The Hartford’s Operating Income Increases 10%

August 2, 2001

The Hartford Financial Services Group Inc. reported operating income of $262 million for the second quarter of 2001, a 10-percent increase over the same period in 2000.

The increase reflects double-digit earnings growth in the company’s group benefits and individual life businesses, strong performance in property-casualty commercial lines, and the incremental benefit of the Fortis Financial Group acquisition completed in April 2001.

Operating income for the second quarter of 2001 was up 20 percent over the same period in 2000, excluding a $24 million tax settlement at Hartford Life in the second quarter 2000. Operating income excludes net realized capital gains or losses (after-tax) and the cumulative effect of accounting changes.

On a per diluted share basis, operating income was $1.09, level with the same period last year. Excluding the favorable tax settlement, operating income per diluted share was up 9 percent over the prior year.

For the quarter ended June 30, 2001, The Hartford’s net income of $226 million reflects a 6-percent increase over the same period last year. Included in net income are after-tax net realized capital losses of $25 million in the second quarter of 2001, and $26 million in the prior-year second quarter. The second quarter 2001 results also reflect the impact of an $11 million (after-tax) charge related to the implementation of a new accounting standard for certain investment securities. Net income of $0.94 per diluted share was down 3 percent from $0.97 for the same period last year, reflecting the implementation of the new accounting rule.

Revenues for the second quarter of 2001 were $3.8 billion, up 9 percent from $3.5 billion for the same period a year ago. The increase was due primarily to strong new business growth in group benefits and increased fee income for individual life; earned premium growth across all North American property-casualty segments; and the Fortis Financial Group acquisition. The increase was partially offset by the sale of the majority of the company’s international property-casualty operations.

Net investment income, before taxes, increased 12 percent to $719 million this quarter, reflecting the FFG acquisition, higher partnership income and improved cash flow.

Property-Casualty Operations
Operating income for North American property-casualty operations increased 10 percent to $101 million in the second quarter, compared with $92 million for the second quarter of 2000.

Property-casualty results reflected:

— Significant growth in business insurance due to price increases and an improved operating environment;

— catastrophe loss ratios in line with the prior year; and

— higher loss costs in the personal insurance and affinity segments, and lower reinsurance results.

North American net written premiums were $1.9 billion in the second quarter of 2001, a 10-percent increase over the same period a year ago, resulting from price increases, strong new business growth and improved renewal retention, particularly within the company’s business insurance segment. Small commercial (select customer) written premiums increased 20 percent, while middle market (key accounts) grew 15 percent. The momentum in the business insurance segment continues to remain strong, with strong pricing and favorable loss costs across all lines.

Written premiums for personal auto and homeowners insurance sold to members of AARP and other affinity groups increased 10 percent. Trends in this business remain very favorable, with strong new business growth and renewal retention running at historically high levels.

Catastrophe losses for the second quarter were $37 million (after-tax) versus $33 million (after-tax) a year ago, while the catastrophe ratios were 3.2 percent and 3.1 percent, respectively.

The combined ratio for the second quarter of 2001 was 104.0, compared to 102.8 in the same period last year.

Among the highlights this quarter, the company:

— Integrated the field agency management operations of personal and business insurance to generate new business growth throughout North America. The move creates a stronger sales organization by aligning the company more closely with agents and opening up more opportunities for cross-selling products.

— was recognized as an industry leader in technology at the 2001 ACORD Technology Conference in Orlando, Fla., receiving honors for the use of standardized technology to enhance agent-company communications.

Six Month Results
For the first six months of 2001, The Hartford’s net income was $466 million, or $1.95 per diluted share, compared with net income of $451 million, or $2.07 per diluted share, for the comparable 2000 period. Operating income for the first six months of the year was $515 million, an increase of 11 percent from the same period last year. On a per diluted share basis, operating income was $2.16 versus $2.13 in 2000.

Total revenues for the first six months of 2001 increased 8 percent to $7.6 billion from $7.0 billion for the same period in 2000, reflecting growth in both the company’s life and property-casualty operations.

The Hartford’s total assets rose to $177.9 billion as of June 30, 2001, up 4 percent from a year ago, while total assets under management, which include the company’s mutual fund assets, increased 7 percent to $194.1 billion. The Hartford’s book value, excluding unrealized gains and losses, rose 17 percent to $33.63 per share as of June 30, 2001, compared with $28.71 per share as of June 30, 2000.

Goodwill Accounting
Effective January 1, 2002 the Company will adopt a new accounting standard (SFAS 142) which eliminates the amortization of goodwill. The company expects full year 2001 goodwill amortization to be approximately $52 million, or $0.22 per diluted share.

The company currently expects the absence of goodwill amortization would benefit 2002 operating earnings by $56 million or $0.23 per diluted share.

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