1. The Insurance Industry Outlook Presented By Frederick Eppinger Frederick Eppinger, Executive Vice President, Field & Service Operations The Hartford To The MetroHartford Regional Economic Alliance/ CBIA Economic Summit and Outlook Conference January 3, 2003

2. The Insurance Industry in 2001  The stock market significantly under performed – and the beginnings of a real recession in almost a decade  September 11 became the largest tragedy in American history  As a result of 9/11, the insurance industry suffered the single largest insurable loss to date  After declining prices since the 1980s, rates began to increase in mid 2000 and accelerated in 2001, surging after 9/11  Many carriers began raising new replacement capital

3. The Current Landscape  Firming market conditions will continue into 2003  Companies continue to focus on underwriting profitability given current industry underwriting trends  Continued pressure on personal and auto lines due to increase in loss costs due to increasing medical, repair, litigation and fraud costs  Winners' and losers' performance continues to separate  Potential share consolidation due to "flight to quality"

4. *2002 figures are estimates; P/C figure based on first-half 2002 data. Source: Insurance Information Institute; Fortune ROE: P/C vs. All Industries ROE (1998-2002*)

5. Source: The Geneva Association, III ROE v. Cost of Capital US Non-Life: 1991-2002 14.6 pts 7.9 pts

6. *Insurance Information Institute Estimate based on first half 2002 data. P/C Net Income After Taxes (’91-’02*) ($Millions)

7. *Occurrence and claims madeSource: Morgan Stanley, Insurance Information Institute Estimated Deficiency Total Excluding A&E: $64 Billion A&E Deficiency: $55 Billion Total Including A&E: $120 Billion Reserve Deficiency, by Line (Accident Year 1992-2001, as of 12/01)

8. *Average for week ending September 6, 2002. Source: Board of Governors, Federal Reserve System; Insurance Information Institute Interest Rates

9. Sources: Insurance Information Institute, calculated from U.S. Bureau of Economic Analysis and A.M. Best data. Net Written Premium as % of GDP

10. Challenges Facing the Industry Managing Terrorism Risk Losses due to 9/11 estimated at $40+ billion Reinsurance for terrorism has disappeared Federal backstop legislation requires careful management of exposures Tort Reform Class actions filed in state courts has risen by 1,043% in ten years Asbestos liability could reach $55-$65 billion in U.S. alone Last year only 6% of claimants were actually sick Corporate Governance We must overcome the “crisis of confidence” in American businesses Opens companies to class action lawsuits Must involve management in attesting to accuracy of financials

11. The Winning Carriers  Deep partnerships with distribution channel  Maintain top rating  Excellent execution  Acquire carefully  Exploit market niches  Invest in technology