Linkage of Risk, Capital and Financial Management

1. Linkage of Risk, Capital and Financial Management Mark Homan CAS Annual Meeting November 12, 2007

2. Introduction • My Role at The Hartford • P&C Risk Modeling • Contribution to Corporate ERM Process • Discuss where The Hartford is with respect to linkage

3. Corporate Oversight • Four Chief Risk Officers • Corporate, Property/Casualty, Life and Investment • Corporate CRO reports to Chief Financial Officer • Entire Board acts as Risk Committee

4. Framework • Consistent Risk/Return Metric • Risk Coverage Ratio • Common Return Target across P&C, Life and Investment • Still working on common performance measures between P&C and Life

5. Risk Assessment • Key Risks already identified in pricing models • Risk dashboards in place for our largest risks • Operational Risk • Sufficient information for allocation • Judgement call on total capital

6. Current Linkage – P&C • Current State • Economic Allocation of carried capital • RORAC Approach; common target return • Single model used for risk and return modeling for all lines, including investment • Same model used for pricing, planning, monitoring and incentive compensation

7. Education and Communication – P&C • Risk adjusted return is key performance metric for planning and monitoring • Regular classes on our risk and return methodology • Actuarial required to attend after one year • Finance and Underwriting specific classes • Quarterly publication of risk adjusted returns relative to plans

8. Monitoring • Quarterly publication of returns at management line level • Quarterly review of GAAP and Statutory Capital • Monthly updates of cat exposure relative to guidelines

9. Contact Information Mark Homan, FCAS, MAAA, CPCU The Hartford mhoman@thehartford.com 860/547-8815