Aging Societies and Retirement: A Ticking Time Bomb

8/3/2019 Aging Societies and Retirement: A Ticking Time Bomb

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The Hartford Financial Services Group, Inc.

Gregory A. BoykoPresident & CEO

Hartford Life Insurance K.K.March 16, 2007

Aging Societies And Retirement:A Ticking Time Bomb

"Reinventing Retirement Asia:Enhancing the Opportunities of Aging

AARP Conference, Tokyo, Japan

Workshop 6: The Gold Power of the 50 Plus Market


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The Hartford Financial Services Group, Inc.2

Aging Societies And Retirement:Agenda

Global demographic trends

Declining workforces

Strain on government and corporate pensions

Public concern about retirement

Shifting retirement burden to individuals

Need for retirement education and credible financial advice


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The Hartford Financial Services Group is an Insurance

and Financial Services Industry Leader

Honoring promises since 1810

Over 30,000 employees worldwide, over 650 in Japan

Strong insurer financial strength ratings

A.M. Best A+

Fitch AA

Leading provider of: mutual funds; annuities; life insurance and group benefits;

automobile and homeowners products; business property-casualty insurance

Growing international operations in Japan, United Kingdom and Brazil

Hartford Life Insurance K.K. is the #1 provider of variable annuities in Japan

Over 450,000 policyholders in Japan

Standard and Poors AA-

Moodys Aa3

Aging Societies And Retirement:The Hartford Has Honored Its Promises Since 1810


4/21The Hartford Financial Services Group, Inc.4

10%

16%

26%

17%

25%

31%

21%

28%

34%

26%

37%

48%

0%

10%

20%

30%

40%

50%

60%

World U.S. U.K. Japan

Percent of Population over 60

2005 2025 2050

64.7

74.777.3

82.4

78.3

83.581.9

88.3

60

65

70

75

80

85

90

95

World U.S. U.K. Japan

Life Expectancies

2005 2050

People in developed countries are living longer and populations areaging. This is putting a strain on public and corporate pension plans.

Source : United Nations Population Division: World Population Prospects: The 2004 Revision

Aging Societies And Retirement:Increasing Life Expectancies



Aging Societies And Retirement:Declining Workforces Will Strain Pensions

Worker-to-Retiree Ratios*

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2000 2010 2020 2030 2040

U.S. U.K. Japan

Aging populations make it difficult for pension systems to providefunds for a significantly older, non-working population.

* Ratio of Workers (aged 15-59) to Retirees (60 and over)Source: Watson Wyatt Aging Vulnerability Index, 2003



Aging Societies And Retirement:Fear of Insufficient Funds in Retirement

24%

11% 10%

35%

20% 18%

33%

42%39%

Somewhat concernedVery Concerned

Extremely Concerned

Japan U.S. U.K.

73%67%

Source: Hartford Life Insurance Retirement Survey, September 2006Base: People aged 45 and older in Japan (1,040) the US (757), and the UK (756).

The majority of people are concerned about having enough money tomaintain their standard of living in retirement, particularly in Japan.

91%



Aging Societies And Retirement:Important Retirement Income Sources

32%

9%

23%24%

46%

57%65%

68%

43%45%

72%

31%

16%

39%

21%25%

41%

52%

35%

43%

64%

Public Pension Bank or PostalDeposits /

Investments

Work Part orFull Time

DefinedBenefit

Employer

Pension

Home / RealEstate

Life Insurance Defined Cont.Employer

Pension

Japan U.S. U.K.

Public pensions are still considered the most important source ofretirement income.

Source: Hartford Life Insurance Retirement Survey, September 2006

Q: Please rank the top three of the following sources of retirement income, in terms of each ones importance to you.(% selecting first, second, or third most important)



47%

21%

42%

42%

30%

36%

Not too confident

Not at all confident

Japan U.S. U.K.

89%78%

51%

Yet the majority of people in Japan, the U.S. and the U.K. lackconfidence that public pension income will be sufficient.

Aging Societies And Retirement:Confidence in Public Pensions is Low


Q: How confident are you that your government-sponsored pension plan will provide you with sufficient income to maintainyour current standard of living? Base: Total Respondents



14%

21%

22%

42%

51%

65%

67%

176%

0% 25% 50% 75% 100% 125% 150% 175% 200%

Australia

South Korea

China

United Kingdom

Switzerland

United States

Germany

Japan

Public Debt as a Percentage of GDP

Source: CIA World Factbook estimates

Rising Japanese Public Debt

The rise of government debt levels to 176% of GDP has contributedto widespread concern about the public pension system.

Aging Societies And Retirement:Rising Public Debt in Japan

$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0

1

2

3

4

5

6

72006*

2004

2005

2002

2003

2001

2000

$6.9

$6.7

$6.2

$5.5

$5.3

$4.8

$4.3

(US$ Trillions)

Source: Ministry of Finance, Government of Japan* As of November 30, 2006


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Aging Societies And Retirement:Responses in Japan - Higher Individual Burden

Government

Retirement age raised to 65

National health care co-payments raised to 30%

Consumption tax raised to 5%

Mandatory long-term care insurance launched

Corporate Shift to defined contribution plans

Less reliance on defined benefit pensions

The government and corporations have largely responded byreducing benefits, resulting in increased individual burden.


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Aging Societies And Retirement:Shifting Balance to Individual Responsibility

GovernmentPensions

Working inRetirement

Individual Savings& Investment

Corporate

Pensions

RetirementIncome

The burden for retirement income is shifting to individuals.


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Aging Societies And Retirement:Solutions for Individuals are Varied

Working in Retirement Delay retirement, work longer

Flexible work arrangements (telecommuting)

Individual Savings & Investment

Investment trusts, variable & fixed annuities

Supplementary health insurance products

Retirement education & investment advice

Solutions increasingly depend on individual efforts.


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5.2

17.4

36.5

70.4

110.4

0

20

40

60

80

100

120

2002 2003 2004 2005 2006

313 322357

478

600

0100

200

300

400

500

600

700

2002 2003 2004 2005 2006

Investment Trust Assets Variable Annuity Assets(US$ Billions*) (US$ Billions*)

Sources: Investment Trust Association of Japan, data as of December 31 annuallyHoken Mainichi (Daily Insurance) Newspaper, data as of September 30 annually

Aging Societies And Retirement:Retail Investment Product Demand in Japan

Strong demand for investment trusts with regular payments.

Strong demand for variable annuities with guarantees.

*Converted from Yen at $1.00 = 115

A i S i i A d R i


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Japanese have over $12 trillion in personal financial assets - 51% in cash and deposits.

Source: Bank of Japan, The Central Council for Financial Services Information, US-Japan Flow of Money Comparison, 2006 3rd Quarter

Aging Societies And Retirement:Personal Financial Assets - Idle Cash in Japan

Japan US

Other: 4.6% Other: 3.4%Cash & deposits:51.3%

Cash & deposits:13.3%

Bonds:7.1%

Bonds: 2.8%

Stocks:

10.7% Stocks: 30.8%

Mutual

Funds:14.0%

Mutual Funds:4.0%

Insurance &

Annuities:26.6%

Insurance &

Annuities:31.4%

A i S i ti A d R ti t


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Aging Societies And Retirement:Retirement Planning and Investing in Japan


Q: How confident are you in your knowledge and abilities with financial planning?Q: Which of the following phrases best describes your approach towards risk and rewards when you choose investments?

8% 10%

21%

53%

22%

24%

Not Too Confident

Not at All Confident

Confidence in Financial Planning

Japan U.S. U.K.

30%34%

74%

18%11% 13%

35%31%

54%

Fairly Risk Averse/ Accept SmallGain

Completely Risk Averse/AcceptMinimal Gain

Tolerance for Risk

42%48%

72%

Japan U.S. U.K.

Japanese are less confident and more risk averse.



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Q: What or who do you rely on for credible financial planning advice?

Base:Total Respondents

35%

24%16% 15%

11%7%

38%

17% 18% 19%

7%

40%

18%

26%33%

23%

46%

26%

2%

13%

4%

News Media Personal

Contact

Fin. Plnr. / Tax

Acct.

Bank Rep Securities

Firm

Ins. Agent Don't Know

Where to Turn

Japan US UK

Japanese are far more unsure of where to turn for credible financialplanning advice.

Aging Societies And Retirement:Sources of Credible Financial Advice in Japan



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Aging Societies And Retirement:Financial Assets Held By Older Generations

Nearly 80% of Japans 13.1 trillion dollars* in personal financial assetsare held by individuals aged 50 and over.

20-29

1%

30-39

6%

40-49

15%

50-59

28%60-69

35%

70 and over

15%

Source: Bank of Japan, The Central Council for Financial Services Information, 2005

Japanese Financial Asset Distribution by Age Group

*Converted from Yen at $1.00 = 115

Aging Societies And Retirement:


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Variable annuities are a great product to meet Japanese

retirement planning needs.

Guarantees protect principal

Option for guaranteed lifelong income

Tax deferral and estate planning benefits

Ability to switch funds

Diversified funds allow stable growth

Aging Societies And Retirement:Variable Annuities Suited to Older Generations



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The Hartford's Variable Annuity Assets Under

Management in Japan (US$ Billions)

0.5 1.02.3

4.8

8.1

11.1

16.5

21.9

26.728.3

0

5

10

15

20

25

30

Mar.

2002

Sep.

2002

Mar.

2003

Sep.

2003

Mar.

2004

Sep.

2004

Mar.

2005

Sep.

2005

Mar.

2006

Sep.

2006

Dec.

2006

29.7

Aging Societies And Retirement:The Hartfords Variable Annuity Growth in Japan



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Hartford Life Insurance promotes financial

education through:

Publications about annuities and investing

Educating the media and other stakeholders

Public opinion surveys about retirement

Seminars for customers and the public

Aging Societies And Retirement:The Hartford is Committed to Financial Education



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Increasing pressure on public and employer safety nets

Retirement responsibility shifting to individuals

Individuals concerned, but not sure what to do

Need for financial education and investment advice

The Hartfords variable annuities are helping customersprepare for retirement

Aging Societies And Retirement:Summary: Defusing The Time Bomb

Aging Societies and Retirement: A Ticking Time Bomb

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