Important disclosures appear on the last page of this report.

The Henry Fund

Henry B. Tippie School of Management

Qian Wang [qian-qwang@uiowa.edu]

The Hartford Financial Services Group, Inc (HIG) April 16, 2016

Financial Services – Property & Casualty Insurance Stock Rating HOLD

Investment Thesis Target Price $48 In 2015, HIG increased its income by 110.8% YOY from $798 million to $1,682 million and has been upgraded by all rating bureaus such as Moody’s. HIG has been actively seeking growth opportunity both organically and inorganically, such as launching a new energy practice under its commercial lines and acquiring Maxum Specialty Insurance Group (Maxum) in 2016. Currently HIG has a P/E ratio around 11.2, which is lower than the Property and Casualty (P/C) Insurance industry average. The overall operating environment is favorable for P/C insurers. Thus we recommend to continue holding HIG. Drivers of Thesis

Growing auto and housing sales have been boosting policy sales in

2015, and they are continuing in 2016. We expect the personal lines

to grow at an annual rate of 2.43% in the following five years.

HIG’s acquisition of Maxum and set-up of the new energy practice

under the commercial lines will strengthen HIG’s market share in

this area.

The application of new technology drives efficiency, makes better predictions, and optimizes underwriting standards. HIG can keep or decrease its combined ratio before catastrophe before industry’s average 92.6%.

Risks to Thesis

The changing climate conditions make it more difficult to predict incidence and severity of catastrophes, which leaves room for uncertainty. The occurrence of severe catastrophes may largely bring down HIG’s profit.

Over the long-term, decreasing oil and gasoline price, slowing of the global economy, and low interest rates may have negative impact on the investment income.

Henry Fund DCF $43.92 Henry Fund DDM $39.06 Relative Multiple P/E $51.02 Price Data Current Price $46.09 52wk Range $36.54 – 50.95 Consensus 1yr Target $49.80 Key Statistics Market Cap (B) $18.34 Shares Outstanding (M) 396.7 Institutional Ownership 89.9% Beta 1.048 Dividend Yield 1.82% Est. 5yr Growth 7.01% Price/Earnings (TTM) 11.2 Price/Earnings (FY1) 10.8 Price/Book (mrq) 0.95 Price/Tangible Book 0.97 Profitability Operating Margin 12.8% Profit Margin 9.1% Return on Assets (TTM) 0.62% Return on Equity (TTM) 9.2%

Earnings Estimates Year 2013 2014 2015 2016E 2017E 2018E

EPS $0.37 $1.81 $4.05 $3.83 $4.17 $4.03

growth -305.6% 389.2% 123.8% -5.3% 8.8% -3.4%

12 Month Performance Company Description

The Hartford Financial Services Group, Inc started as a fire insurance company in 1810. Headquartered in Hartford, CT, now it mainly provides property and casualty insurance, group benefits, and mutual funds services. In 2015, the Hartford had $11.1 billion net premiums written (NPW), which accounted for 1.90% market share, and ranked the 12th in the U.S by NPW.1

11.2

9.27.7

12.8

10.0 9.4

12.7

10.4

16.5

0

5

10

15

20

P/E ROE EV/EBITDA

HIG P&C Insurance Financials

Source: Yahoo Finance & Factset

-15%

-10%

-5%

0%

5%

10%

15%

20%

A M J J A S O N D J F M

HIG S&P 500

Source: Yahoo Finance

EXECUTIVE SUMMARY

2015 was a strong year for HIG, which had a phenomenal 110.8% YOY net income increase from $798 million to $1,682 million. Its P/C written premium increased 3% over the prior year, comprised of 3% growth in Commercial Lines and 4% in Personal Lines. The lower interest rate, lower oil price, and improving job market have boosted auto and housing sales, and there were less catastrophes compared with that in previous two years. As oil price may stay around $40 per barrel and Fed will increase the interest rate, the auto and housing sales are expected to grow at a relatively slower rate in the following two years.

Meanwhile, HIG has been selling off its annuity business since its current CEO Chris Swift has been in position in 2014 and trying to focus its growth in P/C lines. Within the past four months in 2016, HIG has already announced two business plans to grow its commercial lines. The first one is the acquisition of Maxum for $170 million in cash by 2016 Q3 with the aim to expand small enterprise segment. The second one is that HIG hired Zurich’s former vice president Ric Pena to lead the newly-created energy practice to include power and utilities besides the existing renewable energy. We believe these two plans will help HIG’s commercial achieve an average 2% annual rate in the following five years.

Besides organic/inorganic growth plans of its core operations, HIG has a $4.375 billion authorization for equity repurchases from 2014 through 2016. It announced $1.3 billion repurchase plan in 2016, which we believe will help to stabilize the stock price if not increase. Overall, HIG is seeing positive growth in its core operation profit, though there is uncertainty of devastative catastrophe that will largely bring down HIG’s profit. Thus, we recommend to continue holding HIG as we believe it is outperforming its peers and the current operating environment is favorable for P/C insurance industry.

COMPANY DESCRIPTION

HIG is a P/C insurance provider headquartered in Hartford, Connecticut. It mainly provides commercial lines, personal lines, group benefit, and workers’ compensation products. It was recognized by J.D. power for delivering outstanding services to customers, and also launched mobile app in Apr 2015 to keep the pace of new technologies. Meanwhile HIG was trying hard to improve the underwriting of its two largest lines – commercial and personal, thus to grow its P/C business. By focusing on generating new business in these profitable areas, HIG was able to expand overall

margins and improve the combined ratio. Currently HIG is trading below its book value, with P/BV ratio at 0.95 and P/TBV ratio at 0.97, while the industry average is 1.3 and 1.5 respectively.4 In 2015, HIG had $11,135 million net written premiums (NWP) and ranked 12th in the US.

Commercial

Lines35%

Personal Lines

21%

Group

Benefits17%

Mutual Funds

4%

Investment17%

Other

6%

2015 REVENUE BY SEGMENT

Source: HIG 10K

Commercial Lines

Accounting for more than 35% revenues in 2015, the Commercial Lines is the largest driver for the profit of HIG and it is growing strongly especially in recent two years. It provides workers’ compensation, property, automobile, marine, livestock, liability, and umbrella coverage primarily throughout the U.S., along with a variety of customized insurance products and risk management services including professional liability, bond, surety, and specialty casualty coverage. In small commercials, the written premiums grew by 4% while the underlying combined ratio stayed below 90. Construction and service sectors are positives, but manufacturing, energy, and commodities face headwinds. In middle market, there has been a strong new business growth and profitability in construction and marine.5 Workers’ compensation began to improve in 2012. The underwriting results deteriorated markedly in 2007 and 2010 and the extreme high revenue% in below chart in 2008 was due to the negative revenue from investment in that year. The growth rate in commercial lines has been fluctuating in the past five years within the range of -0.89% to 6.67%. We expect around 3% growth rate in 2016, with the acquisition of Maxum and the set-up of the new energy practice, which are discussed in more details in the recent developments section.

Page 3

20%

30%

40%

50%

60%

70%

$5,200

$5,400

$5,600

$5,800

$6,000

$6,200

$6,400

$6,600

$6,800

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Commercial Line Revenue

Revenue $ Total Revenue%

Source: HIG 10K. ($in millions)

Personal Lines

Contributed $185 million in core earnings, personal lines is the 2nd largest contributor after commercial lines to HIG’s revenue. It provides standard automobile, homeowners and personal umbrella coverage to individuals, including a special program designed exclusively for members of AARP (American Association of Retired Persons). Since summer 2015, there has been strong growth in personal lines due to the boosting auto and housing sales. The combined ratio raised 1.4 points to 92 though, due to higher auto loss costs and non-weather loss in homeowners. Due to the cheap oil and gasoline price, which also leads to higher disposable income and more miles driven, the stronger economy, and the improving job market, U.S. car sales set record high in 2015, clearing a peak last reached 15 years ago, while the sales have been skewed toward higher light truck volumes.6 The growth rate in personal lines has been fluctuating in the past five years within the range of -5.07% to 3.99%. We expect continuing positive growth in personal lines’ premiums with an average annual rate of 2.43% in the following five years.

10.0%

20.0%

30.0%

40.0%

50.0%

$3,400

$3,500

$3,600

$3,700

$3,800

$3,900

$4,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Personal Line Revenue

Revenue $ Total Revenue%

Source: HIG 10K. ($in millions)

Group Benefits

Group Benefits provides employers, associations and financial institutions with group life, accident and disability coverage, along with other products and services, including voluntary benefits, and group retiree health. Group Benefits after-tax core earnings margin, excluding buyouts, increased to 5.2% from 4.3% in 2015. The revenue from group benefits line keeps decreasing with a rate range between -12.6% and 1.32%. As HIG focuses more of its business development in commercial and personal lines and we do not foresee any significant business growth opportunity in this segment, we expect 5.9% decrease in this segment in 2016, which is the average decreasing rate within last five years.

Mutual Funds

Mutual Funds offers investment products for retail and retirement accounts and provides investment management and administrative services such as product design, implementation, and oversight. This business also includes a portion of the run off of the mutual funds which support the Company's variable annuity products. This is a relatively small component of HIG’s total revenue, and in the past 10 years, the growth rate has been as high as 28.19% or as low as -16.18%. We expect it to stay relatively stable at an annual growth rate of 2.93% in the following five years.

Investment

Since 2008, HIG has been selling its trading equity securities, leading fixed maturities to being the first place in its investment portfolio. In 2015, HIG invested more than 80% in fixed maturities. With the decreasing oil price affecting energy companies’ profit, the energy-related investment has been a headache on any company’s balance sheet. HIG proactively reduced its holdings of energy-related securities by $1.2 billion to $2.5 billion in 2015, which also led to higher exposure to BB and above bonds than B and below as many energy companies had been downgraded.9

Page 4

54%53% 48%

57% 60% 62% 65% 64% 78% 82% $-

$50,000

$100,000

$150,000

$200,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Investment Amount $

Fixed maturities Equity securities, AFS Mortgage loans

Policy loans LP and other alternatives Other investments

Short-term investments Equity securities, trading

Source: HIG 10K ($in millions)

The declining investment income in trading equity

securities resulted primarily from declines in market

performance of the underlying investment funds

supporting the Japanese variable annuity product. Net

investment income decreased by 3.4% to $3,154

million compared to the prior year and a 50% shrink since

it bounced back to $7,205 million in 2009, which was

primarily due to a decrease in income from fixed

maturities as a result of a decline in asset levels, primarily

in Talcott Resolution and lower income from repurchase

agreements.10 The overall investment yield has been

steady at 4% after it peaked at 8% in 2007, and we expect

it to stay at 4%.

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

$(12,000)

$(10,000)

$(8,000)

$(6,000)

$(4,000)

$(2,000)

$-

$2,000

$4,000

$6,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Investment Income & Yield

Total securities AFS and other Equity securities, trading

Total securities AFS and other Equity securities, trading

Source: HIG 10K ($in millions)

Talcott Resolution

Talcott Resolution is comprised of runoff business from

the Company's individual annuity, institutional, and

private-placement life insurance businesses. The

Company's individual annuity business consists of variable,

fixed, and payout annuity products. In addition, Talcott

Resolution includes the retained yen denominated fixed

payout annuity liabilities, as well as the Company's

discontinued operations from the Hartford Life Insurance

K.K. (HLIKK) in Japan prior to its sale in 2014. Talcott

Resolution after-tax income from continuing operations

was $370, down from $414 in 2015.

Catastrophe Losses

In 2015 the catastrophe losses of HIG totaled $332 million,

compared to $341 million in 2014, both before tax.

Catastrophe losses for both years were primarily due to

winter storms and wind and hail events across the country.

The incidence and severity of catastrophes are inherently

unpredictable7. Some scientists believe that in recent

years, changing climate conditions have added to the

unpredictability and frequency of natural disasters. These

uncertainties bring a lot of risk. The geographic

distribution of its business subjects HIG to catastrophe

exposure for events occurring in a number of areas,

including, but not limited to, hurricanes in Florida, the Gulf

Coast, the Northeast and the Atlantic coast regions of the

United States, tornadoes in the Midwest and Southeast,

earthquakes in California and the New Madrid region of

the United States, and the spread of disease11. In recent

three years, the catastrophe losses have been decreased

by more than 50%. The main catastrophe in 2011 and 2012

were Hurricane Irene, Tropical Storm Lee, and Storm

Sandy. Below chart shows in recent three years, the

catastrophe losses dropped more than 50%, mostly due to

less tornadoes and winter storms. In 2015Q3, HIG missed

its revenue by $0.12 per share due to a 10% decline in net

investment and higher catastrophe losses (two large

California wildfires).2 It led to almost 25% drop in its stock

Page 5

price between Oct 2015 and Jan 2016. The total benefits

and losses expense as percentage of earned premiums

decreased from 96.76% in 2012 to 79.36% in 2015. We

expect it to stay around 80% in the following five years.

$- $100 $200 $300 $400 $500 $600 $700 $800

2011

2012

2013

2014

2015

Wind and Hail Winter storms Tornadoes Other

Source: HIG 10K. ($in millions)

RECENT DEVELOPMENTS

2015 HIG Development

2015 was a strong year for HIG, which had a phenomenal 110.8% YOY net income increase from $798 million to $1,682 million. There are three main contributors. First, there was a $560 million decrease in the loss from discontinued operations on the sale of the Japan variable annuity business in 2014. Second, there was a 3% increase in total earned premiums. Third, there was a $36 million federal income tax benefit lowering the effective tax rate from 20.60% to 15.42% YOY.3

Historically HIG primarily operates in the east coast. However, since Q4 2014, it hired 24 new middle market underwriters with expansion into Midwest and Western US.

Source: HIG 101 Mar 2016 Report

HIG has been investing in market-leading back-office support, such as policy administration system, claims system, and predictive analytics. The integrating data and analytics in the underwriting and claims process can improve efficiency and customer/partner experience. The P/C, Group Benefits, and Mutual Funds are generating ROEs much higher than the Talcott Resolution. HIG is expecting to continue to run-off of Talcott organically.

Source: HIG 101 Mar 2016 Report

Shifting to pure P/C Insurer

The sale of its Japan variable annuity business and the

continued runoff of the Talcott Resolution annuity

business indicated that HIG has successfully narrowed its

focus on P/C insurance, which enabled it to excel. In 2012,

HIG announced that it would divest its individual life and

variable annuities business to focus on core business. In

2014, HIG sold HLIKK to ORIX Life Insurance Corporation,

which is a financial services group headquartered in

Minato, Japan, for $895 million. It brought HIG

approximately $860 million capital benefit including the

net sales proceeds. Besides the sale of HLIKK and Talcott,

HIG also sold its Retirement plans and Individual Life

Insurance business in Jan 2013 and its UK variable annuity

business – the Hartford Life International Limited (HLIL) in

Dec 2013 to Berkshire Hathaway for approximately $285

Page 6

million cash, which helped HIG lower its expenses and free

up more capital. 12 HIG’s existing CEO Chris Swift has been

in position since 2014, but has no significant business

initiatives besides the stock repurchase plan. Finally, in

March and April this year, HIG announced two business

plans, which we believe will help grow the commercial

lines.

The first one is the acquisition of Maxum for $170 million

in cash by 2016 Q3 with the aim to expand small enterprise

segment. Maxum is a Georgia-based provider of

commercial insurance and it will operate as a separate unit

under HIG’s small commercial business. With only 12

years’ history, Maxum already has $114.6 million statutory

surplus. This acquisition, said by HIG’s president Doug

Elliot, “will accelerate HIG’s efforts to build upon its

market-leading position in small commercial by expanding

its product offerings and capabilities”.

The second one is that HIG hired Zurich’s former vice

president Ric Pena, who has more than 25 years of related

underwriting, sales, and national leadership experience, to

lead the newly-created energy practice to include power

and utilities besides the existing renewable energy under

commercial lines. With this new segment, HIG is aiming to

offer better tailored risk management solutions to energy

companies and increase its commercial line revenues.

Though currently energy industry is in its downturn and oil

price may remain low in the following two years, we

expect this new practice will bring positive growth for HIG

in the long-term and it also shows the management of HIG

are focusing on developing strategies to continue growing

its P/C lines.

INDUSTRY TRENDS

The U.S. insurance industry’s net premiums written totaled $1.1 trillion in 2014, with premiums recorded by life/health (L/H) insurers accounting for 56 percent and premiums by P/C insurers accounting for 44 percent, according to SNL Financial.16 The P/C insurance industry is a well-developed industry with generally standardized policy and regulations. However, along with some regulation changes, there also have been some changes to

policies, such as the separation of flood insurance and terrorism insurance.

Source: Statista (in $billions)

The profitability of P/C insurance shows strong cyclicality. When the economy is good and companies have enough capital, they will usually lower the price to write more policies in order to get the market share and capital for investment. The price war will eventually lower the industry’s profit margin, thus companies have to raise rates to stay profitable. Historically, the ROE of the P/C insurance industry peaked very 8-10 years. Below chart shows the historical ROE of P/C insurance industry. It suggests next ROE peak will be in 2016-2017.

ROE of US P/C Insurance Industry

Source: Insurance Information Institute

Terrorism Insurance

While last year started with uncertainty around terrorism insurance, the passage of the federal Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) brought greater certainty to organizations that depend on such coverage. Insurers continue to closely monitor aggregate exposures for central business districts in major cities. Some companies are turning to standalone terrorism insurance marketplace, which can be more

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2014 8.2%

2015E: 8.8%

Page 7

competitive than TRIPRA coverage18. Without this backstop in place, many high-profile properties would not be insurable in the commercial marketplace. However, workers' compensation is also deeply impacted, as there are large amounts of people working in highly concentrated areas19.

Arising Competition

ACE acquired Chubb in July 2014 for $28.3 billion, which

was the biggest ever deal for the insurance industry8. Allianz, Berkshire Hathaway, AXA, and Travelers also

expressed interest back then, which means there may still

be potential M&A activities in P/C insurance industry in

following years. M&A activity in 2015 reached its highest

level since 1998. Globally, across all sectors, M&A activity

exceeded $200B14. Below chart shows the M&A deal value

in recent 20 years. 1998 witnessed the largest M&A

activities with $55,825 million deals. The M&A activity is

up sharply in 2015.

M&A Activities in US P/C Insurance Industry

Source: Insurance Information Institute ($in millions)

Companies like HIG, which is trading below its book value,

will definitely be attractive to investors. As currently we

are in an increasing interest rate cycle and financial

services companies have been steadily recovering from

the financial crisis, P/C insurers may have to lower their

price to get more cash flow so as to increase the

investment portfolio and invest the proceeds at higher

rates and they also have enough capital to do so. Thus, we

are expecting an intense pricing competition in the P/C

insurance industry, which will eventually pull down the

margin for all players.

Low Investment Yield

Investment performance is a key driver of profitability. Depressed yields will necessarily influence underwriting & pricing. Due to persistent low interest rates, investment income fell in 2012, 2013, and 2014, and is still below the 2007 pre-crisis peak. The FED has raised interest rate in Dec, 2015, which helped improve the investment income last year.

Total Investment Income of US P/C Insurance Industry

Source: Insurance Information Institute ($in billions)

New Technology

New technology is shaping many industries as well as the P/C insurance industry. The big data analytics helps companies to build more precise forecasting models and underwriting standards, thus improve the combined ratio (before catastrophe). As smart phones, tablets, computers are more and more popular, more customers like purchasing their insurance through on-line channel. According to a research conducted by PwC, cyber insurance premiums written could more than triple to $7.5 billion by 2020, thus on-line customer experience becomes more important and it is easier for customers to compare prices and policies. To keep in trend, HIG launched its mobile app in Apr 2015.

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Page 8

Estimated Cyber Insurance Premiums Written

Source: PWC; Insurance Information Institute ($in billions)

The development of “Sharing Economy”, such as UBER, AirBnB, and Task Rabbit, also has big impact of the P/C insurance industry. The insurance gaps in lines such as auto and home require new insurance solutions.

Auto insurance is the largest P/C line. 2015 witnessed a record high auto sales in recent 15 years, and we are expecting the auto sales to continue boosting in following two years due to the pent-up demand and favorable economy environment15. However, if Fed is going to increase the interest rate in the following two years, it will slow down the auto sales increasing rate, as the financing cost for customers will increase. more and more vehicles are with fully autonomous models and new technologies are improving the safety of driving, and eventually we may realize “hands-free”. By then, there may be new liability question and challenges for P/C insurers to solve.

MARKETS AND COMPETITION

There are 2,583 P/C insurance companies in 2014 in the US. P/C insurance consists primarily of auto, home, and commercial insurance. The top 25 companies by NWP accounted for 64.55% market share. HIG ranked the 12th on this list, a similar position as Chubb and CNA. The competition is fierce in this industry. Thus companies often have to lower their price to attract more premiums to investment for a higher return. Taking more than 10% of the market share, which almost equaled the total market share of companies in the second and the third place, State Farm has been the No.1 auto insurer in the US since 1942. It is not a public company and its surplus belongs to policyholders. State Farm is a typical example of lowering price to attract more customers. In recent three years, the average underwriting loss of State Farm is $2,200 million, and the investment income led to a

positive net income at $1,400 million on average. Due to the strict regulations and well-developed structure, the insurance policies among different companies are quite similar. Besides price, companies usually compete in services. HIG has been recognized for claims excellence in 2015.17

Source: National Association of Insurance Commissioners

Peer Comparisons

Allstate is the largest publicly traded P/C insurer in the US.

In 2011, it acquired two insurance businesses - Esurance, a

well-known brand in the US private vehicle insurance

market, and Answer Financial, an independent personal

insurance company that gives Allstate a stronger position

with self-directed customers who want a choice between

insurance carriers. During the past five years, its revenue

increased at an annualized rate of 2.7% to $30.1 billion. Its

profitability increased sharply as net income margin grew

from 1.5% of revenue in 2011 to an estimated 8.1% in

2015.20

Liberty Mutual is the third largest public traded P/C insurer

in the US. It has a more international presence as it has a

stake in, or owns, local insurance companies in Argentina,

$1.5$2.0

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2014 2015E 2020F

Page 9

Brazil, Chile, China, Columbia, India, Poland, Portugal,

Singapore, Spain, Thailand, Turkey, Venezuela and

Vietnam. In 2014, the company's international market is

anticipated to account for 28.5% of its total revenue.

During the past five years, its revenue increased at an

annualized rate of 3.8% to $28.3 billion.

HIG may still have market share and revenue growth gaps compared with the larger insurers. However, in the most recent one year, HIG’s stock returns largely outperformed its main competitors and S&P 500. The CNA Insurance has similar market share and P/BV ratios as HIG. However, its stock return was down by almost 40% in February 2016.

Due to the blurry definition of debt and lack of capital

expenditures and depreciation, price to book ratio is a

good indicator when evaluating financial services industry.

In 2015 Q3, the price to book ratio of the P/C insurance

industry is 0.90. Compared with previous three quarters’

average ratio of 0.98, it indicates that the P/C insurance

industry overall may be underpriced. Meanwhile,

companies such as Allstate, Hartford, and LOEWS also had

a below 1 price to book ratio in 2015Q3.15

Source: Factset

In the recent two years, the combined ratio of HIG improved significantly and dropped below industry’s in 2015, which is mostly due to better predictions, optimized underwriting criteria, and less catastrophe. Overall HIG shows positive growth and it is relatively undervalued compared with its peers.

Source: Factset

In 2015, HIG had a 9.25% ROE, similar to Allstate and Chubb. Though CNA is similar to HIG in terms of market share, HIG outperformed CNA regarding its profitability and operating effectiveness.

Source: Bloomberg

Chubb is outstanding in operating margin.

Source: Bloomberg

-40%

-30%

-20%

-10%

0%

10%

20%

A M J J A S O N D J F M

S&P500 HIG C-N-A Allstate Chubb

Source: Yahoo Finance

9.25

3.9

10.619.65

0

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HIG CNA Allstate Chubb

ROE in 2015

12.71

7.7410.02

18.94

0

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HIG CNA Allstate Chubb

Opearting Margin in 2015

Page 10

Though HIG only had half of Allstate’s or Chubb’s market share, its net income in 2015 only lagged Allstate’s by 25%.

Source: Bloomberg

ECONOMIC OUTLOOK

Interest rates will affect HIG’s both investment income and policy premium. With the increase in the fed funds rate, the 1-yr T-Bill and the 10-yr T-Bond yields are expected to increase over the next three years and reached a full normalization of interest rates around 2019. Theoretically the increasing interest rate will benefit HIG with potentially higher investment yield. Historically, however, HIG’s investment yield has remained around 4% despite the macro economy. Regarding the policy premium, the increasing interest rate will also increase the cost for people who buy a house/car or lease a car through financing options. Thus we may see a decreasing auto and homeowners’ insurance market as a result of the increasing interest rate. Overall, the increasing interest rate is not favorable for HIG, unless its investment income can catch up.

Source: Insurance Information Institute

The US unemployment rate has continued to decline with the Dec 2015 rate being reported at 5.0%, and the disposable income has been increasing since 2013. It will

help boost both auto sales and housing sales at least in the following two years. The disposable income has a compound growth rate at 1.5% between 2011-2016 and is forecasted to be 1.9% between 2016 and 2021 by IBIS World. Good job market is essential to higher disposable income, which will lead to higher auto and home sales.

US Per Capita Disposable Income

Source: IBIS World

Oil price dropped below $30 per barrel for the first time since 2001, and it boosted the auto sales and miles driven during 2015. With the sanction on Iran has been lifted, it is foreseen that there will be a supply surplus. OPEC countries discussed the possibility of freeze production from now until Oct 2016 in Doha on April 17th, 2016, however they have not reached an agreement, which may not come true in the near future either. We forecast the oil price will remain below $60 per barrel in the following two years. Because the cost of oil per barrel for shale oil producers is $40. Currently, most shale oil producers reduce production or even went bankruptcy because the price could not cover their cost. Once the oil price arises above $40, shale oil producers will join the game again. With higher supply, the oil price is likely to drop again until it reaches the equilibrium.

1682

479

2055

2834

0

500

1000

1500

2000

2500

3000

HIG CNA Allstate Chubb

Net Income in 2015

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Source: EIA

The construction sector is critical to the economy and the P/C insurance industry. There is an increasing trend in both private residential and private non-residential construction. The new construction peaked at $912 billion in 2006. In 2015, the new construction hit $828 billion, up by 65.4% since 2010 and only 9.1% away from the record in 200613. Job growth, low inventories of existing homes, still-low mortgage rates and demographics should continue to stimulate new home construction for several more years.

Source: US Department of Commerce; Insurance Information Institute (in $billions)

CATALYSTS FOR GROWTH

• Increasing auto and housing sales, especially in new vehicle sales and leasing, are bringing higher unit written premium and policy volume to the auto insurance line. As long as interest rate will not increase significantly and job market stays optimistic, we expect steady growth of personal lines in the following two years.

• HIG has been focusing on developing its commercial lines. We expect Maxum and the new energy practice will fit in HIG’s operations well and start generating more revenues.

• The application of new technology drives efficiency, makes better predictions, and optimizes underwriting standards. HIG can keep or decrease its combined ratio before catastrophe before industry’s average 92.6%.

INVESTMENT POSITIVES

• Boosting auto sales, especially in new vehicles, are bring higher unit written premium and policy volume to the auto insurance line.

• More housing units are being sold and occupied, which dictates a strengthening market in 2016 and will bring more NWP to the homeowners’ insurance line.

• More housing units are being sold and occupied, which dictates a strengthening market in 2016 and will bring more NWP to the homeowners’ insurance line.

INVESTMENT NEGATIVES

• The incidence and severity of catastrophes are difficult to predict. With the changing climate conditions, the unpredictability and frequency of natural disasters could adversely affect P/C insurance industry’s operations, financial conditions, and liquidity.

• The global economy is fluctuating and negative interest rates could hurt the investment income. The rising competition forcing companies to lower price could eventually bring down the premiums margin.

VALUATION

We used a Discounted Cash Flow (DCF), Dividend Discount Model (DDM), and Relative Price to Earnings (P/E) analysis to value HIG. The DCF and DDM models computed stock prices of $43.92 and $39.06. For the relative P/E, P/BV, and P/TBV analysis we calculated a price based on peers, which are $51.02, $57.66, and $62.21 respectively. We believe the true value of Hartford stock is in between at $40 and $48.

The most important assumptions for the valuation model are revenue growth rates, investment amount and yield, losses and expenses, and dividend payout ratio.

Beta was from Bloomberg average 5-year weekly data, which is 1.048. In 2015, HIG’s beta was less than 1. The market risk premium used was the Henry Fund consensus

$0

$100

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$1,000

03 04 05 06 07 08 09 10 11 12 13 14 15*

Non Residential

Residential

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for 2016 (5.00%), resulting in a cost of equity equal to 7.94%.

Commercial lines are expected to grow at around 3% in 2016 benefiting from the acquisition of Maxum and set-up of the new energy practice. Personal lines are expected to grow at around 2.4% benefiting from the increasing sales of auto and houses. Mutual Funds grew more quickly in recent two years and are expected to continue growing. We used the most recent two years’ average growth rate to forecast, and for the rest lines, we used five-year average.

Though investment yield fluctuated with the financial crisis and low interest rates among different investment assets, the overall investment yield has been steady around 4%. Investment amount decreased almost 50% due to the sale of Japanese business. Investment amount growth rate was forecasted according to each investment assets using recent two years or five years’ trend.

Losses and expenses were calculated as percentage of premiums written, which is expected to stay around 80% as HIG has been improving its underwriting criteria.

Dividend payout ratio was assumed the same as that in 2015, which is around 19.26%.

KEYS TO MONITOR

As we are expecting an increasing contribution from

personal lines as a result of boosting auto and housing

sales, we should keep monitor these two markets’ trends

and also whether HIG’s personal line written premiums

increase along with the market. Another metric to pay

attention to is loss cost. With low oil price, not only the

auto sales increase, but also the average miles driven,

which could potentially increase the accident rate, thus

the claims.

For investment income, as HIG still hold energy-related

securities, we should pay to attention to any significant

drop in investment yield. It is also very sensitive to interest

rate change. A decline in interest rates reduces the returns

available on new investments, thereby negatively

impacting the Company’s net investment income.

Conversely, rising interest rates reduce the market value

of existing investments in investment grade bonds.

REFERENCES

1. National Association of Insurance Commissioners. http://www.naic.org/documents/web_market_share_160301_2015_property_lob.pdf

2. Seeking Alpha. http://seekingalpha.com/symbol/HIG/news

3. HIG 10K. 4. Factset. 5. HIG 2015Q4 results earnings call. 6. The Wall Street Journal “U.S. Car Sales Set Record in

2015”. 7. HIG 10K. 8. Market Realist.

http://marketrealist.com/2015/07/ace-chubb-us-insurance-industrys-biggest-ever-acquisition/

9. HIG 2015Q4 results earnings call. 10. HIG 10K. 11. HIG 10K. 12. Zacks.

http://www.zacks.com/stock/news/138886/hartford-financial-vends-hlikk-enhances-core-operations

13. US Department of Commerce. http://www.census.gov/construction/c30/c30index.html

14. Insurance Information Institution, Outlook for P/C insurance industry. http://www.iii.org/presentation/overview-and-outlook-for-the-global-commercial-p-c-insurance-industry-trends-challenges-disruptors-and-opportunities-022316

15. The Wall Street Journal, “U.S. Car Sales Set Record in 2015” by Spector, Bennett, and Stoll, Jan 5, 2016

16. Insurance Information Institution. http://www.iii.org/fact-statistic/industry-overview

17. HIG website. 18. Marsh, Looking Ahead P/C Insurance 2016.

https://www.marsh.com/us/insights/risk-in-context/looking-ahead-property-insurance-market-risk-trends-2016.html

19. Insurance Thought Leadership, Terrorism Insurance. http://insurancethoughtleadership.com/tag/terrorism-risk-insurance-program-reauthorization-act/

20. IBIS World.

IMPORTANT DISCLAIMER

Henry Fund reports are created by student enrolled in the Applied Securities Management (Henry Fund) program at

Page 13

the University of Iowa’s Tippie School of Management. These reports are intended to provide potential employers and other interested parties an example of the analytical skills, investment knowledge, and communication abilities of Henry Fund students. Henry Fund analysts are not registered investment advisors, brokers or officially licensed financial professionals. The investment opinion contained in this report does not represent an offer or solicitation to buy or sell any of the aforementioned securities. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Henry Fund may hold a financial interest in the companies mentioned in this report.

The Hartford Financial Services Group, Inc.Income Statement (in millions)

Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020ERevenuesEarned Premiums 13,231 13,336 13,577 13,770 13,803 13,867 13,975 14,106Fee income 2,105 1,996 1,839 1,762 1,758 1,756 1,756 1,759Net investment income 3,264 3,154 3,030 3,077 3,047 3,091 3,085 3,085Net realized capital gains 1,798 16 (156) 0 0 0 0 0Other revenues 275 112 87 234 235 236 238 240

Total revenues 20,673 18,614 18,377 18,843 18,842 18,950 19,054 19,190Benefits, losses, and expensesBenefits, losses, and loss adjustment expenses 11,048 10,805 10,775 11,043 11,011 11,092 11,163 11,275Amortization of deferred policy acquisition costs and PV of future profits 1,794 1,729 1,502 1,654 1,593 1,633 1,629 1,653Insurance operating costs and other expenses 4,176 4,028 3,772 3,992 3,918 3,979 3,988 4,036Loss on extinguishment of debt 213 0 21 0 0 0 0 0Goodwill impairement 1,574 (23) (28) 0 0 0 0 0Other expense 0 0 0 0 0 0 0 0Interest expense 397 376 357 331 335 327 334 337

Total benefits, losses, and expenses 19,202 16,915 16,399 17,020 16,857 17,030 17,115 17,301Income from continuing operations before income tax 1,471 1,699 1,978 1,823 1,985 1,919 1,939 1,889

Income tax expense 246 350 305 281 306 296 299 291Income from continuing operations, net of tax 1,225 1,349 1,673 1,542 1,679 1,623 1,640 1,598

Income from discontinued operations, net of tax (1,049) (551) 9 0 0 0 0 0Net income 176 798 1,682 1,542 1,679 1,623 1,640 1,598

Preferred stock dividends 10 0 0 0 0 0 0 0Net income available to common shareholders 166 798 1,682 1,542 1,679 1,623 1,640 1,598

Ending Basic # Shares Outstanding (in thousands) 453,290             424,416            401,821            402,243      402,681      403,119      403,556      403,992     Basic EPS 0.37 1.81 4.05 3.83 4.17 4.03 4.06 3.95Dividends per Share 0.50 0.66 0.78 0.78 0.80 0.80 0.80 0.80

The Hartford Financial Services Group, Inc.Cash Flow Statement (in millions)

Fiscal Years Ending Dec. 31 2013 2014 2015Operating Activities

Net income (loss) 176 798 1,682Adjustments to reconcile net income (loss) to net cash provided by operating activities

Amortization of deferred policy acquisition costs and present value of future profits 2,701 1,729 1,502Additions to deferred policy acquisition costs and present value of future profits (1,330) (1,364) (1,390)

Change inReserve for future policy benefits, unpaid losses and loss adjustment expenses and unearned premiums (308) 226 305Reinsurance recoverables (561) (22) 146Receivables (409) (122) 183Payables and accruals 497 (937) (704)Accrued and deferred income taxes (526) 328 363Net realized capital losses (1,149) 141 156Net (increase) decrease in equity securities, held for trading 9,188 3,993 0Net receipts (disbursements) from investment contracts credited to policyholder funds —International variable annuities associated with equity securities, held for trading (9,189) (3,993) 0

Goodwill impairment 1,574 (23) (28)Depreciation and amortization 189 276 373Other, net 384 856 168

Net cash provided by operating activities 1,237 1,886 2,756

Investing ActivitiesProceeds from the sale/maturity/prepayment of:

Fixed maturities, available‐for‐sale, including short‐term investments 40,588 25,710 26,127Equity securities, available‐for‐sale, fair value 274 354 1,319Mortgage loans 468 646 792Partnerships 368 490 624

Payments for the purchase of:Fixed maturities, available‐for‐sale, including short‐term investments (35,596) (22,914) (27,995)Equity securities, available‐for‐sale (212) (683) (1,454)Mortgage loans (718) (604) (870)Partnerships (353) (312) (620)

Change in policy loans, net (5) (11) (30)Change in payables for collateral under securities lending, net 0 0 0Derivative receipts (payments) (2,208) 10 (173)Change in all other securities, net 388 (1,832) 3,072Purchase price adjustment of business acquired 0 0 0Sale of subsidiary, net of cash transferred 815 963 0Additions to property and equipment, net (64) (121) (307)

Net cash used for investing activities 3,745 1,696 485

Financing ActivitiesDeposits and other additions to investment and universal life‐type contracts 5,942 5,289 4,718Withdrawals and other deductions from investment and universal life‐type contracts (25,034) (21,870) (17,085)Net transfers from (to) separate accounts related to investment and universal life‐type contracts 16,978 14,366 11,046Issuance of shares from equity unit contracts 0 0 0Issuance of long‐term debt 533 0 0Repayment/maturity of long‐term debt and on capital lease obligations (1,338) (200) (773)Change in short‐term debt 0 0 0Issuance of convertible preferred shares 0 0 0Issuance of warrants (33) 0 0Proceeds from issuance of consumer notes 0 0 0Repayments of consumer notes (77) (13) (33)Proceeds from issuances of shares under incentive and stock compensation plans, and excess tax benefit 20 30 42Treasury stock acquired (600) (1,796) (1,250)Return of shares under incentive and stock compensation plans to treasury stock 0 0 0Redemption of preferred stock issued to the U.S. Treasury 0 0 0Net proceeds from issuance of common shares under public offering 0 0 0Net proceeds from issuance of common shares under discretionary equity issuance plan 0 0 0Changes in bank deposits and payments on bank advances 0 0 0Net increase (decrease) in securities loaned or sold under agreements to repurchase (1,988) 0 507Dividends paid (223) (282) (316)

Net cash used for financing activities (5,820) (4,476) (3,144)

Foreign Exchange Rate Effect on Cash (155) (135) (48)Net Change in Cash (993) (1,029) 49Beginning Cash 2,421 1,428 399Ending Cash 1,428 399 448

The Hartford Financial Services Group, Inc.Cash Flow Statement (in millions)

Fiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020EOperating Activities

Net income (loss) 1,542 1,679 1,623 1,640 1,598Deferred policy acquisition costs (4) 2 (1) 0 (0)Change in

Reserve for future policy benefits, unpaid losses and loss adjustment expenses (293) 53 68 5 (8)Unearned premiums (139) 5 21 10 5Reinsurance recoverables 135 (67) 34 (17) 8Receivables 53 (8) 10 (3) (11)Deferred income taxes, net 549 (252) (193) 148 (11)Net (increase) decrease in equity securities, held for trading 0 0 0 0 0Other policyholder funds & benefits payable 431 (216) 108 (54) 27Other policyholder funds & benefits payable ‐ int'l VA's 0 0 0 0 0Goodwill impairment 0 0 0 0 0Other, net (565) 282 (141) 71 (35)

Net cash provided by operating activities 1,711 1,479 1,529 1,800 1,573

Investing ActivitiesChange in Fixed maturities (87) 43 (22) 11 (5)Change in Equity securities, AFS 152 (10) (18) (26) 5Change in Mortgage loans (219) (23) 169 (20) (32)Change in policy loans 8 (4) 2 (1) 1Change in Partnerships and  other alternative investments (7) (70) 13 21 5Change in other investments (208) 104 (52) 26 (13)Change in short‐term investments (1,520) 760 (380) 190 (95)Additions to property and equipment, net 36 18 12 (6) (17)

Net cash used for investing activities (1,845) 819 (276) 194 (152)

Financing ActivitiesNet transfers from (to) separate accounts related to investment and universal life‐type contracts 0 0 0 0 0Issuance of preferred stock 0 0 0 0 0Total Debt 375 (188) 94 (47) 23Treasury stock acquired (1,300) (636) (720) (814) (921)Common Stock + APIC 284 284 284 284 284Dividends paid (314) (323) (324) (324) (324)

Net cash used for financing activities (955) (863) (666) (901) (938)

Foreign Exchange Rate Effect on Cash 0 0 0 0 0Net Change in Cash (1,088) 1,435 587 1,093 483Beginning Cash 448 (640) 794 1,382 2,475Ending Cash (640) 794 1,382 2,475 2,958

The Hartford Financial Services Group, Inc.Balance Sheet (in millions)

Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Cash 1,428 399 448 (640) 794 1,382 2,475 2,958Fixed Maturities 63,201 59,872 59,699 59,786 59,742 59,764 59,753 59,758Equity securities, AFS 868 1,047 1,121 969 979 997 1,023 1,018Mortgage loans 5,598 5,556 5,624 5,843 5,866 5,698 5,717 5,750Policy loans 1,420 1,431 1,447 1,439 1,443 1,441 1,442 1,442Limited partnerships and other alternative investments 3,040 2,942 2,874 2,881 2,950 2,937 2,917 2,912Other investments 521 536 120 328 224 276 250 263Short‐term investments 4,008 4,883 1,843 3,363 2,603 2,983 2,793 2,888Equity securities, trading 19,745 11 0 0 0 0 0 0Premiums receivable and agents' balances, net 3,465 3,429 3,537 3,484 3,491 3,481 3,484 3,496Reinsurance recoverables, net 23,330 22,920 23,189 23,055 23,122 23,088 23,105 23,097Deferred policy acquisition costs 2,161 1,823 1,816 1,820 1,818 1,819 1,818 1,818Deferred income taxes, net 3,840 2,897 3,206 2,657 2,908 3,102 2,954 2,965Goodwill 498 498 498 498 498 498 498 498Property and equipment, net 877 831 974 938 919 908 914 931Other assets 2,998 1,236 1,829 2,221 2,025 2,123 2,074 2,098Separate account assets 140,886 134,702 120,123 127,413 123,768 125,590 124,679 125,135Total Assets 277,884 245,013 228,348 236,052 233,152 236,086 235,896 237,025

Reserve for future policy benefits and unpaid losses and loss adjustment losses 41,373 41,444 41,572 41,279 41,332 41,400 41,406 41,398Other policyholder funds & benefits payable 39,029 32,532 31,670 32,101 31,886 31,993 31,939 31,966Other policyholder funds & benefits payable ‐ int'l VA's 19,734 0 0 0 0 0 0 0Unearned premiums 5,225 5,255 5,385 5,246 5,251 5,273 5,282 5,287total debt 6,544 6,109 5,359 5,734 5,547 5,640 5,593 5,617other liabilities 6,188 6,251 6,597 6,424 6,511 6,467 6,489 6,478Separate account liabilities 140,886 134,702 120,123 127,413 123,768 125,590 124,679 125,135Total Liabilities 258,979 226,293 210,706 218,197 214,294 216,364 215,388 215,881

Preferred Stock 0 0 0 0 0 0 0 0Common Stock + APIC 9,899  9,128  8,978  9,262  9,546  9,831  10,115  10,399 Retained Earnings 10,683  11,191  12,550  13,778  15,134  16,434  17,750  19,023 Accumulated other comprehensive income (loss), net of tax (79) 928  (329) (329) (329) (329) (329) (329)Treasury Stock (1,598) (2,527) (3,557) (4,857) (5,493) (6,213) (7,027) (7,948)Total Shareholders' Equity 18,905 18,720 17,642 17,855 18,858 19,722 20,508 21,144Total Liabilities & Shareholders' Equity 277,884 245,013 228,348 236,052 233,152 236,086 235,896 237,025

Assets

Liabilities & Shareholders' Equity

The Hartford Financial Services Group, Inc.Income Statement

Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020ERevenuesEarned Premiums 4.43% 4.80% 5.54% 6.03% 5.85% 5.95% 5.92% 5.98%Fee income 0.71% 0.72% 0.75% 0.77% 0.74% 0.75% 0.74% 0.75%Net investment income 1.09% 1.14% 1.24% 1.35% 1.29% 1.33% 1.31% 1.31%Net realized capital gains 0.60% 0.01% ‐0.06% 0.00% 0.00% 0.00% 0.00% 0.00%Other revenues 0.09% 0.04% 0.04% 0.10% 0.10% 0.10% 0.10% 0.10%

Total revenues 6.93% 6.70% 7.50% 8.25% 7.98% 8.13% 8.07% 8.13%Benefits, losses, and expensesBenefits, losses, and loss adjustment expenses 83.50% 81.02% 79.36% 80.19% 79.78% 79.98% 79.88% 79.93%Amortization of deferred policy acquisition costs and PV of future profits 13.56% 12.96% 11.06% 12.01% 11.54% 11.78% 11.66% 11.72%Insurance operating costs and other expenses 31.56% 30.20% 27.78% 28.99% 28.39% 28.69% 28.54% 28.61%Loss on extinguishment of debt 0.07% 0.00% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%Goodwill imparement 0.53% ‐0.01% ‐0.01% 0.00% 0.00% 0.00% 0.00% 0.00%Other expense 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Interest expense 0.13% 0.14% 0.15% 0.14% 0.14% 0.14% 0.14% 0.14%

Total benefits, losses, and expenses 6.43% 6.09% 6.69% 7.45% 7.14% 7.30% 7.25% 7.33%Income from continuing operations before income tax 0.49% 0.61% 0.81% 0.80% 0.84% 0.82% 0.82% 0.80%

Income tax expense 0.08% 0.13% 0.12% 0.12% 0.13% 0.13% 0.13% 0.12%Income from continuing operations, net of tax 0.41% 0.49% 0.68% 0.68% 0.71% 0.70% 0.69% 0.68%

Income from discontinued operations, net of tax ‐0.35% ‐0.20% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Net income 0.06% 0.29% 0.69% 0.68% 0.71% 0.70% 0.69% 0.68%

Preferred stock dividends 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Net income available to common shareholders 0.06% 0.29% 0.69% 0.68% 0.71% 0.70% 0.69% 0.68%

The Hartford Financial Services Group, Inc.Balance Sheet (in millions)

Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Cash 0.51% 0.16% 0.20% ‐0.27% 0.34% 0.59% 1.05% 1.25%Fixed Maturities 22.74% 24.44% 26.14% 25.33% 25.62% 25.31% 25.33% 25.21%Equity securities, AFS 0.31% 0.43% 0.49% 0.41% 0.42% 0.42% 0.43% 0.43%Mortgage loans 2.01% 2.27% 2.46% 2.48% 2.52% 2.41% 2.42% 2.43%Policy loans 0.51% 0.58% 0.63% 0.61% 0.62% 0.61% 0.61% 0.61%Limited partnerships and other alternative investments 1.09% 1.20% 1.26% 1.22% 1.27% 1.24% 1.24% 1.23%Other investments 0.19% 0.22% 0.05% 0.14% 0.10% 0.12% 0.11% 0.11%Short‐term investments 1.44% 1.99% 0.81% 1.42% 1.12% 1.26% 1.18% 1.22%Equity securities, trading 7.11% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Premiums receivable and agents' balances, net 1.25% 1.40% 1.55% 1.48% 1.50% 1.47% 1.48% 1.47%Reinsurance recoverables, net 8.40% 9.35% 10.16% 9.77% 9.92% 9.78% 9.79% 9.74%Deferred policy acquisition costs 0.78% 0.74% 0.80% 0.77% 0.78% 0.77% 0.77% 0.77%Deferred income taxes, net 1.38% 1.18% 1.40% 1.13% 1.25% 1.31% 1.25% 1.25%Goodwill 0.18% 0.20% 0.22% 0.21% 0.21% 0.21% 0.21% 0.21%Property and equipment, net 0.32% 0.34% 0.43% 0.40% 0.39% 0.38% 0.39% 0.39%Other assets 1.08% 0.50% 0.80% 0.94% 0.87% 0.90% 0.88% 0.89%Separate account assets 50.70% 54.98% 52.61% 53.98% 53.08% 53.20% 52.85% 52.79%Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Reserve for future policy benefits and unpaid losses 14.89% 16.92% 18.21% 17.49% 17.73% 17.54% 17.55% 17.47%Other policyholder funds & benefits payable 14.05% 13.28% 13.87% 13.60% 13.68% 13.55% 13.54% 13.49%Other policyholder funds & benefits payable ‐ int'l VA's 7.10% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Unearned premiums 1.88% 2.14% 2.36% 2.22% 2.25% 2.23% 2.24% 2.23%total debt 2.35% 2.49% 2.35% 2.43% 2.38% 2.39% 2.37% 2.37%other liabilities 2.23% 2.55% 2.89% 2.72% 2.79% 2.74% 2.75% 2.73%Separate account liabilities 50.70% 54.98% 52.61% 53.98% 53.08% 53.20% 52.85% 52.79%Total Liabilities 93.20% 92.36% 92.27% 92.44% 91.91% 91.65% 91.31% 91.08%

Preferred Stock 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Common Stock + APIC 3.56% 3.73% 3.93% 3.92% 4.09% 4.16% 4.29% 4.39%Retained Earnings 3.84% 4.57% 5.50% 5.84% 6.49% 6.96% 7.52% 8.03%Accumulated other comprehensive income (loss), net of tax ‐0.03% 0.38% ‐0.14% ‐0.14% ‐0.14% ‐0.14% ‐0.14% ‐0.14%Treasury Stock ‐0.58% ‐1.03% ‐1.56% ‐2.06% ‐2.36% ‐2.63% ‐2.98% ‐3.35%Total Shareholders' Equity 6.80% 7.64% 7.73% 7.56% 8.09% 8.35% 8.69% 8.92%Total Liabilities & Shareholders' Equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Assets

Liabilities & Shareholders' Equity

The Hartford Financial Services Group, Inc.Revenue Decomposition

Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020EEarned premiums, fees, and other considerationsCommercial LinesWorkers’ compensation 2,975 2,971 3,051        3,129        3,184        3,240        3,296        3,354        Property 521 559 637            653            665            676            688            700            Automobile 579 591 614            630            641            652            663            675            Package business 1,139 1,163 1,203        1,234        1,255        1,277        1,300        1,323        Liability 566 582 567            582            592            602            613            623            Bond 201 210 218            224            228            231            236            240            Professional liability 222 213 221            227            231            235            239            243            

Total Commercial Lines 6,203 6,289 6,511        6,678        6,795        6,914        7,035        7,158        

Personal LinesAutomobile 2,522 2,613 2,671        2,748        2,811        2,877        2,943        3,012        Homeowners 1,138 1,193 1,202        1,237        1,265        1,295        1,325        1,355        

Total Personal Lines 3,660 3,806 3,873        3,984        4,077        4,171        4,268        4,367        

Group BenefitsGroup disability 1,452 1,450 1,479        1,392        1,302        1,222        1,162        1,111        Group life 1,717 1,478 1,477        1,390        1,300        1,220        1,161        1,110        Other 161 167 180            169            158            149            141            135            

Total Group Benefits 3,330 3,095 3,136        2,951        2,760        2,590        2,465        2,356        

Mutual FundsMutual Fund 520 586 607            632            645            665            682            701            Talcott 148 137 116            121            123            127            130            134            

Total Mutual Funds 668 723 723            753            768            792            812            835            

Property & Casualty Other Operations 1 1 32 26 22 18 15 12Talcott Resolution 1,463 1,407 1133 1133 1133 1133 1133 1133Corporate 11 11 8 7 5 5 4 3Individual Annuity/Life/Retirement Plans/Other operations 0 0 0 0 0 0 0 0

Total earned premiums, fees, and other considerations 15,336 15,332 15,416      15,532      15,560      15,623      15,731      15,864      

Fixed maturities 2,552 2,420 2,409 2,390 2,378 2,402 2,399 2,396Equity securities, AFS 30 38 25 33 33 32 33 31Mortgage loans 260 265 267 281 281 271 273 275Policy loans 83 80 82 85 84 83 83 83Limited partnerships and other alternative investments 287 294 227 250 251 262 257 249Other investments 167 179 138 141 110 151 148 169Investment expenses (115) (122) (118) (105) (89) (109) (107) (118)

Total securities AFS and other 3,264 3,154 3,030 3,077        3,047        3,091        3,085        3,085        Equity securities, trading 0 0 0 0 0 0 0 0

Total net investment income 3,264 3,154 3,030        3,077        3,047        3,091        3,085        3,085        

Net realized capital gains 1,798 16 (156) 0 0 0 0 0Other revenues 275 112 87              234            235            236            238            240            

Total Revenues 20,673 18,614 18,377 18,843      18,842      18,950      19,054      19,190      2.08% 0.84% 1.70%

Key Growth RateTotal Commercial Lines ‐0.89% 1.39% 3.53% 2.57% 1.75% 1.75% 1.75% 1.75%Total Personal Lines 0.66% 3.99% 1.76% 2.87% 2.32% 2.32% 2.32% 2.32%Total Group Benefits ‐12.60% ‐7.06% 1.32% ‐5.90% ‐6.47% ‐6.14% ‐4.85% ‐4.41%Total Mutual Funds 6.71% 8.23% 0.00% 4.12% 2.06% 3.09% 2.57% 2.83%Total Other considerations ‐48.66% ‐3.80% ‐17.34% ‐17.34% ‐17.34% ‐17.34% ‐17.34% ‐17.34%

Total earned premiums, fees, and other considerations ‐10.86% ‐0.03% 0.55% 0.75% 0.18% 0.40% 0.69% 0.85%Total net investment income ‐20.91% ‐3.37% ‐3.93% 1.55% ‐0.96% 1.42% ‐0.19% 0.01%Other revenue 6.59% ‐59.27% ‐22.32% 169.26% 0.23% 0.47% 0.78% 0.93%Total Revenues ‐6.40% ‐9.96% ‐1.27% 2.54% 0.00% 0.57% 0.55% 0.71%

Yield %Fixed maturities 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%Equity securities, AFS 3.5% 3.6% 2.2% 3.5% 3.4% 3.2% 3.2% 3.1%Mortgage loans 4.6% 4.8% 4.7% 4.8% 4.8% 4.8% 4.8% 4.8%Policy loans 5.8% 5.6% 5.7% 5.9% 5.8% 5.8% 5.7% 5.8%Limited partnerships and other alternative investments 9.4% 10.0% 7.9% 8.7% 8.5% 8.9% 8.8% 8.6%Other investments 32.1% 33.4% 115.0% 43.1% 49.2% 54.5% 59.0% 64.2%Short‐term investments ‐2.9% ‐2.5% ‐6.4% ‐3.1% ‐3.4% ‐3.7% ‐3.8% ‐4.1%

Total securities AFS and other 4.1% 4.1% 4.2% 4.1% 4.1% 4.2% 4.2% 4.2%Equity securities, trading 0.0% 0.0%

Total investment 3.3% 4.1% 4.2% 4.1% 4.1% 4.2% 4.2% 4.2%

Investment Amount $Fixed maturities 63,201 59,872 59,699 59,786 59,742 59,764 59,753 59,758Equity securities, AFS 868 1,047 1,121 969 979 997 1,023 1,018Mortgage loans 5,598 5,556 5,624 5,843 5,866 5,698 5,717 5,750Policy loans 1,420 1,431 1,447 1,439 1,443 1,441 1,442 1,442Limited partnerships and other alternative investments 3,040 2,942 2,874 2,881 2,950 2,937 2,917 2,912Other investments 521 536 120 328 224 276 250 263Short‐term investments 4,008 4,883 1,843 3,363 2,603 2,983 2,793 2,888

Total securities AFS and other 78,656 76,267 72,728 74,609 73,808 74,096 73,895 74,030Equity securities, trading 19,745 11 0 0 0 0 0 0

Total net investment amount 98,401 76,278 72,728 74,609 73,808 74,096 73,895 74,030

The Hartford Financial Services Group, Inc.Value Driver Estimation (in millions)

Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020ENet Premium Income 13,231 13,336 13,577 13,770 13,803 13,867 13,975 14,106+ Fee Income 2,105 1,996 1,839 1,762 1,758 1,756 1,756 1,759‐ Amortization of deferred policy acquisition costs and PV of future profits 1,794 1,729 1,502 1,654 1,593 1,633 1,629 1,653‐ Benefits, losses, and loss adjustment expenses 11,048 10,805 10,775 11,043 11,011 11,092 11,163 11,275+ Increase in Insurance Liabilities & Reserves 381 71 128 (293) 53 68 5 (8)

Net Insurance Income 2,875 2,869 3,267 2,543 3,009 2,966 2,944 2,929+ Net investment income 3,264 3,154 3,030 3,077 3,047 3,091 3,085 3,085+ Income from discountinued operations, net of tax (1,049) (551) 9 0 0 0 0 0+ Other revenues 2,073 128 (69) 234 235 236 238 240‐ Other expense 5,963 4,005 3,765 3,992 3,918 3,979 3,988 4,036‐ Interest expense 397 376 357 331 335 327 334 337‐ Income tax expense 246 350 305 281 306 296 299 291

Net Income 557 869 1,810 1,250 1,732 1,691 1,645 1,590+ Capital Gains 0 0 0 0 0 0 0 0+ Extraordinary Items 0 0 0 0 0 0 0 0‐ Preferred Dividends 10 0 0 0 0 0 0 0‐ Minority Interest 0 0 0 0 0 0 0 0

Cash from Operations 547 869 1,810 1,250 1,732 1,691 1,645 1,590

Increase in Accounts Payable (12,138) (26,231) (862) 431 (216) 108 (54) 27+ Increase in Debt (582) (435) (750) 375 (188) 94 (47) 23+ Increase in Other Liabilities (4,748) (6,091) (14,103) 6,978 (3,553) 1,800 (880) 450+ Increase in Preferred Stock (556) 0 0 0 0 0 0 0

Sources of Cash (18,024) (32,757) (15,715) 7,784 (3,956) 2,002 (981) 501

Increase in Investments and Cash (36,842) (23,152) (3,501) 793 634 875 893 618+ Increase in Accounts Receivable (77) (36) 108 (53) 8 (10) 3 11+ Increase in Fixed Assets (100) (46) 143 (36) (18) (12) 6 17+ Increase in Deferred Acquisition Costs (3,564) (338) (7) 4 (2) 1 (0) 0+ Increase in Other Assets 19,954 (9,299) (13,408) 6,997 (3,522) 2,080 (1,091) 483+ Increase in Unearned Premium Reserve and Other Provisions 0 0 1 2 3 4 5 6

Uses of Cash (20,629) (32,871) (16,664) 7,706 (2,897) 2,938 (184) 1,135

Cash from Operations 547 869 1,810 1,250 1,732 1,691 1,645 1,590+ Sources of Cash (18,024) (32,757) (15,715) 7,784 (3,956) 2,002 (981) 501‐ Uses of Cash (20,629) (32,871) (16,664) 7,706 (2,897) 2,938 (184) 1,135

FCFE Formal 3,152 983 2,759 1,328 673 755 849 955

Net Income 557  869  1,810  1,250  1,732  1,691  1,645  1,590 Total Shareholders Equity (Beginning) 22,447  18,905  18,720  17,642  17,855  18,858  19,722  20,508 

Return on Equity 2.48% 4.60% 9.67% 7.08% 9.70% 8.97% 8.34% 7.75%

Net Income 557 869 1,810 1,250 1,732 1,691 1,645 1,590+ ∆ in Total Liabilities (17,087) (32,686) (15,587) 7,491 (3,904) 2,070 (975) 493‐ ∆ in Total Assets (20,629) (32,871) (16,665) 7,704 (2,900) 2,934 (189) 1,129

FCFE Simple 4,099 1,054 2,888 1,037 728 827 860 953

Total Shareholders Equity (Beginning) 22,447 18,905 18,720 17,642 17,855 18,858 19,722 20,508Return on Equity 2.48% 4.60% 9.67% 7.08% 9.70% 8.97% 8.34% 7.75%Cost of Equity 7.94% 7.94% 7.94% 7.94% 7.94% 7.94% 7.94% 7.94%

Equity EP (1,225) (632) 324 (151) 314 194 80 (38)

The Hartford Financial Services Group, Inc.Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Inputs:     CV Growth 3.00%     CV ROE 7.75%     Cost of Equity 7.94%

Beta 1.048Risk‐Free Rate 2.70%Equity Risk Premium 5.00%

Fiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020E

DCF ModelFCFE 1,328  673  755  849  955 Terminal Value 19,729 Discount Factor 1.08  1.16  1.25  1.35  1.35 Discounted FCFE 1,232  579  604  630 Discounted Terminal Value 14,635Present Value of Equity DCF 17,680‐ ESOP 34Net Value 17,646Shares Outstanding 401,821

Value per Share 43.92$       

EP ModelEquity Economic Profit (151) 314 194 80 (38)Terminal Value (779)Discount Factor 1.08 1.16 1.25 1.35 1.35Discounted Equity EP (140) 271 155 59Discounted Terminal Value (578)Present Value of Equity EP (234)Beg. Total Stockholders' Equity 18,720Equity Value 18,486‐ ESOP 34Net Value 18,452Shares Outstanding 401,821

Value per Share 45.92$       

The Hartford Financial Services Group, Inc.Relative Valuation Models

EPS EPSTicker Company Price 2016E 2017E P/E 16 P/E 17 P/BV P/TBVALL The Allstate Corporation $64.32 $5.45  $6.26  11.8         10.3        1.29 1.39TRV The Travelers Companies $108.46 $9.73  $9.96  11.1         10.9        1.42 1.69PGR Progressive Corporation $32.11 $1.98  $2.12  16.2         15.1        2.55 2.92AIG American International Group $51.09 $4.85  $5.89  10.5         8.7          0.83 0.84CNA CNA Financial Corporation $28.97 $3.04  $3.30  9.5           8.8          0.81 0.82XL XL Group Plc $34.38 $3.12  $3.94  11.0         8.7          0.85 1.01IPCC Infinity P&C Corp. $76.99 $4.70  $5.18  16.4         14.9        1.33 1.50ACGL Arch Capital Group Ltd. $67.94 $4.12  $4.29  16.5         15.8        1.45 1.48Y Alleghany Corporation $466.04 $28.00  $28.65  16.6         16.3        0.98 1.03

Average 13.3        12.2       1.28 1.41

HIG The Hartford Financial Services Group, Inc. $42.83 $3.83  $4.17  11.2         10.3        0.95 0.97$4.04  $4.43  10.6         9.7         

Implied Value:   Relative P/E (EPS16) $    51.02    Relative P/E (EPS17) 50.72$      P/BV 57.66$      P/TBV 62.21$   

The Hartford Financial Services Group, Inc.Dividend Discount Model (DDM) or Fundamental P/E Valuation Model

Fiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020EKey Assumptions   CV growth 3.00% 3.50%   CV ROE 7.75% 7.27%   Cost of Equity 7.94% 11.34%

Beta 1.048Risk‐Free Rate 2.70%Equity Risk Premium 5.00%

  CV P/E Multiple 12.41  CV EPS 3.95$     Dividend Discount Model

Dividends per Share 0.78 0.80 0.80 0.80Terminal Value 49.07Discount Factor 1.08 1.16 1.25 1.35 1.35Discounted Values 0.72 0.69 0.64 0.60 36.40

Present Value DDM 39.06$    

The Hartford Financial Services Group, Inc.Key Management Ratios

Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Liquidity RatiosCurrent Assets 40,093           20,234      17,014      17,667      18,352      19,195      20,101      20,725     Current Liabilities 105,361         79,231      78,627      78,627      78,469      78,666      78,627      78,652     

Current Ratio 38.05% 25.54% 21.64% 22.47% 23.39% 24.40% 25.57% 26.35%

Current Assets 24,638           3,839        3,985        2,843        4,286        4,863        5,959        6,453       Current Liabilities 105,361         79,231      78,627      78,627      78,469      78,666      78,627      78,652     

Quick Ratio 23.38% 4.85% 5.07% 3.62% 5.46% 6.18% 7.58% 8.21%

Cash & Cash Equivalents 1,428             399           448           (640)          794           1,382        2,475        2,958       Current Liabilities 105,361         79,231      78,627      78,627      78,469      78,666      78,627      78,652     

Cash Ratio 1.36% 0.50% 0.57% ‐0.81% 1.01% 1.76% 3.15% 3.76%

Activity or Asset‐Management RatiosExpenses 4,176 4,028 3,772 3,992 3,918 3,979 3,988 4,036Earned Premiums 15,336 15,332 15,416 15,532 15,560 15,623 15,731 15,864

Expense Ratio 27.23% 26.27% 24.47% 25.70% 25.18% 25.47% 25.35% 25.44%

Net Investment Income 3,264 3,154 3,030 3,077 3,047 3,091 3,085 3,085Total Investments 98,401 76,278 72,728 74,609 73,808 74,096 73,895 74,030

Return on Investments 3.32% 4.13% 4.17% 4.12% 4.13% 4.17% 4.17% 4.17%

Net Income 176 798 1,682 1,542 1,679 1,623 1,640 1,598Average Total Assets 288,199 261,449 236,681 232,200 234,602 234,619 235,991 236,461

Return on Assets 0.06% 0.31% 0.71% 0.66% 0.72% 0.69% 0.69% 0.68%

Financial Leverage RatiosTotal Debt 6,544 6,109 5,359 5,734 5,547 5,640 5,593 5,617Total Assets 277,884 245,013 228,348 236,052 233,152 236,086 235,896 237,025

Debt Ratio 2.35% 2.49% 2.35% 2.43% 2.38% 2.39% 2.37% 2.37%

Total Liabilities 6,544 6,109 5,359 5,734 5,547 5,640 5,593 5,617Shareholder's Equity 18,905 18,720 17,642 17,855 18,858 19,722 20,508 21,144

Debt‐to‐Equity Ratio 34.62% 32.63% 30.38% 32.12% 29.41% 28.60% 27.27% 26.56%

Profitability RatiosIncurred Losses and Expenses 15,224 14,833 14,547 15,035 14,930 15,070 15,152 15,311Earned Premiums 15,336 15,332 15,416 15,532 15,560 15,623 15,731 15,864

Combined Ratio 99.27% 96.75% 94.36% 96.80% 95.95% 96.46% 96.32% 96.51%

Net Income 176 798 1,682 1,542 1,679 1,623 1,640 1,598Revenue 20,673 18,614 18,377 18,843 18,842 18,950 19,054 19,190

Return on Revenue 0.85% 4.29% 9.15% 8.18% 8.91% 8.57% 8.61% 8.32%

Net Income 176 798 1,682 1,542 1,679 1,623 1,640 1,598Beginning TSE 22,447 18,905 18,720 17,642 17,855 18,858 19,722 20,508

Return on Equity 0.78% 4.22% 8.99% 8.74% 9.41% 8.61% 8.32% 7.79%

Payout Policy RatiosDividends per Common Share 0.50 0.66 0.78 0.78 0.80 0.80 0.80 0.80Earnings per Share 0.37 1.81 4.05 3.83 4.17 4.03 4.06 3.95

Dividend Payout Ratio 135.14% 36.46% 19.26% 20.35% 19.26% 19.94% 19.76% 20.31%

The Hartford Financial Services Group, Inc.Sensitivity Analysis

CV Return on EquityImpact on Equity DCF Value 43.92$     5.00% 6.00% 7.00% 7.75% 8.00% 8.50% 9.00%

6.5% 45.14 52.55 56.89 58.90 59.39 60.16 60.697.0% 40.49 46.95 50.73 52.47 52.90 53.56 54.027.5% 36.88 42.60 45.94 47.47 47.85 48.43 48.83

Cost of Equity 7.9% 34.30 39.49 42.53 43.92 44.25 44.77 45.138.5% 31.62 36.26 38.97 40.20 40.50 40.97 41.289.0% 29.64 33.89 36.36 37.48 37.75 38.17 38.459.5% 27.97 31.88 34.15 35.17 35.42 35.80 36.05

BetaImpact on Equity DCF Value 43.92$     0.90          0.95          1.00          1.05          1.10          1.15          1.20         

4.7% 53.28 50.69 48.39 46.39 44.44 42.74 41.194.8% 52.25 49.73 47.48 45.53 43.62 41.96 40.454.9% 51.27 48.81 46.61 44.70 42.84 41.22 39.74

Equity Risk Premium 5.0% 50.33 47.93 45.78 43.92 42.09 40.51 39.065.1% 49.43 47.08 44.98 43.16 41.38 39.82 38.415.2% 48.57 46.27 44.21 42.43 40.69 39.17 37.785.3% 47.74 45.49 43.48 41.74 40.03 38.54 37.18

Commercial Lines Growth Rate in 2016Impact on Equity DCF Value 43.92$     1.00% 1.50% 2.00% 2.57% 3.00% 3.50% 4.00%

1.5% 45.16 44.95 44.74 44.50 44.32 44.10 43.892.0% 44.95 44.74 44.53 44.29 44.11 43.89 43.682.5% 44.74 44.53 44.32 44.08 43.89 43.68 43.46

Personal Lines Growth Rate in 2016 2.9% 44.58 44.37 44.16 43.92 43.73 43.52 43.303.5% 44.30 44.09 43.88 43.64 43.46 43.24 43.024.0% 44.08 43.87 43.66 43.42 43.23 43.02 42.804.5% 43.86 43.65 43.44 43.19 43.01 42.79 42.57

Benefits and Losses Expense RateImpact on Equity DCF Value 43.92$     70.00% 72.00% 77.00% 80.19% 85.00% 88.00% 90.00%

20.0% 85.37 81.48 71.36 64.59 53.78 46.70 41.9824.0% 77.50 73.43 62.82 55.66 44.35 37.31 32.4727.0% 71.36 67.15 56.09 48.61 37.31 29.97 24.81

Operating Expense Rate 29.0% 67.17 62.84 51.45 43.92 32.49 24.84 19.4232.0% 60.61 56.09 44.35 36.86 24.81 16.58 10.6933.0% 58.37 53.78 41.98 34.45 22.14 13.68 7.6035.0% 53.78 49.06 37.31 29.49 16.58 7.60 1.08

CV Return on EquityImpact on Equity DDM Value 39.06$     5.00% 6.00% 7.00% 7.75% 8.00% 8.50% 9.00%

6.5% 40.01 47.51 51.95 54.03 54.54 55.36 55.947.0% 35.36 41.91 45.80 47.61 48.05 48.77 49.277.5% 31.74 37.56 41.01 42.61 43.01 43.64 44.08

Cost of Equity 7.9% 29.17 34.46 37.60 39.06 39.41 39.98 40.398.5% 26.49 31.24 34.04 35.35 35.67 36.18 36.549.0% 24.51 28.86 31.43 32.62 32.92 33.38 33.719.5% 22.85 26.86 29.22 30.32 30.59 31.01 31.31

VALUATION OF OPTIONS GRANTED IN ESOP

Ticker Symbol HIGCurrent Stock Price $42.83Risk Free Rate 2.70%Current Dividend Yield 1.82%Annualized St. Dev. of Stock Returns 21.96% 2015 Yahoo 21.37%

Number Average Average B‐S ValueRange of of Shares Exercise Remaining Option of OptionsOutstanding Options in thousands Price Life (yrs) Price GrantedRange 1 2,351 30.34 5.20 14.56$        34,224$       Total 2,351 30.34$        5.20 17.84$        34,224$      

Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding

Number of Options Outstanding (shares):  2,351Average Time to Maturity (years): 5.20Expected Annual Number of Options Exercised: 452

Current Average Strike Price: 30.34$         Cost of Equity: 7.94%Current Stock Price: $42.83

2016E 2017E 2018E 2019E 2020EIncrease in Shares Outstanding: 452 452 452 452 452Average Strike Price: 30.34$          30.34$          30.34$          30.34$          30.34$         Increase in Common Stock Account: 13,717          13,717          13,717          13,717          13,717         

Change in Treasury Stock 1,300 636 720 814 921Expected Price of Repurchased Shares: $42.83 46.23$          49.90$          53.86$          58.14$         Number of Shares Repurchased: 30                   14                   14                   15                   16                  

Shares Outstanding (beginning of the year) 401,821 402,243 402,681 403,119 403,556Plus: Shares Issued Through ESOP 452 452 452 452 452Less: Shares Repurchased in Treasury 30                   14                   14                   15                   16                  Shares Outstanding (end of the year) 402,243 402,681 403,119 403,556 403,992