Good morning. My name is Ian, and I’ll be your conference operator today. At this time, I would like to welcome everyone to The Hartford Third Quarter 2015 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Sabra Purtill, Head of Investor Relations, you may begin your conference.

Thank you. Good morning. And welcome to The Hartford’s webcast for third quarter 2015 financial results. Our third quarter financial results news release, investor financial supplement, presentation and 10-Q were all released yesterday afternoon and are posted on our website. Our speakers today include Chris Swift, Chairman and CEO of The Hartford; Doug Elliot, President; and Beth Bombara, CFO. Following their prepared remarks, we will have about 30 minutes for Q&A. Just a few notes before Chris begins, today’s call 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 these statements. A detailed description of those risks and uncertainties can be found in our SEC filings, which are also available on our website. Our presentation today also 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 as in the news release and financial supplement. I’ll now turn the call over to Chris.

Thank you, Sabra. Good morning, everyone. Last night we announced our financial results for the third quarter. While we delivered strong underlying performance in our commercial lines and group benefit businesses, we did experienced some headwinds in several areas, resulting in a decrease in core earnings, lower net investment income, prior year development in commercial lines, and higher cats and loss costs in personal lines were the primary contributors to a 19% decline in core earnings per diluted share. Net investment income was down 10% compared to the third quarter of last year. This decline is mainly due to hedge fund performance in the quarter. However, year-to-date results remain ahead of our outlook for alternative investments in aggregate. We also had some notable achievements, including increase in 12 months core earnings return on equity to 9.1% and growing book value per diluted share by 8%. In mutual funds, net flows year-to-date were at the highest level we’ve seen since 2010 and in Talcott, our execution remains steady, where we continue to successfully manage the risk of the book and return capital to the holding company for more creative uses. Doug and Beth will cover operating results in more detail. I wanted to share a few thoughts on our results. In commercial lines, the underlying combined ratio, excluding cats and prior-year development improved 1 point over prior year. This result was driven by small commercial and specialty commercial, which delivered underlying combined ratios of 86.8 and 99.1, respectively, or better than prior year. The underlying results in middle-market were steady versus last year. However, prior-year development in general liability and commercial auto contributed to the deterioration in the total combined ratio. Personal lines cat losses were elevated versus prior year, although, below our expectations. We saw and reacted to recent signs…

Thank you, Chris, and good morning. I am going to provide additional details on the operating results of our Property and Casualty and Group Benefits business units, but, first, let me begin with the few observations about the market. The competitive landscape in Commercial Lines and Group Benefits is slightly more pressured than we experienced over the last four quarters. Markets remain largely rational, but there are more clear signs of aggressive new business pricing with some loosening of terms and conditions, particularly in commercial property. We continue to find opportunities to acquire adequately priced new business while remaining disciplined in our risk selection approach, mainly through more intense sales execution in our local markets with agents and brokers. In Personal Lines, competition is generally consistent with prior quarters. We continue to see opportunity for growth in the direct channel and with our differentiated AARP agency offering. Price competition in the traditional agency channel remains the norm driven by competitive raters. Third quarter core earnings in Commercial Lines was $216 million with the combined ratio of 94.5. This was an earnings decrease of $52 million versus third quarter 2014, primarily driven by adverse prior period development in commercial auto and lower net investment income. The underlying combined ratio, excluding catastrophes and prior period development, was 91, improving 1 point from third quarter 2014, largely driven by continued margin expansion in workers' compensation. This improvement reflects the solid foundation we built in recent years across our commercial businesses through rigorous underwriting and pricing discipline. Renewal written pricing in standard commercial lines was 2% for the quarter, down 1% from second quarter 2015 and 2 points from third quarter last year. Commercial auto continues to achieve high-single-digit price increases as we and the industry address weak returns in the line. Pricing in…

Thank you, Doug. I'm going to briefly cover the other segments, the investment portfolio and our capital management actions before we turn the call over for questions. Mutual Funds core earnings were flat with the prior year quarter, as lower fee income due to the decrease in market levels from June 30th was largely offset by lower distribution and other operating expenses. Total AUM was down about 5% from September 30th last year, mostly due to Talcott related AUM runoff. Excluding Talcott, AUM declined 2% due to the market decline this quarter. Fund performance remains solid, with 58% of all Mutual Funds and 74% of the equity funds, outperforming peers over the last five years, helping to improve net flows to a positive $307 million for the quarter and almost $1.1 billion year-to-date. Talcott posted stronger-than-expected core earnings of a $107 million, but down from a $122 million last year due to decreased fees and investment income, partially offset by lower expenses. The decrease in fees reflects the continued runoff in Talcott, with an 11% decrease in variable annuity contract count over the last year. Investment income was impacted by several factors, the largest item being lower limited partnership income, which was partially offset by higher bond calls and make-whole premiums than last year. In addition, Talcott’s operating expenses and costs for contractholder initiatives were lower than the prior year. As I mentioned last quarter, Talcott paid a dividend of $500 million in July, in addition to the $500 million dividend paid in February. We expect to pay another $500 million dividend to the holding company in early 2016. Corporate segment third quarter 2015 core losses of $63 million were up slightly from $58 million in 2014, which included a $7 million insurance recovery. Excluding this benefit, core losses continue…

Thank you, Beth. First of all to those of you listening on the webcast, I will apologize for some of the sound interference that you are getting. I just want to remind you all that the replay of the call will be available. There is also a transcript, however, given the irritation of the skipping what I want to do is repeat the dial-in number. So that you can hear the Q&A session clearly. So for the dial-in, it’s area code 877-685-7362. For those international, it’s area code 937-999-2389 and the conference ID is 50576163. And I repeat it’s 50576163. If you dial those numbers, you should be admitted automatically to the call and again the dial-in is 877-685-7362. Just a reminder to those of you who are on the call right now that we request that you limit yourself to two questions after which you're welcome to re-queue for additional questions. We appreciate your hearing to this so that we can have as many people as possible ask their questions on the call. Ian, could you please repeat the instructions for Q&A.

[Operator Instructions] Your first question comes from Brian Meredith. Your line is open.

Yes. Thank you. A couple questions. First, can you just dive into whole frequency situation, just a little bit more here. Perhaps you can give us some more color on kind of maybe state that is coming from. Is more of it coming from AARP versus the other agency? Is it balanced? Anything that you're seeing?

Brian, this is Doug. Let me start out by saying clearly July and August were little heavier on the frequency side than September. So we think some of that is attributed to summer travel and we’re very interested how October will play out. So very important transit there on the top. There is obviously a state dynamic. If you look at miles driven that DOT is shared. There clearly is a West Coast and across the South dynamic of more miles driven over the 2015. We’re feeling some of that in our state-by-state analysis. Next point, I would share is that as we look at the top 10 states from a Personal Lines liability perspective, essentially we were in line with market share. So we’re not overlined in any of the bigger states that are driving some of this frequency change namely, California. We’re aware of those states where we are and our work continues. So as I look at this dynamic, we had very favorable rolling 12 frequency changes over the past couple years. We have seen a little bit activity certainly into the third quarter. We reacted to it in our financials. We’ll stay on top of our trends into October, November. And we’re going to make sure that our pricing analytics are correlated with the trend you're seeing in our loss analysis.

Hey Brian, it’s Chris. Let me just add a larger context that you guys jump into it right away. The AARP relationship has been a wonderful 30-year relationship for us and it’s very strategically important. And we pride ourselves on working together with them, some of their members and have coordinated strategies and outlooks so that 80% of our Personal Lines book is AARP whether it be direct or agent. And it’s -- over longer period of time has performed very well. So that when Doug refers to increases in frequencies, you got to think in terms of a lower different base than sort of a larger mass market in your Personal Lines company. So as much as we reacted to it, there is a basis difference that our book is still relatively outperforming with lower frequencies from what we could tell at this point in time.

Got it. Thanks. And then my next question, one of you can just dive in little bit more into the commercial auto adverse development. What are you’ll doing right now to make sure that that’s going to continue here going forward. It’s kind of been almost a quarterly event that we've seen recently?

Brian, again this is Doug. So what we've seen most recently is some pressure between months 24 and 42 in our triangles. And as I mentioned in my commentary, primarily in years 2010 to ‘13, so we’re seeing late emergence of medical information as these claims are unfolding over the couple years. Couple things are happening. One is that inside our claim operation, we’re looking at diagnostics that will try to get our arms around those claims as quickly as possible. I gave an example on the call moments ago. Sometimes we don’t get these till late into their life, but we are looking at our claim practices and wondering whether we can make adjustments there. And more importantly inside our underwriting, we are buckling down and making sure we’ve got all the disciplines around driver behavior, past driver behavior and we’re looking at new class plan tweaks, et cetera. So were working both ends of this, kind of, like we have put our arms around the issue and something that although has been frustrating, I feel like we’re on top of it.

So you’re not seeing any increase in frequency in the commercial auto space necessarily?

No, this has not been a frequency issue. It’s more in the severity side for sure.

Brian?

Yeah.

Again, just a context. This is primarily a middle-market phenomena. Our middle-market premium is little over $200 million on an annualized basis. So it's irritant as we feel and -- but we’re trying to work through the best we can as Doug said. I think the other context too is just the larger balance sheet. And you know we’re one of a few companies that has disclosed our carried reserves in excess of our actuarial point estimates and at year-end ‘14, it was about 3.5%. We continue to grow that here in ‘15. So it’s just a little minor irritant in relation to the larger reserve positions that we have for adverse deviations in the future. We’re very satisfied with particularly as continuing to grow those positions here in ‘15.

Brian, I guess, the last point I’ll just add over the top is as you know we continue to drive rate into that book of business, right. So I’ve given you underwriting claim access but we’re not forgetting about the need for rate to deal with that increased severity.

Great. Thank you.

Operator, we’re ready for the next question.

You next question comes from Michael Nannizzi. I apologize from Gary -- Michael Nannizzi with Goldman Sachs. Your line is open.

Thank you. Can you hear me?

Yes, we can Michael.

Hello. Great. Doug, can we dig a little bit more into the auto -- the auto underlying combined deterioration year-over-year? Can you quantify, it looks like the expense ratio was higher? We can’t really see that breakdown at the product level. Can you just help us understand like what the breakout between the expense ratio and this frequency deterioration wise?

Sure, Mike. Let me see if I can maybe walk third quarter ’15 to second quarter, I’m sorry, third quarter ’14 to third quarter ’15 for just to take you through that. So if you look at an X to X basis, I’m going to walk from 90.9 to 95.6. The frequency dynamic in our auto book, both PD and liability, roughly 2.5 points, so that 4.5 point change, so frequency driving more than half of that change. There’s another point coming from ex-cat property. I talked about the fact that we've seen a few more fires, water losses in the quarter, so there's a point of that change coming from property. And then the other point or so is coming from expenses. So that's how I think about the 4.5 point move.

Okay. So what about just in auto?

In auto, you’d have to rewrite that without the property premium. Obviously, the auto news has nothing to do with the homeowner change, right. So the 2.5 points waits up to within auto probably 3.7-ish or so. The other point I would make when you think about the roll-forward with auto. We had a very favorable frequency quarter in third quarter 2014. So we're comparing a little bit of a move, a 3% frequency move third quarter ‘15 to a very favorable quarter last year makes the compare more challenging. But, nonetheless, our pick is where it needs to be for third quarter ‘15.

Okay. So, okay. Just if I can -- so if I look at the underlying combined in auto deteriorated 460 basis points year-over-year? So can you tell us of that 460 how much of that was the higher expenses? It looks like your expenses about a point higher across personal lines? I’m just trying to figure out how much of that increase is expenses and how much of it is due to frequency?

So 100 to 110 basis points of the 450 would be the expense move?

Okay.

The frequency, I think, you have it is 250.

Okay. And the rest, okay, the rest of frequency. Okay, and then, so can you talk about the rate action that you’ve taken so far and when do you expect to see this trend normalize?

I guess the few things. As I commented, this did emerge on us over the course of the summer. September reasonably performed. So not near the patterns we saw in July and August. We are though thinking we’re in a different frequency environment. In fact, we have planned for that, right. So some of our plans in 2015 suggested that we were not to see some of the favorability we had seen in ‘14 and prior. As we move forward, we obviously are watching carefully, right, whether we have a new norm of the frequency trend or not. I think it's early to call. I would not suggest that we think we’re in a 3% go-forward world, but we are contemplating whether we need to move and how aggressively state-by-state. Lastly, our indications and maybe I didn't say this before, as we think about our book of business, our frequency change does not look to be because of the new business we’ve written over the past year or 18 months, it looks to be across our book, and yes, there is state profile. So we’re spending time with all the large states and also the small states. We’re looking across all of our profiles. We’re spending a lot of time on our renewal book and we’ll be dealing with and are dealing with rate actions necessary to counteract where we see pressure inside the frequency.

Okay. Okay. And then just on the middle-market book, you’ve mentioned a large property loss, can you tell us as far as component of the commercial business, how many points of the combined ratio that represented?

A large property loss.

I think you mentioned in middle-market, right.

I think I said [GL] [ph].

Okay.

So we had an old claim case in our primary liability book many years back, where as we worked our way to the core settlement process with this customer. We just decided it was a time we had to change our estimates and so we did that and that was a prior development move.

Okay. Okay. I thought I'd seen in the conference, in the presentation that you mentioned that you had a middle-market property loss, but I’ll go ahead and take a look at that. I’ll follow-up offline. Thanks.

Okay. You got it.

Your next question comes from Gary Ransom with Dowling & Partners. Your line is open.

Good morning. A while back you talked about a new Small Commercial initiative through the AARP channel. And I was wondering if you could give us an update on where that stands?

Sure. Gary, this is Doug. We did launch an AARP initiative last summer, summer of 2014 with AARP. It has been slow to develop, but we've learned a lot. We continue to work that effort. The aggregate some of the premiums is not over-the-top of $10 million so this is still small dollars to us. But working with AARP and leveraging some of things we've done in Personal Lines, I think we've learned a lot and we continue to adjust and shift as we go forward and expect to continue the right customers that are a big part of the AARP program.

Do you think this can be something quite a bit bigger over the coming years?

I think it's early to call that, Gary. I'd rather give it a little bit more time. I think we probably on both sides expected a little bit more traction in the first year or so, but I’m not deterred by that. I still think there are terrific customers that will become Hartford customers over time. We just have not been able to generate the traction that we expected yet.

Okay. And on the higher AARP marketing cost, is there any early read on what that has generated in terms of new sales as we come after that?

So it's a bit seasonal, Gary. As you know, we ramp up those efforts second half of the year, particularly leading into the January 2016 quarter. So we do not have the success yet that those marketing efforts are geared at, but I think we will over the coming months and obviously they’ll be geared to geographies and our customer segments as well.

Okay. Thank you very much.

Thank you, Gary.

Your next question comes from Randy Binner with FBR Capital Markets. Your line is open.

Hey, thank you. Couple of follow-ups on the frequency and then the commercial auto. So on frequency and personal auto, I just want to kind of get a simple point right, is that -- I think the narrative here is that the older drivers in this AARP heavy book are still different, is that right that they’re safer drivers, they’re just getting kind of caught up in collateral damage out there out on the roads? And the other piece, the AARP question is can you talk a little bit about your pricing power to push that rate against the frequency experience in that book versus what we might see in a more wholesale channel?

I think your first point is well taken and clearly history kind of plays that out. So our driving experience in our AARP financial experience has been very solid over a longer period of time. So yes, we believe exactly what you shared. Secondly, on the pricing piece, we’re just going to have to work at this, right. This is a state-by-state, month-by-month effort. Obviously, the premiums don't all earn in day one. We’re going to have to chip away over the coming quarters. It's not a three or six month process, but it's one that has already begun and one that will accelerate as we look at these patterns that are coming at us today.

Yeah. I mean, I guess I’m thinking is like, I mean you should have better pricing power with an affinity channel, right. So I mean, have you -- I mean can you share how past pricing increases have gone in this channel? I mean, how good the retention or reception is?

We share retention with you in our sub, so you’ve seen very steady performance in our retention area. I would expect that to continue. Consistency is a big part of that performance, right. So we’re very aware of how consistent we need to perform both in a state and a product basis. And I would say that across not only Personal Lines but small commercial as well. So we intend to address the signals we’re seeing here. We are going to watch carefully. But I think that our customer base is very well informed and I expect that our retention will remain strong moving through time.

Randy, it is Chris.

Okay.

I think the only other observation to is probably little bit of industry tailwind helping all of us given others reacting to even higher frequency, and moving rate action in various state. So, most of our policies are on a 12-month basis given the more preferred marketplace. So we don't have a six-month -- lot of six-month of policy phenomenon but the actions the others that have taken, I think will lay a path that we could draft off of. But we also do this in conjunction with our partner, AARP, right. I mean, it’s their members. We want to be thoughtful we want to be consistent. We don’t necessarily want to shock the system here. So, as Doug said this is a three-month phenomenon for us and we are not sure exactly where it's going to top out it but we know how do you manage the AARP relationship. We know how to manage our 50 state new regulators and I think our past performance has indicated that fairly well.

Okay. Great. And then just jumping over commercial auto, I think Doug had mentioned that you are getting high single-digit price increases there and maybe that was a comment for the industry as well. But, I guess a simple question is, I mean, how do we get a sense of that’s enough, the commercial autos was a problem during the financial crisis years and now it is the recovery -- financial recovery problem, if you will, with the 10 to 13 accident years. It seems like these are probably litigated claims. I'm guessing where the medical is building up as well, correct me if I'm wrong there. But I mean there, is high single-digit enough. I mean, should we be getting -- should we be going forward double-digit price increases here? I mean kind of interested in reflection on that?

Randy, a few points for you, one is that our high single digit is approaching double. It has been approaching double over the last several quarters. So, yes we are pushing of the curve. Secondly, we are seeing the benefit inside the early looks of our 2014 and 15 accident years. So, I feel better about progress inside those years. Again, there is a liability line that takes a while to playout. So, I want some maturity before we make those calls. But I'm encouraged by progress and also the underwriting efforts underneath that are tweaking and adjusting our book of business both new and renewal continue to have their impact.

All right. I’ll leave it there. Thanks a lot.

Operator, can I just make a comment before we take our next question. I think, Mike from Goldman asked a question about a property loss. I just want to come back to it. In the financial package, we did share that there was a property lost. It impacted our middle market book of business. We did have a $10 million net fire in that book of business. I think it was a point in change inside the combined ratios. So we commented on it in our disclosures. In the Midwest, I think there was a one-off but that is the answer to the fire question.

Your next question comes from John Nadel with Piper Jaffray. Your line is open.

Hi. Good morning, everybody. Doug, maybe to beat the dead horse of Personal Lines for a moment. If I look at the year-to-date underlying combined ratio, so excluding prior year excluding cats, I think you're running through the first nine months about 91.5% if my math is right. Your guide for 2015 was a range of 89 to 91, it doesn't seem like you’ll get back to that unless you get some favorable weather or something else coming through in 4Q. But I guess the question is, as we look out to ‘16, if you saw that trends that developed here in the third quarter continue. What kind of range relative to that 89 to 91 which you think would be reasonable looking out?

I’ll take that. John, it’s Beth. So, I think we really want to get into providing ‘16 guidance at this point. I mean you're right, when we look at ‘15 in the combined that we provided at the beginning of the year, the 89 to 91 that probably running a bit about that by a point. And so as we look into preparing our views into ‘16 taking into consideration some of the actions that Doug is talking about will firm that up. But sitting here today, I think we would expect to be, kind of on the higher-end of that.

Got it. Okay. That's helpful. And then I guess, I have a question about the level of earnings for Talcott this quarter and thoughts on statutory capital from Talcott as well. So, Talcott’s core earnings in the quarter and if I have it right, $107 million. You had the negative impact of lower alternatives returns, but I guess that was offset or maybe partially offset by better bond prepayment income. I just sort of want to get a sense, if you had a 6% limited partnership or alternatives return there and more normal prepayments, what that segment would've looked like? And then given, you took a $500 million dividend out of Talcott in July, is it simply a matter of hedge gains given the negative market performance that drove statutory capital to be relatively flat quarter-over-quarter?

So, couple of things. So, first on the NII piece, you’re right in that. The underperformance that we saw on the limited partnerships was really made up by the outperformance that we saw on these non-routine items. Just to give you a sense for the quarter for Talcott, it is probably around $30 million pre-tax of these non-routine items. So, I kind of think of those a little bit as a wash.

Okay.

On the surplus side, yeah, we did see a pretty sizeable increase in statutory surplus for Talcott, once you take out the effect of the demand and a couple of things. One, you're right in that because of the market performance during the quarter, we did have hedge gains and because our targets are more economic instead, the reserves did not move to the same degree. So, we had a benefit there. The other items that impacted the quarter as well, was just the recognition of deferred tax assets. That number does tend to bounce around a lot quarter-to-quarter, just because of the way the recognition rules work. So that was also a significant piece of that. So, when I think about Talcott for the year is again, if you back out the impact of dividends, we see statutory surplus up almost $450 million. I still go back to that $200 million to $300 million range we’ve talked about before. I think it’s at the beginning of the year. I was feeling more likely be at the lower end of that range to maybe slightly below. Sitting here today, I kind of see us now at the higher-end and potentially maybe a little bit about that. But it really is going to depend on where market conditions end for the quarter.

And just a real quick follow-up on that. That $200 to $300 million, if we are at the upper end of the range given where things and that's a 2016 dividend out of Talcott, correct?

So potentially, I think what we’ve said is that we want to look and see how the year ends and some of that also. When you think about dividends, you’ve got to think about where is the statutory surplus generation is coming from. It’s coming from recognition of deferred tax assets. Those are hard to dividend out. They are not cash yet.

Understood. Yeah.

But as we said, we’ll end the year. We will asses where we are. We do still anticipate taking out the $500 million in early ‘16 and we will evaluate what other capacity there could be depending on how we end the year.

Thank you so much.

Ian, we are ready for the next question?

Your next question comes from Meyer Shields with KBW. Your line is open.

Thanks. Two quick questions if I can. First, could you give us a sense of the five of the renewal rights books that you’ve got from AIG?

Meyer, it’s relatively small, think in terms of around $30 million.

Okay. And second, I think, you mentioned that you were growing in specialty large commercial property. I was hoping you can talk about that, because I think it could be one of the areas where pricing is particularly weak?

Meyer, this is Doug. We have been building capability in the public entity area for last couple years that area has quite a bit of activity in third quarter, because July one tends to be a big renewal crossover for that book of business. So, couple of underwriters in that area. We have nice success. It's really had some traction. I am very pleased about how that’s gotten off the ground over last of couple years.

Okay. Thank you.

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

Yeah. Sure. One more on the auto frequency issue and that is, there seems to be a variance among companies as far as how they're experiencing this. We are clearly opting, Geico we have seen pick up in frequency, now you have, whereas seemingly Travelers and Progressive don't seem to be bothered nearly as much by this. And I know you don’t know these companies, like you know your own company? But I'm wondering if you can reflect on some of the potential explanations for the differences we are seeing, we are all little confused by ourselves?

Well, let me share some thoughts and maybe some other thoughts I have just shared. I guess, as you look at miles driven, just at the core, Jay. We're seeing gas prices remain at fairly low levels and the miles driven are up. So as you think about parts of the country, we saw that over the middle part of the year and I think we just have more drivers and we have generally a better business climates. So we have both commercial and the person line drivers on the roads. It's hard to avoid accidents as they continue to occur. Again, we are -- our book has performed well overtime and we are very pleased with that. But the fact that they're on the roads today, there are just more accidents and they are part of those accidents. As we think about kind of further dissecting, there is a statewide mix as I mentioned earlier and I think that will continue to play out. I don't want to make projections of ’16 and ’17, but I think the state does matter congestion, et cetera. So, it's early, I don't want to take two months and make too much of it, but I also want to give you indication that we are taking a very seriously, disappointed in our quarter and we are going to work hard to make sure we are connecting the pricing and our frequency discussions.

Jay, the only other observation I would have is, we’ve said it before, I mean, our mature book is different than other aspects of others. So we don't know others company's books, as well as they know it, but all we know is that, the majeure driver does exhibit different driving patterns and different levels of frequency. My only other industry observation and others, I have talked about it, but I've been more attuned to just particularly with teenager and young adult the drivers is, there is too many devices in cars these days, that are potentially creating a unfocused driver situation and I think it's real. And I think, we all need to take personal responsibility to continue to put these devices down and focus on the road, because there is just too many distractions. That’s all I will say on that.

Okay. Thanks for the thoughts guys.

Your next question comes from Jay Gelb of Barclays. Your line is open.

Thanks. My first question is on property/casualty investment income? In the third quarter was $267 million. That included only a $5 million contribution from the limited partnerships and other alternative investments. So, Beth, I am trying to square your comments in terms of what that means for 4Q? I mean, should we expect the total net investment income for P&C to be below that $267 million in 4Q, if I understand the message you are trying to deliver?

Yes. So when you look at the compare from third quarter to fourth quarter, and we think about again the limited partnership return, we are expecting to see those be below what we say in the third quarter, just base on what we see today, so that would be negative. And as I commented, P&C did not -- doesn't really seem to benefit as much as the Talcott portfolio from some of these non-routine items that also impacted the compare.

Okay. And then, more broadly, would Hartford generating around the 9% return on equity in -- for the trailing 12 months? I think there is some concern now whether the company has the ability to get that higher in over the next year or so, and what are your thoughts on that?

Jay, I think, we feel about the improvements, obviously, we have made over the last, couple of years. So, I know, you know, this team has worked hard to deliver that 9.1 trailing where we are today and we are going to finish the year strong and we will talk about our guidance for ‘16 and beyond in February. But I think what we've been trying to signal particularly with my comments, Doug’s comment, Beth’s comments particularly on low interest rate, I mean there are serious competitive pressures. There is serious low interest rate pressures that are affecting the industry’s book of business. And we’re not going to be immune to it. So I would still say that we think we have levers to continue to manage and expand our ROEs going forward. But clearly it's not at the rate and pace that we've been able to deliver in the past.

Understanding the guidance won’t come in totally next year, can you direct -- qualitatively can you give us some insight on those levers?

Well, you know, Doug’s talked about it here just in the Personal Lines book. I mean, it’s underwriting actions, it’s pricing action, it’s a mix of business action. We’re trying to be a more efficient organization, while we invest in some of our new capabilities, particularly technology. As I mentioned, coming out of CIAB, I think we have the opportunity to expand our market share, not competing on price, but by delivering more products and services to our existing customer base and they would do more business with us. So those are just, some of those on top of my thought.

Excellent. Hopefully capital management as well?

Not clearly. I’m focused on the numerator as you know. So but we do -- we have our plan through ‘16, which I think you know is meaningful and will contribute to our performance.

Thanks for the answers.

Thank you, Jay.

Your next question comes from Tom Gallagher, Credit Suisse. Your line is open.

Good morning. One follow-up on the prior-year development in commercial auto, so understanding the higher medical costs that you saw this quarter. Doug, is that what you’ve been assuming from the standpoint of ‘14 and later loss -- initial loss picks or is that if medical costs remain at that level, you'd also have an issue there?

So Tom, we are expecting some of that pattern that we've now seen emerge in 2010 through 2013, to also emerge in 2014 and beyond. So, yes we’ve become a bit more conservative in our development factors in those outer months in the most recent accident years.

So, in other words, if those elevated medical costs remain -- continue as is, you shouldn't have adverse development on ‘14 and later?

Correct. That was our goal. That's why we made the move.

Okay. The other question I had is there was -- I guess for Beth, there was a $200 million capital contribution to a property casualty, U.K. runoff entity. Can you just provide a little color what's going on there? Is that a business you're planning on selling, anymore capital going to be needed there?

Sure. So, yeah, we've been in the process of consolidating our U.K. P&C runoff businesses into a single legal entity. And so what we were disclosing with some of the activity that happened in October is this process does require court approval. We received it on October 13th, and so the capital moved around within the entities. This really is consolidating this business into one legal entity, has a couple of advantage. One actually is more efficient from a capital perspective when you take into consideration the capital standards in the U.K. And it also allows us to consolidate operations, which gives us a little bit of operational efficiency. The second point is it does provide us greater flexibility to potentially act on more permanent solutions to dealing with these types of exposures. Think about this group of business is having reserve about $800 million and I’d say little less than 60% of that is asbestos exposure. But I’m not going to comment on the likelihood that we actually would be able to find such a solution.

Okay. And then if I could just sneak in one last one, Beth. For the 4Q, actuarial review or balance sheet review that we should expect for Talcott, when I consider your long-term separate account return assumptions which are still north of 8%, is that a meaningful risk as we think about current interest rate level and potentially changing that as it would relate to a DAC impairment?

Yes. So, correct. And that we do look at the DAC assumptions and other reserve assumptions in Talcott in the fourth quarter. Sitting here today, I think couple of things to keep in mind. You are right that our long-term assumption is in that 8% range, but we’ve benefitted from many, many quarters of outperformance to that, which actually when you think about how the DAC calculation works gives you a little bit of buffer on that. So sitting here today, I do not see any changes in long-term expectations that would impact our views of that balance as we head into the fourth quarter.

Okay. Thanks.

Thanks. Ian, I think we have one more question in the queue, if we could take that?

Your next question comes from Bob Glasspiegel with Janney Capital. Your line is open.

Good morning, Hartford. I was just wondering if we could just look a little bit more carefully at the homeowners’ book where you’ve been sort of pushing 8% rate increases and retentions being dropping a little bit. The margins aren’t -- you're not making a lot of progress year-over-year, which you highlighted sort of the fluky fire losses this quarter. Have you ruled out sort of any adverse selection going on in that book and what is your overall pricing versus exposure growth doing today?

Bob, you're right. We have had some up-and-down behavior of that book of business that has been disappointing to us. We're spending a lot of time at a granular level inside that book of business by state, et cetera. I think more progress to come but not satisfied at all about our results. Leaning into the fourth quarter, the fourth quarter traditionally has been our best quarter of homeowners’ performance. So, we hope to continue that in the fourth quarter but there are things, some of which you described that we are aggressively cutting apart as we speak right now to make sure there isn't an adverse element there. I don't believe that’s the case today. But right now, leaving no stone unturned.

Fair thoughtfully answer. Is there any difference between the agency and the AARP book versus the similar profile?

The AARP book has performed well across both our product lines. But I would say that home has underperformed in general in both areas. So, we are not accepting and feeling great about our homeowners’ results across both channels and looking at all.

Hey, Bob, it’s Chris. I would add in addition to Doug’s thoughtful comments, as you said, home is very strategically important to us, it’s important to the AARP relationship, it’s probably a product line that we’ve underinvested. And we’re catching up quite honestly, but we’re committed to catching up and providing more homeowners insurance to more AARP members, whether it’d be on a direct basis or through agents. So no, it’s got our retention. And as Doug said, we’re trying to fix it as quickly as possible.

I think the industry is moving from that being an accommodation product to being the standalone P&L item and the professionalism of your competitors has certainly been enhanced. So I think the opportunity to achieve that is there for sure.

Bob, I would agree with that. And I just I think I referred this. But clearly our performance in the AARP states has been closer to our targets than our agency performance, right. So we’ve got more work to be done in the agency area, but in total, as I look across the line still not pleased that we’re not quite where we want to be.

Thank you.

Thank you. And Ian, I believe I misspoke there is one more question in the queue.

Your final question comes from Jimmy Bhullar with JPMorgan. Your line is open.

Hi, good morning. I had a couple of questions. First, on the Personal Lines business, one of the reasons of the weakness obviously was higher AARP Direct marketing spending so -- and obviously that’s a controllable factor. So just wondering what’s your expectation for spending over the next few quarters? And if your loss costs do remain elevated, do you intend to slow down spending a little bit to balance out profitability? And then secondly, on buybacks, you spent about $300 million on buybacks in the third quarter, I realized you’re on the10b-5 program, but to what extent do you have the capacity or the intent to be more proactive on buybacks given that you’ve got the capital already? So if the stock price drops further, would you may be front end some of the buyback activity?

Jimmy, let me address the first part of your question and then maybe Beth wants to work on the second.

Sure.

We’re obviously being always through the fourth quarter we have the ability to kind of look at and address what we’re going to spend in the next 60, 90 days and we’re doing that as we speak given the trends we’re seeing. Second part of the answer I would share with you is that although I have characterized it as marketing spend, obviously part of that is the ability in our service centers to handle the demand that comes out of the marketing spend. So it is really a marketing spend in the aggregate and we’re making sure that if for running ads on a weekend we are ready to handle those requests as they come in. So it’s a combination of both generating frontline response and also being able to handle the flow as it comes to our centers.

And then on the question on share buyback, yeah we did $300 million this past quarter and you are right, our practice has been to put in trading plan. So for the fourth quarter, our trading plan is around $350 million. We can always be opportunistic. As you know, our practice has been to really spread that out over the period. We’ve seen that has worked very well for us, but it doesn’t mean from time to time that we might take advantage of some opportunistic trades, but don’t anticipate to deviate significantly from how we thought about this in the past.

Okay. Thanks. And maybe if I could just ask one final question. On your annuity business, you fixed annuity surrenders run up, I think that because of the enhanced surrender value program that you initiated in June. So, maybe if you could just address the scope of that and has the benefit of that come through already or do you expect additional or continue elevated lapses and into the fourth quarter? And then on the VA business, your surrenders actually went down, so how much of that is just because of the drop in account values versus maybe that in the past they were elevated just given the surrender value programs that you had before?

Yeah. So just the VA piece first. So, yes, we have seen a little bit of a decline in the VA surrender rate. You’re right, in a market where we would see equity levels go down, we would typically tend to see those surrender rates act accordingly. But we do believe that there’s a little bit of the impact of the actions we’ve taken had in the past and front ended some of the surrender. So when we think about surrender rate absent any other programs that we might do in the variable annuity space, we do see then being a little bit lower than maybe what the run rate has been in the past. And then on the ISB, the program that we have in the fixed annuity book, we did benefit in the quarter from that. There is still some activity that’s happening in the fourth quarter, so we might see continuously a little bit of bump from that and then as we go into ’16, it just remains to see what other type of initiatives we might do.

Okay. Thank you.

Thank you. And thank you all for joining us today and your interest in The Hartford. Please note for your calendars that The Hartford will be presenting at the Goldman Sachs Financial Services Conference on December 9th in New York City. And as always, if you have any follow-up questions, please don't hesitate to contact either Sean or myself by phone or e-mail. Thank you for your attention and have a good day.

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