Good morning. My name is Nicole, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hartford First Quarter 2012 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Sabra Purtill, Head of Investor Relations. You may begin your conference.

Thank you. Good morning, and welcome to The Hartford's First Quarter 2012 Conference Call. Our speakers today are Liam McGee, The Hartford's Chairman, President and CEO; and Chris Swift, our CFO. Other members of our senior management team here today include Doug Elliot, Alan Kreczko, Dave Levenson, Andy Napoli, Bob Rupp and Hugh Whelan. After Liam and Chris' presentation, we will have time for questions. Please note that as discussed on Page 2 of the presentation, any statements made today concerning The Hartford's future results or actions should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, and actual results may differ materially from these statements. We assume no obligation to update the forward-looking statements. You should also consider the important risks and uncertainties that may cause results to differ, including those discussed in our press release, our first quarter 10-Q, our 2011 10-K and other filings we make with the SEC. These documents are available in the Investor Information section of The Hartford's website. I also need to mention that our presentation today includes some financial measures that are not derived from generally accepted accounting principles. Definitions and reconciliations to these measures -- of these measures to the most directly comparable GAAP measures are provided in our financial supplement, press release and 10-Q. I'll now turn the call over to Liam.

Thank you, Sabra. Good morning, everyone, and thank you for joining us today. Yesterday, we announced strong first quarter results, with core earnings up 11% to $1.25 per diluted share. Our P&C combined ratio was 95.7%, a very good result. Strong pricing momentum continued in the P&C Commercial segment, and we had significantly improved new business growth in Consumer Markets. We also achieved several significant accomplishments. We concluded the strategic evaluation of the businesses and announced our plan to focus on the Property & Casualty, Group Benefits and Mutual Funds businesses. This is The Hartford's best path forward to deliver greater value for shareholders. So in order to increase transparency on our go-forward businesses, we expanded P&C disclosures this quarter, providing more details on Small Commercial, Middle Market and Consumer Markets. Going forward, our presentations will focus on greater detail on the performance about our go-forward businesses and the progress in reducing the size and amount of risk in the Runoff division. We are moving quickly to execute the plan we outlined in March, including selling businesses, placing the annuity block into Runoff and exploring options for the Runoff division. Let me update you briefly on each of these. The sales processes for Individual Life, Retirement Plans and Woodbury Financial are going well. The offering memoranda for each are in the marketplace. There is great interest in each property. We expect to have a competitive auction process, and we expect definitive agreements later this year. I am proud of the hard work and dedication of the employees in these businesses. They are focused on delivering successful and valuable businesses to the ultimate buyers. The proceeds from these sales will give us additional financial flexibility that, over time, we expect to use for capital management actions and some debt reduction. We…

Thank you, Liam. Good morning, everyone. I'll begin on Slide 5. First quarter core earnings were $612 million or $1.25 per diluted share, representing an 11% improvement over prior year. Excluding the $192 million DAC unlock, core earnings were $420 million or $0.86 per diluted share, so it's a 7% increase compared to prior year. These results were largely in line with the estimate we provided on March 21, except for catastrophes. Cats were running about $20 million favorable to budget through mid-March. But with the late March storm activity, total cats ended the quarter at $46 million after tax, in line with our budget. Prior-year development was slightly favorable at $19 million after tax, with releases in personal lines offset by some modest development in P&C Commercial. The investment portfolio yield was stable this quarter at 4.2%, excluding partnerships. We are modestly increasing allocations to higher-yield assets and purchasing longer-duration bonds. Returns on alternatives and limited partnerships were 8%, and we continue to expect an annualized return of 9% for 2012. Impairments and changes to the mortgage loan loss reserve remained low at $28 million pretax in the quarter. Slide 6 shows book value per diluted common share on a restated basis for the new DAC accounting standard. At the end of the first quarter, book value per diluted share was $43.25, an increase of 12% over last year. Excluding AOCI, book value per diluted share rose by 1% to $40.55. Let's turn to our business results by segment. Slide 7 shows the summary results for P&C Commercial. Core earnings were $162 million, a decline of 8% from prior year. Results included $13 million, after tax, of prior-year net reserve strengthening across multiple lines. Importantly, there were no meaningful reserve adjustments related to our workers' compensation loss experience. The…

Thank you, Chris. We'll now open the call for questions. [Operator Instructions] In addition, I just wanted to make one slight clarification of Chris' comments referring to the Individual Annuity business. Since our announcement to exit the Individual Annuity business, lapses have increased to approximately 20% in the U.S. and 4% in Japan on an annualized basis. Nicole, can you please give the instructions for asking a question?

[Operator Instructions] Your first question comes from the line of Mark Finkelstein with Evercore Partners.

Liam, in your opening remarks, you talked constructively about some alternatives on the VA side, whether it's reinsurance or what have you. Can you expand on those comments? And I guess what I'm interested in is, how would you weigh the probability of success and how meaningful could one of these structures be in terms of capital release?

Well, Mark, it's early, and what I expressed was we have received interest from a variety of parties on different parts of the book and different parts of the block. Our team is working hard evaluating those options, and we do think some of them will materialize over time. But I think it's also important, as I said in my comments as well, Mark, that we'll balance the short-term economics with the ultimate goal of getting them off our books. So it's early in the process. I think we're constructively optimistic with the level of interest that's being presented, the kind of thinking that our teammates are doing on it, with the assistance of advisors in some cases, that some of these transactions will materialize over time.

Okay. I guess my follow-up will just be on the Annuity business as well. I guess we've seen markets go higher, a little bit of interest rate volatility, but I guess what is the opportunity to kind of restrike some of the options and reduce that cost at this stage? Is that a -- do we need markets to go higher from here, or is there opportunity to kind of reduce that long-term cost at this stage?

That's a great question. And I'll make a comment, and I know Chris would like to add something as well. As Chris said in his remarks, we are looking at the hedges. We refer to them as a dynamic hedging program, particularly in Japan. So with the markets having appreciated as they have, particularly equity markets, and although it's backed up a little bit, the yen weakening, offset by lower interest rates, I would tell you we evaluate our hedging levels on a daily basis, led by our HIMCO teammates and our Chief Risk Officer, Bob Rupp, now in conjunction with our Runoff group. So we look at it every single day. And there may be opportunities because of strengthening market levels to reduce it. And Chris, other things you might say?

I think it's exactly right. Mark, we're very sensitive on the economic cost side. So particularly, as markets reach 1,400, 1,450 on the S&P and beyond, there are definitely opportunities to be much more cost-effective. So I think you should take away that we're working hard to appropriately balance risk and economics, like we have always said.

Your next question comes from the line of John Nadel with Sterne Agee. John M. Nadel - Sterne Agee & Leach Inc., Research Division: I have a question on the VA business as well. In the U.S., in particular, but in Japan as well, your net amount at risk and the in-the-moneyness, if I focus on the living benefit guarantees, came down very nicely quarter-over-quarter. My question is for the U.S., can you give us a guesstimate on about how much higher do you think markets need to move for that level of in-the-moneyness to essentially be wiped out or moved to 0?

John, thanks for the question. In the U.S., if you look at sort of the cohorts of when we put a lot of business on the books '05, '06, '07, '08, we were approaching that level just by the nature of the disclosure that we made. So to me, when you get into the 1,400, 1,500 levels, 1,500, I think you'd be virtually at breakeven from the moneyness perspective. John M. Nadel - Sterne Agee & Leach Inc., Research Division: Okay. And then on the Japan side, I assume -- is that going to be -- should we be looking more at that being influenced more by the yen than necessarily market levels?

Yes, I've always said about 50% of sort of just the risk comes from yen-dollar, yen-euro. John M. Nadel - Sterne Agee & Leach Inc., Research Division: Got it. Okay. And then just a separate question is -- I'm interested in the move up that you mentioned in the annualized surrender rate on the U.S. VA book. Obviously, one month doesn't necessarily make a trend. But I was wondering if you have any granularity on the composition of that higher surrender rate. Specifically, what proportion of those lapses reflected contracts where the living benefit guarantee was in the money? Has that changed? I think historically, you've mentioned around 40% of lapses were in the money.

So John, it's Dave Levenson. So for April, as you know, we've been -- we were running at 20% annualized lapse rate. As we look at the weekly numbers, that has been pretty consistent. So we've seen it maybe moderate slightly. I think over time, we'll have a much better read on that. As far as lapses in the money versus out of the money, your 40% to 50% number is right on.

Your next question comes from the line of Andrew Kligerman with UBS.

First question, just around the group guidance had been for a benefits ratio of around 77%, 80%. Of course, you came in at about 83%, and I know the pricing takes time. So what should we be thinking about in terms of the guidance going forward? And then the second question would be around the -- with all the restructuring and changes going on, some people have suggested that maybe it might not be a bad idea to IPO part of the P&C business, maybe a minority interest, 15%, 20%. Is that something you've thought about? Would that make some sense?

Andrew, let me -- this is Doug. Let me take the second part of the question on the Group Benefit. Number one, there are macroeconomic headwinds across that business. But we are encouraged, and I think there are some reasons for optimism across our Group Benefit business as we work our way through Q1 into Q2. Clearly, our incidence level look like they're flattening. We look like we, on the long-term side, have some flattening signals over the past 5 quarters. In the short-term area, it looks like we've got some improvement on our incident trends, so that's a positive. Clearly, as we've talked in the past, our terminations are down and running lower than our historical run rate. We are working all the levers available to us. We have additional disclosure for the quarter in there. We achieved 4 points of rate increase, which is why we were slightly down in retention, but I think that's a good trade. And our overall price improvement in the book for the first quarter was about 10%. So I feel like we're making significant strides toward improving our margin, and overall, I'm also encouraged by what I would say is an improving pricing climate in disability.

Hey, Andrew, it's Chris. I think you...

One quick second, Doug, though. So therefore, you think you could achieve guidance for the year or the original guidance?

I think Chris gave you the adjusted guidance.

I'm sorry, I missed that.

Yes, Andrew, what I was trying to be clear in my prepared remarks is that we really see group now just basically flat to prior year. When we were with you in December, we saw group hopefully improving earnings 15%, 16%, 17%, high teens. I would consider that business now just sort of flat with prior year.

Got it.

Andrew, this is Liam. And as far as your question about possible other structures for the company, I'll just remind you what I've said consistently that management and the board, since the middle of last year, looked comprehensively at virtually every alternative. We've chosen a path, and that's the path we're going to execute against.

Your next question comes from the line of Tom Gallagher with Crédit Suisse. Thomas G. Gallagher - Crédit Suisse AG, Research Division: Liam, you had talked about the sales process going well. Can you just give a little bit of color on that? Because in my mind, the greatest risk here is while there may be buyers lined up, if the bid is 50% of book value or some very low amount, then it may be a decision of deciding not to sell some of the properties that you've put up for sale. But your comments certainly seem to indicate that you're comfortable with the way things are progressing. So maybe you can talk a little bit about just the process and whether you've gotten any price indications yet and whether you're comfortable with those.

Well, Tom, we are confident that we will sell the businesses at an appropriate value. You can appreciate where we are in the process with just the process itself that -- I'm not going to get into too much detail. But I think based on the volume of parties that are interested in each of the 3 properties, both objective and subjective feedback that we're getting from the market, we feel pretty confident we're going to sell these businesses and have definitive agreements certainly in the latter part of this year. Thomas G. Gallagher - Crédit Suisse AG, Research Division: Okay, that's helpful. And then just one follow-up. I guess it would be for Chris. When you guys talk about potentially freeing up capital from the closed block, should we think about it being a normal process, where you first need to sell these businesses and then the proceeds would give you more flexibility to consider solutions? So in other words, should we think about the freeing up of capital being a 2013 or 2014 event? Can you help a little bit about tying those 2 things together?

Well, Tom, let me just make a high level comment first, and I know Chris is anxious to give his own perspective as well. When you look at the actions that we're taking, first of all, we will not be selling new life products, which, in general, have been capital-consumptive; secondly, selling the businesses, which will create proceeds and subsequently, some capital release as well from those businesses. The natural lapsing -- and if the elevated lapse rates continues, so the better. And then any actions that were effective in our runoff business -- this is a company that, over the next couple of years, should liberate capital. We're more confident in the strength of our balance sheet, and to be more specific than that, now would be premature obviously. There's timing, market levels, et cetera, but I think we position the company as we execute effectively, and we're focused on -- laser-focused on execution, on the things that we've described. And over time, we will liberate capital, and we'll have a variety of choices as what to do with it. And of course, our primary guiding principle will be to the benefit of the shareholder. Chris?

I think that you're right on. There's nothing other to add, Tom, other than, again, if you look at sort of the sequence of events and timing in different constituencies that we want to bring along with our plans, whether it be regulators, agencies, and how we would use, I'll call it, the incremental value that we monetize and the capital that's backing those blocks, we know how to work with those constituencies to bring them along, to make sure everyone understands what they're trying to accomplish and what we're going to do with that deployable capital at the time. But as Liam said, we'd rather not just speculate right now on size, timing and amounts just given that there's a lot of variables outside of our control right now. But I think my view is we're going to have a good competitive option on these properties.

Certainly, Tom, we have certainty and clarity about our direction. And along with creating superior financial performance, a big part of generating superior shareholder performance will be over the next periods of time, and we have very specific actions. We've articulated them, I think, very clearly. We need to execute on them. We understand very clearly that, over time, those activities will result in capital that we'll be able to deploy in, as Chris says, appropriately, in consultation with our normal constituents, which I think we've demonstrated our ability to effectively do in the steps we've taken in the past couple of years. I think this is a company that will definitely do that, and I think we've made the decisions to position us to do that.

Your next question comes from the line of John Hall with Wells Fargo Securities.

I have 2 questions around capital. And not to be repetitive here, on the VA book of business, I think initially, when you talked about it potentially being put into Runoff, you didn't see capital being freed up. Lapse rates are substantially higher now. Does that change the view there about the speed of capital return from that book?

Chris will give you an answer on that, John.

John, directionally, yes. I think we view net lapses as positive from a capital side. As long as they're balanced and steady, net-net, it's positive because we just have to hold less capital against the liabilities, particularly in stress scenarios.

Great. And then my second question has to do with the Mutual Fund operation and I guess where it's held within the enterprise. Being owned by a life insurance company, I guess, constrains your ability to use the cash that it generates. In everything that you're doing about moving things around and the like, are you considering trying to transfer the ownership out from the life company to a holding company that wouldn't be insurance regulatory-constrained?

John, I think that one of our work streams that we have is just the, we called it, legal entity simplification process, and that's part of it. But I wouldn't view it necessarily as a constraint. It's more potentially simplifying sort of a holding company structure. But just because Mutual Funds is owned by a life group right now, I wouldn't have you necessarily think of any extraordinary restraints or conditions on that entity, its use of proceeds and cash flows that we would generate from it. But we are looking at just the overall simplification of the legal entity structure.

Yes, I agree with, John, with everything Chris said, particularly as it relates to Mutual Fund business. But I'd reiterate we will simplify the legal structure of the company, and that body of work is underway. If it has such a benefit, so be it. But we're really trying to simplify the company and its legal structure.

Our next question comes from the line of Vincent DeAugustino with Stifel, Nicolaus. Vincent M. DeAugustino - Stifel, Nicolaus & Co., Inc., Research Division: Just 2 quick questions. On commercial auto, it looked like there was some adverse development that ran a little bit higher than recent quarter's trends. I was just curious of your thoughts on, I guess, what you're seeing is driving that and then specifically, if there's any particular accident years that, that's flowing from?

Vincent, this is Doug. I would characterize the $12 million as rather insignificant against the entire period. A little bit of pressure with the last couple accident years, '09, '10, '11, primarily '11, and primarily in Small Commercial. So there's nothing there that I think is systemic. I think we're all over the issues. Vincent M. DeAugustino - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. And then just a real quick follow-up. Since reporting your strategic restructuring plans, were there any segments that are maybe facing incremental headwinds as a result of the changes you're putting in place? Or is everything outside of the units potentially up for sale going as planned and no kind of cross headwinds there?

No, not at all. I think as our results indicated, Vincent, our Property & Casualty businesses are really performing very well, top line growth in Small Commercial and in Consumer and after margin improvement in Consumer. I think Doug and his team,, as you saw in the pricing actions, are making the right trade-off between getting price and the persistency rate there. Obviously, like everyone else in the industry, there are some challenges in Group Benefits, but that has nothing to do with our announcements. And finally, I think Mutual Funds, we could not be more excited about the prospects of that. And the feedback we get from the distributors is they're pretty excited about it, too. The unique combination of The Hartford and the Wellington's sub-advisory, cross-equity and fixed income is really, really creating, I think, a very positive reception. So I'd say if anything, other than just the systemic and macroeconomic issues around Group Benefits, the go-forward businesses are firing at all cylinders.

Your next question comes from the line of Jeff Schuman with KBW. Jeffrey R. Schuman - Keefe, Bruyette, & Woods, Inc., Research Division: A kind of a mundane question but a necessary one, I guess. With all of the unusual levels of corporate activity, it seemed like corporate expenses were a little higher this quarter. Can you give us a sense of kind of where those expenses might go directionally from here?

Down.

Jeff, it's Chris. I would tend to think in terms of the corporate level of expenses, this quarter is maybe $15 million to $20 million higher than sort of the normalized run rate. We had some just accrual adjustments coming out of year end and a little bit of restructuring charges. I think going forward, we plan to break that out as clear as possible as far as restructuring expenses, whether it be severance benefits, whether it be stay bonuses, things along those lines. But I think from a model perspective, you ought to think this quarter is $15 million to $20 million higher than a normal run rate.

Yes, and Jeff, my one-word answer was meant to convey this management team's determination to run this company in, I think, a financial services environment that requires it as efficiently as possible. As I said in my remarks, and I want our investors to understand it, about The Hartford management team, there was $150 million of efficiencies realized last year, $30 million in the first quarter. We're going to stay focused on the efficiency and process improvement actions through the balance of 2012. Obviously, we will get the expenses as we sell the businesses. All expenses, whether they're solid or dotted line, are going to come out. And then we think we have a very unique opportunity, truly a once-in-a-lifetime opportunity, for the go-forward business to really reinvent how we do things at The Hartford and better and more efficient. So you'll hear more consistently more from us on our process improvement and efficiency. And I think we've demonstrated our ability to do that on the old construct of The Hartford. We'll continue that and even with greater urgency because we do believe we have a unique opportunity here.

Thank you. Thank you all for joining us this morning. We know it's a busy morning with a lot of conference calls being held. So as always, we appreciate your interest and support of The Hartford. And for any follow-up questions, we're available today and tomorrow to take them. Thanks.

Thank you for participating in today's conference call. You may now disconnect.