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The Hartford Reports Fourth Quarter And Full Year 2013 Financial Results; Announces 2014 Outlook And Capital Management Plan For 2014 And 2015

For the full year ended Dec. 31, 2013 (full year 2013), core earnings grew 26% to $1,742 million, or $3.55 per diluted share, from $1,386 million, or $2.85 per diluted share in 2012. Core earnings improved as a result of lower catastrophe losses and improved margins in P&C Commercial, Consumer Markets and Group Benefits, partially offset by a decline in core earnings from Talcott Resolution.

Full year 2013 net income was $176 million, or $0.34 per diluted share compared with full year 2012 net loss of $38 million, or $0.18 per diluted share. Full year 2013 net income was impacted by $701 million, after-tax and DAC, of net realized capital losses, principally related to international VA hedging programs, that are not included in core earnings and a $525 million, after-tax, unlock charge. Full year 2012 net income included $410 million of net realized capital losses not included in core earnings, after-tax and DAC; $587 million loss on extinguishment of debt, after-tax; and $388 million net reinsurance loss, after-tax, related to the sale of the Individual Life business, announced in September 2012.
 

CONSOLIDATED FINANCIAL RESULTS
 
($ in millions except per share data)       Three Months Ended       Years Ended
      Dec. 31 2013     Dec. 31 2012     Change 2       Dec. 31 2013     Dec. 31 2012     Change 2
Core earnings (loss):                
P&C Commercial $229 $26 NM $827 $511 62%
Consumer Markets $49 $11 NM $205 $159 29%
P&C Other Operations       $22     $17     29%       ($11)     $44     NM
Property & Casualty Combined       $300     $54     NM       $1,021     $714     43%
Group Benefits       $55     $39     41%       $158     $101     56%
Mutual Funds       $20     $16     25%       $78     $74     5%
Sub-Total       $375     $109     NM       $1,257     $889     41%
Talcott Resolution       $173     $202     (14)%       $735     $810     (9)%
Corporate       ($92)     ($55)     (67)%       ($250)     ($313)     20%
Core earnings       $456     $256     78%       $1,742     $1,386     26%
Net income (loss)       $314     ($46)     NM       $176     ($38)     NM
Net income (loss) available to common shareholders per diluted share 1       $0.65     $(0.13)     NM       $0.34     $(0.18)     NM
Weighted average diluted common shares outstanding       486.1     488.9     (1)%       490.6     486.8     1%
Core earnings available to common shareholders per diluted share 1       $0.94     $0.52     81%       $3.55     $2.85     25%

[1] Includes dilutive potential common shares[2] The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as "NM" or not meaningful

Fourth quarter 2013 net income and core earnings included the following items that had no net impact on earnings, compared with items that decreased net income and core earnings by a total of $120 million, after-tax, or $0.25 per diluted share, in fourth quarter 2012:
  • Fourth quarter 2013 catastrophe losses that were less than the company's $42 million, after-tax, outlook by $24 million, after-tax, or $0.05 per diluted share. This compares with fourth quarter 2012 catastrophe losses that were $174 million, after-tax, or $0.36 per diluted share, higher than the company's fourth quarter 2012 outlook of $44 million, after-tax;
  • Fourth quarter 2013 unfavorable P&C (Combined) prior year loss and loss adjustment expense reserve development (PYD) of $10 million, after-tax, or $0.02 per diluted share, compared with fourth quarter 2012 unfavorable PYD of $6 million, after-tax, or $0.01 per diluted share;
  • Fourth quarter 2013 Corporate segment expense of $14 million, after-tax, or $0.03 per diluted share, related to a tax adjustment, compared to a fourth quarter 2012 Corporate segment tax benefit of $17 million, after-tax, or $0.03 per diluted share, related to retiree prescription drug benefits; and
  • Fourth quarter 2012 core earnings in Talcott Resolution of $43 million, or $0.09 per diluted share, from the Individual Life and Retirement Plans businesses that were sold in first quarter 2013.

Full year 2013 net income and core earnings included the following items that increased net income and core earnings by a total of $19 million, after-tax, or $0.04 per diluted share, compared with items that decreased net income and core earnings by a total of $26 million, after-tax, or $0.05 per diluted share, in 2012.
  • Full year 2013 catastrophe losses that were less than the company's 2013 outlook of $305 million, after-tax, by $103 million, after-tax, or $0.21 per diluted share, compared with full year 2012 catastrophe losses that were $210 million, after-tax, or $0.43 per diluted share, greater than the company's 2012 catastrophe outlook of $249 million, after-tax;
  • Full year 2013 unfavorable PYD of $125 million, after-tax, or $0.25 per diluted share, compared with full year 2012 favorable PYD of $3 million, after-tax, or $0.01 per diluted share;
  • Full year 2013 net benefit of $41 million, or $0.08 per diluted share, in the Corporate segment for an insurance recovery, tax adjustment and other items, compared with a full year 2012 tax benefit totaling $17 million, or $0.03 per diluted share; and
  • Full year 2012 core earnings in Talcott Resolution of $164 million, or $0.34 per diluted share, from the Retirement Plans and Individual Life businesses that were sold in first quarter 2013.

2014 OUTLOOK

The Hartford announced that the company's full year 2014 core earnings outlook is $1,650 million to $1,750 million. The 2014 outlook includes catastrophe losses of $305 million, after-tax, unfavorable PYD of $22 million, after-tax, due to the accretion of the discount on workers' compensation loss reserves, and limited partnership and other alternative investment returns of 6%, or $112 million, after-tax.

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