The Hartford Announces Settlement with Attorneys General of New York, Connecticut and Illinois

The Hartford Announces Settlement with Attorneys General of New York, Connecticut and Illinois

The Hartford Financial Services Group, Inc. (NYSE: HIG) today announced a settlement regarding the New York Attorney General’s investigation of market timing within the company’s variable annuity products. The company has also settled with the New York, Connecticut and Illinois Attorneys General, resolving matters relating to their investigations of the compensation arrangements between The Hartford and its property-casualty agents and brokers. The State of New York Insurance Department joined in the settlement. The company also announced that other previously disclosed matters that were under investigation by these attorneys general have been concluded.

In addition, The Hartford had previously disclosed an investigation by the staff of the Securities and Exchange Commission into matters related to market timing. In light of the settlement announced today, the Commission’s staff informed The Hartford that it has concluded its investigation without recommending any enforcement action.

In settling both the market timing and broker compensation matters, The Hartford has agreed to pay, in total, $115 million. This amount consists of $89 million in restitution ($84 million for market timing and $5 million for broker compensation) and $26 million in penalties. A substantial portion of the cost of the settlement has already been funded by the previously disclosed reserve of $83 million set aside for regulatory matters. The Hartford did not admit or deny any violation of federal or state law as a result of this settlement.

Commenting on the announcement, The Hartford’s Chairman and CEO, Ramani Ayer said, “We are pleased to have these matters behind us. Since these investigations began more than three years ago, we have cooperated fully with the attorneys general and other regulators. We have worked assiduously to strengthen and improve our business practices and will continue to do so. We emerge from this period with an unwavering resolve to uphold our longstanding commitment to providing our customers with outstanding products and exemplary service.”

RESOLUTION OF MARKET TIMING ISSUES

Of the total settlement, $84 million will be paid into a fund to compensate certain variable annuity contract holders of The Hartford for harm the New York Attorney General found to have resulted from the market timing activities of variable annuity contract holders from 1998 through 2003. The Hartford will retain an independent distribution consultant to develop a distribution plan for this fund that will be subject to the New York Attorney General’s approval.

Since the 1990’s, The Hartford has introduced a wide range of measures to curtail market timing in its individual variable annuity products. These measures include establishment and enforcement of limitations on trading frequency, implementation of programs designed to monitor and detect excessive trading, and institution of fair-valuation procedures to eliminate international arbitrage opportunities. As a result, The Hartford has in place robust measures designed to address market timing in its funds while continuing to provide investors in these products the ability to manage their investments wisely.