"With improved financial flexibility and growing dividend capacity from our operating subsidiaries, we are pleased to announce our 2014 and 2015 capital management plan and 2014 core earnings outlook of $1.65 billion to $1.75 billion," said The Hartford’s Chief Financial Officer Christopher J. Swift. "Our 2014 outlook represents a modest increase over 2013 core earnings and ROE, adjusted for certain 2013 items including favorable catastrophes and limited partnership income and unfavorable prior year development. Having closed out an outstanding 2013, we are now focused on 2014 and beyond. We look forward to making continued progress on our goals to grow book value per share and to increase core earnings ROE."

The Hartford's outlook is a management estimate based on business, competitive, capital market, catastrophe loads and other assumptions. Key business and market assumptions included in this outlook are set forth in the table below. This outlook is subject to change for many reasons, including unusual or unpredictable items, such as catastrophe losses, tax benefits or charges, prior year development, investment results, and other items. The company has frequently experienced unusual or unpredictable benefits and charges that were not anticipated in previously provided guidance.

2014 Outlook
($ in millions)       2013 Actual       2014 Outlook
Consolidated core earnings       $1,742       $1,650 - $1,750
Key Metrics and Market Assumptions:                
P&C Commercial combined ratio 1       93.0       90.0 - 92.0
Consumer Markets combined ratio 1       90.6       87.0 - 90.0
P&C catastrophe loss ratio 2       3.2%       4.7%
Group Benefits core earnings after-tax margin       4.3%       4.5% - 5.0%
Talcott Resolution core earnings       $735       $560 - $580
Annualized investment portfolio yield 3       4.3%       4.1%
S&P 500 annualized return       29.6%       4.0%
10 Year Treasury yield, at year-end       3.0%       3.2%

[1] Excludes catastrophes and PYD and is a financial measure not calculated based on generally accepted accounting principles [2] Outlook includes P&C catastrophe ratio outlook of 2.5% in P&C Commercial and 8.3% in Consumer Markets [3] Yields calculated using annualized net investment income (excluding income related to equity securities, trading) divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding equity securities, trading, repurchase agreement and dollar roll collateral, and consolidated variable interest entity non-controlling interests

Full year 2013 core earnings include the impact of certain items that differ or are not included in the company's 2014 core earnings outlook. In particular, 2013 catastrophes were $103 million, after-tax, below the company's 2013 outlook; the 2014 outlook includes a catastrophe loss estimate of $305 million, after-tax. In addition, full year 2014 unfavorable PYD includes only the accretion of discount on workers' compensation reserves, whereas full year 2013 PYD includes unfavorable development on other P&C lines, including $92 million, after-tax, of unfavorable asbestos and environmental PYD. Finally, the yield on full year 2013 limited partnership and other alternative investments was 10%, above the company's 2014 outlook of 6%. The table below provides a reconciliation of these and Corporate segment items between full year 2013 core earnings and the 2014 outlook.
2013 Core Earnings Reconciliation To 2014 Outlook
($ in millions)       2013       2014 Outlook
Core earnings       $1,742       $1,650     -     $1,750
Catastrophes favorable to outlook       (103)                    
Unfavorable prior year development       125       22     -     22
Net favorable items in Corporate       (41)                    
Limited partnership returns above 6% return       (73)                    
Adjusted core earnings       $1,650       $1,672     -     $1,772
2014 outlook growth over 2013, as adjusted               1%     -     7%

PROPERTY & CASUALTY (COMBINED)Fourth Quarter 2013 Highlights:
  • Combined ratio, before catastrophes and PYD, improved 2.2 points to 93.2 from 95.4 in fourth quarter 2012
  • Written premiums grew 2% over fourth quarter 2012
  • Core earnings were $300 million, compared to $54 million in fourth quarter 2012, primarily due to lower catastrophe losses
($ in millions)       Three Months Ended
        Dec. 31 2013     Dec. 31 2012     Change
Underwriting gain (loss)*       $128     $(229)     NM
Investment income       $324     $301     8%
Core earnings       $300     $54     NM
Net income       $346     $80     NM
Expense ratio       28.3     28.2     (0.1)
Combined ratio       94.9     109.2     14.3
Combined ratio before catastrophes and PYD       93.2     95.4     2.2
PYD, before tax       $15     $9     67%
Current accident year catastrophe losses, before tax       $28     $335     92%
Written premiums       $2,349     $2,314     2%

Fourth quarter 2013 P&C (Combined) core earnings were $300 million, an increase from $54 million in fourth quarter 2012 due to significantly lower catastrophe losses and better current accident year results. Fourth quarter 2013 net income was $346 million, compared with $80 million in fourth quarter 2012, reflecting the improvement in core earnings.

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