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”.

The Company’s derivative transactions are permitted uses of derivatives under the derivatives use plan filed and/or approved, as applicable, by the State of Connecticut, the State of Illinois and the State of New York insurance departments. The Company does not make a market or trade in these instruments for the express purpose of earning short-term trading profits.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 2. Derivatives and Hedging Activity (continued)

Derivative Instruments (continued)

The increase in notional amount since December 31, 2003 is primarily due to an increase in embedded derivatives associated with guaranteed minimum withdrawal benefits (“GMWB”) product sales, and, to a lesser extent, derivatives transferred to the general account as a result of the adoption of SOP 03-1 and new hedging strategies. The decrease in the net fair value of derivative instruments since December 31, 2003 was primarily due to the rise in interest rates during the second quarter of 2004 and derivatives transferred to the general account pursuant to the adoption of SOP 03-1, partially offset by the increase in derivatives associated with GMWB.

Due to the adoption of ~~the~~ SOP 03-1, derivatives previously included in separate accounts were reclassified into various other balance sheet classifications. On January 1, 2004, the notional amount and net fair value of derivative instruments reclassified totaled $2.9 billion and $(71), respectively. As of ~~March 31,~~June 30, 2004, ~~$50~~$22 of the derivatives were reported in other investments, ~~$(93)~~$103 in other liabilities, and $6$5 of embedded derivatives in fixed maturities in the condensed consolidated balance sheets. Management’s ~~objective~~objectives with regard to the reclassified derivatives along with the notional amount and net fair value ~~as of March 31, 2004~~ are as follows:


	Notional					As of June 30, 2004
Hedging Strategy	Amount		Fair Value			Notional Amount		Fair Value
Cash Flow Hedges
Interest rate swaps- Interest rate swaps are primarily used to convert interest receipts on floating-rate fixed maturity investments to fixed rates. These derivatives are predominantly used to better match cash receipts from assets with cash disbursements required to fund liabilities.	$	1,511	$	68		$	1,596	$	18
Foreign currency swaps- Foreign currency swaps are used to convert foreign denominated cash flows associated with certain foreign denominated fixed maturity investments to U.S. dollars. The foreign fixed maturities are primarily denominated in Euros and are swapped to minimize cash flow fluctuations due to changes in currency rates.		413		(98	)		413		(103	)
Fair Value Hedges
Interest rate caps and floors- Interest rate caps and floors are used to offset the changes in fair value related to corresponding interest rate caps and floors that exist in certain of the Company’s variable-rate fixed maturity investments.		111		(3	)		111		(2	)
Other Investment and Risk Management Activities
Credit default and total return swaps -The Company enters into swap agreements in which the Company assumes credit exposure or reduces credit exposure from an individual entity, referenced index or asset pool.		234		1			444		—
Interest rate swaps- The Company enters into interest rate swaps to economically terminate existing swaps in hedging relationships and thereby offset the changes in value in the original swap. In addition, the Company uses interest rate swaps to manage interest rate risk.		345		—
Interest rate swaps- The Company uses interest rate swaps to manage interest rate risk.							250		16
Options -The Company writes option contracts for a premium to monetize the option embedded in certain of its fixed maturity investments.		417		—			162		—
Foreign currency swaps- The Company enters into foreign currency swaps to hedge the foreign currency exposures in certain of its foreign fixed maturity investments.		13		(5	)		45		(5	)

Total	$	3,044	$	(37	)	$	3,021	$	(76	)

In addition to the derivatives transferred to the general account as a result of the adoption of ~~the~~ SOP 03-1, during the first quarter of 2004, the Company entered into a series of interest rate swap agreements with a combined notional value of $350 to hedge a portion of the Company’s floating rate guaranteed investment contracts. These swaps have been designated as cash flow hedges, with the objective of hedging changes in the benchmark interest rate ~~(i.e. LIBOR)~~(LIBOR), and were structured to offset the payments associated with the guaranteed investment contracts. As of ~~March 31,~~June 30, 2004, the notional amount and net fair value of these swaps totaled $350 and ~~$(7)~~$13, respectively.

During the six months ended June 30, 2004, the Company entered into credit default swap agreements in which the Company pays a derivative counterparty a periodic fee in exchange for compensation from the counterparty should a credit event occur on the part of the referenced security issuer. The Company entered into these agreements as an efficient means to reduce credit exposure to the specified issuers. As of June 30, 2004, the notional amount and net fair value of these swaps totaled $534 and less than $1, respectively.

During the second quarter of 2004, the Company also entered into a series of forward starting swap agreements to hedge interest rate exposure on anticipated fixed-rate asset purchases and anticipated variable cash flows on floating rate assets due to changes in the benchmark interest rate (LIBOR). These swaps have been designated as cash flow hedges and were structured to hedge interest rate exposure inherent in the assumptions used to price primarily certain long-term disability products. As of June 30, 2004, the notional amount and net fair value of these swaps totaled $720 and $(22), respectively.

Periodically the Company enters into interest rate swap agreements to terminate existing swaps in hedging relationships, thereby offsetting the prospective changes in value in the original swap. During the second quarter 2004, the Company cash settled both the original and offsetting swap agreements, resulting in a reduction in notional amount of approximately $3.3 billion from December 31, 2003. No net realized gain or loss was recorded as a result of the settlement.

The Company offers certain variable annuity products with a ~~guaranteed minimum withdrawal benefit (“GMWB”)~~GMWB rider. As of ~~March 31,~~June 30, 2004 and December 31, 2003, ~~$9.7~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 2. Derivatives and Hedging Activity (continued)

Derivative Instruments (continued)

$12.5 billion, or ~~46%~~53%, and $6.2 billion, or 36%, respectively, of account value with the GMWB feature was unreinsured. In order to minimize the volatility associated with the unreinsured GMWB liabilities, the Company has established an alternative risk management strategy. ~~During the third quarter of~~In 2003, the Company began hedging its unreinsured GMWB exposure using interest rate futures, and Standard and Poor’s (“S&P”) 500 and NASDAQ index options and futures contracts. During ~~the first quarter of~~ 2004, the Company ~~entered into~~began using Europe, ~~Asia~~Australasia and Far East (“EAFE”) Index swaps to hedge GMWB exposure to international equity markets.

The total notional amount of derivative contracts purchased to hedge the GMWB exposure, as of ~~March 31,~~June 30, 2004 and December 31, 2003, was ~~$1.7~~$1.9 billion and $544, respectively, and net fair value was ~~$100~~$79 and $21, respectively. For the second quarter and six months ended ~~March 31,~~June 30, 2004, net realized capital gains and losses included the change in market value of both the embedded derivative related to the GMWB liability and the related derivative contracts that were purchased as economic hedges, the net effect of which was a ~~$2 loss~~gain of $6 and $4, respectively, before deferred policy acquisition costs and tax effects.

Derivative instruments are recorded at fair value and presented in the condensed consolidated balance sheets as follows:

The increase in the asset values of derivative instruments since December 31, 2003 was primarily due to derivatives transferred to the general account pursuant to the adoption of the SOP, the increase in derivatives used to hedge GMWB exposure and market appreciation associated with interest rate swaps due to a decrease in interest rates.

The following table summarizes the notional amount and fair value of derivatives by hedge designation as of March 31, 2004 and December 31, 2003. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and are not reflective of credit risk. The fair value amounts of derivative assets and liabilities are presented on a net basis in the following table.

For the ~~quarters~~second quarter and six months ended ~~March 31,~~June 30, 2004 and ~~March 31,~~ 2003, the Company’s gross gains and losses representing the total ineffectiveness of all ~~cash flow,~~ fair value and net investment hedges ~~were immaterial,~~was less than $1, with the net impact reported as net realized capital gains and losses.

For the ~~quarters~~second quarter and six months ended ~~March 31,~~June 30, 2004, ~~and 2003,~~ the Company ~~recognized an~~recorded a net loss due to ineffectiveness on cash flow hedges of $3, after-tax, ~~net gain (loss) of $17 and $(3), respectively, (reported as~~primarily associated with interest rate swap hedges, in net realized capital gains and ~~losses in~~losses. For the ~~condensed consolidated statements of operations), which represented~~second quarter and six months ended June 30, 2003, the cash flow hedge ineffectiveness was less than $1.

The total change in value for other derivative-based strategies which do not qualify for hedge accounting treatment, including the periodic net coupon ~~settlements.~~settlements, are reported as net realized capital gains and losses in the condensed consolidated statements of operations. For the second quarter and six months ended June 30, 2004, the Company recognized an after-tax net gain of $11 and $28, respectively, for derivative-based strategies which do not qualify for hedge accounting treatment. For the second quarter and six months ended June 30, 2003, the after-tax net gain was $8 and $11, respectively.

As of ~~March 31,~~June 30, 2004, the after-tax deferred net gains on derivative instruments ~~accumulated~~ in accumulated other comprehensive income (“AOCI”) that are expected to be reclassified to earnings during the next twelve months are ~~$15.~~$11. This expectation is based on the anticipated interest payments on hedged investments in fixed maturity securities that will occur over the next twelve months, at which time the Company will recognize the deferred net gains ~~(losses)~~or losses as an adjustment to interest income over the term of the investment cash flows. The maximum term over which the Company is hedging its exposure to the variability of future cash flows (for all forecasted transactions, excluding interest payments on ~~variable rate~~variable-rate fixed maturities) is twenty-four months. For the ~~quarters~~second quarter and six months ended ~~March 31,~~June 30, 2004 and 2003, ~~the net~~there were no reclassifications from AOCI to earnings resulting from the discontinuance of cash flow ~~hedges were immaterial.~~hedges.

The net investment hedge of the Japanese Life operation was established in the fourth quarter of 2003. The after-tax amount of net gain (loss) included in the foreign currency cumulative translation adjustment associated with the net investment hedge was ~~$(6)~~less than $1 and $(3) as of ~~March 31,~~June 30, 2004 and December 31, 2003, respectively.

The Company sells variable annuity contracts, through separate accounts, that offer various guaranteed death benefits. The Company currently reinsures a significant portion of these death benefit guarantees associated with its in-force block of business. Upon adoption of SOP 03-1, the Company recorded a liability for GMDB and other benefits sold with variable annuity products of $225 and a related reinsurance recoverable asset of $108. As of June 30, 2004, the liability from GMDB and other benefits sold with variable annuity products was $212 with a related reinsurance recoverable asset of $92. The net GMDB liability is established by estimating the expected value of net reinsurance costs and net death benefits in excess of the projected account balance and recognizing the excess death benefits and net reinsurance costs ratably over the accumulation period based on total expected assessments. The determination of the GMDB liability and related reinsurance recoverable is based on models that involve a range of scenarios and assumptions, including those regarding expected market rates of return and volatility, contract surrender rates and mortality experience. The assumptions used are consistent with those used in determining estimated gross profits for purposes of amortizing deferred acquisition costs.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 3. Death Benefits and Other Insurance Benefit Features (continued)

The following table provides details concerning GMDB exposure for the Retail Products Group which comprises substantially all of the GMDB exposure:


Breakdown of Variable Annuity Account Value by	Account		Net Amount		Retained Net
GMDB Type	Value		at Risk		Amount at Risk
Maximum anniversary value (MAV) [1]
MAV only	$	61,264	$	8,299	$	913
With 5% rollup [2]		4,132		672		121
With Earnings Protection Benefit Rider (EPB) [3]		3,974		134		40
With 5% rollup & EPB		1,469		112		19

Total MAV		70,839		9,217		1,093
Asset Protection Benefit (APB) [4]		11,627		17		10
Ratchet [5] (5 years)		43		3		—
Reset [6] (5-7 years)		8,478		863		862
Return of Premium [7]/Other		1,517		11		11

Total	$	92,504	$	10,111	$	1,976


[1]		MAV: the death benefit is the greatest of current account value, net premiums paid and the highest account value on any anniversary before age 80 (adjusted for withdrawals).

[2]		Rollup: the death benefit is the greatest of the MAV, current account value, net premium paid and premiums (adjusted for withdrawals) accumulated at generally 5% simple interest up to the earlier of age 80 or 100% of adjusted premiums.

[3]		EPB: The death benefit is the greatest of the MAV, current account value, or contract value plus a percentage of the contract’s growth. The contract’s growth is account value less premiums net of withdrawals, subject to a cap of 200% of premiums net of withdrawals.

[4]		APB: the death benefit is the greater of current account value or MAV, not to exceed current account value plus 25% times the greater of net premiums and MAV (each adjusted for premiums in the past 12 months).

[5]		Ratchet: the death benefit is the greatest of current account value, net premiums paid and the highest account value on any specified anniversary before age 85 (adjusted for withdrawals).

[6]		Reset: the death benefit is the greatest of current account value, net premiums paid and the most recent five to seven year anniversary account value before age 80 (adjusted for withdrawals).

[7]		Return of premium: the death benefit is the greater of current account value and net premiums paid.

The Individual Life segment sells universal life-type contracts with certain secondary guarantees, such as a guarantee that the policy will not lapse, even if the account value is reduced to zero, as long as the policyholder makes scheduled premium payments. The cumulative effect on net income upon recording liabilities for secondary guarantees, in accordance with SOP 03-1, was not material. Currently there is diversity in industry practice and inconsistent guidance surrounding the application of SOP 03-1 to universal life-type contracts. An AICPA task force has been convened to develop guidance surrounding the methodology for determining reserves for universal life-type contracts and the related secondary guarantees. This may result in an adjustment to the cumulative effect of adopting SOP 03-1 and could impact future earnings.

Note 4. Separate Account Presentation

The Hartford maintains separate account assets and liabilities, which are reported at fair value. Separate account assets are segregated from other investments and investment income and gains and losses accrue directly to the policyholder. See Note 3 for a discussion of death benefit guarantees offered in variable annuity contracts sold through separate accounts. The fees earned for administrative and contractholder maintenance services performed for these separate accounts are included in fee income. During 2004, there were no gains or losses on transfers of assets from the general account to the separate account. The Company had recorded certain market value adjusted (“MVA”) fixed annuity products and modified guarantee life insurance (primarily the Company’s Compound Rate Contract (“CRC”) and associated assets) as separate account assets and liabilities through December 31, 2003. Notwithstanding the market value adjustment feature in this product, all of the investment performance of the separate account assets is not being passed to the contractholder, and it therefore, does not meet the conditions for separate account reporting, under SOP 03-1. Separate account assets and liabilities related to CRC of $11 billion were reclassified to and revalued in, the general account upon adoption of SOP 03-1.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 4. Separate Account Presentation (continued)

Prior to the adoption of SOP 03-1 the Company had also recorded its variable annuity products offered in Japan in separate account assets and liabilities through December 31, 2003. These assets are not legally insulated from general creditors and therefore did not meet the conditions for separate account reporting under SOP 03-1. On January 1, 2004, separate account assets and liabilities in Japan of $6.2 billion were reclassified to the general account with no change in value. The investment assets were recorded at fair value in a trading securities portfolio. As of June 30, 2004, due to strong sales of Japan variable annuity products and positive performance of the Japanese equity markets these assets had increased to $9.3 billion.

Note 5. Sales Inducements

The Company currently offers enhanced crediting rates or bonus payments to contractholders on certain of its individual and group annuity products. Through December 31, 2003, the expense associated with offering certain of these bonuses was deferred and amortized over the contingent deferred sales charge period. Others were expensed as incurred. Effective January 1, 2004, upon adopting SOP 03-1, the expense associated with offering a bonus is deferred and amortized over the life of the related contract in a pattern consistent with the amortization of deferred policy acquisition costs. Also, effective January 1, 2004, amortization expense associated with expenses previously deferred is recorded over the remaining life of the contract rather than over the contingent deferred sales charge period. Changes in deferred sales inducement activity were as follows:


	Second Quarter Ended			Six Months Ended
	June 30, 2004			June 30, 2004
Balance, beginning of period	$	225		$	198
Sales inducements deferred		30			63
Amortization charged to income		(6	)		(12	)

Balance at June 30, 2004	$	249		$	249

Note 6. Goodwill and Other Intangible Assets

Effective January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”, and accordingly ceased all amortization of goodwill.

The carrying amount of goodwill as of ~~March 31,~~June 30, 2004 and December 31, 2003, is shown below.


Life	$	796
Property & Casualty		152
Corporate		772

Total	$	1,720

Net amortization expense for the second quarter ended ~~March 31,~~June 30, 2004 and 2003 was ~~$30~~$43 and ~~$26,~~$27, respectively. Net amortization expense for the six months ended June 30, 2004 and 2003 was $73 and $52, respectively.

On December 31, 2003, the Company acquired CNA Financial Corporation’s group life and accident, and short-term and long-term disability businesses for $485 in cash. The purchase price paid on December 31, 2003 was based on September 30, 2003 statutory surplus. During the second quarter of 2004, the purchase price was finalized for $543 in cash based on the actual statutory surplus at December 31, 2003. The Company continues to integrate this acquisition and obtain the information necessary to finalize the initial estimates in purchase accounting. The Company expects to finalize those initial fair value estimates within the one year allocation period, ending December 31, 2004.

The ~~following is detail~~Company has agreed to offer over 40,000 London Pacific Life and Annuity Company (“London Pacific”) deferred annuity customers, representing approximately $1.5 billion in account value, the opportunity to exchange to a Hartford Life Insurance Company (“HLIC”) contract in the third quarter of 2004. HLIC will also assume approximately 6,000 immediate annuities and 2,000 universal life policies from London Pacific pursuant to orders entered by the Wake County Superior Court of North Carolina. The transactions are expected to be completed in three separate blocks between July 2004 and March 2005.

During the second quarter of 2004, the Company completed an evaluation of the reinsurance recoverable asset associated with older, long-term casualty liabilities reported in the Other Operations segment, including asbestos liabilities. As a result of this evaluation, the Company reduced its net ~~acquired intangible asset activity as~~reinsurance recoverable by $181. The after-tax income effect of ~~March 31, 2004 and 2003:~~this action was $118.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

The following tables present a reconciliation of net income (loss) and shares used in calculating basic earnings (loss) per share to those used in calculating diluted earnings (loss) per share.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~
~~(unaudited)~~

~~Note 4. Earnings (Loss) Per Share (continued)~~

March 31, 2003

Basic Loss per Share

Net loss available to common shareholders $ (1,395 ) 255.4 $ (5.46 )

Diluted Loss per Share [1]

Options — —

Net loss available to common shareholders plus assumed conversions $ (1,395 ) 255.4 $ (5.46 )


	Second Quarter Ended						Six Months Ended
	June 30, 2003						June 30, 2003
	Net				Per Share		Net					Per Share
	Income		Shares		Amount		Income (Loss)			Shares		Amount
Basic Earnings (Loss) per Share
Income (Loss) available to common shareholders	$	507		268.8	$	1.89	$	(888	)		262.1	$	(3.39	)

Diluted Earnings (Loss) per Share [1]
Options		—		1.4				—			—

Income (Loss) available to common shareholders plus assumed conversions	$	507		270.2	$	1.88	$	(888	)		262.1	$	(3.39	)


[1]		As a result of the net loss in the ~~quarter~~six months ended ~~March 31,~~June 30, 2003, SFAS No. 128 requires the Company to use basic weighted average shares outstanding in the calculation of ~~first quarter~~the six months ended June 30, 2003 diluted earnings per share, as the inclusion of options of ~~0.7~~1.0 would have been antidilutive to the earnings per share calculation. In the absence of the net loss, weighted average common shares outstanding and dilutive potential common shares would have totaled ~~256.1.~~263.1.

Basic earnings (loss) per share reflects the actual weighted average number of shares outstanding during the period. Diluted earnings (loss) per share includes the dilutive effect of outstanding options and equity units, using the treasury stock method. Under the treasury stock method exercise of options and equity units are assumed, with the proceeds used to purchase common stock at the average market price for the period. The equity units are reflected in diluted earnings per share during periods where the average market price of the Company’s common stock exceeds the applicable appreciation threshold. For a discussion of the Company’s equity units, see Note 8 of Notes to Consolidated Financial Statements included in The Hartford’s 2003 Form 10-K Annual Report.

Note 5.9. Commitments and Contingencies

Litigation

The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford accounts for such activity through the establishment of unpaid claim and claim adjustment expense reserves. Subject to the uncertainties discussed in Note 16 of Notes to Consolidated Financial Statements under the caption “Asbestos and Environmental ~~Claims”,~~Claims,” included in The Hartford’s 2003 Form 10-K Annual Report, management expects that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition, results of operations or cash flows of The Hartford.

The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. These actions include, among others, putative state and federal class actions seeking certification of a state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper underwriting practices in connection with various kinds of insurance policies, such as personal and commercial automobile, ~~premises liability~~property, and inland marine, and improper sales practices in connection with the sale of life insurance and other investment products. The Hartford also is involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims. Management expects that the ultimate liability, if any, with respect to such lawsuits, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition of The Hartford. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s consolidated results of operations or cash flows in particular quarterly or annual periods.

As discussed in Note 16 of Notes to Consolidated Financial Statements under the caption “Asbestos and Environmental ~~Claims”,~~Claims,” included in The Hartford’s 2003 Form 10-K Annual

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 9. Commitments and Contingencies (continued)

Litigation (continued)

Report, The Hartford continues to receive asbestos and environmental claims that involve significant uncertainty regarding policy coverage issues. Regarding these claims, The Hartford continually reviews its overall reserve levels ~~methodologies~~ and reinsurance ~~coverages.~~coverages, as well as the methodologies it uses to estimate its exposures. Because of the significant uncertainties ~~which~~that limit the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid losses and related expenses, ~~principally~~particularly those related to asbestos, the ultimate liabilities may exceed the currently recorded reserves. Any such additional liability (or any range of additional amounts) cannot be reasonably estimated now but could be material to The Hartford’s future consolidated operating results, financial condition and liquidity.

The MacArthur Litigation– On December 19, 2003, Hartford Accident and Indemnity Company (“Hartford A&I”) entered into a conditional settlement to resolve all claims relating to general liability policies that Hartford A&I issued to Mac Arthur Company and its subsidiary, Western MacArthur Company, both former regional distributors of asbestos products (collectively or individually, “MacArthur”), during the period 1967 to 1976. MacArthur had filed a pre-negotiated bankruptcy and plan of reorganization in November 2002 pursuant to a settlement with another of its insurers, United States Fidelity and Guaranty Company. The Hartford settlement was contingent on the occurrence of certain conditions, including the entry of final, non-appealable court orders approving the settlement agreement and confirming a bankruptcy plan under which, among other things, all claims against the Company relating to the asbestos liability of MacArthur would be enjoined. Under the settlement agreement, Hartford A&I paid $1.15 billion into an escrow account in the first quarter of 2004, pending the occurrence of the conditions. On April 22, 2004, all conditions to the settlement were satisfied, and the escrowed funds were disbursed to a trust established for the benefit of present and future asbestos claimants pursuant to the bankruptcy plan. The completion by the Company of the settlement resolves all disputes concerning

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~
~~(unaudited)~~

~~Note 5. Commitments and Contingencies (continued)~~

Hartford A&I’s alleged obligations from MacArthur’s asbestos liability.

~~Bancorp Services, LLC~~– In the third quarter of 2003, Hartford Life Insurance Company and its affiliate International Corporate Marketing Group, LLC settled their intellectual property dispute with Bancorp Services, LLC (“Bancorp”). The dispute concerned, among other things, Bancorp’s claims for alleged patent infringement, breach of a confidentiality agreement, and misappropriation of trade secrets related to certain stable value corporate-owned life insurance products. The settlement provided that The Hartford would pay a minimum of $70 and a maximum of $80, depending on the outcome of the patent appeal, to resolve all disputes between the parties. The settlement resulted in the recording of an additional charge of $40, after-tax, in the third quarter of 2003, reflecting the maximum amount payable under the settlement, and in November of 2003, The Hartford paid the initial $70 of the settlement. On March 1, 2004, the Federal Circuit Court of Appeals decided the patent appeal adversely to The Hartford, and on March 22, 2004, The Hartford paid Bancorp an additional $10 in full and final satisfaction of its obligations under the settlement. Because the charge taken in the third quarter of 2003 reflected the maximum amount payable under the settlement, the amount paid in the first quarter of 2004 had no effect on the Company’s results of operations.

Regulatory Developments

There continues to be significant federal and state regulatory activity relating to financial services companies, particularly mutual funds companies. These regulatory inquiries have focused on a number of mutual fund issues. The Company has received requests for information and subpoenas from the Securities and Exchange Commission (“SEC”), a subpoena from the New York Attorney General’s Office, and requests for information from the Connecticut Securities and Investments Division of the Department of Banking, in each case requesting documentation and other information regarding various mutual fund regulatory issues. ~~Representatives~~The Company continues to respond to requests for documents and information from representatives from the SEC’s Office of Compliance Inspections and Examinations ~~continue to request documents and information~~ in connection with their ongoing compliance ~~examination.~~examinations regarding market timing and late trading, revenue sharing and directed brokerage, fees, fund service providers and transfer agents, and other mutual fund-related issues. In addition, the SEC’s Division of Enforcement has commenced an investigation of the Company’s variable annuity and mutual fund operations. The Company continues to cooperate fully with the SEC and other regulatory agencies.

The Company’s mutual funds are available for purchase by the separate accounts of different variable life insurance policies, variable annuity products, and funding agreements, and they are offered directly to certain qualified retirement plans. Although existing products contain transfer restrictions between subaccounts, some products, particularly older variable annuity products, do not contain restrictions on the frequency of transfers. In addition, as a result of the settlement of litigation against the Company with respect to certain owners of older variable annuity products, the Company’s ability to restrict transfers by these owners is limited.

A number of companies have announced settlements of enforcement actions with various regulatory agencies, primarily the SEC and the New York Attorney General’s Office. While no such action has been initiated against the Company, it is possible that the SEC or one or more other regulatory agencies may pursue action against the Company in the future. If such an action is brought, it could have a material effect on the Company.

Like numerous other insurance carriers, The Hartford has received a subpoena from the New York Attorney General’s Office in connection with its inquiry into compensation arrangements between brokers and carriers. The Hartford is cooperating with the inquiry. Consistent with long-standing and wide-spread industry practice, The Hartford makes incentive compensation payments to brokers that may be based on the volume, growth and/or profitability of business placed with The Hartford. The Hartford expects the independent brokers with whom we work to comply with all applicable laws, including any concerning the disclosure of compensation arrangements. At this early stage, it is too soon to tell what impact, if any, the investigation will have on The Hartford.

The Financial Services Agency, the Company’s primary regulator in Japan, is considering new reserving methodologies and Solvency Margin Ratio (“SMR”) standards for variable annuity contracts. The industry and Institute of Actuaries of Japan (“IAJ”) have been consulting with the regulators on the development of the new methodologies and SMR standards. While there has been no formal time frame established, it is expected that the IAJ should conclude its discussions in September and new regulations could go into force as early as April 2005. Although the new reserve methodologies and SMR standards would only apply to capital requirements for Japanese regulatory purposes, it is possible in the future that the Company would need to provide additional capital to support its Japanese operations, which would lower the Company’s return on invested capital for this business. At this time, it is not possible to predict the final form of any reserve methodology or SMR standard changes.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 9. Commitments and Contingencies (continued)

Tax Matters

The ~~Hartford’s federal~~Company’s Federal income tax returns are routinely audited by the Internal Revenue Service (“IRS”). The Company is currently under audit for the ~~1998–2001~~1998-2001 tax years. Management believes that adequate provision has been made in the financial statements for any potential assessments that may result from tax examinations and other tax-related matters for all open tax years.

Although there has been no agreement reached between the Company and the IRS at this time, the amount of tax related to the separate account dividends-received deduction (“DRD”) that is under discussion for all open ~~tax~~ years could result in a benefit to the Company’s financial position and future results of operations. There can be no assurances that such an agreement will be reached. (For further discussion of the Company’s separate account DRD, see Note 16 of Notes to Consolidated Financial Statements included in ~~The Hartford’s~~the Company’s 2003 Form 10-K Annual Report.) Management believes that adequate provision has been made in the financial statements for any potential assessments that may result from tax examinations and other tax-related matters for all open tax years.

Note 6.10. Segment Information

The Hartford is organized into two major operations: Life and Property & Casualty. In the quarter ended March 31, 2004, and as more fully described below, the Company changed its reporting segments to reflect the current manner by which its chief operating decision maker views and manages the business. All segment data for prior reporting periods have been adjusted to reflect the current segment reporting. Within the Life and Property & Casualty operations, The Hartford conducts business principally in eight operating segments. Additionally, Corporate now includes all of the Company’s debt financing and related interest expense, as well as certain capital raising and purchase accounting adjustment activities.

Life has changed its reportable operating segments from Investment Products, Individual Life, Group Benefits and Corporate Owned Life Insurance (“COLI”) to Retail Products Group (“Retail”), Institutional Solutions Group (“Institutional”), Individual Life and Group Benefits. Retail offers individual variable and fixed annuities, mutual funds, retirement plan products and services to corporations under Section 401(k) plans and other investment products. Institutional primarily offers retirement plan products and services to municipalities under Section 457 plans, other institutional investment products and private placement life insurance. Individual Life sells a variety of life insurance products, including variable universal life, universal life, interest sensitive whole life and term life insurance. Group Benefits sells group insurance products, including group life and group disability insurance as well as other products, including medical stop loss and supplementary medical coverages to employers and employer sponsored plans, accidental death and

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~
~~(unaudited)~~

~~Note 6. Segment Information (continued)~~

dismemberment, travel accident and other special risk coverages to employers and associations. Life also includes in an Other category its international operations, which are primarily located in Japan and Brazil; net realized capital gains and losses other than periodic net coupon settlements on non-qualifying derivatives and net realized capital gains and losses related to guaranteed minimum withdrawal benefits; corporate items not directly allocated to any of its reportable operating segments; and intersegment eliminations. Periodic net coupon settlements on non-qualifying derivatives and net realized capital gains and losses related to guaranteed minimum withdrawal benefits are reflected in each applicable segment in net realized capital gains and losses.

Property & Casualty is ~~now~~ organized into four reportable operating segments: the underwriting segments of Business Insurance, Personal Lines, and Specialty Commercial (collectively “Ongoing Operations”); and the Other Operations segment. Prior to the segment reporting change made in the first quarter of 2004, Property ~~and~~& Casualty had also included a Reinsurance segment. With the discontinuance of writing new reinsurance assumed business, the reinsurance assumed business is now included in the Other Operations segment.

Business Insurance provides standard commercial insurance coverage to small commercial and middle market commercial ~~business~~businesses primarily throughout the United States. This segment offers workers’ compensation, property, automobile, liability, umbrella and marine coverages. Commercial risk management products and services are also provided.

Personal Lines provides automobile, homeowners’ and home-based business coverages to the members of AARP through a direct marketing operation; to individuals who prefer local agent involvement through a network of independent agents in the standard personal lines market; and through the Omni Insurance Group in the non-standard automobile market. Personal Lines also operates a member contact center for health insurance products offered through AARP’s Health Care Options.

The Specialty Commercial segment offers a variety of customized insurance products and risk management services. Specialty Commercial provides standard commercial insurance products including workers’ compensation, automobile and liability coverages to large-sized companies. Specialty Commercial also provides bond, professional liability, specialty casualty and agricultural coverages, as well as core property and excess and surplus lines coverages not normally written by standard lines insurers. Alternative markets, within Specialty Commercial, provides insurance products and services primarily to captive insurance companies, pools and self-insurance groups. In addition, Specialty Commercial provides third party administrator services for claims administration, integrated benefits, loss control and performance measurement through Specialty Risk Services, a subsidiary of the Company.

The Other Operations segment consists of certain property and casualty insurance operations of The Hartford which have discontinued writing new business and includes substantially all of the Company’s asbestos and environmental exposures.

The measure of profit or loss used by The Hartford’s management in evaluating the performance of its Life segments is net income. The Property & Casualty ~~underwriting~~ segments are evaluated by The Hartford’s management primarily based upon underwriting results. Underwriting results represent premiums earned less incurred claims, claim adjustment expenses and underwriting expenses.

First Quarter Ended
March 31,
2004
2003
Net Income (Loss)

Life
Retail Products Group $ 107 $ 77
Institutional Solutions Group 28 31
Individual Life 33 32
Group Benefits 47 34
Other [1] 66 (29 )

Total Life 281 145

Property & Casualty
Ongoing Operations
Underwriting results
Business Insurance 225 7
Personal Lines 106 56
Specialty Commercial (110 ) 5

Total Ongoing Operations underwriting results 221 68
Other Operations underwriting results [2] (65 ) (2,651 )

Total Property & Casualty underwriting results 156 (2,583 )
Net servicing and other income [3] 9 3
Net investment income 311 281
Other expenses (68 ) (41 )
Net realized capital gains (losses) 71 (1 )
Income tax (expense) benefit (138 ) 846

Total Property & Casualty 341 (1,495 )

Corporate (54 ) (45 )

Net income (loss)
$ 568 $ (1,395 )

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)

Note 10. Segment Information (continued)


	Second Quarter Ended						Six Months Ended
	June 30,						June 30,
Net Income (Loss)	2004			2003			2004			2003
Life
Retail Products Group	$	128		$	121		$	235		$	198
Institutional Solutions Group		28			29			56			60
Individual Life		37			36			70			68
Group Benefits		48			35			95			69
Other [1]		28			41			94			12

Total Life		269			262			550			407

Property & Casualty
Ongoing Operations
Underwriting results
Business Insurance		97			50			322			57
Personal Lines		75			8			181			64
Specialty Commercial		29			25			(81	)		30

Total Ongoing Operations underwriting results		201			83			422			151
Other Operations underwriting results [2]		(214	)		(89	)		(279	)		(2,740	)

Total Property & Casualty underwriting results		(13	)		(6	)		143			(2,589	)
Net servicing and other income [3]		21			3			30			6
Net investment income		295			286			606			567
Other expenses		(60	)		(93	)		(128	)		(134	)
Net realized capital gains		27			212			98			211
Income tax (expense) benefit		(67	)		(107	)		(205	)		739

Total Property & Casualty		203			295			544			(1,200	)

Corporate		(39	)		(50	)		(93	)		(95	)

Net income (loss)	$	433		$	507		$	1,001		$	(888	)


[1]		Amounts include net realized capital gains, ~~(losses)~~ after-tax, of ~~$49~~$14 and ~~$(31)~~$33 for the ~~first quarters~~second quarter ended ~~March 31,~~June 30, 2004 and 2003, respectively. Amounts include net realized capital gains of $63 and $2 for the six months ended June 30, 2004 and 2003, respectively.

[2]		Includes $2,604 infor the six months ended June 30, 2003 of before-tax impact of asbestos reserve addition.

[3]		Net of expenses related to service business.

1821

During the six months ended June 30, 2004, the Company repaid $477 of commercial paper utilizing the proceeds from the equity offering and internal sources.

On March 15, 2004, HLI redeemed $250 of its 7.2% junior subordinated debentures underlying the trust preferred securities issued by Hartford Life Capital I.

On March 9, 2004, the Company issued 4.75% senior notes due March 1, 2014, and received net proceeds of $197. Interest on the notes is payable semi-annually on March 1 and September 1, commencing on September 1, 2004.

~~On March 15, 2004, HLI redeemed $250 of its 7.2% junior subordinated debentures underlying the trust preferred securities issued by Hartford Life Capital 1.~~

On December 3, 2003, The Hartford’s shelf registration statement (Registration No. 333-108067) for the potential offering and sale of debt and equity securities in an aggregate amount of up to $3.0 billion was declared effective by the SEC. The Registration Statement allows for the following types of securities to be offered (i) debt securities, preferred stock, common stock, depositary shares, warrants, stock purchase contracts, stock purchase units and junior subordinated deferrable interest debentures of the Company, and (ii) preferred securities of any of one or more capital trusts organized by The Hartford (“The Hartford Trusts”). The Company may enter into guarantees with respect to the preferred securities of any of The Hartford Trusts. As of ~~March 31,~~June 30, 2004, The Hartford had $2.4 billion remaining on its shelf.

On May 15, 2001, HLI filed with the SEC a shelf registration statement for the potential offering and sale of up to $1.0 billion in debt and preferred securities. The registration statement was declared effective on May 29, 2001. As of ~~March 31,~~June 30, 2004, HLI had $1.0 billion remaining on its shelf.

The Hartford and its subsidiary HLI have formed statutory business trusts which exist for the exclusive purposes of (i) issuing Trust Securities representing undivided beneficial interests in the assets of the Trust; (ii) investing the gross proceeds of the Trust Securities in Junior Subordinated Deferrable Interest Debentures (“Junior Subordinated Debentures”) of The Hartford or HLI; and (iii) engaging in only those activities necessary or incidental thereto. The Company may enter into guarantees with respect to the preferred securities of any of The Hartford Trusts.

The following table presents interest expense incurred ~~for~~during the ~~quarters~~second quarter and six months ended ~~March 31,~~June 30, 2004 and 2003, respectively.

On January 22, 2004, The Hartford issued approximately 6.3 million shares of common stock pursuant to an underwritten offering at a price to the public of $63.25 per share and received net proceeds of $388. Subsequently, on January 30, 2004, The Hartford issued approximately 377 thousand shares of common stock pursuant to an underwritten offering at a price to the public of $63.25 per share and received net proceeds of $23. The Company used the proceeds from these issuances to repay $411 of commercial paper issued in connection with the acquisition of the group life and accident, and short-term and long-term disability ~~business~~businesses of CNA Financial Corporation. (For further discussion of this acquisition, see Note 18 of Notes to Consolidated Financial Statements included in The Hartford’s 2003 Form 10-K Annual Report.)

Note 9.13. Pension Plans and Postretirement Health Care and Life Insurance Benefit Plans

Total net periodic benefit cost for the ~~quarters~~six months ended ~~March 31,~~June 30, 2004 and 2003 include the following components:

~~There were no employer contributions paid during the quarter ended March 31, 2004.~~ On April 15, 2004, the Company made a $312 voluntary contribution into its U.S. qualified defined benefit pension plan. No additional contributions are expected to be made in 2004.

Comprehensive income (loss) is defined as all changes in stockholders’ equity, except those arising from transactions with stockholders. Comprehensive income (loss) includes net income (loss) and other comprehensive income (loss), which for the Company consists of changes in unrealized appreciation or depreciation of investments carried at market value, changes in

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~
~~(unaudited)~~

~~Note 10. Accumulated Other Comprehensive Income (continued)~~

The components of ~~AOCI, net of tax,~~accumulated other comprehensive income (loss) were as follows:


						Foreign												Net Gain			Foreign
						Currency									Net			(Loss) on			Currency			Minimum			Accumulated
			Net Gain (Loss) on			Cumulative			Minimum Pension			Accumulated Other			Unrealized			Cash-Flow			Cumulative			Pension			Other
	Unrealized Gain		Cash flow Hedging			Translation			Liability			Comprehensive			Gain on			Hedging			Translation			Liability			Comprehensive
For the first quarter ended March 31, 2004	on Securities		Instruments			Adjustments			Adjustment			Income
For the second quarter ended June 30, 2004															Securities			Instruments			Adjustments			Adjustment			Income (Loss)
Balance, beginning of period	$	1,764	$	(42	)	$	(101	)	$	(375	)	$	1,246		$	2,630		$	17		$	(104	)	$	(375	)	$	2,168
Unrealized gain/loss on securities [1] [2]		574		—			—			—			574			(1,564	)		—			—			—			(1,564	)
Foreign currency translation adjustments		—		—			(3	)		—			(3	)		—			—			(15	)		—			(15	)
Net gain/loss on cash flow hedging instruments [1] [3]		—		59			—			—			59
Cumulative effect of accounting change [4]		292		—			—			—			292
Net gain/loss on cash-flow hedging instruments [1] [3]																—			(109	)		—			—			(109	)

Balance, end of period	$	2,630	$	17		$	(104	)	$	(375	)		2,168		$	1,066		$	(92	)	$	(119	)	$	(375	)	$	480

For the first quarter ended March 31, 2003
For the second quarter ended June 30, 2003
Balance, beginning of period	$	1,444	$	128		$	(95	)	$	(383	)	$	1,094		$	1,621		$	105		$	(86	)	$	(383	)	$	1,257
Unrealized gain/loss on securities [1] [2]		177		—			—			—			177			555			—			—			—			555
Foreign currency translation adjustments		—		—			9			—			9			—			—			10			—			10
Net gain/loss on cash flow hedging instruments [1] [3]		—		(23	)		—			—			(23	)
Net gain/loss on cash-flow hedging instruments [1] [3]																—			(15	)		—			—			(15	)

Balance, end of period	$	1,621	$	105		$	(86	)	$	(383	)	$	1,257		$	2,176		$	90		$	(76	)	$	(383	)	$	1,807

~~Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~(Dollar amounts in millions except share data unless otherwise stated)~~

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

(Dollar amounts in millions except share data unless otherwise stated)

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) addresses the financial condition of The Hartford Financial Services Group, Inc. and its subsidiaries (collectively, “The Hartford” or the “Company”) as of ~~March 31,~~June 30, 2004, compared with December 31, 2003, and its results of operations for the ~~first~~second quarter and six months ended ~~March 31,~~June 30, 2004, compared to the equivalent 2003 ~~period.~~periods. This discussion should be read in conjunction with the MD&A in The Hartford’s 2003 Form 10-K Annual Report.

Certain of the statements contained herein are forward-looking statements. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include estimates and assumptions related to economic, competitive and legislative developments. These forward-looking statements are subject to change and uncertainty which are, in many instances, beyond the Company’s control and have been made based upon management’s expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with management’s expectations or that the effect of future developments on The Hartford will be those anticipated by management. Actual results could differ materially from those expected by the Company, depending on the outcome of various factors. These factors 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 uncertain effect on the Company of the Jobs and Growth Tax Relief Reconciliation Act of 2003, in particular the reduction in tax rates on long-term capital gains and most dividend distributions; 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 the Terrorism Risk Insurance Act of 2002 is not extended 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 other factors described in such forward-looking statements.

~~INDEX~~


INDEX
Critical Accounting Estimates			2225
Consolidated Results of Operations			2327
Life			2529
Retail Products Group			2630
Institutional Solutions Group			2731
Individual Life			2832
Group Benefits			2832
Property & Casualty			2933
Business Insurance			3237
Personal Lines			3338
Specialty Commercial			3440
Other Operations (Including Asbestos and Environmental Claims)			3541
Investments			3945
Investment Credit Risk			4349
Capital Markets Risk Management			4753
Capital Resources and Liquidity			4855
Accounting Standards			5258

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America (“GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company has identified the following estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability: reserves for future policy benefits and unpaid claim and claim adjustment expenses; Life operations deferred policy acquisition costs and present value of future profits; investments; pension and other postretirement benefits; and ~~commitments and~~ contingencies. In developing these estimates management makes subjective and complex judgments that are inherently uncertain and subject to material change as facts and circumstances develop. Although variability is inherent in these estimates, management believes the amounts provided are appropriate based upon the facts available upon compilation of the financial statements.

Deferred Policy Acquisition Costs and Present Value of Future Profits

Life

Policy acquisition costs, which include commissions and certain other expenses that vary with and are primarily associated with

lives of the contracts, usually 20 years. These deferred costs, together with the present value of future profits of acquired business, are recorded as an asset commonly referred to as deferred policy acquisition costs and present value of future profits (“DAC”). At ~~March 31,~~June 30, 2004 and December 31, 2003, the carrying value of the Company’s Life operations’ DAC was ~~$6.5~~$7.1 billion and $6.6 billion, respectively. For statutory accounting purposes, such costs are expensed as incurred.

The Company has developed sophisticated modeling capabilities to evaluate its DAC asset, which allowed it to run a large number of stochastically determined scenarios of separate account fund performance. These scenarios were then utilized to calculate a statistically significant range of reasonable estimates of gross profits or “EGPs”. This range was then compared to the present value of EGPs currently utilized in the DAC amortization model. As of ~~March 31,~~June 30, 2004, the present value of the EGPs utilized in the DAC amortization model fall within a reasonable range of statistically calculated present value of EGPs. As a result, the Company does not believe there is ~~sufficient~~ evidence to suggest that a revision to the EGPs (and therefore, a revision to the DAC) as of ~~March 31,~~June 30, 2004 is necessary; however, if in the future the EGPs utilized in the DAC amortization model were to exceed the margin of the reasonable range of statistically calculated EGPs, a revision could be necessary. Furthermore, the Company has estimated that the present value of the EGPs is likely to remain within a reasonable range if overall separate account returns decline by ~~15%~~30% or less from June 30 levels for the balance of 2004, or 20% or less over the next twelve months, and if certain other assumptions that are implicit in the computations of the EGPs are achieved. For further discussion of these assumptions, see the Critical Accounting Estimates section of the Company’s 2003 Form 10-K Annual Report under the heading “Deferred Policy Acquisition Costs and Present Value of Future Profits”.

Additionally, the Company continues to perform analyses with respect to the potential impact of a revision to future EGPs. If such a revision to EGPs were deemed necessary, the Company would adjust, as appropriate, all of its assumptions for products accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments”, and reproject its future EGPs based on current account values at the end of the quarter in which a revision is deemed to be necessary. To illustrate the effects of this process, assume the Company had concluded that a revision of the Company’s EGPs was required at ~~March 31,~~June 30, 2004. If the Company assumed a 9% average long-term rate of growth from ~~March 31,~~June 30, 2004 forward along with other appropriate assumption changes in determining the revised EGPs, the Company estimates the cumulative increase to amortization would be approximately ~~$40-~~$25-$~~45,~~30 after-tax. If instead the Company were to assume a long-term growth rate of 8% in determining the revised EGPs, the adjustment would be approximately ~~$60-~~$55-$~~70,~~60, after-tax. Assuming that such an adjustment were to have been required, the Company anticipates that there would have been immaterial impacts on its DAC amortization for the 2004 and 2005 years exclusive of the adjustment, and that there would have been positive earnings effects in later years. Any such adjustment would not affect statutory income or surplus, due to the prescribed accounting for such amounts that is discussed above.

The overall recoverability of the DAC asset is dependent on the future profitability of the business. The Company tests the aggregate recoverability of the DAC asset by comparing the amounts deferred to the present value of total EGPs. In addition, the Company routinely stress tests its DAC asset for recoverability against severe declines in its separate account assets, which could occur if the equity markets experienced another significant sell-off, as the majority of policyholders’ funds in the separate accounts is invested in the equity market. As of ~~March 31,~~June 30, 2004, the Company believed variable annuity separate account assets could fall by at least 45% before portions of its DAC asset would be unrecoverable.

Other Critical Accounting Estimates

There have been no material changes to the Company’s critical accounting estimates regarding reserves for future policy benefits and unpaid claims and claim adjustment expenses; investments; pension and other postretirement benefits; and contingencies since the filing of the Company’s 2003 Form 10-K Annual Report.

~~CONSOLIDATED RESULTS OF OPERATIONS~~

~~Operating Summary~~

First Quarter Ended
March 31,

2004
2003
Change
Earned premiums $ 3,181 $ 2,849 12 %
Fee income 786 617 27 %
Net investment income 1,517 788 93 %
Other revenues 104 122 (15 %)
Net realized capital gains (losses) 144 (45 ) NM

Total revenues
5,732 4,331 32 %
Benefits, claims and claim adjustment expenses 3,297 5,245 (37 %)
Amortization of deferred policy acquisition costs and present value of future profits 679 564 20 %
Insurance operating costs and expenses 692 538 29 %
Interest expense 66 66 —
Other expenses 180 143 26 %

Total benefits, claims and expenses
4,914 6,556 (25 %)

Income (loss) before income taxes and cumulative effect of accounting change
818 (2,225 ) NM
Income tax expense (benefit) 227 (830 ) NM

Income (loss) before cumulative effect of accounting change
591 (1,395 ) NM

Cumulative effect of accounting change, net of tax (23 ) — NM

Net income (loss)
$ 568 $ (1,395 ) NM

2326

CONSOLIDATED RESULTS OF OPERATIONS


	Second Quarter Ended							Six Months Ended
	June 30,							June 30,
Operating Summary	2004		2003		Change			2004			2003			Change
Earned premiums	$	3,323	$	2,812		18	%	$	6,504		$	5,661			15	%
Fee income		793		656		21	%		1,579			1,273			24	%
Net investment income		1,158		796		45	%		2,675			1,584			69	%
Other revenues		118		147		(20	%)		222			269			(17	%)
Net realized capital gains		52		271		(81	%)		196			226			(13	%)

Total revenues		5,444		4,682		16	%		11,176	��		9,013			24	%

Benefits, claims and claim adjustment expenses		3,288		2,629		25	%		6,585			7,874			(16	%)
Amortization of deferred policy acquisition costs and present value of future profits		701		557		26	%		1,380			1,121			23	%
Insurance operating costs and expenses		653		584		12	%		1,345			1,122			20	%
Interest expense		62		69		(10	%)		128			135			(5	%)
Other expenses		163		214		(24	%)		343			357			(4	%)

Total benefits, claims and expenses		4,867		4,053		20	%		9,781			10,609			(8	%)

Income (loss) before income taxes and cumulative effect of accounting change		577		629		(8	%)		1,395			(1,596	)	NM
Income tax expense (benefit)		144		122		18	%		371			(708	)	NM

Income (loss) before cumulative effect of accounting change		433		507		(15	%)		1,024			(888	)	NM

Cumulative effect of accounting change, net of tax		—		—		—			(23	)		—		NM

Net income (loss)	$	433	$	507		(15	%)	$	1,001		$	(888	)	NM

The Hartford defines “NM” as not meaningful for increases or decreases greater than 200%, or changes from a net gain to a net loss position, or vice versa.

Operating Results

Net income for the second quarter ended June 30, 2004 decreased $74 from the comparable prior year period, due primarily to a $118 provision related to the completion of the Company’s evaluation of the reinsurance recoverable asset associated with older, long-term casualty liabilities and a $145 decrease in net realized capital gains, after-tax. The remaining difference, an increase of $189, was primarily the result of improved underwriting results in the Personal Lines and Business Insurance segments and an increase in net income in the Group Benefits segment. Net income for the six months ended June 30, 2004 increased ~~$2.0~~$1.9 billion, due primarily to $1.7 billion, after-tax, in reserve strengthening resulting from the completion of the Company’s asbestos reserve study in the first quarter of 2003. ~~The~~Contributing to the remaining difference ~~an increase of $262, was primarily the result of an increase in net realized capital gains, after-tax, of $124;~~were improved underwriting results in the Personal Lines and Business Insurance segments and ~~Personal Lines segments;~~higher net income in the Group Benefits and Retail Products Group segments, partially offset by the 2004 evaluation of the reinsurance recoverable asset noted above.

Revenues for the second quarter and six months ended June 30, 2004 increased $762 and $2.2 billion over the comparable prior year periods, primarily due to an increase in net investment income of $362 for the second quarter and $1.1 billion for the six months ended June 30, 2004. The increase in ~~the Retail Products Group and Group Benefits segments; partially offset by a $23~~ net ~~of tax cumulative effect of accounting change charge resulting from~~investment income was due primarily to the adoption of Statement of Position 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts” ~~(the “SOP”, or “SOP~~(“SOP 03-1”).

Revenues for the first quarter ended March 31, 2004 increased $1.4 billion over the comparable prior year period, primarily due to the adoption of the SOP, which resulted in an additional $656 in net investment income ($495 related to trading securities income and $154 related to income earned on separate account assets reclassified to the general account as a result of the adoption of the SOP). Also contributing to the increase ~~was a $313 increase in~~were higher earned premiums in the Group Benefits, ~~segment, a $189 increase in net realized capital gains,~~Business Insurance and ~~a $142 increase in fee income and other in the Retail Products Group segment.~~Personal Lines segments.

Income Taxes

The effective tax rate for the ~~first~~second quarter and six months ended ~~March 31,~~June 30, 2004 was ~~28%~~25% and 27%, respectively, as compared with ~~37%~~19% and 44%, respectively, for the comparable ~~period~~periods in 2003. Tax-exempt interest earned on invested assets and the ~~dividends received~~dividends-received deduction were the principal causes of the effective tax rates ~~being different than~~differing from the 35% U.S. statutory rate.

Organizational Structure

The Hartford is organized into two major operations: Life and Property & Casualty. In the first quarter ~~ended March 31,~~ 2004, and as more fully described below, the Company changed its reporting segments to reflect the current manner by which its chief operating decision maker views and manages the business. All segment data for prior reporting periods have been adjusted to reflect the current segment reporting. Within the Life and Property & Casualty operations, The Hartford conducts business principally in eight operating segments. Additionally, Corporate now includes all of the Company’s debt financing and related interest expense, as well as certain capital raising and purchase accounting adjustment activities.

Benefits sells group insurance products, including group life and group disability insurance as well as other products, including medical stop loss and supplementary medical coverages to employers and employer sponsored plans, accidental death and dismemberment, travel accident and other special risk coverages to employers and associations. Life also includes, in an Other category, its international operations, which are primarily located in Japan and Brazil; net realized capital gains and losses other than periodic net coupon settlements on non-qualifying derivatives and net realized capital gains and losses related to guaranteed minimum withdrawal benefits; corporate items not directly allocated to any of its reportable operating segments; and intersegment eliminations. Periodic net coupon settlements on non-qualifying derivatives and net realized capital gains and losses related to guaranteed minimum withdrawal benefits are reflected in each applicable segment in net realized capital gains and losses.

Property & Casualty is now organized into four reportable operating segments: the underwriting segments of Business Insurance, Personal Lines, and Specialty Commercial (collectively “Ongoing Operations”); and the Other Operations segment. Prior to the segment reporting change made in the first quarter of 2004, Property ~~and~~& Casualty had also included a Reinsurance segment. With the discontinuance of writing new reinsurance assumed business, the reinsurance assumed business is now included in the Other Operations segment.

The following is a summary of Property & Casualty underwriting results by segment.

Underwriting ~~Results (before-tax)~~results represent premiums earned less incurred claims, claim adjustment expenses and underwriting expenses.

Life’s net income increased ~~largely~~for the second quarter of 2004 compared to 2003 due primarily to ~~a significant increase~~net income increases in Group Benefits, Retail and international operations, partially offset by lower realized capital gains. (See the Investments section for further discussion of investment results and related realized capital gains.) Also contributing to the earnings growth were increases in net income in the Retail and Group Benefits segments. Net income in the Retail segment increased, principally driven by growth in the variable annuity and mutual fund businesses as a result of increasing assets under management. Partially offsetting these increases was lower spread income on market value adjusted (“MVA”) fixed annuities due to the adoption of the SOP. Net income in the Group Benefits segment increased due to earned premiums and net investment income growth, primarily resulting from the Company’s acquisition of the group life and accident, and short-term and long-term disability businesses of CNA Financial Corporation (“CNA Acquisition”). Net income in the Retail segment increased, principally driven by growth in the variable annuity and mutual fund businesses as a result of increasing assets under management. Partially offsetting the increase in the Retail segment was lower spread income on market value adjusted (“MVA”) fixed annuities due to the adoption of SOP 03-1. Net income for the international operations, which is included in the other category, increased over the comparable prior year period primarily driven by the increase in assets under management of the Japan annuity business. Japan’s assets under management have grown to $9.3 billion at June 30, 2004 from $3.1 billion at June 30, 2003.

Retail Products Group


	Second Quarter Ended									Six Months Ended
	June 30,									June 30,
Operating Summary	2004			2003			Change			2004			2003			Change
Fee income and other	$	513		$	401			28	%	$	1,019		$	765			33	%
Earned premiums		(17	)		1		NM				(31	)		(8	)	NM
Net investment income		266			128			108	%		538			245			120	%
Net realized capital gains		2			3			(33	%)		1			9			(89	%)

Total revenues		764			533			43	%		1,527			1,011			51	%

Benefits, claims and claim adjustment expenses		259			153			69	%		516			300			72	%
Amortization of deferred policy acquisition costs and present value of future profits		160			114			40	%		327			217			51	%
Insurance operating costs and other expenses		180			149			21	%		355			281			26	%

Total benefits, claims and expenses		599			416			44	%		1,198			798			50	%

Income before income taxes and cumulative effect of accounting change		165			117			41	%		329			213			54	%
Income tax expense (benefit)		37			(4	)	NM				75			15		NM

Income before cumulative effect of accounting change		128			121			6	%		254			198			28	%
Cumulative effect of accounting change, net of tax [1]		—			—			—			(19	)		—			—

Net income	$	128		$	121			6	%	$	235		$	198			19	%


	June 30, 2004		June 30, 2003		Change
Individual variable annuity account values	$	92,504	$	73,748		25	%
Other individual annuity account values		11,372		10,587		7	%
401K and specialty products account values		5,588		3,720		50	%

Total account values [2]		109,464		88,055		24	%
Mutual fund assets under management		23,897		17,012		40	%

Total assets under management	$	133,361	$	105,067		27	%

S&P 500 Index value at end of period		1,141		975		17	%

~~Operating Summary~~

First Quarter Ended
March 31,
2004
2003
Change
Fee income and other $ 506 $ 364 39 %
Earned premiums (14 ) (9 ) (56 %)
Net investment income 272 117 132 %
Net realized capital (losses) gains (1 ) 6 NM

Total revenues
763 478 60 %
Benefits, claims and claim adjustment expenses 257 147 75 %
Insurance operating costs and other expenses 175 132 33 %
Amortization of deferred policy acquisition costs and present value of future profits 167 103 62 %

Total benefits, claims and expenses
599 382 57 %

Income before income taxes and cumulative effect of accounting change
164 96 71 %
Income tax expense 38 19 100 %

Income before cumulative effect of accounting change
126 77 64 %

Cumulative effect of accounting change, net of tax[1] (19 ) — NM

Net income
$ 107 $ 77 39 %

March 31, March 31,
2004
2003
Change
Individual variable annuity account values $ 90,386 $ 64,047 41 %
Other individual annuity account values 11,312 10,602 7 %
401K and Specialty products account values 5,230 3,219 62 %

Total account values [2]
106,928 77,868 37 %
Mutual fund assets under management 22,977 14,328 60 %

Total assets under management
$ 129,905 $ 92,196 41 %

S&P 500 Index value at end of period
1,126 848 33 %

[1]		~~[1]~~ For the ~~quarter~~six months ended ~~March 31,~~June 30, 2004, represents the cumulative impact of the Company’s adoption of SOP 03-1.

[2]		~~[2]~~ Includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts.

Net income in the Retail segment increased for the second quarter and six months ended June 30, 2004, principally driven by significant growth in the assets under management within the variable annuity and mutual fund businesses. ~~Assets~~The Company uses assets under management isas an internal performance ~~measure used by~~measure. Relative profitability of the Retail segment ~~as relative profitability~~ is highly correlated to the growth in assets under management ~~which is~~since the segment generally earns fee income on a daily basis on its assets under management. Assets under management are driven by ~~net flows and~~the performance of the equity ~~markets.~~ markets and net flows. Net flows are comprised of new sales less surrenders, death benefits and annuitizations of variable annuity contracts. In the mutual fund business, net flows are known as net sales. Net sales are comprised of new sales less redemptions of mutual fund customers.

Fee income generated by the variable annuity operation increased, as average account values ~~increased~~were higher in the ~~first~~second quarter asand six months ended June 30, 2004 compared to the respective prior ~~year.~~year periods. The increase in average account values can be attributed to ~~approximately $8.6~~equity market growth of $11.0 billion ofand net flows of $7.8 billion over the past four ~~quarters and growth in the equity markets, more specifically the average daily value of the S&P 500, which rose by approximately 31% in this time period.~~quarters. The Company uses the S&P 500 Index as an indicator for evaluating market returns of the underlying account ~~portfolios.~~portfolios, more specifically the average daily value of the S&P 500, which rose by approximately 17% from June 30, 2003 to June 30, 2004. Another contributing factor to the increase in fee income was the mutual fund business. Mutual fund assets under management increased 40% principally due to equity market growth ~~as well as higher~~of $3.4 billion and net sales ~~which were $1.1~~of $3.2 billion inover the ~~first quarter as compared to $132 in the first quarter of 2003.~~past four quarters.

Partially offsetting the positive earnings drivers discussed above ~~were the cumulative effect of accounting change from the Company’s adoption of the SOP and the resulting lower~~was a decrease in net income ~~associated with~~in the individual fixed annuity ~~business.~~business, higher amortization of deferred policy acquisition costs, and higher income tax expense. The decrease ~~in net income~~ in the individual fixed annuity business was attributed to a lower investment spread from the market value adjusted fixed annuity product infor the ~~first~~second quarter ofand six months ended June 30, 2004 as compared to the comparable prior ~~year. With~~year periods. In addition, with the adoption of ~~the~~ SOP 03-1, the Company includes the investment return from the product in net investment income and includes interest credited to ~~contract holders~~contractholders in the benefits, claims and claim adjustment expenses line onin the income statement rather than reporting the net spread in fee ~~income.~~income and other. Additionally, the ratio of DAC amortization to gross profits for the individual annuity business (defined as amortization of deferred policy acquisition costs as a percentage of income before taxes and amortization of deferred policy acquisition costs) was slightly higher for the second quarter and six months ended June 30, 2004 as compared to the comparable prior year periods, which resulted in lower net income. Income tax expense was higher for the second quarter and the six months

Institutional Solutions Group


	Second Quarter Ended							Six Months Ended
	June 30,							June 30,
Operating Summary	2004		2003		Change			2004			2003		Change
Fee income and other	$	76	$	79		(4	%)	$	150		$	156		(4	%)
Earned premiums		95		142		(33	%)		204			242		(16	%)
Net investment income		262		244		7	%		519			488		6	%
Net realized capital gains		1		5		(80	%)		3			6		(50	%)

Total revenues		434		470		(8	%)		876			892		(2	%)

Benefits, claims and claim adjustment expenses		357		374		(5	%)		712			709		—
Amortization of deferred policy acquisition costs and present value of future profits		10		7		43	%		19			13		46	%
Insurance operating costs and other expenses		27		48		(44	%)		64			84		(24	%)

Total benefits, claims and expenses		394		429		(8	%)		795			806		(1	%)

Income before income taxes and cumulative effect of accounting change		40		41		(2	%)		81			86		(6	%)
Income tax expense		12		12		—			24			26		(8	%)

Income before cumulative effect of accounting change		28		29		(3	%)		57			60		(5	%)
Cumulative effect of accounting change, net of tax [1]		—		—		—			(1	)		—		—

Net income	$	28	$	29		(3	%)	$	56		$	60		(7	%)


	June 30, 2004		June 30, 2003		Change
Institutional account values	$	13,377	$	11,224		19	%
Governmental account values		9,445		7,811		21	%
Private Placement Life Insurance account values
Variable products		21,592		20,326		6	%
Leveraged COLI		2,508		3,137		(20	%)

Total account values [2]		46,922		42,498		10	%
Mutual fund assets under management		1,272		850		50	%

Total assets under management	$	48,194	$	43,348		11	%

~~Operating Summary~~

First Quarter Ended
March 31,
2004
2003
Change
Fee income and other $ 74 $ 77 (4 %)
Earned premiums 109 100 9 %
Net investment income 257 244 5 %
Net realized capital gains 2 1 100 %

Total revenues
442 422 5 %
Benefits, claims and claim adjustment expenses 355 335 6 %
Insurance operating costs and other expenses 37 36 3 %
Amortization of deferred policy acquisition costs and present value of future profits 9 6 50 %

Total benefits, claims and expenses
401 377 6 %

Income before income taxes and cumulative effect of accounting change
41 45 (9 %)
Income tax expense 12 14 (14 %)

Income before cumulative effect of accounting change
29 31 (6 %)

Cumulative effect of accounting change, net of tax[1] (1 ) — NM

Net income
$ 28 $ 31 (10 %)

March 31, March 31,
2004
2003
Change
Institutional account values $ 12,941 $ 9,963 30 %
Governmental account values 9,243 7,199 28 %
Private Placement Life Insurance account values
Variable products 21,305 19,863 7 %
Leveraged COLI 2,537 3,159 (20 %)

Total account values [2]
46,026 40,184 15 %
Mutual fund assets under management 1,246 717 74 %

Total assets under management
$ 47,272 $ 40,901 16 %

[1]		~~[1]~~ For the ~~quarter~~six months ended ~~March 31,~~June 30, 2004, represents the cumulative impact of the Company’s adoption of SOP 03-1.

[2]		~~[2]~~ Includes policyholder balances for investment contracts and reserves for future policy benefits for insurance contracts.

Net income for the ~~Institutional segment~~second quarter and six months ended June 30, 2004 decreased as ~~compared to the comparable prior year period. This decrease was the~~a result of lower ~~earnings~~income from ~~the private placement life insurance business and~~ the institutional business, which includes structured settlements and institutional ~~annuities.~~annuities, and the private placement life insurance business. Lower net income in ~~private placement life insurance~~the institutional business was due primarily to lower ~~revenues earned~~spread income as a result of the lower ~~account values in~~interest rates and slightly higher insurance operating costs for the ~~leveraged COLI product due primarily to surrenders that occurred in 2003. The leveraged COLI product continues to contribute favorably~~second quarter and six months ended June 30, 2004 as compared to the ~~segment’s profitability, although the contribution may decline in the future depending on the surrender activity of these policies.~~respective prior year periods. In addition, the institutional business contributed lower earnings infor the ~~first quarter of~~six months ended June 30, 2004 compared to the same period in 2003 due to favorable mortality experience in 2003. ~~This decrease was~~Private placement life insurance also experienced lower net income for the second quarter and six months ended June 30, 2004 primarily ~~the~~as a result of ~~favorable mortality experienced~~lower revenues earned due to the 20% decline in leveraged COLI account values, which resulted from surrenders that occurred in 2003. Partially offsetting these declines was ~~a small increase in~~higher income from the ~~net income before~~governmental business for the ~~cumulative effect of accounting change of the Governmental business when compared to the same period in 2003.~~second quarter and six months ended June 30, 2004. This increase was primarily attributable to higher revenues earned from the growth in the average account values as a result of positive net flows and market appreciation since the ~~first~~second quarter of 2003.

2731

Individual Life


				Second Quarter Ended									Six Months Ended
	June 30,									June 30,
Operating Summary	2004			2003			Change			2004			2003			Change
Fee income and other	$	181		$	184			(2	%)	$	367		$	366			—
Earned premiums		(5	)		(6	)		17	%		(10	)		(10	)		—
Net investment income		76			63			21	%		149			129			16	%
Net realized capital losses		—			(1	)		100	%		—			(1	)		100	%

Total revenues		252			240			5	%		506			484			5	%

Benefits, claims and claim adjustment expenses		120			108			11	%		245			220			11	%
Amortization of deferred policy acquisition costs and present value of future profits		40			43			(7	%)		79			89			(11	%)
Insurance operating costs and other expenses		39			39			—			79			78			1	%

Total benefits, claims and expenses		199			190			5	%		403			387			4	%

Income before income taxes and cumulative effect of accounting change		53			50			6	%		103			97			6	%
Income tax expense		16			14			14	%		32			29			10	%

Income before cumulative effect of accounting change		37			36			3	%		71			68			4	%
Cumulative effect of accounting change, net of tax [1]		—			—			—			(1	)		—			—

Net income	$	37		$	36			3	%	$	70		$	68			3	%

Variable life account values										$	4,934		$	4,141			19	%
Total account values										$	8,992		$	8,066			11	%

Variable life insurance in force										$	67,537		$	66,518			2	%
Total life insurance in force										$	134,420		$	127,520			5	%

~~Operating Summary~~

First Quarter Ended
March 31,
2004
2003
Change
Fee income and other $ 186 $ 182 2 %
Earned premiums (5 ) (4 ) (25 %)
Net investment income 73 66 11 %

Total revenues
254 244 4 %
Benefits, claims and claim adjustment expenses 125 112 12 %
Amortization of deferred policy acquisition costs and present value of future profits 39 46 (15 %)
Insurance operating costs and other expenses 40 39 3 %

Total benefits, claims and expenses
204 197 4 %

Income before income taxes and cumulative effect of accounting change
50 47 6 %
Income tax expense 16 15 7 %

Income before cumulative effect of accounting change
34 32 6 %

Cumulative effect of accounting change, net of tax[1] (1 ) — NM

Net income
$ 33 $ 32 3 %

March 31, March 31,
2004
2003
Change
Variable universal life account values $ 4,797 $ 3,673 31 %
Total account values $ 8,836 $ 7,583 17 %

Variable universal life insurance in force $ 67,101 $ 66,631 1 %
Total life insurance in force $ 132,482 $ 127,029 4 %

[1]

~~[1]~~ For the ~~quarter~~six months ended ~~March 31,~~June 30, 2004, represents the cumulative impact of the Company’s adoption of SOP 03-1.

Net income in the Individual Life segment increased slightly for the second quarter and six months ended June 30, 2004 as compared to the ~~comparable~~respective prior year ~~period. This increase was~~periods. These increases were primarily driven by growth in account values and life insurance ~~in-force~~in force and favorable equity market conditions. The impact of this growth was partially offset by higher mortality costs ~~than~~in the ~~prior~~current year. However, the increased mortality costs reduced the amount of amortization of deferred policy acquisition costs recorded during the ~~quarter.~~quarter and six months ended June 30, 2004. Net investment income increased ~~partially~~primarily due to the adoption of SOP 03-1 in the ~~SOP,~~first quarter of 2004, which resulted in increases in net investment income and benefits, claims and claim adjustment expenses for the segment’s Modified Guarantee Life Insurance product, which was formerly classified as a separate account product.

Group Benefits

~~Operating Summary~~


	First Quarter Ended								Second Quarter Ended							Six Months Ended
	March 31,								June 30,							June 30,
	2004		2003			Change
Operating Summary									2004		2003		Change			2004		2003			Change
Earned premiums and other	$	915	$	602			52	%	$	906	$	573		58	%	$	1,821	$	1,175			55	%
Net investment income		89		68			31	%		93		64		45	%		182		132			38	%
Net realized capital losses		—		(3	)		100	%
Net realized capital gains (losses)										1		1		—			1		(2	)	NM

Total revenues		1,004		667			51	%		1,000		638		57	%		2,004		1,305			54	%

Benefits, claims and claim adjustment expenses		684		489			40	%		690		451		53	%		1,374		940			46	%
Amortization of deferred policy acquisition costs and present value of future profits		5		4			25	%
Amortization of deferred policy acquisition costs										6		5		20	%		11		9			22	%
Insurance operating costs and other expenses		252		131			92	%		240		138		74	%		492		269			83	%

Total benefits, claims and expenses		941		624			51	%		936		594		58	%		1,877		1,218			54	%

Income before income taxes		63		43			47	%		64		44		45	%		127		87			46	%
Income tax expense		16		9			78	%		16		9		78	%		32		18			78	%

Net income	$	47	$	34			38	%	$	48	$	35		37	%	$	95	$	69			38	%

Fully insured – ongoing premiums	$	905	$	568			59	%
Fully insured-ongoing premiums									$	897	$	568		58	%	$	1,802	$	1,136			59	%
Buyout premiums		—		28			(100	%)		—		1		(100	%)		—		29			(100	%)
Other		10		6			83	%		9		4		125	%		19		10			90	%

Earned premiums and other	$	915	$	602			52	%	$	906	$	573		58	%	$	1,821	$	1,175			55	%

expenses as a percentage of premiums and other considerations excluding buyouts) was ~~75%,~~76% for both the second quarter and six months ended June 30, 2004, down from 79% and 80% ~~in first quarter~~for the comparable periods of 2003, respectively, which contributed favorably to net income. Partially offsetting these favorable items were higher commissions due to higher sales and premiums previously ~~discussed and sales from the CNA Acquisition.~~discussed. Additionally, operating costs increased due to the growth in the segment and the CNA Acquisition. Consistent with the increase in commissions and operating costs, the segment’s ratio of insurance operating costs and other expenses to premiums and other considerations (excluding buyouts) increased to 27% and 28%, for the second quarter and six months ended June 30, 2004, respectively, from ~~23% in 2003.~~25% and 24% for the comparable prior year periods, respectively. As part of the CNA Acquisition, a larger block of affinity business is now included in the Group Benefits ~~segment in 2004.~~segment. This business typically has lower expected loss ratios and higher expected commission ratios than other products within the business. Due to this change in business mix, the segment, as expected, has a lower loss ratio and higher commission ratio than in 2003.

PROPERTY & CASUALTY

Second Quarter Ended Six Months Ended
June 30,
June 30,
Operating Summary
2004
2003
Change
2004
2003
Change
Earned premiums $ 2,353 $ 2,106 12 % $ 4,539 $ 4,272 6 %
Net investment income 295 286 3 % 606 567 7 %
Other revenues [1] 117 113 4 % 221 208 6 %
Net realized capital gains 27 212 (87 %) 98 211 (54 %)

Total revenues
2,792 2,717 3 % 5,464 5,258 4 %

Benefits, claims and claim adjustment expenses
Current year 1,535 1,541 — 3,004 2,978 1 %
Prior year 221 — — 170 2,724 (94 %)

Total benefits, claims and claim adjustment expenses 1,756 1,541 14 % 3,174 5,702 (44 %)
Amortization of deferred policy acquisition costs and present value of future profits 468 382 23 % 914 783 17 %
Insurance operating costs and expenses 142 189 (25 %) 308 376 (18 %)
Other expenses 156 203 (23 %) 319 336 (5 %)

Total benefits, claims and expenses
2,522 2,315 9 % 4,715 7,197 (34 %)

Income (loss) before income taxes
270 402 (33 %) 749 (1,939 ) NM
Income tax expense (benefit) 67 107 (37 %) 205 (739 ) NM

Net income (loss) [2]
$ 203 $ 295 (31 %) $ 544 $ (1,200 ) NM

Ongoing Operations Underwriting Ratios [3]

Loss and loss adjustment expense ratio
Current year 65.2 68.9 3.7 65.9 69.4 3.5
Prior year 0.7 — (0.7 ) (1.8 ) — 1.8

Total loss and loss adjustment expense ratio 65.8 68.9 3.1 64.1 69.4 5.3
Expense ratio 25.6 26.6 1.0 26.4 26.4 —
Policyholder dividend ratio — 0.5 0.5 0.1 0.5 0.4

Combined ratio 91.4 96.0 4.6 90.6 96.3 5.7
Catastrophe ratio 2.4 4.7 2.3 (4.6 ) 3.7 8.3

Combined ratio before catastrophes 89.0 91.3 2.3 95.2 92.6 (2.6 )
Combined ratio before catastrophes and prior accident year development 88.5 91.3 2.8 90.5 92.6 2.1

~~Operating Summary~~

First Quarter Ended
March 31,
2004
2003
Change
Earned premiums $ 2,186 $ 2,166 1 %
Net investment income 311 281 11 %
Other revenues [1] 104 95 9 %
Net realized capital gains (losses) 71 (1 ) NM

Total revenues
2,672 2,541 5 %
Benefits, claims and claim adjustment expenses
Current year 1,469 1,504 (3 %)
Prior year (51 ) 2,657 NM

Total benefits, claims and claim adjustment expenses 1,418 4,161 (66 %)
Amortization of deferred policy acquisition costs 446 401 11 %
Insurance operating costs and expenses 166 187 (11 %)
Other expenses 163 133 23 %

Total benefits, claims and expenses
2,193 4,882 (55 %)

Income (loss) before income taxes
479 (2,341 ) NM
Income tax expense (benefit) 138 (846 ) NM

Net income (loss) [2]
$ 341 $ (1,495 ) NM

Ongoing Operations Underwriting Ratios [3]

Loss and loss adjustment expense ratio
Current year 66.8 69.9 3.1
Prior year (4.5 ) — 4.5

Total loss and loss adjustment expense ratio 62.2 69.9 7.7
Expense ratio 27.3 26.2 (1.1 )
Policyholder dividend ratio 0.3 0.5 0.2

Combined ratio 89.8 96.6 6.8
Catastrophe ratio (12.2 ) 2.7 14.9

Combined ratio before catastrophes 102.0 93.8 (8.2 )
Combined ratio before catastrophes and prior accident year development 92.7 93.8 1.1

[1]	Represents servicing revenue.

[2]		Includes net realized capital gains, ~~(losses),~~ after-tax, of ~~$47~~$16 and $0$138 for the ~~quarters~~second quarter ended ~~March 31,~~June 30, 2004 and 2003, respectively, and $63 and $138 for the six months ended June 30, 2004 and 2003, respectively.

[3]	Excludes Other Operations.

~~Revenues~~Total revenues for Property & Casualty increased ~~$131~~$75 for the ~~first~~second quarter and $206 for the six months ended ~~March 31, 2004 compared with the first quarter of 2003.~~June 30, 2004. The increase for both periods was due primarily to ~~an increase~~earned premium growth and increased net investment income, which were significantly offset by a decrease in net realized capital ~~gains (losses) and net investment income as well as earned premium growth.~~gains. The increase in earned premiums for the second quarter and six months ended June 30, 2004 in the Business Insurance, ~~and~~ Personal Lines and Specialty Commercial segments was due primarily to earned pricing ~~increases and new business growth.~~increases. Partially offsetting the growth in ~~earned premiums was a decrease of $90 in~~ Specialty Commercial earned premiums for the six months ended June 30, 2004 was a $90 decrease reflecting a reduction in estimated earned premium under retrospectively-rated policies.

Net income decreased $92 for the second quarter ended June 30, 2004, primarily due to a $118 after-tax provision related to a reduction in the reinsurance recoverable asset on older, long-term casualty liabilities and a $122 after-tax decrease in net realized capital gains, partially offset by improved underwriting results in the Business Insurance and Personal Lines segments. Net income increased ~~$1.8~~$1.7 billion for the ~~first quarter~~six months ended ~~March 31,~~June 30, 2004 primarily due to the net asbestos reserve strengthening of $1.7 billion, after-tax, in the first quarter ended March 31, ~~2003. Results for the quarter also were favorably impacted by~~2003 and improved underwriting results in the Business Insurance and increases in net realized capital gains (losses) and net investment income. Pre-tax net investment income rose $30 for the quarter ending March 31, 2004, due to higher invested assets, primarily from strong cash flows.Personal Lines segments.

2933

Ratios

The previous table and the following segment discussions for the ~~quarters~~second quarter and six months ended ~~March 31,~~June 30, 2004 and 2003 include various operating ratios. Management believes that these ratios are useful in understanding the underlying trends in The Hartford’s insurance underwriting business. However, these measures should only be used in conjunction with, and not in lieu of, underwriting income and net income for the Property & Casualty segments and may not be comparable to other performance measures used by the Company’s competitors. The “loss and loss adjustment expense ratio” is the ratio of claims and claim adjustment expenses to earned premiums. The “expense ratio” is the ratio of underwriting expenses (amortization of deferred policy acquisition costs, as well as other underwriting expenses) to earned premiums. The “policyholder dividend ratio” is the ratio of policyholder dividends to earned premiums. The “combined ratio” is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. These ratios are relative measurements that describe for every $100 of ~~net~~earned premiums, ~~earned,~~ the cost of losses and expenses, respectively. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses. The “loss and loss expense paid ratio” represents the ratio of paid claims and claim adjustment expenses to earned premiums. The “catastrophe ratio” (a component of the loss ratio) represents the ratio of catastrophe losses to earned premiums. A catastrophe is an event that causes $25 or more in industry insured property losses and affects a significant number of property and casualty policyholders and insurers. See the Reserve section for explanation of prior accident year development.

Premium Measures

Written premiums are a non-GAAP financial measure which represent the amount of premiums charged for policies issued, net of reinsurance, during a fiscal period. Earned premiums are a GAAP measure. Premiums are considered earned and are included in the financial results on a pro rata basis over the policy period. The following segment discussions for the quarters and six months ended ~~March 31,~~June 30, 2004 and 2003 include the presentation of written premiums in addition to earned premiums. Management believes that this performance measure is useful to investors as it reflects current trends in the Company’s sales of property and casualty insurance products, as compared to earned premiums. Premium renewal retention is defined as renewal premium written in the current period divided by total premium written in the prior period.

Reserves

Reserving for property and casualty losses is an estimation process. As additional experience and other relevant claim data become available, reserve levels are adjusted accordingly. Such adjustments of reserves related to claims incurred in prior years are a natural occurrence in the loss reserving process and are referred to as “reserve development”. Reserve development that increases previous estimates of ultimate cost is called “reserve strengthening”. Reserve development that decreases previous estimates of ultimate cost is called “reserve releases”. Reserve development can influence the comparability of year over year underwriting results and is set forth in the paragraphs and tables that follow. The “prior accident year development” in the following table represents the ratio of reserve development to earned premiums. For a detailed discussion of the Company’s reserve policies, see Notes 1, 7 and 16 of Notes to Consolidated Financial Statements and the Critical Accounting Estimates section of the MD&A included in The Hartford’s 2003 Form 10-K Annual Report.

~~During~~There was no significant reserve strengthening or release in the Business Insurance, Personal Lines or Specialty Commercial segments for the quarter ended June 30, 2004. Within Other Operations, the Company completed a gross asbestos reserve evaluation during the first quarter of 2004 which indicated no change in the ~~aggregate~~overall required gross asbestos reserves. During the second quarter of 2004, the Company completed an evaluation of the reinsurance recoverable asset associated with older, long-term casualty liabilities reported in the Other Operations segment, including asbestos liabilities. As a result of this evaluation, the Company reduced its net ~~reserve development relative to~~reinsurance recoverable by $181. The after-tax income effect of this action was $118.

For the ~~Company’s Property & Casualty reserves was not material. The~~six months ended June 30, 2004, the amount of reserve development ~~in the first quarter~~ for each of the Company’s Property & Casualty segments varied. During the first quarter of 2004, the Company completed a gross asbestos reserve evaluation. The evaluation indicated no change in the overall required gross asbestos reserves. It is anticipated that the related net reserve evaluation will be completed during the second quarter of 2004. The results of the gross study may not be an indication of what may result from the net study. Until the application of ceded reinsurance to the direct and assumed reserves and an assessment of collectibility are completed, the Company will not know the impact, if any, on the required net reserves.

As indicated in the Company’s segment level reserve discussion in the 2003 Annual Report on Form 10-K, at the end of 2003 several areas of reserve exposure were being closely monitored. Consistent with the Company’s practices to regularly review its reserves, the Company continued to monitor these reserve exposures throughout the first quarter and completed several reserve studies, including studies related to September 11 reserves and construction defects claims. As a result of these monitoring activities and studies, the Company made reserve adjustments with regard to certain of those reserve exposures, most notably related to September 11, construction defects and certain assumed reinsurance reserves. These reserve adjustments and the effects on the Company’s segments are more fully discussed in the paragraphs that follow.

With respect to September 11 claim reserves, in the first quarter of 2004, the Company observed continued favorable developments, including the closure of all but 44 primary insurance property cases, no additional significant anticipated loss notices on assumed reinsurance property treaties, a high participation rate within the Victim’s Compensation Fund and the expiration of the deadline for filing a liability claim in March 2004. Based on these sustained favorable events, the Company determined in the first quarter that it was appropriate to reduce both the gross and net estimate of loss from September 11. The Company’s gross estimate of loss of $1.1 billion was reduced to $845. ~~Gross reserves remaining are $430.~~ The corresponding reduction in net reserves for September 11 was $175 in Business Insurance, $116 in Specialty Commercial, $7 in Personal Lines and $97 in Other Operations. ~~Net~~As of June 30, 2004, gross reserves and net reserves remaining ~~are $152.~~related to September 11 were $423 and $149, respectively. Most of the remaining September 11 net reserves carried by the Company relate to incurred but not reported (“IBNR”) reserves for workers compensation exposures.

The Company has exposure to losses from construction defects, particularly from contractors in California. The Company has been evaluating and closely monitoring these reserves over time. Based on the Company’s first quarter 2004 study that used various predictive models and reflected the increasing severity of

project. The Company has been evaluating and closely monitoring these reserves over time and during 2003 and 2002 booked unfavorable reserve development of $129 and $77, respectively. Unfavorable trends continued in the first quarter of 2004 and, as a result, the Company increased reserves by ~~$130.~~$130 in the first quarter. The majority of the $130 is for assumed casualty treaty reinsurance for the years 1997-2001, with $30 for certain alternative risk transfer contracts.

In addition to the foregoing reserve adjustments in the first quarter of 2004, within the Specialty Commercial segment, there were other offsetting positive and negative adjustments. The principal offsetting adjustments related to a strengthening in specialty large deductible workers compensation reserves and a release in other liability reserves, each approximately $150.

A rollforward of liabilities for unpaid claims and claim adjustment expenses by segment for the ~~first~~second quarter and six months ended ~~March 31,~~June 30, 2004 for Property & Casualty follows:


	First Quarter Ended March 31, 2004
Second Quarter Ended June 30, 2004																			Second Quarter Ended June 30, 2004
	Business Insurance			Personal Lines			Specialty Commercial			Ongoing Operations			Other Operations			Total P&C				Business Insurance			Personal Lines			Specialty Commercial			Ongoing Operations			Other Operations			Total P&C
Beginning liabilities for unpaid claims and claim adjustment expenses-gross	$	5,296		$	1,733		$	5,148		$	12,177		$	9,538		$	21,715			$	5,302		$	1,721		$	5,066		$	12,089		$	8,157		$	20,246
Reinsurance and other recoverables		395			43			2,096			2,534			2,963			5,497				369			42			1,932			2,343			2,693			5,036

Beginning liabilities for unpaid claims and claim adjustment expenses-net		4,901			1,690			3,052			9,643			6,575			16,218				4,933			1,679			3,134			9,746			5,464			15,210

Add provision for unpaid claims and claim adjustment expenses
Current year		626			533			293			1,452			17			1,469				634			588			302			1,524			11			1,535
Prior year [1]		(147	)		1			47			(99	)		48			(51	)			9			4			3			16			205			221

Total provision for unpaid claims and claim adjustment expenses		479			534			340			1,353			65			1,418				643			592			305			1,540			216			1,756
Less payments [2]		(447	)		(545	)		(258	)		(1,250	)		(1,176	)		(2,426	)
Less payments																					(499	)		(544	)		(199	)		(1,242	)		(231	)		(1,473	)

Ending liabilities for unpaid claims and claim adjustment expenses-net [1]		4,933			1,679			3,134			9,746			5,464			15,210
Ending liabilities for unpaid claims and claim adjustment expenses-net																					5,077			1,727			3,240			10,044			5,449			15,493
Reinsurance and other recoverables		369			42			1,932			2,343			2,693			5,036				366			42			2,150			2,558			2,511			5,069

Ending liabilities for unpaid claims and claim adjustment expenses-gross [1]	$	5,302		$	1,721		$	5,066		$	12,089		$	8,157		$	20,246
Ending liabilities for unpaid claims and claim adjustment expenses-gross																				$	5,443		$	1,769		$	5,390		$	12,602		$	7,960		$	20,562

Earned premiums	$	1,018		$	835		$	321		$	2,174		$	12		$	2,186			$	1,061		$	861		$	417		$	2,339		$	14		$	2,353
Loss and loss expense paid ratio		43.9			65.4			80.5			57.6										46.9			63.0			48.5			53.1
Loss and loss expense incurred ratio		47.1			64.1			105.2			62.2										60.4			68.6			73.8			65.8
Prior accident year development (pts.)		(14.5	)		0.1			14.9			(4.5	)									0.8			0.5			0.6			0.7

[1]

The ~~quarter~~three months ended ~~March 31,~~June 30, 2004 included a provision of $181 associated with the evaluation of the reinsurance recoverable asset.

Six Months Ended June 30, 2004

Business Personal Specialty Ongoing Other
Insurance
Lines
Commercial
Operations
Operations [3]
Total P&C
Beginning liabilities for unpaid claims and claim adjustment expenses-gross
$ 5,296 $ 1,733 $ 5,148 $ 12,177 $ 9,538 $ 21,715
Reinsurance and other recoverables 395 43 2,096 2,534 2,963 5,497

Beginning liabilities for unpaid claims and claim adjustment expenses-net
4,901 1,690 3,052 9,643 6,575 16,218

Add provision for unpaid claims and claim adjustment expenses

Current year 1,260 1,121 595 2,976 28 3,004
Prior year [1] (138 ) 5 50 (83 ) 253 170

Total provision for unpaid claims and claim adjustment expenses 1,122 1,126 645 2,893 281 3,174
Less payments [2] (946 ) (1,089 ) (457 ) (2,492 ) (1,407 ) (3,899 )

Ending liabilities for unpaid claims and claim adjustment expenses-net [1]
5,077 1,727 3,240 10,044 5,449 15,493
Reinsurance and other recoverables 366 42 2,150 2,558 2,511 5,069

Ending liabilities for unpaid claims and claim adjustment expenses-gross [1]
$ 5,443 $ 1,769 $ 5,390 $ 12,602 $ 7,960 $ 20,562

[1]

Earned premiums $ 2,079 $ 1,696 $ 738 $ 4,513 $ 26 $ 4,539
Loss and loss expense paid ratio 45.4 64.2 62.4 55.3
Loss and loss expense incurred ratio 53.9 66.4 87.5 64.1
Prior accident year development (pts.) (6.7 ) 0.3 6.8 (1.8 )

[1] The six months ended June 30, 2004 included a $181 provision associated with the evaluation of the reinsurance recoverable asset. The six month period also included a net reserve release related to September 11 of $175 in Business Insurance, $7 in Personal Lines, $116 in Specialty Commercial and $97 in Other Operations, an increase of $190 for construction defects claims, an increase in assumed casualty reinsurance reserves of $130, and offsetting strengthening in large deductible workers compensation reserves and release in other liability reserves, each approximately $150.

[2] Other Operations reflects payments pursuant to the MacArthur settlement.
[3] Effective January 1, 2004, the financial results of the Company’s Reinsurance segment are reported in Other Operations and 2004 beginning liabilities have been reclassified to reflect this change.

Reinsurance Recoverables

The Company’s net reinsurance recoverables from various property and casualty reinsurance arrangements amounted to ~~$5.2~~$5.0 billion and $5.4 billion at ~~March 31,~~June 30, 2004 and December 31, 2003, respectively. Of the total net reinsurance recoverables as of December 31, 2003, $446 relates to the Company’s mandatory participation in various involuntary assigned risk pools, which are backed by the financial strength of the property and casualty insurance industry. Of the remainder, $3.5 billion, or 71%, were rated by A.M. Best. Of the total rated by A.M. Best, 92%, were rated A- (excellent) or better. The remaining $1.4 billion, or 29%, of net recoverables from reinsurers were comprised of the following: 5% related to voluntary pools, 2% related to captive insurance companies, and 22% related to companies not rated by A.M. Best. ~~There have been no material changes to the distribution of net recoverables from reinsurers for the Company since December 31, 2003.~~

Where its contracts permit, the Company secures future claim obligations with various forms of collateral including irrevocable letters of credit, secured trusts such as New York Regulation 114 trusts, funds held accounts and group wide offsets.

The allowance for ~~unrecoverable~~uncollectible reinsurance was ~~$348~~$397 and $381 at ~~March 31,~~June 30, 2004 and December 31, 2003, respectively. The allowance for ~~unrecoverable~~uncollectible reinsurance is based on an assessment of the credit quality of our reinsurers as well as an estimate ~~(if any)~~ of the cost of resolution of reinsurer disputes.

InDuring the second quarter of 2004, the Company ~~expects to complete~~completed an ~~updated study~~evaluation of the reinsurance recoverable asset associated with older, long-term casualty liabilities reported in the Other Operations segment, including asbestos liabilities. The Company has observed certain developments that could potentially have implications for its ability to recover reinsurance cessions of such liabilities, including recent trends in commutation activity between reinsurers and cedants and recent trends in arbitration and litigation outcomes in disputes between these parties. The Company is also analyzing recent changes in the mix of The Hartford’s estimated liabilities in the Other Operations segment to determine whether these have implications for its ability to cede liabilities.

~~Business Insurance~~

~~Underwriting Summary~~

First Quarter Ended
March 31,
2004
2003
Change
Written premiums $ 1,136 $ 990 15 %
Change in unearned premium reserve 118 110 7 %

Earned premiums $ 1,018 $ 880 16 %
Benefits, claims and claim adjustment expenses
Current year 626 598 5 %
Prior year (147 ) — —

Total benefits, claims and claim adjustment expenses 479 598 (20 %)
Amortization of deferred policy acquisition costs 255 204 25 %
Insurance operating costs and expenses 59 71 (17 %)

Underwriting results
$ 225 $ 7 NM

Loss and loss adjustment expense ratio
Current year 61.6 67.9 6.3
Prior year (14.5 ) — 14.5

Total loss and loss adjustment expense ratio 47.1 67.9 20.8
Expense ratio 30.3 30.5 0.2
Policyholder dividend ratio 0.4 0.8 0.4

Combined ratio 77.9 99.2 21.3
Catastrophe ratio (15.4 ) 4.6 20.0

Combined ratio before catastrophes 93.4 94.6 1.2
Combined ratio before catastrophes and prior accident year development 90.3 94.6 4.3

~~Premium Breakdown~~

Written Premiums [1]
Earned Premiums [1]
First Quarter Ended First Quarter Ended
March 31,
March 31,
2004
2003
Change
2004
2003
Change
Small Commercial $ 560 $ 480 17 % $ 481 $ 430 12 %
Middle Market 576 510 13 % 537 450 19 %

Total
$ 1,136 $ 990 15 % $ 1,018 $ 880 16 %

~~[1] The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve.~~

Business Insurance achieved written premium growth of $146 reflecting new business growth of 11% and written pricing increases of 4%. Premium renewal retention was 84% and 90% for the first quarter ending March 31, 2004 and 2003, respectively. Small commercial and middle market written premiums increased $80 and $66, respectively, asAs a result of ~~new business growth~~this evaluation, the Company reduced its net reinsurance recoverable by $181. The after-tax income effect of this action was $118. The $181 primarily relates to a reduction of the amount of liabilities, principally asbestos, that it expects to cede to reinsurers and, ~~written pricing increases. Premium renewal retention remains strong~~to a lesser extent, an increase in ~~both small commercial and middle market.~~the allowance for uncollectible reinsurance recoverables.

Business Insurance

Second Quarter Ended Six Months Ended
June 30,
June 30,
Underwriting Summary
2004
2003
Change
2004
2003
Change
Written premiums $ 1,134 $ 974 16 % $ 2,270 $ 1,964 16 %
Change in unearned premium reserve 73 77 (5 %) 191 187 2 %

Earned premiums 1,061 897 18 % 2,079 1,777 17 %
Benefits, claims and claim adjustment expenses
Current year 634 561 13 % 1,260 1,159 9 %
Prior year 9 — NM (138 ) — NM

Total benefits, claims and claim adjustment expenses 643 561 15 % 1,122 1,159 (3 %)
Amortization of deferred policy acquisition costs 261 214 22 % 516 418 23 %
Insurance operating costs and expenses 60 72 (17 %) 119 143 (17 %)

Underwriting results
$ 97 $ 50 94 % $ 322 $ 57 NM

Loss and loss adjustment expense ratio
Current year 59.6 62.6 3.0 60.6 65.2 4.6
Prior year 0.8 — (0.8 ) (6.7 ) — 6.7

Total loss and loss adjustment expense ratio 60.4 62.6 2.2 53.9 65.2 11.3
Expense ratio 30.0 31.0 1.0 30.2 30.8 0.6
Policyholder dividend ratio 0.4 0.8 0.4 0.4 0.8 0.4

Combined ratio 90.8 94.4 3.6 84.5 96.8 12.3
Catastrophe ratio 1.7 2.5 0.8 (6.7 ) 3.5 10.2

Combined ratio before catastrophes 89.1 91.9 2.8 91.2 93.3 2.1
Combined ratio before catastrophes and prior accident year development 88.3 91.9 3.6 89.3 93.3 4.0

Second Quarter Ended Six Months Ended
June 30,
June 30,
2004
2003
Change
2004
2003
Change
Written Premiums [1]

Small Commercial $ 577 $ 459 26 % $ 1,137 $ 939 21 %
Middle Market 557 515 8 % 1,133 1,025 11 %

Total
$ 1,134 $ 974 16 % $ 2,270 $ 1,964 16 %

Earned Premiums [1]

Small Commercial $ 521 $ 442 18 % $ 1,002 $ 872 15 %
Middle Market 540 455 19 % 1,077 905 19 %

Total
$ 1,061 $ 897 18 % $ 2,079 $ 1,777 17 %

[1] The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve.

Earned premiums for the segment increased ~~$138~~$164 for the second quarter and $302 for the six month period due to ~~strong~~earned pricing increases and new business growth outpacing non-renewals during the last six months of 2003 and first six months of 2004. During the second quarter and six month periods ended June 30, 2004, ~~written~~respectively, earned pricing ~~increases. Earned premiums increased $87~~increases of 8% for small commercial and ~~$51~~5% to 6% for middle market contributed to earned premium growth of $79 and $130 in small commercial ~~respectively, reflecting strong~~and $85 and $172 in middle market.

As substantially all premiums in the segment are earned over a 12 month policy period, earned pricing ~~increases.~~in the second quarter and six month period was primarily driven by written pricing increases of 8% to 11% in the last six months of 2003 and 3% to 4% in the first six months of 2004. New business premium in the second quarter and six month period ended June 30, 2004 was $275 and $565, respectively, which was up from $262 and $523, respectively, for the comparable periods of the prior year.

Premium renewal retention, which includes the impact of written pricing increases, decreased from 89% in the second quarter of 2003 to 85% in the second quarter of 2004 and decreased from 89% in the first six months of 2003 to 85% in the first six months of 2004. The moderation in written pricing increases from 2003 to 2004 contributed to the decrease in premium renewal retention.

Underwriting results improved ~~$218,~~$47, with a corresponding ~~21.3~~3.6 point decrease in the combined ratio, for the ~~first~~second quarter ended ~~March 31,~~June 30, 2004. The improvement was ~~driven by~~due primarily to earned pricing increases and improved claim frequency versus that of the same prior year period. Underwriting results improved $265, with a corresponding 12.3 point decrease in the ~~loss and loss adjustment expense~~combined ratio, for the six months ended June 30, 2004. The improvement was due primarily to a reduction in reserves for September 11 of $175, which was partially offset by an increase in reserves of $23 for construction defects. These reserve actions represent ~~14.9~~7.3 points of the ~~14.5 point~~combined ratio favorable ~~development in prior year losses.~~development. The catastrophe ratio includes ~~17.2~~8.4 points of favorable development related to the $175 decrease in September 11 reserves. ~~Before this favorable~~

3237

Before this favorable impact, catastrophe losses infor the ~~first quarter of~~six months ended June 30, 2004 decreased by ~~2.8~~1.8 points from the same period in the prior year. Before catastrophes and all prior accident year development, underwriting results improved $52 and $103 with a corresponding ~~4.3~~3.6 point ~~decrease~~and 4.0 point decreases in the combined ~~ratio.~~ratios for the second quarter and six months ended June 30, 2004, respectively. The improvement in both periods was ~~driven~~primarily due to improved claim frequency, partially offset by increased severity, and to earned pricing increases which drove a decrease in the loss and loss adjustment expense ratio for both small commercial and middle ~~market, primarily due to improved frequency of loss and earned pricing increases.~~market.

Personal Lines

~~Underwriting Summary~~


	First Quarter Ended								Second Quarter Ended							Six Months Ended
	March 31,								June 30,							June 30,
	2004		2003			Change
Underwriting Summary									2004		2003		Change			2004		2003		Change
Written premiums	$	836	$	770			9	%	$	945	$	854		11	%	$	1,781	$	1,624		10	%
Change in unearned premium reserve		1		(2	)		NM			84		69		22	%		85		67		27	%

Earned premiums	$	835	$	772			8	%		861		785		10	%		1,696		1,557		9	%
Benefits, claims and claim adjustment expenses
Current year		533		540			(1	%)		588		602		(2	%)		1,121		1,142		(2	%)
Prior year		1		—			—			4		—		—			5		—		—

Total benefits, claims and claim adjustment expenses		534		540			(1	%)		592		602		(2	%)		1,126		1,142		(1	%)
Amortization of deferred policy acquisition costs		125		104			20	%		138		100		38	%		263		204		29	%
Insurance operating costs and expenses		70		72			(3	%)		56		75		(25	%)		126		147		(14	%)

Underwriting results	$	106	$	56			89	%	$	75	$	8	NM			$	181	$	64		183	%

Loss and loss adjustment expense ratio
Current year		64.0		69.7			5.7			68.1		76.8		8.7			66.1		73.3		7.2
Prior year		0.1		—			(0.1	)		0.5		—		(0.5	)		0.3		—		(0.3	)

Total loss and loss adjustment expense ratio		64.1		69.7			5.6			68.6		76.8		8.2			66.4		73.3		6.9
Expense ratio		23.3		23.0			(0.3	)		22.6		22.2		(0.4	)		22.9		22.6		(0.3	)

Combined ratio		87.4		92.7			5.3			91.3		99.0		7.7			89.4		95.9		6.5
Catastrophe ratio		0.8		1.4			0.6			3.7		8.2		4.5			2.2		4.8		2.6

Combined ratio before catastrophes		86.6		91.3			4.7			87.6		90.8		3.2			87.1		91.1		4.0
Combined ratio before catastrophes and prior accident year development		86.1		91.3			5.2			87.2		90.8		3.6			86.6		91.1		4.5
Other revenues [1]	$	29	$	28			4	%	$	35	$	32		9	%	$	64	$	60		7	%

~~[1] The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve.~~

Written premiums increased $66 due to growth in both the automobile and homeowners lines. The increase in automobile of $40 was due to strong new business growth and written pricing increases of 4%. Automobile premium renewal retention was 88% and 90% for the first quarter ending March 31, 2004 and 2003, respectively. Homeowners growth of $26 was also largely driven by increased new business and written pricing increases of 10%. Homeowners premium renewal retention was 101% and 103% for the first quarter ending March 31, 2004 and 2003, respectively. The increases in both automobile and homeowners written premiums were primarily due to growth in the AARP program and the agency business unit. AARP increased $48 and agency increased $24, primarily as a result of strong new business growth and written pricing increases. Although written premium growth in agency increased 13%, this increase reflects the dampening effects of the Company’s conversion from twelve to six-month policies written under a new automobile class plan product. Partially offsetting the

Second Quarter Ended Six Months Ended
June 30,
June 30,
2004
2003
Change
2004
2003
Change
Earned Premiums [1]

Business Unit

AARP $ 536 $ 481 11 % $ 1,056 $ 947 12 %
Other Affinity 35 41 (15 %) 71 85 (16 %)
Agency 225 198 14 % 440 397 11 %
Omni 65 65 — 129 128 1 %

Total
$ 861 $ 785 10 % $ 1,696 $ 1,557 9 %

Product Line

Automobile $ 653 $ 610 7 % $ 1,286 $ 1,208 6 %
Homeowners 208 175 19 % 410 349 17 %

Total
$ 861 $ 785 10 % $ 1,696 $ 1,557 9 %

Combined Ratios

Automobile 95.2 98.0 2.8 92.7 97.0 4.3
Homeowners 79.0 102.9 23.9 78.9 91.9 13.0

Total
91.3 99.0 7.7 89.4 95.9 6.5

~~increase in written premiums for the Personal Lines segment was a $8 decrease in written premiums in other affinity due to an expected reduction in policy counts.~~
[1] The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve.

Earned premiums increased ~~$63~~$76 for the second quarter and $139 for the six months ended June 30, 2004 due primarily to growth in ~~AARP.~~AARP and agency. AARP increased ~~$54~~$55 for the second quarter and $109 for the six months ended June 30, 2004 and agency increased $27 for the second quarter and $43 for the six month period primarily as a result of earned pricing increases and because new business growth over the prior 6 to 12 months has exceeded non-renewals. Both AARP and Agency have experienced increased earned premiums in both automobile and homeowners business.

Earned pricing increases in automobile of 6% in both the second quarter and six month period ended June 30, 2004 primarily reflect written pricing increases of 5% to 7% in the last 6 months of 2003 and 4% in the first six months of 2004. Earned pricing increases of 12% in homeowners for the second quarter and six month period ended June 30, 2004 primarily reflect written pricing increases of 11% to 14% in the last 6 months of 2003 and 9% in the first 6 months of 2004. During the second quarter and six months ended June 30, 2004, there was an increase in new business premiums for both automobile and homeowners. Automobile new business premiums were $127 and $241 for the second quarter and six month period ended June 30, 2004 respectively, and homeowners new business premiums were $31 and $53, respectively.

Premium renewal retention for automobile, which includes the impact of written pricing increases, decreased from a range of 93% to 94% in the second quarter and first six months of 2003 to 88% in the second quarter and first six months of 2004. For homeowners, premium renewal retention decreased less significantly, from 103% in the second quarter and first six months of 2003 to 101% in the second quarter and first six months of 2004. The decrease in premium renewal retention for both automobile and homeowners is driven largely by the impact of declining written pricing increases.

Underwriting results increased ~~$50,~~$67 for the second quarter and $117 for the six months ended June 30, 2004, with a corresponding ~~5.3~~7.7 point and 6.5 point decrease in the combined ~~ratio.~~ratio, respectively. Pre-tax catastrophes decreased $32, or 4.5 points, for the second quarter and $37, or 2.6 points, for the six month period. Automobile results improved ~~6.0~~2.8 combined ratio points for the second quarter and 4.3 combined ratio points for the six months ended June 30, 2004 due to earned pricing ~~increases.~~increases and favorable claim frequency, offset by an increase in claim severity. The underwriting experience related to homeowners continued to remain favorable and improved ~~2.1~~23.9 combined ratio points ~~over~~for the ~~prior year~~second quarter and 13.0 combined ratio points for the six month period due primarily to double-digit earned pricing increases, decreased catastrophes and favorable ~~loss frequency.~~

~~Specialty Commercial~~

~~Underwriting Summary~~

First Quarter Ended
March 31,
2004
2003
Change
Written premiums $ 426 $ 406 5 %
Change in unearned premium reserve 105 51 106 %

Earned premiums $ 321 $ 355 (10 %)
Benefits, claims and claim adjustment expenses
Current year 293 265 11 %
Prior year 47 — —

Total benefits, claims and claim adjustment expenses 340 265 28 %
Amortization of deferred policy acquisition costs 61 56 9 %
Insurance operating costs and expenses 30 29 3 %

Underwriting results
$ (110 ) $ 5 NM

Loss and loss adjustment expense ratio
Current year 90.3 75.1 (15.2 )
Prior year 14.9 — (14.9 )

Total loss and loss adjustment expense ratio 105.2 75.1 (30.1 )
Expense ratio 28.1 22.6 (5.5 )
Policyholder dividend ratio 0.8 0.7 (0.1 )

Combined ratio 134.1 98.4 (35.7 )
Catastrophe ratio (35.6 ) 0.9 36.5

Combined ratio before catastrophes 169.7 97.5 (72.2 )
Combined ratio before catastrophes and prior accident year development 117.5 97.5 (20.0 )
Other revenues [1] $ 74 $ 67 10 %

~~[1] Represents servicing revenue.~~

~~Premium Breakdown~~

Written Premiums [1]
Earned Premiums [1]
First Quarter Ended First Quarter Ended
March 31,
March 31,
2004
2003
Change
2004
2003
Change
Property 83 97 (14 %) 87 89 (2 %)
Casualty 192 187 3 % 81 148 (45 %)
Bond 48 45 7 % 44 42 5 %
Professional Liability 78 65 20 % 82 64 28 %
Other 25 12 108 % 27 12 125 %

Total
$ 426 $ 406 5 % $ 321 $ 355 (10 %)

~~[1] The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve.~~

~~Specialty Commercial written premiums increased $20, driven~~claim frequency, offset by an increase in claim severity.

Specialty Commercial

Second Quarter Ended Six Months Ended
June 30,
June 30,
Underwriting Summary
2004
2003
Change
2004
2003
Change
Written premiums $ 473 $ 399 19 % $ 899 $ 805 12 %
Change in unearned premium reserve 56 44 27 % 161 95 69 %

Earned premiums 417 355 17 % 738 710 4 %
Benefits, claims and claim adjustment expenses
Current year 302 240 26 % 595 505 18 %
Prior year 3 — — 50 — —

Total benefits, claims and claim adjustment expenses 305 240 27 % 645 505 28 %
Amortization of deferred policy acquisition costs 63 55 15 % 124 111 12 %
Insurance operating costs and expenses 20 35 (43 %) 50 64 (22 %)

Underwriting results
$ 29 $ 25 16 % $ (81 ) $ 30 NM

Loss and loss adjustment expense ratio
Current year 73.2 67.2 (6.0 ) 80.6 71.1 (9.5 )
Prior year 0.6 — (0.6 ) 6.8 — (6.8 )

Total loss and loss adjustment expense ratio 73.8 67.2 (6.6 ) 87.5 71.1 (16.4 )
Expense ratio 20.4 25.3 4.9 23.8 23.9 0.1
Policyholder dividend ratio (1.2 ) 0.7 1.9 (0.3 ) 0.7 1.0

Combined ratio 93.1 93.2 0.1 110.9 95.8 (15.1 )
Catastrophe ratio 1.6 2.5 0.9 (14.5 ) 1.7 16.2

Combined ratio before catastrophes 91.5 90.7 (0.8 ) 125.4 94.1 (31.3 )
Combined ratio before catastrophes and prior accident year development 91.7 90.7 (1.0 ) 102.9 94.1 (8.8 )
Other revenues [1] $ 83 $ 81 2 % $ 157 $ 148 6 %

[1] Represents servicing revenues.

Second Quarter Ended Six Months Ended
June 30,
June 30,

2004
2003
Change
2004
2003
Change
Written Premiums [1]

Property $ 122 $ 116 5 % $ 205 $ 213 (4 %)
Casualty 182 149 22 % 374 336 11 %
Bond �� 50 36 39 % 98 81 21 %
Professional Liability 85 78 9 % 163 143 14 %
Other 34 20 70 % 59 32 84 %

Total
$ 473 $ 399 19 % $ 899 $ 805 12 %

Earned Premiums [1]

Property $ 99 $ 96 3 % $ 186 $ 185 1 %
Casualty 163 141 16 % 244 289 (16 %)
Bond 49 35 40 % 93 77 21 %
Professional Liability 82 72 14 % 164 136 21 %
Other 24 11 118 % 51 23 122 %

Total
$ 417 $ 355 17 % $ 738 $ 710 4 %

[1] The difference between written premiums and earned premiums is attributable to the change in unearned premium reserve.

Earned premiums for the Specialty Commercial segment grew $62 and $28, respectively, for the second quarter and six month period ended June 30, 2004 due primarily to earned pricing increases, offset by a decline in new business premium and renewal retention over the comparable periods of the prior year. The increase in earned premium for the six month period is also offset by a $90 reduction in premiums receivable under retrospectively-rated policies, reflecting a decrease in estimated earned premium under the terms of these policies. As substantially all premiums in the segment are earned over a 12 month policy period, the earned pricing increases resulted from written pricing increases over the prior 12 months. All lines within Specialty Commercial except property experienced earned pricing increases in the six months ended June 30, 2004.

Written pricing during the six months ended June 30, 2004 has continued to be positive for casualty and bond, but has decreased for property and professional liability. While market conditions are still favorable, property and professional liability experienced written pricing decreases in the mid-single digits, which contributed to a business decision to write less new business and non-renew more premium in those lines. Casualty experienced single-digit written pricing increases, partially offset by ~~a reduction~~decreases in new business growth and premium renewal ~~retention~~retention. Casualty written premiums were up $33 in ~~property. The increase~~the second quarter and $38 in the six months ended June 30, 2004, primarily because of written premium growth in alternative markets business. In professional liability, despite the decrease in written ~~premiums~~pricing, new business and renewal retention, written premium is up for ~~professional liability is primarily~~both the second quarter and six month period ended June 30, 2004 due to a decrease in the portion of risks ceded to ~~reinsurers, offset in part by a decrease in~~reinsurers. Within the

“other” category, written ~~pricing~~ and ~~a decrease in premium renewal retention. Casualty experienced written pricing increases of 11 to 15%, offset by a decrease in renewal retention. Within the “other” category, written~~earned premiums increased due to increased premiums on internal reinsurance arrangements.

~~Premiums receivable under retrospectively-rated policies were reduced by $90, reflecting a decrease~~Underwriting results improved $4 for the second quarter ended June 30, 2004 as improvements in estimated earned premiums under the terms of these policies. This reduction in retrospective premiums receivable, which is based on the Company’s most recent estimates, was reflected as a reduction in earned premiums in the first quarter of 2004, which is the main cause of the $34 decrease in earned premiums. Partially offsetting the decrease in earned premiums was growth in the casualty andbond, professional liability ~~lines of business as a result of strong earned pricing increases.~~

and property were offset by deterioration in casualty. Underwriting results decreased ~~$115~~$111 for the ~~first quarter as compared with the same prior year period,~~six months ended June 30, 2004 primarily due ~~primarily~~ to the $90 decrease in earned premiums under retrospectively-rated policies and net unfavorable prior accident year loss development. Prior accident year loss development of ~~$47~~$50 for the ~~first quarter~~six months ended June 30, 2004 included $167 of reserve strengthening for

construction defect claims, a release of $116 in September 11 reserves, and strengthening in large deductible workers compensation reserves and a release in other liability reserves, each approximately $150. The combined effect of all prior accident year loss development and the earned premium adjustment on retrospectively-rated policies caused a ~~34.7~~15.6 point increase in the total loss and loss expense ratio, and a ~~41.1~~18.1 point increase in the combined ~~ratio.~~ratio for the six months ended June 30, 2004. Before considering the $116 release in September 11 reserves, the catastrophe ratio was ~~0.6~~1.1 points for the six months ended June 30, 2004, which is down slightly from the prior year period.

Before catastrophes, all prior accident year ~~accident~~ development, and the earned premium adjustment on retrospectively-rated policies, underwriting results improved ~~$24~~$26 with a corresponding ~~5.8~~2.4 point decrease in the combined ratio for the six months ended June 30, 2004, primarily due to underwriting improvement over the prior year period in the ~~casualty and~~ professional liability ~~lines~~line of business.

Other Operations (Including Asbestos and Environmental Claims)


	First Quarter Ended									Second Quarter Ended									Six Months Ended
	March 31,									June 30,									June 30,
Operating Summary	2004			2003			Change
										2004			2003			Change			2004			2003			Change
Written premiums	$	(1	)	$	281		NM			$	(4	)	$	(93	)		96	%	$	(5	)	$	188		NM
Change in unearned premium reserve		(13	)		122		NM				(18	)		(162	)		89	%		(31	)		(40	)		23	%

Earned premiums		12			159			(92	%)		14			69			(80	%)		26			228			(89	%)
Benefits, claims and claim adjustment expenses
Current year		17			101			(83	%)		11			71			(85	%)		28			172			(84	%)
Prior year		48			2,657			(98	%)		205			67		NM				253			2,724			(91	%)

Total benefits, claims and claim adjustment expenses		65			2,758			(98	%)		216			138			57	%		281			2,896			(90	%)
Amortization of deferred policy acquisition costs		5			37			(95	%)		6			13			(54	%)		11			50			(78	%)
Insurance operating costs and expenses		7			15			(33	%)		6			7			(14	%)		13			22			(41	%)

Underwriting results	$	(65	)	$	(2,651	)		98	%	$	(214	)	$	(89	)		(140	%)	$	(279	)	$	(2,740	)		90	%

The Other Operations segment includes operations that are under a single management structure, Heritage Holdings, which is responsible for two related activities. The first activity is the management of certain subsidiaries and operations of The Hartford that have discontinued writing new business. The second is the management of claims (and the associated reserves) related to asbestos and environmental exposures. Effective January 1, 2004, the financial results of the Company’s Reinsurance segment are reported in Other Operations and 2003 results of operations have been reclassified to reflect this change.

~~The~~Earned premiums continue to decline in ~~written and earned premiums in the first quarter was due to~~Other Operations as a result of the Company’s decision to exit from the assumed domestic reinsurance business in ~~May~~the second quarter of 2003. The ~~Company entered into a quota share and purchase agreement with~~negative written premiums in the second quarter of 2003 were primarily driven by the retrocession, as of April 1, 2003, to Endurance Reinsurance Corporation of America ~~(“Endurance”), whereby the majority~~of most of the Company’s inforce book of ~~business was retroceded as of April 1, 2003~~domestic reinsurance. The negative written premiums in the second quarter and six months ended June 30, 2004 are primarily related to ~~Endurance. Under~~assumed commutation activities and other premium adjustments.

Underwriting results decreased $125 for the ~~quota share agreement, Endurance reinsured most~~second quarter ended June 30, 2004 due to the $181 provision upon completion of the ~~assumed~~evaluation of the reinsurance ~~contracts that were written by~~recoverable asset associated with older, long-term casualty liabilities reported in Other Operations, including asbestos liabilities. Partially offsetting this decrease in underwriting results from the ~~Company on or after January 1, 2002 and that had unearned premium as~~second quarter ended June 30, 2003 was a decrease of ~~April 1, 2003. The Company remains subject~~$43 in all other prior accident year development.

Underwriting results increased $2.5 billion for the six months ended June 30, 2004, primarily due to ~~ongoing reserve development relating to all retained business.~~

~~The underwriting loss in 2003 reflects~~the impact of $2.6 billion of asbestos reserve ~~strengthening. As indicated~~strengthening in the ~~Company’s~~ first quarter 2003, which was partially offset by the $181 provision associated with the evaluation of the reinsurance recoverable asset in the second quarter 2004, as well as the strengthening of assumed reinsurance reserves ~~discussion, for Other Operations,~~of $130, offset by a reduction in September 11 net reserves ~~were reduced by~~of $97 ~~and assumed reinsurance reserves, primarily for casualty business written during the 1997 – 2001 period and certain alternative risk transfer contracts, were increased by $130.~~

On December 19, 2003, Hartford Accident and Indemnity Co. (“Hartford A&I”) entered into a settlement agreement with MacArthur Co. and its subsidiary, Western MacArthur Co. Under the settlement agreement, duringin the first quarter of 2004, Hartford A&I paid $1.15 billion into an escrow account owned by Hartford A&I. The funds were held in an escrow account until conditions precedent to the settlement occurred in April. On April 22, 2004, the funds were disbursed from the escrow account into a trust established for the benefit of present and future asbestos claimants pursuant to the bankruptcy plan. The settlement payments have been accounted for as a reduction in unpaid claim and claim adjustment expenses during the first quarter of 2004. Because the escrow funds would have reverted back to The Hartford’s ownership if the conditions precedent had not occurred, the $1.15 billion payment also resulted in an increase in both other assets and other liabilities as of March 31, 2004. These will decrease in an equal amount when the escrowed funds are paid into the trust.

With regard to ~~both~~ environmental and particularly asbestos claims, significant uncertainty limits the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid losses and related expenses. Traditional actuarial reserving techniques cannot reasonably estimate the ultimate cost of these claims, particularly during periods when theories of law are in flux. The degree of variability of reserve estimates for these exposures is significantly greater than for other more traditional exposures. In particular, ~~The~~the Company believes there is a high degree of uncertainty inherent in the estimation of asbestos loss reserves.

In the case of the reserves for asbestos exposures, factors contributing to the high degree of uncertainty include inadequate development patterns, plaintiffs’ expanding theories of liability, the risks inherent in major litigation, and inconsistent emerging legal doctrines. Furthermore, insurers in general, including the Company, have recently experienced an increase in the number of asbestos-related claims due to, among other things, plaintiffs’

protection as a result of asbestos-related liabilities. Plaintiffs and insureds have sought to use bankruptcy proceedings, including “pre-packaged” bankruptcies, to accelerate and increase loss payments by insurers. In addition, some policyholders have asserted new classes of claims for so-called “non-products” coverages to which an aggregate limit of liability may not apply. Recently, many insurers, including The Hartford, also have been sued directly by asbestos claimants asserting that insurers had a duty to protect the public from the dangers of asbestos. Management believes these issues are not likely to be resolved in the near future.

Further uncertainties include whether some policyholders’ liabilities will reach the umbrella or excess layers of their coverage; the resolution or adjudication of some disputes pertaining to the amount of available coverage for asbestos claims in a manner inconsistent with The Hartford’s previous assessment of these claims; insolvencies of other carriers; the number and outcome of direct actions against The Hartford; and unanticipated developments pertaining to The Hartford’s ability to recover reinsurance for asbestos and environmental claims. It is also not possible to predict changes in the legal and legislative environment and their impact on the future development of asbestos and environmental claims. It is unknown whether potential Federal asbestos-related legislation will be enacted and, if so, what its effect will be on The Hartford’s aggregate asbestos liabilities.

The reporting pattern for ~~excess insurance and~~ reinsurance claims is much longer than for direct claims. In many instances, it takes months or years to determine that the policyholder’s own obligations have been met and how the reinsurance in question may apply to such claims. The delay in reporting ~~excess and~~ reinsurance claims adds to the uncertainty of estimating the related reserves.

In the case of the reserves for environmental exposures, factors contributing to the high degree of uncertainty include court decisions that have interpreted the insurance coverage to be broader than originally intended; inconsistent decisions, especially across jurisdictions; and uncertainty as to the monetary amount being ~~sought by the claimant from the insured.~~sought.

Given the factors and emerging trends described above, The Hartford believes the actuarial tools and other techniques it employs to estimate the ultimate cost of claims for other kinds of insurance exposure are less precise in estimating reserves for its asbestos and environmental exposures. For this reason, the Company relies on an ~~exposure based~~exposure-based analysis to estimate the ultimate costs of these claims and regularly evaluates new information in assessing its potential asbestos and environmental exposures.

Reserve Activity

Reserves and reserve activity in the Other Operations segment are categorized and reported as asbestos, environmental or “all other” activity. The following discussion ~~below~~ relates to reserves and reserve activity, net of applicable reinsurance.

There are a wide variety of claims that drive the reserves within each category of Other Operations. Asbestos claims relate primarily to bodily injuries asserted by those who came in contact with asbestos or products containing asbestos. Environmental claims relate primarily to pollution and related clean-up costs. The “all other” category of reserves covers a wide range of insurance and reinsurance coverages, including potential liability for breast implants, ~~blood products,~~ construction defects, lead paint, silica, pharmaceutical products and other long-tail liabilities.

The Other Operations book of business contains policies written from the 1940’s to 2003. The Hartford’s experience has been that this book of business has over time produced significantly higher claims and losses than were contemplated at inception. The areas of active claim activity have also shifted based on changes in plaintiff focus and the overall litigation environment. A significant portion of the claim reserves of the Other Operations segment relates to exposure to the insurance businesses of other insurers or reinsurers (“whole account” exposure). Many of these whole account exposures arise from reinsurance agreements previously written by The Hartford. The Hartford’s net exposure in these arrangements has increased for a variety of reasons, including The Hartford’s commutation of previous retrocessions of such business. Due to the reporting practices of cedants to their reinsurers, determination of the nature of the individual risks involved in these whole account exposures (such as asbestos, environmental, or other exposures) requires various assumptions and estimates, which are subject to uncertainty, as previously discussed.

Consistent with the Company’s long-standing reserving practices, The Hartford will continue to review and monitor these reserves regularly and, where future developments indicate, make appropriate adjustments to the reserves. The loss reserving assumptions, drawn from both industry data and the Company’s experience, have over time been applied to all of this business and have resulted in strengthening or reserve releases at various times over the past decade.

The following table presents reserve activity, inclusive of estimates for both reported and incurred but not reported claims, net of reinsurance, for Other Operations, categorized by asbestos, environmental and “all other” claims, for the second quarter and six months ended ~~March 31,~~June 30, 2004. Also included are the remaining asbestos and environmental exposures of Ongoing Operations.

3642

Other Operations Claims and Claim Adjustment Expenses

For the First Quarter Ended March 31, 2004
Asbestos
Environmental
All Other [1]
Total
Beginning liability - net [2][3] $ 3,794 $ 408 $ 2,392 $ 6,594
Claims and claim adjustment expenses incurred 3 3 61 67
Claims and claim adjustment expenses paid [5] 1,091 19 67 1,177

Ending liability – net [2] [3]
$ 2,706 [4] $ 392 $ 2,386 $ 5,484

For the Second Quarter Ended June 30, 2004
Asbestos
Environmental
All Other [1]
Total
Beginning liability - net [2] [3] $ 2,706 $ 392 $ 2,386 $ 5,484
Change in reinsurance ceded, net 181 — — 181
Claims and claim adjustment expenses incurred 3 3 33 39
Claims and claim adjustment expenses paid (40 ) (19 ) (174 ) (233 )
Reclassification of allowance for uncollectible reinsurance (330 ) (10 ) 340 —

Ending liability – net [2] [3]
$ 2,520 [5] $ 366 $ 2,585 $ 5,471

For the Six Months Ended June 30, 2004
Asbestos
Environmental
All Other [1]
Total
Beginning liability - net $ 3,794 $ 408 $ 2,392 $ 6,594
Change in reinsurance ceded, net 180 — — 180
Claims and claim adjustment expenses incurred 7 6 94 107
Claims and claim adjustment expenses paid [4] (1,131 ) (38 ) (241 ) (1,410 )
Reclassification of allowance for uncollectible reinsurance (330 ) (10 ) 340 —

Ending liability – net [2] [3]
$ 2,520 [5] $ 366 $ 2,585 $ 5,471

[1] Includes unallocated loss adjustment expense reserves and ~~the Reinsurance segment.~~allowance for uncollectible reinsurance.

[2] ~~Ending liabilities~~Liabilities include asbestos and environmental reserves reported in Ongoing Operations of $13 and $9, respectively, as of June 30, 2004; $11 and $9, respectively, as of March 31, ~~2004~~2004; and of $11 and $8, respectively, as of December 31, 2003. The total net claim and claim adjustment expenses incurred for the quarter and six months ended June 30, 2004 of ~~$67~~$39 and $107, respectively, includes $2$4 and $6, respectively, related to asbestos and environmental claims reported in Ongoing Operations.

[3] Gross of reinsurance, asbestos and environmental reserves were $4,583 and $499, respectively, as of June 30, 2004; $4,644 and $513, respectively, as of March 31, ~~2004~~2004; and $5,884 and $542, respectively, as of December 31, 2003.

[4] Asbestos payments include payments pursuant to the MacArthur settlement.
[5] The one year and average three year net paid amounts for asbestos claims are ~~$1,215~~$1,206 and ~~$1,443,~~$484 respectively, resulting in a one year net survival ratio of ~~2.2 (13.7~~2.1 (13.8 excluding the MacArthur payments) and a three year net survival ratio of ~~5.6 (19.1~~5.2 (17.7 excluding MacArthur). Net survival ratio is the quotient of the net carried reserves divided by the average annual payment amount and is an indication of the number of years that the net carried reserve would last (i.e. survive) if the future annual claim payments were consistent with the calculated historical average.
~~[5]~~ ~~Asbestos payments include $1.15 billion of payments pursuant to the MacArthur settlement.~~

At ~~March 31,~~June 30, 2004, asbestos reserves were ~~$2.7~~$2.5 billion, a decrease of ~~$1.1~~$1.3 billion compared to $3.8 billion as of December 31, 2003. The decrease in asbestos reserves is primarily driven by the MacArthur settlement payment made in the first quarter of 2004.

During the first quarter of 2004, the Company completed a gross asbestos reserve evaluation. As part of this evaluation, the Company reviewed all of its open direct domestic insurance accounts exposed to asbestos liability as well as assumed reinsurance accounts and certain closed accounts. The Company also examined its London Market exposures for both direct insurance and assumed reinsurance. The evaluation indicated no change in the overall required gross asbestos reserves. ~~It is anticipated that the net reserve evaluation will be completed during~~

During the second quarter of 2004, the Company completed an evaluation of the reinsurance recoverable asset associated with older, long-term casualty liabilities reported in the Other Operations segment, including asbestos liabilities. In conducting its Other Operations reinsurance recoverable review, the Company used its most recent detailed studies of gross asbestos, environmental and ~~net reserve estimates could change as~~all other liabilities reported in the segment, including its estimate of the type and potential timing of future claims, and analyzed the legal entities through which each exposed coverage was written, the reinsurance arrangements in place at each of these legal entities and the years of potential reinsurance available. As part of its Other Operations reinsurance recoverable review, the Company also analyzed recent developments in commutation activity between reinsurers and cedants, recent trends in arbitration and litigation outcomes in disputes between cedants and reinsurers and the overall credit quality of the Company’s reinsurers. As a result of this ~~evaluation.~~evaluation, the Company reduced its net reinsurance recoverable by $181. The after-tax income effect of this action was $118. The following summarizes the components of the $181 reduction of reinsurance recoverables:

Reduction of ceded amounts $ 126
Increase in allowance for uncollectible reinsurance 55

Total provision (before tax) $ 181

The Company reduced ceded amounts because while the Company’s estimate of total gross losses was unchanged, some of the individual components of the Company’s estimate changed, and less reinsurance coverage is available for the changed composition of losses. The increase in the allowance for uncollectible reinsurance reflects management’s current estimate of future reinsurance cessions that may be uncollectible due to reinsurers’ unwillingness or inability to pay. The net effect of the change in the allowance for uncollectible reinsurance was to increase the allowance as a percentage of ceded reinsurance from 8% at March 31, 2004 to 10% at June 30, 2004. The Company also consolidated within the “all other” category its allowance for insolvencies and disputes that might impact reinsurance coverage associated with Other Operations into a single $346 allowance, inclusive of other second quarter operating activity.

The Company currently expects to perform a comprehensive review of Other Operations reinsurance recoverables at least annually. In addition, at any time there are significant developments that affect particular exposures, reinsurance arrangements or the financial condition of particular reinsurers, the Company will respond by making adjustments in the portion of liabilities it expects to cede or in its allowance for uncollectible reinsurance.

The Company classifies its asbestos reserves into three categories: direct insurance; assumed reinsurance and London Market. Direct insurance includes primary and excess coverage. Assumed ~~Reinsurance~~reinsurance includes both “treaty” reinsurance (covering broad categories of claims or blocks of business) and “facultative” reinsurance (covering specific risks or individual policies of primary or excess insurance companies). London Market business includes the business written by one or more of The Hartford’s subsidiaries in the United Kingdom, which are no longer active in the insurance or reinsurance business. Such business includes both direct insurance and assumed reinsurance.

The Company continues to divide its direct asbestos exposures into the following categories: Major Asbestos Defendants (the “Top 70” accounts in Tillinghast’s published Tiers 1 and 2 and Wellington accounts collectively divided into: structured settlements, Wellington, and Other Major Asbestos Defendants), Accounts with Future Expected Exposures greater than $2.5, Accounts with Future Expected Exposures less than $2.5 and Unallocated. An account may move between categories from one evaluation to the next. For example, an account with future expected exposure of greater than $2.5 in one evaluation may be reevaluated due to changing conditions in the account’s profile within the claim and legal environment such that the exposure may be viewed as less than $2.5 in a subsequent evaluation, or vice versa. During the first quarter of 2004, the Company reclassified some losses paid more than three years ago to different categories. These reclassifications had no effect on total reserves or on the one-year or three-year gross survival ratios.

~~Structured settlements are those accounts where the Company has reached an agreement with the insured as to the amount and timing of the claim payments to be made to the insured.~~

The Wellington category includes insureds that entered into the “Wellington Agreement” dated June 19, 1985. The Wellington Agreement provided terms and conditions for how the signatory asbestos producers would access their coverage from the signatory insurers.

The Other Major Asbestos Defendants subcategory represents insureds included in Tiers 1 and 2, as defined by Tillinghast. The Tier 1 and 2 classifications are meant to capture the insureds for which there is expected to be significant exposure to asbestos claims.

The unallocated category includes an estimate of the reserves necessary for asbestos claims related to direct insureds who have not previously tendered asbestos claims to the company, potential non-products exposures and closed accounts exclusive of Major Asbestos Defendants.

Assumed ~~Reinsurance~~reinsurance exposures are inherently less predictable than direct insurance exposures because the Company may not receive notice of a reinsurance claim until the underlying direct insurance claim is mature. This causes a delay in the receipt of information at the reinsurer level reflecting changes in the asbestos tort litigation and direct insurance coverage environments.

Estimating liabilities for London Market business is the most uncertain of the three categories of claims (direct, assumed reinsurance and London ~~Market.)~~Market). As a participant in the London Market (comprised of both Lloyd’s of London and London Company Markets), the Company wrote business on a subscription basis, with the Company’s involvement being limited to a relatively small percentage of a total contract placement. Claims are reported, via a broker, to the “lead” underwriter and, once agreed to, are presented to the following markets for concurrence. This reporting and claim agreement process makes estimating liabilities for this business the most uncertain of the three categories of claims.

On December 19, 2003 Hartford Accident and Indemnity Co. (“Hartford A&I”) entered into a settlement agreement with Mac Arthur Co. and its subsidiary, Western MacArthur Co. Under the settlement agreement, during the first quarter of 2004, Hartford A&I paid $1.15 billion into an escrow account owned by Hartford A&I. The ~~following table displays gross~~funds were held in the escrow account until conditions precedent to the settlement occurred in April. On April 22, 2004, the funds were disbursed from the escrow account into a trust established for the benefit of present and future asbestos ~~reserves~~claimants pursuant to the bankruptcy plan. The settlement payments have been accounted for as a reduction in unpaid claim and ~~other statistics by policyholder category, as~~claim adjustment expenses during the first quarter of ~~March 31, 2004, reflecting the Company’s most recent gross reserve study:~~2004.

~~Summary of Gross Asbestos Reserves~~

3 Year
Gross Survival
3 Year Ratio [1] [2]
% of Gross Survival before
Number of All Time Total Asbestos All Time Ratio [1] [2] MacArthur
Accounts [5]
Paid
Reserves
Reserves
Ultimate
(in years)
(in years)
As of Most Recent Reserve Evaluation [4]

Major asbestos defendants
Structured settlements (includes 2 Wellington accounts) 7 $ 257 $ 358 6 % $ 615 9.1 9.1
Wellington (direct only) 31 682 281 5 % 963 5.3 5.3
Other major asbestos defendants 27 178 443 8 % 621 27.3 27.3
No known policies (includes 3 Wellington accounts) 5 — — — — — —
Accounts with future exposure > $2.5 106 369 1,210 20 % 1,579 16.7 16.7
Accounts with future exposure < $2.5 930 152 135 2 % 287 12.9 12.9
MacArthur settlement 1 32 1,150 20 % 1,182
Unallocated [3] — 100 896 15 % 996

Total direct 1,770 4,473 76 % 6,243 22.0 16.8
Assumed reinsurance 560 931 16 % 1,491 15.5 15.5
London market 373 480 8 % 853 13.6 13.6

Total 2,703 5,884 100 % 8,587 19.7 16.1

First Quarter 2004 MacArthur payments 1 1,162 (1,162 ) —
First Quarter 2004 Activity, excluding MacArthur 82 (78 ) 4

Total as of March 31, 2004 [2]
$ 3,947 $ 4,644 $ 8,591 6.6 14.8


~~[1]~~		Survival ratio is a commonly used industry ratio for comparing reserve levels between companies. While the method is commonly used, it is not a predictive technique. Survival ratios may vary over time due to numerous factors such as large payments due to the final resolution of certain asbestos liabilities, or reserve re-estimates. The survival ratio presented in the above table is computed by dividing the recorded reserves by the average of the past three years of payments. The ratio is the calculated number of years the recorded reserves would survive if future annual payments were equal to the average annual payments for the past three years. The 3-year gross survival ratio as of March 31, 2004 is computed based on total paid losses of $2,105 for the period from April 1, 2001 to March 31, 2004. All other 3-year gross survival ratios presented are based on total paid losses for the 3-year period ended December 31, 2003.

~~[2]~~		As of March 31, 2004, the one year gross paid amount for total asbestos claims is $1.5 billion resulting in a one year gross survival ratio of 3.1. If the ratio was calculated without considering the $1.16 billon in payments for MacArthur in the first quarter of 2004, the one year gross survival ratio would be 13.7.

~~[3]~~		~~Includes closed accounts, exclusive of Major Asbestos Defendants, and unallocated IBNR.~~

~~[4]~~		~~The information presented by account category reflects the first quarter 2004 reserve evaluation of gross asbestos losses incurred as of December 31, 2003.~~

~~[5]~~		An account may move between categories from one evaluation to the next. Reclassifications were made as a result of the reserve evaluation completed in the first quarter of 2004. There was no impact on total all-time paid losses or total reserves.

INVESTMENTS

General

The Hartford’s investment portfolios are primarily divided between Life and Property & Casualty. The investment portfolios are managed based on the underlying characteristics and nature of each operation’s respective liabilities and within established risk parameters. (For further discussion of The Hartford’s approach to managing risks, see the Investment Credit Risk section.)

The investment portfolios of Life and Property & Casualty are managed by Hartford Investment Management Company and its affiliates (“Hartford Investment Management”), a wholly-owned subsidiary of The Hartford. Hartford Investment Management is responsible for monitoring and managing the asset/liability profile, establishing investment objectives and guidelines, and determining, within specified risk tolerances and investment guidelines, the appropriate asset allocation, duration, convexity and other characteristics of the portfolios. Security selection and monitoring are performed by asset class specialists working within dedicated portfolio management teams.

AsPursuant to the adoption of SOP 03-1, as discussed in ~~Note~~Notes 1 and 4 of Notes to Condensed Consolidated Financial Statements, on January 1, 2004, the Company reclassified $17.9 billion of separate account assets to the general ~~account as a result of adopting the SOP.~~account. Of this amount, $11.7 billion was associated with guaranteed separate accounts and was primarily comprised of fixed maturities. These assets are ~~designated~~classified as available-for-sale securities with changes in fair value reported in other comprehensive income. The remaining $6.2 billion is primarily comprised of equity securities related to variable annuity products offered in Japan. These assets are ~~designated~~classified as trading securities with changes in fair value reported in net investment income.

Return on invested assets is an important element of The Hartford’s financial results. Significant fluctuations in the fixed income or equity markets could weaken the Company’s financial condition or its results of operations. Additionally, changes in market interest rates may impact the period of time over which certain investments, such as mortgage-backed securities, are repaid and whether certain investments are called by the issuers. Such changes may, in turn, impact the yield on these investments and also may result in reinvestment of funds received from calls and prepayments at rates below the average portfolio yield. Net investment income and net realized capital gains and losses accounted for ~~approximately 29%~~22% and ~~17%~~23% of the Company’s consolidated ~~revenues~~revenue for the ~~quarters~~second quarter ended ~~March 31,~~June 30, 2004 and 2003, respectively. For the six months ended June 30, 2004 and 2003, net investment income and net realized capital gains and losses accounted for approximately 26% and 20%, respectively, of the Company’s consolidated revenues. The increase in the percentage of consolidated revenues for the six months ended June 30, 2004, as compared to the respective prior year period, is primarily due to income earned on separate account assets reclassified to the general account as a result of the adoption of ~~the SOP.~~SOP 03-1.

Fluctuations in interest rates affect the Company’s return on, and the fair value of, fixed maturity investments, which comprised approximately ~~85%~~83% and 93% of the fair value of its invested assets as of ~~March 31,~~June 30, 2004 and December 31, 2003, respectively. Other events beyond the Company’s control could also adversely impact the fair value of these investments. Specifically, a downgrade of an issuer’s credit rating or default of payment by an issuer could reduce the Company’s investment return.

The Company invests in private placement securities, mortgage loans and limited partnership arrangements in order to further diversify its investment portfolio. These investment types comprised approximately ~~16% and~~ 17% of the fair value of its invested assets as of ~~March 31,~~June 30, 2004 and December 31, ~~2003, respectively.~~2003. These security types are typically less liquid than direct investments in publicly traded fixed income or equity investments. However, generally these securities have higher yields to compensate for the liquidity risk.

A decrease in the fair value of any investment that is deemed other-than-temporary would result in the Company’s recognition of a net realized capital loss in its financial results prior to the actual sale of the investment. (For further discussion, see the Company’s discussion of the evaluation of other-than-temporary impairments in Critical Accounting Estimates under the “Investments” section in ~~the~~The Hartford’s 2003 Form 10-K Annual Report.)

Life

The primary investment objective of Life is to maximize after-tax returns consistent with acceptable risk parameters, including the management of the interest rate sensitivity of invested assets and the generation of sufficient liquidity relative to that of policyholder and corporate obligations.

Fixed maturity investments and equity securities held for trading increased ~~32%~~28% and 100%, respectively, since December 31, 2003, primarily the result of fixed maturities and equity securities that were reclassified from separate accounts to the general account as a result of the adoption of ~~the SOP.~~SOP 03-1. The ~~remaining~~ increase in fixed maturity investments was partially offset by a decline in market prices primarily due to an increase in ~~market prices driven by a decline in~~long-term interest rates during the ~~first~~second quarter of 2004.

Mortgage loans increased $386, or 83%, since December 31, 2003 as a result of a decision to increase Life’s investment in this asset class primarily due to its attractive yields and diversification opportunities.

Investment Results

The following table summarizes Life’s investment results.


	First Quarter Ended						Second Quarter Ended						Six Months Ended
	March 31,						June 30,						June 30,
(Before-tax)	2004			2003
Net investment income – excluding income on policy loan and trading securities [1]	$	661		$	445
(before-tax)							2004			2003			2004			2003
Net investment income – excluding income on policy loans and trading securities [1]							$	662		$	450		$	1,323		$	895
Policy loan income		45			58			47			54			92			112
Trading securities income [2]		495			—			149			—			644			—

Net investment income – total [1]	$	1,201		$	503		$	858		$	504		$	2,059		$	1,007
Yield on average invested assets [3]		5.7	%		6.1	%		5.8	%		5.8	%		5.8	%		5.9	%

Gross gains on sale	$	100		$	57		$	84		$	91		$	184		$	148
Gross losses on sale		(18	)		(47	)		(70	)		(17	)		(88	)		(64	)
Impairments		(8	)		(67	)		(4	)		(17	)		(12	)		(84	)
Periodic net coupon settlements on non-qualifying derivatives [1]		2			4			1			9			3			13
GMWB derivatives, net		(2	)		—			6			—			4			—
Other, net [4]		2			9			9			(7	)		11			2

Net realized capital gains (losses) [1] [5]	$	76		$	(44	)
Net realized capital gains [1]							$	26		$	59		$	102		$	15

For the second quarter and six months ended ~~March 31,~~June 30, 2004, net investment income, excluding income on policy loans and trading securities, increased ~~$216,~~$212, or ~~49%~~47%, and $428, or 48%, respectively, compared to the ~~same period~~respective prior year periods. The increases in ~~2003. Approximately $154~~net investment income were primarily due to income earned on a higher average invested assets base, as compared to the respective prior year periods, partially offset by lower investment yields. The increase in the average invested assets base, as compared to the prior year periods, was primarily the result of separate account assets reclassified to the ~~increase related~~general account pursuant to ~~income~~the adoption of SOP 03-1 and, to a lesser extent, assets acquired in the CNA Acquisition and operating cash flows. Income earned on separate account assets reclassified to the general account ~~as a result of~~was $150 and $304 for the ~~adoption of the SOP~~second quarter and ~~approximately $26 of the increase related to income~~six months ended June 30, 2004, respectively. Income earned on assets acquired in the CNA ~~acquisition, which~~Acquisition was ~~consummated on December 31, 2003. The remaining increase was primarily due to income earned on a higher invested asset base, as compared to~~$29 and $55 for the ~~first~~second quarter ~~2003, partially offset by lower investment yields. Yields~~and six months ended June 30, 2004, respectively.

For the six months ended June 30, 2004, the yield on average invested assets decreased from the respective prior year period as a result of lower rates on new investment purchases and decreased policy loan income. Since the Company invests primarily in long-term fixed rate debt securities, current period changes in long-term interest rates impact the yield on new asset purchases and, therefore, have a gradual impact on the overall portfolio yield. The weighted average yield on new invested asset purchases in the ~~first~~second quarter ofand six months ended June 30, 2004 of approximately ~~4.8%~~4.7%, before-tax, continues to be below the average portfolio yield.

Net realized capital gains ~~(losses)~~ for the ~~first~~second quarter ended ~~March 31,~~June 30, 2004 ~~improved~~decreased by ~~$120~~$33 compared to the ~~same~~respective prior year period, ~~in 2003,~~ primarily the result of ~~higher~~lower net realized gains on sales of fixed maturity ~~and equity~~ securities ~~and~~in 2004, partially offset by lower other-than-temporary impairments. ~~Realized~~Net realized capital gains for the six months ended June 30, 2004 improved by $87 compared to the respective prior year period primarily due to lower other-than-temporary impairments. (For further discussion of other-than-temporary impairments, see the Other-Than-Temporary Impairments commentary in this section of the MD&A.)

Gross gains on sales for the second quarter and six months ended June 30, 2004 were primarily within fixed maturities and were the result of decisions to reposition the portfolio primarily due to the spread tightening in certain sectors and changes in interest rates. Gross gains on sales of fixed maturity investments were concentrated in the corporate, foreign government and asset-backed securities (“ABS”) sectors. The majority of the gains on sales in the corporate and ABS sectors were the

unrealized loss position primarily due to changes in long-term interest rates.

Realized gains on sales for the ~~Other-Than-Temporary Impairments commentary~~second quarter and six months ended June 30, 2003 primarily resulted from portfolio rebalancing of securities that had appreciated in ~~this section of the MD&A.)~~value due to historically low interest rates.

Property & Casualty

The investment objective for Property & Casualty’s ongoing operations is to maximize economic value while generating after-tax income and sufficient liquidity to meet policyholder and corporate obligations. For Property & Casualty’s Other Operations segment, the investment objective is to ensure the full and timely payment of all liabilities. Property & Casualty’s investment strategies are developed based on a variety of factors including business needs, regulatory requirements and tax considerations.

The following table identifies Property & Casualty’s invested assets by type as of ~~March 31,~~June 30, 2004 and December 31, 2003.

Composition of Invested Assets


	March 31, 2004					December 31, 2003					June 30, 2004					December 31, 2003
	Amount		Percent			Amount		Percent			Amount		Percent			Amount		Percent
Fixed maturities, available-for-sale, at fair value	$	23,196		96.4	%	$	23,715		96.4	%	$	22,774		96.3	%	$	23,715		96.4	%
Equity securities, available-for-sale, at fair value		206		0.9	%		208		0.8	%		201		0.8	%		208		0.8	%
Real estate/Mortgage loans, at cost		309		1.3	%		328		1.3	%		306		1.3	%		328		1.3	%
Limited partnerships, at fair value		164		0.7	%		168		0.7	%		156		0.7	%		168		0.7	%
Other investments		177		0.7	%		186		0.8	%		220		0.9	%		186		0.8	%

Total investments	$	24,052		100.0	%	$	24,605		100.0	%	$	23,657		100.0	%	$	24,605		100.0	%

Total fixed maturities decreased 2%$941, or 4%, since December 31, 2003, primarily due to $1.15 billion of payments made pursuant to the MacArthur settlement ~~partially offset by premium cash flow~~ and ~~an increase~~a decline in ~~the~~ fair value of fixed maturities as a result of ~~a decrease~~an increase in long-term interest ~~rates.~~rates, partially offset by operating cash flow.

For the ~~first~~second quarter and six months ended ~~March 31,~~June 30, 2004, ~~before-~~before-tax net investment income increased $9, or 3%, and $39, or 7%, respectively, and after-tax net investment income increased ~~$30,~~$5, or ~~11%~~2%, and ~~$17,~~$21, or 8%5%, respectively, compared to the respective prior year ~~period.~~periods. The ~~increase~~increases in net investment income ~~was~~for the second quarter and six months ended June 30, 2004, were primarily due to income earned on a higher average invested asset base, as compared to the respective prior year periods, partially offset by lower investment yields. ~~Invested assets as of March 31, 2004 increased as compared to March 31, 2003, due to positive operating cash flow partially offset by payments made pursuant to the MacArthur settlement. Yields~~

The yield on average invested assets decreased from the prior year ~~period~~periods as a result of lower rates on new investment purchases. Since the Company invests primarily in long-term fixed rate debt securities, current period changes in long-term interest rates impact the yield on new asset purchases and, therefore, have a gradual impact on the overall portfolio yield. The weighted average yield on new asset purchases in the ~~first~~second quarter ofand six months ended June 30, 2004 of approximately ~~4.7%~~4.9% and 4.8%, before-tax, respectively, continues to be below the average portfolio yield.

Net realized capital gains ~~(losses)~~ for the ~~first~~second quarter and six months ended ~~March 31,~~June 30, 2004 ~~improved~~decreased by ~~$72~~$185 and $113, respectively, as compared to the ~~same period in 2003,~~respective prior year periods, primarily the result of ~~higher~~lower net realized gains on sales of fixed maturity securities ~~and~~in 2004, partially offset by lower other-than-temporary impairments. (For further discussion of other-than-temporary impairments, see the Other-Than-Temporary Impairments commentary in this section of the MD&A.)

~~impairments. Realized~~Gross gains on sales for the second quarter and six months ended June 30, 2004 were primarily within fixed maturities and were the result of decisions to reposition the portfolio primarily due to the spread tightening in certain sectors and changes in long-term interest rates. Gross gains on sales of fixed maturity investments were concentrated in the corporate, foreign government and ABS sectors. The majority of the gains on sales in the corporate and ABS sectors were the result of ~~portfolio rebalancing that resulted in~~ divesting of securities that had appreciated in value due to a decline in interest rates and an improved corporate credit environment. Foreign government securities were sold ~~in the first quarter of 2004~~ primarily to realize gains associated with the decline in value of the U.S. Dollar against foreign currencies. ~~(For further discussion~~

Gross losses on sales for the second quarter ended June 30, 2004 resulted predominantly from sales of ~~other-than-temporary impairments, see~~corporate and CMBS securities that were in an unrealized loss position primarily due to changes in long-term interest rates.

Realized gains on sales for the ~~Other-than-Temporary Impairments commentary~~second quarter and six months ended June 30, 2003 primarily resulted from portfolio rebalancing of securities that had appreciated in ~~this section of the MD&A.)~~value due to historically low interest rates.

Corporate

~~Certain proceeds from~~The investment objective of Corporate is to raise capital through financing activities to support the ~~Company’s September 2002~~Life and ~~May 2003 capital raising~~Property & Casualty operations of the Company and to maintain sufficient funds to support the cost of those financing activities ~~have been retained in Corporate.~~including the payment of interest for Hartford Financial Services Group, Inc. (“HFSG”) issued debt and dividends to shareholders of The Hartford common stock. As of ~~March 31,~~June 30, 2004 and December 31, 2003, Corporate held ~~$38~~$122 and $86, respectively, of short-term fixed maturity investments. In addition, Corporate held ~~$28~~$6 and $2, respectively, of other investments as of ~~March 31,~~June 30, 2004 and December 31, ~~2003, respectively.~~2003.

Other-Than-Temporary Impairments

For the second quarter and six months ended June 30, 2004, total consolidated other-than-temporary impairments were $4 and $18, respectively, as compared with $27 and $116, respectively, for the comparable periods in 2003.

The following table identifies the Company’s other-than-temporary impairments by ~~type.~~type for the six months ended June 30, 2004 and 2003.

Other-Than-Temporary Impairments by Type


	First Quarter Ended						First Quarter Ended
	March 31, 2004						March 31, 2003						Six Months Ended June 30,
			Property &						Property &				Life				Property & Casualty				Consolidated
(before-tax)	Life		Casualty		Consolidated		Life		Casualty		Consolidated		2004		2003		2004		2003		2004		2003
ABS
Corporate debt obligations (“CDO”)	$	4	$	1	$	5	$	10	$	5	$	15
Corporate debt obligations (“CDOs”)													$	4	$	10	$	1	$	5	$	5	$	15
Credit card receivables		—		—		—		12		2		14		—		12		—		2		—		14
Other ABS		—		5		5		4		1		5		—		4		5		1		5		5

Total ABS		4		6		10		26		8		34		4		26		6		8		10		34
Commercial mortgages														3		—		—		—		3		—
CMBS														1		4		—		—		1		4
Corporate
Consumer non-cyclical		—		—		—		7		2		9		—		7		—		2		—		9
Technology and communications		—		—		—		3		2		5		—		3		—		2		—		5
Transportation		—		—		—		7		3		10		—		7		—		3		—		10
Other corporate		3		—		3		3		1		4		3		4		—		1		3		5

Total corporate		3		—		3		20		8		28		3		21		—		8		3		29
Equity		—		—		—		21		6		27		—		21		—		9		—		30
Mortgage-backed securities (“MBS”) – interest only securities		1		—		1		—		—		—		1		12		—		7		1		19

Total other-than-temporary impairments	$	8	$	6	$	14	$	67	$	22	$	89	$	12	$	84	$	6	$	32	$	18	$	116

~~ABS~~~~— During~~For the ~~first quarter of~~six months ended June 30, 2004, other-than-temporary impairments were ~~recorded for various~~primarily comprised of ABS and commercial mortgages security types and were recorded as a result of a deterioration of cash flows derived from the underlying collateral of several securities.

The decrease in impairments in the second quarter and six months ended June 30, 2004, as compared to the respective prior year ~~period~~periods, is primarily ~~the~~a result of an improvement in general economic conditions and operating fundamentals, and improved pricing levels for ABS security types. In general, security issuers’ operating fundamentals have improved due to reduced company leverage, improved liquidity and successfully implementing various cost cutting measures. Improvement in pricing levels for ABS has been driven by a general stabilization in the performance of the underlying collateral ~~which has resulted in improved pricing levels. Pricing levels for CDOs recovered modestly during the first quarter of 2004 due to~~and an increase in demand for these asset types ~~driven by~~due to improved economic and operating fundamentals of the underlying security issuers, better market liquidity and attractive yields. ~~The increase in pricing levels for credit card receivables was~~

Impairments during the six months ended June 30, 2003 were primarily driven by ~~improvement in collateral performance.~~

~~Impairments of ABS during the first quarter of 2003 were driven by a deterioration of collateral cash flows. CDO impairments were primarily the result of~~ increasing default rates and lower recovery rates on collateral supporting certain ABS security types and the ~~collateral. Impairments on ABS backed by credit card receivables were~~decline in value of several corporate debt securities as a result of ~~issuers extending credit to sub-prime borrowers and the higher default rates on these loans.~~

~~Corporate~~— The decline in corporate bankruptcies and improvement in general economic conditions have contributed to lower corporate impairment levels in the first quarter of 2004 compared to the first quarter of 2003.

A significant portion of corporate impairments during the quarter ended March 31, 2003 was the result of one consumer non-cyclical issuer in the healthcare industry stemming from its decline in value due to accounting fraud, and one communications sector issuer in the cable television industry due to deteriorating earnings forecasts, debt restructuring issues and accounting irregularities. ~~Additional impairments~~Impairments were also incurred as a result of the deterioration in the transportation sector, specifically issuers of airline debt, asdue to a ~~result of a~~significant decline in airline travel.

~~Other~~~~— Other-than-temporary~~ Additionally, other-than-temporary impairments were ~~also~~ recorded ~~in the first quarter of 2003~~ on various diversified mutual funds and ~~preferred stock investments.~~interest only securities.

~~In addition to~~The favorable other-than-temporary impairments trend will depend on continued strong economic fundamentals, political stability and collateral performance. (For further discussion of risk factors associated with sectors with significant unrealized loss positions, see the ~~impairments described above, fixed maturity and equity securities were sold during~~sector risk factor commentary under the ~~quarters ended March 31, 2004 and 2003 at total gross losses~~Consolidated Total Available-for-Sale Securities with Unrealized Loss Greater than Six Months by Type schedule in the Investment Credit Risk section of ~~$22 and $99, respectively. No single security was sold at a loss in excess of $5 and $9 during~~ the ~~quarters ended March 31, 2004 and 2003, respectively.~~MD&A.)

INVESTMENT CREDIT RISK

The Hartford has established investment credit policies that focus on the credit quality of obligors and counterparties, limit credit concentrations, encourage diversification and require frequent creditworthiness reviews. Investment activity, including setting of policy and defining acceptable risk levels, is subject to regular review and approval by senior management and by the Finance Committee of the Company’s Board of Directors.

Please refer to the Investment Credit Risk section of the MD&A in The Hartford’s 2003 Form 10-K Annual Report for a description of the Company’s objectives, policies and strategies, including the use of derivative instruments.

The Company invests primarily in securities that are rated investment grade, and has established exposure limits, diversification standards and review procedures for all credit risks including borrower, issuer and counterparty. Creditworthiness of specific obligors is determined by an internal credit evaluation supplemented by consideration of external determinants of creditworthiness, typically ratings assigned by nationally recognized ratings agencies. Obligor, asset sector and industry concentrations are subject to established limits and are monitored on a regular basis. The Hartford is not exposed to any credit concentration risk of a single issuer greater than 10% of the Company’s stockholders’ equity.

The following table identifies fixed maturity securities by type on a consolidated basis, as of ~~March 31,~~June 30, 2004 and December 31, 2003.

Consolidated Fixed Maturities by Type


	March 31, 2004												December 31, 2003												June 30, 2004												December 31, 2003
										Percent of													Percent of												Percent												Percent
										Total												Total												of Total												of Total
	Amortized		Unrealized		Unrealized			Fair		Fair			Amortized		Unrealized		Unrealized			Fair		Fair			Amortized		Unrealized		Unrealized			Fair		Fair			Amortized		Unrealized		Unrealized			Fair		Fair
	Cost		Gains		Losses			Value		Value			Cost		Gains		Losses			Value		Value			Cost		Gains		Losses			Value		Value			Cost		Gains		Losses			Value		Value
ABS	$	6,276	$	168	$	(71	)	$	6,373		8.8	%	$	6,483	$	154	$	(113	)	$	6,524		8.9	%	$	6,554	$	117	$	(97	)	$	6,574		9.3	%	$	6,483	$	154	$	(113	)	$	6,524		8.9	%
CMBS		10,791		724		(20	)		11,495		15.8	%		10,230		545		(44	)		10,731		14.7	%		10,764		399		(124	)		11,039		15.6	%		10,230		545		(44	)		10,731		14.7	%
Collateralized mortgage obligation (“CMO”)		882		21		(1	)		902		1.2	%		1,059		17		(3	)		1,073		1.5	%
Collateralized mortgage obligations (“CMOs”)																										1,009		12		(5	)		1,016		1.4	%		1,059		17		(3	)		1,073		1.5	%
Corporate
Basic industry		3,333		278		(5	)		3,606		5.0	%		4,035		286		(15	)		4,306		5.9	%		3,206		157		(38	)		3,325		4.7	%		3,343		223		(15	)		3,551		4.8	%
Capital goods		2,076		179		(4	)		2,251		3.1	%		1,850		133		(11	)		1,972		2.7	%		2,093		93		(31	)		2,155		3.0	%		2,037		143		(10	)		2,170		3.0	%
Consumer cyclical		3,330		268		(4	)		3,594		4.9	%		3,167		210		(12	)		3,365		4.6	%		3,234		127		(41	)		3,320		4.7	%		3,305		217		(11	)		3,511		4.8	%
Consumer non-cyclical		3,373		298		(7	)		3,664		5.0	%		3,572		236		(18	)		3,790		5.2	%		3,287		157		(47	)		3,397		4.8	%		3,525		234		(17	)		3,742		5.1	%
Energy		2,070		190		(2	)		2,258		3.1	%		2,036		142		(10	)		2,168		3.0	%		1,931		97		(25	)		2,003		2.8	%		2,026		142		(11	)		2,157		3.0	%
Financial services		7,830		675		(27	)		8,478		11.6	%		7,767		536		(45	)		8,258		11.3	%		8,052		410		(93	)		8,369		11.9	%		7,848		560		(44	)		8,364		11.5	%
Technology and communications		5,001		561		(8	)		5,554		7.6	%		4,955		489		(18	)		5,426		7.5	%		4,889		303		(73	)		5,119		7.3	%		5,051		496		(19	)		5,528		7.6	%
Transportation		739		61		(4	)		796		1.1	%		777		51		(6	)		822		1.1	%		713		34		(11	)		736		1.0	%		778		52		(7	)		823		1.1	%
Utilities		3,110		269		(11	)		3,368		4.6	%		2,941		221		(20	)		3,142		4.3	%		3,176		167		(51	)		3,292		4.7	%		3,101		224		(20	)		3,305		4.5	%
Other		859		63		(1	)		921		1.3	%		720		33		(5	)		748		1.0	%		846		36		(11	)		871		1.2	%		806		46		(6	)		846		1.2	%
Government/Government agencies
Foreign		1,385		154		(4	)		1,535		2.1	%		1,605		171		(3	)		1,773		2.4	%		1,329		75		(24	)		1,380		2.0	%		1,605		171		(3	)		1,773		2.4	%
United States		1,292		41		—			1,333		1.8	%		1,401		33		(4	)		1,430		1.9	%		1,086		8		(22	)		1,072		1.5	%		1,401		33		(4	)		1,430		1.9	%
MBS – agency		2,415		55		—			2,470		3.4	%		2,794		43		(3	)		2,834		3.9	%		2,212		18		(17	)		2,213		3.1	%		2,794		43		(3	)		2,834		3.9	%
Municipal
Taxable		742		32		(9	)		765		1.1	%		625		19		(15	)		629		0.9	%		855		12		(40	)		827		1.2	%		625		19		(15	)		629		0.9	%
Tax-exempt		9,469		816		(3	)		10,282		14.1	%		9,445		775		(4	)		10,216		14.0	%		9,546		524		(27	)		10,043		14.2	%		9,445		775		(4	)		10,216		14.0	%
Redeemable preferred stock		71		3		—			74		0.1	%		77		3		—			80		0.1	%
Redeemable preferred
stock																										36		1		—			37		0.1	%		77		3		—			80		0.1	%
Short-term		3,094		1		—			3,095		4.3	%		3,708		3		—			3,711		5.1	%		3,914		1		—			3,915		5.5	%		3,708		3		—			3,711		5.1	%

Total fixed maturities	$	68,138	$	4,857	$	(181	)	$	72,814		100.0	%	$	69,247	$	4,100	$	(349	)	$	72,998		100.0	%	$	68,732	$	2,748	$	(777	)	$	70,703		100.0	%	$	69,247	$	4,100	$	(349	)	$	72,998		100.0	%

Total general account fixed maturities													$	58,127	$	3,413	$	(277	)	$	61,263		83.9	%													$	58,127	$	3,413	$	(277	)	$	61,263		83.9	%
Total guaranteed separate account fixed maturities [1]													$	11,120	$	687	$	(72	)	$	11,735		16.1	%													$	11,120	$	687	$	(72	)	$	11,735		16.1	%

The Company’s fixed maturity gross unrealized gains decreased $1,352 and gross unrealized losses ~~have improved by $757 and $168, respectively,~~increased $428 from December 31, 2003 to ~~March 31,~~June 30, 2004, primarily due to ~~a decline~~an increase in long-term interest rates and, to a lesser extent, credit spread ~~tightening associated with ABS, partially offset by~~widening and sales of securities in a gain position. During the ~~quarter~~six months ended ~~March 31,~~June 30, 2004, the ten year U.S. treasury rate ~~declined~~increased approximately 4035 basis points ~~since December 31,~~and to more than 100 basis points from its low in June 2003, largely ~~due to disappointing new job creation and a~~the result of continued economic growth evidenced by an increase in capacity utilization, ~~percentage.~~employment growth and continued strong consumer spending. At the June 30, 2004 Federal Open Market Committee policy meeting, the overnight funds rate was raised a quarter point to 1.25%. The ~~Company expects U.S. fiscal and monetary policy~~Fed members signaled that interest rates will continue to rise at a measured pace as long as inflation risks remain ~~stimulative until inflationary pressures return.~~stable.

Investment allocations as a percentage of total fixed maturities have remained materially consistent since December 31, 2003, except for ~~CMBS and short-term securities.~~CMBS. CMBS increased as a result of a ~~tactical~~ decision to

~~primarily due to payments made pursuant to the MacArthur settlement.~~

(For further discussion of risk factors associated with sectors with significant unrealized loss positions, see the sector risk factor commentary under the Consolidated Total Available-for-Sale Securities with Unrealized Loss Greater than Six Months by Type schedule in this section of the MD&A.)

The following table identifies fixed maturities by credit quality on a consolidated basis, as of ~~March 31,~~June 30, 2004 and December 31, 2003. The ratings referenced below are based on the ratings of a nationally recognized rating organization or, if not rated, assigned based on the Company’s internal analysis of such securities.

Consolidated Fixed Maturities by Credit Quality


	March 31, 2004							December 31, 2003							June 30, 2004							December 31, 2003
					Percent of							Percent of							Percent of							Percent of
	Amortized				Total Fair			Amortized				Total Fair			Amortized				Total Fair			Amortized				Total Fair
	Cost		Fair Value		Value			Cost		Fair Value		Value			Cost		Fair Value		Value			Cost		Fair Value		Value
United States Government/Government agencies	$	4,662	$	4,777		6.6	%	$	5,274	$	5,357		7.3	%	$	4,299	$	4,293		6.1	%	$	5,274	$	5,357		7.3	%
AAA		15,799		16,854		23.1	%		15,672		16,552		22.7	%		16,502		16,968		24.0	%		15,672		16,552		22.7	%
AA		7,479		8,043		11.0	%		7,377		7,855		10.8	%		7,458		7,769		11.0	%		7,377		7,855		10.8	%
A		16,863		18,220		25.0	%		17,646		18,750		25.7	%		17,022		17,683		25.0	%		17,646		18,750		25.7	%
BBB		17,025		18,350		25.2	%		16,143		17,114		23.4	%		16,565		17,036		24.1	%		16,143		17,114		23.4	%
BB & below		3,216		3,475		4.8	%		3,427		3,659		5.0	%		2,972		3,039		4.3	%		3,427		3,659		5.0	%
Short-term		3,094		3,095		4.3	%		3,708		3,711		5.1	%		3,914		3,915		5.5	%		3,708		3,711		5.1	%

Total fixed maturities	$	68,138	$	72,814		100.0	%	$	69,247	$	72,998		100.0	%	$	68,732	$	70,703		100.0	%	$	69,247	$	72,998		100.0	%

Total general account fixed maturities								$	58,127	$	61,263		83.9	%								$	58,127	$	61,263		83.9	%
Total guaranteed separate account fixed maturities [1]								$	11,120	$	11,735		16.1	%								$	11,120	$	11,735		16.1	%

As of ~~March 31,~~June 30, 2004 and December 31, 2003, greater than 95% and 95%, respectively, of the fixed maturity portfolio was invested in short-term securities or securities rated investment grade (BBB and above).

The following table presents the Below Investment Grade (“BIG”) fixed maturities by type, as of ~~March 31,~~June 30, 2004 and December 31, 2003.

As of ~~March 31,~~June 30, 2004 and December 31, 2003, the Company held no issuer of a BIG security with a fair value in excess of 3% of the total fair value for BIG securities. Total BIG securities decreased since December 31, 2003 as a result of ~~tactical~~ decisions to reduce exposure to lower credit quality assets and re-invest in investment grade securities.

The ~~decrease~~increase in the unrealized loss amount since December 31, 2003 is primarily the result of an increase in long-term interest rates, partially offset by slightly improved pricing levels for ABS securities ~~a decline in long-term interest rates~~ and, to a lesser extent, asset sales. (For further discussion, see the economic commentary under the Consolidated Fixed Maturities by Type table in this section of the MD&A.)

As of ~~March 31,~~June 30, 2004 and December 31, 2003, fixed maturities represented ~~$181,~~$777, or ~~90%~~97%, and $349, or 96%, of the Company’s total unrealized loss associated with securities classified as available-for-sale, respectively. There were no fixed maturities as of ~~March 31,~~June 30, 2004 or December 31, 2003 with a fair value less than 80% of the security’s amortized cost basis for six continuous months other than certain asset-backed and commercial mortgage-backed securities. Other-than-temporary impairments for certain asset-backed and commercial mortgage-backed securities are recognized if the fair value of the security, as determined by external pricing sources, is less than its carrying amount and there has been a decrease in the present value of the expected cash flows since the last reporting period. There were no asset-backed or commercial mortgage-backed securities included in the table above, as of ~~March 31,~~June 30, 2004 and December 31, 2003, for which management’s best estimate of future cash flows adversely changed during the reporting period. As of ~~March 31,~~June 30, 2004 and December 31, 2003, no asset-backed or commercial mortgage-backed securities had an unrealized loss in excess of ~~$13~~$14 and $15, respectively. (For further discussion of the other-than-temporary impairments criteria, see “Investments” included in the Critical Accounting Estimates section of the MD&A and in Note 1 of Notes to Consolidated Financial Statements both of which are included in The Hartford’s 2003 Form 10-K Annual Report.)

The Company held no securities of a single issuer that were at an unrealized loss position in excess of 8%3% and 5% of the total unrealized loss amount as of ~~March 31,~~June 30, 2004 and December 31, 2003, respectively.

The total securities classified as available-for-sale in an unrealized loss position for longer than six months by type as of ~~March 31,~~June 30, 2004 and December 31, 2003 are presented in the following table.

Consolidated Total Available-for-Sale Securities with Unrealized Loss Greater Than Six Months by Type

Aircraft lease receivables— ~~During~~The increase in the ~~first quarter~~unrealized loss position from December 31, 2003 to June 30, 2004 was primarily the result of ~~2004, securities supported~~recent rating agency downgrades for certain issuers in this sector, partially offset by an upward trend and stabilization of prices of other aircraft lease receivables ~~sustained a modest increase in value, continuing an upward~~securities. This trend ~~that began in the fourth quarter of 2003. This increase~~ is primarily due to a modest improvement on certain aircraft lease rates, driven by greater demand for aircraft as a result of increased airline travel. In prior periods, these securities had suffered a considerable decrease in value as a result of a prolonged decline in airline travel and the uncertainty of a potential industry recovery. While the Company has seen modest price increases and greater liquidity in this sector during ~~the first quarter of~~ 2004, ~~and fourth quarter of 2003,~~ any additional price recovery will depend on continued improvement in economic fundamentals, political stability and airline operating performance.

~~CDOs~~Financial services— ~~Pricing levels for CDOs recovered modestly during~~As of June 30, 2004, the first quarter of 2004 due to an increase in demand for these asset types, driven by improved economic and operating fundamentals of the underlying security issuers, better market liquidity and attractive yields.

~~Credit card receivables~~~~— The decrease~~Company held approximately seventy different securities in the ~~unrealized loss position~~financial services sector that had been in ~~credit card securities during the first quarter of 2004 is primarily the result of~~ an increase in pricing levels, driven by an improvement in collateral performance. While the unrealized loss position has improved for these holdings, concerns remain regarding the long-term viability of certain issuers within this sub-sector.

~~As of March 31, 2004 and December 31, 2003, security types other than ABS and CMBS that were in a significant~~ unrealized loss position for greater than six ~~months were corporate fixed maturities primarily within the financial services sector.~~

~~Financial services~~~~— As of March 31, 2004, the~~months. These securities ~~in the financial services sector unrealized loss position for greater than six months were comprised of approximately 60 different securities. The securities in this category~~ are primarily investment grade ~~and~~with the majority ~~of these securities are~~ priced at or greater than 90% of amortized cost as of ~~March 31,~~June 30, 2004. These positions are ~~primarily~~a mixture of fixed rate and variable rate securities with extended maturity dates, which have been adversely impacted by changes in interest rates. The increase in the ~~reduction~~unrealized loss position for this sector since December 31, 2003 is primarily due to the increase in ~~forward~~ interest rates ~~resulting~~adversely impacting the fixed rate securities partially offset by the variable rate securities which increased in ~~lower expected cash flows. Unrealized loss amounts for these securities have increased during the first quarter of 2004~~value as interest rates ~~have declined.~~rose. Additional changes in fair value of these securities are primarily dependent on future changes in ~~forward~~ interest rates. A substantial percentage of these securities are currently hedged with interest rate swaps, which convert the variable rate earned on the securities to a fixed amount. The swaps receive cash flow hedge accounting treatment and are currently in an unrealized gain position.

As part of the Company’s ongoing security monitoring process by a committee of investment and accounting professionals, the Company has reviewed its investment portfolio and concluded that there were no additional other-than-temporary impairments as of ~~March 31,~~June 30, 2004 and December 31, 2003. Due to the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms and the expectation that they will continue to do so, management’s intent and ability to hold these securities, as well as the evaluation of the fundamentals of the issuers’ financial condition and other objective evidence, the Company believes that the prices of the securities in the sectors identified above were temporarily depressed.

The evaluation for other-than-temporary impairments is a quantitative and qualitative process, which is subject to risks and uncertainties in the determination of whether declines in the fair value of investments are other-than-temporary. The risks and uncertainties include changes in general economic conditions, the issuer’s financial condition or near term recovery prospects and the effects of changes in interest rates. In addition, for securitized financial assets with contractual cash flows (e.g. ABS and CMBS), projections of expected future cash flows may change based upon new information regarding the performance of the underlying collateral. As of ~~March 31,~~June 30, 2004 and December 31, 2003, management’s expectation of the discounted future cash flows on these securities was in excess of the associated securities’ amortized cost. (For further discussion, see “Investments” included in the Critical Accounting Estimates section of MD&A and in Note 1 of Notes to Consolidated Financial Statements both of which are included in The Hartford’s 2003 Form 10-K Annual Report.)

The following table presents the Company’s unrealized loss aging for BIG and equity securities classified as available-for-sale on a consolidated basis, as of ~~March 31,~~June 30, 2004 and December 31, 2003.

Consolidated Unrealized Loss Aging of Available-for-Sale BIG and Equity Securities


	March 31, 2004							December 31, 2003							June 30, 2004							December 31, 2003
	Amortized		Fair		Unrealized			Amortized		Fair		Unrealized			Amortized		Fair		Unrealized			Amortized		Fair		Unrealized
	Cost		Value		Loss			Cost		Value		Loss			Cost		Value		Loss			Cost		Value		Loss
Three months or less	$	300	$	292	$	(8	)	$	133	$	129	$	(4	)	$	816	$	779	$	(37	)	$	133	$	129	$	(4	)
Greater than three months to six months		43		41		(2	)		134		129		(5	)		156		143		(13	)		134		129		(5	)
Greater than six months to nine months		54		52		(2	)		81		73		(8	)		42		39		(3	)		81		73		(8	)
Greater than nine months to twelve months		75		67		(8	)		18		17		(1	)		48		47		(1	)		18		17		(1	)
Greater than twelve months		271		229		(42	)		417		349		(68	)		308		258		(50	)		417		349		(68	)

Total	$	743	$	681	$	(62	)	$	783	$	697	$	(86	)	$	1,370	$	1,266	$	(104	)	$	783	$	697	$	(86	)

Total general accounts								$	663	$	593	$	(70	)								$	663	$	593	$	(70	)
Total guaranteed separate accounts [1]								$	120	$	104	$	(16	)								$	120	$	104	$	(16	)

Similar to the ~~decrease~~increase in the Consolidated Unrealized Loss Aging of Total Available-for-Sale Securities table from December 31, 2003 to ~~March 31,~~June 30, 2004, the ~~decrease~~increase in the BIG and equity security unrealized loss amount for securities classified as available-for-sale was primarily the result of an increase in long-term interest rates, partially offset by slightly improved pricing levels for ABS securities ~~a decline in long-term interest rates~~ and, to a lesser extent, asset sales. (For further discussion, see the economic

The decrease in the consolidated available-for-sale BIG and equity securities greater than six months unrealized loss amount since December 31, 2003 was primarily the result of improved pricing levels for ABS securities supported by CDOs and credit card receivables and, to a lesser extent, asset sales.

For aadditional discussion of the Company’s current view of risk factors relative to certain security types listed above, please refer to the Consolidated Total Available-for-Sale Securities with Unrealized Loss Greater Than Six Months by Type table in this section of the MD&A.

The Hartford has a disciplined approach to managing risks associated with its capital markets and asset/liability management activities. Investment portfolio management is organized to focus investment management expertise on specific classes of investments, while asset/liability management is the responsibility of dedicated risk management units supporting Life and Property & Casualty operations. Derivative instruments are utilized in compliance with established Company policy and regulatory requirements and are monitored internally and reviewed by senior management.

The Hartford has material exposure to both interest rate and equity market risk. The Company analyzes interest rate risk using various models including multi-scenario cash flow projection models that forecast cash flows of the liabilities and their supporting investments, including derivative instruments. (For further discussion of market risk see the Capital Markets Risk Management section of MD&A in The Hartford’s 2003 Form 10-K Annual Report.) There have been no material changes in market risk exposures from December 31, 2003.

The Hartford utilizes a variety of derivative instruments, including swaps, caps, floors, forwards and exchange traded futures and options, in compliance with Company policy and regulatory requirements designed to achieve one of four Company approved objectives: to hedge risk arising from interest rate, price or currency exchange rate volatility; to manage ~~liquidity,~~liquidity; to control transaction costs; or to enter into replication transactions. The Company does not make a market or trade in these instruments for the express purpose of earning short term trading profits. (For further discussion on The Hartford’s use of derivative instruments, refer to Note 2 of Notes to Condensed Consolidated Financial Statements.)

The Company’s operations are significantly influenced by changes in the equity markets. The Company’s profitability depends largely on the amount of assets under management, which is primarily driven by the level of sales, equity market appreciation and depreciation and the persistency of the in-force block of business. Prolonged and precipitous declines in the equity markets can have a significant impact on the Company’s operations, as sales of variable products may decline and surrender activity may increase, as customer sentiment towards the equity market turns negative. Lower assets under management will have a negative impact on the Company’s financial results, primarily due to lower fee income related to the Retail Products Group and Institutional Solutions Group and, to a lesser extent, Individual Life segments, where a heavy concentration of equity linked products are administered and sold. Furthermore, the Company may experience a reduction in profit margins if a significant portion of the assets held in the variable annuity separate accounts move to the general account and the Company is unable to earn an acceptable investment spread,

Company’s estimated gross profits would require the Company to accelerate the amount of DAC amortization in a given period, potentially causing a material adverse deviation in that period’s net income. Although an acceleration of DAC amortization would have a negative impact on the Company’s earnings, it would not affect the Company’s cash flow or liquidity position.

Additionally, the Retail Products Group segment sells variable annuity contracts that offer various guaranteed death benefits. For certain guaranteed death benefits, the Company pays the greater of (1) the account value at death; (2) the sum of all premium payments less prior withdrawals; or (3) the maximum anniversary value of the contract, plus any premium payments since the contract anniversary, minus any withdrawals following the contract anniversary. For certain guaranteed death benefits sold with variable annuity contracts beginning in June of 2003, the Company pays the greater of (1) the account value at death; or (2) the maximum anniversary value; not to exceed the account value plus the greater of (a) 25% of premium payments, or (b) 25% of the maximum anniversary value of the contract. The Company currently reinsures a significant portion of these death benefit guarantees associated with its in-force block of business. The Company maintains a liability for the death benefit costs, net of reinsurance, of ~~$117,~~$120, as of ~~March 31,~~June 30, 2004. Declines in the equity market may increase the Company’s net exposure to death benefits under these contracts.

The Retail ~~Products~~Product Group segment’s total gross exposure (i.e. before reinsurance) to these guaranteed death benefits as of ~~March 31,~~June 30, 2004 is ~~$10.5~~$10.1 billion. Due to the fact that 80% of this amount is reinsured, the net exposure is $2.0 billion. This amount is often referred to as the net amount at risk. However, the Company will incur these guaranteed death benefit payments in the future only if the policyholder has an in-the-money guaranteed death benefit at their time of death.

In addition, the Company offers certain variable annuity products with a GMWB rider. Declines in the equity market may increase the Company’s exposure to benefits under the GMWB contracts. For all contracts in effect through July 6, 2003, the Company entered into a reinsurance arrangement to offset its exposure to the GMWB for the remaining lives of those contracts. As of July 6, 2003, the Company exhausted all but a small portion of the reinsurance capacity for new business under the current arrangement and will be ceding only a very small number of new contracts subsequent to July 6, 2003. Substantially all new contracts with the GMWB are not covered by reinsurance. These unreinsured contracts are expected to generate volatility in net income as the underlying embedded derivative liabilities are recorded at fair value each reporting period, resulting in the recognition of net realized capital gains or losses in response to changes in certain critical factors including capital market conditions and policyholder behavior. In order to minimize the volatility associated with the unreinsured GMWB liabilities, the Company established an alternative risk management strategy. During the third quarter of 2003, the Company began hedging its unreinsured GMWB exposure using interest rate futures, Standard and Poor’s (“S&P”) 500 and NASDAQ index options and futures contracts. During the first quarter of 2004, the Company entered into Europe, ~~Asia~~Australasia and Far East (“EAFE”) Index swaps to hedge GMWB exposure to international equity markets. The hedging program involves a detailed monitoring of policyholder behavior and capital markets conditions on a daily basis and rebalancing of the hedge position as needed. While the Company actively manages this hedge position, hedge ineffectiveness may result due to factors including, but not limited to, policyholder behavior, capital markets dislocation or discontinuity and divergence between the performance of the underlying funds and the hedging indices.

The net impact of the change in value of the embedded derivative, net of the results of the hedging program was a ~~$2 loss~~$4 gain before deferred policy acquisition costs and tax effects for the ~~three~~six months ended ~~March 31,~~June 30, 2004.

Interest Rate Risk

The Company believes that the moderate increase in interest rates from the levels prevailing in the first quarter of 2004 is generally a favorable development for the Company. The rate increases are expected to provide additional net investment income, increased sales of fixed rate Life investment products, reduce the cost of the GMWB hedging program, limit the potential risk of margin erosion due to minimum guaranteed crediting rates in certain Life products and, if sustained through the end of 2004, could reduce the Company’s prospective pension expense. Conversely, a rise in interest rates will reduce the net unrealized gain position of the investment portfolio, increase interest expense on the Company’s variable rate debt obligations and, if long-term interest rates rise dramatically within a six to twelve month time period, certain Life businesses may be exposed to disintermediation risk. Disintermediation risk refers to the risk that policyholders will surrender their contracts in a rising interest rate environment requiring the Company to liquidate assets in an unrealized loss position. To help mitigate disintermediation risk, the Company analyzes interest rate risk using various models including multi-scenario cash flow projections that forecast cash flows of the liabilities and their supporting investments, including derivative instruments. Measures used by the Company to quantify its exposure to interest rate risk inherent in its invested assets and interest rate sensitive liabilities are duration and key rate duration. In conjunction with the interest rate risk measurement and management techniques, significant portions of Life’s fixed income product offerings have market value adjustment provisions at contract surrender.

The Company believes that a gradual rise in interest rates should increase net investment income and sales of fixed rate Life investment products while the potential adverse consequences of increased rates, primarily the reduction of the investment portfolio’s net unrealized gain and disintermediation risk, is mitigated by the Company’s disciplined asset liability management techniques and product design.

CAPITAL RESOURCES AND LIQUIDITY

Capital resources and liquidity represent the overall financial strength of The Hartford and its ability to generate strong cash flows from each of the business segments, borrow funds at competitive rates and raise new capital to meet operating and growth needs.

Liquidity Requirements

The liquidity requirements of The Hartford have been and will continue to be met by funds from operations as well as the issuance of commercial paper, common stock, debt securities and borrowings from its credit facilities. The principal sources of operating funds are premiums and investment income, while investing cash flows originate from maturities and sales of invested assets.

The Hartford endeavors to maintain a capital structure that provides financial and operational flexibility to its insurance subsidiaries, ratings that support its competitive position in the financial services marketplace (see the Ratings section below for further discussion), and strong shareholder returns. As a result, the Company may from time to time raise capital from the issuance of stock, debt or other capital securities. The issuance of common stock, debt or other capital securities could result in the dilution of shareholder interests or reduced net income due to additional interest expense.

The Hartford Financial Services Group, Inc. (“HFSG”) and HLI are holding companies which rely upon operating cash flow in the form of dividends from their subsidiaries, which enable them to service debt, pay dividends, and pay certain business expenses.

Dividends to HFSG from its subsidiaries are ~~restricted. The payment of dividends by~~subject to statutory limitations established for Connecticut-domiciled insurers ~~is limited~~ under the insurance holding company laws of Connecticut. Under these laws, the insurance subsidiaries may only make their dividend payments out of unassigned surplus. These laws require notice to and approval by the state insurance commissioner for the declaration or payment of any dividend, which, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of the insurer’s policyholder surplus as of December 31 of the preceding year or (ii) net income (or net gain from operations, if such company is a life insurance company) for the twelve-month period ending on the thirty-first day of December last preceding, in each case determined under statutory

insurance accounting policies. In addition, if any dividend of a Connecticut-domiciled insurer exceeds the insurer’s earned surplus, it requires the prior approval of the Connecticut Insurance Commissioner. The insurance holding company laws of the other jurisdictions in which The Hartford’s insurance subsidiaries are incorporated (or deemed commercially domiciled) generally contain similar (although in certain instances somewhat more restrictive) limitations on the payment of dividends. Through ~~April 30,~~July 31, 2004, the Company’s insurance subsidiaries had paid ~~$301~~$651 to HFSG and HLI and are permitted to pay up to a maximum of approximately ~~$1.1 billion~~$705 in dividends to HFSG and HLI for the remainder of 2004 without prior approval from the applicable insurance commissioner.

The primary uses of funds are to pay claims, policy benefits, operating expenses and commissions and to purchase new investments. The Hartford has a policy of carrying a significant short-term investment position and accordingly does not anticipate selling intermediate and long-term fixed maturity investments to meet its liquidity needs. (For a discussion of the Company’s investment objectives and strategies, see the Investments and Capital Markets Risk Management sections.)

Sources of Liquidity

Shelf Registrations

On December 3, 2003, The Hartford’s shelf registration statement (Registration No. 333-108067) for the potential offering and sale of debt and equity securities in an aggregate amount of up to $3.0 billion was declared effective by the Securities and Exchange Commission. The Registration Statement allows for the following types of securities to be offered: (i) debt securities, preferred stock, common stock, depositary shares, warrants, stock purchase contracts, stock purchase units and junior subordinated deferrable interest debentures of the Company, and (ii) preferred securities of any of one or more capital trusts organized by The Hartford (“The Hartford Trusts”). The Company may enter into guarantees with respect to the preferred securities of any of The Hartford Trusts.

In January 2004, the Company issued approximately 6.7 million shares of common stock pursuant to an underwritten offering at a price to the public of $63.25 per share and received net proceeds of $411. On March 9, 2004, the Company issued $200 of 4.75% senior notes due March 1, 2014. As of ~~March 31,~~June 30, 2004, the Company had $2.4 billion remaining on its shelf.

There have been no material changes to the Company’s off-balance sheet arrangements and aggregate contractual obligations since the filing of the Company’s 2003 Form 10-K Annual Report.

While the Company has significant discretion in making voluntary contributions to the Plan, the Employee Retirement Income Security Act of 1974 regulations mandate minimum contributions in certain circumstances. On April 10, 2004, the Pension Funding Equity Act of 2004 was signed into law. This Act provided pension funding relief by replacing the defunct 30-year Treasury bond rate with a composite rate based on conservatively invested long-term corporate bonds. As a result of the passage of this legislation, the Company’s minimum funding requirement in 2004 has been eliminated.

On April 15, 2004, the Company made a $312 voluntary contribution into its U.S. qualified defined benefit pension plan. No additional contributions are expected to be paid during the current fiscal year.

The Hartford’s total capitalization ~~increased $1.4 billion~~decreased $101 as of ~~March 31,~~June 30, 2004 as compared with December 31, 2003. This ~~increase~~decrease was due to a decrease in debt offset by an increase in stockholders’ ~~equity partially offset by a decrease in debt.~~equity. The increase in total stockholders’ equity is primarily due to ~~an increase in AOCI of $922,~~the issuance of common stock of $411 and net income of ~~$568.~~$1 billion, partially offset by a decrease in AOCI of $766. The ~~increase~~decrease in AOCI is primarily a result of ~~an increase~~a decrease in unrealized gains of ~~$574 and~~$990, partially offset by Life’s adoption of SOP 03-1, which resulted in a $292 cumulative effect on unrealized gains on securities in the first quarter of 2004 related to the reclassification of investments from separate account assets to general account assets. The decrease in total debt reflects repayments of commercial paper of $477 and senior notes of $200 and the redemption of $250 of junior subordinated debentures, partially offset by issuance of ~~$199~~$200 in ~~long-term debt.~~4.75% senior notes.

The following discussion describes the Company’s debt financing activities for the ~~first quarter~~six months ended June 30, 2004.

During the six months ended June 30, 2004, the Company repaid $477 of ~~2004.~~commercial paper utilizing the proceeds from the equity offering and internal sources.

On March 15, 2004, HLI redeemed its 7.2% junior subordinated debentures underlying the trust preferred securities issued by Hartford Life Capital I.

~~During the quarter ended March 31, 2004, the Company repaid $477 of commercial paper utilizing the proceeds from the equity offering and internal sources.~~

On March 9, 2004, the Company issued 4.75% senior notes due March 1, 2014 and received net proceeds of $197. Interest on the

notes is payable semi-annually on March 1 and September 1, commencing on September 1, 2004.

For additional information regarding debt, see Note 8 of Notes to Consolidated Financial Statements in The Hartford’s 2003 Form 10-K Annual Report.

Stockholders’ Equity

Issuance of Common Stock —On January 22, 2004, The Hartford issued approximately 6.3 million shares of common stock pursuant to an underwritten offering at a price to the public of $63.25 per share and received net proceeds of $388. Subsequently, on January 30, 2004, The Hartford issued approximately 377 thousand shares of common stock pursuant to an underwritten offering at a price to the public of $63.25 per share and received net proceeds of $23. The Company used the proceeds from these issuances to repay $411 of commercial paper issued in connection with the ~~acquisition of the group life and accident, and short-term and long-term disability business of~~ CNA ~~Financial Corporation.~~Acquisition.

Dividends— On ~~February 19,~~May 20, 2004, The Hartford declared a dividend on its common stock of $0.28 per share payable on ~~April~~July 1, 2004 to shareholders of record as of ~~March~~June 1, 2004.

On July 22, 2004, The Hartford declared a dividend on its common stock of $0.28 per share payable on October 1, 2004 to shareholders of record as of September 1, 2004.

AOCI-— AOCI ~~increased~~decreased by ~~$922~~$766 as of ~~March 31,~~June 30, 2004 compared with December 31, 2003. The ~~increase~~decrease in AOCI is primarily a result of ~~an increase~~a decrease in unrealized gains of ~~$574 and~~$990, partially offset by Life’s adoption of SOP 03-1, in the first quarter of 2004 which resulted in a $292 cumulative effect on unrealized gains on securities ~~in the first quarter of 2004~~ related to the reclassification of investments from separate account assets to general account assets.

The funded status of the Company’s pension and postretirement plans is dependent upon many factors, including returns on invested assets and the level of market interest rates. Declines in the value of securities traded in equity markets coupled with declines in long-term interest rates have had a negative impact on the funded status of the plans. As a result, the Company recorded a minimum pension liability as of ~~March 31,~~June 30, 2004 and December 31, 2003, which resulted in an after-tax reduction of stockholders’ equity of $375. This minimum pension liability did not affect the Company’s results of operations.

For additional information on stockholders’ equity and AOCI see Notes 9 and 19, respectively, of Notes to Consolidated Financial Statements in The Hartford’s 2003 Form 10-K Annual Report.

Cash Flow


							Six Months Ended
	First Quarter Ended March 31,						June 30,
	2004			2003			2004			2003
Net cash provided by operating activities	$	99		$	667		$	631		$	1,336
Net cash provided by (used for) investing activities	$	386		$	(1,607	)	$	195		$	(5,380	)
Net cash provided by (used for) financing activities	$	(307	)	$	1,216
Cash – end of period	$	638		$	655

Net cash provided by (used for) financing							$	(591	)	$	4,092
activities Cash – end of period							$	695		$	429

The decrease in cash from operating activities was primarily due to the ~~result~~decrease in change in reserves including an asbestos reserve addition of ~~the funding of $1.15~~$1.7 billion in ~~settlement of the MacArthur litigation~~2003 partially offset by net income in ~~2004.~~2004 compared to a net loss in 2003. Investing activities increased primarily due to a $1.15 billion settlement of the MacArthur litigation in 2004 and decreased capital proceeds from financing activities compared to 2003. Financing activities decreased primarily due to decreased proceeds from investment and universal life-type contracts, ~~and~~decreased capital raising activities, ~~relating to issuance of common stock and long-term debt offset by~~ repayments on commercial paper and early retirement of junior subordinated ~~debentures. The increase~~debentures in ~~cash~~

~~from financing activities and settlement of the MacArthur litigation accounted for the majority of the change in cash from investing activities.~~2004 compared to 2003.

Operating cash flows for the ~~quarters~~six months ended ~~March 31,~~June 30, 2004 and 2003 have been adequate to meet liquidity requirements.

Equity Markets

For a discussion of the potential impact of the equity markets on capital and liquidity, see the Capital Markets Risk Management section under “Market Risk”.

Ratings

Ratings are an important factor in establishing the competitive position in the insurance and financial services marketplace. There can be no assurance that the Company’s ratings will continue for any given period of time or that they will not be changed. In the event the Company’s ratings are downgraded, the level of revenues or the persistency of the Company’s business may be adversely impacted.

The following table summarizes The Hartford’s significant member companies’ financial ratings from the major independent rating organizations as of ~~April~~July 30, 2004.


	A.M.		Standard
	Best	Fitch	& Poor’s	Moody’s
*Insurance Financial Strength Ratings:*
Hartford Fire	A+	AA	AA-	Aa3
Hartford Life Insurance Company	A+	AA	AA-	Aa3
Hartford Life and Accident	A+	AA	AA-	Aa3
Hartford Life Group Insurance Company	A+	AA	~~AA-~~—	—
Hartford Life and Annuity	A+	AA	AA-	Aa3
Hartford Life Insurance KK (Japan)	—	—	AA-	—

*Other Ratings:*
The Hartford Financial Services Group, Inc.:
Senior debt	a-	A	A-	A3
Commercial paper	AMB-2	F1	A-2	P-2
Hartford Capital III trust originated preferred securities	bbb	A-	BBB	Baa1
Hartford Life, Inc.:
Senior debt	a-	A	A-	A3
Commercial paper	—	F1	A-2	P-2
Hartford Life, Inc.:
Capital II trust preferred securities	bbb	A-	BBB	Baa1
Hartford Life Insurance Company:
Short Term Rating	—	—	A-1+	P-1

Regulatory Developments —There continues to be significant federal and state regulatory activity relating to financial services companies, particularly mutual funds companies. These regulatory inquiries have focused on a number of mutual fund issues. The Company has received requests for information and subpoenas from the Securities and Exchange Commission (“SEC”), a subpoena from the New York Attorney General’s Office, and requests for information from the Connecticut Securities and Investments Division of the Department of Banking, in each case requesting documentation and other information regarding various mutual fund regulatory issues. ~~Representatives~~The Company continues to respond to requests for documents and information from representatives from the SEC’s Office of Compliance Inspections and Examinations ~~continue to request documents and information~~ in connection with their ongoing compliance ~~examination.~~examinations regarding market timing and late trading, revenue sharing and directed brokerage, fees, fund service providers and transfer agents, and other mutual fund-related issues. In addition, the SEC’s Division of Enforcement has commenced an investigation of the Company’s variable annuity and mutual fund operations. The Company continues to cooperate fully with the SEC and other regulatory agencies.

For further information on other contingencies, see Note 16 of Notes to Consolidated Financial Statements included in The Hartford’s 2003 Form 10-K Annual Report.

Item 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The Company’s principal executive officer and its principal financial officer, based on their evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) have concluded that the Company’s disclosure controls and procedures are adequate and effective for the purposes set forth in the definition thereof in Exchange Act Rule 13a-15(e) as of ~~March 31,~~June 30, 2004.

Change in internal control over financial reporting

There was no change in the Company’s internal control over financial reporting that occurred during the ~~first~~second quarter ofended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1. ~~Legal Proceedings~~LEGAL PROCEEDINGS

The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford accounts for such activity through the establishment of unpaid claim and claim adjustment expense reserves. Subject to the uncertainties discussed in Note 16 of Notes to Condensed Consolidated Financial Statements under the caption “Asbestos and Environmental Claims” in The Hartford’s 2003 Form 10-K Annual Report, ~~Form 10-K,~~ management expects that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition, results of operations or cash flows of The Hartford.

The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. These actions include, among others, putative state and federal class actions seeking certification of a state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper underwriting practices in connection with various kinds of insurance policies, such as personal and commercial automobile, ~~premises liability,~~property and inland marine, and improper sales practices in connection with the sale of life insurance and other investment products. The Hartford also is involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims. Management expects that the ultimate liability, if any, with respect to such lawsuits, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition of The Hartford. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s consolidated results of operations or cash flows in particular quarterly or annual periods.

As further discussed in the MD&A under the caption “Other Operations,” The Hartford continues to receive asbestos and environmental claims that involve significant uncertainty regarding policy coverage issues. Regarding these claims, The Hartford continually reviews its overall reserve levels ~~methodologies~~ and reinsurance ~~coverages.~~coverages, as well as the methodologies it uses to estimate its exposures. Because of the significant uncertainties ~~which~~that limit the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid losses and related expenses, ~~principally~~particularly those related to asbestos, the ultimate liabilities may exceed the currently recorded reserves. Any such additional liability (or any range of additional amounts) cannot be reasonably estimated now but could be material to The Hartford’s future consolidated operating results, financial condition and liquidity.

Item 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND PURCHASES OF EQUITY SECURITIES BY THE ISSUER

Purchases of Equity Securities by the Issuer

The ~~MacArthur Litigation~~– following table summarizes the Company’s repurchases of its common stock for the three months ended June 30, 2004:

Total Number of
Shares Purchased as Maximum Number of
Part of Publicly Shares that May Yet
Total Number of Average Price Paid Announced Plans or Be Purchased as Part
Period Shares Purchased Per Share Programs of the Plans or Programs

April 2004 1,390 ¹ $ 66.40 N/A N/A
May 2004 3,145 ¹ $ 63.70 N/A N/A
June 2004 975 ¹ $ 66.38 N/A N/A

(1) Represents shares acquired from employees of the Company for tax withholding purposes in connection with the Company’s benefit plans.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On May 20, 2004, The Hartford held its annual meeting of shareholders. The following matters were considered and voted upon: (1) the election of eleven directors, each to serve for a one-year term; (2) a proposal to ratify the appointment of the Company’s Independent Registered Public Accounting Firm, Deloitte & Touche LLP, for the fiscal year ended December ~~19, 2003, Hartford Accident~~31, 2004; and ~~Indemnity Company (“Hartford A&I”) entered into~~(3) a ~~conditional settlement to resolve all claims~~shareholder proposal relating to ~~general liability policies that Hartford A&I issued~~executive compensation.

Only shareholders of record as of the close of business on March 22, 2004 were entitled to ~~Mac Arthur Company and its subsidiary, Western MacArthur Company, both former regional distributors~~vote at the annual meeting. As of ~~asbestos products (collectively or individually, “MacArthur”), during the period 1967 to 1976. MacArthur had filed a pre-negotiated bankruptcy and plan~~March 22, 2004, 291,638,836 shares of ~~reorganization in November 2002 pursuant to a settlement with another~~common stock of its insurers, United States Fidelity and Guaranty Company. The Hartford settlement was contingent on the occurrence of certain conditions, including the entry of final, non-appealable court orders approving the settlement agreement and confirming a bankruptcy plan under which, among other things, all claims against the Company ~~relating~~were outstanding and entitled to vote at the asbestos liability of MacArthur would be enjoined. Under the settlement agreement, Hartford A&I paid $1.15 billion into an escrow account in the first quarter of 2004, pending the occurrence of the conditions. On April 22, 2004, all conditions to the settlement were satisfied, and the escrowed funds were disbursed to a trust established for the benefit of present and future asbestos claimants pursuant to the bankruptcy plan. The completion by the Company of the settlement resolves all disputes concerning Hartford A&I’s alleged obligations arising from MacArthur’s asbestos liability.annual meeting.


	Page
Report of Independent ~~Accountants’ Review Report~~Registered Public Accounting Firm		3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		4
Condensed Consolidated Statements of Operations — ~~First~~Second Quarter and Six Months Ended ~~March 31,~~June 30, 2004 and 2003		4
Condensed Consolidated Balance Sheets — ~~As of March 31,~~June 30, 2004 and December 31, 2003		5
Condensed Consolidated Statements of Changes in Stockholders’ Equity — ~~First Quarter~~Six Months Ended ~~March 31,~~June 30, 2004 and 2003		6
Condensed Consolidated Statements of Comprehensive Income (Loss) — ~~First~~Second Quarter and Six Months Ended ~~March 31,~~June 30, 2004 and 2003		6
Condensed Consolidated Statements of Cash Flows — ~~First Quarter~~Six Months Ended ~~March 31,~~June 30, 2004 and 2003		7
Notes to Condensed Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2225
Item 3. Quantitative and Qualitative Disclosures About Market Risk		5258
Item 4. Controls and Procedures		5259
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		5259
Item 2. Changes in Securities, Use of Proceeds and Purchases of Equity Securities by the Issuer		59
Item 4. Submission of Matters to a Vote of Security Holders		59
Item 6. Exhibits and Reports on Form 8-K		5360
Signature		5461
Exhibits Index		5562
~~FORM OF EMPLOYMENT AGREEMENT~~BY-LAWS
~~FORM OF EMPLOYMENT AGREEMENT~~INVESTMENT AND SAVINGS PLAN
~~FORM OF EMPLOYMENT AGREEMENT~~
~~FORM OF EMPLOYMENT AGREEMENT~~
~~FORM OF EMPLOYMENT AGREEMENT~~
~~FORM OF EMPLOYMENT AGREEMENT~~
~~FORM OF KEY EXECUTIVE EMPLOYMENT AGREEMENT~~
~~SENIOR EXECUTIVE SEVERANCE PAY~~RESTRICTED STOCK PLAN
INCENTIVE STOCK PLAN
DELOITTE & TOUCHE LLP LETTER OF AWARENESS
CERTIFICATION ~~OF RAMANI AYER~~
CERTIFICATION ~~OF DAVID M. JOHNSON~~
CERTIFICATION ~~OF RAMANI AYER~~
CERTIFICATION ~~OF DAVID M. JOHNSON~~

•		Recognizing expenses for a variety of contracts and contract features, including guaranteed minimum death benefits (“GMDB”), certain death benefits on universal-life type contracts and annuitization options, on an accrual basis versus the previous method of recognition upon payment;

•		Reporting and measuring assets and liabilities of certain separate account products as general account assets and liabilities when specified criteria are not met;

•		Reporting and measuring the Company’s interest in its separate accounts as general account assets based on the insurer’s proportionate beneficial interest in the separate account’s underlying assets; and

•		Capitalizing sales inducements that meet specified criteria and amortizing such amounts over the life of the contracts


	First Quarter Ended
	March 31,						Second Quarter Ended June 30,						Six Months Ended June 30,
(In millions)	2004			2003			2004			2003			2004			2003
	(Unaudited)						(Unaudited)						(Unaudited)
Comprehensive Income (Loss)
Net income (loss)	$	568		$	(1,395	)	$	433		$	507		$	1,001		$	(888	)

Other Comprehensive Income
Change in unrealized gain/loss on securities		574			177
Other Comprehensive Income (Loss)
Change in net unrealized gain/loss on securities								(1,564	)		555			(990	)		732
Cumulative effect of accounting change		292			—			—			—			292			—
Change in net gain/loss on cash flow hedging instruments		59			(23	)
Change in net gain/loss on cash-flow hedging instruments								(109	)		(15	)		(50	)		(38	)
Foreign currency translation adjustments		(3	)		9			(15	)		10			(18	)		19

Total other comprehensive income		922			163
Total other comprehensive income (loss)								(1,688	)		550			(766	)		713

Total comprehensive income (loss)	$	1,490		$	(1,232	)	$	(1,255	)	$	1,057		$	235		$	(175	)


[1]		Includes the impact of non-option plans of $3 and $1, respectively, for the ~~first quarters~~second quarter, and $4 and $2, respectively, for the six months ended ~~March 31,~~June 30, 2004 and 2003.

[2]		The pro forma disclosures are not representative of the effects on net income (loss) and earnings (loss) per share in future periods.

[3]		As a result of the net loss in the ~~quarter~~six months ended ~~March 31,~~June 30, 2003, SFAS No. 128, “Earnings Per ~~Share,”~~Share”, requires the Company to use basic weighted average common shares outstanding in the calculation of ~~first quarter~~the six months ended June 30, 2003 diluted earnings (loss) per share, assince the inclusion of options of ~~0.7~~1.0 would have been antidilutive to the earnings per share calculation. In the absence of the net loss, weighted average common shares outstanding and dilutive potential common shares would have totaled ~~256.1.~~263.1.


	Net			Other
	Income			Comprehensive			Net			Other Comprehensive
Cumulative Effect of Adoption	(Loss)			Income			Income (Loss)			Income (Loss)

Establishing GMDB and other benefit reserves for annuity contracts	$	(54	)	$	—		$	(54	)	$	—
Reclassifying certain separate accounts to general accounts		30			294			30			294
Other		1			(2	)		1			(2	)

Total cumulative effect of adoption	$	(23	)	$	292		$	(23	)	$	292


	March 31, 2004				December 31, 2003
	Gross		Accumulated		Gross		Accumulated		June 30, 2004				December 31, 2003
	Carrying		Net		Carrying		Net		Gross Carrying		Accumulated Net		Gross Carrying		Accumulated Net
Amortized Intangible Assets	Amount		Amortization		Amount		Amortization		Amount		Amortization		Amount		Amortization
Present value of future profits	$	1,459	$	408	$	1,459	$	380	$	1,453	$	449	$	1,459	$	380
Renewal rights		30		18		30		17		30		19		30		17
Other		11		2		11		1		13		3		11		1

Total	$	1,500	$	428	$	1,500	$	398	$	1,496	$	471	$	1,500	$	398


	Present Value of
	Future Profits			Renewal Rights			Other			Total
For the six months ended June 30, 2004
Balance, beginning of period	$	1,079		$	13		$	10		$	1,102
Acquisition of business [1]		(6	)		—			2			4
Amortization, net of the accretion of interest		(69	)		(2	)		(2	)		(73	)

Balance, ending of period	$	1,004		$	11		$	10		$	1,025

For the six months ended June 30, 2003
Balance, beginning of period	$	1,132		$	15		$	—		$	1,147
Acquisition of business		—			4			9			13
Amortization, net of the accretion of interest		(49	)		(3	)		—			(52	)

Balance, ending of period	$	1,083		$	16		$	9		$	1,108


For the year ended December 31,
2004	$	124	$	127
2005	$	104	$	104
2006	$	95	$	92
2007	$	80	$	78
2008	$	69	$	69


	Present Value
	of Future		Renewal
	Profits		Rights		Other		Total
For the quarter ended March 31, 2004
Balance, beginning of period	$	1,079	$	13	$	10	$	1,102
Amortization, net of the accretion of interest		28		1		1		30

Balance, ending of period	$	1,051	$	12	$	9	$	1,072

For the quarter ended March 31, 2003
Balance, beginning of period	$	1,132	$	15	$	—	$	1,147
Acquisition of business		—		4		9		13
Amortization, net of the accretion of interest		24		2		—		26

Balance, ending of period	$	1,108	$	17	$	9	$	1,134


March 31, 2003
Basic Loss per Share
Net loss available to common shareholders	$	(1,395	)	255.4	$	(5.46	)

Diluted Loss per Share [1]
Options		—		—

Net loss available to common shareholders plus assumed conversions	$	(1,395	)	255.4	$	(5.46	)


Short-Term Debt	March 31, 2004		December 31, 2003		June 30, 2004		December 31, 2003
Commercial paper	$	373	$	850	$	373	$	850
Current maturities of long-term debt		200		200		249		200

Total Short-Term Debt	$	573	$	1,050	$	622	$	1,050


Long –Term Debt [1]	March 31, 2004		December 31, 2003
Long–Term Debt [1]					June 30, 2004		December 31, 2003
Senior Notes and Debentures
7.75% Notes, due 2005	$	249	$	249	$	—	$	249
2.375% Notes, due 2006		254		252		248		252
7.1% Notes, due 2007		198		198		198		198
4.7% Notes, due 2007		300		300		300		300
6.375% Notes, due 2008		200		200		200		200
4.1% Equity Units Notes, due 2008		330		330
2.56% Equity Units Notes, due 2008		690		690
4.1% Equity Unit Notes, due 2008						330		330
2.56% Equity Unit Notes, due 2008						690		690
7.9% Notes, due 2010		275		275		275		275
4.625% Notes, due 2013		319		319		319		319
4.75% Notes, due 2014		199		—		198		—
7.3% Notes, due 2015		200		200		200		200
7.65% Notes, due 2027		248		248		248		248
7.375% Notes, due 2031		400		400		400		400

Total Senior Notes and Debentures	$	3,862	$	3,661		3,606		3,661

Junior Subordinated Debentures
7.20% Notes, due 2038		—		245
7.2% Notes, due 2038						—		245
7.625% Notes, due 2050		200		200		200		200
7.45% Notes, due 2050		518		507		498		507

Total Junior Subordinated Debentures		718		952		698		952

Total Long-Term Debt	$	4,580	$	4,613	$	4,304	$	4,613


[1]		The Hartford’s long-term debt securities are issued by either The Hartford Financial Services Group, Inc. (“HFSG”) or HLI and are unsecured obligations of HFSG or HLI and rank on a parity with all other unsecured and unsubordinated indebtedness of HFSG or HLI.


							Outstanding as of										Outstanding as of
	Effective		Expiration		Maximum		March 31,		December 31,		Effective		Expiration		Maximum		June 30,		December 31,
Description	Date		Date		Available		2004		2003		Date		Date		Available		2004		2003
Commercial Paper
Commercial paper
The Hartford		11/10/86		N/A	$	2,000	$	373	$	850		11/10/86		N/A	$	2,000	$	373	$	850
HLI		2/7/97		N/A		250		—		—		2/7/97		N/A		250		—		—

Total commercial paper					$	2,250	$	373	$	850						2,250		373		850
Revolving Credit Facility

Revolving credit facilities
5-year revolving credit facility		6/20/01		6/20/06	$	1,000	$	—	$	—		6/20/01		6/20/06		1,000		—		—
3-year revolving credit facility		12/31/02		12/31/05		490		—		—		12/31/02		12/31/05		490		—		—

Total revolving credit facility					$	1,490	$	—	$	—
Total revolving credit facilities																1,490		—		—

Total Outstanding Commercial Paper and Revolving Credit Facilities					$	3,740	$	373	$	850
Total outstanding commercial paper and revolving credit facilities															$	3,740	$	373	$	850


							Other Postretirement						Pension						Other Postretirement
	Pension Benefits						Benefits						Benefits						Benefits
	2004			2003			2004			2003			2004			2003			2004			2003
Service cost	$	26		$	26		$	4		$	3		$	50		$	52		$	7		$	6
Interest cost		43			42			7			7			85			84			14			14
Expected return on plan assets		(43	)		(42	)		(2	)		(2	)		(100	)		(85	)		(4	)		(4	)
Amortization of prior service cost		1			1			(6	)		(6	)		(6	)		3			(12	)		(12	)
Amortization of unrecognized net losses		7			6			2			1			23			12			4			2

Net periodic benefit cost	$	34		$	33		$	5		$	3		$	52		$	66		$	9		$	6


[1]		Unrealized ~~gain~~gain/loss on securities is net of tax expense (benefit) and other items of ~~$276~~$(746) and ~~$131~~$486 for the ~~first quarters~~second quarter and $(313) and $617 for the six months ended ~~March 31,~~June 30, 2004 and 2003, respectively. Net ~~gain~~gain/loss on ~~cash flow~~cash-flow hedging instruments is net of tax ~~expense (benefit)~~benefit of ~~$32~~$59 and ~~$(12)~~$8 for the ~~first quarters~~second quarter and $27 and $20 for the six months ended ~~March 31,~~June 30, 2004 and 2003, respectively.

[2]		Net of reclassification adjustment for gains (losses) realized in net income (loss) of ~~$83~~$14 and ~~$(31)~~$146 for the ~~first quarters~~second quarter and $97 and $115 for the six months ended ~~March 31,~~June 30, 2004 and 2003, respectively.

[3]		Net of amortization adjustment of $5 and $4 for the second quarter and $9 ~~to net investment income~~and $13 for the ~~first quarters~~six months ended ~~March 31,~~June 30, 2004 and 2003, respectively.

[4]		Cumulative effect of accounting change is net of tax of $157 for the ~~first quarter~~six months ended ~~March 31,~~June 30, 2004.


[1]		With the adoption of SOP 03-1, certain annuity products were required to be accounted for in the general account. This change in accounting resulted in ~~an increase~~increases of $299 and $948 in net investment income and increases of $250 and $854 in benefits, claims and claim adjustment ~~expenses.~~expenses for the second quarter and six months ended June 30, 2004, respectively.

[2]		For the ~~quarter~~six months ended ~~March 31,~~June 30, 2004, represents the cumulative impact of the Company’s adoption of SOP 03-1.


	Business			Personal			Specialty			Ongoing			Other
	Insurance			Lines			Commercial			Operations			Operations [3]			Total P&C
Beginning liabilities for unpaid claims and claim adjustment expenses-gross	$	5,296		$	1,733		$	5,148		$	12,177		$	9,538		$	21,715
Reinsurance and other recoverables		395			43			2,096			2,534			2,963			5,497

Beginning liabilities for unpaid claims and claim adjustment expenses-net		4,901			1,690			3,052			9,643			6,575			16,218

Add provision for unpaid claims and claim adjustment expenses
Current year		1,260			1,121			595			2,976			28			3,004
Prior year [1]		(138	)		5			50			(83	)		253			170

Total provision for unpaid claims and claim adjustment expenses		1,122			1,126			645			2,893			281			3,174
Less payments [2]		(946	)		(1,089	)		(457	)		(2,492	)		(1,407	)		(3,899	)

Ending liabilities for unpaid claims and claim adjustment expenses-net [1]		5,077			1,727			3,240			10,044			5,449			15,493
Reinsurance and other recoverables		366			42			2,150			2,558			2,511			5,069

Ending liabilities for unpaid claims and claim adjustment expenses-gross [1]	$	5,443		$	1,769		$	5,390		$	12,602		$	7,960		$	20,562

[1]
Earned premiums	$	2,079		$	1,696		$	738		$	4,513		$	26		$	4,539
Loss and loss expense paid ratio		45.4			64.2			62.4			55.3
Loss and loss expense incurred ratio		53.9			66.4			87.5			64.1
Prior accident year development (pts.)		(6.7	)		0.3			6.8			(1.8	)

[1]		The six months ended June 30, 2004 included a $181 provision associated with the evaluation of the reinsurance recoverable asset. The six month period also included a net reserve release related to September 11 of $175 in Business Insurance, $7 in Personal Lines, $116 in Specialty Commercial and $97 in Other Operations, an increase of $190 for construction defects claims, an increase in assumed casualty reinsurance reserves of $130, and offsetting strengthening in large deductible workers compensation reserves and release in other liability reserves, each approximately $150.

[2]		Other Operations reflects payments pursuant to the MacArthur settlement.

[3]		Effective January 1, 2004, the financial results of the Company’s Reinsurance segment are reported in Other Operations and 2004 beginning liabilities have been reclassified to reflect this change.


	Written Premiums [1]							Earned Premiums [1]
	First Quarter Ended							First Quarter Ended
	March 31,							March 31,
	2004		2003		Change			2004		2003		Change
Small Commercial	$	560	$	480		17	%	$	481	$	430		12	%
Middle Market		576		510		13	%		537		450		19	%

Total	$	1,136	$	990		15	%	$	1,018	$	880		16	%


For the First Quarter Ended March 31, 2004	Asbestos			Environmental		All Other [1]		Total
Beginning liability - net [2][3]	$	3,794		$	408	$	2,392	$	6,594
Claims and claim adjustment expenses incurred		3			3		61		67
Claims and claim adjustment expenses paid [5]		1,091			19		67		1,177

Ending liability – net [2] [3]	$	2,706	[4]	$	392	$	2,386	$	5,484

[1]		Includes unallocated loss adjustment expense reserves and ~~the Reinsurance segment.~~allowance for uncollectible reinsurance.

[2]		~~Ending liabilities~~Liabilities include asbestos and environmental reserves reported in Ongoing Operations of $13 and $9, respectively, as of June 30, 2004; $11 and $9, respectively, as of March 31, ~~2004~~2004; and of $11 and $8, respectively, as of December 31, 2003. The total net claim and claim adjustment expenses incurred for the quarter and six months ended June 30, 2004 of ~~$67~~$39 and $107, respectively, includes $2$4 and $6, respectively, related to asbestos and environmental claims reported in Ongoing Operations.

[3]		Gross of reinsurance, asbestos and environmental reserves were $4,583 and $499, respectively, as of June 30, 2004; $4,644 and $513, respectively, as of March 31, ~~2004~~2004; and $5,884 and $542, respectively, as of December 31, 2003.

[4]		Asbestos payments include payments pursuant to the MacArthur settlement.

[5]		The one year and average three year net paid amounts for asbestos claims are ~~$1,215~~$1,206 and ~~$1,443,~~$484 respectively, resulting in a one year net survival ratio of ~~2.2 (13.7~~2.1 (13.8 excluding the MacArthur payments) and a three year net survival ratio of ~~5.6 (19.1~~5.2 (17.7 excluding MacArthur). Net survival ratio is the quotient of the net carried reserves divided by the average annual payment amount and is an indication of the number of years that the net carried reserve would last (i.e. survive) if the future annual claim payments were consistent with the calculated historical average.

~~[5]~~		~~Asbestos payments include $1.15 billion of payments pursuant to the MacArthur settlement.~~


Reduction of ceded amounts	$	126
Increase in allowance for uncollectible reinsurance		55

Total provision (before tax)	$	181


															3 Year
															Gross Survival
													3 Year		Ratio [1] [2]
								% of					Gross Survival		before
	Number of		All Time		Total			Asbestos			All Time		Ratio [1] [2]		MacArthur
	Accounts [5]		Paid		Reserves			Reserves			Ultimate		(in years)		(in years)
As of Most Recent Reserve Evaluation [4]
Major asbestos defendants
Structured settlements (includes 2 Wellington accounts)		7	$	257	$	358			6	%	$	615		9.1		9.1
Wellington (direct only)		31		682		281			5	%		963		5.3		5.3
Other major asbestos defendants		27		178		443			8	%		621		27.3		27.3
No known policies (includes 3 Wellington accounts)		5		—		—			—			—		—		—
Accounts with future exposure > $2.5		106		369		1,210			20	%		1,579		16.7		16.7
Accounts with future exposure < $2.5		930		152		135			2	%		287		12.9		12.9
MacArthur settlement		1		32		1,150			20	%		1,182
Unallocated [3]		—		100		896			15	%		996

Total direct				1,770		4,473			76	%		6,243		22.0		16.8
Assumed reinsurance				560		931			16	%		1,491		15.5		15.5
London market				373		480			8	%		853		13.6		13.6

Total				2,703		5,884			100	%		8,587		19.7		16.1

First Quarter 2004 MacArthur payments		1		1,162		(1,162	)					—
First Quarter 2004 Activity, excluding MacArthur				82		(78	)					4

Total as of March 31, 2004 [2]			$	3,947	$	4,644					$	8,591		6.6		14.8


~~[1]~~		~~Reflects payments pursuant to the MacArthur settlement.~~


	Asbestos						Environmental
	Paid			Incurred			Paid			Incurred
For the Six Months Ended June 30, 2004	Loss & LAE [1]			Loss & LAE			Loss & LAE			Loss & LAE
Gross
Direct	$	1,279		$	(23	)	$	32		$	6
Assumed – Domestic		19			30			6			—
London Market		10			—			12			—

Total		1,308			7			50			6
Ceded		(177	)		180			(12	)		—

Net	$	1,131		$	187		$	38		$	6


[1]		The prior ~~period reflects~~periods reflect the reclassification of periodic net coupon settlements on non-qualifying derivatives from net investment income to net realized capital gains (losses) to conform to the current year presentation.

[2]		Represents the change in value of securities classified as trading.

[3]		Represents annualized net investment income (excluding the change in fair value of trading securities) divided by the monthly weighted average invested assets at cost or amortized cost, as applicable, for the ~~first~~second quarter and six months ended ~~March 31,~~June 30, 2004 and ~~2003. Average invested assets are calculated by dividing the sum of the beginning and ending period amounts by two,~~2003, excluding trading securities and collateral received associated with the securities lending program.

[4]		Primarily consists of changes in fair value on non-qualifying derivatives and hedge ineffectiveness on qualifying derivative instruments as well as the amortization of deferred policy acquisition costs associated with realized capital ~~gains (losses).~~

~~[5]~~		~~First quarter 2004 includes $5 of net realized gains (losses) associated with guaranteed separate accounts classified within the general account amounts pursuant to the adoption of the SOP .~~gains.


[1]		Effective January 1, 2004, guaranteed separate account assets were included with general account assets as a result of adopting ~~the SOP.~~SOP 03-1.


							Outstanding											Outstanding
							As of											As of
	Effective		Expiration		Maximum		March 31,		December 31,					Effective	Expiration	Maximum		June 30,		December 31,
Description	Date		Date		Available		2004		2003		Change			Date	Date	Available		2004		2003		Change
Commercial Paper
The Hartford		11/10/86		N/A	$	2,000	$	373	$	850		(56	%)	11/10/86	N/A	$	2,000	$	373	$	850		(56	%)
HLI		2/7/97		N/A		250		—		—		—		2/7/97	N/A		250		—		—		—

Total commercial paper					$	2,250	$	373	$	850		(56	%)			$	2,250	$	373	$	850		(56	%)
Revolving Credit Facility
5-year revolving credit facility		6/20/01		6/20/06	$	1,000	$	—	$	—		—		6/20/01	6/20/06	$	1,000	$	—	$	—		—
3-year revolving credit facility		12/31/02		12/31/05		490		—		—		—		12/31/02	12/31/05		490		—		—		—

Total revolving credit facility					$	1,490	$	—	$	—		—				$	1,490	$	—	$	—		—

Total Outstanding Commercial Paper and Revolving Credit Facility					$	3,740	$	373	$	850	$	(56	%)			$	3,740	$	373	$	850		(56	%)


Names of Director			Shares
Nominees	Shares For		Withheld
Ramani Ayer		252,713,531		5,746,989
Ronald E. Ferguson		255,370,567		3,089,953
Edward J. Kelly, III		252,997,514		5,463,006
Paul G. Kirk, Jr.		255,196,990		3,263,530
Thomas M. Marra		255,283,647		3,176,873
Gail J. McGovern		255,271,623		3,188,897
Robert W. Selander		255,340,317		3,120,203
Charles B. Strauss		255,361,224		3,099,296
H. Patrick Swygert		255,256,100		3,204,420
Gordon I. Ulmer		255,004,009		3,456,511
David K. Zwiener		255,634,512		2,826,008


Shares For:			255,167,079
Shares Against:			1,624,820
Shares Abstained:			1,668,621


Shares For:			20,130,164
Shares Against:			211,305,658
Shares Abstained:			4,481,902
Broker Non-Votes:			22,542,796