Good morning. My name is Kamiko, and I'll be your conference operator today. At this time, I'd like to welcome everyone to The Hartford Third Quarter 2010 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to your host, Mr. Rick Costello. Sir, you may begin.

Thank you, Kamiko. Good morning, and thank you for joining us for The Hartford's Third Quarter 2010 Financial Results Conference Call. The earnings release and financial supplement were issued yesterday. Our slide presentation for today's call is available on the company's website at www.thehartford.com. Chief Executive Officer, Liam McGee; and Chief Financial Officer, Chris Swift, will provide prepared remarks this morning and we will finish with Q&A. Also participating on today's call are Dave Levenson, President of Wealth Management; Andy Napoli, President of Consumer Markets; Andy Pincus, Acting Head of Commercial Markets; Greg Mcgreevey, Chief Investment Officer; and Alan Kreczko, General Counsel. Turning to the presentation on Slide 2, please note that we will make certain statements during the call 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 the actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ, including those discussed in our press release issued yesterday, our 2010 quarterly reports on Form 10-Q, our 2009 annual report on Form 10-K and other filings we make with the Securities and Exchange Commission. We assume no obligation to update this presentation, which speaks as of today's date. Today's discussion of The Hartford's financial performance includes financial measures that are not derived from Generally Accepted Accounting Principles or GAAP. Information regarding these non-GAAP and other financial measures, including reconciliations to the most directly comparable GAAP measures, is provided in the investor financial supplement for the third quarter of 2010 and in the press release we issued yesterday, as well as on the company's website, all of which can be found at www.thehartford.com. Now, I will hand the call over to The Hartford's Chairman, President and CEO, Liam McGee.

Thank you, Rick. Good morning, everyone, and thank you for joining us today. Before we begin, I want to take a moment to remember JR Riley of The Hartford's Investor Relations team. As you probably heard, JR passed away unexpectedly a few weeks ago. I know many of you interacted with him on a regular basis. He was a valued and respected member of our team and a friend, and his untimely passing was truly tragic. We miss him. And his family remains in our thoughts and prayers. In the third quarter, we delivered strong financial results based on solid execution, receiving a lift from rising equity markets and light catastrophe losses. I am confident that we are on the path to delivering more predictable and consistent performance, as well as achieving the targets we set out in April. Core earnings were up 8% from last year at $710 million or $1.43 per diluted share. Net income was $666 million or $1.34 per diluted share. The investment portfolio improved significantly in the quarter. Chris will provide details but by almost any metric, the portfolio was substantially stronger than it was a year ago. While some of the improvement is due to lower interest rates and spread tightening, it also reflects the significant actions that Greg McGreevey and his team have taken to appropriately derisk the portfolio. Investment improvements helped drive book value per share to $45.80 on September 30, up 21% year-over-year and 11% sequentially. Our statutory surplus position increased about $700 million. During the quarter, we also put on additional equity and currency hedge protection to mitigate surplus volatility. We managed The Hartford surplus volatility with a combination of reinsurance and hedging programs and by holding appropriate amount of surplus capital. Over time, we will continue to reduce our…

Thank you, Liam. Good morning, everyone. Let's begin on Slide 4. The Hartford generated very strong third quarter results, with net income of $666 million or $1.34 per diluted share. Core earnings were $710 million or $1.43 per diluted share. These results were driven by the five following items: First, solid performance in most of our operating businesses; second, the DAC unlock benefit; third, favorable prior year development in our Property & Casualty businesses; fourth, positive returns on our alternative investments; and fifth, favorable caps. All-in book value at the end of September stood at $45.80, up 11% from the end of June and 21% over prior year. Diluted book value per share, excluding AOCI, grew 2% during the quarter to $41.72. Now, let's move to Slide 5 to discuss two new financial metrics that we are using internally to track progress against our strategic plan. They are adjusted core earnings and the expense efficiency ratio. Adjusted core earnings excludes significant one-time items, as well as the volatile items like prior year reserve development and DAC unlock. Making these adjustments will provide a clearer picture of the underlying profitability trend of our business. It will also serve as a baseline from which we will measure core earnings growth in future years. We've also quantified the efficiency ratio. As you will recall, at our April Investor Day, we set a goal of reducing our efficiency ratio of 200 basis points by the end of 2012. Now, let's discuss the numbers. Adjusted core earnings for the third quarter were $485 million or $0.98 per diluted share. This excludes two items. First, the DAC unlock and second, Property & Casualty prior year reserve development. The DAC unlock benefit's core earnings was $166 million. The majority of this benefit was driven by global equity…

Thank you, Chris. [Operator Instructions] Kamiko, please open the call for questions.

[Operator Instructions] And your first question is from Darin Arita at Deutsche Bank.

I had a question on first Slide 11, on the effective low interest rates and I was wondering how much of that is coming from lower investment income in the -- your Property & Casualty insurance businesses?

Darin, it's Chris. I do not split it out by Property & Casualty Life, but we did it more in the analysis in total. I mean, we could get that information to you but I don't have it split out right now between Property-Casualty and Life.

I guess, it's fair to assume that you're assuming pressure from that business, but you're not assuming any corresponding price changes to offset the low rate environment?

Well, again, it's from an in-force perspective. So it's sort of running off the in-force book and as you heard, we are trying to take pricing actions in most lines where appropriate. So I would bifurcate the analysis here. This is in-forced future pricing, we're trying to take that rate where appropriate.

And then just turning to the Group Benefits and P&C Commercial joint sales, Liam, I appreciate the data that you're giving out at the start of the call. Just curious what are the size of accounts that Hartford is targeting here for the joint sales and where do you think this can get to?

Well, initially, Darin, initially most of the cross sales tend to be at the higher end of the market. But as we go forward, we're very focused on the Middle Market. We think that as the highest potential for us and we're beginning to see interest there from agencies who have come to the same conclusion.

And the sales, where do you think that can get to $30 million now?

I'm not sure we're prepared to quantify it yet, Darin. I would say that we're very encouraged. The teams are working together very well. As I noted, agencies are -- see the wisdom of it. They're working with us not only to sort through how we deliver to them, but how they deliver to their customers. And we're very excited about it. I think the first stage is what we're talking about is the joint sales between our two sales forces. But we understand the next stage or iteration will be more about product innovation as well.

Your next question is from Chris Giovanni with Goldman Sachs.

Question for Chris. Do you think you could provide a bit more detail around the hedges you put on in terms of the global equity markets and the yen in terms of maybe potential around pricing, as well as the timing of those hedges?

Sure. I think we have pointed out is that we've been building our FX positions during the second and third quarter, working with risk management. Those positions were put on a different, obviously yen levels, dollar levels but I think we've built a substantial base of protection on currency. We've spent approximately $170 million run rate accumulative year-to-date on the program. If program expires -- most of it expires early 2011. We do anticipate putting on protection in '11. We're working through the exact strategy and the dynamics of that. We're trying to balance as we always said, risk, capital, earnings and do the right thing from a long-term shareholder perspective. So hopefully, that's enough detail to give you a feel for it.

I guess, different from some of the past calls where you provided sort of RBC estimates, I haven't seen that this quarter. Do you have an update in terms of where that stands and what you expect that to end the year?

The question is from RBC from our main life company, HLA, I would say that it's well north of four in the quarter on an estimated basis at this point in time.

Your next question comes from Nigel Dally of Morgan Stanley.

With the steps with volatility in hedging, can you discuss where you stand with regards to hedging interest rates on your global annuity book. Is that an area that's fully hedged or is that one of the areas where additional work is still needed to reduce the volatility going forward? Second with group disability, obviously still seeing weakness, but I understand, you're pushing through some relatively price increases, so can you provide an update on the renewal process? Are clients accepting the price increases or should we expect some estimated lapses as we look to 2011?

Nigel, it's Chris. I'll try to take the first one going forward. I think your question was on interest rates and surplus volatility. I would say again, if you look at our WB program, we do have some interest rate protection, let's say about at the 50% level. When you translate that into the statutory world VA CARVM, you don't have that significant volatility. So from an interest rate side, there isn't that much volatility on the VA CARVM. It does consume a little capital -- lower interest rate environment. So we just model different benefits and things and along those lines more from a valuation side, but not a hedging side. So hopefully that's clear.

Nigel, Andy Pincus. In terms of the competition and the rates that we're talking about taking, really, we believe that higher incident rates that we're seeing and lower termination rates are really a marketplace phenomenon, as well as the challenge that low interest rates are providing generally. So we are responding to those appropriately we believe. We're going to take price. We believe that the market is going to do the same as well. We'll see in 2011, but we expect to remain competitive and we will proceed forward and as we've said, we are seeing others seeing the same challenges and certainly interest rates are out there for them as well.

I guess, my question is more about the renewal process. You're largely through that prices now, so it would have been your action of clients. Is everyone sort of trying to push forward price or are you actually still keeping the client or is that the pushback from clients as to the prices that you're trying to push forward?

Well I think most of it, there's mix but I think we're seeing both. And so we're going to take these one at a time as we underwrite these and we're going to make the right judgment for us about what business is priced appropriately and what business we should walk away from.

Your next question is from Eric Berg at Barclays Capital.

You indicated that your -- in the annuity area, your Personal Retirement Manager continues not to meet your expectations. Can you describe what your domestic annuity strategy is going to be therefore? Since this one hasn't work, and since the existing guarantee-based products prior to this are essentially winding down, where do we go from here on the annuity business?

I'll make a comment and then Dave may want to make some comments on his own perspective. Eric, I would just go back to what I said in my remarks, which is we are candid and realistic about the performance of the PRM. For the factors that you and I both describe. Second of all, Dave and his team are hard at work on a go-forward annuity strategy and we anticipate that being a mix of products that will be suitable for various distributors and customers. As we said in April, the $5 billion was always a proportional guide as compared to the $15 billion plus that we did in our peak. We don't see ourselves playing at that level. And finally, as I said, we will not chase that target and seed either profitability or take undue risk. Dave, anything else you'd like to add?

I guess, what I would add is we're not going to be a single product provider on go-forward basis. So as we look at PRM, it did not work well in this macroeconomic environment. In a different environment, we think it may work quite well. But we do have the complement that with other products and that's really what's on the lab right now.

Your next question is from Edward Spehar with Bank of America.

On the DAC unlock and I think there was a comment made that the assumption changes were only about $15 million benefit. And that they were concentrated in a decrease in withdrawal rates assumed in the U.S. and an increase in annuitization in Japan. I guess, if that's correct, we're at a point now where it's a good if we have higher annuitization rates in Japan and the business is more persistent in the U.S., is that correct?

Ed, it's Chris. Your point, I would say, annuitizations in Japan are not a good thing. That keeps the risk that means people are in essence using the guarantee. So again, when we updated our assumptions, obviously we planned for that because they're just more in the money so you just call it behavioral assumptions, yet we had to update. That did sort of an and all in base, not only affecting core but that it was about a $52 million charge in DAC for that. It did also consume some statutory capital from a VA CARVM side when we made that change. Generally, in the U.S., we had been, I call it, assuming a, I call it a higher utilization rate and higher lapses, which we took down, which provided a benefit because less than the money, I call it balance more from the risk side greater, we'll earn more fee income over the longer period of time. That's why that turned out to be approximately a $58 million benefit all in on that assumption change.

The one follow up on interest rates is what type of negative impact do you see if you had a period of, a multi-year period beyond the next couple of years of rates where they are today with regard to the variable annuity guarantees? Or is that not a big deal?

I would say, multi-year is a big deal. I mean, we worry about interest rates that probably one of the key economic factors that -- I could tell you, I just haven't modeled it out and agreed to any detailed fashion at this point, but it's something we could talk about in the future.

Chris, just the idea that you hedged half of the WB on the interest rates, does it suggest that, that is not a -- when we say it's a bigger issue, is it just -- is it a really big issue or is it something that you obviously haven't been that worried about considering how much you've protected yourself?

I think we're just mixing and matching apples and oranges here. One, the WB program is obviously done for hedging purposes in 157 valuation purpose then you've got to look at the economics in the long term. And I would say, I mean, yes, it is an important factor that we'd look at and consider. So...

Your next question is from Larry Greenber at Langen McAlenney.

I'm wondering if you can give us a little bit more color on the reserve releases in Property-Casualty past quarters. Specialty seemed to be the biggest contributor to the releases and wondering if you could maybe give us a little bit of a breakdown between what we use to know of as the old segment and then on the consumer side, was that just the normal reserving process or was there anything more substantial that went into the look at reserves this quarter?

It's Andy Pincus. So on the Property-Casualty Commercial side, the thing I'd say is it really have been fairly broad-based across our markets. Small, commercial and middle market have seen in terms of the old segmentation have seen a fair amount. But again, I would say pretty broad-based they include workers comp, really general liability, auto, we have seen favorable severity in there and particularly I would say in our longtail lines and that's really where we've seen it.

We do break it out in some detail actually in the IFS (Investor Financial Supplement). There's actually a bunch of detail in there that shows it by segment, I believe.

And the consumer question? Consumer reserve releases?

Larry, this is Rick. On the consumer releases, that's primarily going to be out of the auto liability side.

But it was just the normal process for looking at the reserves this quarter? I mean, the number was more favorable than it's been running.

Yes, new process changes are seeing the emergence of severity coming out of that book.

And then I was just wondering if you could discuss on the consumer side the emphasis on preferred and are the agencies not giving or showing you the business you're not interested when it comes up for renewal? Are you just pricing yourself out of the market there? Just how is that process working?

Larry, this is Andy Napoli. I guess, I'll start with homeowners in this current year and going forward in 2011, we believe our pricing will increase in response to rising loss cost, both cat and non-cat and we'll be consistent with what's happening in the market. On the auto side, our plus eight is high, but not unexpected given the profitability actions we're taking in our agency channel. As far as what's happening at the agency level, we have introduced pretty strict underwriting guidelines that are driving that mixed shift that Liam referenced and Chris in their remarks. We're pushing our new business mix 40 plus is what we call it, accounts for 80% of that new business flow. As that continues to propagate itself within the renewal book, I think we'll be in a much better place going forward.

Your next question is from Andrew Kligerman with UBS.

With regard to the Group Benefits business, the 77% ratio there, I know you've got three-year products and it take a while to beat price, but when do you think you could get back to a more normal 70% level, 72% that you were at a few years ago? The second question is around the variable annuity comments that you made earlier. Liam, it sounds like you want to get back to that $5 billion target. Do you have some moving benefit products that you might launch pretty soon that could get you back into the game that might bring you in the near tern toward a $5 billion annualized rate? And then just lastly real quickly, what do you estimate to be your access of redeployable capital number at this stage in the game?

Thanks, Andrew. So in terms of the time, I'd say as you referenced a large portion of our book has three-year rate guarantees. And so we are going into the market with price based on our reaction to higher incidence and lower terminations and interest rate. And so it's going to take some time, probably the number of years to work completely through. But we're still working very diligently on the higher incidence and lowered termination piece, so we are taking actions there with regard to price. But we're also keenly focused from a claim perspective on making sure that our execution is absolutely good as it can be. And so we will continue to be very focused there. Obviously, with the goal of improving that ratio.

It sounds like you can gradually get it down over the next few years, but it should directionally come down from where it is now. Does that sound right?

That's our goal, for sure. This trend, if it's a trend at all, is new and so we're watching it. And so we're going to continue to watch it.

Andrew, to your question, I'm going to have Dave Levenson comment or answer your specific question. But again, I would just reiterate what I said both in April and today, the $5 billion was a proportional sense, it was a third of our peak and $15 billion and when we were market leader. That kind of gives you a sense of the appetite we have, but I would reemphasize that we will not chase that $5 billion with inappropriate risk or unacceptable profitability. Now Dave I know can share more about his specific thoughts.

So Andrew, as you know, it's very hard to pinpoint a number whether it's $5 billion or $4 billion or $6 billion. So what I would say to you is again, we are trying to build a rational portfolio of products kind of an all weather portfolio, if you will. We do have a couple of ideas as I said in the lab that do need a risk appetite, we think it's early. And also, we're not going to do anything as Liam said that is subpar from a profitability perspective.

David, do you think that you could come out with some products that will compete effectively with Lincoln and Prudential and that can be viewed in the same light?

So with respect to the competitors that you mentioned, there are some things that they do that are attracting flows for them that for us may not make sense. And all I would say is that it's just a little too early for us to comment a little bit further on that.

Andrew, it's Chris. On your excess capital position, I would state that similar to what we said in our opening comments, there's really no change in our capital management philosophy. Hopefully, you understood the points on improving credit offset by some modest yen and interest rate declines. So from where we were in our April capital raise numbers, I would say we're modestly ahead of those numbers. But there is general no philosophy change at this point in time.

Still a lot of economic uncertainty and market volatility, Andrew, that I think reinforces the position that Chris and I have articulated today.

Your next question is from Thomas Gallagher with Crédit Suisse. Thomas Gallagher - Crédit Suisse AG: First question is a follow up on the hedges you bought this quarter. What does that bring your 2011 sort of run rate hedge expenses to I think prior to 3Q, the number was $260 million. Where does that stand today?

Thomas, it's Chris. I think we had been talking about for the macro program was maybe about a $65 million run rate cost before that. You overlay the incremental FX positions we've been building during the second and third quarter. I put that at another $60 million run rate. So and again, as we said, the FX positions are short term in nature and expire first part of '11. So all in, you could say right now on a run rate basis, about $125 million a quarter. Thinking about '11, again, it's still trying to design the planned balance sheet and anything I would not be uncomfortable with sort of $100 million per quarter all in run rate cost for our macro hedging program in the short term. Right? Balancing what we might do in the long term. Thomas Gallagher - Crédit Suisse AG: So that's a decent run rate to think about moving ahead. The next question I had, Chris, it's just when you all did your DAC review, are you factoring the hedge cost in? When you look at the AGTs and evaluate future gross profits, are you assuming that the hedge cost is going to be continuing or is that not factored in?

I would say yes, we factored in a lot of things. If you're specifically referring to maybe our Japan derisking activities, those AGPs do not have I call it a defined hedging program associated with them at this point in time. Thomas Gallagher - Crédit Suisse AG: I guess, it's a question both on the U.S. and Japan. If you were to overlay kind of a forward-looking assumption that you're going to continue to hedge this, would that affect the way you look at reserves and DAC on these businesses? And I guess, in particular, in Japan, it sounds like it was a fairly modest charge. Are you pretty confident that the reserves in DAC are right sized now or is there still some uncertainty there?

Like we've been saying, Tom, the macro programs and the FX programs are short term in nature. So by definition, if we would extend anything for a longer period of time, we would consider baking that into our AGPs depending on how we define the program. U.S. maybe less sensitive, Japan maybe a little bit more so. But I would remind you, Japan we have about $1.7 billion of DAC. If I look out over the next five years, about 65% of that will just be amortized with our current methodologies and these factors. So it's not a long-duration asset there in Japan, that DAC asset.

And we have time for one more question and that is from John Nadel of Sterne Agee. John Nadel - Sterne Agee & Leach Inc.: On the waterfall slide on Slide #9 in your deck, that walks us through the $700 million change in capital in bank capital. Just two quick questions. One, the $200 million positive impact of credit related impacts, I just was hoping you could give us a little bit more detail there and I guess, I was under the impression that mark-to-market is not reflected on a statutory basis. So I assume is this equity positions or a trading account that's driving that? And then the second question also on the same slide, the $100 million reduction for Life third quarter statutory earnings, I think Chris you mentioned that was largely related to the fixed annuity business. Could you give us a sense for what the assumption impacts were there or how to think about that? Does that reset those reserves to current interest rate environment or is there more to take if we remain low?

John, I would say the credit related impact is primarily related to what I would call our CRC or market value adjusted annuity program, where assets we bought the assets and so there is a credit benefit there as spreads come in. And then on the statutory earnings, the negative, I would point out during the quarter, the headwinds that we faced, you alluded to one. We did record, call it increase in reserves, in the annuity line, about $300 million due to the low interest rate environment, coupled then with some assumption changes that we put in for others that, that maybe cost us nearly $200 million. So with that, we still then were able to obviously grow statutory surplus during the quarter. So as we fast-forward to year end and during our year end cash flow affecting Q3 Phase I final judgment, actually we feel pretty good that there's not going to be any other headwinds or charges that we face at year end related to those particular items.

And there are no further questions at this time. Do you have any closing remarks?

This is Rick Costello. I know we didn't get to all the questions. But we do want to be respectful of the 11:00 call that has already started. We will be available all day for follow-up questions. Thank you so much for your participation on The Hartford's Third Quarter Earnings Call, and we look forward to seeing you soon.

Thank you. This concludes today's teleconference. You may now disconnect.