The Hartford Notes 17% Gain in Q1 Net Income

April 28, 2005

The Hartford Financial Services Group Inc. set a new quarterly record with net income of $666 million, or $2.21 per diluted share, in the first quarter of 2005, a 17-percent increase over the prior-year period.

Net income in the current quarter included net realized capital gains of $83 million (after-tax), or $0.28 per diluted share. In the first quarter of 2004, net income was $568 million, or $1.93 per diluted share, which included net realized capital gains of $95 million (after-tax), or $0.32 per diluted share.

Included in the company’s first quarter results is a charge of $66 million, or $0.22 cents per diluted share, to establish a reserve for
investigations related to market timing by the SEC and New York Attorney General, and directed brokerage by the SEC. Although neither regulator has initiated any formal action, the company previously stated that it believed some action was likely to be taken at the end of the investigations. The reserve is an estimate.

“We are working to give regulators what they need to conclude their work so we can put these matters behind us,” said Ramani Ayer, chairman and CEO of The Hartford.

“The results from the quarter show how well our management team has remained focused on operations and delivering results for shareholders,” Ayer added. The Hartford’s operating income in the first quarter of 2005 rose 16 percent to $583 million, or $1.93 per diluted share, compared to $501 million, or $1.70 per diluted share, in the first quarter of 2004.

“We’re beginning 2005 by topping a net income record set just last quarter on strong income from both our property/casualty and life operating segments,” Ayer said.

“Our return on equity remained excellent at 16 percent in the first
quarter,” said Ayer. “In a market where competition is rising on many product fronts — from auto insurance to variable annuities — we remain committed to growing in businesses that meet or exceed our high bar for profitability.

“With operating income of $386 million, the property/casualty operation achieved its most profitable quarter ever due to excellent underwriting results and higher investment income,” said Ayer. Operating income was up 30 percent over the same period last year. “The Hartford’s sharp focus on producing profitable growth is reflected in our exceptional combined ratios across business insurance, personal lines and specialty commercial.

The company reported a combined ratio in ongoing operations of 88.6
percent in the current quarter due to disciplined underwriting and favorable loss costs, particularly in business insurance. Catastrophe losses were mild during the period at 1.9 points.

Business insurance reported strong underwriting results in the first
quarter of 2005 even as prices moderated. Written premium grew 9 percent to $1.2 billion in the first quarter of 2005 compared to the same period in 2004.

In small commercial, written premium increased 18 percent to $658 million as a result of good retention and excellent new business growth of 23 percent. Pricing increases were moderate. During the quarter, the company added to its base of agents who are producing business and made its Xpand product available through its online quoting tool to make it easier for agents to submit applications.

In middle market, rising competition and the company’s commitment to maintaining acceptable margins led to an overall decline in new business. The company selectively captured new customers in industry sectors such as technology, business services and private education. Written premium for the quarter was essentially flat at $580 million.

The combined ratio for business insurance in the first quarter of 2005 was 89.8, reflecting strong earned premium growth of 13 percent. Property claim frequency and severity trends continued to remain favorable. Catastrophe losses were 1.5 points during the current quarter, including additional loss development related to the third quarter 2004 hurricanes.

Personal lines written premium rose approximately 3 percent to $864 million versus the first quarter of 2004, supported in part by premium retention of 89 percent.

Standard personal lines premium written through independent agents increased 10 percent over the first quarter of 2004, as a larger base of company sales representatives and improved technology helped drive agent submissions. As competition rises and flat pricing persists in the auto sector, the company expects moderate net written premium growth but strong profitability.

The personal lines combined ratio improved to 85.8 percent in the current quarter, primarily due to earned premium growth and favorable reserve development for prior-year, non-catastrophe claims of $20 million. Catastrophe losses during the current quarter, including additional loss development related to the third quarter 2004 hurricanes, totaled 2.5 points. Favorable property claim frequency continued during the period.

The Hartford posted written premium growth of 12 percent to $477 million in specialty commercial during the quarter. Written premium was down sharply in specialty property, reflecting a more competitive pricing environment.

Specialty casualty written premium grew 26 percent, primarily due to a year- over-year increase in a program which has now ceased issuing new policies. As a result, written premium for the casualty line is expected to experience year-over-year premium declines in the latter half of 2005.

Specialty commercial reported a combined ratio of 91.3 percent in the
current quarter, supported by disciplined underwriting. In the first quarter of 2005, catastrophe losses totaled 1.5 points.

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