UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 2005
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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 001-13958 13-3317783
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
The Hartford Financial Services Group, Inc.
Hartford Plaza
Hartford, Connecticut 06115-1900
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 547-5000
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 7.01 REGULATION FD DISCLOSURE.
In connection with its release of earnings for the first quarter of 2005, The
Hartford Financial Services Group, Inc. hereby furnishes an update regarding the
regulatory developments disclosure set forth in the Company's annual report on
Form 10-K for the period ended December 31, 2004.
REGULATORY DEVELOPMENTS
In June 2004, The Hartford Financial Services Group, Inc. and its subsidiaries
(collectively, "The Hartford" or the "Company") received a subpoena from the New
York Attorney General's Office in connection with its inquiry into compensation
arrangements between brokers and carriers. In mid-September 2004 and
subsequently, the Company has received additional subpoenas from the New York
Attorney General's Office, which relate more specifically to possible
anti-competitive activity among brokers and insurers. Since the beginning of
October 2004, the Company has received subpoenas or other information requests
from Attorneys General and regulatory agencies in more than a dozen
jurisdictions regarding broker compensation and possible anti-competitive
activity. The Company may receive additional subpoenas and other information
requests from Attorneys General or other regulatory agencies regarding similar
issues. The Company also has received a subpoena from the New York Attorney
General's Office requesting information related to the Company's underwriting
practices with respect to legal professional liability insurance. In addition,
the Company has received a request for information from the New York Attorney
General's Office concerning the Company's compensation arrangements in
connection with the administration of workers compensation plans. The Company
intends to continue cooperating fully with these investigations, and is
conducting an internal review, with the assistance of outside counsel, regarding
broker compensation issues in its Property & Casualty and Group Benefits
operations.
On October 14, 2004, the New York Attorney General's Office filed a civil
complaint against Marsh & McLennan Companies, Inc., and Marsh, Inc.
(collectively, "Marsh"). The complaint alleges, among other things, that certain
insurance companies, including the Company, participated with Marsh in
arrangements to submit inflated bids for business insurance and paid contingent
commissions to ensure that Marsh would direct business to them. The Company was
not joined as a defendant in the action, which has since settled. Although no
regulatory action has been initiated against the Company in connection with the
allegations described in the civil complaint, it is possible that the New York
Attorney General's Office or one or more other regulatory agencies may pursue
action against the Company or one or more of its employees in the future. The
potential timing of any such action is difficult to predict. If such an action
is brought, it could have a material adverse effect on the Company.
On October 29, 2004, the New York Attorney General's Office informed the Company
that the Attorney General is conducting an investigation with respect to the
timing of the previously disclosed sale by Thomas Marra, a director and
executive officer of the Company, of 217,074 shares of the Company's common
stock on September 21, 2004.
The sale occurred shortly after the issuance of two additional subpoenas dated
September 17, 2004 by the New York Attorney General's Office. The Company has
engaged outside counsel to review the circumstances related to the transaction
and is fully cooperating with the New York Attorney General's Office. On the
basis of the review, the Company has determined that Mr. Marra complied with the
Company's applicable internal trading procedures and has found no indication
that Mr. Marra was aware of the additional subpoenas at the time of the sale.
There continues to be significant federal and state regulatory activity relating
to financial services companies, particularly mutual funds companies. These
regulatory inquiries have focused on a number of mutual fund issues, including
market timing and late trading, revenue sharing and directed brokerage, fees,
transfer agents and other fund service providers, and other mutual-fund related
issues. The Company has received requests for information and subpoenas from the
SEC, subpoenas from the New York Attorney General's Office, a subpoena from the
Connecticut Attorney General's Office, requests for information from the
Connecticut Securities and Investments Division of the Department of Banking,
and requests for information from the New York Department of Insurance, in each
case requesting documentation and other information regarding various mutual
fund regulatory issues.
The SEC's Division of Enforcement and the New York Attorney General's Office are
investigating aspects of the Company's variable annuity and mutual fund
operations related to market timing. The Company's mutual funds are available
for purchase by the separate accounts of different variable universal life
insurance policies, variable annuity products, and funding agreements, and they
are offered directly to certain qualified retirement plans. Although existing
products contain transfer restrictions between subaccounts, some products,
particularly older variable annuity products, do not contain restrictions on the
frequency of transfers. In addition, as a result of the settlement of litigation
against the Company with respect to certain owners of older variable annuity
products, the Company's ability to restrict transfers by these owners is
limited. In February 2005, the Company agreed in principle with the Boards of
Directors of the mutual funds to indemnify the mutual funds for any material
harm caused to the funds from frequent trading by these owners. The specific
terms of the indemnification have not been determined.
The SEC's Division of Enforcement also is investigating aspects of the Company's
variable annuity and mutual fund operations related to directed brokerage and
revenue sharing. The Company discontinued the use of directed brokerage in
recognition of mutual fund sales in late 2003. The Company also has received
subpoenas from the New York Attorney General's Office and the Connecticut
Attorney General's Office requesting information related to the Company's group
annuity products. The Company continues to cooperate fully with the SEC, the New
York Attorney General's Office and other regulatory agencies.
To date, neither the SEC's and New York Attorney General's market timing
investigation nor the SEC's directed brokerage investigation has resulted in
either regulator initiating any formal action against the Company. However, the
Company believes that the SEC
and the New York Attorney General's Office are likely to take some action
against the Company at the conclusion of the respective investigations. The
potential timing of any such action is difficult to predict. Based on the
Company's discussions with the SEC and the New York Attorney General's Office
and its own analysis, the Company recorded a charge of $66 million to establish
a reserve for these matters during the first quarter of 2005. This reserve is an
estimate; in view of the uncertainties regarding the timing and outcome of any
payments relating to these types of regulatory investigations, as well as the
tax-deductibility, if any, and any potential deferred acquisition cost effects
(though no deferred acquisition cost effects are included in this estimate) that
may be applicable, it is possible that the ultimate cost to the Company of these
matters may exceed or be below the reserve amount, perhaps by a significant
amount.
As provided in General Instruction B.2 of Form 8-K, the information contained in
this Form 8-K shall not be deemed to be "filed" for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended, nor shall it be deemed to be
incorporated by reference in any filing under the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific reference in such a
filing.
Some of the statements in this Form 8-K should be considered forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995.
These include statements about our future results of operations. We caution
investors that these forward-looking statements are not guarantees of future
performance, and actual results may differ materially. Investors should consider
the important risks and uncertainties that may cause actual results to differ.
These important risks and uncertainties include the difficulty in predicting the
Company's potential exposure for asbestos and environmental claims and related
litigation; the possible occurrence of terrorist attacks; the response of
reinsurance companies under reinsurance contracts and the availability, pricing
and adequacy of reinsurance to protect the Company against losses; changes in
the stock markets, interest rates or other financial markets, including the
potential effect on the Company's statutory capital levels; the inability to
effectively mitigate the impact of equity market volatility on the Company's
financial position and results of operations arising from obligations under
annuity product guarantees; the difficulty in predicting the Company's potential
exposure arising out of regulatory proceedings or private claims relating to
incentive compensation or payments made to brokers or other producers and
alleged anti-competitive conduct; the uncertain effect on the Company of
regulatory and market-driven changes in practices relating to the payment of
incentive compensation to brokers and other producers, including changes that
have been announced and those which may occur in the future; the possibility of
more unfavorable loss experience than anticipated; the incidence and severity of
catastrophes, both natural and man-made; stronger than anticipated competitive
activity; unfavorable judicial or legislative developments, including the
possibility that the Terrorism Risk Insurance Act of 2002 is not extended beyond
2005; the potential effect of domestic and foreign regulatory developments,
including those which could increase the Company's business costs and required
capital levels; the possibility of general economic and business conditions that
are less favorable
than anticipated; the Company's ability to distribute its products through
distribution channels, both current and future; the uncertain effects of
emerging claim and coverage issues; the effect of assessments and other
surcharges for guaranty funds and second-injury funds and other mandatory
pooling arrangements; a downgrade in the Company's claims-paying, financial
strength or credit ratings; the ability of the Company's subsidiaries to pay
dividends to the Company; and others discussed in our Quarterly Reports on Form
10-Q, our 2004 Annual Report on Form 10-K and the other filings we make with the
Securities and Exchange Commission. We assume no obligation to update the
information set forth in this Form 8-K, which speaks as of the date issued.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Date: April 28, 2005 By: /s/ Neal S. Wolin
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Name: Neal S. Wolin
Title: Executive Vice President
and General Counsel