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Hartford Financial Services Annual Meeting Call HARTFORD FINANCIAL SERVICES ANNUAL MEETING MARCH 29, 2005 CALL PARTICIPANTS • Kimberly Johnson The Hartford Financial Services Group Head of Investor Relations • Lizabeth Zlatkus The Hartford Financial Services Group EVP & CFO, Hartford Life • Daniel Guilbert The Hartford Financial Services Group AVP, Risk Management/Hedging & Hartford Life • David Braun The Hartford Financial Services Group SVP & Chief Risk Officer Hartford Investment Management Company • Ernie McNeill The Hartford Financial Services Group VP and CAO, Hartford Life • Jim Trimble The Hartford Financial Services Group VP and Chief Actuary, Hartford Life • Vic Severino The Hartford Financial Services Group SVP and CIO, Hartford Life • Vanessa Wilson Deutsche Bank Analyst • Jeff Shuman KBW Analyst • Jason Booker Analyst • Steven Gavios Genus Associates Analyst • Ken Crawford Citigroup Asset Management Analyst • Eric Burke Lehman Brothers Analyst PRESENTATION Kimberly Johnson: We'll get our session started today. My name is Kim Johnson, and I head Investor Relations at The Hartford. And on behalf of the Life Company management team and our Income management team, I want to welcome you here to our half-day session focused on hedging and risk management. Last December 2003, we had a Life Company Investor Day. And at that point in time, we discussed, in fairly good detail, the approach that we're using for our hedging programs. And this morning, you'll get a chance to understand how we've evolved from that point in time, what's changed, what we've learned, and how we're doing the business today. Before we get into that agenda, I've got a couple of things. First off, I'd ask that your cell phone ringers off. So if you've been on the phone, please do that for all of us. I'd also like to introduce the newest member of our IR team at The Hartford, Greg Schroeder. Greg is in the back of the room. He just joined us from Nationwide. So in your weatherproof packets today, you have a business card from both Greg and myself. So if there is any follow-up after today's session, we'd appreciate getting a call for either of us, and we should be able to help you out. Also, before we get into the agenda, we've got the obligatory Safe Harbor. I'd like to remind you that we will make certain statements during this meeting that should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These include statements about The Hartford's future results of operations. We caution investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ, including those discussed in The Hartford's Annual Report on Form 10-K filed on February 28, 2005 and other filings we make with the SEC. We assume no obligation to update this presentation or our forward-looking statements, made during the meeting. The discussion of The Hartford's financial performance during this meeting includes financial measures that are not derived from generally accepted accounting principles. Information regarding these non-GAAP financial measures is provided in the "Investor Financial Supplement" for the fourth quarter of 2004, which is available for review in the "Investor Relations" section of our website, at "thehartford.com." With that, I'm going to introduce the CFO of the Life Company, Liz Zlatkus, who will host today's meeting. Lizabeth Zlatkus: Hey. Good morning everybody. Did everybody get their coffee? I'm really excited this morning, because I have the best job of all this morning. I get to introduce really an outstanding group of people. We probably would bring the individuals that actually do the hedging everyday and are involved in really all of our risk management in terms of equity hedging and equity risk at the Life Company. We have a panel up here. First, we're going to hear from Dan Guilbert. Dan has been working with The Hartford for over nine years, and he's been involved in hedging from day one. He really is extremely educated, and you're going to hear from him that he's involved in this on a daily basis and has a great team of people working underneath him. We're then going to hear -- he's really involved in the liabilities side. He works literally daily, often times many times a day. That's David Braun and his team. Dave works at HIMCO. He came to us probably years ago, has many years of experience in kind of capital markets, and he's just done a phenomenal job on the assets side of the hedging. So we're really pleased to hear from David. And again, both David and Dan are backed up by a very extraordinary team of talented individuals back at The Hartford. We're then going to hear from Ernie McNeill. Many of you didn't meet him. Earlier in '04, he was the individual -- he's our Chief Accounting Officer, who talks about FSU3-1, another very technical data for Hartford. And Ernie is the individual at The Hartford Life that really helps that accounting policy and also involves in all of the financial reporting (inaudible) at The Hartford. So he's going to go over the accounting for us in our hedging program. And then we're going to hear from Jim Trimble. Jim Trimble has been with us for close to 30 years. He is now the Chief Actuary of Hartford Life. He took that role of Craig Raymond, who you all know took on the Chief Risk Officer of Hartford Financial Services Group. And we're also going to have Craig come up for Q&A. Many of you know Craig. He's been the face of the lot of the hedging questions and very and still involved today but has taken that kind of higher role looking at risk across the entire enterprise. And we're really pleased to have someone as Jim's caliber to take on and play his role. Jim was most recently before that the Head of Product Development and was then out to explore our international operation. He's going to cover our Japan product and how the risks of that product look. He's also going to cover a small portion on C3 Phase II. So, certainly, he's the individual that knows a lot about the Japan products and clearly helps develop it. And then we're going to talk a little bit about technology. I wanted to introduce some other individuals, who are not going to up at the panel, because we're running out of room. But Dick Sabarino is the Head of our Chief Installation Officer at The Hartford Life, and he's been with us for many years and previously was on Wall Street. He's just done a phenomenal job with his team on the technology front, and I think you're going to hear some very exciting things that we've developed that really give us a strategic competitive advantage. I'm going to have Dick stand just in case you have any technology questions. He's going to be able to answer them. So there is Dick. Everybody else will be up on the stage, so you'll be able to see them. Combined the team that I just introduce has over 130 years experience in the financial services industry. I think what's really important to also know there is not only as this team involved again many people underneath them. We have spent millions of dollars both on technology and investment in our hedging and risk analytics. But also we have routinely get-together, I guess, with this team, Craig, David Johnson, Tom Marra, obviously myself, John Walters. And those are a very routine process where the very senior executives of Hartford Life get together and talk about our hedging program, talk about how we're evolving, think about product development, the risks involved in really our products across the spectrum. So this morning, obviously, is primarily about hedging. We are going to be talking about some other analytics when we talk about, for example, our technology. And with that, I'm going to turn it over to Dan Guilbert, who is going to start off our day. Dan? Daniel Guilbert: Thanks, Liz. The focus of my presentation will be on four main items. I'm going to discuss the Principal First business mix and some contractholder experience. I'll also discuss how we look at risk and hedging, in general. I'd get into the actual performance of the hedging program in 2004 and also what to expect, going forward. First off, just from a definitions perspective, I want to describe Principal First, which is all we know is the Guaranteed Minimum Withdrawal Benefit, or GMWB. Principal First was launched in August of 2002, as sales ramped up very quickly and really set the pace for the industry in the last couple of years. In fact, all of the top 15 (inaudible) writers now offer GMWB (inaudible). Our version of a GMWB Principal First really has a few distinct features. First off, the fundamental of guarantees that you'll get your money back. The mechanism for getting your money back is by taking up to 7% annual withdrawals. The fee that we charge is 50 basis points, and also the client has a benefit of reset. For up to every five years, they can reset how much remaining benefit they have and also the max amount they can take on an annual basis.
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