The Hartford to Purchase Fortis; Fourth Quarter Core EPS Up 10 Percent

January 26, 2001

The Hartford Financial Services Group has announced that it will acquire the individual life insurance, annuity and mutual fund businesses of Dutch-Belgian bank-insurance giant Fortis Inc. for $1.12 billion in cash.

Operating as Fortis Financial Group, the acquisition will add about $11 billion of assets under management to Hartford Financial, which currently manages about $183 billion in assets. The deal particularly increases Hartford Financial’s mutual fund business, adding $4 billion in mutual fund assets to Hartford’s existing $11 billion.

As of September 30, 2000, Fortis had approximately $11 billion of assets under management, including $4 billion of mutual fund assets. Through the first nine months of 2000, the operating earnings of Fortis Financial Group were approximately $60 million.

The Hartford has also reported core earnings of $1.09 per diluted share for the fourth quarter of 2000, a 10 percent increase over the same period 1999. The increase reflects continued strong performance by the company’s life operations, as well as improved commercial and personal lines results.

The Hartford’s core earnings for the fourth quarter of 2000 were $252 million, or $1.09 per diluted share, up 14 percent from $221 million, or $0.99 per diluted share, for the fourth quarter of 1999, reflecting solid performance in the life operations, along with stronger commercial lines and personal lines results. Core earnings exclude net realized capital gains and losses (after-tax) and certain non-recurring items.

After-tax catastrophe losses were $9 million in the fourth quarter, compared to $21 million in the comparable quarter of 1999. The Hartford’s net income increased 22 percent to $273 million in the fourth quarter, compared with $223 million for the fourth quarter of 1999. Fourth quarter net income of $1.18 per diluted share was an 18 percent increase over the $1.00 per diluted share for the same period in 1999. Fourth quarter net income results include a $69 million (after-tax) gain resulting from the sale of the company’s Netherlands-based Zwolsche Algemeene NV subsidiary, which was partially offset by net realized investment losses of $48 million (after-tax).

Revenues were $3.9 billion for the fourth quarter of 2000, up 13 percent from $3.4 billion in the same period a year ago. The revenue increase was due to continued growth in group benefits, and other investment products, along with strong premium growth in personal and small commercial insurance, as well as the hardening of prices in other commercial businesses and reinsurance.

Also contributing to the increase were higher net realized capital gains, primarily the result of the aforementioned sale of Zwolsche.

Life Operations Core earnings for the property-casualty operations were $115 million in the fourth quarter, compared with $116 million for the fourth quarter of 1999. Improving operating trends, including price increases in commercial and personal lines, along with lower catastrophe losses, had a favorable earnings impact. This was offset by a decline in the company’s reinsurance results. Net written premiums for the quarter were $1.7 billion, a 4 percent increase from the same period last year.

Premiums grew 20 percent in the select customer operation of small commercial, and 7 percent in the middle market, where price increases continue to hold and retention rates are improving. Written premiums for personal auto and homeowners insurance sold to members of AARP and other affinity groups increased 6 percent.

Full-Year Results

For the year ended December 31, 2000, The Hartford’s core earnings were $962 million, or $4.29 per diluted share, up 17 percent on a per-share basis from $837 million, or $3.68 per diluted share, a year ago. The company’s 2000 results include favorable federal and state tax settlements of $32 million (after-tax), or $0.12 per diluted share, at its Hartford Life subsidiary.

Excluding these items, core earnings per share grew 13 percent in 2000. Catastrophe losses for 2000 were $89 million (after-tax) compared with $131 million (after-tax) for 1999. Net income for the full year was up 15 percent on a per-share basis to $974 million, or $4.34 per diluted share, compared with $862 million, or $3.79 per diluted share, in the comparable 1999 period.

Revenues for 2000 totaled $14.7 billion, up 9 percent from $13.5 billion for the same period last year. The Hartford’s total assets under management, which include $11.4 billion in mutual fund assets, increased 6 percent to $183.0 billion, as of December 31, 2000. The company’s book value, excluding unrealized gains and losses, increased 18 percent to $30.79 per share as of December 31, 2000, compared with $26.08 per share as of December 31, 1999. Fortis Acquisition

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