The Hartford Reports 32% Increase in Net Income for 2d Quarter

July 27, 2007

The Hartford Financial Services Group, Inc. reported second quarter 2007 net income of $627 million, or $1.96 per diluted share, a 32 percent increase over the second quarter 2006.

The Hartford’s core earnings in the second quarter of 2007 were $764 million, or $2.39 per diluted share, compared to $573 million in the same period last year.

Second quarter 2007 results include a $30 million, or $0.09 per diluted share, after-tax increase to reserves for regulatory matters.

“We reported another quarter of strong operating results,” said Ramani Ayer, The Hartford’s chairman and chief executive officer. “The Hartford delivered greater than 17 percent return on equity and double-digit book value per share growth over the last 12 months. I am pleased that we are striking the right balance between growth, profitability and risk in our diversified businesses.

Ayer noted that even in a challenging competitive environment, the insurer grew written premium in small commercial, as well as personal lines.

Property and Casualty Operations

Total written premiums for The Hartford’s property and casualty operations in the second quarter of 2007 were $2.7 billion, down one percent from the second quarter of 2006. The combined ratio for ongoing operations was 91.7 percent in the second quarter of 2007, including catastrophe losses of 2.1 points. The combined ratio before catastrophes and prior year development was 90.2 percent in the second quarter of 2007, compared to 86.9 percent in the second quarter of 2006.

Net investment income increased 22 percent over the prior year due to an increase in partnership income and strong cash flow from operations.

Personal lines continued to grow, with written premiums up 7 percent in AARP business and four percent in agency business. Business insurance growth slowed as a result of increased competition, particularly in middle market.

“Given the market dynamics and our underwriting discipline, we expect 2007 premiums to be modestly lower than our previous guidance,” said Ayer.

Business Insurance
Written premiums for business insurance were $1.2 billion for the second quarter of 2007, down 2 percent from the second quarter of 2006. Small commercial written premiums grew 1 percent, with a 6 percent increase in policies in force, as compared to the second quarter of 2006. Last year’s launch of Next Gen Auto, which leverages sophisticated market segmentation to offer more competitive pricing, enabled The Hartford to sell more policies to smaller commercial customers. Middle market written premiums in the second quarter of 2007 declined 6 percent compared to the prior year, largely as a result of a more competitive pricing environment.

The company has extended its Next Gen Auto product to middle market, where it is widely available throughout the country.

The combined ratio for business insurance was 89.6 percent in the second quarter of 2007, including catastrophe losses of 1.4 points. Second quarter 2007 results also include net favorable reserve development of $29 million, or 2.3 points. Excluding catastrophes and prior year development, the combined ratio was 90.5 percent for the second quarter of 2007, compared to 85.4 percent in the second quarter of 2006.

Personal Lines Insurance
In the second quarter of 2007, personal lines written premiums grew 3 percent over the second quarter of 2006 to $1.0 billion. Second quarter 2006 results included $30 million in written premiums from Omni, a subsidiary that The Hartford sold in November 2006.
AARP written premium was up seven percent over the prior year and this business now comprises 70 percent of the company’s personal lines business. Written premiums through independent agents grew four percent over the prior year, with the continued success of Dimensions with Auto Packages, launched last year. Since 2004, the company has doubled its appointed personal lines agents to about 6,500.

Personal lines reported a combined ratio of 91.3 percent for the quarter, including 3.6 points of catastrophe losses. Excluding catastrophes and prior year development, the combined ratio was 87.7 percent for the second quarter of 2007, compared to 85.7 percent for the second quarter of 2006.

Specialty Commercial Insurance
In specialty commercial, written premiums for the second quarter of 2007 decreased 7 percent from the prior year to $387 million. Professional liability, fidelity and surety written premiums, which constitute nearly half of specialty’s overall premiums, increased 2 percent in the second quarter of 2007, compared to the prior year. Casualty written premiums in the second quarter of 2007 declined 7 percent, as the company slowed new business in response to the competitive environment.

Specialty commercial reported a combined ratio of 100.3 percent for the second quarter of 2007, including 0.6 points of catastrophe losses. Excluding catastrophes and prior year development, the combined ratio was

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