The Hartford 2013 Annual Report Download - page 68

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KEY PERFORMANCE MEASURES AND RATIOS
The Company considers several measures and ratios to be the key performance indicators for its businesses. The following discussions
include the more significant ratios and measures of profitability for the years ended December 31, 2013, 2012 and 2011. Management
believes that these ratios and measures are useful in understanding the underlying trends in The Hartford’s businesses. However, these
key performance indicators should only be used in conjunction with, and not in lieu of, the results presented in the segment discussions
that follow in this MD&A. These ratios and measures may not be comparable to other performance measures used by the Company’s
competitors.
Definitions of Non-GAAP and other measures and ratios
Account Value
Account value includes policyholders’ balances for investment contracts and reserves for future policy benefits for insurance contracts.
Account value is a measure used by the Company because a significant portion of the Company’s fee income is based upon the level of
account value. These revenues increase or decrease with a rise or fall in the amount of account value whether caused by changes in the
market or through net flows.
After-tax Margin, excluding buyouts and realized gains (losses)
After-tax margin, excluding buyouts and realized gains (losses), is a non-GAAP financial measure that the Company uses to evaluate,
and believes is an important measure of, the Group Benefits segment’s operating performance. After-tax margin is the most directly
comparable U.S. GAAP measure. The Company believes that the measure after-tax margin, excluding buyouts and realized gains
(losses), provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that
may be obscured by the effect of buyouts and realized gains (losses). After-tax margin, excluding buyouts and realized gains (losses),
should not be considered as a substitute for after-tax margin and does not reflect the overall profitability of Group Benefits. Therefore,
the Company believes it is important for investors to evaluate both after-tax margin, excluding buyouts and realized gains (losses), and
after-tax margin when reviewing performance. After-tax margin, excluding buyouts and realized gains (losses) is calculated by dividing
core earnings excluding buyouts and realized gains (losses) by total core revenues excluding buyouts and realized gains (losses). A
reconciliation of after-tax margin to after-tax margin, core earnings excluding buyouts and realized gains (losses) for the year ended
December 31, 2013, 2012 and 2011 is set forth in the After-tax Margin section within MD&A - Group Benefits.
Assets Under Management
Assets under management (“AUM”) include account values and mutual fund assets. AUM is a measure used by the Company because a
significant portion of the Company’s revenues are based upon asset values. These revenues increase or decrease with a rise or fall in the
amount of account value whether caused by changes in the market or through net flows.
Catastrophe ratio
The catastrophe ratio (a component of the loss and loss adjustment expense ratio) represents the ratio of catastrophe losses incurred in
the current calendar year (net of reinsurance) to earned premiums and includes catastrophe losses incurred for both the current and prior
accident years. A catastrophe is an event that causes $25 or more in industry insured property losses and affects a significant number of
property and casualty policyholders and insurers. The catastrophe ratio includes the effect of catastrophe losses, but does not include the
effect of reinstatement premiums.
Combined ratio
The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. This
ratio is a relative measurement that describes the related cost of losses and expenses for every $100 of earned premiums. A combined
ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses.
Combined ratio before catastrophes and prior accident year development
The combined ratio before catastrophes and prior accident year development, a non-GAAP measure, represents the combined ratio for
the current accident year, excluding the impact of catastrophes. Combined ratio is the most directly comparable U.S. GAAP measure. A
reconciliation of combined ratio to combined ratio before prior accident year reserve development for the years ended December 31,
2013, 2012 and 2011 is set forth in MD&A - Property & Casualty Commercial and Consumer Markets.