Good morning. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to The Hartford's Fourth Quarter Conference Call. [Operator Instructions] Sabra Purtill, Head of Investor Relations, you may begin your conference.

Thank you, and good morning, everyone. Welcome to The Hartford's 2012 financial results and 2013 outlook conference call. Our speakers today include Liam McGee; and Chris Swift; as well as Doug Elliot, President of Commercial Markets; and Andy Napoli, President of Consumer Markets. Other members of our executive management team are also available for the Q&A session. Today's prepared remarks are longer than normal in order to cover the 2013 outlook, as well as Doug and Andy's presentations about their businesses. We will still have about 30 minutes for Q&A at the end of our prepared remarks. As detailed on Page 2 of the presentation, today's statements concerning future results or actions are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance, and actual results may differ in a material manner from these statements. In addition, we do not assume any obligation to update the forward-looking statements. Furthermore, you should consider the risks and uncertainties that may cause actual results to differ, including those in our press release, our 2012 10-K and other filings we make with the SEC. Finally, please note that our presentation includes financial measures that are not derived from GAAP. Definitions and reconciliations to the most directly comparable GAAP measures are provided in the Financial Supplement press release and 10-Q available on our website. I'll now turn the call over to Liam.

Thank you, Sabra. Good morning, everyone, and welcome. As you saw from our release last night, The Hartford had a strong finish to 2012, and the fourth quarter completed a successful year of strategic transformation, as well as execution for the company. Following the life divestures, we enter 2013 with a sharper focus on the Property & Casualty, Group Benefits and Mutual Funds businesses. We are transforming and profitably growing the organization with the continued goal of delivering greater shareholder value. As Sabra mentioned on today's call, Chris and I will speak, and then Doug Elliot and Andy Napoli will review the Commercial Markets and Consumer Markets results and preview their 2013 outlooks. We're going to use this format going forward so Doug and Andy can share greater detail about the operating fundamentals of their businesses. Chris will provide an update on the impact of Storm Sandy, but I do want to express our deep appreciation for the professionalism and excellence demonstrated by our claims team in their response to the storm. Their dedication to serving our customers is a hallmark of The Hartford about which we're all very proud. Before we start, I also want to say thank you for the many wishes of good luck and good health. I'm feeling great, as well as very fortunate, and we are back to business as usual. Since I arrived at The Hartford in 2009, our top priority has been to restore the operating performance of the company and deliver increased shareholder value. We have taken significant steps to improve the company's financial strength and stability. As examples, we repaid the TARP funds, refinanced the Allianz debt, successfully repositioned the investment portfolio, implemented a tail hedge in Japan, and executed a series of necessary expense actions. As you know, to accelerate…

Thank you, Liam. Good morning, everyone. This morning, I will focus on 4 areas. First, I'll briefly cover fourth quarter and full year 2012 results. Second, I will provide an update on our Life runoff operations, which we have named Talcott Resolution. Third, I'll discuss our capital management plan. And last, but not least, I'll cover our 2013 core earnings outlook. Let's begin on Slide 7. Fourth quarter 2012 core earnings were $265 million or $0.54 per diluted share. This quarter, we changed our definition of core earnings, which now excludes restructuring and other costs and DAC unlocks. We believe this definition gives a better view of fundamental operating results. Storm Sandy generated significant CAT losses this quarter. 2 months have passed since we released our preliminary estimate, which is the same as what we recorded in this quarter's results. This quarter, this storm generated more claims than any other CAT event in our history. To date, we've closed about 80% of property claims and 90% of auto claims. For the quarter, total pretax CAT losses were $335 million, including the $350 million for Sandy. This means that fourth quarter CATs after tax were $174 million higher than our original guidance. Core earnings in the quarter, after excluding CATs, prior-year development and a small retiree tax benefit, were about $0.87 per diluted share, above our November outlook of $0.77 to $0.82 per diluted share. Improved group LTD results, lower expenses in Talcott Resolution and favorable non-CAT weather results were the principal drivers over this outperformance. Slide 8 summarizes full year 2012 results. Core earnings were $1.4 billion or $2.88 per diluted share. Excluding prior year development and the retiree tax benefit and catastrophes above forecast, 2012 core earnings were $1.6 billion or $3.27 per diluted share. Turning to Slide 9.…

Thank you, Chris, and good morning, everyone. I'm going to cover our P&C Commercial and Group Benefits results for the fourth quarter and full year 2012. I'll also provide some commentary on the marketplace, and our 2013 business objectives and outlook. The P&C Commercial segment made strong pricing progress during 2012, including a very solid fourth quarter. We're confident that our end-market actions are driving improvement in our underwriting margins. And while these actions put pressure on our new business and retentions, our continuously improving risk analytics convince us that we're making the right tradeoffs on a daily basis. Our all-in combined ratio for the year was 102.9%, a decrease of 1.7 points from the 104.6% in 2011. This margin improvement reflects our focus on pricing and targeted underwriting actions, as well as lower unfavorable prior year development versus 2011. I'll cover each of these shortly. Catastrophes were a major contributor to losses during the fourth quarter due almost entirely to Storm Sandy. Current accident year CATs were 5.2 points on the full year 2012 combined ratio, which coincidentally, is the same as 2011. For the year, CATs totaled $325 million pretax, with Storm Sandy contributing $207 million in the fourth quarter. Excluding prior year development and catastrophes, the combined ratio on P&C Commercial improved to 96.6% for the year, down slightly compared to 97.3% in 2011. Our fourth quarter results further highlight the significant improvements we're seeing and the depth and speed of our actions since a year ago. The ex CAT, ex prior year combined ratio for the quarter was 97.8% versus 101.1% for the prior year period, a solid improvement. Our cumulative rate change in Middle Market over the last 6 quarters positions us among the more aggressive companies in the industry and sets us up well…

Thanks, Andy. Thanks to Doug and Chris as well. As you heard from our comments, this was a good quarter for The Hartford and a strong end to a transformational year, and we all feel very good about our progress in the ongoing businesses. So operator, let's turn it now over to Q&A.

[Operator Instructions] Your first question comes from the line of Tom Gallagher with Crédit Suisse. Thomas G. Gallagher - Crédit Suisse AG, Research Division: My first question is just on the earnings guidance. I guess for Chris, can you just remind us the -- how much of a back-end loading we should expect to get from the expense savings here? Maybe if you can frame it in the way of, how are we going to start out in 1Q, where are we going to be by 4Q in terms of the bottom line benefit of cost saves? That's my first question.

Sure. Happy to, Tom. I think just to remind everyone, we had an $850 million total plan and we think about $500 million is already out with the transactions plus cuts we made at the end of 2012. We have $285 million to take out this year. I would say that it is more back-ended because there is a little bit of an expense drag in the first couple quarters primarily. So it's hard to slope precisely, but I would make -- weight more the expense saves. It will start to come out in the second half for the year. Thomas G. Gallagher - Crédit Suisse AG, Research Division: So Chris, that -- the $285 million, is that from now to the end of the year? That's going to be the bottom line pretax benefit that we would expect to see by the end of 4Q?

Tom, those are the gross saves that we need to achieve that we set for ourselves in essence to make up for the lost revenue. So I don't think of it as all dropping to the bottom line, or a very little dropping to the bottom line, in fact, because those are -- revenues and expenses have gone away, and that is the corporate overhead we need to cut in essence to maintain our existing revenue streams. Now there is an incremental goal. In there, you have about a written [ph] $80 million that will improve margins overall. But the vast majority was to cut our overhead expenses in relation to revenues that are going away. Thomas G. Gallagher - Crédit Suisse AG, Research Division: Yes, understood, Chris. I just wanted to make sure because I know you're going to lose the associated revenues in 1Q, but that you would expect to essentially get that back by the end of 2013. Is that the way we should be thinking about it?

Liam addressed this...

Yes, about 90% of the stranded costs, Tom, that were not transferred to the buyers will be out by the end of this calendar year, the other 10% will come out early in the first quarter. And then, and I will -- I want to be very clear on this. We have this down to the dollar, to the head. We know exactly where it's coming from. We have a very disciplined plan. Yes, this will occur. Thomas G. Gallagher - Crédit Suisse AG, Research Division: I appreciate that. So the -- just moving on to the net amount of risk improvement in Japan. I just want to understand from your standpoint, what does this practically mean for you? Because obviously, when you see a reduction in net amount of risk of that magnitude from 3Q to now, it's been cut more than half, you would sort of assume that an associated liability would be going down pretty meaningfully and potential capital lift or capital getting freed up, but then you have the complexity of money being tied up in captives here. So anyway, just, I guess broad question, what does this mean for you in terms of the yen weakening and the reduction in net amount of risk and the liability from a practical standpoint?

Well, clearly, the high level, and I'm sure Chris and Doug may have some -- their own perspectives, Tom. At a high level, prima fascia, the economics of the book have improved very significantly. And as I commented, I think the general market consensus is the yen, as it relates to dollar and euro, is likely, worse case, to stay where it is and perhaps even weaken further. So the economics are better. I think you're well aware that our hedging program is very dynamic. And so as the yen weakens, it enables us to take more risks, if you will, which gives us a greater upside. And clearly, as I commented and Chris reiterated in his remarks, the improving economics should give us a greater ability to consider potential derisking transactions either to reduce the risk or permanently move the risk. So I think, from all those perspectives, and ultimately, as these things annuitize, and if they annuitize at these kind of values over the next 4 years, that's also attractive to us from an economic and cash flow perspective. So I think we're quite encouraged by this. I think that the magnitude of the reduction and the net amount of risk, I think, does give shareholders a view of -- with more normal yen-dollar, yen-euro, the economics are much more manageable for us.

Yes, I think you're right on, Liam. And I think, Tom, also, I think the April Investor Day, the real intent is to dive deeper with Beth and her team into exactly some of those questions, how we see these blocks running off, policyholder behavior, sensitivities, more economic values. So stay tuned. But we'll try to be much more clear of why we think the net economics of these blocks are improving significantly, as Liam said. Thomas G. Gallagher - Crédit Suisse AG, Research Division: Got it. And then just my last follow-up on that is, Chris, you had mentioned the annual cash spend on hedging has gone from $200 million to $250 million to $75 million to $100 million. Is that mainly the currency hedge getting -- being able to hedge less, it's -- or it's cheaper, or is that not related to the currency?

Not related to the currency. That reference, I thought the words that I used were macro hedged. So as the macro equity protection that -- with Bob Rupp and the team, we just made much more economics virtually for the same amount of coverage. So we cheapened up that program, and the risk management techniques of managing Japan is still our dynamic program, where we manage interest rates, currency and equity dynamically. Thomas G. Gallagher - Crédit Suisse AG, Research Division: And I believe, you had said you were spending $200 million on a currency hedge or so annually, is that still about the same?

No, never talked in those terms, Tom. Thomas G. Gallagher - Crédit Suisse AG, Research Division: Okay. And any guidance you can give us on what you're spending on currency hedges for Japan?

Again, I think, we could give you general views but we'd like to spend a little bit more time with you in April -- so we save that for April, and we could be more scenario specific, and then you could see the effects of the hedging programs and the economics that emerge.

Tom, this is Liam. Just one final comment I make. I think the ability to purchase effectively the same protection on our macro hedge at half or less of our historic cost, I hope it is an indication to investors on how far along our risk management has come in the last year.

Your next question comes from the line of Jay Gelb with Barclays.

Liam, I'm very glad to hear you're feeling better as I'm sure everyone else is.

Thank you, Jay. Very kind of you. I feel -- I actually feel great and very blessed.

Glad to hear it. With regard to the capital deployment, the proceeds from the sale of the units was around $2.2 billion, and it appears currently around $1.5 billion of that is being deployed into debt repurchase and share buybacks. So I think what a lot of people are wondering is, why hold back the $700 million?

Well, you're correct, Jay, that, first of all, we presented management and the board's capital management plan, and work collaboratively with our regulators, and we're gratified that they approved the plan that we presented to them. I'll just go back to the concept, which I think I've been very consistent about over the last 3 quarters, is, first of all, we are going to do share repurchases, the $0.5 billion that we have outlined, which clearly will be accretive for shareholders. Second of all, we will reduce the holding company debt by $1 billion. A couple of additional perspectives, as I make on that. First of all, as you recall, The Hartford, during the financial crisis, significantly levered up, number one. Second of all, the foregone earnings from the sold businesses require us to delever a little bit. And third, we do want, we've said all along that we want to be more of a P&C centric, a leading P&C-oriented company, and we want to get our leverage down, as Chris and I both said, in the low 20s and our debt service coverage up in that 5 to 6 range, also accretive for shareholders. $55 million reduction in our interest cost as well. I've always been clear that it was likely that we were going to preserve capital in our life subsidiaries, which I think is even more important now with the improving markets that we just discussed with Tom when transactions, whether it'd be customer offers either in the U.S. or Japan, potential permanent transactions or other risk reduction transactions, may be more available and we want to be ready to act as soon as those things present themselves. So I think this is a very thoughtful, balanced plan. It is very friendly to shareholders. And that third element of being able to either reduce or permanently eliminate VA liabilities is also very good for shareholders. I think you'd agree. So I think it's thoughtful, it's balanced. We feel very good about it. And I remind you, as I said, I think Chris alluded to it, our intention particularly with the historic capital generating ability of our go-forward businesses, as well as what we expect will be some success reducing or permanently eliminating VA liabilities of these market values, our intention is to continue to have a consistent capital management approach of returning excess capital as appropriate to our shareholders. But this is our plan now for '13 and '14, and we feel good about it.

Okay. On the variable annuity guarantee exposure, last night, as I'm sure you saw, Berkshire Hathaway announced a deal with Cigna to reinsure the remainder of those guaranteed minimum benefits. Would something like that have an attraction to Hartford as well, knowing that already a good portion of it is -- of that exposure is reinsured?

Well, at a high level, Beth may have some comments. I would say, first of all, obviously, I can't comment on conversations we may or may not be having for obvious reasons. What I can assure you of, particularly with the capital flexibility and I think more normal market scenario we have today, Beth and her team are leaving no stone unturned in terms of ways to move the risk off or reduce the risk, which very well could include transactions. Beth, anything you'd like to add?

Yes, I think Liam has said it very well. He said from the beginning that we are open to looking at transactions where they make sense, so we're -- our view of the underlying economics are there, and we can maximize the use of our resources and our capital to reduce our risk. So we continue to work with our advisers, and we'll continue to evaluate opportunities in that space. I think seeing transactions getting done, seeing different players that are interested in these exposures, I think, is all positive for us.

Okay. And then just a quick one for Chris or Sabra. The corporate expense in 2013, that's going to -- I believe you said $40 million less. Is that $40 million less than the $315 million that was the full year 2012 core corporate impact?

Yes.

Your next question comes from the line of John Nadel with Sterne Agee. John M. Nadel - Sterne Agee & Leach Inc., Research Division: Let me echo Jay's comments. Liam, I'm very happy to hear you're in good health. A couple -- just one quick follow-up on Tom's question about the expense saves or cuts. I just wanted to clarify. So should we think about $285 million as the total expense saved for all of 2013, and should we think about that as a run rate by the fourth quarter? So something like $70-or-so million by the fourth quarter?

No. That -- you think about that as the actual cuts that will happen in 2013, so that's a run rate reduction that will be achieved by the end of '13.

John, our commitment was -- we've all been associated with selling businesses and not getting the costs out. Our commitment was we're going to get all the costs out, and so we're -- that's why we've been so clear about it. And again, I'll reiterate, we're very disciplined about it in the company. Those -- this will be a cost neutral exercise at the end of the day. John M. Nadel - Sterne Agee & Leach Inc., Research Division: Fully appreciate that. The guidance for 2013, what -- if you could give us sort of a modest ROE range, what type of ROE are you expecting to achieve?

John, I think at a high level, we're going to give you some more details in ROE in April. I think '13 is a year where if we see ROE increase, it will be very modest. The real increase in ROE is going to occur in '14 -- in '14 and 15. We'll show you that. You should expect pretty significant increases in ROE in '14 and '15. But with all the moving parts, the kick-in over time of the capital management actions, the loss of the earnings, and as Chris said, a bit of a lag in getting the costs out and we've increased our CAT load as well. I think '13 is a year where if we see ROE increase, it will be modest. John M. Nadel - Sterne Agee & Leach Inc., Research Division: Okay. And then just finally. Given all the shifts in capital in the life side, in particular, reflecting the business unit divestitures, the dividend, et cetera, is it fair for us to assume that the vast majority of what's remaining pro forma at $6.6 billion or $6.7 billion of life statutory capital relates to the runoff U.S. VA business? Or is there something else still remaining in there, the Group Benefits business or other?

John, I think you're right. We tried to talk about this the last time. We think of sort of $6.6 billion as the new beginning normal, $4 billion for the life statutory surplus. Of that, approximately $1.5 billion, it would be, I'll call it, allocated to Group Benefits, and there's a little bit allocated to the reinsurance sort of recoverables from our transaction. So that's how we think about it. And then, we have obviously the holding company liquidity also. But from a statutory bluebook side, that's how we think about it.

Your next question comes from the line of Mark Finkelstein with Evercore Partners.

I've got a few. I guess my first question, kind of back to Gallagher's question a little bit. And maybe the way I'll frame it out is, back in -- what was it, October of 2011, you gave some scenarios around the Japan block and kind of a benign scenario, as well as a kind of an adverse scenario. The question I would ask is when you look at where things are today, the yen kind of JPY 93, market is higher, et cetera, should we expect a meaningful improvement in that net cashflow in that benign scenario in the Japan block?

It's a definition of meaningful. It is improved, and I would say, particularly, if the trend continues, it can be meaningful. But it is a definite improvement, and again, something we could talk more about in April, and we plan to. So if you could let us update our complete models and present them to you, I think that would be very helpful.

Okay. And then Chris, just how do we think about statutory capital generation in the life company going forward? Obviously, you've had some expenses in annuities, markets are a tailwind, you've got Group Benefits improvements. I mean, how should we think about free cash generation in the life business?

I'm more positive on it, particularly at these market levels and condition. You've always heard us talk about the low interest rates and sort of the constraints that, that has and some of the additional liabilities we put up at the end of the year. But I would say, there's more tailwind mark to have a modest expansion in statutory surplus going forward in '13. Beyond that, a lot depends just on market conditions and policyholder behavior. But I'm encouraged with the potential to do increase in gross surplus in 2013.

I guess, just a follow-up on that. I mean, just if things kind of trended from here the way you would ordinarily expect them or how you normally model them, would you expect the VA business to generate capital in '13?

Yes. I would say I'm not hesitating, I'm just trying to quantify it from a range. I mean, it's in the range of a couple hundred million we could generate from the VA book over time. And then I'd remind you, that the life -- the Group Benefit operations are also in there, but we do have some interest sensitive liabilities that will still feel some pressure from interest rates. So I'm trying to be balanced on the positives but still, the existing pressure on certain blocks of business.

Okay. And then just one quick final question is, I saw the cut in the macro hedge costs more than in half. Are there any changes in how we should think about the below the line kind of structural loss on the dynamic hedge, which I think historically has been around 15 bps? Or is that about the same going forward?

On the dynamic program was your question or the macro?

No, you told us the macro, I'm thinking more about the dynamic.

Right. The dynamic for both pieces, Japan and, I'll call it, the U.S., I would say, are generally remain consistent. And we've talked generally about it in total, about 40 bps for both programs.

Right. But the macros -- I assume the macro is much lower than the 25 that you've historically talked about, is that wrong?

The macro, we just said, was $75 million to $100 million in annual spend. I mean, I think you could do the translation, which less is coming down. But the dynamic program for the U.S. VA block and the Japan block still is in -- around 40 bps.

Your next question comes from the line of Brian Meredith with UBS.

Just a couple of quick questions here. First, with respect to the capital management, one quick question, Chris. You've got like, I guess, $520 million of debt coming due over the next 2 years. How do you plan on dealing with the remaining $40 million? Do you have any call provisions in any of your debt? Or will you have to go into the marketplace and buy it?

I'd rather not be too specific. It really involves a tender process. So we're going to be active here in the near term, but we are looking at trying to reduce that debt that ultimately is NPV positive compared to any premium that we might pay.

Okay. So in the $1 billion -- the $1 billion is a part reduction, right, so it could cost you a little more than $1 billion to actually reduce it?

Yes. So the $520 million is the component of the $1 billion, and then the rest would come to reducing the amount that we will tender for.

Great. And then the next question, I'm just curious to know you've kind of carried [ph] by this, how did you come up with the $500 million of share buyback by year-end '14, particularly given the additional liquidity, you've got the holding company and the capital generation you'll have over the next 2 years, which should be pretty substantial?

I think I'll just go back to what I said. We're really working -- management working with our board. I believe this is the most prudent, balanced approach. All 3 elements of it are very accretive for shareholders. And for the reasons that I noted, both the amount of leverage that the company added during the crisis, the earnings loss from the sold businesses and our desire to get a balance sheet that is consistent with our go-forward strategy of being a P&C-centric company, as Chris -- I think, as Chris has noted, the $1 billion was the right number. We thought $0.5 billion was the appropriate number for buybacks. I think, as Chris has said, we'll be pretty methodical about that. And then lastly, I think, for reasons that should be even more apparent now, preserving incremental capital in the life subsidiaries to potentially do the most accretive thing, which is to either reduce or eliminate VA, and particularly Japan VA risk, we thought was a really good balance, and as I said earlier, I feel really good about the plan. And then I'd reiterate for the reasons that I said earlier, we -- Chris and I intend to have a consistent capital management approach of returning excess capital as appropriate to shareholders going forward once this plan is complete.

Okay, great. And then just a quick question with respect to the specialty business, Doug, it was -- wonder if you could tell a little bit about what needs to be done to really improve the profitability there. Is it a pricing issue? Is it a risk selection issue? And how quickly do we think we can get those underlying combines down into, call it, mid-90s area, where they probably need to be?

Yes, good question, Brian. And let me just give you some context. I think this will help all of you think through this. Inside our specialty businesses, we really have 4 businesses. We've got our national account business, which largely is an excess -- casualty excess workers' comp line. In the program captive area, we have some dollar 1 programs, but we also have pretty significant excess casualty programs in there as well. And then, obviously, we have our D&O financial products business. When you look at the 4 businesses, 2 of those businesses have target combined ratios for our levels excess 100% right? So we have a mixed component of businesses in there. Our national account casualty business for returns in the teens has target combined ratios in excess of 107% to 110%. So when you look at combined ratio, you can't just think of specialty as, okay, where is my D&O book running? So I give you that as an outdrop. Number two, our national account book had a terrific 2012. We're very satisfied with our returns. We feel good about that book. And as I've mentioned, we have work right now underway inside our program and excess program captive group as well. And last but not the least, our D&O book needs work just as others in the industry would describe as well. So we are attempting to achieve rate. Our rate incline so far for 2012 fourth quarter in the mid single-digits, but we're not satisfied yet with our combined ratio performance in our professional practice.

Your next question comes from the line of Jay Cohen with Bank of America Merrill Lynch.

A couple of questions. First, on the workers' comp, obviously, you had a little bit of adverse development, not that much, but still it is kind of an ongoing drag. And I'm wondering if you could talk about what's happening from a claim standpoint. You had talked about frequency popping up, I guess, about 1.5 years ago. What are you seeing these days?

Jay, this is Doug. You're right. We have worked hard at our workers' comp book, both actions in the marketplace and also books and records relative to reserving. I would say this in terms of frequency severity. Our frequency has really settled down very well in our Middle Market based on the actions and drivers that we've taken over the last 5 or 6 quarters. We're seeing a little bit of continued frequency in Small Commercial. I think, we've got our focus around a few key programs that's driving it and a little bit on the geography side, but what -- we have started to take steps to address it, and that's where that margin pressure has come from in small, albeit, very, very solid returns still in that small arena. So I feel like comparing where we were 12 months ago to where we are today, I feel so much better about our comp progress. More work ahead but significant strides in the last 12 months.

Got it. And then on the -- just the buyback portion of the capital plan. I could see, over time, why you would want to be consistent in your buyback activities if it's based on earnings. But in this case, it seems to me, you've got capital free and clear, it's at the holding company, you don't need it. Why wait 2 years to return a relatively modest amount of capital to shareholders when doing it quicker would be even more accretive, if, in fact, it is free and clear?

Jay, it's Chris. Thank you for your perspective. I think, as Liam said, we do feel good with the overall plan on debt and equity, the priorities and sort of the amounts that we're starting with. Consistency portion is important to us. I think to your specific point, I think, you just need to keep in context that we're still managing large risk positions in our runoff block. And so we're looking...

You have capital in the runoff business to handle that.

Yes, but we're still managing to stress scenarios. That would indicate that we still need to move capital and liquidity around the organization if those stress scenarios emerge. So I understand your perspective when you see it. But when you stress the organization the way we share with the regulators and the rating agencies, the plan that we adopted is still the prudent one for 2013 and as we head into 2014.

Okay. And then if I could ask one last question, I don't want to overstep my bounds here. But you have seen 2 other transactions where runoff businesses have been eliminated or sold to another party. What makes your runoff business different than Sun Life or Cigna's that makes it more of a challenge for you to complete a similar transaction?

Well, Jay, I think that's a big leap to assume that's the case. Just because we haven't done one, it doesn't mean it's more or less challenging than those that have been done, number one. We certainly are well aware of the unique characteristics of certainly, the Sun Life transaction have been done for a while and what we've learned of the Cigna transaction. And again, I don't think it's appropriate for us to talk about the nature of discussions that we may be having. So what I can say is what I think Chris and I and Beth have said pretty repeatedly, as you can assume, we're talking to the parties we should be talking to or the advisers we should be talking to, and if there's a transaction that makes sense for us and for shareholders, we'll do it.

So there's nothing specific about your business that really prevents you from engaging in such a transaction?

I think there are nuances and idiosyncrasies to every book. But at a -- in a general sense, no.

Jay, I would add a little color that -- and Liam's right. I mean, we're -- Beth and the team are very proactive. But as we've talked about it, the book really has 3 components, Japan, VA, U.S. VA and a big fixed block of annuities. Those characteristics are different so there isn't going to be one holistic transaction that just sort of says, yes, here it is. I think, structurally, we have some short-term limitations given that we write the Group Benefits business in life legal entities. And if you look at the deal besides the Cigna deal that you referenced, those involved legal entities, where acquirers wanted legal entities and structures to absorb. We can't do a legal entity deal right now until we deal with the Group Benefit business and where it's being written. So there are some short-term constraints. But over the long-term, you ought to think in terms of what we're thinking along those 3 blocks in trying to have buyers that have appetite for Japanese exposures, U.S. VA exposures and fixed annuity exposures here in the U.S.

Your next question comes from the line of Eric Bass with Citigroup.

So first question, can you just talk a little bit about how much capital do you expect the core ongoing business kind of x the runoff to generate in 2013?

Erik, I would estimate that the core P&C business would generate about $900 million of statutory surplus. I would estimate that the Group Benefits business would generate approximately $100 million to $125 million. And then what we did with our life Mutual Funds operations, moved it up to the life holding company. I would say that the cash-based earnings that we could have access to, thereabout $75 million.

Okay, that's very helpful. And then just one follow-up on -- Chris, I guess, on the point you are just making on kind of the moving of the Group Benefits business. If you could talk a little bit about maybe what that process is and then any other actions you're taking within kind of the U.S. life subs to isolate and consolidate the variable annuity blocks, and maybe a timeline for potentially completing this.

I think what I would just like to share, Erik, is that the Group Benefits business is strategically important to us. It's written in 2 life legal entities currently, and we're figuring out what is the right structure going forward. So there isn't anything sort of an aha here. This is just what legal entity are we going to use to write Group Benefits. And we're going to align it to Doug and his management team going forward. It's just as simple as that.

Okay. And then on the annuity side. The Japan block is standalone, but the, I think, the other -- the U.S. piece is in -- is it 3 different entities currently?

Yes. We have 3 different U.S. legal entities that write that. And we're looking at, obviously, a lot of different strategies to how to manage legal entities and books of business over the long term. But once -- if we make any changes, we'll let you know, but we're always looking to how to be more efficient with our operating structures, our hedging programs and long-term risk management.

Our last question comes from the line of Bob Glasspiegel with Langen McAlenney.

On the migration to becoming a Property-Casualty company when you grow up, I mean, you talked about the -- getting your debt in line with P&C peers. I'm curious on where the investment portfolio stands on that migration? And just looking at your BBB's are 26%, your bigs [ph] are 5%. You've got 3% in CDOs. Travelers, which is probably at one end of the spectrum, is at 9% BBBs, 3% junk and no CDOs. You obviously needed to get your ROE higher to -- so there's a tension on that point. So are you closer to using an AIG game plan of cranking up risk here on the margin? Or do you want to move more towards Travelers over time, and how long would that take?

Bob, it's Chris. I would say, we're trying to have a prudent portfolio. We probably favor a Travelers model long term. There are some holdover and transitional issues as we migrate out of some of our life books and assets that were retained or transferred back to us that the buying parties didn't want to have. So I think we'll balance all that out over the next couple of years here. But I think, Brion Johnson and his team at HIMCO have the appropriate mindset to run a P&C and Group Benefit-orientated group going forward. I would say, again, with that Group Benefit business, there are longer duration liabilities that we need to continue to manage there similar to the workers' comp line. So the component could be just slightly different, but think more along the Travelers model long term.

So let's say, a couple of years from now, what do you think BBB's would be versus 26% today, down a couple of points or down 5 to 10 or?

Bob, I'm just trying to get through this month and next month, so I'm not really focusing on '14 yet where it's at. But we'll see if maybe, at Investor Day, we can address that. But I don't have a vision right now for you.

Thank you. Thank you all, for joining us today. I know it's been a longer call than usual, and we appreciate all your attention. If you have any follow-up calls, please reach out to the Investor Relations department. And again, I'd like to add my invitation to you all to join us on April 11 in Hartford for an Investor Day focused on Talcott Resolution. Thank you all, and have a great day.

This concludes today's conference call. You may now disconnect.