The Hartford 2013 Annual Report Download - page 7

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In the surety business, favorable underwriting results over the past couple of years have led to increased competition for market share,
setting the stage for potential written price decreases. Driven by the upheaval in the credit markets, new public construction activity
remains at a historically low level, resulting in lower demand for contract surety business
Specialty lines is comprised of a diverse group of businesses that operate independently within their specific industries. These
businesses, while somewhat interrelated, have different business models and operating cycles. Specialty lines competes on an account-
by-account basis due to the complex nature of each transaction. Competition in this market includes other stock companies, mutual
companies, alternative risk sharing groups and other underwriting organizations. The relatively large size and underwriting capacity of
The Hartford provides opportunities not available to smaller companies. Disciplined underwriting and targeted returns are the objectives
of specialty lines since premium writings may fluctuate based on the segment’s view of perceived market opportunity.
For specialty casualty businesses, written pricing competition continues to be significant, particularly for the larger individual accounts.
Carriers are aggressively negotiating renewals with customers by initiating the renewal process well in advance of the policy renewal
date, to improve retention, reducing new business opportunities within the marketplace. Within the national account business, as written
pricing increases, more insureds may opt for loss-sensitive products in lieu of guaranteed cost policies.
Carriers writing professional liability business are increasingly focused on profitable private, middle market companies. This trend has
continued as the downturn in the economy has led to a significant drop in the number of initial public offerings, and volatility for all
public companies. Also, carriers’ new business opportunities in the marketplace for directors & officers and errors & omissions
insurance have been significantly influenced by customer perceptions of financial strength, as investment portfolio losses have had a
negative effect on the financial strength ratings of some insurers.
In the commercial marketplace, the weak economy has prompted carriers to offer differentiated products and services as a means of
gaining a competitive advantage. In addition to the initiatives specific to each of The Hartford’s Property & Casualty Commercial lines
of business noted above, the Company is leveraging its diverse product, service and distribution capabilities to deliver differentiated
value in the market, while simultaneously increasing its ability to access its own diverse customer base for new product sales.
Consumer Markets
Principal Products and Services
Consumer Markets provides automobile, homeowners and personal umbrella coverages to individuals across the United States,
including a special program designed exclusively for members of AARP (“AARP Program”). The Hartford's auto and homeowners
products provide coverage options and customized pricing tailored to a customer's individual risk. The Hartford has individual customer
relationships with AARP Program policyholders and, as a group, these customers represent a significant portion of the total Consumer
Markets' business. Business sold to AARP members, either direct or through independent agents, amounted to earned premiums of $2.9
billion, $2.8 billion and $2.8 billion in 2013, 2012 and 2011, respectively. Consumer Markets previously operated a member contact
center for health insurance products offered through the AARP Health program (Catalyst 360). For further information regarding the sale
of Catalyst 360 in 2013, see Note 2 - Business Dispositions of Notes to Consolidated Financial Statements.
Marketing and Distribution
Consumer Markets reaches diverse customers through multiple distribution channels including direct sales to the consumer, brokers and
independent agents. In direct sales to the consumer, the Company markets its products through a mix of media, including direct mail and
e-commerce marketing, television and advertising, both digitally and in publications. Most of Consumer Markets' direct sales to the
consumer are associated with its exclusive licensing arrangement with AARP, with the current agreement in place through January 1,
2023, to market automobile, homeowners and home-based business insurance products to AARP's approximately 38 million members.
This agreement provides Consumer Markets with an important competitive advantage given the number of “baby boomers” over age 50,
many of whom become AARP members.
During 2013, the Company had affinity agreements with the American Kennel Club, Sierra Club, the National Wildlife Federation and
Direct Selling Association. In addition to selling product through its relationship with AARP and other affinities, the Company markets
direct to the consumer within select underwriting markets, acquired through partnerships or list acquisitions, and to consumers in
geographies where we think we have a competitive advantage.
The agency channel provides products and services to customers through a network of independent agents in the standard personal lines
market. These independent agents are not employees of The Hartford.