[GRAPHIC OMITTED] News Release
Hartford Plaza - Hartford, CT 06115
Date: January 27, 2003
For Release: Upon Receipt
Contact: Media Investors
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Joyce Willis Hans Miller
860/547-4951 860/547-2751
jwillis@thehartford.com hmiller@thehartford.com
Cynthia Michener Mike Lesperance
860/547-5624 860/547-6781
cynthia.michener@thehartford.com michael.lesperance@thehartford.com
THE HARTFORD REPORTS NET INCOME OF $258 MILLION, OR
$1.01 PER SHARE, FOR THE FOURTH QUARTER
Full Year-Net Income Per Share Up 89% to $3.97
HARTFORD, CONN. -- The Hartford Financial Services Group Inc. (NYSE:
HIG) today said its fourth quarter and full-year earnings for 2002 increased
substantially, as the company took advantage of firm pricing in the
property-casualty market, while minimizing the impact of the prolonged bear
market on equity market-driven business in its life operations.
"Our results prove that our diverse business platform can withstand
market turbulence and generate profitable growth," said Ramani Ayer, The
Hartford's chairman and CEO.
The company reported a 79 percent increase in net income for the
quarter ended Dec. 31, 2002, a result of robust earnings growth in North
American property-casualty operations, which was partially offset by an equity
market-driven decline in earnings for the life operations.
The Hartford reported net income of $258 million for the fourth quarter
of 2002, compared with $144 million for the same period in 2001. Included in net
income for the fourth quarter are after-tax net realized capital losses of $43
million, compared to after-tax net realized capital losses of $98 million in
2001. On a per diluted share basis, net income was up 74 percent to $1.01 in the
fourth quarter of 2002, compared with $0.58 per diluted share in the same period
last year.
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The Hartford's Earnings/2
The Hartford's operating income was up 15 percent to $301 million, or
$1.17 per diluted share, for the fourth quarter of 2002, compared with $261
million, or $1.06 per diluted share, for the fourth quarter of 2001, again the
result of substantial improvement in property-casualty operating income.
Operating income excludes net realized capital gains or losses (after-tax),
restructuring charges, loss from early retirement of debt and the cumulative
effect of accounting changes.
Operating income per diluted share in the fourth quarter of 2002
reflected more shares outstanding than the comparable prior-year period. This is
due primarily to the company's third quarter 2002 capital raising, which added a
total of 7.3 million shares, and the effect of shares issued and exercised under
stock compensation plans.
FOURTH QUARTER AND FULL-YEAR CONSOLIDATED RESULTS
FOR THE QUARTER ENDED FOR THE 12 MONTHS ENDED
---------------------------- -------------------------------------
DECEMBER 31, DECEMBER 31,
($ in millions except EPS; all after-tax) 2002 2001 2002 2001
------------- -------------- --------------- ---------------------
Net income $258 $144 $1,000 $507
- Net realized capital losses (43) (98) (250) (164)
- Cumulative effect of acctng. chng. -- -- -- (34)
- Restructuring charges -- (11) -- (11)
- Loss from early retirement of debt -- (8) -- (8)
- -------------------------------------------------------------------------------------------------------------------
Operating income $301 $261 $1,250 $724
===================================================================================================================
- Net income/diluted share $1.01 $0.58 $3.97 $2.10
- Operating income/diluted share $1.17 $1.06 $4.96 $3.00
For the fourth consecutive quarter, The Hartford's North American
property-casualty operations achieved a combined ratio below 100, while written
premiums rose 14 percent for the quarter ended Dec. 31, 2002.
Ayer noted that asbestos continues to be a challenge for
property-casualty insurers, and rapidly changing developments demand constant
scrutiny of asbestos exposures. The company expects to complete a comprehensive
review of its asbestos exposures in the second quarter and will provide more
detailed disclosure of exposures and reserves upon conclusion of the study.
-- more --
The Hartford's Earnings/3
LIFE OPERATIONS
"Good execution, coupled with excellent distribution and product
enhancements, helped our life operation maintain its overall market share and
even grow in some key markets," said Ayer. "Despite the challenging market
environment, our life operations achieved record variable annuity and 401(K)
sales, while our group benefits segment continues to execute well in an arena of
growing competition."
The company previously announced a record $3.5 billion of variable
annuity sales and other deposits for the fourth quarter of 2002, a 45 percent
increase over the third quarter of 2002, and a 70 percent jump from the fourth
quarter of 2001.
FOR THE QUARTER ENDED FOR THE 12 MONTHS ENDED
------------------------------ -----------------------------------
DECEMBER 31, DECEMBER 31,
($ in millions; all after-tax) 2002 2001 2002 2001
------------- -------------- --------------- ------------------
Net income $125 $135 $557 $685
- Net realized capital losses (42) (46) (196) (89)
- Cumulative effect of acctng. chng. -- -- -- (26)
- -------------------------------------------------------------------------------------------------------------------
Operating income $167 $181 $753 $800
===================================================================================================================
Excluding the $5 million impact of goodwill amortization, net income
for The Hartford's life operations was down 11 percent in the fourth quarter of
2002, from $140 million in the same period last year, driven primarily by the
effect of the continuing unfavorable equity market on the company's individual
annuity results.
The Hartford's investment products segment reported $110.2 billion in
total assets under management as of Dec. 31, 2002, a 6 percent increase from
$103.6 billion as of Sept. 30, 2002, but an 8 percent decrease from $120.3
billion as of Dec. 31, 2001. Net income for investment products decreased 18
percent to $97 million for the quarter ended Dec. 31, 2002, from $119 million in
the prior-year period, primarily as a result of reduced fee income from a lower
asset base, driven by the weak equity market.
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The Hartford's Earnings/4
Fourth quarter net income for individual life was down slightly to $34
million, as the results were dampened by the lower equity market and higher
mortality. Account values of $7.6 billion were down 4 percent from Dec. 31,
2001, but were up 3 percent from Sept. 30, 2002. A market shift from variable to
fixed accumulation products resulted in a 37 percent decrease in sales for
individual life products to $48 million compared with the fourth quarter of
2001.
Strong underwriting and disciplined claims management were the
hallmarks of the group benefits segment, which includes group life and
disability insurance. Net income increased by 20 percent to $36 million in the
fourth quarter of this year, as total fully insured ongoing premiums rose 6
percent to $562 million and the segment experienced favorable loss costs. Fully
insured sales, excluding buyouts, were down 39 percent to $65 million, primarily
as a result of increased competition in the large-case group disability and
group life markets.
"Hartford Life K.K. in Japan continues to outpace the industry with
robust sales," Ayer said. "The recent addition of the bank channel for annuity
sales in that country promises to boost our market share even further."
The Japanese operation achieved $757 million in variable annuity sales
in the fourth quarter of 2002, a more than four-fold increase over the previous
year's quarter, bringing account values to more than $1.7 billion as of Dec. 31,
2002.
The Hartford's life operations also received four prestigious DALBAR
awards this year, evidence of the company's commitment to excellent customer
service:
o The seventh consecutive honor for annuity customer service, the only
company to reach this landmark.
o The second consecutive award for service to life insurance customers.
o The Financial Intermediary Award for life insurance services to brokers.
o The Seal for Communication for The Hartford's 401(k) statements for
customers.
DALBAR is a recognized, independent financial services research
organization.
-- more --
The Hartford's Earnings/5
NORTH AMERICAN PROPERTY-CASUALTY OPERATIONS
Significantly improved underwriting results, driven by a hard pricing
market, helped to boost net income for North American property-casualty
operations to $135 million in the fourth quarter of 2002.
"Our strong operating platform, coupled with the hard market and
disciplined underwriting, have helped us to increase our share of some key
markets," said Ayer. "Our double-digit earned premium growth and an overall
5.2-point improvement in the combined ratio are two key factors positioning the
company for continued growth and profitability."
FOR THE QUARTER ENDED FOR THE 12 MONTHS ENDED
--------------------------- ----------------------------------
DECEMBER 31, DECEMBER 31,
($ in millions; all after-tax) 2002 2001 2002 2001
----------- --------------- ------------- --------------------
Net income (loss) $135 $21 $482 $(125)
- Net realized capital losses (5) (52) (37) (79)
- Cumulative effect of acctng. chng. -- -- -- (8)
- Restructuring charges -- (10) -- (10)
- Loss from early retirement of -- (8) -- (8)
debt
- -------------------------------------------------------------------------------------------------------------------
Operating income (loss) $140 $91 $519 $(20)
===================================================================================================================
Earned premium increased 12 percent in the fourth quarter of 2002,
primarily as a result of price increases; and the combined ratio was 99.4, the
fourth consecutive quarter in which the property-casualty operations achieved a
combined ratio below 100.
The combined ratio for three of the four North American property-casualty
segments improved, including improvements of 17.4 points in the specialty
commercial lines to 98.1; 5.3 points in personal lines to 99.5; and 2.0 points
in business insurance to 94.5.
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The Hartford's Earnings/6
Net investment income of $252 million was up 11 percent, as strong cash
flow and an increased asset base more than offset the decline in yields.
Firm pricing continues across all four segments, resulting in a
favorable impact on North American property-casualty net written premiums, which
were up 14 percent in the fourth quarter to $2.1 billion.
Consistent performance in the business insurance segment has resulted
in strong new business growth and solid renewal retentions. The segment reported
an overall 18 percent increase in written premium to $885 million in the fourth
quarter, compared with $752 million in the year-ago period. For the seventh
consecutive quarter, the business insurance segment achieved a combined ratio
below 100, excluding the impact of Sept. 11 on third-quarter 2001 results.
Within the business insurance segment, The Hartford's small commercial
and middle market businesses continue to outpace the industry, with written
premium growth of 16 percent and 19 percent, respectively, for the fourth
quarter of 2002.
The company's specialty commercial lines segment achieved an overall 56
percent increase in written premium in the same period.
Solid retention levels and disciplined underwriting helped to improve
results for personal lines, where written premiums were up 6 percent to $756
million for the fourth quarter of 2002, including an 11 percent rise in written
premiums for personal auto, homeowners and other insurance sold to members of
AARP.
North American property-casualty catastrophe losses for the quarter
were $10 million (after-tax), compared with $6 million (after-tax) the previous
year.
FULL-YEAR RESULTS
"Our diversified business model and industry-leading distribution
platform, coupled with product enhancements, disciplined underwriting and claim
management, helped us to withstand a tough insurance market and turbulent equity
market in 2002," said Ayer.
-- more --
The Hartford's Earnings/7
"To give some examples, for business insurance, we achieved a 27
percent new business growth in the fourth quarter of 2002, and 23 percent new
business growth for all of 2002. We reported record-breaking variable annuity
sales of $10.3 billion in 2002, maintaining The Hartford's position as the
nation's leading seller of variable annuities based on retail sales," Ayer said.
In addition, The Hartford achieved $1 billion in 401(k) sales for the year, a
new record for the company.
For the full year of 2002, The Hartford's net income increased to $1
billion compared to $507 million in 2001. On a per diluted share basis, net
income increased to $3.97, compared with $2.10 for 2001.
The company's operating income for the full year ended Dec. 31, 2002,
was $1.25 billion, or $4.96 per diluted share, up from $724 million, or $3.00
per diluted share, last year.
The Hartford's operating income for 2002 includes several life
operations items: A $76 million tax benefit at Hartford Life; an $11 million
(after-tax) expense related to the Bancorp Services litigation; and an $8
million (after-tax) benefit due to lower-than-expected losses related to Sept.
11. The 2001 full-year results include after-tax losses of $440 million related
to Sept. 11, a $130 million federal tax benefit at Hartford Life, and after-tax
goodwill amortization of $52 million.
Total revenues for 2002 were up 5 percent to $15.9 billion, compared
with $15.1 billion for the previous year.
TOTAL ASSETS AND EQUITY
As of Dec. 31, 2002, The Hartford's total assets were $182.0 billion, up
slightly from a year ago, while total assets under management, which include the
mutual fund assets managed by the company and its affiliates, were $198.7
billion. The company's book value, excluding accumulated other comprehensive
income, rose 9 percent to $37.77 per share as of Dec. 31, 2002, compared with
$34.54 per share as of Dec. 31, 2001. Including accumulated other comprehensive
income, The Hartford's book value was $42.06 as of Dec. 31, 2002, compared with
$36.71 at year-end 2001.
-- more --
The Hartford's Earnings/8
"Our results demonstrate that our strategy for top-line growth and
profitability is working and we are well positioned for growth across all of our
businesses in 2003 and beyond," said Ayer. "We've benefited from the flight to
quality and we know that our customers want a well-managed company that executes
well and provides consistently excellent customer service."
OPERATING INCOME OUTLOOK
Based on current information, the company expects operating income per
share for 2003 to range between $4.50 and $4.75 per diluted share. The company's
previous range was $4.50 to $5.00 per diluted share. The company has changed the
range to reflect equity market valuations at the beginning of 2003 and a further
increase in expected pension expense based on changes in interest rates in the
last part of 2002. This estimate is subject to adjustment based on changes in
market conditions affecting both life and property-casualty operations. The
estimate incorporates the following items:
o The impact of lower equity markets on life earnings from investment
products;
o the impact of the company's decision to expense the fair value of options
granted as employee compensation in 2003;
o continuation of positive property-casualty earnings trends;
o continuing pressure on property-casualty investment income due to lower
interest rates (which is expected to be largely offset by improving cash
flow);
o an increase in pension expense due to lower discount rates and assumed
investment returns on plan assets; and
o continued growth in life earnings from group benefits and individual life.
This estimate is for operating income per share. A large number of factors
could cause this estimate to change, including significant changes in estimated
future earnings on investment products caused by changes in the company's
outlook with respect to the equity markets, catastrophe losses at levels in
excess of expectations, adverse developments emerging as a result of changes in
estimates arising from the company's regular reviews of its loss reserves for
all lines of insurance, particularly related to highly variable exposures of
asbestos and reinsurance and any actions the company might take in response.
-- more --
The Hartford's Earnings/9
The company will review fourth quarter results and its outlook for 2003
in an analyst conference call scheduled for 10 a.m. EST Tuesday, Jan. 28. The
conference call will be simultaneously webcast at
www.thehartford.com/ir/index.html.
The Hartford (NYSE: HIG) is one of the nation's largest investment and
insurance companies, with 2002 revenues of $15.9 billion. As of Dec. 31, 2002,
The Hartford had assets of $182.0 billion and stockholders' equity of $10.7
billion. The company is a leading provider of investment products, life
insurance and group benefits; automobile and homeowners products; business
property and casualty insurance; and reinsurance.
More detailed financial information can be found in The Hartford's
Investor Financial Supplement available on the company's Web site,
www.thehartford.com.
Certain statements made in this release should be considered forward looking
information as defined in the Private Securities Litigation Reform Act of 1995.
The Hartford cautions investors that any such forward-looking statements are not
guarantees of future performance, and actual results may differ materially.
Investors are directed to consider the risks and uncertainties in our business
that may affect future performance and that are discussed in readily available
documents, including the company's annual report and other documents filed by
The Hartford with the Securities and Exchange Commission. These uncertainties
also include: the possibility of less favorable loss activity than anticipated;
the response of reinsurance companies under reinsurance contracts; the
possibility that actual and anticipated asbestos liabilities might be greater
than currently estimated; general economic and business conditions that are less
favorable than anticipated; changes in interest rates or the stock markets;
stronger than anticipated competitive activity; unfavorable legislative,
regulatory or judicial developments; and more frequent or severe catastrophes
than anticipated. The Company assumes no obligation to update this release which
speaks as of the date issued.
###
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
(All amounts are in millions, except for per share data)
FOURTH QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------- -----------------------------------
2002 2001 CHANGE 2002 2001 CHANGE
---------- ---------- ---------- ----------- ----------- -----------
HIGHLIGHTS Net income [1] [2] $ 258 $ 144 79% $ 1,000 $ 507 97%
Operating income [1] [2] [3] $ 301 $ 261 15% $ 1,250 $ 724 73%
Total revenues [3] $ 4,161 $3,856 8% $ 15,907 $ 15,147 5%
Total assets $ 182,043 $ 181,593 -
Total assets under management [4] $ 198,676 $ 198,914 -
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PER SHARE Basic earnings per share [1] [2]
AND SHARES DATA Net income $ 1.01 $ 0.59 71% $ 4.01 $ 2.13 88%
Operating income $ 1.18 $ 1.07 10% $ 5.01 $ 3.05 64%
Diluted earnings per share [1] [2]
Net income $ 1.01 $ 0.58 74% $ 3.97 $ 2.10 89%
Operating income $ 1.17 $ 1.06 10% $ 4.96 $ 3.00 65%
Weighted average common shares outstanding 255.2 244.1 11.1 249.4 237.7 11.7
Weighted average common shares outstanding
and dilutive potential common shares 256.3 247.1 9.2 251.8 241.4 10.4
Common shares outstanding 255.2 245.5 9.7
Book value (including AOCI) $ 42.06 $ 36.71 15%
Book value (excluding AOCI) $ 37.77 $ 34.54 9%
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<FN>
[1] 2002 includes the earnings impacts of the $76 tax benefit in Life, the $11
after-tax expense in Life related to Bancorp Services, LLC litigation and
the $8 after-tax benefit in Life's September 11 Terrorist Attack exposure.
2001 includes $440 of after-tax losses related to the September 11
Terrorist Attack and the $130 tax benefit in Life.
[2] The fourth quarter and year ended December 31, 2001 includes after-tax
goodwill amortization of $14 and $52, respectively.
[3] Included in the quarter ended December 31, 2001 is additional premium of
$23, an adjustment for reinsurance cessions related to the September 11
Terrorist Attack. The year ended December 31, 2001 is net of $91 of
reinsurance cessions related to the September 11 Terrorist Attack.
[4] Includes $15,321 and $16,809 of mutual fund assets and $1,312 and $512 of
third party assets managed by HIMCO as of December 31, 2002 and 2001,
respectively.
</FN>