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THE I HARTFORD Definition of Underwriting Terms Claims Count A/E: In order to analyze the adequacy of the current rate structure, a subset of The Hartford's insured groups are reviewed that share similar demographic and industry characteristics with your company. The review establishes an expectation of claim incidence for your industry and demographic mix. The Claim Count A/E (Actual Claims versus Expected Claims) reflected in your experience is evaluated against The Hartford's expectations. Life Claim Count A/E: (Life Claims + (Premium Waiver Claims x 0.5 x Total Exposure Years - (Total Exposure Years — 0.5)) LTD Claim Count A/E: Total Claims Expected Number of Claims Formula Rate: The Formula Rate is a weighted blend of the Pure Manual Rate and the Manual rate adjusted for the Claim Count A/E. The two rates are blended together using a Credibility percentage. • Manual Rate is calculated based on your employees' demographic profile, plan design, industry and volume of coverage. • Credibility is the extent to which The Hartford believes prior results will predict future results. Credibility is calculated based on the number of lives covered and the number of years in the experience period. Formula Rate: (Manual Rate x Claim Count A/E x Credibility) + (Manual Rate x (1-Credibility)) Life Experience Analysis: In order to analyze the adequacy of the current rate structure, all Premiums received during the analysis period are adjusted to the current rate level, shown as "Constant Premium". The "Constant Premium" is then compared to Incurred Claims which is comprised of: Paid Claims, Premium Waiver Reserves, charges for Living Benefits Option and Portability, Statutory Interest, and Incurred but not Reported Reserves (reserves established for claims incurred during the time period that have not been reported). Experience Rate: The Experience Rate is calculated based upon prior Premium and Incurred Claims experience. The Permissible Loss Ratio is the percent of Premium The Hartford can allocate to Incurred Claims which allows us to recover expenses associated with administering your benefit program. These expenses contemplate claims activity, account structure complexity, and regularly - updated expense factors. Because expense components fluctuate from year to year, the Permissible Loss Ratio reported for each renewal will subsequently fluctuate. Experience Rate: (Incurred Loss Ratio / Permissible Loss Ratio) x (Current Rate) 12 -55A-39' ail.