Sabra Purtill - Head of Investor Relations and Senior Vice President Liam E. McGee - Chairman, Chief Executive Officer, President, Member of Finance, Investment & Risk Management Committee and Member of Enterprise Risk & Capital Committee Douglas G. Elliot - President of Commercial Markets, Executive Vice President and Member of Enterprise Risk & Capital Committee André A. Napoli - President of Consumer Markets & Enterprise Business Services and Member of Enterprise Risk & Capital Committee Christopher John Swift - Chief Financial Officer, Executive Vice President and Member of Enterprise Risk & Capital Committee Beth A. Bombara - President of Talcott Resolution, Executive Vice President and Member of Enterprise Risk & Capital Committee

Brian Meredith - UBS Investment Bank, Research Division Vincent M. DeAugustino - Keefe, Bruyette, & Woods, Inc., Research Division Erik James Bass - Citigroup Inc, Research Division Jay Adam Cohen - BofA Merrill Lynch, Research Division John M. Nadel - Sterne Agee & Leach Inc., Research Division A. Mark Finkelstein - Evercore Partners Inc., Research Division Jay Gelb - Barclays Capital, Research Division Thomas G. Gallagher - Crédit Suisse AG, Research Division Christopher Giovanni - Goldman Sachs Group Inc., Research Division Robert Glasspiegel - Janney Montgomery Scott LLC, Research Division

Good morning. My name is Ginger, and I will be your conference operator today. At this time, I would like to welcome everyone to The Hartford Fourth Quarter and Full Year 2013 Financial Results and Outlook Conference Call. [Operator Instructions] Thank you. Ms. Sabra Purtill, Head of Investor Relations, you may begin your conference.

Thank you, Ginger, and good morning to everyone. Thank you for joining us for The Hartford's 2013 financial results and 2014 outlook conference call. I would just note that our prepared comments this morning run a little bit longer than normal, so we have allowed for some extra time on the back of the call beyond 10:00 for the Q&A session. Our speakers today include Liam McGee, Chairman, President and CEO; Doug Elliot, President of Commercial Markets; Andy Napoli, President of Consumer Markets; and Chris Swift, Chief Financial Officer. Other members of our executive management team are also available for the Q&A section of this call, including Beth Bombara, President of Talcott Resolution. As described on Page 2 of the slides, today's presentation includes forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance, and actual results could be materially different. We do not assume any obligation to update forward-looking statements, and investors should consider the risks and uncertainties that could cause actual results to differ from any forward-looking statements. A detailed description of those risks and uncertainties can be found in our SEC filings, available in the Investor Relations section of our website. Also note that our presentation includes several non-GAAP financial measures. Explanations and reconciliations of these measures to the comparable GAAP measure are included in our SEC filings as well and also in the earnings release and financial supplement. I'll now turn the call over to Liam.

Thank you, Sabra. Good morning, everyone. And thanks for joining our earnings call. 2013 was an outstanding year for The Hartford. We executed our strategy and delivered superior results for shareholders. Heading into 2014, we have positive momentum with expanding margins in P&C and Group Benefits and improving performance in Mutual Funds. With the company's strong financial position and improved capital generation outlook, we are pleased to announce a new 2-year capital management plan, which includes $2 billion of equity repurchases and $656 million of debt repayments. As you know already, last night, we reported excellent fourth quarter and full year 2013 results. Full year core earnings increased 26% to $1.7 billion or $3.55 per diluted share. Core earnings in the P&C, Group Benefits and Mutual Fund businesses increased 41% year-over-year. The increases in P&C and Group Benefits were driven by disciplined underwriting, expanding margins and lower CATs, which was a welcome reprieve after several years of elevated CAT losses. As Doug will discuss, this was the sixth consecutive quarter of 8% renewal written price increases in P&C Standard Commercial. Our pricing philosophy is unchanged, and written pricing continues to outpace loss cost trends. In Talcott Resolution, the size and risk of the annuity blocks have been significantly reduced. The number of VA contracts in Japan declined 26% in 2013, as surrenders increased due to market performance in the moneyness and aging of the block. In the U.S., the number of VA contracts declined 14%, driven by improving markets, as well as the successful ESV program. We've achieved over 90% of our $850 million expense reduction target, including cost related to the divested businesses. Plans are in place to take out the rest this year. We are instilling a culture of continuous improvement that will ensure we operate more effectively…

Thank you, Liam, and good morning, everyone. Today, I'll cover the 2013 highlights for P&C commercial and Group Benefits, and then share some thoughts for 2014. We finished 2013 in very strong fashion, and our overall theme remains unchanged. Significant core margin improvement across the business. For P&C commercial, 2013 was a very solid year, with $827 million of core earnings and a combined ratio of 96.1. This was an increase of $316 million from 2012, largely driven by 6.8 points of improvement in the combined ratio. The underlying combined ratio, which excludes catastrophes and prior development, was 93 for the year, representing 3.6 points of fundamental margin improvement. As always, there are many moving pieces inside our business that contribute to our aggregate result, but the final analysis demonstrates a simple fact: We made substantial progress this year in expanding underlying margins across our P&C commercial business units. While catastrophes were much lighter in 2013, we achieved real success on the front lines, where pricing and underwriting decisions are executed. Turning to the top line, our written premium of $6.2 billion was consistent with 2012. Two significant factors contributed to this outcome. First was our relentless focus on achieving pricing gains. We made difficult choices to walk away from certain accounts where we could not meaningfully improve pricing adequacy, causing our retention to suffer a bit. Second, we continued to reduce our Programs and Captives book of business, generating over $80 million of written premium year-over-year. We believe these decisions were appropriate for the loss trends and interest rate environment that have characterized the last 2 years, and our margin improvement in 2013 supports that conclusion. These actions offset top line growth in other areas. We've been encouraged by our overall new business momentum over the back half of…

Thank you, Andy. This morning, I'll cover several topics. First, I'll quickly review 2013 results and discuss our '14 outlook, including our capital management plan for 2014 and '15. Second, I'll provide a year-end update on several important metrics for Talcott and the company, including capital margins, and finally, I'll cover our first quarter 2014 outlook. Let's begin on Slide 19. Doug and Andy have covered the results for our Commercial and Consumer Markets. Let me now briefly touch upon the other segments. Mutual Funds core earnings rose 5% in 2013, in line with our original outlook as we continue to strengthen and position this business for future growth opportunities. Retail mutual funds net flow performance improved in 2013, driven by higher sales and better distribution effectiveness, supported by solid fund performance throughout the year. Assuming normal market conditions, we expect 2014 core earnings growth of roughly 10%, driven by improved earnings in retail mutual funds, partially offset by the runoff of VA mutual funds. Turning to Talcott on Slide 20. Core earnings declined 9% in 2013, which was less than expected, attributable to higher partnership returns, lower DAC amortization and higher market levels. As Liam mentioned, we have made significant strides to reducing the size and risk of Talcott, which will enable us to begin returning capital from Talcott in the second half of 2014, initially from HLIKK, our Japan subsidiary. Talcott 2014 core earnings is expected to decline approximately $165 million or 20% from 2013 core earnings, reflecting lower fees due to higher surrenders. This outlook projects an additional 31% decline in policy counts in Japan and 12% in the U.S., which will permanently reduce risk, but will also continue to reduce earnings in 2014 and 2015. Slide 21 summarizes the Corporate segment, which includes interest, expense and…

Thank you, Chris. We have about 30 minutes for Q&A. [Operator Instructions] Ginger, could you please give the Q&A instructions again?

[Operator Instructions] Your first question is from Brian Meredith from UBS.

A couple of questions for you. First, with your first quarter outlook, I noticed there really was no mention of higher CAT losses, and given all the weather and some of the warnings by some other companies,. I wonder if you could comment on that. and what the potential impact on the Hartford could be.

Brian, it's Chris. As I said in my comments, we've looked at January results, we still feel good about our CAT assumptions for the full first quarter. January's CATs were maybe a little elevated from normal, but still, we feel good about the overall budget for the first quarter. As it relates to the non-CAT weather, Doug might be able to comment a little bit. But there was really nothing unusual in our book of business, whether it be commercial or personal lines that we're seeing in the first month of January. But, Doug, any additional color?

Well, Chris, I think you hit it. As I look at the balance in January, we know it's a colder month, but I think we're within our general norms, and we'll continue to work our way through the rest of the quarters. So I don't see anything really that is so significant we should comment on.

Great. And then second question for Doug. I'm just curious, you talked about preparing for some increased competition here going into 2014. However, if I look at your renewal rate activity, you seem to be holding in there better than most of the other competitors. I wonder if you could kind of comment on that and why you think that is.

I guess, a few thoughts for you, Brian. One is, I would remind you, we have a big Small Commercial book of business, and that has performed well. It's been a steady component of our business that's here for a long time, and that rate performance is very solid for an extended period. Secondly, in prior calls, we worked hard at our auto line of business and the auto line is still achieving and taking rate, and given some of our profit dynamics, we think that is exactly the direction we need to head. And through it all, we were pleased with the fourth quarter. I did point to the fact that my view is at the end of the fourth quarter, things got a bit more competitive. But I look at 2013 across-the-board, I looked at overall performance in the fourth quarter, I'm very pleased with the progress we made.

Okay, your next question is from Vincent DeAugustino from KBW. Vincent M. DeAugustino - Keefe, Bruyette, & Woods, Inc., Research Division: Switch gears a little bit on Personal Auto. So just noticed the prior quarter or current accident year frequency adjustments stemming from the higher second quarter '13 estimates. And I'm just wondering if that's all 3Q '13-related, or perhaps if there's sort of late reported claim that are popping up that might be causing the adjustment? André A. Napoli: Vince, this is Andy. So first, I'll say that is a normal part of our process to make current accident year reserve adjustments throughout the course of the year, as we see emerging trends in frequency or severity for auto liability. So occasionally, liability frequency can exhibit some volatility from quarter-to-quarter. And so ultimately for 2013, auto liability frequency ended right about where we expected at the beginning of the year. Just sort of the way it played out was that the first of the year, we saw some favorability and then in the second half, we saw some unfavorability and we booked that in the fourth quarter. So you're seeing a full year impact all getting booked in the fourth quarter. Vincent M. DeAugustino - Keefe, Bruyette, & Woods, Inc., Research Division: Okay, great. And then just switching over to the Mutual Funds business. So it seems like you have really strong fund performance and we had good market performance for the ICI fund flows were positive. But you guys' retail fund flows were still a little troublesome. So I'm just curious of your thoughts on improving that and whether if you feel this is a distribution hurdle or if there's anything else that's holding back the business because all is equal it seems, like the performance there is pretty solid.

Vincent, it's Chris. Jim Davey, if he were here today, he had a prior commitment with his Mutual Fund Board. He would answer it along the lines of -- He really is positive about 2014. We do think we could have net positive flows for all of '14. We would look back in '13. We had good, decent performance from our partner, Wellington. We also did have maybe 2 major accounts, 401(k)-type money that rolled off. We did shut down now since our money market fund and roll those assets to another new provider. So was it a couple of a one-time items, but overall, we do think we could begin to grow net fund flows in 2014.

The next question is from our Erik Bass from Citigroup.

Just hoping if you could talk a little bit more within your capital plan, what you're assuming for dividends from Talcott in 2014 and 2015? I know you mentioned specifically the Japan target, but given the ability to request a special dividend from the U.S. block in 2014? And I guess, if not, what's preventing you from taking capital out, given the significant lapsation you're seeing.

Erik, in a high level, and I'm sure Chris may want to give you more perspective. As Chris noted, we'll take out from HLIKK this year and next year, and we do intend to have an extraordinary dividend out of the U.S. in 2015. Obviously, that will require regulatory approvals. I think it's premature for us to comment in more than it is our intent to do so. And as we work through that process, we'll give you more details. Chris?

I would say, Erik, in addition to Liam's points, just the context of Talcott's capital return, as I said in my prepared remarks, we are taking out, I'll call it, to the holding company $1.2 billion of cash flow. And really, some of those cash flow resources are from old Talcott operations, whether it be Mutual Fund or Group Benefits. So we plan to take out roughly $70 million of dividends from Mutual Funds next year, $100 million from Group Benefits. So in a way, we think Talcott's already contributing. As we said, Japan is coming online with dividend distributions. We expect, I would say $150 million to $200 million over the next 4 or 5 years on average to come out of Japan. As Liam said, we have some things that to still do in the U.S. And really what I mean is, I want to get completed that legal entity separation. We are beginning work on collapsing White River REIT, our Vermont captive into the ILA, and then we'll approach the regulators in the second half of the year and have that discussion, that multi-year discussion, on what we think is an appropriate funding source coming out of the remaining 2 U.S. life legal entities for Talcott. So I think we have a plan, and I think we've been executing it pretty well and we're very confident that, particularly in '15, increased cash flows will come out of Talcott.

That's helpful color. And just -- could you provide an update on the stack capital levels to the different blocks within Talcott similar to what you gave in April?

I think what our plan is, we'll do that at the first quarter once we complete the legal entity separation and just have, I'll call it, the new structure lock down and just present it to you there. So I would say that there is nothing dramatically changed from the April presentation, but we'll update you first quarter.

The next question is from Jay Cohen from Bank of America Merrill Lynch.

A question on the current year reserve adjustment in the auto side. Can you quantify that just so we can get a good sense of what the underlying numbers look like there? André A. Napoli: Sure. It was 2.6 points on the quarter. And then for the year for auto, it was about just over a half point.

With ownership on the auto... André A. Napoli: On the auto, right.

The next question is from John Nadel from Sterne Agee. John M. Nadel - Sterne Agee & Leach Inc., Research Division: I'm curious on the outlook for the runoff of the Japanese variable annuity block. It looks like you're expecting the surrender rate will remain somewhere around that 30% level in 2014. Obviously, we've had some very early 2014 market weakness and yen movement. I'm just wondering if that 30% outlook takes into account the more recent market activity or is there some risk that, that surrender rate comes lower.

John, I'll have Beth comment in more detail. But I'll remind you that even at a yen of 101 and the topics where it is now, we're really back where we were just a few months ago when the redemption rate, what it is, right -- the lapse rate, I should say, is similar to what it is right now. So with that context, Beth, do you want to give more details?

Yes. I would agree. So where we are right now, what we saw in January, our surrender rates were pretty much in line with what we would have expected. January is typically a little bit slower just because of a lot of holidays and so forth. And the other thing, 2 other points just to keep in mind is, one, the funds backing the account value in Japan, about 40% of that is allocated to equities and of that, half of it is to Japan equities. So it's not all linked to what we’re seeing in the Japan equity movements. And then secondly, we do have a very significant amount of account value that starts to come up to the annuitization, the annuity commencement date in 2014, about $2 billion worth of account value. And most of that account value at the end of the year was above 110% of the guarantee amount. So very significant amount out of the money, and our experience has been that, for contracts that come to the annuity commencement date, if they're out of the money, we see a very high number of those choosing to take the lump sum. So if you put all of those factors together, we still feel good about our surrender rates assumption for the year. John M. Nadel - Sterne Agee & Leach Inc., Research Division: That's excellent color. And then, Chris, maybe just a clarification on your Slide #28 that talks about the capital margins. So, at the end of 2015, if the base scenario comes to 4, that $7.6 billion is effectivity your excess capital at The Hartford above those requirements for P&C Group and Talcott?

I think, John, it's our definition of capital margin, we've never, call it, quantified it per se as excess, because excess then would take into account which is really deployable. And, as you know, I mean, particularly for the Life group, we're still in the U.S. Life group in an extraordinary dividend land. It can't be readily turned into cash. So that's the only nuance. But, yes, I think you should think about capital margins as a buffer above our AA targets, our 400% RBC, particularly in Group Benefits as a healthy margin. And we would manage that over time. John M. Nadel - Sterne Agee & Leach Inc., Research Division: I assume this really goes to supporting the dialogue that you guys expect to have with some of the insurance regulators around this sort of multi-year dividend planning?

Yes, I mean, obviously, we share all our data with all our constituencies, whether it be regulators, agencies, as the like. I think the only other thought, John, just on that base number, I mean, that's the margin at the ATCOS, plus the holding company liquidity. And we do have targets that are roughly 2x annual the interest in dividend, so that would be, in essence, the subtraction from a deployable capital number also. John M. Nadel - Sterne Agee & Leach Inc., Research Division: Okay. And then just to -- just one last point on this. Given how much that capital margin moves, especially under the stress scenario, I guess it's fair to assume that most of that capital margin is -- resides in Talcott, given Talcott would probably be the piece that requires more capital under that stress scenario?

Remember, we've always said, that we're managing Talcott to remain capital self-sufficient, and Talcott is in this scenario. The actual breakdown of that $2 billion is, there's $1 billion at the holding company, because we're always solving for a minimum liquidity at the holding company, and P&C's got $600 million and Life group has $400 million. So those are the components of the $2 billion capital margin in the stress.

Your next question comes from Mark Finkelstein from Evercore.

Maybe start with Chris. Chris, for 2014, what is the economic cost of hedging that you are assuming? And what I mean is that, kind of a number that falls below the line, if markets operate the way you expect them to.

I would say on the hedging, in general, we have a context right. Markets moved dramatically in 2013 and maybe we could talk about the cost of the hedging program in general over the life of the block as it runs off. But the answer to your specific question, I mean, Talcott, you would assume roughly $225 million of after-tax hedge losses recorded in realized losses. I translate that into -- from our core ROE to a net income ROE, that's about a 1 point cost of that hedge program. I think on the overall cost, we may able to provide some updates, and I'll compare and contrast. So I always start with Japan. In prior years, we talked about 200 basis points of cost. You see sort of a run rate cost going forward, primarily because the market moves so dramatically where they are today with about 70 basis points. U.S., that 40 basis points on average now is around 30 basis points. And then from a macro program, I would have you think of our spend going forward of roughly $75 million.

And that's all after -- or pretax, right?

The basis points was after-tax and then the spend $75 million was a pretax number.

Okay. So after-tax on the 70 and 30. Okay. Just on the dividend out of P&C group in Mutual Funds, did you back off the $1.50 billion at Talcott, it's $1.50 billion. Is there any reason to think that, that number shouldn't kind of trend with earnings? Is there anything that would drive it up above the earnings or perhaps below in terms of that kind of capital release?

I think that's a pretty decent trend. The way we think about it more importantly is what is -- what is distributable earnings, sort of the statutory income or GAAP income on our Mutual Fund operation. What do we need from a holding company side, considering the growth in the investments, that Doug and Andy in the go-forward businesses need it to make. But that's how we think about sort of the growth sources of flows and then what we would take up to the holding company, and what I described for 2014 is what we're taking up the holding company in '14.

Okay. And then one final quick one if I may. Doug, what is your expectation around lost trend in Standard Commercial for '14 if maybe a directly comparable number to the 8% rate increase that you showed in the fourth quarter?

Mark, I would say that in our planning for '14, we're expecting loss trend to be about where it was in '13. So, from a loss trend perspective, single digits generally across all lines, we've had some good news on the frequency side and workers' compensation, and auto, the auto line has been a little warmer than the overall rest of the book. But generally, '14 in line with '13.

And just remind me, what, like, 4% range, 3%?

Yes. Yes. 3.5% to 4% is a good point to be at.

Your next question is from Jay Gelb from Barclays.

I wanted to touch base on the Talcott outlook initially. In the slide, it says continued VA surrenders will lead to further core earnings reduction in 2015 for Talcott. I was trying to get a sense of magnitude on that.

Jay, it's Chris. I mean, I think the way to think about it is in relation to AUM. Contracts will decline, but then, your market factors in forces can increase that, but on your earnings fees kind of called higher asset base, per policy basis. So that's sort of the calculus. I think in terms of just roughly numbers, I would expect in '15, Talcott decline another $125 million to $150 million after-tax.

$125 million to $150 million?

Correct.

Second point is on the overall or, let's say, core return on equity. Around 9% in 2014. Tell us how you plan to get that into double digits.

A lot of hard work. To me, it starts with, and I'm looking at Doug and Andy and the business leaders. I mean, we're going to, as Liam said, the strategy is to profitably grow the go-forward businesses as Talcott shrinks. And you can see what we think is a prudent capital management plan, focused on equity and debt. That philosophy will continue. You add in sort of the expense efficiency targets. And we think 10% is on the horizon. It will take a lot of work, but we still feel comfortable in growing ROE in the 40 basis points plus or minus annually going forward, through earnings growth, through accretive capital management plans and driving more efficiency into the organization.

Great. And the debt retirement, Chris, by our estimates, you should get to that 23% range, debt to capital ex-AOCI by the end of 2015. Does that mean that debt retirement should pretty much be complete by the end of '15?

Jay, I'd like to execute our '14 and '15 plans and we'll talk a lot about '16 and beyond. But I've always said we would like to get into low 20s. I always defined low 20s as 22%. And obviously, improving our coverage ratios and when we get our targets, we could then start to think about a different approach, or will it be '15 or '16, I mean, know that we're trying to get to our targets.

Your next question is from Tom Gallagher from Credit Suisse. Thomas G. Gallagher - Crédit Suisse AG, Research Division: Chris, I wanted to come back to question on Talcott. And if I heard you correctly in response to Mark's question, your hedging costs are going to be going down. So can you talk about whether you expect Talcott to generate meaningful capital, assuming your base plan for market expectations? And if so, how much? And also, I know you're focused on core earnings, but I know net income has been very weak on that block. Is that getting better or worse, factoring in the cost of hedging?

I think, 2 points. On your first one on the surplus, I do expect both Life and P&C to generate a couple of $100 million of surplus after dividends next year. So, we think Talcott specifically can begin to generate surplus based from the net income side. That's why we try to frame it at that $225 million after-tax, that's assuming markets grow 4% and rates follow our trend. And basically, FX remains stable. So I would say, if that's the market condition, we're printing less hedging losses so that there is less of a difference between core and net income. And I tried to frame it as that 1 point ROE difference right now based on our hedging cost going forward. Thomas G. Gallagher - Crédit Suisse AG, Research Division: Got it. And then also, I just want to get a better handle on the way you guys are thinking about valuing this business, because I was just a little confused thinking about the $2.2 billion increase in market consistent value and then the $3 billion of NPV of cash flow positives. And then contrasting that with the 80% offset from hedge losses. So I understand there's capital, that we can put a value on capital depending on how quickly it gets returned. But then there's the valuing the cash flows and the business itself. How do you think about it, taking those 3 other data points that I just mentioned if you can help reconcile those?

No. I mean, you're describing a classic actuarial valuation, right? Value of the block of business, assets and liabilities and the value of the surplus, but we think about it is the same way. I think my comments in my script was trying to lead you to conclude that MCV would not be a transaction value because a willing buyer and seller would have to negotiate, but it is sort of a risk-neutral value that helps build the foundation for your thinking in any potential transaction. Thomas G. Gallagher - Crédit Suisse AG, Research Division: So Chris, sorry, just to follow-up on that. So I would start with 100% of surplus size, I assume, and add, on top of that, market consistent value of 2.2 and then adjust that based, to your point, based on the bid-ask spread from a buyer and seller, if you want to think about it along those terms. But then would I then adjust that downward by 80% considering hedge losses or am I hitting that too hard considering the impact to the hedge losses?

I think you're going to think in terms of the hedge losses, those printed hedge losses are reading results, right? I mean, we booked them as realized losses, so it's in surplus already. So I would say you're already have accounted for it in your reconciliations. And Tom, I'd love doing this with you, but why don't you and Sabra visit, and if you want a little help on any thoughts on the model, we could talk to you off line.

The next question is from Chris Giovanni from Goldman Sachs.

I guess, question on the U.S. VA book. Obviously, lapse has slowed. I know you touched there. I think recently you talked about the possibility of exploring another ESV program. So can you talk maybe where we stand with that? And maybe why or is that still a focus given where NAR stands today?

Well, Beth will give you her views on that, Chris. I think the ESV performance played out as we said it would. And so now, Beth can give her perspectives on what if anything else things that she's thinking about.

Yes, thanks, Liam. So currently, in the plan we have right now, we have built in an expectation of doing an offer related to our fixed annuity book. And our plan includes about $30 million of cost associated with that, so it's sort of the next evolution of offerings that we're looking at. Beyond that, the team continues to look if there are other, again as we talked about in the past, sort of nearly focused parts of the business that we would look to. So you should expect that we'll continue to look for that. And as our plans in that area firm up, we will share them with you.

Okay. And then, you obviously give us a look in terms of buybacks through January. But wondering how we should think about kind of the cadence of buybacks here over the next couple of years. Will you be optimistic around price or would it be fairly balanced on a quarterly basis?

Chris, I think the way we think about it is $1 billion $1 billion first order, and then we do want to be stable and consistent and prudent, but we'll look at buying opportunities. And in fact, I can just give you an update through yesterday, we had purchased $151 million of shares back in through January, and then first business day of February. So we're been opportunistic when we see it, but we also want to be stable and steady, too.

Okay. And then one last quick one. Liam, you talked about in terms of one of the approaches for long term value, top quartile growth in book value, and how should we think about that just in terms of if you were to be executing on transactions within Talcott that could potentially reduce GAAP book value? I mean, is that a focus or is that just studying economics in terms of thinking about what that would do versus your translation of GAAP book value?

I want to clarify my statement, was that we want to be a top quartile company as measured by total shareholder return over trend. We think that will be driven, we have conviction that, that will be driven by growing book value. And as Chris discussed earlier, increasing our ROE. Obviously, if we were to seriously consider a transaction, we would do what was economic. And as I've always said, we take a look at the purchase price, the amount of capital that could be released versus what our view is of the underlying economics. And that will really inform our decision as opposed to, if you will, solving to a book value answer per se. I will certainly be part of the equation, we're well aware of that. But I think the longer-term view that I'm trying to impart is we are focused on being a top quartile CSR company. We know that will be driven by prudent growth to book value, as well as an increase in ROE, and I think I've given you a consistent frame of reference for how we might view a potential transaction.

And, Ginger, I think we have time for one more question. I think Chris, had a quick follow-up to Tom Gallagher's question on hedge cost first.

Tom, it's Chris. Actually, I think it was Mark that I probably misspoke just a little bit. The 70 and 30 basis points we're hedging for Japan and the U.S. are pretax numbers, consistent with the $75 million spend, which is also a pretax number. So sorry if I confused.

Ginger, can we have just the next question or the last question, please?

Yes, ma'am. Your final question comes from Bob Glasspiegel from Janney.

Question on whether I'm thinking about Talcott correctly. It seems like 2013 was a nirvana environment with the U.S. stock market up, Japan up, weakening yen, higher interest rates, good for sort of operating results, good for our balance sheet, bad for hedging. We certain reverse those dynamics in the first quarter, yet you have Talcott's sort of earning more than a quarter of the full year earnings. So I just want to make sure that the guidance sort of fully reflects the 255 10-year and the other impacts of the yen, and the Nikkei, et cetera.

Thanks, Bob. For the question again, Beth and Chris may have their own context. I remind you that yen/dollar on TOPIX/Nikkei are really back where they were just a few months ago. So, well above what we started last year wasn't even at the end of the first quarter. So let's be sure we have that context. So I'd turn over to Chris and Beth for any additional comments you might want to make to Bob's question.

No. Again, I think that we've taken all those into consideration, and the guidance that we've provided and reflecting the surrender activity that we saw during 2013, kind of our starting point for 2014, and the expectation that we have goes for surrender activity, as well as the impact of the annuitizations that begin in Japan.

Okay. So it's just when I saw the year end 10-year at 220 -- 320, which has a pretty big grade up from where we are today. I didn't know if that reflected a feeling that this is just a blip in the 10-year, something that you're managing.

Bob, it's Chris. I think the way we thought about our overall plan is that those were our point estimates. I think the ranges that we have around a lot of -- our data provides enough sensitivity for different market conditions. Interest rates, U.S. interest rates and sort of the returns on the assets that back those Japan liabilities aren't directly correlated. So, as we said, at the point estimate, I think at $570 million of core earnings for Talcott, where we sit here today, we still think that's our best estimate, knowing some of the market noise that even happened during the last few weeks.

Thank you, and thank you all for joining us for the call today. We appreciate your taking the extra time that we took today for the call. And if you have any follow-up questions, Sean and I are available after the call. Thank you, and have a good day.

Ladies and gentlemen, this does conclude today's conference call. Thank you for participating. At this time, you may now disconnect.