The Hartford Sees Q4 2005 Net Income of $474 Million

The Hartford Financial Services Group Inc. reported fourth quarter 2005 net income of $474 million, or $1.53 per diluted share. The company’s net income reached $2.3 billion for the year, a new record for the company.

The Hartford’s core earnings in the fourth quarter of 2005 were $505 million, or $1.63 per diluted share. Catastrophe losses and reinstatement premiums during the quarter, including Hurricane Wilma, totaled $0.27 cents per diluted share, compared with $0.06 cents per diluted share in the prior year period.

In addition, results for the quarter included an after-tax increase to reserves related to regulatory matters of $29 million, or $0.09 cents per diluted share.

“Notwithstanding, the several unusual items that influenced our results the last three months demonstrate that the underlying performance of The Hartford’s property and casualty and life operations was strong. This performance is a reflection of our efforts to sustain profitable growth in a competitive environment. Our return on equity of over 15 percent over the last twelve months has exceeded our stated long-term goals,” said Ramani Ayer, chairman, president and CEO of The Hartford. “Actions we have taken to broaden distribution and improve our products are driving our sales momentum.”

For 2005, The Hartford reported record net income of $2.3 billion. This compared with net income of $2.1 billion in 2004, a year which benefited from significant tax benefits and higher net realized capital gains. Core earnings rose 14 percent in 2005, to reach $2.2 billion.

“In December, we reached a milestone for our company as we celebrated our 10-year anniversary as an independent publicly traded company on the New York Stock Exchange. Over the past decade, our shareholders have been well rewarded with a 16 percent compound annual total return that handily exceeds the performance of the Standard & Poor’s 500,” Ayer said.

“The final days of the last quarter also saw a significant legislative accomplishment in passage of an extension of the Terrorism Risk Insurance Act of 2002, or TRIA,” Ayer continued. “The President and Congress deserve our praise for their careful consideration of this important issue. The Hartford, and many others in the insurance and related industries, voiced strong support for this law which provides a vital measure of economic security for the nation in uncertain times.

Property and Casualty Operations

Core earnings for The Hartford’s property and casualty operations in the fourth quarter of 2005 were $220 million, compared with $331 million in the same quarter of the prior year. Core earnings for the quarter included $85 million (after-tax) in net catastrophe losses and reinstatement premiums. The quarter also included estimated hurricane-related assessments of $32 million (after-tax), primarily for Citizen’s Property Insurance Corporation of Florida.

Net written premium for The Hartford’s property and casualty operations in the fourth quarter of 2005 was $2.6 billion, a 6 percent increase from the fourth quarter of 2004. This net written premium growth reflected a double- digit rise in business insurance net written premium and high single digit growth in AARP and Agency personal lines, partially offset by lower net written premium in specialty property and specialty casualty lines.

For the fourth quarter of 2005, ongoing operations reported a combined ratio of 99.2 percent, or 94.6 percent before catastrophes. These combined ratios include 1.9 points of estimated hurricane-related assessments and $61 million, or 2.4 points, of net prior year adverse reserve development primarily related to strengthening of general liability reserves in business insurance.

For the full year 2005, net written premium of $10.5 billion was up by 5 percent over 2004, and the company’s property and casualty operations delivered record core earnings of over $1.2 billion. “The fourth quarter capped a tremendous year for the property and casualty business,” said Ayer. “The strategic initiatives we’ve implemented over the past two years are driving our profitable growth. Together, business insurance and personal lines net written premium totaled $8.7 billion, or over 80 percent of net written premium for property and casualty as a whole. Going forward, we will continue to make strategic investments in products, distribution, service and agent technology to further differentiate The Hartford in the property and casualty market.”

Business Insurance

Business insurance reported strong premium growth in the fourth quarter of 2005. Net written premium of $1.3 billion rose 12 percent compared with the same period in 2004.

The combined ratio for business insurance before catastrophes was 94.9 percent compared with 93.4 percent in the fourth quarter of 2004. Included in the 94.9 percent combined ratio were estimated hurricane-related assessments of $25 million (before-tax), which added approximately 2.0 points. Catastrophe losses were 4.1 points in the fourth quarter of 2005.

In small commercial insurance, new business and strong renewal retention contributed to another quarter of double-digit growth in net written premium. For the quarter, net written premium was up 12 percent to $638 million. In the fourth quarter, the company continued to add sales representatives and increase the number of appointed agents representing The Hartford. The number of small commercial sales representatives at year-end 2005 exceeded 140, more than 20 percent higher than one year ago.

In middle market insurance, net written premium grew 11 percent, to $655 million. During the quarter, the company continued to deepen its relationships with key agencies, helping generate year-over-year increases in both new business and retention. The company also generated new relationships with members of the National Association of Wholesalers.

Personal Lines Insurance

In the fourth quarter of 2005, personal lines net written premium reached $901 million, a 5 percent increase over the fourth quarter of 2004. Increased marketing activities to AARP members led to net written premium growth of 9 percent in the quarter. In Agency personal lines, the company expanded its distribution platform through added sales representatives and improved technology capabilities. Agency net written premium increased by 8 percent over the fourth quarter of 2004.

Excluding catastrophe losses, underwriting results for personal lines continued to be excellent. The combined ratio before catastrophes was 91.0 percent during the fourth quarter of 2005, compared with 89.6 in the same period last year. Included in the 91.0 percent combined ratio were estimated hurricane-related assessments of $24 million (before-tax), which added approximately 2.6 points. Catastrophe losses in personal lines were 0.9 points in the fourth quarter of 2005.

During the quarter, the company’s AARP operations recorded a first for any sales and services call center in the property and casualty industry, being recognized for excellence in call center customer satisfaction through the J.D. Power and Associates Certified Call Center Program.

Specialty Commercial Insurance

The Hartford’s specialty commercial insurance operations recorded $372 million in net written premium for the fourth quarter of 2005, compared with $408 million during the prior year period. The company continued to demonstrate underwriting discipline in specialty property and selectively wrote business where pricing and risks were aligned with acceptable profitability. In particular, the company reduced its writings of specialty property business in the face of very competitive market conditions.

The combined ratio before catastrophes for The Hartford’s specialty commercial segment was 101.9 percent in the fourth quarter of 2005 compared with the extremely favorable combined ratio of 77.6 percent in the fourth quarter of 2004. Catastrophe losses for the fourth quarter of 2005 were 15.1 points.