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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): October 26, 2023
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
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Delaware | 001-13958 | 13-3317783 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
The Hartford Financial Services Group, Inc.
One Hartford Plaza, Hartford, Connecticut 06155
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (860) 547-5000
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))
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | HIG | The New York Stock Exchange |
6.10% Notes due October 1, 2041 | HIG 41 | The New York Stock Exchange |
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Depositary Shares, Each Representing a 1/1,000th Interest in a Share of 6.000% Non-Cumulative Preferred Stock, Series G, par value $0.01 per share | HIG PR G | The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Item 2.02 | Results of Operations and Financial Condition |
On October 26, 2023, The Hartford Financial Services Group, Inc. (the "Company") issued (i) a press release announcing its financial results for the quarterly period ended September 30, 2023, and (ii) its Investor Financial Supplement (“IFS”) relating to its financial results for the quarterly period ended September 30, 2023. Copies of the press release and the IFS are furnished herewith as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.
The information furnished pursuant to this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.
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Item 9.01 | Financial Statements and Exhibits |
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Exhibit No. | | |
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99.1 | | | |
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99.2 | | | |
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101 | | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.
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104 | | The cover page from this Current Report on Form 8-K, formatted as Inline XBRL.
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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.
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Date: | October 26, 2023 | By: | /s/ Allison G. Niderno |
| | Name: | Allison G. Niderno |
| | Title: | Senior Vice President and Controller |
NEWS RELEASE
The Hartford Announces Third Quarter 2023 Financial Results
Increased quarterly common dividend per share by 11%
•Third quarter 2023 net income available to common stockholders of $645 million ($2.09 per diluted share) increased 93% from $334 million ($1.02 per diluted share) over the same period in 2022. Core earnings* of $708 million ($2.29 core earnings per diluted share*) increased 50% from $472 million ($1.45 core earnings per diluted share) in the prior year quarter.
•Net income ROE for the trailing 12 months of 17.7% and core earnings ROE* for the same period of 14.9%.
•Property & Casualty (P&C) written premiums rose 8% in third quarter 2023 compared with third quarter 2022, driven by both Commercial Lines and Personal Lines. Group Benefits fully insured ongoing premium growth of 8% in third quarter 2023.
•Commercial Lines third quarter combined ratio of 90.2 and underlying combined ratio* of 87.8.
•Group Benefits third quarter net income margin of 8.5% and core earnings margin* of 9.8%.
•Returned $481 million to stockholders in the third quarter, including $350 million of shares repurchased and $131 million in common stockholder dividends paid. Increased the quarterly common dividend per share by 11%, to $0.47, payable Jan. 3, 2024 to shareholders of record at the close of business on Dec. 1, 2023.
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures.
** All amounts and percentages set forth in this press release are approximate unless otherwise noted.
HARTFORD, Conn., Oct. 26, 2023 – The Hartford (NYSE: HIG) today announced financial results for the quarter ended Sept. 30, 2023.
“The Hartford continues to deliver strong financial performance with a 12-month core earnings ROE of 14.9 percent," said The Hartford's Chairman and CEO Christopher Swift. "Results were driven by continued momentum and exceptional performance in our Commercial Lines and Group Benefits businesses, representing over 85 percent of earned premium, and a strong contribution from investments.”
The Hartford's Chief Financial Officer Beth Costello said, “Commercial Lines had an outstanding quarter with an underlying combined ratio of 87.8. Personal Lines achieved sustained double-digit written pricing increases with acceleration in auto to 19.7 percent in the quarter. Group Benefits continues to deliver excellent results driven by 8 percent growth in fully insured ongoing premiums and a core earnings margin of 9.8 percent. Our investment performance remains strong benefiting from attractive new money yields. We announced an 11 percent increase in the common dividend and, in the third quarter, returned $481 million to shareholders.”
Swift continued, “We continue to expand our strong competitive position, successfully executing on our priorities and delivering superior returns for our shareholders. Looking ahead there is much to be bullish about at The Hartford. Building on our results over the last nine months, I am confident in our ability to consistently deliver core earnings ROEs in the 14 to 15 percent range."
CONSOLIDATED RESULTS:
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| Three Months Ended | |
($ in millions except per share data) | Sep 30 2023 | Sep 30 2022 | Change | | | |
Net income available to common stockholders | $645 | $334 | 93% | | | |
Net income available to common stockholders per diluted share1 | $2.09 | $1.02 | 105% | | | |
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Core earnings | $708 | $472 | 50% | | | |
Core earnings per diluted share | $2.29 | $1.45 | 58% | | | |
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Book value per diluted share | $43.50 | $39.13 | 11% | | | |
Book value per diluted share (ex. accumulated other comprehensive income (AOCI))2 | $57.12 | $52.65 | 8% | | | |
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Net income available to common stockholders' return on equity (ROE)3, last 12-months | 17.7% | 12.8% | 4.9 | | | |
Core earnings ROE3, last 12-months | 14.9% | 14.3% | 0.6 | | | |
[1] Includes dilutive potential common shares; for net income available to common stockholders per diluted share, the numerator is net income less preferred dividends
[2] Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
[3] Return on equity (ROE) is calculated based on last 12-months net income available to common stockholders and core earnings, respectively; for net income ROE, the denominator is common stockholders’ equity including AOCI; for core earnings ROE, the denominator is common stockholders’ equity excluding AOCI
Third quarter 2023 net income available to common stockholders of $645 million, or $2.09 per diluted share, improved compared with $334 million in third quarter 2022, primarily due to a higher P&C underwriting gain, an increase in net investment income, lower net realized losses, and higher Group Benefits results, with improvements in both life and disability.
Third quarter 2023 core earnings of $708 million, or $2.29 per diluted share, compared with $472 million of core earnings in third quarter 2022. Contributing to the results were:
•An increase in earnings generated by 8% growth in P&C earned premium and 8% growth in Group Benefits fully insured ongoing premium.
•P&C current accident year (CAY) catastrophe (CAT) losses of $184 million, before tax, in third quarter 2023, compared with CAY CAT losses of $293 million in third quarter 2022.
•Commercial Lines loss and loss adjustment expense ratio of 58.9 improved 3.7 points compared with 62.6 in third quarter 2022, including 2.7 points of lower CATs. Underlying loss and loss adjustment expense ratio* improved 0.9 points, to 56.6 in third quarter 2023 from 57.5 in third quarter 2022, primarily driven by lower net non-CAT property losses.
•Personal Lines loss and loss adjustment expense ratio of 83.7 compared with 82.5 in third quarter 2022, including 6.4 points of lower CATs and a change from favorable prior accident year development (PYD) of 1.5 in third quarter 2022 to unfavorable PYD of 0.1 in third quarter 2023. Underlying loss and loss adjustment expense ratio of 74.7 in third quarter 2023 compared with 68.8 in third quarter 2022, with the increase largely due to higher severity in auto liability and physical damage, partially offset by double-digit earned pricing increases benefiting both auto and homeowners.
•Group Benefits loss ratio of 70.2% improved 2.6 points compared with 72.8% primarily due to improved mortality experience and favorable long-term disability recoveries.
•The expense ratios improved across P&C and Group Benefits from third quarter 2022, driven by the impact of higher earned premium, lower incentive compensation, lower
marketing spend in Personal Lines and incremental savings from the Hartford Next operational transformation and cost reduction program.
•Net investment income of $597 million, before tax, compared with $487 million in third quarter 2022, driven by higher yields on the fixed income portfolio.
Sept. 30, 2023, book value per diluted share of $43.50 increased 4.4%, from $41.67 at Dec. 31, 2022, principally due to net income in excess of stockholder dividends through Sept. 30, 2023, partially offset by the effect of share repurchases on diluted shares outstanding and greater net unrealized losses on investments within AOCI driven by an increase in interest rates.
Book value per diluted share (excluding AOCI) of $57.12 as of Sept. 30, 2023, increased 6.4%, from $53.66 at Dec. 31, 2022, as the impact from net income in excess of stockholder dividends through Sept. 30, 2023 was partially offset by the dilutive effect of share repurchases.
Net income available to common stockholders' ROE (net income ROE) for the 12-month period ending Sept. 30, 2023, was 17.7%, an increase of 4.9 points from third quarter 2022, primarily due to an increase in 12-month trailing net income available to common stockholders, and an increase in average net unrealized losses on investments in AOCI.
Core earnings ROE for the 12-month period ending Sept. 30, 2023, was 14.9%, an increase of 0.6 points from third quarter 2022 due to higher trailing 12-month core earnings.
BUSINESS RESULTS:
Commercial Lines
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| Three Months Ended | |
($ in millions, unless otherwise noted) | Sep 30 2023 | Sep 30 2022 | Change | | | |
Net income | $519 | $286 | 81% | | | |
Core earnings | $542 | $363 | 49% | | | |
Written premiums | $3,003 | $2,780 | 8% | | | |
Underwriting gain1 | $290 | $153 | 90% | | | |
Underlying underwriting gain1 | $359 | $290 | 24% | | | |
Losses and loss adjustment expense ratio | | | | | | |
Current accident year before catastrophes | 56.6 | 57.5 | (0.9) | | | |
Current accident year catastrophes | 3.9 | 6.6 | (2.7) | | | |
Favorable prior accident year development | (1.6) | (1.6) | — | | | |
Expenses | 30.7 | 31.5 | (0.8) | | | |
Policyholder dividends | 0.5 | 0.3 | 0.2 | | | |
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Combined ratio | 90.2 | 94.3 | (4.1) | | | |
Impact of catastrophes and PYD on combined ratio | (2.3) | (5.0) | 2.7 | | | |
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Underlying combined ratio | 87.8 | 89.3 | (1.5) | | | |
[1] Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
Third quarter 2023 net income of $519 million compared with net income of $286 million in third quarter 2022, principally due to a higher underwriting gain driven by, lower CAY CAT losses, the impact of earned premium growth, and a lower underlying loss and loss adjustment expense ratio, as well as higher net investment income, and lower net realized losses.
Commercial Lines core earnings of $542 million in third quarter 2023 compared with $363 million in third quarter 2022. Contributing to the results were:
•CAY CAT losses of $115 million, before tax, in third quarter 2023, primarily from tornado, wind and hail events across several regions of the United States, down from CAY CAT losses of $179 million in third quarter 2022, which included $133 million from Hurricane Ian.
•Net favorable PYD within core earnings of $46 million, before tax, in third quarter 2023, compared with $42 million of favorable PYD within core earnings in third quarter 2022. The net favorable PYD in third quarter 2023 primarily includes reserve reductions in workers’ compensation and package business, partially offset by reserve increases in general liability.
•An underlying loss and loss adjustment expense ratio of 56.6, in third quarter 2023 compared with 57.5 in third quarter 2022, with the improvement principally due to lower net non-CAT property losses driven by Middle & Large Commercial.
•9% growth in earned premium.
•Net investment income of $395 million, before tax, compared with $315 million in third quarter 2022, primarily driven by reinvesting at higher rates and a higher yield on variable rate securities, as well as slightly higher income earned on limited partnerships and other alternative investments (LPs).
Combined ratio of 90.2 in third quarter 2023, improved 4.1 points compared with 94.3 in third quarter 2022, primarily due to 2.7 points of lower CAY CAT losses, and a 1.5 point decrease in the underlying combined ratio. Underlying combined ratio of 87.8 improved primarily due to a 0.9 point decrease in the underlying loss and loss adjustment expense ratio, and a 0.8 point decrease in the expense ratio.
•Small Commercial combined ratio of 87.7 compared with 89.3 in third quarter 2022, including 2.1 points of lower CAY CATs and 0.8 points of more favorable PYD. Underlying combined ratio of 89.7 compared with 88.5 in third quarter 2022, primarily due to higher non-CAT property losses.
•Middle & Large Commercial combined ratio of 94.5 compared with 100.7 in third quarter 2022, including 2.1 points of lower CAY CATs and a 1.4 point increase in unfavorable PYD. Underlying combined ratio of 88.1, an improvement of 5.6 points from 93.7 in third quarter 2022, due to lower non-CAT property losses and a lower expense ratio.
•Global Specialty combined ratio of 88.9 improved from 94.2 in third quarter 2022, benefiting from 4.7 points of lower CAY CATs and a 0.3 point decrease in unfavorable PYD. The underlying combined ratio of 84.3 improved 0.2 points from third quarter 2022, primarily due to lower loss ratios in global reinsurance and international lines, partially offset by higher loss ratios in U.S. financial lines, as well as higher policyholder dividends and a slightly higher expense ratio.
•The Commercial Lines expense ratio of 30.7 improved 0.8 points from third quarter 2022, driven by the impact of higher earned premium, lower incentive compensation and incremental savings from the Hartford Next program, partially offset by investments in technology and higher underwriting staffing costs.
Third quarter 2023 written premiums of $3.0 billion were up 8% from third quarter 2022, with increases across the segment, including continued expansion in property lines, growth in new business within Small Commercial and Global Specialty, and the effect of renewal written price increases.
Personal Lines
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| Three Months Ended | |
($ in millions, unless otherwise noted) | Sep 30 2023 | Sep 30 2022 | Change | | | |
Net loss | ($12) | $(36) | 67% | | | |
Core loss | ($8) | $(28) | 71% | | | |
Written premiums | $869 | $803 | 8% | | | |
Underwriting loss | $(62) | $(72) | 14% | | | |
Underlying underwriting gain | $8 | $31 | (74%) | | | |
Losses and loss adjustment expense ratio | | | | | | |
Current accident year before catastrophes | 74.7 | 68.8 | 5.9 | | | |
Current accident year catastrophes | 8.8 | 15.2 | (6.4) | | | |
Unfavorable (favorable) prior accident year development | 0.1 | (1.5) | 1.6 | | | |
Expenses | 24.2 | 27.1 | (2.9) | | | |
Combined ratio | 107.9 | 109.6 | (1.7) | | | |
Impact of catastrophes and PYD on combined ratio | (8.9) | (13.7) | 4.8 | | | |
Underlying combined ratio | 99.0 | 95.9 | 3.1 | | | |
Net loss of $12 million in third quarter 2023 compared with $36 million in third quarter 2022, driven by an increase in net investment income, improved underwriting results, and lower net realized losses.
Personal Lines core loss of $8 million compared with $28 million of core loss in third quarter 2022. Contributing to the results were:
•Net investment income of $47 million, before tax, in third quarter 2023 compared with $31 million in third quarter 2022.
•CAY CAT losses of $69 million, before tax, in third quarter 2023, primarily from tornado, wind and hail events across several regions of the United States, down from CAY CAT losses of $114 million in third quarter 2022, which included $81 million from Hurricane Ian.
•$1 million, before tax, of unfavorable PYD in third quarter of 2023, compared with $11 million favorable PYD in third quarter 2022. In third quarter 2023, there was no increase in prior year reserves for auto liability.
•An underlying loss and loss adjustment expense ratio of 74.7 in third quarter 2023 compared with 68.8 in third quarter 2022, with the increase primarily driven by higher severity in auto liability and physical damage, partially offset by double-digit earned pricing increases in auto and homeowners.
Combined ratio of 107.9 in third quarter 2023, compared with 109.6 in third quarter 2022, primarily due to a 6.4 point decrease in the CAY CAT ratio, partially offset by a 5.9 increase in the underlying loss and loss adjustment expense ratio and a 1.6 point change from favorable PYD in third quarter 2022 to unfavorable in third quarter 2023. Underlying combined ratio of 99.0 compared with 95.9 in third quarter 2022, primarily due to an increase in the underlying loss and loss adjustment expense ratio in auto, partially offset by a 2.9 point improvement in the expense ratio.
•Auto combined ratio of 110.8 compared with 113.2 in third quarter 2022. The underlying combined ratio of 108.5 increased from 102.6 in third quarter 2022, primarily due to an increase in auto liability and physical damage severity, partially offset by an increase in earned pricing and a lower expense ratio.
•Homeowners combined ratio of 101.4 compared with 102.6 in third quarter 2022. The underlying combined ratio of 78.1 improved from 80.4 in third quarter 2022, primarily due to a lower expense ratio, and the effect of double-digit earned pricing increases which offset the change in weather and non-weather loss costs.
The expense ratio of 24.2 improved 2.9 points from third quarter 2022, primarily driven by lower direct marketing costs and, to a lesser extent, the impact of higher earned premium.
Written premiums in third quarter 2023 were $869 million compared with $803 million in third quarter 2022 with:
•Higher renewal written price increases in auto and homeowners in response to increased loss cost trends.
•Renewal written price increases in auto and homeowners of 19.7% and 14.1%, respectively.
•An increase in homeowners' new business.
•Flat policy count retention across the segment.
•A partial offset from a decline in auto new business.
Group Benefits
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| Three Months Ended | |
($ in millions, unless otherwise noted) | Sep 30 2023 | Sep 30 2022 | Change | | | |
Net income | $146 | $86 | 70% | | | |
Core earnings | $170 | $117 | 45% | | | |
Fully insured ongoing premiums | $1,569 | $1,453 | 8% | | | |
Loss ratio | 70.2% | 72.8% | (2.6) | | | |
Expense ratio | 24.0% | 25.4% | (1.4) | | | |
Net income margin | 8.5% | 5.4% | 3.1 | | | |
Core earnings margin | 9.8% | 7.2% | 2.6 | | | |
Net income of $146 million in third quarter 2023 increased from $86 million in third quarter 2022, largely driven by earnings generated from growth in fully insured ongoing premium, and lower group life and disability loss ratios.
Core earnings were $170 million, up from $117 million in third quarter 2022, largely driven by earnings generated from 8% growth in fully insured ongoing premiums, strong disability results, and improved mortality experience.
Fully insured ongoing premiums were up 8% compared with third quarter 2022, driven by strong persistency and new business sales as well as an increase in exposure on existing accounts. Fully insured ongoing sales were $143 million in third quarter 2023, up 35% over third quarter 2022, driven by group disability sales.
Loss ratio of 70.2% decreased 2.6 points from third quarter 2022.
•Group life loss ratio of 80.2% improved 2.9 points largely driven by a lower level of mortality.
•Group disability loss ratio was 67.3% compared with 68.4% in third quarter 2022 primarily due to favorable long-term disability claim recoveries, partially offset by higher short-term disability and Paid Family Leave loss incidence.
Expense ratio of 24.0 improved 1.4 points from third quarter 2022, primarily due to the effect of higher earned premiums, incremental expense savings from Hartford Next, and lower incentive compensation, partially offset by higher staffing costs.
Hartford Funds
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| Three Months Ended | |
($ in millions, unless otherwise noted) | Sep 30 2023 | Sep 30 2022 | Change | | | |
Net income | $41 | $41 | 0% | | | |
Core earnings | $45 | $47 | (4)% | | | |
Daily average Hartford Funds AUM | $128,786 | $129,782 | (1)% | | | |
Mutual Funds and exchange-traded funds (ETF) net flows | $(1,629) | $(2,223) | 27% | | | |
Total Hartford Funds AUM | $123,193 | $117,827 | 5% | | | |
Third quarter 2023 net income of $41 million was flat to third quarter 2022, resulting from a decrease in net realized losses, offset by a decline in fee income net of variable expenses driven by lower daily average Hartford Funds AUM.
Core earnings of $45 million compared with $47 million in third quarter 2022 largely driven by lower daily average Hartford Funds AUM resulting in lower fee income net of variable expenses.
Daily average AUM of $129 billion in third quarter 2023 declined 1% from third quarter 2022, driven by net outflows over the preceding twelve months, partially offset by an increase in market values.
Mutual fund and ETF net outflows totaled $1.6 billion in third quarter 2023, compared with net outflows of $2.2 billion in third quarter 2022.
Corporate
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| Three Months Ended | |
($ in millions, unless otherwise noted) | Sep 30 2023 | Sep 30 2022 | Change | | | |
Net loss | $(52) | $(43) | (21)% | | | |
Net loss available to common stockholders | $(58) | $(49) | (18)% | | | |
Core loss | $(52) | $(37) | (41)% | | | |
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Net investment income, before tax | $12 | $7 | 71% | | | |
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Interest expense and preferred dividends, before tax | $56 | $56 | —% | | | |
Net loss available to common stockholders of $58 million in third quarter 2023 compared with $49 million in third quarter 2022, primarily driven by a capital-based state tax expense recorded in the 2023 period, partially offset by an increase in net investment income.
Third quarter 2023 core loss of $52 million compared with a third quarter 2022 core loss of $37 million, primarily driven by a capital-based state tax expense recorded in the 2023 period, partially offset by an increase in net investment income.
INVESTMENT INCOME AND PORTFOLIO DATA:
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| Three Months Ended | |
($ in millions, unless otherwise noted) | Sep 30 2023 | Sep 30 2022 | Change | | | |
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Net investment income, before tax | $597 | $487 | 23% | | | |
Annualized investment yield, before tax | 4.2% | 3.5% | 0.7 | | | |
Annualized investment yield, before tax, excluding LPs1 | 4.1% | 3.3% | 0.8 | | | |
Annualized LP yield, before tax | 6.3% | 6.3% | 0.0 | | | |
Annualized investment yield, after tax | 3.4% | 2.8% | 0.6 | | | |
[1] Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
Third quarter 2023 consolidated net investment income of $597 million compared with $487 million in third quarter 2022, largely driven by the impact of reinvesting at higher rates and a higher yield on variable rate securities.
Third quarter 2023 included $72 million, before tax, of LP income as compared to $62 million in third quarter 2022. Annualized LP yield, before tax, of 6.3% was flat to third quarter 2022.
Net realized losses of $90 million, before tax, in third quarter 2023 improved by $76 million from losses of $166 million, before tax, in third quarter 2022 primarily due to greater net losses on equity securities and sales of fixed maturities in the 2022 period compared to the 2023 period, partially offset by greater losses on interest rate derivatives in the 2023 period compared to 2022.
Total invested assets of $53.3 billion increased from Dec. 31, 2022, primarily due to an increase in fixed maturities, available-for-sale, at fair value and LPs, partially offset by a decrease in equity securities, at fair value and short-term investments.
CONFERENCE CALL
The Hartford will discuss its third quarter 2023 financial results on a webcast at 9:00 a.m. EDT on Friday, Oct. 27, 2023. The call can be accessed via a live listen-only webcast or as a replay through the Investor Relations section of The Hartford's website at https://ir.thehartford.com. The replay will be accessible approximately one hour after the conclusion of the call and be available along with a transcript of the event for at least one year.
More detailed financial information can be found in The Hartford's Investor Financial Supplement for Sept. 30, 2023, and the third quarter 2023 Financial Results Presentation, both of which are available at https://ir.thehartford.com.
About The Hartford
The Hartford is a leader in property and casualty insurance, group benefits and mutual funds. With more than 200 years of expertise, The Hartford is widely recognized for its service excellence, sustainability practices, trust and integrity. More information on the company and its financial performance is available at https://www.thehartford.com.
The Hartford Financial Services Group, Inc., (NYSE: HIG) operates through its subsidiaries under the brand name, The Hartford, and is headquartered in Hartford, Connecticut. For additional details, please read https://www.thehartford.com/legal-notice.
HIG-F
From time to time, The Hartford may use its website and/or social media outlets, such as X (formerly known as Twitter) and Facebook, to disseminate material company information. Financial and other important information regarding The Hartford is routinely accessible through and posted on our website at https://ir.thehartford.com. In addition, you may automatically receive email alerts and other information about The Hartford when you enroll your email address by visiting the “Email Alerts” section at https://ir.thehartford.com.
Media Contacts: Investor Contact:
Michelle Loxton Susan Spivak Bernstein
860-547-7413 860-547-6233
michelle.loxton@thehartford.com susan.spivak@thehartford.com
Matthew Sturdevant
860-547-8664
matthew.sturdevant@thehartford.com
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THE HARTFORD FINANCIAL SERVICES GROUP, INC. | |
CONSOLIDATING INCOME STATEMENTS | |
Three Months Ended September 30, 2023 | |
($ in millions) | |
| Commercial Lines | Personal Lines | P&C Other Ops | Group Benefits | Hartford Funds | Corporate | | Consolidated | |
Earned premiums | $ | 2,951 | | $ | 784 | | $ | — | | $ | 1,575 | | $ | — | | $ | — | | | $ | 5,310 | | |
Fee income | 11 | | 7 | | — | | 54 | | 248 | | 10 | | | 330 | | |
Net investment income | 395 | | 47 | | 18 | | 121 | | 4 | | 12 | | | 597 | | |
Net realized losses | (38) | | (5) | | (2) | | (31) | | (4) | | (10) | | | (90) | | |
Other revenue | (1) | | 21 | | — | | — | | — | | 1 | | | 21 | | |
Total revenues | 3,318 | | 854 | | 16 | | 1,719 | | 248 | | 13 | | | 6,168 | | |
Benefits, losses, and loss adjustment expenses | 1,738 | | 656 | | 2 | | 1,146 | | — | | 1 | | | 3,543 | | |
Amortization of DAC | 451 | | 58 | | — | | 8 | | — | | — | | | 517 | | |
Insurance operating costs and other expenses | 473 | | 156 | | 3 | | 372 | | 195 | | 27 | | | 1,226 | | |
Restructuring and other costs | — | | — | | — | | — | | — | | 1 | | | 1 | | |
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Interest expense | — | | — | | — | | — | | — | | 50 | | | 50 | | |
Amortization of other intangible assets | 7 | | 1 | | — | | 10 | | — | | — | | | 18 | | |
Total benefits, losses and expenses | 2,669 | | 871 | | 5 | | 1,536 | | 195 | | 79 | | | 5,355 | | |
Income (loss) before income taxes | 649 | | (17) | | 11 | | 183 | | 53 | | (66) | | | 813 | | |
Income tax expense (benefit) | 130 | | (5) | | 2 | | 37 | | 12 | | (14) | | | 162 | | |
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Net income (loss) | 519 | | (12) | | 9 | | 146 | | 41 | | (52) | | | 651 | | |
Preferred stock dividends | — | | — | | — | | — | | — | | 6 | | | 6 | | |
Net income (loss) available to common stockholders | 519 | | (12) | | 9 | | 146 | | 41 | | (58) | | | 645 | | |
Adjustments to reconcile net income (loss) available to common stockholders to core earnings (loss) | | | | | | | | | |
Net realized losses, excluded from core earnings, before tax | 29 | | 5 | | 1 | | 28 | | 4 | | 9 | | | 76 | | |
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Restructuring and other costs, before tax | | | | | | 1 | | | 1 | | |
Integration and other non-recurring M&A costs, before tax | 1 | | — | | — | | 1 | | — | | — | | | 2 | | |
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Income tax expense (benefit) | (7) | | (1) | | 1 | | (5) | | — | | (4) | | | (16) | | |
Core earnings (loss) | $ | 542 | | $ | (8) | | $ | 11 | | $ | 170 | | $ | 45 | | $ | (52) | | | $ | 708 | | |
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THE HARTFORD FINANCIAL SERVICES GROUP, INC. |
CONSOLIDATING INCOME STATEMENTS |
Three Months Ended September 30, 2022 |
($ in millions) |
| Commercial Lines | Personal Lines | P&C Other Ops | Group Benefits | Hartford Funds | Corporate | | Consolidated |
Earned premiums | $ | 2,703 | | $ | 749 | | $ | — | | $ | 1,458 | | $ | — | | $ | — | | | $ | 4,910 | |
Fee income | 10 | | 8 | | — | | 46 | | 253 | | 11 | | | 328 | |
Net investment income | 315 | | 31 | | 14 | | 117 | | 3 | | 7 | | | 487 | |
Net realized losses | (95) | | (11) | | (4) | | (37) | | (9) | | (10) | | | (166) | |
Other revenue | 1 | | 20 | | — | | — | | — | | — | | | 21 | |
Total revenues | 2,934 | | 797 | | 10 | | 1,584 | | 247 | | 8 | | | 5,580 | |
Benefits, losses, and loss adjustment expenses | 1,692 | | 618 | | — | | 1,096 | | — | | 1 | | | 3,407 | |
Amortization of DAC | 399 | | 57 | | — | | 8 | | — | | — | | | 464 | |
Insurance operating costs and other expenses | 466 | | 167 | | 2 | | 364 | | 195 | | 12 | | | 1,206 | |
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Restructuring and other costs | — | | — | | — | | — | | — | | 3 | | | 3 | |
Interest expense | — | | — | | — | | — | | — | | 50 | | | 50 | |
Amortization of other intangible assets | 7 | | 1 | | — | | 10 | | — | | — | | | 18 | |
Total benefits, losses and expenses | 2,564 | | 843 | | 2 | | 1,478 | | 195 | | 66 | | | 5,148 | |
Income (loss) before income taxes | 370 | | (46) | | 8 | | 106 | | 52 | | (58) | | | 432 | |
Income tax expense (benefit) | 84 | | (10) | | 2 | | 20 | | 11 | | (15) | | | 92 | |
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Net income (loss) | 286 | | (36) | | 6 | | 86 | | 41 | | (43) | | | 340 | |
Preferred stock dividends | — | | — | | — | | — | | — | | 6 | | | 6 | |
Net income (loss) available to common stockholders | 286 | | (36) | | 6 | | 86 | | 41 | | (49) | | | 334 | |
Adjustments to reconcile net income (loss) available to common stockholders to core earnings (loss) | | | | | | | | |
Net realized losses, excluded from core earnings, before tax | 95 | | 10 | | 4 | | 38 | | 9 | | 10 | | | 166 | |
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Restructuring and other costs | — | | — | | — | | — | | — | | 3 | | | 3 | |
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Integration and other non-recurring M&A costs, before tax | 3 | | — | | — | | 2 | | — | | — | | | 5 | |
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Income tax benefit | (21) | | (2) | | — | | (9) | | (3) | | (1) | | | (36) | |
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Core earnings (loss) | $ | 363 | | $ | (28) | | $ | 10 | | $ | 117 | | $ | 47 | | $ | (37) | | | $ | 472 | |
The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as "NM" or not meaningful.
DISCUSSION OF NON-GAAP FINANCIAL MEASURES
The Hartford uses non-GAAP financial measures in this press release to assist investors in analyzing the company's operating performance for the periods presented herein. Because The Hartford's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing The Hartford's non-GAAP financial measures to those of other companies. Definitions and calculations of other financial measures used in this press release can be found below and in The Hartford's Investor Financial Supplement for third quarter 2023, which is available on The Hartford's website, https://ir.thehartford.com.
Annualized investment yield, excluding limited partnerships and other alternative investments - This non-GAAP measure is calculated as (a) the annualized net investment income, on a Consolidated, P&C or Group Benefits level, excluding limited partnerships and other alternative investments, divided by (b) the monthly average invested assets at amortized cost, as applicable, excluding derivatives book value and limited partnerships and other alternative investments. The Company believes that annualized investment yield, excluding limited partnerships and other alternative investments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments. Annualized investment yield is the most directly comparable GAAP measure. A reconciliation of the annualized investment yield to annualized investment yield excluding limited partnerships and other alternatives investments for the quarterly periods ended September 30, 2023 and 2022 is provided in the table below.
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| Three Months Ended |
| Sept 30 2023 | Sept 30 2022 | | | | |
| Consolidated | | |
Annualized investment yield | 4.2 | % | 3.5 | % | | | | |
Adjustment for income from limited partnerships and other alternative investments | (0.1) | % | (0.2) | % | | | | |
Annualized investment yield excluding limited partnerships and other alternative investments | 4.1 | % | 3.3 | % | | | | |
Book value per diluted share (excluding AOCI) - This is a non-GAAP per share measure that is calculated by dividing (a) common stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding and dilutive potential common shares. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes that excluding AOCI from the numerator is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per diluted share is the most directly comparable U.S. GAAP measure. A reconciliation of book value per diluted share to book value per diluted share (excluding AOCI) is provided in the table below.
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| As of |
| Sept 30 2023 | Dec 31 2022 | Change |
Book value per diluted share | $43.50 | $41.67 | 4% |
Per diluted share impact of AOCI | $13.62 | $11.99 | 14% |
Book value per diluted share (excluding AOCI) | $57.12 | $53.66 | 6% |
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| As of |
| Sept 30 2023 | Sept 30 2022 | Change |
Book value per diluted share | $43.50 | $39.13 | 11% |
Per diluted share impact of AOCI | $13.62 | $13.52 | 1% |
Book value per diluted share (excluding AOCI) | $57.12 | $52.65 | 8% |
Core earnings - The Hartford uses the non-GAAP measure core earnings as an important measure of the Company’s operating performance. The Hartford believes that core earnings provides investors with a valuable measure of the performance of the Company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain items. Therefore, the following items are excluded from core earnings:
•Certain realized gains and losses - Generally realized gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses that tend to be highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income.
•Restructuring and other costs - Costs incurred as part of a restructuring plan are not a recurring operating expense of the business.
•Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before maturity, these losses are not a recurring operating expense of the business.
•Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a business or to reinsure loss reserves, are not a recurring operating expense of the business.
•Integration and other non-recurring M&A costs - These costs, including transaction costs incurred in connection with an acquired business, are incurred over a short period of time and do not represent an ongoing operating expense of the business.
•Change in loss reserves upon acquisition of a business - These changes in loss reserves are excluded from core earnings because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition.
•Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance agreements economically transfer risk to the reinsurers and excluding the deferred gain on retroactive reinsurance and related amortization of the deferred gain from core earnings provides greater insight into the economics of the business.
•Change in valuation allowance on deferred taxes related to non-core components of before tax income - These changes in valuation allowances are excluded from core earnings because they relate to non-core components of before tax income, such as tax attributes like capital loss carryforwards.
•Results of discontinued operations - These results are excluded from core earnings for businesses sold or held for sale because such results could obscure the ability to compare period over period results for our ongoing businesses.
In addition to the above components of net income available to common stockholders that are excluded from core earnings, preferred stock dividends declared, which are excluded from net income, are included in the determination of core earnings. Preferred stock dividends are a cost of financing more akin to interest expense on debt and are expected to be a recurring expense as long as the preferred stock is outstanding.
Net income (loss) and net income (loss) available to common stockholders are the most directly comparable U.S. GAAP measures to core earnings. Core earnings should not be considered as a substitute for net income (loss) or net income (loss) available to common stockholders and does not reflect the overall profitability of the Company’s business. Therefore, The Hartford believes that it is useful for investors to evaluate net income (loss), net income (loss) available to common stockholders, and core earnings when reviewing the Company’s performance.
A reconciliation of net income (loss) to core earnings for the quarterly periods ended September 30, 2023 and 2022, is included in this press release. A reconciliation of net income (loss) to core earnings for individual reporting segments can be found in this press release under the heading "The Hartford Financial Services Group, Inc. Consolidating Income Statements" and in The Hartford's Investor Financial Supplement for the quarter ended September 30, 2023.
Core earnings margin - The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues, excluding buyouts and realized gains (losses). Net income margin, calculated by dividing net income by revenues, is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin 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) as well as other items excluded in the calculation of core earnings. Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance. A reconciliation of net income margin to core earnings margin for the quarterly periods ended September 30, 2023 and 2022, is set forth below.
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| Three Months Ended | |
Margin | Sept 30 2023 | Sept 30 2022 | Change | | | |
Net income margin | 8.5% | 5.4% | 3.1 | | | |
Adjustments to reconcile net income margin to core earnings margin: | | | | | | |
Net realized losses, before tax | 1.5% | 2.3% | (0.8) | | | |
Integration and other non-recurring M&A costs, before tax | 0.1% | 0.1% | — | | | |
Income tax benefit on items excluded from core earnings | (0.3)% | (0.6)% | 0.3 | | | |
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Core earnings margin | 9.8% | 7.2% | 2.6 | | | |
Core earnings per diluted share - This non-GAAP per share measure is calculated using the non-GAAP financial measure core earnings rather than the GAAP measure net income. The Company believes that core earnings per diluted share provides investors with a valuable measure of the Company's operating performance for the same reasons applicable to its underlying measure, core earnings. Net income (loss) available to common stockholders per diluted common share is the most directly comparable GAAP measure. Core earnings per diluted share should not be considered as a substitute for net income (loss) available to common stockholders per diluted common share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate net income (loss) available to common stockholders per diluted common share and core earnings per diluted share when reviewing the Company's performance. A reconciliation of net income available to common stockholders per diluted common share to core earnings per diluted share for the quarterly periods ended September 30, 2023 and 2022 is provided in the table below.
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| Three Months Ended | | |
| Sept 30 2023 | Sept 30 2022 | Change | | | | | | |
PER SHARE DATA | | | | | | | | | |
Diluted earnings per common share: | | | | | | | | | |
Net income available to common stockholders per share1 | $2.09 | $1.02 | 105% | | | | | | |
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Adjustments made to reconcile net income available to common stockholders per diluted share to core earnings per diluted share: | | | | | | | | | |
Net realized losses, excluded from core earnings, before tax | 0.25 | 0.51 | (51)% | | | | | | |
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Restructuring and other costs, before tax | — | 0.01 | (100)% | | | | | | |
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Integration and other non-recurring M&A costs, before tax | 0.01 | 0.02 | (50)% | | | | | | |
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Income tax benefit on items excluded from core earnings | (0.06) | (0.11) | 45% | | | | | | |
Core earnings per diluted share | $2.29 | $1.45 | 58% | | | | | | |
[1] Net income available to common stockholders includes dilutive potential common shares | | | | | | | | | |
Core Earnings Return on Equity - The Company provides different measures of the return on stockholders' equity (ROE). Core earnings ROE is calculated based on non-GAAP financial measures. Core earnings ROE is calculated by dividing (a) the non-GAAP measure core earnings for the prior four fiscal quarters by (b) the non-GAAP measure average common stockholders' equity, excluding AOCI. Net income ROE is the most directly comparable U.S. GAAP measure. The Company excludes AOCI in the calculation of core earnings ROE to provide investors with a measure of how effectively the Company is investing the portion of the Company's net worth that is primarily attributable to the Company's business operations. The Company provides to investors return on equity measures based on its non-GAAP core earnings financial measure for the reasons set forth in the core earnings definition. A quantitative reconciliation of net income available to common stockholders ROE to core earnings ROE is not calculable on a forward-looking basis because it is not possible to provide a reliable forecast of realized gains and losses, which typically vary substantially from period to period.
A reconciliation of consolidated net income available to common stockholders ROE to consolidated core earnings ROE is set forth below.
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| Last Twelve Months Ended |
| Sept 30 2023 | Sept 30 2022 |
Net income available to common stockholders ROE | 17.7% | 12.8% |
Adjustments to reconcile net income available to common stockholders ROE to core earnings ROE: | | |
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Net realized losses excluded from core earnings, before tax | 0.9% | 2.9% |
Restructuring and other costs, before tax | 0.1% | 0.1% |
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Loss on extinguishment of debt, before tax | —% | 0.1% |
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Integration and other non-recurring M&A costs, before tax | 0.1% | 0.1% |
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Change in deferred gain on retroactive reinsurance, before tax | 1.8% | 1.1% |
Income tax benefit on items not included in core earnings | (0.6)% | (0.9)% |
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Impact of AOCI, excluded from denominator of core earnings ROE | (5.1)% | (1.9)% |
Core earnings ROE | 14.9% | 14.3% |
Underlying combined ratio- This non-GAAP financial measure of underwriting results represents the combined ratio before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable GAAP measure. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve development. The changes to loss reserves upon acquisition of a business are excluded from underlying combined ratio because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of the combined ratio to the underlying combined ratio for individual reporting segments can be found in this press release under the heading "Business Results" for Commercial Lines" and "Personal Lines". A reconciliation of the combined ratio to underlying combined ratio for lines of business within the Company's P&C reporting segments is set forth below.
SMALL COMMERCIAL
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| Three Months Ended |
| Sept 30 2023 | Sept 30 2022 | | | Change |
Combined ratio | 87.7 | | 89.3 | | | | (1.6) | |
Adjustment to reconcile combined ratio to underlying combined ratio: | | | | | |
Current accident year catastrophes | (3.2) | | (5.3) | | | | 2.1 | |
Prior accident year development | 5.2 | | 4.4 | | | | 0.8 | |
Underlying combined ratio | 89.7 | | 88.5 | | | | 1.2 | |
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MIDDLE & LARGE COMMERCIAL
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| Three Months Ended |
| Sept 30 2023 | Sept 30 2022 | | | Change |
Combined ratio | 94.5 | | 100.7 | | | | (6.2) | |
Adjustment to reconcile combined ratio to underlying combined ratio: | | | | | |
Current accident year catastrophes | (4.5) | | (6.6) | | | | 2.1 | |
Prior accident year development | (1.8) | | (0.4) | | | | (1.4) | |
Underlying combined ratio | 88.1 | | 93.7 | | | | (5.6) | |
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GLOBAL SPECIALTY
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| Three Months Ended |
| Sept 30 2023 | Sept 30 2022 | | | Change |
Combined ratio | 88.9 | | 94.2 | | | | (5.3) | |
Adjustment to reconcile combined ratio to underlying combined ratio: | | | | | |
Current accident year catastrophes | (4.3) | | (9.0) | | | | 4.7 | |
Prior accident year development | (0.3) | | (0.6) | | | | 0.3 | |
Underlying combined ratio | 84.3 | | 84.5 | | | | (0.2) | |
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PERSONAL LINES AUTO
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| Three Months Ended |
| Sept 30 2023 | Sept 30 2022 | | | Change |
Combined ratio | 110.8 | | 113.2 | | | | (2.4) | |
Adjustment to reconcile combined ratio to underlying combined ratio: | | | | | |
Current accident year catastrophes | (2.3) | | (11.9) | | | | 9.6 | |
Prior accident year development | — | | 1.4 | | | | (1.4) | |
Underlying combined ratio | 108.5 | | 102.6 | | | | 5.9 | |
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PERSONAL LINES HOMEOWNERS
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| Three Months Ended |
| Sept 30 2023 | Sept 30 2022 | | | Change |
Combined ratio | 101.4 | | 102.6 | | | | (1.2) | |
Adjustment to reconcile combined ratio to underlying combined ratio: | | | | | |
Current accident year catastrophes | (23.1) | | (22.6) | | | | (0.5) | |
Prior accident year development | (0.3) | | 0.4 | | | | (0.7) | |
Underlying combined ratio | 78.1 | | 80.4 | | | | (2.3) | |
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Underwriting gain (loss) - The Hartford's management evaluates profitability of the Commercial and Personal Lines segments primarily on the basis of underwriting gain or loss. Underwriting gain (loss) is a before tax non-GAAP measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of The Hartford's pricing. Underwriting profitability over time is also greatly influenced by The Hartford's underwriting discipline, as management strives to manage exposure to loss through favorable risk selection and diversification, effective management of claims, use of reinsurance and its ability to manage its expenses. The Hartford believes that underwriting gain (loss) provides investors with a valuable measure of profitability, before tax, derived from underwriting activities, which are managed separately from the Company's investing activities. A reconciliation of net income to underwriting gain (loss) for the quarterly periods ended September 30, 2023 and 2022, is set forth below.
Underlying underwriting gain (loss) - This non-GAAP measure of underwriting profitability represents underwriting gain (loss) before current accident year catastrophes, PYD and current accident year change in loss reserves upon acquisition of a business. The most directly comparable GAAP measure is net income (loss). The Company believes underlying underwriting gain (loss) is important to understand the Company’s periodic earnings because the volatile and unpredictable nature (i.e., the timing and amount) of catastrophes and prior accident year reserve development could obscure underwriting trends. The changes to loss reserves upon acquisition of a business are also excluded from underlying underwriting gain (loss) because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of net income (loss) to underlying underwriting gain (loss) for individual reporting segments for the quarterly periods ended September 30, 2023 and 2022, is set forth below.
COMMERCIAL LINES
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| Three Months Ended | |
| Sept 30 2023 | Sept 30 2022 | | |
Net income | $ | 519 | | $ | 286 | | | |
Adjustments to reconcile net income to underwriting gain: | | | | |
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Net investment income | (395) | | (315) | | | |
Net realized losses | 38 | | 95 | | | |
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Other expense (income) | (2) | | 3 | | | |
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Income tax expense | 130 | | 84 | | | |
Underwriting gain | 290 | | 153 | | | |
Adjustments to reconcile underwriting gain to underlying underwriting gain: | | | | |
Current accident year catastrophes | 115 | | 179 | | | |
Prior accident year development | (46) | | (42) | | | |
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Underlying underwriting gain | $ | 359 | | $ | 290 | | | |
PERSONAL LINES
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| Three Months Ended | |
| Sept 30 2023 | Sept 30 2022 | | |
Net loss | $ | (12) | | $ | (36) | | | |
Adjustments to reconcile net loss to underwriting loss: | | | | |
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Net investment income | (47) | | (31) | | | |
Net realized losses | 5 | | 11 | | | |
Net servicing and other income | (3) | | (6) | | | |
Income tax benefit | (5) | | (10) | | | |
Underwriting loss | (62) | | (72) | | | |
Adjustments to reconcile underwriting loss to underlying underwriting gain: | | | | |
Current accident year catastrophes | 69 | | 114 | | | |
Prior accident year development | 1 | | (11) | | | |
Underlying underwriting gain | $ | 8 | | $ | 31 | | | |
Underlying loss and loss adjustment expense ratio - This non-GAAP financial measure of the loss and loss adjustment expense ratio for Commercial Lines and Personal Lines represents the loss and loss adjustment expense ratio before catastrophes and prior accident year development. The loss and loss adjustment expense ratio is the most directly comparable GAAP measure. The underlying loss and loss adjustment expense ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year reserve development. A reconciliation of the loss and loss adjustment expense ratio to the underlying loss and loss adjustment expense ratio for the quarterly periods ended September 30, 2023 and 2022, is set forth below.
COMMERCIAL LINES
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| | Three Months Ended | |
| | Sep 30 2023 | | Sep 30 2022 | Change | | | |
Loss and loss adjustment expense ratio | | | | | | | | |
Total losses and loss adjustment expenses | | 58.9 | | | 62.6 | | (3.7) | | | | |
Current accident year catastrophes | | (3.9) | | | (6.6) | | 2.7 | | | | |
Prior accident year development | | 1.6 | | | 1.6 | | — | | | | |
Underlying loss and loss adjustment expense ratio | | 56.6 | | | 57.5 | | (0.9) | | | | |
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PERSONAL LINES
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| | Three Months Ended | |
| | Sep 30 2023 | | Sep 30 2022 | Change | | | |
Loss and loss adjustment expense ratio | | | | | | | | |
Total losses and loss adjustment expenses | | 83.7 | | | 82.5 | | 1.2 | | | | |
Current accident year catastrophes | | (8.8) | | | (15.2) | | 6.4 | | | | |
Prior accident year development | | (0.1) | | | 1.5 | | (1.6) | | | | |
Underlying loss and loss adjustment expense ratio | | 74.7 | | | 68.8 | | 5.9 | | | | |
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SAFE HARBOR STATEMENT
Certain of the statements contained herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” and similar references to future periods.
Forward-looking statements are based on management's current expectations and assumptions regarding future economic, competitive, legislative and other developments and their potential effect upon The Hartford Financial Services Group, Inc. and its subsidiaries (collectively, the "Company" or "The Hartford"). Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from expectations depending on the evolution of various factors, including the risks and uncertainties identified below, as well as factors described in such forward-looking statements; or in The Hartford’s 2022 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and our other filings with the Securities and Exchange Commission.
◦Risks Relating to Economic, Political and Global Market Conditions: challenges related to the Company’s current operating environment, including global political, economic and market conditions, and the effect of financial market disruptions, economic downturns, changes in trade regulation including tariffs and other barriers or other potentially adverse macroeconomic developments on the demand for our products and returns in our investment portfolios; market risks associated with our business, including changes in credit spreads, equity prices, interest rates, inflation rate, foreign currency exchange rates and market volatility; the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy; the impacts of changing climate and weather patterns on our businesses, operations and investment portfolio including on claims, demand and pricing of our products, the availability and cost of reinsurance, our modeling data used to evaluate and manage risks of catastrophes and severe weather events, the value of our investment portfolios and credit risk with reinsurers and other counterparties; the ongoing effects of COVID-19, including exposure to COVID-19 business interruption property claims, the possibility of a resurgence of COVID-19 related losses in Group Benefits, and the potential for further legislative, regulatory or judicial actions pertaining to insurance underwriting and claims;
Insurance Industry and Product-Related Risks: the possibility of unfavorable loss development, including with respect to long-tailed exposures; the significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental claims; the possibility of another pandemic, civil unrest, earthquake, or other natural or man-made disaster that may adversely affect our businesses; weather and other natural physical events, including the intensity and frequency of thunderstorms, tornadoes, hail, wildfires, flooding, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns; the possible occurrence of terrorist attacks and the Company’s inability to contain its exposure as a result of, among other factors, the inability to exclude coverage for terrorist attacks from workers' compensation policies and limitations on reinsurance coverage from the federal government under applicable laws; the Company’s ability to effectively price its products and policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines; actions by competitors that may be larger or have greater financial resources than we do; technological changes, including usage-based methods of determining premiums, advancements in automotive safety features, the development of autonomous vehicles, and platforms that facilitate ride sharing; the Company's ability to market, distribute and provide insurance products and investment advisory services through current and
future distribution channels and advisory firms; the uncertain effects of emerging claim and coverage issues; political instability, politically motivated violence or civil unrest, which may increase the frequency and severity of insured losses;
Financial Strength, Credit and Counterparty Risks: risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments; capital requirements which are subject to many factors, including many that are outside the Company’s control, such as National Association of Insurance Commissioners ("NAIC") risk based capital formulas, rating agency capital models, Funds at Lloyd's and Solvency Capital Requirement, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results; losses due to nonperformance or defaults by others, including credit risk with counterparties associated with investments, derivatives, premiums receivable, reinsurance recoverables and indemnifications provided by third parties in connection with previous dispositions; the potential for losses due to our reinsurers' unwillingness or inability to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses; state and international regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends;
Risks Relating to Estimates, Assumptions and Valuations: risks associated with the use of analytical models in making decisions in key areas such as underwriting, pricing, capital management, reserving, investments, reinsurance and catastrophe risk management; the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the Company’s fair value estimates for its investments and the evaluation of intent-to-sell impairments and allowance for credit losses on available-for-sale securities and mortgage loans; the potential for impairments of our goodwill;
Strategic and Operational Risks: the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event; the potential for difficulties arising from outsourcing and similar third-party relationships; the risks, challenges and uncertainties associated with capital management plans, expense reduction initiatives and other actions; risks associated with acquisitions and divestitures, including the challenges of integrating acquired companies or businesses, which may result in our inability to achieve the anticipated benefits and synergies and may result in unintended consequences; difficulty in attracting and retaining talented and qualified personnel, including key employees, such as executives, managers and employees with strong technological, analytical and other specialized skills; the Company’s ability to protect its intellectual property and defend against claims of infringement;
Regulatory and Legal Risks: the cost and other potential effects of increased federal, state and international regulatory and legislative developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels; unfavorable judicial or legislative developments; the impact of changes in federal, state or foreign tax laws; regulatory requirements that could delay, deter or prevent a takeover attempt that stockholders might consider in their best interests; and the impact of potential changes in accounting principles and related financial reporting requirements.
Any forward-looking statement made by the Company in this document speaks only as of the date of this release. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
INVESTOR FINANCIAL SUPPLEMENT
September 30, 2023
Measures used in these financial statements and exhibits that are not based on generally accepted accounting principles ("non-GAAP") are denoted with an asterisk (*) the first time they appear in this document. These measures are defined within the Discussion of Non-GAAP and Other Financial Measures section and are reconciled to the most directly comparable generally accepted accounting principles ("GAAP") measure herein.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
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| | As of October 25, 2023 | | | | | | |
Address: | | | | | | | | |
One Hartford Plaza | | | | A.M. Best | | Standard & Poor’s | | Moody’s |
Hartford, CT 06155 | | Insurance Financial Strength Ratings: | | | | | | |
| | Hartford Fire Insurance Company | | A+ | | A+ | | A1 |
| | Hartford Life and Accident Insurance Company | | A+ | | A+ | | A1 |
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| | Navigators Insurance Company | | A+ | | A+ | | NR |
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| | - Hartford Fire Insurance Company and Hartford Life and Accident Insurance Company ratings are on stable outlook at A.M. Best, Moody’s, and Standard and Poor’s |
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Internet address: | | - Navigators Insurance Company ratings are on stable outlook at A.M. Best and Standard and Poor's |
http://www.thehartford.com | | NR - Not Rated |
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| | Other Ratings: | | | | | | |
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Contact: | | Senior debt | | a- | | BBB+ | | Baa1 |
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Susan Spivak Bernstein | | Junior subordinated debentures | | bbb | | BBB- | | Baa2 |
Senior Vice President | | Preferred stock | | bbb | | BBB- | | Baa3 |
Investor Relations | | | | | | | | |
Phone (860) 547-6233 | - The Hartford Financial Services Group, Inc. senior debt, junior subordinated debentures, and preferred stock are on stable outlook at A.M. Best, Standard and Poor’s, and Moody's. |
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| | TRANSFER AGENT |
| | Stockholder correspondence should be mailed to: | | Overnight correspondence should be mailed to: |
| | Computershare | | Computershare |
| | P.O. Box 505000 | | 462 South 4th Street, Suite 1600 |
| | Louisville, KY 40233 | | Louisville, KY 40202 |
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Common stock and preferred stock of The Hartford Financial Services Group, Inc. are traded on the New York Stock Exchange under the symbols “HIG” and "HIG PR G", respectively. This report is for information purposes only. It should be read in conjunction with documents filed by The Hartford Financial Services Group, Inc. with the U.S. Securities and Exchange Commission, including, without limitation, the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
On January 1, 2023, the Company adopted the Financial Accounting Standards Board's ("FASB") long-duration targeted improvements ("LDTI") guidance, which was applied on a modified retrospective basis as of January 1, 2021. Impacted prior periods in this document have been restated to reflect the adoption of LDTI. For additional information refer to Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements in the Company's most recent Quarterly Report on Form 10-Q.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTOR FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
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| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
HIGHLIGHTS | | | | | | | | | | | |
Net income | $ | 651 | | $ | 547 | | $ | 535 | | $ | 592 | | $ | 340 | | $ | 444 | | $ | 443 | | | | $ | 1,733 | | $ | 1,227 | |
Net income available to common stockholders [1] | $ | 645 | | $ | 542 | | $ | 530 | | $ | 587 | | $ | 334 | | $ | 439 | | $ | 438 | | | | $ | 1,717 | | $ | 1,211 | |
Core earnings* | $ | 708 | | $ | 588 | | $ | 536 | | $ | 749 | | $ | 472 | | $ | 716 | | $ | 559 | | | | $ | 1,832 | | $ | 1,747 | |
Total revenues | $ | 6,168 | | $ | 6,049 | | $ | 5,910 | | $ | 6,016 | | $ | 5,580 | | $ | 5,373 | | $ | 5,393 | | | | $ | 18,127 | | $ | 16,346 | |
Total assets | $ | 74,516 | | $ | 73,895 | | $ | 74,249 | | $ | 73,008 | | $ | 71,786 | | $ | 72,395 | | $ | 75,255 | | | | | |
PER SHARE AND SHARES DATA | | | | | | | | | | | |
Basic earnings per common share | | | | | | | | | | | |
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Net income available to common stockholders | $ | 2.12 | | $ | 1.75 | | $ | 1.69 | | $ | 1.85 | | $ | 1.04 | | $ | 1.34 | | $ | 1.32 | | | | $ | 5.55 | | $ | 3.70 | |
Core earnings* | $ | 2.32 | | $ | 1.90 | | $ | 1.71 | | $ | 2.36 | | $ | 1.47 | | $ | 2.19 | | $ | 1.68 | | | | $ | 5.92 | | $ | 5.34 | |
Diluted earnings per common share | | | | | | | | | | | |
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Net income available to common stockholders | $ | 2.09 | | $ | 1.73 | | $ | 1.66 | | $ | 1.82 | | $ | 1.02 | | $ | 1.32 | | $ | 1.30 | | | | $ | 5.48 | | $ | 3.65 | |
Core earnings* | $ | 2.29 | | $ | 1.88 | | $ | 1.68 | | $ | 2.32 | | $ | 1.45 | | $ | 2.16 | | $ | 1.66 | | | | $ | 5.84 | | $ | 5.27 | |
Weighted average common shares outstanding (basic) | 304.6 | | 309.4 | | 314.0 | | 317.5 | | 322.1 | | 327.4 | | 332.3 | | | | 309.3 | | 327.3 | |
Dilutive effect of stock compensation | 4.4 | | 3.9 | | 4.6 | | 5.1 | | 4.2 | | 4.4 | | 5.0 | | | | 4.3 | | 4.5 | |
Weighted average common shares outstanding and dilutive potential common shares (diluted) | 309.0 | | 313.3 | | 318.6 | | 322.6 | | 326.3 | | 331.8 | | 337.3 | | | | 313.6 | | 331.8 | |
Common shares outstanding | 302.4 | | 307.1 | | 311.8 | | 315.1 | | 319.5 | | 324.7 | | 330.7 | | | | | |
Book value per common share | $ | 44.13 | | $ | 45.00 | | $ | 44.92 | | $ | 42.34 | | $ | 39.64 | | $ | 42.84 | | $ | 47.04 | | | | | |
Per common share impact of accumulated other comprehensive income [2] | 13.82 | | 11.47 | | 10.44 | | 12.19 | | 13.70 | | 10.01 | | 5.17 | | | | | |
Book value per common share (excluding AOCI)* | $ | 57.95 | | $ | 56.47 | | $ | 55.36 | | $ | 54.53 | | $ | 53.34 | | $ | 52.85 | | $ | 52.21 | | | | | |
Book value per diluted share | $ | 43.50 | | $ | 44.43 | | $ | 44.27 | | $ | 41.67 | | $ | 39.13 | | $ | 42.27 | | $ | 46.34 | | | | | |
Per diluted share impact of AOCI | 13.62 | | 11.33 | | 10.28 | | 11.99 | | 13.52 | | 9.87 | | 5.09 | | | | | |
Book value per diluted share (excluding AOCI)* | $ | 57.12 | | $ | 55.76 | | $ | 54.55 | | $ | 53.66 | | $ | 52.65 | | $ | 52.14 | | $ | 51.43 | | | | | |
Common shares outstanding and dilutive potential common shares | 306.8 | | 311.0 | | 316.4 | | 320.2 | | 323.7 | | 329.1 | | 335.7 | | | | | |
RETURN ON COMMON STOCKHOLDER'S EQUITY ("ROE") [3] | | | | | | | | | | | |
Net income available to common stockholders' ROE ("Net income ROE") | 17.7 | % | 14.4 | % | 12.8 | % | 11.7 | % | 12.8 | % | 13.1 | % | 15.5 | % | | | | |
Core earnings ROE* | 14.9 | % | 13.6 | % | 14.3 | % | 14.5 | % | 14.3 | % | 14.0 | % | 14.8 | % | | | | |
[1]Net income available to common stockholders includes the impact of preferred stock dividends.
[2]Accumulated other comprehensive income ("AOCI") represents net of tax unrealized gain (loss) on fixed maturities, net gain (loss) on cash flow hedging instruments, foreign currency translation adjustments, and pension and other postretirement benefit plan adjustments.
[3]For reconciliation of Net income ROE to Core earnings ROE, see Appendix beginning on page 33.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
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| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Earned premiums | $ | 5,310 | | $ | 5,220 | | $ | 5,063 | | $ | 5,019 | | $ | 4,910 | | $ | 4,810 | | $ | 4,651 | | | | $ | 15,593 | | $ | 14,371 | |
Fee income | 330 | | 328 | | 319 | | 318 | | 328 | | 341 | | 362 | | | | 977 | | 1,031 | |
Net investment income | 597 | | 540 | | 515 | | 640 | | 487 | | 541 | | 509 | | | | 1,652 | | 1,537 | |
Net realized gains (losses) | (90) | | (64) | | (7) | | 22 | | (166) | | (338) | | (145) | | | | (161) | | (649) | |
Other revenues | 21 | | 25 | | 20 | | 17 | | 21 | | 19 | | 16 | | | | 66 | | 56 | |
Total revenues | 6,168 | | 6,049 | | 5,910 | | 6,016 | | 5,580 | | 5,373 | | 5,393 | | | | 18,127 | | 16,346 | |
Benefits, losses and loss adjustment expenses | 3,543 | | 3,580 | | 3,482 | | 3,537 | | 3,407 | | 3,074 | | 3,120 | | | | 10,605 | | 9,601 | |
Amortization of deferred policy acquisition costs ("DAC") | 517 | | 502 | | 491 | | 473 | | 464 | | 450 | | 437 | | | | 1,510 | | 1,351 | |
Insurance operating costs and other expenses | 1,226 | | 1,225 | | 1,216 | | 1,200 | | 1,206 | | 1,225 | | 1,210 | | | | 3,667 | | 3,641 | |
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Interest expense | 50 | | 50 | | 50 | | 50 | | 50 | | 51 | | 62 | | | | 150 | | 163 | |
Amortization of other intangible assets | 18 | | 17 | | 18 | | 18 | | 18 | | 17 | | 18 | | | | 53 | | 53 | |
Restructuring and other costs [1] | 1 | | 3 | | — | | 3 | | 3 | | 2 | | 5 | | | | 4 | | 10 | |
Total benefits, losses and expenses | 5,355 | | 5,377 | | 5,257 | | 5,281 | | 5,148 | | 4,819 | | 4,852 | | | | 15,989 | | 14,819 | |
Income before income taxes | 813 | | 672 | | 653 | | 735 | | 432 | | 554 | | 541 | | | | 2,138 | | 1,527 | |
Income tax expense | 162 | | 125 | | 118 | | 143 | | 92 | | 110 | | 98 | | | | 405 | | 300 | |
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Net income [2] | 651 | | 547 | | 535 | | 592 | | 340 | | 444 | | 443 | | | | 1,733 | | 1,227 | |
Preferred stock dividends | 6 | | 5 | | 5 | | 5 | | 6 | | 5 | | 5 | | | | 16 | | 16 | |
Net income available to common stockholders | 645 | | 542 | | 530 | | 587 | | 334 | | 439 | | 438 | | | | 1,717 | | 1,211 | |
Adjustments to reconcile net income available to common stockholders to core earnings: | | | | | | | | | | | |
Net realized losses (gains), excluded from core earnings, before tax | 76 | | 53 | | 7 | | (22) | | 166 | | 336 | | 146 | | | | 136 | | 648 | |
Restructuring and other costs, before tax [1] | 1 | | 3 | | — | | 3 | | 3 | | 2 | | 5 | | | | 4 | | 10 | |
Loss on extinguishment of debt, before tax | — | | — | | — | | — | | — | | 9 | | — | | | | — | | 9 | |
Integration and other non-recurring M&A costs, before tax [3] | 2 | | 2 | | 2 | | 5 | | 5 | | 6 | | 5 | | | | 6 | | 16 | |
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Change in deferred gain on retroactive reinsurance, before tax | — | | — | | — | | 229 | | — | | — | | — | | | | — | | — | |
Income tax benefit [4] | (16) | | (12) | | (3) | | (53) | | (36) | | (76) | | (35) | | | | (31) | | (147) | |
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Core earnings [2] | $ | 708 | | $ | 588 | | $ | 536 | | $ | 749 | | $ | 472 | | $ | 716 | | $ | 559 | | | | $ | 1,832 | | $ | 1,747 | |
[1]Represents restructuring costs related to the Company's Hartford Next operational transformation and cost reduction plan.
[2]Adopting LDTI resulted in an after tax increase (decrease) to net income and core earnings of $3, $1, $2 and $(2) for the three months ended December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, respectively.
[3]Includes integration costs in connection with the 2019 acquisition of Navigators Group and 2017 acquisition of Aetna's group life and disability business.
[4]Primarily represents federal income tax expense (benefit) related to before tax items not included in core earnings.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
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| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net income (loss): | | | | | | | | | | | |
Commercial Lines | $ | 519 | | $ | 458 | | $ | 421 | | $ | 566 | | $ | 286 | | $ | 389 | | $ | 383 | | | | $ | 1,398 | | $ | 1,058 | |
Personal Lines | (12) | | (60) | | (1) | | 44 | | (36) | | 6 | | 77 | | | | (73) | | 47 | |
Property & Casualty Other Operations ("P&C Other Operations") | 9 | | 9 | | 6 | | (184) | | 6 | | (20) | | 8 | | | | 24 | | (6) | |
Property & Casualty ("P&C") | 516 | | 407 | | 426 | | 426 | | 256 | | 375 | | 468 | | | | 1,349 | | 1,099 | |
Group Benefits | 146 | | 121 | | 92 | | 143 | | 86 | | 106 | | (8) | | | | 359 | | 184 | |
Hartford Funds | 41 | | 45 | | 41 | | 45 | | 41 | | 34 | | 42 | | | | 127 | | 117 | |
Sub-total | 703 | | 573 | | 559 | | 614 | | 383 | | 515 | | 502 | | | | 1,835 | | 1,400 | |
Corporate | (52) | | (26) | | (24) | | (22) | | (43) | | (71) | | (59) | | | | (102) | | (173) | |
Net income | 651 | | 547 | | 535 | | 592 | | 340 | | 444 | | 443 | | | | 1,733 | | 1,227 | |
Preferred stock dividends | 6 | | 5 | | 5 | | 5 | | 6 | | 5 | | 5 | | | | 16 | | 16 | |
Net income available to common stockholders | $ | 645 | | $ | 542 | | $ | 530 | | $ | 587 | | $ | 334 | | $ | 439 | | $ | 438 | | | | $ | 1,717 | | $ | 1,211 | |
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Core earnings (loss): | | | | | | | | | | | |
Commercial Lines | $ | 542 | | $ | 493 | | $ | 436 | | $ | 562 | | $ | 363 | | $ | 544 | | $ | 456 | | | | $ | 1,471 | | $ | 1,363 | |
Personal Lines | (8) | | (57) | | — | | 42 | | (28) | | 21 | | 84 | | | | (65) | | 77 | |
P&C Other Operations | 11 | | 10 | | 8 | | (5) | | 10 | | (13) | | 11 | | | | 29 | | 8 | |
P&C | 545 | | 446 | | 444 | | 599 | | 345 | | 552 | | 551 | | | | 1,435 | | 1,448 | |
Group Benefits | 170 | | 133 | | 90 | | 144 | | 117 | | 163 | | 6 | | | | 393 | | 286 | |
Hartford Funds | 45 | | 44 | | 37 | | 39 | | 47 | | 44 | | 50 | | | | 126 | | 141 | |
Sub-total | 760 | | 623 | | 571 | | 782 | | 509 | | 759 | | 607 | | | | 1,954 | | 1,875 | |
Corporate | (52) | | (35) | | (35) | | (33) | | (37) | | (43) | | (48) | | | | (122) | | (128) | |
Core earnings | $ | 708 | | $ | 588 | | $ | 536 | | $ | 749 | | $ | 472 | | $ | 716 | | $ | 559 | | | | $ | 1,832 | | $ | 1,747 | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
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| PROPERTY & CASUALTY | | GROUP BENEFITS | | HARTFORD FUNDS | | CORPORATE [1] | | CONSOLIDATED |
| Sept 30 2023 | Dec 31 2022 | | Sept 30 2023 | Dec 31 2022 | | Sept 30 2023 | Dec 31 2022 | | Sept 30 2023 | Dec 31 2022 | | Sept 30 2023 | Dec 31 2022 |
Investments | | | | | | | | | | | | | | |
Fixed maturities, available-for-sale ("AFS"), at fair value | $ | 30,061 | | $ | 28,222 | | | $ | 7,720 | | $ | 7,736 | | | $ | — | | $ | — | | | $ | 181 | | $ | 273 | | | $ | 37,962 | | $ | 36,231 | |
Fixed maturities, at fair value using the fair value option | 275 | | 275 | | | 57 | | 58 | | | — | | — | | | — | | — | | | 332 | | 333 | |
Equity securities, at fair value | 466 | | 1,194 | | | 98 | | 308 | | | 117 | | 115 | | | 197 | | 184 | | | 878 | | 1,801 | |
Mortgage loans, net | 4,404 | | 4,346 | | | 1,612 | | 1,654 | | | — | | — | | | — | | — | | | 6,016 | | 6,000 | |
Limited partnerships and other alternative investments | 3,680 | | 3,311 | | | 984 | | 866 | | | — | | — | | | — | | — | | | 4,664 | | 4,177 | |
Other investments | 152 | | 137 | | | 8 | | 7 | | | 8 | | 15 | | | — | | — | | | 168 | | 159 | |
Short-term investments | 1,752 | | 2,475 | | | 317 | | 325 | | | 246 | | 202 | | | 985 | | 857 | | | 3,300 | | 3,859 | |
Total investments | 40,790 | | 39,960 | | | 10,796 | | 10,954 | | | 371 | | 332 | | | 1,363 | | 1,314 | | | 53,320 | | 52,560 | |
Cash | 91 | | 193 | | | 10 | | 27 | | | 7 | | 6 | | | 3 | | 3 | | | 111 | | 229 | |
Restricted cash | 62 | | 104 | | | 8 | | 11 | | | — | | — | | | — | | — | | | 70 | | 115 | |
Premiums receivable and agents’ balances, net | 4,944 | | 4,369 | | | 591 | | 580 | | | — | | — | | | — | | — | | | 5,535 | | 4,949 | |
Reinsurance recoverables, net [2] | 6,467 | | 6,455 | | | 249 | | 250 | | | — | | — | | | 247 | | 259 | | | 6,963 | | 6,964 | |
Deferred policy acquisition costs ("DAC") | 1,091 | | 966 | | | 33 | | 32 | | | — | | — | | | — | | — | | | 1,124 | | 998 | |
Deferred income taxes | 919 | | 902 | | | 116 | | 58 | | | 7 | | 8 | | | 444 | | 469 | | | 1,486 | | 1,437 | |
Goodwill | 778 | | 778 | | | 723 | | 723 | | | 181 | | 181 | | | 229 | | 229 | | | 1,911 | | 1,911 | |
Property and equipment, net | 780 | | 808 | | | 57 | | 57 | | | 8 | | 9 | | | 49 | | 53 | | | 894 | | 927 | |
Other intangible assets | 348 | | 370 | | | 367 | | 398 | | | 10 | | 10 | | | — | | — | | | 725 | | 778 | |
Other assets | 1,561 | | 1,356 | | | 233 | | 188 | | | 83 | | 89 | | | 500 | | 507 | | | 2,377 | | 2,140 | |
Total assets | $ | 57,831 | | $ | 56,261 | | | $ | 13,183 | | $ | 13,278 | | | $ | 667 | | $ | 635 | | | $ | 2,835 | | $ | 2,834 | | | $ | 74,516 | | $ | 73,008 | |
Unpaid losses and loss adjustment expenses | $ | 33,453 | | $ | 33,083 | | | $ | 8,233 | | $ | 8,160 | | | $ | — | | $ | — | | | $ | — | | $ | — | | | $ | 41,686 | | $ | 41,243 | |
Reserves for future policy benefits [2] | — | | — | | | 299 | | 319 | | | — | | — | | | 164 | | 183 | | | 463 | | 502 | |
Other policyholder funds and benefits payable [2] | — | | — | | | 412 | | 419 | | | — | | — | | | 233 | | 239 | | | 645 | | 658 | |
Unearned premiums | 8,636 | | 7,779 | | | 44 | | 36 | | | — | | — | | | — | | — | | | 8,680 | | 7,815 | |
Debt | — | | — | | | — | | — | | | — | | — | | | 4,361 | | 4,357 | | | 4,361 | | 4,357 | |
Other liabilities | 2,762 | | 2,434 | | | 191 | | 254 | | | 142 | | 143 | | | 1,907 | | 1,926 | | | 5,002 | | 4,757 | |
Total liabilities | 44,851 | | 43,296 | | | 9,179 | | 9,188 | | | 142 | | 143 | | | 6,665 | | 6,705 | | | 60,837 | | 59,332 | |
Common stockholders' equity, excluding AOCI* | 15,233 | | 14,977 | | | 4,653 | | 4,623 | | | 525 | | 492 | | | (2,888) | | (2,909) | | | 17,523 | | 17,183 | |
Preferred stock | — | | — | | | — | | — | | | — | | — | | | 334 | | 334 | | | 334 | | 334 | |
AOCI, net of tax | (2,253) | | (2,012) | | | (649) | | (533) | | | — | | — | | | (1,276) | | (1,296) | | | (4,178) | | (3,841) | |
Total stockholders' equity | 12,980 | | 12,965 | | | 4,004 | | 4,090 | | | 525 | | 492 | | | (3,830) | | (3,871) | | | 13,679 | | 13,676 | |
Total liabilities and stockholders' equity | $ | 57,831 | | $ | 56,261 | | | $ | 13,183 | | $ | 13,278 | | | $ | 667 | | $ | 635 | | | $ | 2,835 | | $ | 2,834 | | | $ | 74,516 | | $ | 73,008 | |
[1]Corporate includes fixed maturities, short-term investments, investment sales receivable and cash of approximately $1.0 billion as of September 30, 2023 and December 31, 2022, respectively, held by the holding company of The Hartford Financial Services Group, Inc. Corporate also includes investments held by Hartford Life and Accident Insurance Company ("HLA") that support reserves for run-off structured settlement and terminal funding agreement liabilities.
[2]Corporate includes retained reserves and reinsurance recoverables for the run-off life and annuity business sold in May 2018.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
| | | | | | | | | | | | | | | | | | | | | | | | |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | |
DEBT | | | | | | | | |
Short-term debt | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 591 | | |
Senior notes | 3,862 | | 3,861 | | 3,859 | | 3,858 | | 3,857 | | $ | 3,856 | | $ | 3,855 | | |
Junior subordinated debentures | 499 | | 499 | | 499 | | 499 | | 499 | | 499 | | 499 | | |
Total debt | $ | 4,361 | | $ | 4,360 | | $ | 4,358 | | $ | 4,357 | | $ | 4,356 | | $ | 4,355 | | $ | 4,945 | | |
STOCKHOLDERS’ EQUITY | | | | | | | | |
Total stockholders’ equity | $ | 13,679 | | $ | 14,152 | | $ | 14,340 | | $ | 13,676 | | $ | 12,999 | | $ | 14,245 | | $ | 15,890 | | |
Less: Preferred stock | 334 | | 334 | | 334 | | 334 | | 334 | | 334 | | 334 | | |
Less: AOCI | (4,178) | | (3,524) | | (3,254) | | (3,841) | | (4,377) | | (3,249) | | (1,710) | | |
Common stockholders' equity, excluding AOCI | $ | 17,523 | | $ | 17,342 | | $ | 17,260 | | $ | 17,183 | | $ | 17,042 | | $ | 17,160 | | $ | 17,266 | | |
CAPITALIZATION | | | | | | | | |
Total capitalization, including AOCI, net of tax | $ | 18,040 | | $ | 18,512 | | $ | 18,698 | | $ | 18,033 | | $ | 17,355 | | $ | 18,600 | | $ | 20,835 | | |
Total capitalization, excluding AOCI, net of tax* | $ | 22,218 | | $ | 22,036 | | $ | 21,952 | | $ | 21,874 | | $ | 21,732 | | $ | 21,849 | | $ | 22,545 | | |
DEBT TO CAPITALIZATION RATIOS | | | | | | | | |
Total debt to capitalization, including AOCI | 24.2 | % | 23.6 | % | 23.3 | % | 24.2 | % | 25.1 | % | 23.4 | % | 23.7 | % | |
Total debt to capitalization, excluding AOCI* | 19.6 | % | 19.8 | % | 19.9 | % | 19.9 | % | 20.0 | % | 19.9 | % | 21.9 | % | |
Total debt and preferred stock to capitalization, including AOCI | 26.0 | % | 25.4 | % | 25.1 | % | 26.0 | % | 27.0 | % | 25.2 | % | 25.3 | % | |
Total debt and preferred stock to capitalization, excluding AOCI* | 21.1 | % | 21.3 | % | 21.4 | % | 21.4 | % | 21.6 | % | 21.5 | % | 23.4 | % | |
Total rating agency adjusted debt to capitalization [1] [2] | 25.7 | % | 25.0 | % | 24.7 | % | 25.7 | % | 27.4 | % | 25.7 | % | 25.1 | % | |
FIXED CHARGE COVERAGE RATIOS | | | | | | | | |
Total earnings to total fixed charges [3] | 13.6:1 | 12.8:1 | 12.6:1 | 10.1:1 | 8.9:1 | 8.9:1 | 8.0:1 | |
[1]The leverage calculation reflects adjustments, as applicable, related to defined benefit plans' unfunded pension liability, lease liabilities and uncollateralized letters of credit for Lloyd's of London for a total adjustment of $0.3 billion and $0.5 billion as of September 30, 2023 and 2022, respectively.
[2]Reflects 25% equity credit for the Company's outstanding junior subordinated debentures and 50% equity credit for the Company’s outstanding preferred stock.
[3]Calculated as year to date total earnings divided by year to date total fixed charges. Total earnings represent income before income taxes and total fixed charges (excluding the impact of preferred stock dividends), less undistributed earnings from limited partnerships and other alternative investments. Total fixed charges include interest expense, preferred stock dividends, interest factor attributable to rent expense, capitalized interest and amortization of debt issuance costs.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY CAPITAL TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
SEPTEMBER 30, 2023
| | | | | | | | |
| P&C | GROUP BENEFITS |
U.S. statutory net income [1][2] | $ | 1,259 | | $ | 446 | |
U.S. statutory capital [2][3][4] | $ | 12,274 | | $ | 2,628 | |
U.S. GAAP adjustments [2]: | | |
DAC | 1,050 | | 33 | |
Non-admitted deferred tax assets [5] | 224 | | 150 | |
Deferred taxes [6] | (52) | | (192) | |
Goodwill | 141 | | 723 | |
Other intangible assets | 43 | | 367 | |
Non-admitted assets other than deferred taxes | 910 | | 75 | |
Asset valuation and interest maintenance reserve | — | | 311 | |
Benefit reserves | (88) | | 380 | |
Unrealized gains (losses) on investments | (2,716) | | (1,053) | |
Deferred gain on retroactive reinsurance agreements [7] | (762) | | — | |
Other, net | 962 | | 582 | |
U.S. GAAP stockholders’ equity of U.S. insurance entities [2] | 11,986 | | 4,004 | |
U.S. GAAP stockholders’ equity of international subsidiaries as well as goodwill and other intangible assets related to the acquisition of Navigators Group | 994 | | — | |
Total U.S. GAAP stockholders’ equity | $ | 12,980 | | $ | 4,004 | |
[1]Statutory net income is for the nine months ended September 30, 2023.
[2]Excludes insurance operations based in the U.K.
[3]For reporting purposes, statutory capital and surplus is referred to collectively as "statutory capital."
[4]The statutory capital for property and casualty insurance subsidiaries in this table does not include the value of an intercompany note owed by Hartford Holdings, Inc. ("HHI") to Hartford Fire Insurance Company.
[5]Represents the limitations on the recognition of deferred tax assets under U.S. statutory accounting principles ("U.S. STAT").
[6]Represents the tax timing differences between U.S. GAAP and U.S. STAT.
[7]Represents the deferred gain on retroactive reinsurance associated with U.S. entities for losses ceded to the Navigators and asbestos and environmental adverse development cover ("A&E ADC") agreements that is recognized within a special category of surplus under U.S. STAT but is recorded within other liabilities under U.S. GAAP.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
| | | | | | | | | | | | | | | | | | | | | | | | |
| AS OF |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | |
Net unrealized gain (loss) on fixed maturities, AFS [1] | $ | (2,948) | | $ | (2,277) | | $ | (2,008) | | $ | (2,594) | | $ | (3,038) | | $ | (1,858) | | $ | (261) | | |
Unrealized loss on fixed maturities, AFS with allowance for credit losses ("ACL") | (9) | | (10) | | (13) | | (7) | | (7) | | (2) | | (2) | | |
Net gains on cash flow hedging instruments | 27 | | 31 | | 48 | | 40 | | 69 | | 30 | | 5 | | |
Total net unrealized gain (loss) | (2,930) | | (2,256) | | (1,973) | | (2,561) | | (2,976) | | (1,830) | | $ | (258) | | |
Foreign currency translation adjustments | 35 | | 36 | | 33 | | 31 | | 14 | | 33 | | 41 | | |
Liability for future policy benefits adjustments [1] | 47 | | 32 | | 27 | | 35 | | 37 | | 13 | | (16) | | |
Pension and other postretirement plan adjustments | (1,330) | | (1,336) | | (1,341) | | (1,346) | | (1,452) | | (1,465) | | (1,477) | | |
Total AOCI [1] | $ | (4,178) | | $ | (3,524) | | $ | (3,254) | | $ | (3,841) | | $ | (4,377) | | $ | (3,249) | | $ | (1,710) | | |
[1]Adopting LDTI, including removing shadow adjustments formerly reported in net unrealized gain (loss) on fixed maturities, AFS as well as the liability for future policy benefits adjustments, resulted in an after tax increase (decrease) to total AOCI of $35, $37, $13 and $(11) as of December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, respectively.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Written premiums | $ | 3,872 | | $ | 3,979 | | $ | 3,856 | | $ | 3,428 | | $ | 3,583 | | $ | 3,592 | | $ | 3,516 | | | | $ | 11,707 | | $ | 10,691 | |
Change in unearned premium reserve | 137 | | 333 | | 351 | | (93) | | 131 | | 251 | | 310 | | | | 821 | | 692 | |
Earned premiums | 3,735 | | 3,646 | | 3,505 | | 3,521 | | 3,452 | | 3,341 | | 3,206 | | | | 10,886 | | 9,999 | |
Fee income | 18 | | 17 | | 18 | | 17 | | 18 | | 17 | | 17 | | | | 53 | | 52 | |
Losses and loss adjustment expenses | | | | | | | | | | | |
Current accident year before catastrophes | 2,255 | | 2,216 | | 2,085 | | 2,081 | | 2,070 | | 1,944 | | 1,833 | | | | 6,556 | | 5,847 | |
Current accident year catastrophes [1] | 184 | | 226 | | 185 | | 135 | | 293 | | 123 | | 98 | | | | 595 | | 514 | |
Prior accident year development [2] | (43) | | (39) | | — | | 183 | | (53) | | (58) | | (36) | | | | (82) | | (147) | |
Total losses and loss adjustment expenses | 2,396 | | 2,403 | | 2,270 | | 2,399 | | 2,310 | | 2,009 | | 1,895 | | | | 7,069 | | 6,214 | |
Amortization of DAC | 509 | | 493 | | 482 | | 466 | | 456 | | 441 | | 428 | | | | 1,484 | | 1,325 | |
Underwriting expenses | 601 | | 616 | | 604 | | 598 | | 610 | | 606 | | 577 | | | | 1,821 | | 1,793 | |
Amortization of other intangible assets | 8 | | 7 | | 8 | | 8 | | 8 | | 7 | | 8 | | | | 23 | | 23 | |
Dividends to policyholders | 16 | | 7 | | 8 | | 8 | | 7 | | 7 | | 7 | | | | 31 | | 21 | |
Underwriting gain* | 223 | | 137 | | 151 | | 59 | | 79 | | 288 | | 308 | | | | 511 | | 675 | |
Net investment income | 460 | | 415 | | 392 | | 469 | | 360 | | 407 | | 382 | | | | 1,267 | | 1,149 | |
Net realized gains (losses) | (45) | | (57) | | (23) | | 3 | | (110) | | (225) | | (104) | | | | (125) | | (439) | |
Net servicing and other income (expense) | 5 | | 7 | | 6 | | 2 | | 3 | | 2 | | (2) | | | | 18 | | 3 | |
Income before income taxes | 643 | | 502 | | 526 | | 533 | | 332 | | 472 | | 584 | | | | 1,671 | | 1,388 | |
Income tax expense | 127 | | 95 | | 100 | | 107 | | 76 | | 97 | | 116 | | | | 322 | | 289 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income | 516 | | 407 | | 426 | | 426 | | 256 | | 375 | | 468 | | | | 1,349 | | 1,099 | |
Adjustments to reconcile net income to core earnings: | | | | | | | | | | | |
Net realized losses (gains), excluded from core earnings, before tax | 35 | | 48 | | 23 | | (3) | | 109 | | 222 | | 106 | | | | 106 | | 437 | |
| | | | | | | | | | | |
Integration and other non-recurring M&A costs, before tax | 1 | | 2 | | — | | 3 | | 3 | | 4 | | 3 | | | | 3 | | 10 | |
| | | | | | | | | | | |
Change in deferred gain on retroactive reinsurance, before tax [2] | — | | — | | — | | 229 | | — | | — | | — | | | | — | | — | |
Income tax expense (benefit) [3] | (7) | | (11) | | (5) | | (56) | | (23) | | (49) | | (26) | | | | (23) | | (98) | |
Core earnings | $ | 545 | | $ | 446 | | $ | 444 | | $ | 599 | | $ | 345 | | $ | 552 | | $ | 551 | | | | $ | 1,435 | | $ | 1,448 | |
ROE | | | | | | | | | | | |
Net income available to common stockholders [4] | 17.6 | % | 13.8 | % | 12.8 | % | 12.7 | % | 15.2 | % | 15.7 | % | 18.4 | % | | | | |
Adjustments to reconcile net income available to common stockholders to core earnings: | | | | | | | | | | | |
Net realized losses (gains), excluded from core earnings, before tax | 1.1 | % | 1.8 | % | 3.3 | % | 4.0 | % | 2.8 | % | 1.2 | % | (1.3 | %) | | | | |
| | | | | | | | | | | |
Integration and other non-recurring M&A costs, before tax | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | | | | |
| | | | | | | | | | | |
Change in deferred gain on retroactive reinsurance, before tax [2] | 2.5 | % | 2.3 | % | 2.2 | % | 2.1 | % | 1.6 | % | 1.8 | % | 2.1 | % | | | | |
Income tax expense (benefit) [3] | (0.8 | %) | (0.9 | %) | (1.3 | %) | (1.4 | %) | (1.0 | %) | (0.7 | %) | (0.3 | %) | | | | |
| | | | | | | | | | | |
Impact of AOCI, excluded from core earnings ROE | (4.3 | %) | (2.6 | %) | (1.6 | %) | (0.9 | %) | (1.0 | %) | (0.2 | %) | 0.6 | % | | | | |
Core earnings [4] | 16.2 | % | 14.5 | % | 15.5 | % | 16.6 | % | 17.7 | % | 17.9 | % | 19.6 | % | | | | |
[1]The three months ended September 30, 2022 included $214 of losses, net of reinsurance, from Hurricane Ian, including $133 in Commercial Lines and $81 in Personal Lines.
[2]Prior accident year development does not include a benefit for the portion of ceded losses in excess of ceded premium paid under ADC agreements, which is recognized as a deferred gain under retroactive reinsurance accounting.
[3]Primarily represents federal income tax expense (benefit) related to before tax items not included in core earnings.
[4]Net income ROE and Core earnings ROE are calculated by allocating a portion of debt, interest expense, preferred stock and preferred stock dividends accounted for within Corporate to Property & Casualty.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS (CONTINUED)
Prior accident year development included the following unfavorable (favorable) reserve development:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Workers’ compensation | $ | (61) | | $ | (52) | | $ | (61) | | $ | (61) | | $ | (58) | | $ | (40) | | $ | (45) | | | | $ | (174) | | $ | (143) | |
Workers' compensation discount accretion | 10 | | 11 | | 11 | | 9 | | 9 | | 9 | | 9 | | | | 32 | | 27 | |
General liability | 11 | | 16 | | 12 | | 23 | | — | | 21 | | 12 | | | | 39 | | 33 | |
Marine | — | | (2) | | 1 | | — | | 5 | | (3) | | — | | | | (1) | | 2 | |
Package business | (10) | | (3) | | (5) | | (4) | | (11) | | (13) | | (11) | | | | (18) | | (35) | |
Commercial property | 2 | | (5) | | 5 | | 6 | | 4 | | (6) | | (15) | | | | 2 | | (17) | |
Professional liability | — | | (3) | | — | | (2) | | — | | (9) | | — | | | | (3) | | (9) | |
Bond | — | | 12 | | — | | (28) | | — | | (4) | | — | | | | 12 | | (4) | |
Assumed reinsurance | 2 | | 15 | | 2 | | 7 | | — | | — | | 12 | | | | 19 | | 12 | |
Automobile liability - Commercial Lines | — | | 6 | | — | | 15 | | 11 | | 12 | | — | | | | 6 | | 23 | |
Automobile liability - Personal Lines | — | | — | | — | | — | | (9) | | — | | (5) | | | | — | | (14) | |
Homeowners | — | | 2 | | (1) | | 1 | | (2) | | — | | — | | | | 1 | | (2) | |
Net asbestos and environmental reserves | — | | — | | — | | — | | — | | — | | — | | | | — | | — | |
Catastrophes | — | | (44) | | — | | (30) | | (2) | | (27) | | (3) | | | | (44) | | (32) | |
Uncollectible reinsurance | 1 | | 4 | | 8 | | — | | (3) | | 6 | | — | | | | 13 | | 3 | |
Other reserve re-estimates | 2 | | 4 | | 28 | | 18 | | 3 | | (4) | | 10 | | | | 34 | | 9 | |
Prior accident year development before change in deferred gain | (43) | | (39) | | — | | (46) | | (53) | | (58) | | (36) | | | | (82) | | (147) | |
Change in deferred gain on retroactive reinsurance included in other liabilities | — | | — | | — | | 229 | | — | | — | | — | | | | — | | — | |
Total prior accident year development | $ | (43) | | $ | (39) | | $ | — | | $ | 183 | | $ | (53) | | $ | (58) | | $ | (36) | | | | $ | (82) | | $ | (147) | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNDERWRITING RATIOS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
UNDERWRITING GAIN | $ | 223 | | $ | 137 | | $ | 151 | | $ | 59 | | $ | 79 | | $ | 288 | | $ | 308 | | | | $ | 511 | | $ | 675 | |
UNDERWRITING RATIOS | | | | | | | | | | | |
Losses and loss adjustment expenses | | | | | | | | | | | |
Current accident year before catastrophes | 60.4 | | 60.8 | | 59.5 | | 59.1 | | 60.0 | | 58.2 | | 57.2 | | | | 60.2 | | 58.5 | |
Current accident year catastrophes | 4.9 | | 6.2 | | 5.3 | | 3.8 | | 8.5 | | 3.7 | | 3.1 | | | | 5.5 | | 5.1 | |
Prior accident year development | (1.2) | | (1.1) | | — | | 5.2 | | (1.5) | | (1.7) | | (1.1) | | | | (0.8) | | (1.5) | |
Total losses and loss adjustment expenses | 64.1 | | 65.9 | | 64.8 | | 68.1 | | 66.9 | | 60.1 | | 59.1 | | | | 64.9 | | 62.1 | |
Expenses [1] | 29.5 | | 30.1 | | 30.7 | | 30.0 | | 30.6 | | 31.0 | | 31.1 | | | | 30.1 | | 30.9 | |
Policyholder dividends | 0.4 | | 0.2 | | 0.2 | | 0.2 | | 0.2 | | 0.2 | | 0.2 | | | | 0.3 | | 0.2 | |
Combined ratio | 94.0 | | 96.2 | | 95.7 | | 98.3 | | 97.7 | | 91.4 | | 90.4 | | | | 95.3 | | 93.2 | |
Adjustments to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
Current accident year catastrophes and prior accident year development | (3.7) | | (5.1) | | (5.3) | | (9.0) | | (7.0) | | (2.0) | | (2.0) | | | | (4.7) | | (3.6) | |
Underlying combined ratio * | 90.3 | | 91.1 | | 90.4 | | 89.3 | | 90.8 | | 89.4 | | 88.5 | | | | 90.6 | | 89.6 | |
[1]Integration and transaction costs related to the acquisition of Navigators Group are not included in the expense ratio.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Written premiums | $ | 3,003 | | $ | 3,177 | | $ | 3,109 | | $ | 2,733 | | $ | 2,780 | | $ | 2,836 | | $ | 2,809 | | | | $ | 9,289 | | $ | 8,425 | |
Change in unearned premium reserve | 52 | | 291 | | 343 | | (34) | | 77 | | 221 | | 323 | | | | 686 | | 621 | |
Earned premiums | 2,951 | | 2,886 | | 2,766 | | 2,767 | | 2,703 | | 2,615 | | 2,486 | | | | 8,603 | | 7,804 | |
Fee income | 11 | | 10 | | 10 | | 10 | | 10 | | 10 | | 9 | | | | 31 | | 29 | |
Losses and loss adjustment expenses | | | | | | | | | | | |
Current accident year before catastrophes | 1,669 | | 1,638 | | 1,564 | | 1,542 | | 1,555 | | 1,467 | | 1,395 | | | | 4,871 | | 4,417 | |
Current accident year catastrophes [1] | 115 | | 123 | | 138 | | 114 | | 179 | | 67 | | 81 | | | | 376 | | 327 | |
Prior accident year development | (46) | | (38) | | (23) | | (68) | | (42) | | (88) | | (33) | | | | (107) | | (163) | |
Total losses and loss adjustment expenses | 1,738 | | 1,723 | | 1,679 | | 1,588 | | 1,692 | | 1,446 | | 1,443 | | | | 5,140 | | 4,581 | |
Amortization of DAC | 451 | | 436 | | 424 | | 408 | | 399 | | 385 | | 371 | | | | 1,311 | | 1,155 | |
Underwriting expenses | 460 | | 469 | | 456 | | 461 | | 455 | | 447 | | 425 | | | | 1,385 | | 1,327 | |
Amortization of other intangible assets | 7 | | 7 | | 7 | | 8 | | 7 | | 7 | | 7 | | | | 21 | | 21 | |
Dividends to policyholders | 16 | | 7 | | 8 | | 8 | | 7 | | 7 | | 7 | | | | 31 | | 21 | |
Underwriting gain | 290 | | 254 | | 202 | | 304 | | 153 | | 333 | | 242 | | | | 746 | | 728 | |
| | | | | | | | | | | |
Net investment income | 395 | | 364 | | 338 | | 411 | | 315 | | 356 | | 333 | | | | 1,097 | | 1,004 | |
Net realized losses | (38) | | (51) | | (19) | | (1) | | (95) | | (198) | | (91) | | | | (108) | | (384) | |
| | | | | | | | | | | |
Other income (expense) [2] | 2 | | — | | — | | (2) | | (3) | | (1) | | (6) | | | | 2 | | (10) | |
Income before income taxes | 649 | | 567 | | 521 | | 712 | | 370 | | 490 | | 478 | | | | 1,737 | | 1,338 | |
Income tax expense | 130 | | 109 | | 100 | | 146 | | 84 | | 101 | | 95 | | | | 339 | | 280 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net income | 519 | | 458 | | 421 | | 566 | | 286 | | 389 | | 383 | | | | 1,398 | | 1,058 | |
Adjustments to reconcile net income to core earnings: | | | | | | | | | | | |
Net realized losses, excluded from core earnings, before tax | 29 | | 43 | | 19 | | 1 | | 95 | | 194 | | 93 | | | | 91 | | 382 | |
Integration and other non-recurring M&A costs, before tax [2] | 1 | | 2 | | — | | 3 | | 3 | | 4 | | 3 | | | | 3 | | 10 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Income tax benefit [3] | (7) | | (10) | | (4) | | (8) | | (21) | | (43) | | (23) | | | | (21) | | (87) | |
Core earnings | $ | 542 | | $ | 493 | | $ | 436 | | $ | 562 | | $ | 363 | | $ | 544 | | $ | 456 | | | | $ | 1,471 | | $ | 1,363 | |
[1]Refer to [1] on page 8 for information about catastrophe losses related to Hurricane Ian for the three months ended September 30, 2022. [2]Includes Navigators Group integration costs.
[3]Primarily represents federal income tax benefit related to before tax items not included in core earnings.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS (CONTINUED)
Prior accident year development included the following unfavorable (favorable) reserve development:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Workers’ compensation | $ | (61) | | $ | (52) | | $ | (61) | | $ | (61) | | $ | (58) | | $ | (40) | | $ | (45) | | | | $ | (174) | | $ | (143) | |
Workers' compensation discount accretion | 10 | | 11 | | 11 | | 9 | | 9 | | 9 | | 9 | | | | 32 | | 27 | |
General liability | 11 | | 16 | | 12 | | 23 | | — | | (10) | | 12 | | | | 39 | | 2 | |
Marine | — | | (2) | | 1 | | — | | 5 | | (3) | | — | | | | (1) | | 2 | |
Package business | (10) | | (3) | | (5) | | (4) | | (11) | | (13) | | (11) | | | | (18) | | (35) | |
Commercial property | 2 | | (5) | | 5 | | 6 | | 4 | | (6) | | (15) | | | | 2 | | (17) | |
Professional liability | — | | (3) | | — | | (2) | | — | | (9) | | — | | | | (3) | | (9) | |
Bond | — | | 12 | | — | | (28) | | — | | (4) | | — | | | | 12 | | (4) | |
Assumed reinsurance | 2 | | 15 | | 2 | | 7 | | — | | — | | 12 | | | | 19 | | 12 | |
Automobile liability | — | | 6 | | — | | 15 | | 11 | | 12 | | — | | | | 6 | | 23 | |
Catastrophes | — | | (40) | | — | | (29) | | (2) | | (26) | | (3) | | | | (40) | | (31) | |
Uncollectible reinsurance | (2) | | 4 | | 5 | | — | | (1) | | — | | — | | | | 7 | | (1) | |
Other reserve re-estimates | 2 | | 3 | | 7 | | (4) | | 1 | | 2 | | 8 | | | | 12 | | 11 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total prior accident year development | $ | (46) | | $ | (38) | | $ | (23) | | $ | (68) | | $ | (42) | | $ | (88) | | $ | (33) | | | | $ | (107) | | $ | (163) | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
UNDERWRITING RATIOS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
UNDERWRITING GAIN | $ | 290 | | $ | 254 | | $ | 202 | | $ | 304 | | $ | 153 | | $ | 333 | | $ | 242 | | | | $ | 746 | | $ | 728 | |
UNDERWRITING RATIOS | | | | | | | | | | | |
Losses and loss adjustment expenses | | | | | | | | | | | |
Current accident year before catastrophes | 56.6 | | 56.8 | | 56.5 | | 55.7 | | 57.5 | | 56.1 | | 56.1 | | | | 56.6 | | 56.6 | |
Current accident year catastrophes | 3.9 | | 4.3 | | 5.0 | | 4.1 | | 6.6 | | 2.6 | | 3.3 | | | | 4.4 | | 4.2 | |
Prior accident year development | (1.6) | | (1.3) | | (0.8) | | (2.5) | | (1.6) | | (3.4) | | (1.3) | | | | (1.2) | | (2.1) | |
Total losses and loss adjustment expenses | 58.9 | | 59.7 | | 60.7 | | 57.4 | | 62.6 | | 55.3 | | 58.0 | | | | 59.7 | | 58.7 | |
Expenses [1] | 30.7 | | 31.3 | | 31.7 | | 31.3 | | 31.5 | | 31.7 | | 31.9 | | | | 31.2 | | 31.7 | |
Policyholder dividends | 0.5 | | 0.2 | | 0.3 | | 0.3 | | 0.3 | | 0.3 | | 0.3 | | | | 0.4 | | 0.3 | |
Combined ratio | 90.2 | | 91.2 | | 92.7 | | 89.0 | | 94.3 | | 87.3 | | 90.3 | | | | 91.3 | | 90.7 | |
Adjustments to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
Current accident year catastrophes and prior accident year development | (2.3) | | (3.0) | | (4.2) | | (1.6) | | (5.0) | | 0.8 | | (2.0) | | | | (3.2) | | (2.1) | |
| | | | | | | | | | | |
Underlying combined ratio | 87.8 | | 88.3 | | 88.5 | | 87.4 | | 89.3 | | 88.1 | | 88.3 | | | | 88.2 | | 88.6 | |
| | | | | | | | | | | |
COMBINED RATIOS BY LINE OF BUSINESS | | | | | | | | | | | |
SMALL COMMERCIAL | | | | | | | | | | | |
Combined ratio | 87.7 | | 90.8 | | 90.8 | | 89.4 | | 89.3 | | 85.2 | | 82.9 | | | | 89.7 | | 85.9 | |
Adjustments to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
Current accident year catastrophes | (3.2) | | (5.7) | | (6.2) | | (6.3) | | (5.3) | | (3.0) | | (1.9) | | | | (5.0) | | (3.4) | |
Prior accident year development | 5.2 | | 4.5 | | 4.9 | | 4.5 | | 4.4 | | 4.7 | | 4.9 | | | | 4.9 | | 4.7 | |
Underlying combined ratio | 89.7 | | 89.7 | | 89.5 | | 87.5 | | 88.5 | | 86.9 | | 85.9 | | | | 89.6 | | 87.1 | |
MIDDLE & LARGE COMMERCIAL | | | | | | | | | | | |
Combined ratio | 94.5 | | 93.6 | | 97.6 | | 91.8 | | 100.7 | | 95.6 | | 94.6 | | | | 95.2 | | 97.1 | |
Adjustments to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
Current accident year catastrophes | (4.5) | | (3.8) | | (5.0) | | (3.1) | | (6.6) | | (2.0) | | (2.3) | | | | (4.4) | | (3.7) | |
Prior accident year development | (1.8) | | (1.1) | | (2.7) | | 1.5 | | (0.4) | | (0.8) | | (0.9) | | | | (1.9) | | (0.7) | |
Underlying combined ratio | 88.1 | | 88.7 | | 89.9 | | 90.2 | | 93.7 | | 92.9 | | 91.5 | | | | 88.9 | | 92.7 | |
GLOBAL SPECIALTY | | | | | | | | | | | |
Combined ratio | 88.9 | | 87.3 | | 88.7 | | 84.1 | | 94.2 | | 85.0 | | 96.9 | | | | 88.3 | | 91.9 | |
Adjustments to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
Current accident year catastrophes | (4.3) | | (2.6) | | (3.1) | | (1.9) | | (9.0) | | (2.8) | | (6.9) | | | | (3.3) | | (6.2) | |
Prior accident year development | (0.3) | | 0.3 | | (0.4) | | 0.7 | | (0.6) | | 0.9 | | (1.8) | | | | (0.1) | | (0.5) | |
Underlying combined ratio | 84.3 | | 85.0 | | 85.2 | | 83.0 | | 84.5 | | 83.1 | | 88.2 | | | | 84.8 | | 85.2 | |
[1]Integration and transaction costs related to the acquisition of Navigators Group are not included in the expense ratio.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
SUPPLEMENTAL DATA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
WRITTEN PREMIUMS | | | | | | | | | | | |
Small Commercial | $ | 1,228 | | $ | 1,266 | | $ | 1,319 | | $ | 1,130 | | $ | 1,131 | | $ | 1,145 | | $ | 1,180 | | | | $ | 3,813 | | $ | 3,456 | |
Middle & Large Commercial | 1,031 | | 1,013 | | 935 | | 911 | | 979 | | 907 | | 853 | | | | 2,979 | | 2,739 | |
Middle Market | 900 | | 881 | | 796 | | 773 | | 856 | | 785 | | 724 | | | | 2,577 | | 2,365 | |
National Accounts and Other | 131 | | 132 | | 139 | | 138 | | 123 | | 122 | | 129 | | | | 402 | | 374 | |
Global Specialty [1] | 730 | | 885 | | 842 | | 681 | | 659 | | 772 | | 764 | | | | 2,457 | | 2,195 | |
U.S. | 500 | | 551 | | 468 | | 466 | | 466 | | 516 | | 466 | | | | 1,519 | | 1,448 | |
International | 96 | | 121 | | 99 | | 110 | | 92 | | 103 | | 91 | | | | 316 | | 286 | |
Global Re | 134 | | 213 | | 275 | | 105 | | 101 | | 153 | | 207 | | | | 622 | | 461 | |
Other | 14 | | 13 | | 13 | | 11 | | 11 | | 12 | | 12 | | | | 40 | | 35 | |
Total | $ | 3,003 | | $ | 3,177 | | $ | 3,109 | | $ | 2,733 | | $ | 2,780 | | $ | 2,836 | | $ | 2,809 | | | | $ | 9,289 | | $ | 8,425 | |
EARNED PREMIUMS | | | | | | | | | | | |
Small Commercial | $ | 1,221 | | $ | 1,190 | | $ | 1,139 | | $ | 1,147 | | $ | 1,117 | | $ | 1,081 | | $ | 1,034 | | | | $ | 3,550 | | $ | 3,232 | |
Middle & Large Commercial | 955 | | 948 | | 914 | | 915 | | 896 | | 855 | | 828 | | | | 2,817 | | 2,579 | |
Middle Market | 829 | | 806 | | 785 | | 788 | | 774 | | 733 | | 717 | | | | 2,420 | | 2,224 | |
National Accounts and Other | 126 | | 142 | | 129 | | 127 | | 122 | | 122 | | 111 | | | | 397 | | 355 | |
Global Specialty [1] | 761 | | 735 | | 700 | | 695 | | 678 | | 666 | | 613 | | | | 2,196 | | 1,957 | |
U.S. | 501 | | 484 | | 463 | | 472 | | 460 | | 450 | | 426 | | | | 1,448 | | 1,336 | |
International | 104 | | 108 | | 99 | | 93 | | 99 | | 98 | | 87 | | | | 311 | | 284 | |
Global Re | 156 | | 143 | | 138 | | 130 | | 119 | | 118 | | 100 | | | | 437 | | 337 | |
Other | 14 | | 13 | | 13 | | 10 | | 12 | | 13 | | 11 | | | | 40 | | 36 | |
Total | $ | 2,951 | | $ | 2,886 | | $ | 2,766 | | $ | 2,767 | | $ | 2,703 | | $ | 2,615 | | $ | 2,486 | | | | $ | 8,603 | | $ | 7,804 | |
| | | | | | | | | | | |
COMMERCIAL LINES STATISTICAL PREMIUM INFORMATION | | | | | | | | | | | |
Small Commercial | | | | | | | | | | | |
Net New Business Premium | $ | 220 | | $ | 237 | | $ | 242 | | $ | 191 | | $ | 190 | | $ | 201 | | $ | 186 | | | | $ | 699 | | $ | 577 | |
Renewal Written Price Increases | 4.5 | % | 4.3 | % | 3.9 | % | 4.7 | % | 4.0 | % | 3.4 | % | 3.1 | % | | | 4.2 | % | 3.5 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
Policy Count Retention | 85 | % | 85 | % | 86 | % | 86 | % | 86 | % | 85 | % | 86 | % | | | 85 | % | 86 | % |
| | | | | | | | | | | |
Policies in Force (in thousands) | 1,479 | | 1,461 | | 1,439 | | 1,421 | | 1,411 | | 1,395 | | 1,378 | | | | | |
Middle Market [2] | | | | | | | | | | | |
Net New Business Premium | $ | 137 | | $ | 164 | | $ | 148 | | $ | 131 | | $ | 150 | | $ | 130 | | $ | 120 | | | | $ | 449 | | $ | 400 | |
Renewal Written Price Increases | 7.6 | % | 7.4 | % | 6.6 | % | 6.2 | % | 6.1 | % | 5.1 | % | 5.0 | % | | | 7.2 | % | 5.4 | % |
| | | | | | | | | | | |
Premium Retention | 82 | % | 83 | % | 82 | % | 83 | % | 84 | % | 82 | % | 82 | % | | | 83 | % | 83 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Global Specialty | | | | | | | | | | | |
Gross New Business Premium [3] | $ | 216 | | $ | 246 | | $ | 191 | | $ | 192 | | $ | 201 | | $ | 226 | | $ | 206 | | | | $ | 653 | | $ | 633 | |
Renewal Written Price Increases [4] | 3.9 | % | 5.1 | % | 3.7 | % | 4.5 | % | 4.3 | % | 6.6 | % | 9.3 | % | | | 4.3 | % | 6.7 | % |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
[1]U.S. business includes a small amount of business issued by U.S. insurance entities to U.S. policyholders with international-based exposures. International represents Navigators Group business written in either Lloyd's market or other international markets, which includes U.S.-based exposures.
[2]Except for net new business premium, metrics for Middle Market exclude loss sensitive and programs businesses.
[3]Excludes Global Re and is before ceded reinsurance.
[4]Excludes Global Re, offshore energy policies, credit and political risk insurance policies, political violence and terrorism policies, and any business under which the managing agent of our Lloyd's Syndicate 1221 delegates underwriting authority to coverholders and other third parties.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Written premiums | $ | 869 | | $ | 802 | | $ | 747 | | $ | 695 | | $ | 803 | | $ | 756 | | $ | 707 | | | | $ | 2,418 | | $ | 2,266 | |
Change in unearned premium reserve | 85 | | 42 | | 8 | | (59) | | 54 | | 30 | | (13) | | | | 135 | | 71 | |
Earned premiums | 784 | | 760 | | 739 | | 754 | | 749 | | 726 | | 720 | | | | 2,283 | | 2,195 | |
Fee income | 7 | | 7 | | 8 | | 7 | | 8 | | 7 | | 8 | | | | 22 | | 23 | |
Losses and loss adjustment expenses | | | | | | | | | | | |
Current accident year before catastrophes | 586 | | 578 | | 521 | | 539 | | 515 | | 477 | | 438 | | | | 1,685 | | 1,430 | |
Current accident year catastrophes [1] | 69 | | 103 | | 47 | | 21 | | 114 | | 56 | | 17 | | | | 219 | | 187 | |
Prior accident year development | 1 | | (3) | | 20 | | 1 | | (11) | | — | | (3) | | | | 18 | | (14) | |
Total losses and loss adjustment expenses | 656 | | 678 | | 588 | | 561 | | 618 | | 533 | | 452 | | | | 1,922 | | 1,603 | |
Amortization of DAC | 58 | | 57 | | 58 | | 58 | | 57 | | 56 | | 57 | | | | 173 | | 170 | |
Underwriting expenses | 138 | | 145 | | 145 | | 135 | | 153 | | 157 | | 149 | | | | 428 | | 459 | |
Amortization of other intangible assets | 1 | | — | | 1 | | — | | 1 | | — | | 1 | | | | 2 | | 2 | |
Underwriting gain (loss) | (62) | | (113) | | (45) | | 7 | | (72) | | (13) | | 69 | | | | (220) | | (16) | |
| | | | | | | | | | | |
Net investment income | 47 | | 34 | | 38 | | 41 | | 31 | | 35 | | 33 | | | | 119 | | 99 | |
Net realized gains (losses) | (5) | | (5) | | (1) | | 3 | | (11) | | (18) | | (9) | | | | (11) | | (38) | |
| | | | | | | | | | | |
Net servicing and other income (expense) | 3 | | 7 | | 6 | | 4 | | 6 | | 3 | | 4 | | | | 16 | | 13 | |
Income (loss) before income taxes | (17) | | (77) | | (2) | | 55 | | (46) | | 7 | | 97 | | | | (96) | | 58 | |
Income tax expense (benefit) | (5) | | (17) | | (1) | | 11 | | (10) | | 1 | | 20 | | | | (23) | | 11 | |
Net income (loss) | (12) | | (60) | | (1) | | 44 | | (36) | | 6 | | 77 | | | | (73) | | 47 | |
Adjustments to reconcile net income (loss) to core earnings (loss): | | | | | | | | | | | |
Net realized losses (gains), excluded from core earnings, before tax | 5 | | 4 | | 1 | | (3) | | 10 | | 19 | | 9 | | | | 10 | | 38 | |
Income tax expense (benefit) [2] | (1) | | (1) | | — | | 1 | | (2) | | (4) | | (2) | | | | (2) | | (8) | |
Core earnings (loss) | $ | (8) | | $ | (57) | | $ | — | | $ | 42 | | $ | (28) | | $ | 21 | | $ | 84 | | | | $ | (65) | | $ | 77 | |
[1]Refer to [1] on page 8 for information about catastrophe losses related to Hurricane Ian. [2]Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS (CONTINUED)
Prior accident year development included the following unfavorable (favorable) reserve development:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Automobile liability | $ | — | | $ | — | | $ | — | | $ | — | | $ | (9) | | $ | — | | $ | (5) | | | | $ | — | | $ | (14) | |
Homeowners | — | | 2 | | (1) | | 1 | | (2) | | — | | — | | | | 1 | | (2) | |
Catastrophes | — | | (4) | | — | | (1) | | — | | (1) | | — | | | | (4) | | (1) | |
Uncollectible reinsurance | 1 | | — | | — | | — | | (2) | | — | | — | | | | 1 | | (2) | |
Other reserve re-estimates, net [1] | — | | (1) | | 21 | | 1 | | 2 | | 1 | | 2 | | | | 20 | | 5 | |
Total prior accident year development | $ | 1 | | $ | (3) | | $ | 20 | | $ | 1 | | $ | (11) | | $ | — | | $ | (3) | | | | $ | 18 | | $ | (14) | |
[1]Other reserve re-estimates, net for the nine months ended September 30, 2023 includes a $22 increase in automobile physical damage reserves.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
UNDERWRITING RATIOS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
UNDERWRITING GAIN (LOSS) | $ | (62) | | $ | (113) | | $ | (45) | | $ | 7 | | $ | (72) | | $ | (13) | | $ | 69 | | | | $ | (220) | | $ | (16) | |
UNDERWRITING RATIOS | | | | | | | | | | | |
Losses and loss adjustment expenses | | | | | | | | | | | |
Current accident year before catastrophes | 74.7 | | 76.1 | | 70.5 | | 71.5 | | 68.8 | | 65.7 | | 60.8 | | | | 73.8 | | 65.1 | |
Current accident year catastrophes | 8.8 | | 13.6 | | 6.4 | | 2.8 | | 15.2 | | 7.7 | | 2.4 | | | | 9.6 | | 8.5 | |
Prior accident year development | 0.1 | | (0.4) | | 2.7 | | 0.1 | | (1.5) | | — | | (0.4) | | | | 0.8 | | (0.6) | |
Total losses and loss adjustment expenses | 83.7 | | 89.2 | | 79.6 | | 74.4 | | 82.5 | | 73.4 | | 62.8 | | | | 84.2 | | 73.0 | |
Expenses | 24.2 | | 25.7 | | 26.5 | | 24.7 | | 27.1 | | 28.4 | | 27.6 | | | | 25.4 | | 27.7 | |
Combined ratio | 107.9 | | 114.9 | | 106.1 | | 99.1 | | 109.6 | | 101.8 | | 90.4 | | | | 109.6 | | 100.7 | |
Adjustment to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
Current accident year catastrophes and prior accident year development | (8.9) | | (13.2) | | (9.1) | | (2.9) | | (13.7) | | (7.7) | | (2.0) | | | | (10.4) | | (7.9) | |
Underlying combined ratio | 99.0 | | 101.7 | | 97.0 | | 96.2 | | 95.9 | | 94.1 | | 88.5 | | | | 99.3 | | 92.8 | |
PRODUCT | | | | | | | | | | | |
Automobile | | | | | | | | | | | |
Combined ratio | 110.8 | | 116.4 | | 110.2 | | 108.6 | | 113.2 | | 101.2 | | 92.8 | | | | 112.5 | | 102.6 | |
Adjustment to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
Current accident year catastrophes | (2.3) | | (3.8) | | (1.1) | | (0.1) | | (11.9) | | (1.4) | | (0.3) | | | | (2.4) | | (4.7) | |
Prior accident year development | — | | (0.8) | | (4.0) | | 0.3 | | 1.4 | | 0.2 | | 0.9 | | | | (1.5) | | 0.8 | |
Underlying combined ratio | 108.5 | | 111.8 | | 105.1 | | 108.9 | | 102.6 | | 100.0 | | 93.3 | | | | 108.5 | | 98.7 | |
Homeowners | | | | | | | | | | | |
Combined ratio | 101.4 | | 115.1 | | 96.8 | | 78.1 | | 102.6 | | 103.1 | | 85.2 | | | | 104.5 | | 97.0 | |
Adjustment to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
Current accident year catastrophes | (23.1) | | (35.5) | | (17.8) | | (8.8) | | (22.6) | | (21.2) | | (7.0) | | | | (25.5) | | (17.0) | |
Prior accident year development | (0.3) | | (0.1) | | (0.1) | | (1.0) | | 0.4 | | 0.1 | | (0.8) | | | | (0.1) | | (0.1) | |
Underlying combined ratio | 78.1 | | 79.6 | | 78.9 | | 68.3 | | 80.4 | | 82.0 | | 77.4 | | | | 78.8 | | 79.9 | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
DISTRIBUTION | | | | | | | | | | | |
WRITTEN PREMIUMS | | | | | | | | | | | |
AARP Direct | $ | 754 | | $ | 698 | | $ | 648 | | $ | 596 | | $ | 698 | | $ | 655 | | $ | 610 | | | | $ | 2,100 | | $ | 1,963 | |
AARP Agency | 57 | | 52 | | 50 | | 50 | | 50 | | 50 | | 48 | | | | 159 | | 148 | |
Other Agency | 53 | | 48 | | 44 | | 44 | | 48 | | 46 | | 43 | | | | 145 | | 137 | |
Other | 5 | | 4 | | 5 | | 5 | | 7 | | 5 | | 6 | | | | 14 | | 18 | |
Total | $ | 869 | | $ | 802 | | $ | 747 | | $ | 695 | | $ | 803 | | $ | 756 | | $ | 707 | | | | $ | 2,418 | | $ | 2,266 | |
EARNED PREMIUMS | | | | | | | | | | | |
AARP Direct | $ | 681 | | $ | 659 | | $ | 640 | | $ | 653 | | $ | 645 | | $ | 625 | | $ | 617 | | | | $ | 1,980 | | $ | 1,887 | |
AARP Agency | 50 | | 51 | | 49 | | 50 | | 50 | | 50 | | 50 | | | | 150 | | 150 | |
Other Agency | 47 | | 45 | | 45 | | 45 | | 46 | | 46 | | 47 | | | | 137 | | 139 | |
Other | 6 | | 5 | | 5 | | 6 | | 8 | | 5 | | 6 | | | | 16 | | 19 | |
Total | $ | 784 | | $ | 760 | | $ | 739 | | $ | 754 | | $ | 749 | | $ | 726 | | $ | 720 | | | | $ | 2,283 | | $ | 2,195 | |
PRODUCT LINE | | | | | | | | | | | |
WRITTEN PREMIUMS | | | | | | | | | | | |
Automobile | $ | 596 | | $ | 543 | | $ | 529 | | $ | 473 | | $ | 541 | | $ | 509 | | $ | 497 | | | | $ | 1,668 | | $ | 1,547 | |
Homeowners | 273 | | 259 | | 218 | | 222 | | 262 | | 247 | | 210 | | | | 750 | | 719 | |
Total | $ | 869 | | $ | 802 | | $ | 747 | | $ | 695 | | $ | 803 | | $ | 756 | | $ | 707 | | | | $ | 2,418 | | $ | 2,266 | |
EARNED PREMIUMS | | | | | | | | | | | |
Automobile | $ | 541 | | $ | 523 | | $ | 509 | | $ | 519 | | $ | 516 | | $ | 497 | | $ | 493 | | | | $ | 1,573 | | $ | 1,506 | |
Homeowners | 243 | | 237 | | 230 | | 235 | | 233 | | 229 | | 227 | | | | 710 | | 689 | |
Total | $ | 784 | | $ | 760 | | $ | 739 | | $ | 754 | | $ | 749 | | $ | 726 | | $ | 720 | | | | $ | 2,283 | | $ | 2,195 | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | | | | | | |
Net New Business Premium | | | | | | | | | | | |
Automobile | $ | 61 | | $ | 52 | | $ | 46 | | $ | 41 | | $ | 71 | | $ | 57 | | $ | 58 | | | | $ | 159 | | $ | 186 | |
Homeowners | $ | 25 | | $ | 22 | | $ | 21 | | $ | 18 | | $ | 22 | | $ | 19 | | $ | 15 | | | | $ | 68 | | $ | 56 | |
Renewal Written Price Increases | | | | | | | | | | | |
Automobile | 19.7 | % | 13.7 | % | 9.9 | % | 6.2 | % | 5.0 | % | 4.0 | % | 2.9 | % | | | 14.6 | % | 4.0 | % |
Homeowners | 14.1 | % | 14.4 | % | 13.9 | % | 13.3 | % | 11.8 | % | 9.0 | % | 8.8 | % | | | 14.1 | % | 9.9 | % |
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Policy Count Retention | | | | | | | | | | | |
Automobile | 85 | % | 86 | % | 85 | % | 85 | % | 85 | % | 84 | % | 84 | % | | | 85 | % | 84 | % |
Homeowners | 84 | % | 84 | % | 84 | % | 84 | % | 84 | % | 84 | % | 84 | % | | | 84 | % | 84 | % |
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Policies in Force (in thousands) | | | | | | | | | | | |
Automobile | 1,270 | | 1,287 | | 1,305 | | 1,323 | | 1,331 | | 1,315 | | 1,315 | | | | | |
Homeowners | 712 | | 723 | | 731 | | 740 | | 749 | | 756 | | 765 | | | | | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C OTHER OPERATIONS
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
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Losses and loss adjustment expenses | | | | | | | | | | | |
Prior accident year development | $ | 2 | | $ | 2 | | $ | 3 | | $ | 250 | | $ | — | | $ | 30 | | $ | — | | | | $ | 7 | | $ | 30 | |
Total losses and loss adjustment expenses | 2 | | 2 | | 3 | | 250 | | — | | 30 | | — | | | | 7 | | 30 | |
Underwriting expenses | 3 | | 2 | | 3 | | 2 | | 2 | | 2 | | 3 | | | | 8 | | 7 | |
Underwriting loss | (5) | | (4) | | (6) | | (252) | | (2) | | (32) | | (3) | | | | (15) | | (37) | |
Net investment income | 18 | | 17 | | 16 | | 17 | | 14 | | 16 | | 16 | | | | 51 | | 46 | |
Net realized gains (losses) | (2) | | (1) | | (3) | | 1 | | (4) | | (9) | | (4) | | | | (6) | | (17) | |
| | | | | | | | | | | |
Income (loss) before income taxes | 11 | | 12 | | 7 | | (234) | | 8 | | (25) | | 9 | | | | 30 | | (8) | |
Income tax expense (benefit) | 2 | | 3 | | 1 | | (50) | | 2 | | (5) | | 1 | | | | 6 | | (2) | |
Net income (loss) | 9 | | 9 | | 6 | | (184) | | 6 | | (20) | | 8 | | | | 24 | | (6) | |
Adjustments to reconcile net income (loss) to core earnings (loss): | | | | | | | | | | | |
Net realized losses (gains), excluded from core earnings, before tax | 1 | | 1 | | 3 | | (1) | | 4 | | 9 | | 4 | | | | 5 | | 17 | |
| | | | | | | | | | | |
Change in deferred gain on retroactive reinsurance, before tax | — | | — | | — | | 229 | | — | | — | | — | | | | — | | — | |
Income tax benefit [1] | 1 | | — | | (1) | | (49) | | — | | (2) | | (1) | | | | — | | (3) | |
Core earnings (loss) | $ | 11 | | $ | 10 | | $ | 8 | | $ | (5) | | $ | 10 | | $ | (13) | | $ | 11 | | | | $ | 29 | | $ | 8 | |
[1]Represents federal income tax benefit related to before tax items not included in core earnings (loss).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
INCOME STATEMENTS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Earned premiums | $ | 1,575 | | $ | 1,574 | | $ | 1,558 | | $ | 1,498 | | $ | 1,458 | | $ | 1,469 | | $ | 1,445 | | | | $ | 4,707 | | $ | 4,372 | |
Fee income | 54 | | 56 | | 51 | | 48 | | 46 | | 48 | | 45 | | | | 161 | | 139 | |
Net investment income | 121 | | 113 | | 110 | | 154 | | 117 | | 130 | | 123 | | | | 344 | | 370 | |
Net realized gains (losses) | (31) | | (19) | | 5 | | 1 | | (37) | | (70) | | (16) | | | | (45) | | (123) | |
Total revenues | 1,719 | | 1,724 | | 1,724 | | 1,701 | | 1,584 | | 1,577 | | 1,597 | | | | 5,167 | | 4,758 | |
Benefits, losses and loss adjustment expenses | 1,146 | | 1,175 | | 1,210 | | 1,135 | | 1,096 | | 1,063 | | 1,223 | | | | 3,531 | | 3,382 | |
Amortization of DAC | 8 | | 9 | | 9 | | 7 | | 8 | | 9 | | 9 | | | | 26 | | 26 | |
Insurance operating costs and other expenses | 372 | | 381 | | 380 | | 371 | | 364 | | 365 | | 367 | | | | 1,133 | | 1,096 | |
Amortization of other intangible assets | 10 | | 10 | | 10 | | 10 | | 10 | | 10 | | 10 | | | | 30 | | 30 | |
Total benefits, losses and expenses | 1,536 | | 1,575 | | 1,609 | | 1,523 | | 1,478 | | 1,447 | | 1,609 | | | | 4,720 | | 4,534 | |
Income (loss) before income taxes | 183 | | 149 | | 115 | | 178 | | 106 | | 130 | | (12) | | | | 447 | | 224 | |
Income tax expense (benefit) | 37 | | 28 | | 23 | | 35 | | 20 | | 24 | | (4) | | | | 88 | | 40 | |
Net income (loss) [1] | 146 | | 121 | | 92 | | 143 | | 86 | | 106 | | (8) | | | | 359 | | 184 | |
Adjustments to reconcile net income (loss) to core earnings: | | | | | | | | | | | |
Net realized losses (gains), excluded from core earnings, before tax | 28 | | 16 | | (5) | | (2) | | 38 | | 70 | | 16 | | | | 39 | | 124 | |
Integration and other non-recurring M&A costs, before tax | 1 | | — | | 2 | | 2 | | 2 | | 2 | | 2 | | | | 3 | | 6 | |
Income tax expense (benefit) [2] | (5) | | (4) | | 1 | | 1 | | (9) | | (15) | | (4) | | | | (8) | | (28) | |
Core earnings [1] | $ | 170 | | $ | 133 | | $ | 90 | | $ | 144 | | $ | 117 | | $ | 163 | | $ | 6 | | | | $ | 393 | | $ | 286 | |
Margin | | | | | | | | | | | |
Net income margin | 8.5 | % | 7.0 | % | 5.3 | % | 8.4 | % | 5.4 | % | 6.7 | % | (0.5 | %) | | | 6.9 | % | 3.9 | % |
Core earnings margin* | 9.8 | % | 7.6 | % | 5.2 | % | 8.5 | % | 7.2 | % | 9.9 | % | 0.4 | % | | | 7.6 | % | 5.9 | % |
ROE | | | | | | | | | | | |
Net income available to common stockholders [3] | 15.9 | % | 13.0 | % | 11.9 | % | 8.3 | % | 5.3 | % | 3.4 | % | 5.1 | % | | | | |
Adjustments to reconcile net income available to common stockholders to core earnings: | | | | | | | | | | | |
Net realized losses (gains), excluded from core earnings, before tax | 1.3 | % | 1.5 | % | 3.1 | % | 3.6 | % | 1.6 | % | 0.1 | % | (2.6 | %) | | | | |
Integration and other non-recurring M&A costs, before tax | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | | | | |
Income tax expense (benefit) [2] | (0.2 | %) | (0.4 | %) | (0.7 | %) | (0.8 | %) | (0.4 | %) | — | % | 0.5 | % | | | | |
Impact of AOCI, excluded from core earnings ROE | (3.4 | %) | (1.8 | %) | (0.9 | %) | (0.3 | %) | (0.1 | %) | 0.1 | % | 0.3 | % | | | | |
Core earnings [3] | 13.8 | % | 12.5 | % | 13.6 | % | 11.0 | % | 6.6 | % | 3.8 | % | 3.5 | % | | | | |
[1]Adopting LDTI resulted in an after tax increase (decrease) to net income and core earnings of $3, $0, $2 and $(2) for the three months ended December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022, respectively.
[2]Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
[3]Net income ROE and core earnings ROE are calculated by allocating a portion of debt, interest expense, preferred stock and preferred stock dividends accounted for within Corporate to Group Benefits.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
SUPPLEMENTAL DATA
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
PREMIUMS | | | | | | | | | | | |
Fully insured ongoing premiums | | | | | | | | | | | |
Group disability | $ | 827 | | $ | 822 | | $ | 814 | | $ | 805 | | $ | 772 | | $ | 780 | | $ | 754 | | | | $ | 2,463 | | $ | 2,306 | |
Group life | 640 | | 650 | | 643 | | 604 | | 593 | | 599 | | 597 | | | | 1,933 | | 1,789 | |
Other [1] | 102 | | 102 | | 100 | | 89 | | 88 | | 90 | | 87 | | | | 304 | | 265 | |
Total fully insured ongoing premiums | 1,569 | | 1,574 | | 1,557 | | 1,498 | | 1,453 | | 1,469 | | 1,438 | | | | 4,700 | | 4,360 | |
Total buyouts [2] | 6 | | — | | 1 | | — | | 5 | | — | | 7 | | | | 7 | | 12 | |
Total premiums | $ | 1,575 | | $ | 1,574 | | $ | 1,558 | | $ | 1,498 | | $ | 1,458 | | $ | 1,469 | | $ | 1,445 | | | | $ | 4,707 | | $ | 4,372 | |
SALES (GROSS ANNUALIZED NEW PREMIUMS) | | | | | | | | | | | |
Fully insured ongoing sales | | | | | | | | | | | |
Group disability | $ | 83 | | $ | 77 | | $ | 209 | | $ | 67 | | $ | 51 | | $ | 123 | | $ | 222 | | | | $ | 369 | | $ | 396 | |
Group life | 45 | | 60 | | 227 | | 21 | | 41 | | 70 | | 125 | | | | 332 | | 236 | |
Other [1] | 15 | | 14 | | 38 | | 14 | | 14 | | 11 | | 42 | | | | 67 | | 67 | |
Total fully insured ongoing sales | 143 | | 151 | | 474 | | 102 | | 106 | | 204 | | 389 | | | | 768 | | 699 | |
Total buyouts [2] | 6 | | — | | 1 | | — | | 5 | | — | | 7 | | | | 7 | | 12 | |
Total sales | $ | 149 | | $ | 151 | | $ | 475 | | $ | 102 | | $ | 111 | | $ | 204 | | $ | 396 | | | | $ | 775 | | $ | 711 | |
RATIOS, EXCLUDING BUYOUTS | | | | | | | | | | | |
Group disability loss ratio | 67.3 | % | 67.0 | % | 70.4 | % | 65.5 | % | 68.4 | % | 66.3 | % | 73.2 | % | | | 68.2 | % | 69.3 | % |
Group life loss ratio | 80.2 | % | 84.1 | % | 86.7 | % | 89.1 | % | 83.1 | % | 78.6 | % | 98.7 | % | | | 83.7 | % | 86.8 | % |
Total loss ratio | 70.2 | % | 72.1 | % | 75.2 | % | 73.4 | % | 72.8 | % | 70.1 | % | 82.0 | % | | | 72.5 | % | 74.9 | % |
Expense ratio [3] | 24.0 | % | 24.5 | % | 24.7 | % | 25.0 | % | 25.4 | % | 25.2 | % | 25.9 | % | | | 24.4 | % | 25.5 | % |
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[1]Includes other group coverages such as retiree health insurance, critical illness, accident and hospital indemnity coverages.
[2]Takeover of open claim liabilities and other non-recurring premium amounts.
[3]Integration and transaction costs related to the acquisition of Aetna's U.S. group life and disability business are not included in the expense ratio.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
HARTFORD FUNDS
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Investment management fees | $ | 189 | | $ | 186 | | $ | 182 | | $ | 183 | | $ | 190 | | $ | 198 | | $ | 216 | | | | $ | 557 | | $ | 604 | |
Shareowner servicing fees | 21 | | 21 | | 21 | | 21 | | 21 | | 23 | | 25 | | | | 63 | | 69 | |
Other revenue | 42 | | 41 | | 41 | | 41 | | 45 | | 43 | | 47 | | | | 124 | | 135 | |
Net realized gains (losses) | (4) | | 1 | | 5 | | 7 | | (9) | | (13) | | (9) | | | | 2 | | (31) | |
Total revenues | 248 | | 249 | | 249 | | 252 | | 247 | | 251 | | 279 | | | | 746 | | 777 | |
Sub-advisory expense | 67 | | 66 | | 65 | | 65 | | 68 | | 71 | | 78 | | | | 198 | | 217 | |
Employee compensation and benefits | 28 | | 29 | | 34 | | 29 | | 27 | | 31 | | 36 | | | | 91 | | 94 | |
Distribution and service | 73 | | 73 | | 73 | | 72 | | 75 | | 81 | | 87 | | | | 219 | | 243 | |
General, administrative and other | 27 | | 24 | | 26 | | 29 | | 25 | | 24 | | 28 | | | | 77 | | 77 | |
Total expenses | 195 | | 192 | | 198 | | 195 | | 195 | | 207 | | 229 | | | | 585 | | 631 | |
Income before income taxes | 53 | | 57 | | 51 | | 57 | | 52 | | 44 | | 50 | | | | 161 | | 146 | |
Income tax expense | 12 | | 12 | | 10 | | 12 | | 11 | | 10 | | 8 | | | | 34 | | 29 | |
Net income | 41 | | 45 | | 41 | | 45 | | 41 | | 34 | | 42 | | | | 127 | | 117 | |
Adjustments to reconcile net income to core earnings: | | | | | | | | | | | |
Net realized losses (gains), excluded from core earnings, before tax | 4 | | (1) | | (5) | | (7) | | 9 | | 13 | | 9 | | | | (2) | | 31 | |
Income tax expense (benefit) [1] | — | | — | | 1 | | 1 | | (3) | | (3) | | (1) | | | | 1 | | (7) | |
Core earnings | $ | 45 | | $ | 44 | | $ | 37 | | $ | 39 | | $ | 47 | | $ | 44 | | $ | 50 | | | | $ | 126 | | $ | 141 | |
Daily average Hartford Funds AUM | $ | 128,786 | | $ | 127,540 | | $ | 127,084 | | $ | 124,087 | | $ | 129,782 | | $ | 136,841 | | $ | 150,131 | | | | $ | 127,810 | | $ | 138,843 | |
Return on assets (bps, net of tax) [2] | | | | | | | | | | | |
Net income | 12.7 | | 14.1 | | 12.9 | | 14.5 | | 12.6 | | 9.9 | | 11.2 | | | | 13.2 | | 11.2 | |
Core earnings* | 14.0 | | 13.8 | | 11.6 | | 12.6 | | 14.5 | | 12.9 | | 13.3 | | | | 13.1 | | 13.5 | |
ROE | | | | | | | | | | | |
Net income available to common stockholders [3] | 44.9 | % | 44.9 | % | 42.7 | % | 42.4 | % | 48.2 | % | 51.9 | % | 58.0 | % | | | | |
Adjustments to reconcile net income available to common stockholders to core earnings: | | | | | | | | | | | |
Net realized losses (gains) excluded from core earnings, before tax | (2.4 | %) | (1.1 | %) | 2.7 | % | 6.5 | % | 7.8 | % | 6.0 | % | 2.0 | % | | | | |
Income tax expense (benefit) [1] | 0.5 | % | (0.3 | %) | (1.1 | %) | (1.6 | %) | (1.7 | %) | (1.1 | %) | — | % | | | | |
Impact of AOCI, excluded from core earnings ROE | (2.5 | %) | (1.9 | %) | (1.5 | %) | (1.2 | %) | (1.5 | %) | (0.9 | %) | (0.6 | %) | | | | |
Core earnings [3] | 40.5 | % | 41.6 | % | 42.8 | % | 46.1 | % | 52.8 | % | 55.9 | % | 59.4 | % | | | | |
[1]Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
[2]Represents annualized earnings divided by daily average assets under management ("AUM"), as measured in basis points ("bps") which represents one hundredth of one percent.
[3]Net income ROE and core earnings ROE are calculated by allocating a portion of debt, interest expense, preferred stock and preferred stock dividends accounted for within Corporate to Hartford Funds.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
HARTFORD FUNDS
ASSET VALUE ROLLFORWARD
ASSETS UNDER MANAGEMENT BY ASSET CLASS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Equity Funds | | | | | | | | | | | |
Beginning balance | $ | 78,951 | | $ | 76,132 | | $ | 73,782 | | $ | 69,128 | | $ | 74,891 | | $ | 89,282 | | $ | 95,703 | | | | $ | 73,782 | | $ | 95,703 | |
Sales | 3,096 | | 3,447 | | 4,202 | | 4,200 | | 4,257 | | 5,631 | | 6,856 | | | | 10,745 | | 16,744 | |
Redemptions | (4,366) | | (4,145) | | (5,221) | | (6,505) | | (5,178) | | (6,795) | | (6,965) | | | | (13,732) | | (18,938) | |
Net flows | (1,270) | | (698) | | (1,019) | | (2,305) | | (921) | | (1,164) | | (109) | | | | (2,987) | | (2,194) | |
Change in market value and other | (3,375) | | 3,517 | | 3,369 | | 6,959 | | (4,842) | | (13,227) | | (6,312) | | | | 3,511 | | (24,381) | |
Ending balance | $ | 74,306 | | $ | 78,951 | | $ | 76,132 | | $ | 73,782 | | $ | 69,128 | | $ | 74,891 | | $ | 89,282 | | | | $ | 74,306 | | $ | 69,128 | |
Fixed Income Funds | | | | | | | | | | | |
Beginning balance | $ | 16,149 | | $ | 16,399 | | $ | 15,861 | | $ | 16,018 | | $ | 17,388 | | $ | 18,889 | | $ | 20,113 | | | | $ | 15,861 | | $ | 20,113 | |
Sales | 1,160 | | 1,216 | | 1,521 | | 1,852 | | 1,084 | | 1,736 | | 1,900 | | | | 3,897 | | 4,720 | |
Redemptions | (1,127) | | (1,468) | | (1,372) | | (2,471) | | (2,071) | | (2,306) | | (2,254) | | | | (3,967) | | (6,631) | |
Net flows | 33 | | (252) | | 149 | | (619) | | (987) | | (570) | | (354) | | | | (70) | | (1,911) | |
Change in market value and other | (241) | | 2 | | 389 | | 462 | | (383) | | (931) | | (870) | | | | 150 | | (2,184) | |
Ending balance | $ | 15,941 | | $ | 16,149 | | $ | 16,399 | | $ | 15,861 | | $ | 16,018 | | $ | 17,388 | | $ | 18,889 | | | | $ | 15,941 | | $ | 16,018 | |
Multi-Strategy Investments Funds [1] | | | | | | | | | | | |
Beginning balance | $ | 19,764 | | $ | 19,941 | | $ | 19,975 | | $ | 19,028 | | $ | 20,362 | | $ | 22,603 | | $ | 23,610 | | | | $ | 19,975 | | $ | 23,610 | |
Sales | 354 | | 402 | | 516 | | 530 | | 467 | | 598 | | 722 | | | | 1,272 | | 1,787 | |
Redemptions | (968) | | (918) | | (892) | | (959) | | (810) | | (841) | | (826) | | | | (2,778) | | (2,477) | |
Net flows | (614) | | (516) | | (376) | | (429) | | (343) | | (243) | | (104) | | | | (1,506) | | (690) | |
Change in market value and other | (577) | | 339 | | 342 | | 1,376 | | (991) | | (1,998) | | (903) | | | | 104 | | (3,892) | |
Ending balance | $ | 18,573 | | $ | 19,764 | | $ | 19,941 | | $ | 19,975 | | $ | 19,028 | | $ | 20,362 | | $ | 22,603 | | | | $ | 18,573 | | $ | 19,028 | |
Exchange-Traded Funds ("ETF") AUM | | | | | | | | | | | |
Beginning balance | $ | 3,243 | | $ | 3,036 | | $ | 2,854 | | $ | 2,590 | | $ | 2,765 | | $ | 3,211 | | $ | 3,206 | | | | $ | 2,854 | | $ | 3,206 | |
Net flows | 222 | | 210 | | 67 | | 60 | | 28 | | (34) | | 143 | | | | 499 | | 137 | |
Change in market value and other | (103) | | (3) | | 115 | | 204 | | (203) | | (412) | | (138) | | | | 9 | | (753) | |
Ending balance | $ | 3,362 | | $ | 3,243 | | $ | 3,036 | | $ | 2,854 | | $ | 2,590 | | $ | 2,765 | | $ | 3,211 | | | | $ | 3,362 | | $ | 2,590 | |
Mutual Fund and ETF AUM | | | | | | | | | | | |
Beginning balance | $ | 118,107 | | $ | 115,508 | | $ | 112,472 | | $ | 106,764 | | $ | 115,406 | | $ | 133,985 | | $ | 142,632 | | | | $ | 112,472 | | $ | 142,632 | |
Sales - mutual fund | 4,610 | | 5,065 | | 6,239 | | 6,582 | | 5,808 | | 7,965 | | 9,478 | | | | 15,914 | | 23,251 | |
Redemptions - mutual fund | (6,461) | | (6,531) | | (7,485) | | (9,935) | | (8,059) | | (9,942) | | (10,045) | | | | (20,477) | | (28,046) | |
Net flows - ETF | 222 | | 210 | | 67 | | 60 | | 28 | | (34) | | 143 | | | | 499 | | 137 | |
Net flows - mutual fund and ETF | (1,629) | | (1,256) | | (1,179) | | (3,293) | | (2,223) | | (2,011) | | (424) | | | | (4,064) | | (4,658) | |
Change in market value and other | (4,296) | | 3,855 | | 4,215 | | 9,001 | | (6,419) | | (16,568) | | (8,223) | | | | 3,774 | | (31,210) | |
Ending balance | 112,182 | | 118,107 | | 115,508 | | 112,472 | | 106,764 | | 115,406 | | 133,985 | | | | 112,182 | | 106,764 | |
Third-party life and annuity separate account AUM | 11,011 | | 11,799 | | 11,672 | | 11,635 | | 11,063 | | 11,992 | | 14,061 | | | | 11,011 | | 11,063 | |
Hartford Funds AUM | $ | 123,193 | | $ | 129,906 | | $ | 127,180 | | $ | 124,107 | | $ | 117,827 | | $ | 127,398 | | $ | 148,046 | | | | $ | 123,193 | | $ | 117,827 | |
[1]Includes balanced, allocation, and alternative investment products.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Fee income [1] | $ | 10 | | $ | 11 | | $ | 9 | | $ | 12 | | $ | 11 | | $ | 13 | | $ | 13 | | | | $ | 30 | | $ | 37 | |
| | | | | | | | | | | |
Other revenue | 1 | | — | | 1 | | — | | — | | — | | 1 | | | | 2 | | 1 | |
Net investment income | 12 | | 8 | | 10 | | 13 | | 7 | | 3 | | 3 | | | | 30 | | 13 | |
Net realized gains (losses) | (10) | | 11 | | 6 | | 11 | | (10) | | (30) | | (16) | | | | 7 | | (56) | |
Total revenues (losses) | 13 | | 30 | | 26 | | 36 | | 8 | | (14) | | 1 | | | | 69 | | (5) | |
Benefits, losses and loss adjustment expenses [2] | 1 | | 2 | | 2 | | 3 | | 1 | | 2 | | 2 | | | | 5 | | 5 | |
Insurance operating costs and other expenses [1][3] | 27 | | 11 | | 13 | | 13 | | 12 | | 23 | | 13 | | | | 51 | | 48 | |
| | | | | | | | | | | |
Interest expense | 50 | | 50 | | 50 | | 50 | | 50 | | 51 | | 62 | | | | 150 | | 163 | |
Restructuring and other costs | 1 | | 3 | | — | | 3 | | 3 | | 2 | | 5 | | | | 4 | | 10 | |
Total expenses | 79 | | 66 | | 65 | | 69 | | 66 | | 78 | | 82 | | | | 210 | | 226 | |
Loss before income taxes | (66) | | (36) | | (39) | | (33) | | (58) | | (92) | | (81) | | | | (141) | | (231) | |
Income tax benefit | (14) | | (10) | | (15) | | (11) | | (15) | | (21) | | (22) | | | | (39) | | (58) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Net loss [4] | (52) | | (26) | | (24) | | (22) | | (43) | | (71) | | (59) | | | | (102) | | (173) | |
Preferred stock dividends | 6 | | 5 | | 5 | | 5 | | 6 | | 5 | | 5 | | | | 16 | | 16 | |
Net loss available to common stockholders | (58) | | (31) | | (29) | | (27) | | (49) | | (76) | | (64) | | | | (118) | | (189) | |
Adjustments to reconcile net loss available to common stockholders to core loss: | | | | | | | | | | | |
Net realized losses (gains), excluded from core earnings, before tax | 9 | | (10) | | (6) | | (10) | | 10 | | 31 | | 15 | | | | (7) | | 56 | |
| | | | | | | | | | | |
Restructuring and other costs, before tax | 1 | | 3 | | — | | 3 | | 3 | | 2 | | 5 | | | | 4 | | 10 | |
Loss on extinguishment of debt, before tax | — | | — | | — | | — | | — | | 9 | | — | | | | — | | 9 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Income tax expense (benefit) [5] | (4) | | 3 | | — | | 1 | | (1) | | (9) | | (4) | | | | (1) | | (14) | |
| | | | | | | | | | | |
Core loss [4] | $ | (52) | | $ | (35) | | $ | (35) | | $ | (33) | | $ | (37) | | $ | (43) | | $ | (48) | | | | $ | (122) | | $ | (128) | |
[1]Includes investment management fees and expenses related to managing third-party business.
[2]Includes benefits, losses and loss adjustment expenses for run-off structured settlement and terminal funding agreement liabilities.
[3]Insurance operating costs and other expenses for the three and nine months ended September 30, 2023, includes a $14 capital-based state tax expense covering several years recorded in the 2023 period related to recently released guidance, and for the nine months ended September 30, 2022, includes a $9 loss on extinguishment of debt related to The Hartford's redemption of its 7.875% junior subordinated loans on April 15, 2022.
[4]Adopting LDTI resulted in an after tax decrease to net loss and core loss of $1 for the three months ended September 30, 2022. There were no impacts to the other periods presented in the table above.
[5]Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net Investment Income (Loss) | | | | | | | | | | | |
Fixed maturities [1] | | | | | | | | | | | |
Taxable | $ | 433 | | $ | 411 | | $ | 395 | | $ | 365 | | $ | 323 | | $ | 290 | | $ | 275 | | | | $ | 1,239 | | $ | 888 | |
Tax-exempt | 47 | | 49 | | 50 | | 51 | | 53 | | 56 | | 56 | | | | 146 | | 165 | |
Total fixed maturities | 480 | | 460 | | 445 | | 416 | | 376 | | 346 | | 331 | | | | 1,385 | | 1,053 | |
Equity securities | 9 | | 9 | | 13 | | 17 | | 15 | | 13 | | 12 | | | | 31 | | 40 | |
Mortgage loans | 59 | | 58 | | 57 | | 55 | | 53 | | 53 | | 50 | | | | 174 | | 156 | |
Limited partnerships and other alternative investments [2] | 72 | | 32 | | 26 | | 169 | | 62 | | 158 | | 126 | | | | 130 | | 346 | |
Other [3] | (1) | | 4 | | (2) | | 4 | | (1) | | (7) | | 9 | | | | 1 | | 1 | |
Subtotal | 619 | | 563 | | 539 | | 661 | | 505 | | 563 | | 528 | | | | 1,721 | | 1,596 | |
Investment expense | (22) | | (23) | | (24) | | (21) | | (18) | | (22) | | (19) | | | | (69) | | (59) | |
Total net investment income | $ | 597 | | $ | 540 | | $ | 515 | | $ | 640 | | $ | 487 | | $ | 541 | | $ | 509 | | | | $ | 1,652 | | $ | 1,537 | |
Annualized investment yield, before tax [4] | 4.2 | % | 3.9 | % | 3.7 | % | 4.6 | % | 3.5 | % | 3.9 | % | 3.6 | % | | | 3.9 | % | 3.7 | % |
Annualized limited partnerships and other alternative investment yield, before tax [4] | 6.3 | % | 2.9 | % | 2.5 | % | 16.8 | % | 6.3 | % | 17.3 | % | 14.6 | % | | | 4.0 | % | 13.0 | % |
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4]* | 4.1 | % | 4.0 | % | 3.8 | % | 3.7 | % | 3.3 | % | 3.0 | % | 2.9 | % | | | 3.9 | % | 3.1 | % |
Annualized investment yield, net of tax [4] | 3.4 | % | 3.1 | % | 3.0 | % | 3.7 | % | 2.8 | % | 3.2 | % | 2.9 | % | | | 3.2 | % | 3.0 | % |
Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4]* | 3.3 | % | 3.2 | % | 3.0 | % | 3.0 | % | 2.7 | % | 2.4 | % | 2.4 | % | | | 3.2 | % | 2.5 | % |
Average reinvestment rate [5] | 6.0 | % | 5.3 | % | 5.8 | % | 6.0 | % | 4.9 | % | 4.5 | % | 3.3 | % | | | 5.7 | % | 4.1 | % |
Average sales/maturities yield [6] | 4.5 | % | 4.1 | % | 4.2 | % | 4.2 | % | 3.7 | % | 3.6 | % | 3.0 | % | | | 4.2 | % | 3.4 | % |
Portfolio duration (in years) [7] | 4.1 | | 4.0 | | 4.0 | | 4.0 | | 4.0 | | 4.3 | | 4.4 | | | | 4.1 | | 4.0 | |
[1]Includes income on short-term investments.
[2]Within Property & Casualty, other alternative investments include an insurer-owned life insurance policy, which is primarily invested in private equity funds and fixed income.
[3]Includes changes in fair value of certain equity fund investments and income from derivatives that qualify for hedge accounting and are used to hedge fixed maturities.
[4]Represents annualized net investment income divided by the monthly average invested assets at amortized cost, as applicable, excluding derivatives book value.
[5]Represents the annualized yield on fixed maturities and mortgage loans that were purchased during the respective period. Excludes U.S. Treasury securities and cash equivalents.
[6]Represents the annualized yield on fixed maturities and mortgage loans that were sold, matured, or redeemed, including calls and paydowns, during the respective period. Excludes U.S. Treasury securities and cash equivalents.
[7]Excludes certain short-term investments.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
PROPERTY & CASUALTY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net Investment Income (Loss) | | | | | | | | | | | |
Fixed maturities [1] | | | | | | | | | | | |
Taxable | $ | 333 | | $ | 316 | | $ | 304 | | $ | 276 | | $ | 243 | | $ | 219 | | $ | 207 | | | | $ | 953 | | $ | 669 | |
Tax-exempt | 34 | | 37 | | 37 | | 38 | | 40 | | 43 | | 41 | | | | 108 | | 124 | |
Total fixed maturities | 367 | | 353 | | 341 | | 314 | | 283 | | 262 | | 248 | | | | 1,061 | | 793 | |
Equity securities | 6 | | 7 | | 9 | | 9 | | 10 | | 10 | | 9 | | | | 22 | | 29 | |
Mortgage loans | 43 | | 42 | | 41 | | 39 | | 38 | | 38 | | 36 | | | | 126 | | 112 | |
Limited partnerships and other alternative investments [2] | 60 | | 26 | | 21 | | 119 | | 44 | | 123 | | 97 | | | | 107 | | 264 | |
Other [3] | — | | 5 | | (2) | | 4 | | (2) | | (9) | | 6 | | | | 3 | | (5) | |
Subtotal | 476 | | 433 | | 410 | | 485 | | 373 | | 424 | | 396 | | | | 1,319 | | 1,193 | |
Investment expense | (16) | | (18) | | (18) | | (16) | | (13) | | (17) | | (14) | | | | (52) | | (44) | |
Total net investment income | $ | 460 | | $ | 415 | | $ | 392 | | $ | 469 | | $ | 360 | | $ | 407 | | $ | 382 | | | | $ | 1,267 | | $ | 1,149 | |
Annualized investment yield, before tax [4] | 4.3 | % | 3.9 | % | 3.6 | % | 4.4 | % | 3.4 | % | 3.9 | % | 3.7 | % | | | 3.9 | % | 3.7 | % |
Annualized limited partnerships and other alternative investment yield, before tax [4] | 6.7 | % | 3.0 | % | 2.5 | % | 14.8 | % | 5.7 | % | 16.7 | % | 14.1 | % | | | 4.2 | % | 12.4 | % |
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] | 4.0 | % | 4.0 | % | 3.7 | % | 3.6 | % | 3.3 | % | 2.9 | % | 2.9 | % | | | 3.9 | % | 3.0 | % |
Annualized investment yield, net of tax [4] | 3.5 | % | 3.1 | % | 3.0 | % | 3.6 | % | 2.7 | % | 3.1 | % | 3.0 | % | | | 3.2 | % | 3.0 | % |
Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4] | 3.2 | % | 3.2 | % | 3.0 | % | 2.9 | % | 2.6 | % | 2.4 | % | 2.4 | % | | | 3.2 | % | 2.5 | % |
Average reinvestment rate [5] | 6.0 | % | 5.3 | % | 5.8 | % | 6.1 | % | 4.9 | % | 4.4 | % | 3.2 | % | | | 5.7 | % | 4.0 | % |
Average sales/maturities yield [6] | 4.5 | % | 4.1 | % | 4.2 | % | 4.1 | % | 3.7 | % | 3.6 | % | 2.9 | % | | | 4.2 | % | 3.4 | % |
Portfolio duration (in years) [7] | 3.9 | | 3.8 | | 3.9 | | 3.8 | | 3.9 | | 4.2 | | 4.3 | | | | 3.9 | | 3.9 | |
Footnotes [1] through [7] are explained on page 26.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
GROUP BENEFITS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net Investment Income (Loss) | | | | | | | | | | | |
Fixed maturities [1] | | | | | | | | | | | |
Taxable | $ | 86 | | $ | 85 | | $ | 81 | | $ | 79 | | $ | 75 | | $ | 69 | | $ | 67 | | | | $ | 252 | | $ | 211 | |
Tax-exempt | 10 | | 11 | | 12 | | 12 | | 11 | | 12 | | 13 | | | | 33 | | 36 | |
Total fixed maturities | 96 | | 96 | | 93 | | 91 | | 86 | | 81 | | 80 | | | | 285 | | 247 | |
Equity securities | 3 | | 1 | | 2 | | 2 | | 3 | | 2 | | 2 | | | | 6 | | 7 | |
Mortgage loans | 16 | | 16 | | 16 | | 16 | | 15 | | 15 | | 14 | | | | 48 | | 44 | |
Limited partnerships and other alternative investments [2] | 12 | | 6 | | 5 | | 50 | | 18 | | 35 | | 29 | | | | 23 | | 82 | |
Other [3] | — | | (1) | | — | | — | | — | | 2 | | 3 | | | | (1) | | 5 | |
Subtotal | 127 | | 118 | | 116 | | 159 | | 122 | | 135 | | 128 | | | | 361 | | 385 | |
Investment expense | (6) | | (5) | | (6) | | (5) | | (5) | | (5) | | (5) | | | | (17) | | (15) | |
Total net investment income | $ | 121 | | $ | 113 | | $ | 110 | | $ | 154 | | $ | 117 | | $ | 130 | | $ | 123 | | | | $ | 344 | | $ | 370 | |
Annualized investment yield, before tax [4] | 4.1 | % | 3.9 | % | 3.8 | % | 5.3 | % | 4.0 | % | 4.4 | % | 4.2 | % | | | 3.9 | % | 4.2 | % |
Annualized limited partnerships and other alternative investment yield, before tax [4] | 4.8 | % | 2.5 | % | 2.5 | % | 24.5 | % | 8.7 | % | 19.4 | % | 16.7 | % | | | 3.3 | % | 15.4 | % |
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] | 4.1 | % | 4.0 | % | 3.9 | % | 3.8 | % | 3.6 | % | 3.4 | % | 3.4 | % | | | 4.0 | % | 3.5 | % |
Annualized investment yield, net of tax [4] | 3.3 | % | 3.1 | % | 3.0 | % | 4.2 | % | 3.2 | % | 3.6 | % | 3.4 | % | | | 3.2 | % | 3.4 | % |
Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4] | 3.3 | % | 3.2 | % | 3.1 | % | 3.1 | % | 2.9 | % | 2.8 | % | 2.8 | % | | | 3.2 | % | 2.8 | % |
Average reinvestment rate [5] | 5.9 | % | 5.3 | % | 6.0 | % | 5.9 | % | 4.8 | % | 4.7 | % | 3.6 | % | | | 5.7 | % | 4.4 | % |
Average sales/maturities yield [6] | 4.8 | % | 4.3 | % | 4.4 | % | 4.3 | % | 4.0 | % | 3.8 | % | 3.3 | % | | | 4.5 | % | 3.7 | % |
Portfolio duration (in years) [7] | 5.1 | | 4.9 | | 4.8 | | 4.8 | | 4.8 | | 5.0 | | 5.2 | | | | 5.1 | | 4.8 | |
Footnotes [1] through [7] are explained on page 26.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET INVESTMENT INCOME
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
Net Investment Income by Segment | Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net Investment Income | | | | | | | | | | | |
Commercial Lines | $ | 395 | | $ | 364 | | $ | 338 | | $ | 411 | | $ | 315 | | $ | 356 | | $ | 333 | | | | $ | 1,097 | | $ | 1,004 | |
Personal Lines | 47 | | 34 | | 38 | | 41 | | 31 | | 35 | | 33 | | | | 119 | | 99 | |
P&C Other Operations | 18 | | 17 | | 16 | | 17 | | 14 | | 16 | | 16 | | | | 51 | | 46 | |
Total Property & Casualty | 460 | | 415 | | 392 | | 469 | | 360 | | 407 | | 382 | | | | 1,267 | | 1,149 | |
Group Benefits | 121 | | 113 | | 110 | | 154 | | 117 | | 130 | | 123 | | | | 344 | | 370 | |
Hartford Funds | 4 | | 4 | | 3 | | 4 | | 3 | | 1 | | 1 | | | | 11 | | 5 | |
Corporate | 12 | | 8 | | 10 | | 13 | | 7 | | 3 | | 3 | | | | 30 | | 13 | |
Total net investment income by segment | $ | 597 | | $ | 540 | | $ | 515 | | $ | 640 | | $ | 487 | | $ | 541 | | $ | 509 | | | | $ | 1,652 | | $ | 1,537 | |
| |
|
| THREE MONTHS ENDED | | | | NINE MONTHS ENDED |
Net Investment Income from Limited Partnerships and Other Alternative Investments | Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Total Property & Casualty | $ | 60 | | $ | 26 | | $ | 21 | | $ | 119 | | $ | 44 | | $ | 123 | | $ | 97 | | | | $ | 107 | | $ | 264 | |
Group Benefits | 12 | | 6 | | 5 | | 50 | | 18 | | 35 | | 29 | | | | 23 | | 82 | |
Total net investment income from limited partnerships and other alternative investments [1] | $ | 72 | | $ | 32 | | $ | 26 | | $ | 169 | | $ | 62 | | $ | 158 | | $ | 126 | | | | $ | 130 | | $ | 346 | |
[1]Amounts are included above in total net investment income by segment.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED GAINS (LOSSES)
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net Realized Gains (Losses) | | | | | | | | | | | |
Gross gains on sales of fixed maturities | $ | 6 | | $ | 3 | | $ | 17 | | $ | 3 | | $ | 16 | | $ | 15 | | $ | 23 | | | | $ | 26 | | $ | 54 | |
Gross losses on sales of fixed maturities | (27) | | (21) | | (39) | | (59) | | (81) | | (80) | | (95) | | | | (87) | | (256) | |
Equity securities [1] | (13) | | 10 | | 35 | | 101 | | (81) | | (262) | | (107) | | | | 32 | | (450) | |
Net credit losses on fixed maturities, AFS | (5) | | (3) | | (5) | | (3) | | (3) | | — | | (12) | | | | (13) | | (15) | |
Change in ACL on mortgage loans | (5) | | (5) | | — | | — | | — | | (5) | | (2) | | | | (10) | | (7) | |
Intent-to-sell impairments | — | | — | | — | | (1) | | (2) | | — | | (3) | | | | — | | (5) | |
Other net gains (losses) [2] | (46) | | (48) | | (15) | | (19) | | (15) | | (6) | | 51 | | | | (109) | | 30 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total net realized gains (losses) | (90) | | (64) | | (7) | | 22 | | (166) | | (338) | | (145) | | | | (161) | | (649) | |
Net realized losses (gains), included in core earnings, before tax [3] | 14 | | 11 | | — | | — | | — | | 2 | | (1) | | | | 25 | | 1 | |
Total net gains (losses) excluded from core earnings, before tax | (76) | | (53) | | (7) | | 22 | | (166) | | (336) | | (146) | | | | (136) | | (648) | |
Income tax benefit (expense) related to net realized gains (losses) excluded from core earnings | 15 | | 10 | | 3 | | 4 | | 34 | | 73 | | 29 | | | | 28 | | 136 | |
Total net realized gains (losses) excluded from core earnings, after tax | $ | (61) | | $ | (43) | | $ | (4) | | $ | 26 | | $ | (132) | | $ | (263) | | $ | (117) | | | | $ | (108) | | $ | (512) | |
[1]Includes all changes in fair value and trading gains and losses for equity securities.
[2]Includes changes in value of fair value option securities and non-qualifying derivatives, including credit derivatives, interest rate derivatives used to manage duration, and commodity derivatives. Also includes periodic net coupon settlements on credit derivatives, which are included in core earnings, as well as transactional foreign currency revaluation.
[3]Represents net periodic settlements on credit derivatives.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 |
| Amount [1] | Percent | Amount | Percent | Amount | Percent | Amount [1] | Percent | Amount | Percent |
Total investments | $ | 53,320 | | 100.0 | % | $ | 52,668 | | 100.0 | % | $ | 53,667 | | 100.0 | % | $ | 52,560 | | 100.0 | % | $ | 50,661 | | 100.0 | % |
Asset-backed securities | $ | 3,130 | | 8.2 | % | $ | 2,685 | | 7.2 | % | $ | 2,181 | | 5.8 | % | $ | 1,941 | | 5.4 | % | $ | 1,892 | | 5.3 | % |
Collateralized loan obligations | 3,043 | | 8.0 | % | 2,981 | | 8.0 | % | 3,013 | | 8.0 | % | 2,941 | | 8.1 | % | 2,919 | | 8.2 | % |
Commercial mortgage-backed securities | 3,124 | | 8.2 | % | 3,227 | | 8.6 | % | 3,329 | | 8.9 | % | 3,368 | | 9.3 | % | 3,278 | | 9.2 | % |
Corporate | 16,651 | | 43.9 | % | 16,096 | | 42.9 | % | 16,210 | | 43.3 | % | 15,233 | | 42.0 | % | 14,888 | | 41.7 | % |
Foreign government/government agencies | 567 | | 1.5 | % | 539 | | 1.4 | % | 549 | | 1.5 | % | 547 | | 1.5 | % | 584 | | 1.6 | % |
Municipal | 5,686 | | 15.0 | % | 6,226 | | 16.6 | % | 6,365 | | 17.0 | % | 6,296 | | 17.4 | % | 6,197 | | 17.3 | % |
Residential mortgage-backed securities | 3,827 | | 10.1 | % | 3,729 | | 9.9 | % | 3,737 | | 10.0 | % | 3,708 | | 10.2 | % | 3,724 | | 10.4 | % |
U.S. Treasuries | 1,934 | | 5.1 | % | 2,014 | | 5.4 | % | 2,060 | | 5.5 | % | 2,197 | | 6.1 | % | 2,235 | | 6.3 | % |
Total fixed maturities, AFS [2] | $ | 37,962 | | 100.0 | % | $ | 37,497 | | 100.0 | % | $ | 37,444 | | 100.0 | % | $ | 36,231 | | 100.0 | % | $ | 35,717 | | 100.0 | % |
U.S. government/government agencies | $ | 4,747 | | 12.5 | % | $ | 4,790 | | 12.8 | % | $ | 4,904 | | 13.1 | % | $ | 5,025 | | 13.9 | % | $ | 5,018 | | 14.0 | % |
AAA | 6,733 | | 17.8 | % | 6,752 | | 18.0 | % | 6,047 | | 16.1 | % | 5,824 | | 16.1 | % | 5,675 | | 15.9 | % |
AA | 6,959 | | 18.3 | % | 6,782 | | 18.1 | % | 6,879 | | 18.4 | % | 6,650 | | 18.4 | % | 6,465 | | 18.1 | % |
A | 9,273 | | 24.4 | % | 9,295 | | 24.8 | % | 9,275 | | 24.8 | % | 8,968 | | 24.7 | % | 8,972 | | 25.1 | % |
BBB | 8,561 | | 22.6 | % | 8,143 | | 21.7 | % | 8,559 | | 22.9 | % | 7,973 | | 22.0 | % | 7,732 | | 21.7 | % |
BB | 1,115 | | 2.9 | % | 1,130 | | 3.0 | % | 1,189 | | 3.2 | % | 1,235 | | 3.4 | % | 1,333 | | 3.8 | % |
B | 565 | | 1.5 | % | 595 | | 1.6 | % | 576 | | 1.5 | % | 535 | | 1.5 | % | 490 | | 1.4 | % |
CCC | 8 | | — | % | 9 | | — | % | 14 | | — | % | 19 | | — | % | 16 | | — | % |
CC & below | 1 | | — | % | 1 | | — | % | 1 | | — | % | 2 | | — | % | 16 | | — | % |
Total fixed maturities, AFS [2] | $ | 37,962 | | 100.0 | % | $ | 37,497 | | 100.0 | % | $ | 37,444 | | 100.0 | % | $ | 36,231 | | 100.0 | % | $ | 35,717 | | 100.0 | % |
[1]Amount represents the value at which the assets are presented in the Consolidating Balance Sheets (page 4). [2]Fixed maturities, at fair value using the fair value option are not included.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
SEPTEMBER 30, 2023
| | | | | | | | | | | |
| |
| Cost or Amortized Cost | Fair Value | Percent of Total Invested Assets |
Top Ten Corporate Fixed Maturity, AFS and Equity Exposures by Sector | | | |
Financial services | $ | 5,774 | | $ | 5,312 | | 10.0 | % |
Technology and communications | 2,436 | | 2,177 | | 4.1 | % |
Consumer non-cyclical | 2,310 | | 2,104 | | 3.9 | % |
Utilities | 2,161 | | 1,912 | | 3.6 | % |
Capital goods | 1,549 | | 1,425 | | 2.7 | % |
Consumer cyclical | 1,265 | | 1,159 | | 2.2 | % |
Energy | 1,227 | | 1,123 | | 2.1 | % |
Basic industry | 1,003 | | 927 | | 1.7 | % |
Transportation | 783 | | 696 | | 1.3 | % |
Other | 747 | | 694 | | 1.3 | % |
Total | $ | 19,255 | | $ | 17,529 | | 32.9 | % |
Top Ten Exposures by Issuer [1] | | | |
Goldman Sachs Group Inc. | $ | 377 | | $ | 349 | | 0.7 | % |
Government of Canada | 241 | | 234 | | 0.4 | % |
NextEra Energy Inc. | 219 | | 203 | | 0.4 | % |
UBS Group AG | 203 | | 187 | | 0.4 | % |
Morgan Stanley | 201 | | 181 | | 0.3 | % |
Penske Corporation | 175 | | 169 | | 0.3 | % |
Eversource Energy | 174 | | 165 | | 0.3 | % |
Toronto Dominion Bank | 183 | | 163 | | 0.3 | % |
Philip Morris International Inc. | 165 | | 162 | | 0.3 | % |
HarbourVest Structured Solutions IV Holdings | 158 | | 157 | | 0.3 | % |
Total | $ | 2,096 | | $ | 1,970 | | 3.7 | % |
[1]Includes corporate bonds, municipal bonds, bonds issued by foreign government/government agencies, and equity securities excluding exchange-traded mutual funds.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
APPENDIX
BASIS OF PRESENTATION AND DEFINITIONS
All amounts are in millions, except for per share and ratio information, unless otherwise stated. Amounts presented throughout this document have been rounded for presentation purposes.
The Hartford Financial Services Group, Inc. (the "Company", "we", or "our") currently conducts business principally in five reporting segments: Commercial Lines, Personal Lines, Property & Casualty Other Operations ("P&C Other Operations"), Group Benefits and Hartford Funds, as well as a Corporate category.
Property & Casualty ("P&C") businesses consist of three reporting segments: Commercial Lines, Personal Lines and P&C Other Operations. Commercial Lines provides workers’ compensation, property, automobile, general liability, umbrella, professional liability, bond, marine, livestock and accident and health reinsurance to businesses in the United States ("U.S.") and internationally. Commercial Lines generally consists of products written for small businesses, middle market companies as well as national and multi-national accounts, largely distributed through retail agents and brokers, wholesale agents and global and specialty reinsurance brokers. Small commercial and middle market lines within middle & large commercial are generally referred to as standard commercial lines. Global specialty provides a variety of customized insurance products, including reinsurance. Personal Lines provides automobile, homeowners and personal umbrella coverages to individuals across the U.S., including a special program designed exclusively for members of AARP. P&C Other Operations includes certain property and casualty operations, managed by the Company, that have discontinued writing new business and represent approximately 95% of the Company's asbestos and environmental exposures, before considering losses ceded to the A&E ADC.
Group Benefits provides group life, accident and disability coverage, group retiree health and voluntary benefits to individual members of employer groups and associations. Group Benefits offers disability underwriting, administration, claims processing and reinsurance to other insurers and self-funded employer plans.
Hartford Funds provides investment management, administration, distribution and related services to investors through investment products in domestic markets. Mutual fund and exchange-traded funds are sold primarily through retail, bank trust and registered investment advisor channels.
The Company includes in the Corporate category reserves for run-off structured settlement and terminal funding agreement liabilities, restructuring costs, capital raising activities (including equity financing, debt financing and related interest expense), transaction expenses incurred in connection with an acquisition, certain M&A costs, purchase accounting adjustments related to goodwill, and other expenses not allocated to the reporting segments. Corporate also includes investment management fees and expenses related to managing third party assets.
Certain operating and statistical measures for P&C Commercial Lines and Personal Lines have been incorporated herein to provide supplemental data that indicates current trends in the Company's business. These measures include net new business premium, gross new business premium, renewal written price increases, policy count retention, premium retention, and policies in-force.
•Net new business premium represents the amount of premiums charged, after ceded reinsurance, for policies issued to customers who were not insured with the Company in the previous policy term. Net new business premium plus renewal written premium equals total written premium.
•Gross new business premium represents the amount of premiums charged, before ceded reinsurance, for policies issued to customers who were not insured with the Company in the previous policy term. Gross new business premium plus gross renewal written premium less ceded reinsurance equals total written premium. For global specialty, gross new business premium is used by management, as it is thought to be more indicative of new business growth trends, in part because global specialty includes the Global Re assumed reinsurance book of business.
•Renewal written price increases for Commercial Lines represents the combined effect of rate changes and individual risk pricing decisions per unit of exposure since the prior year on policies that renewed and includes amount of insurance, which is a component of change in exposure and offsets increases in loss cost trends due to inflation. For Personal Lines, renewal written price increases represents the total change in premium per policy since the prior year on those policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Lines, other changes in exposure include, but are not limited to, the effect of changes in number of drivers, vehicles and incidents, as well as changes in customer policy elections, such as deductibles and limits.
•Policy count retention represents the ratio of the number of renewal policies issued during the current year period divided by the number of policies issued in the previous calendar period before considering policies cancelled subsequent to renewal.
•Premium retention for middle and large commercial, represents the ratio of prior period premiums that were successfully renewed divided by premiums associated with policies available for renewal in the current period. Premium retention excludes premium amounts from annual audits, renewal written price increases and changes in exposure, including amount of insurance. Premium Retention statistics are subject to change from period to period based on a number of factors, including the effect of subsequent cancellations and non-renewals.
•Policies-in-force represents the number of policies with coverage in effect as of the end of the period. The number of policies in force is a growth measure used for Personal Lines and standard commercial lines (small commercial and middle market lines within middle & large commercial) and is affected by both new business growth and policy count retention.
The Company, along with others in the property and casualty insurance industry, uses underwriting ratios as measures of performance. The loss and loss adjustment expense ratio is the ratio of losses and loss adjustment expenses to earned premiums. The expense ratio is the ratio of underwriting expenses less fee income to earned premiums. Underwriting expenses included in the expense ratio consist of amortization of deferred policy acquisition costs and insurance operating costs and expenses, including certain centralized services and bad debt expense, but excluding integration and other non-recurring M&A costs. The policyholder dividend ratio is the ratio of policyholder dividends to earned premiums. The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. These ratios are relative measurements that describe the related cost of losses, expenses and policyholder dividends for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses. The current accident year catastrophe ratio (a component of the loss ratio) represents the ratio of catastrophe losses and loss adjustment expenses incurred in the current accident year to earned premiums. The prior accident year loss and loss adjustment expense ratio (a component of the loss ratio) represents the increase (decrease) in the estimated cost of settling catastrophe and non-catastrophe claims incurred in prior accident years as recorded in the current calendar year divided by earned premiums.
A catastrophe is a severe loss, resulting from natural or man-made events, including risks such as fire, earthquake, windstorm, explosion, terrorist attack, civil unrest and similar events. Each catastrophe has unique characteristics and the events are unpredictable as to timing or loss amount. Catastrophe losses are not included in either earnings or in losses and loss adjustment expense reserves prior to occurrence of the catastrophe event. The Company believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings. For U.S. events, 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, as defined by the Property Claim Service office of Verisk. For international events, the Company's approach is similar, informed, in part, by how Lloyd's of London defines major losses and, consistent with that definition, incurred losses arising from the Ukraine conflict have been accounted for as catastrophe losses. The Company does not treat incurred benefits and losses arising from the COVID-19 pandemic as catastrophe losses.
The Company, along with others in the insurance industry, use loss and expense ratios as measures of the Group Benefits segment's performance. The loss ratio is the ratio of benefits, losses and loss adjustment expenses, excluding those related to buyout premiums, to premiums and other considerations, excluding buyout premiums. The expense ratio is the ratio of insurance operating costs and other expenses (excluding integration and other non-recurring M&A costs) to premiums and other considerations, excluding buyout premiums. Buyout premiums represent takeover of open claim liabilities and other non-recurring premium amounts.
The Hartford Funds segment provides supplemental data on sales, redemptions, net flows and account value that indicate current trends in that segment.
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES
The Company uses non-GAAP and other financial measures in this Investor Financial Supplement to assist investors in analyzing the Company's operating performance. Because the Company's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing the Company's non-GAAP and other financial measures to those of other companies. Non-GAAP measures are indicated with an asterisk the first time they appear in this document.
Core earnings- The Hartford uses the non-GAAP measure core earnings as an important measure of the Company’s operating performance. The Hartford believes that core earnings provides investors with a valuable measure of the performance of the Company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain items. Therefore, the following items are excluded from core earnings:
•Certain realized gains and losses - Generally realized gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses that tend to be highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income.
•Restructuring and other costs - Costs incurred as part of a restructuring plan are not a recurring operating expense of the business.
•Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before maturity, these losses are not a recurring operating expense of the business.
•Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a business or to reinsure loss reserves, are not a recurring operating expense of the business.
•Integration and other non-recurring M&A costs - These costs, including transaction costs incurred in connection with an acquired business, are incurred over a short period of time and do not represent an ongoing operating expense of the business.
•Change in loss reserves upon acquisition of a business - These changes in loss reserves are excluded from core earnings because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition.
•Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance agreements economically transfer risk to the reinsurers and excluding the deferred gain on retroactive reinsurance and related amortization of the deferred gain from core earnings provides greater insight into the economics of the business.
•Change in valuation allowance on deferred taxes related to non-core components of before tax income - These changes in valuation allowances are excluded from core earnings because they relate to non-core components of before tax income, such as tax attributes like capital loss carryforwards.
•Results of discontinued operations - These results are excluded from core earnings for businesses sold or held for sale because such results could obscure the ability to compare period over period results for our ongoing businesses.
In addition to the above components of net income available to common stockholders that are excluded from core earnings, preferred stock dividends declared, which are excluded from net income, are included in the determination of core earnings. Preferred stock dividends are a cost of financing more akin to interest expense on debt and are expected to be a recurring expense as long as the preferred stock is outstanding.
Net income (loss) and net income (loss) available to common stockholders are the most directly comparable U.S. GAAP measures to core earnings. Core earnings should not be considered as a substitute for net income (loss) or net income (loss) available to common stockholders and does not reflect the overall profitability of the Company’s business. Therefore, The Hartford believes that it is useful for investors to evaluate net income (loss), net income (loss) available to common stockholders, and core earnings when reviewing the Company’s performance. A reconciliation of net income (loss) available to common stockholders to core earnings is set forth on page 2. Core earnings per share-This is a non-GAAP per share measure calculated using the non-GAAP financial measure core earnings rather than the GAAP measure net income. The Company believes that core earnings per share provides investors with a valuable measure of the Company's operating performance for the same reasons applicable to its underlying measure, core earnings. Net income (loss) available to common stockholders per share is the most directly comparable U.S. GAAP measure. Core earnings per share should not be considered as a substitute for net income (loss) available to common stockholders per share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate net income (loss) available to common stockholders per share and core earnings per share when reviewing our performance. A reconciliation of net income (loss) available to common stockholders per share to core earnings per share is set forth below.
BASIC EARNINGS PER SHARE
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net Income available to common stockholders per share | $ | 2.12 | | $ | 1.75 | | $ | 1.69 | | $ | 1.85 | | $ | 1.04 | | $ | 1.34 | | $ | 1.32 | | | | $ | 5.55 | | $ | 3.70 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Adjustments made to reconcile net income available to common stockholders per share to core earnings per share: | | | | | | | | | | | |
Net realized losses (gains), excluded from core earnings, before tax | 0.25 | | 0.17 | | 0.02 | | (0.07) | | 0.52 | | 1.03 | | 0.44 | | | | 0.44 | | 1.98 | |
Restructuring and other costs, before tax | — | | 0.01 | | — | | 0.01 | | 0.01 | | 0.01 | | 0.02 | | | | 0.01 | | 0.03 | |
Loss on extinguishment of debt, before tax | — | | — | | — | | — | | — | | 0.03 | | — | | | | — | | 0.03 | |
Integration and other non-recurring M&A costs, before tax | 0.01 | | 0.01 | | 0.01 | | 0.02 | | 0.02 | | 0.02 | | 0.02 | | | | 0.02 | | 0.05 | |
| | | | | | | | | | | |
Change in deferred gain on retroactive reinsurance, before tax | — | | — | | — | | 0.72 | | — | | — | | — | | | | — | | — | |
Income tax benefit on items excluded from core earnings | (0.06) | | (0.04) | | (0.01) | | (0.17) | | (0.12) | | (0.24) | | (0.12) | | | | (0.10) | | (0.45) | |
Core earnings per share | $ | 2.32 | | $ | 1.90 | | $ | 1.71 | | $ | 2.36 | | $ | 1.47 | | $ | 2.19 | | $ | 1.68 | | | | $ | 5.92 | | $ | 5.34 | |
Core earnings per diluted share-This non-GAAP per share measure is calculated using the non-GAAP financial measure core earnings rather than the GAAP measure net income. The Company believes that core earnings per diluted share provides investors with a valuable measure of the Company's operating performance for the same reasons applicable to its underlying measure, core earnings. Net income (loss) available to common stockholders per diluted common share is the most directly comparable GAAP measure. Core earnings per diluted share should not be considered as a substitute for net income (loss) available to common stockholders per diluted common share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate net income (loss) available to common stockholders per diluted common share and core earnings per diluted share when reviewing the Company's performance. A reconciliation of net income available to common stockholders per diluted share to core earnings per diluted share is set forth below.
DILUTED EARNINGS PER SHARE
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net Income available to common stockholders per diluted share | $ | 2.09 | | $ | 1.73 | | $ | 1.66 | | $ | 1.82 | | $ | 1.02 | | $ | 1.32 | | $ | 1.30 | | | | $ | 5.48 | | $ | 3.65 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Adjustments made to reconcile net income available to common stockholders per diluted share to core earnings per diluted share: | | | | | | | | | | | |
Net realized losses (gains), excluded from core earnings, before tax | 0.25 | | 0.17 | | 0.02 | | (0.07) | | 0.51 | | 1.01 | | 0.43 | | | | 0.43 | | 1.95 | |
Restructuring and other costs, before tax | — | | 0.01 | | — | | 0.01 | | 0.01 | | 0.01 | | 0.01 | | | | 0.01 | | 0.03 | |
Loss on extinguishment of debt, before tax | — | | — | | — | | — | | — | | 0.03 | | — | | | | — | | 0.03 | |
| | | | | | | | | | | |
Integration and other non-recurring M&A costs, before tax | 0.01 | | 0.01 | | 0.01 | | 0.02 | | 0.02 | | 0.02 | | 0.01 | | | | 0.02 | | 0.05 | |
| | | | | | | | | | | |
Change in deferred gain on retroactive reinsurance, before tax | — | | — | | — | | 0.71 | | — | | — | | — | | | | — | | — | |
Income tax benefit on items excluded from core earnings | (0.06) | | (0.04) | | (0.01) | | (0.17) | | (0.11) | | (0.23) | | (0.09) | | | | (0.10) | | (0.44) | |
Core earnings per diluted share | $ | 2.29 | | $ | 1.88 | | $ | 1.68 | | $ | 2.32 | | $ | 1.45 | | $ | 2.16 | | $ | 1.66 | | | | $ | 5.84 | | $ | 5.27 | |
Book value per diluted share (excluding AOCI)-This is a non-GAAP per share measure that is calculated by dividing (a) common stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding and dilutive potential common shares. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes that excluding AOCI from the numerator is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per diluted share is the most directly comparable U.S. GAAP measure. Reconciliations of book value per common share and book value per diluted share to book value per common share, excluding AOCI and book value per diluted share, excluding AOCI, are set forth on page 1. Core Earnings Return on Equity- The Company provides different measures of the return on stockholders' equity (ROE). Core earnings ROE is calculated based on non-GAAP financial measures. Core earnings ROE is calculated by dividing (a) the non-GAAP measure core earnings for the prior four fiscal quarters by (b) the non-GAAP measure average common stockholders' equity, excluding AOCI. Net income ROE is the most directly comparable U.S. GAAP measure. The Company excludes AOCI in the calculation of core earnings ROE to provide investors with a measure of how effectively the Company is investing the portion of the Company's net worth that is primarily attributable to the Company's business operations. The Company provides to investors return on equity measures based on its non-GAAP core earnings financial measure for the reasons set forth in the core earnings definition. A reconciliation of Net income (loss) ROE to Core earnings ROE is set forth below:
| | | | | | | | | | | | | | | | | | | | | | | | |
| LAST TWELVE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | |
Net income ROE | 17.7 | % | 14.4 | % | 12.8 | % | 11.7 | % | 12.8 | % | 13.1 | % | 15.5 | % | |
| | | | | | | | |
Adjustments to reconcile net income (loss) ROE to core earnings ROE: | | | | | | | | |
Net realized losses (gains) excluded from core earnings, before tax | 0.9 | % | 1.5 | % | 3.3 | % | 4.1 | % | 2.9 | % | 1.3 | % | (1.7 | %) | |
| | | | | | | | |
Restructuring and other costs, before tax | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | — | % | — | % | |
Loss on extinguishment of debt, before tax | — | % | — | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | — | % | |
| | | | | | | | |
| | | | | | | | |
Integration and other non-recurring M&A costs, before tax | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.2 | % | 0.3 | % | |
| | | | | | | | |
Change in deferred gain on retroactive reinsurance, before tax | 1.8 | % | 1.7 | % | 1.5 | % | 1.5 | % | 1.1 | % | 1.3 | % | 1.5 | % | |
Income tax benefit on items not included in core earnings | (0.6 | %) | (0.8 | %) | (1.1 | %) | (1.3 | %) | (0.9 | %) | (0.6 | %) | (0.1 | %) | |
| | | | | | | | |
| | | | | | | | |
Impact of AOCI, excluded from denominator of core earnings ROE | (5.1 | %) | (3.4 | %) | (2.5 | %) | (1.8 | %) | (1.9 | %) | (1.4 | %) | (0.7 | %) | |
Core earnings ROE | 14.9 | % | 13.6 | % | 14.3 | % | 14.5 | % | 14.3 | % | 14.0 | % | 14.8 | % | |
Common stockholders' equity, excluding AOCI- This non-GAAP measure is calculated as total stockholders' equity less preferred stock and AOCI. Total stockholders' equity is the most directly comparable GAAP measure. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes that excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. A reconciliation of common stockholders' equity, excluding AOCI to its most directly comparable GAAP measure, total stockholders' equity, is set forth on page 4. Total capitalization, excluding AOCI, net of tax- This non-GAAP measure is calculated as total debt plus total stockholders' equity, excluding the impacts of AOCI included in stockholders’ equity. Total capitalization, including AOCI, net of tax is the most directly comparable GAAP measure. Total debt to capitalization ratio excluding, AOCI is calculated by dividing total debt to total capitalization excluding, AOCI, net of tax. The Company provides this measure to enable investors to analyze the Company’s financial leverage. The Company believes that excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Reconciliations of capitalization metrics, are set forth on page 5. Underwriting gain (loss)- The Hartford's management evaluates profitability of the Commercial and Personal Lines segments primarily on the basis of underwriting gain or loss. Underwriting gain (loss) is a before tax non-GAAP measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of The Hartford's pricing. Underwriting profitability over time is also greatly influenced by The Hartford's underwriting discipline, as management strives to manage exposure to loss through favorable risk selection and diversification, effective management of claims, use of reinsurance and its ability to manage its expenses. The Hartford believes that underwriting gain (loss) provides investors with a valuable measure of profitability, before tax, derived from underwriting activities, which are managed separately from the Company's investing activities. Reconciliations of net income (loss) to underwriting gain (loss) for the Company's P&C businesses are set forth below.
Underlying underwriting gain (loss)- This non-GAAP measure of underwriting profitability represents underwriting gain (loss) before current accident year catastrophes, PYD and current accident year change in loss reserves upon acquisition of a business. The most directly comparable GAAP measure is net income (loss). The Company believes underlying underwriting gain (loss) is important to understand the Company’s periodic earnings because the volatile and unpredictable nature (i.e., the timing and amount) of catastrophes and prior accident year reserve development could obscure underwriting trends. The changes to loss reserves upon acquisition of a business are also excluded from underlying underwriting gain (loss) because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. Reconciliation of net income (loss) to underlying underwriting gain (loss) for the Company's P&C businesses are set forth below.
PROPERTY & CASUALTY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net income | $ | 516 | | $ | 407 | | $ | 426 | | $ | 426 | | $ | 256 | | $ | 375 | | $ | 468 | | | | $ | 1,349 | | $ | 1,099 | |
Adjustments to reconcile net income to underlying underwriting gain: | | | | | | | | | | | |
Net investment income | (460) | | (415) | | (392) | | (469) | | (360) | | (407) | | (382) | | | | (1,267) | | (1,149) | |
Net realized losses (gains) | 45 | | 57 | | 23 | | (3) | | 110 | | 225 | | 104 | | | | 125 | | 439 | |
Net servicing and other expense (income) | (5) | | (7) | | (6) | | (2) | | (3) | | (2) | | 2 | | | | (18) | | (3) | |
| | | | | | | | | | | |
Income tax expense | 127 | | 95 | | 100 | | 107 | | 76 | | 97 | | 116 | | | | 322 | | 289 | |
Underwriting gain | 223 | | 137 | | 151 | | 59 | | 79 | | 288 | | 308 | | | | 511 | | 675 | |
Current accident year catastrophes | 184 | | 226 | | 185 | | 135 | | 293 | | 123 | | 98 | | | | 595 | | 514 | |
Prior accident year development | (43) | | (39) | | — | | 183 | | (53) | | (58) | | (36) | | | | (82) | | (147) | |
| | | | | | | | | | | |
Underlying underwriting gain | $ | 364 | | $ | 324 | | $ | 336 | | $ | 377 | | $ | 319 | | $ | 353 | | $ | 370 | | | | $ | 1,024 | | $ | 1,042 | |
COMMERCIAL LINES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net income | $ | 519 | | $ | 458 | | $ | 421 | | $ | 566 | | $ | 286 | | $ | 389 | | $ | 383 | | | | $ | 1,398 | | $ | 1,058 | |
Adjustments to reconcile net income to underlying underwriting gain: | | | | | | | | | | | |
| | | | | | | | | | | |
Net investment income | (395) | | (364) | | (338) | | (411) | | (315) | | (356) | | (333) | | | | (1,097) | | (1,004) | |
Net realized losses | 38 | | 51 | | 19 | | 1 | | 95 | | 198 | | 91 | | | | 108 | | 384 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Other expense (income) | (2) | | — | | — | | 2 | | 3 | | 1 | | 6 | | | | (2) | | 10 | |
Income tax expense | 130 | | 109 | | 100 | | 146 | | 84 | | 101 | | 95 | | | | 339 | | 280 | |
Underwriting gain | 290 | | 254 | | 202 | | 304 | | 153 | | 333 | | 242 | | | | 746 | | 728 | |
Current accident year catastrophes | 115 | | 123 | | 138 | | 114 | | 179 | | 67 | | 81 | | | | 376 | | 327 | |
Prior accident year development | (46) | | (38) | | (23) | | (68) | | (42) | | (88) | | (33) | | | | (107) | | (163) | |
| | | | | | | | | | | |
Underlying underwriting gain | $ | 359 | | $ | 339 | | $ | 317 | | $ | 350 | | $ | 290 | | $ | 312 | | $ | 290 | | | | $ | 1,015 | | $ | 892 | |
PERSONAL LINES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net income (loss) | $ | (12) | | $ | (60) | | $ | (1) | | $ | 44 | | $ | (36) | | $ | 6 | | $ | 77 | | | | $ | (73) | | $ | 47 | |
Adjustments to reconcile net income (loss) to underlying underwriting gain (loss): | | | | | | | | | | | |
| | | | | | | | | | | |
Net investment income | (47) | | (34) | | (38) | | (41) | | (31) | | (35) | | (33) | | | | (119) | | (99) | |
Net realized losses (gains) | 5 | | 5 | | 1 | | (3) | | 11 | | 18 | | 9 | | | | 11 | | 38 | |
| | | | | | | | | | | |
Net servicing and other expense (income) | (3) | | (7) | | (6) | | (4) | | (6) | | (3) | | (4) | | | | (16) | | (13) | |
Income tax expense (benefit) | (5) | | (17) | | (1) | | 11 | | (10) | | 1 | | 20 | | | | (23) | | 11 | |
Underwriting gain (loss) | (62) | | (113) | | (45) | | 7 | | (72) | | (13) | | 69 | | | | (220) | | (16) | |
Current accident year catastrophes | 69 | | 103 | | 47 | | 21 | | 114 | | 56 | | 17 | | | | 219 | | 187 | |
Prior accident year development | 1 | | (3) | | 20 | | 1 | | (11) | | — | | (3) | | | | 18 | | (14) | |
Underlying underwriting gain (loss) | $ | 8 | | $ | (13) | | $ | 22 | | $ | 29 | | $ | 31 | | $ | 43 | | $ | 83 | | | | $ | 17 | | $ | 157 | |
P&C OTHER OPERATIONS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net income (loss) | $ | 9 | | $ | 9 | | $ | 6 | | $ | (184) | | $ | 6 | | $ | (20) | | $ | 8 | | | | $ | 24 | | $ | (6) | |
Adjustments to reconcile net income (loss) to underlying underwriting loss: | | | | | | | | | | | |
Net investment income | (18) | | (17) | | (16) | | (17) | | (14) | | (16) | | (16) | | | | (51) | | (46) | |
Net realized losses (gains) | 2 | | 1 | | 3 | | (1) | | 4 | | 9 | | 4 | | | | 6 | | 17 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Income tax expense (benefit) | 2 | | 3 | | 1 | | (50) | | 2 | | (5) | | 1 | | | | 6 | | (2) | |
Underwriting gain (loss) | (5) | | (4) | | (6) | | (252) | | (2) | | (32) | | (3) | | | | (15) | | (37) | |
| | | | | | | | | | | |
Prior accident year development | 2 | | 2 | | 3 | | 250 | | — | | 30 | | — | | | | 7 | | 30 | |
Underlying underwriting loss | $ | (3) | | $ | (2) | | $ | (3) | | $ | (2) | | $ | (2) | | $ | (2) | | $ | (3) | | | | $ | (8) | | $ | (7) | |
Underlying combined ratio-This non-GAAP financial measure of underwriting results represents the combined ratio before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable GAAP measure. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve development. The changes to loss reserves upon acquisition of a business are excluded from underlying combined ratio because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of the combined ratio to the underlying combined ratio for Property & Casualty, Commercial Lines, and Personal Lines is set forth on pages 10, 13 and 17, respectively.
Core earnings margin- The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues, excluding buyouts and realized gains (losses). Net income margin, calculated by dividing net income by revenues, is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin 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) as well as other items excluded in the calculation of core earnings. Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance. A reconciliation of net income margin to core earnings margin is set forth below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Net income margin | 8.5 | % | 7.0 | % | 5.3 | % | 8.4 | % | 5.4 | % | 6.7 | % | (0.5) | % | | | 6.9 | % | 3.9 | % |
Adjustments to reconcile net income margin to core earnings margin: | | | | | | | | | | | |
Net realized losses (gains), before tax | 1.5 | % | 0.8 | % | (0.3) | % | (0.1) | % | 2.3 | % | 4.1 | % | 1.0 | % | | | 0.8 | % | 2.5 | % |
Integration and other non-recurring M&A costs, before tax | 0.1 | % | — | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | | | 0.1 | % | 0.1 | % |
Income tax expense (benefit) | (0.3) | % | (0.2) | % | 0.1 | % | 0.1 | % | (0.6) | % | (1.0) | % | (0.2) | % | | | (0.2) | % | (0.6) | % |
| | | | | | | | | | | |
Core earnings margin | 9.8 | % | 7.6 | % | 5.2 | % | 8.5 | % | 7.2 | % | 9.9 | % | 0.4 | % | | | 7.6 | % | 5.9 | % |
Return on Assets ("ROA"), Core Earnings- The Company uses this non-GAAP financial measure to evaluate, and believes is an important measure of, the Hartford Funds segment’s operating performance. ROA, core earnings is calculated by dividing annualized core earnings by a daily average AUM. ROA is the most directly comparable U.S. GAAP measure. The Company believes that ROA, core earnings, provides investors with a valuable measure of the performance of the Hartford Funds segment because it reveals trends in our business that may be obscured by the effect of items excluded in the calculation of core earnings. ROA, core earnings, should not be considered as a substitute for ROA and does not reflect the overall profitability of our Hartford Funds business. Therefore, the Company believes it is important for investors to evaluate both ROA, and ROA, core earnings when reviewing the Hartford Funds segment performance. A reconciliation of ROA to ROA, core earnings is set forth below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Return on Assets ("ROA") | 12.7 | | 14.1 | | 12.9 | | 14.5 | | 12.6 | | 9.9 | | 11.2 | | | | 13.2 | | 11.2 | |
Adjustments to reconcile ROA to ROA, core earnings: | | | | | | | | | | | |
Effect of net realized losses (gains), excluded from core earnings, before tax | 1.3 | | (0.3) | | (1.6) | | (2.2) | | 2.8 | | 3.9 | | 2.4 | | | | (0.2) | | 3.0 | |
Effect of income tax expense (benefit) | — | | — | | 0.3 | | 0.3 | | (0.9) | | (0.9) | | (0.3) | | | | 0.1 | | (0.7) | |
Return on Assets ("ROA"), core earnings | 14.0 | | 13.8 | | 11.6 | | 12.6 | | 14.5 | | 12.9 | | 13.3 | | | | 13.1 | | 13.5 | |
Net investment income, excluding limited partnerships and other alternative investments- This non-GAAP measure is the amount of net investment income, on a Consolidated, P&C or Group Benefits level earned from invested assets, excluding the net investment income related to limited partnerships and other alternative investments. The Company believes that net investment income, excluding limited partnerships and other alternative instruments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative instruments. Net investment income is the most directly comparable GAAP measure. A reconciliation of net investment income to net investment income, excluding limited partnerships and other alternative investments is set forth below.
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Total net investment income | $ | 597 | | $ | 540 | | $ | 515 | | $ | 640 | | $ | 487 | | $ | 541 | | $ | 509 | | | | $ | 1,652 | | $ | 1,537 | |
Adjustment for income from limited partnerships and other alternative investments | (72) | | (32) | | (26) | | (169) | | (62) | | (158) | | (126) | | | | (130) | | (346) | |
Net investment income excluding limited partnerships and other alternative investments | $ | 525 | | $ | 508 | | $ | 489 | | $ | 471 | | $ | 425 | | $ | 383 | | $ | 383 | | | | $ | 1,522 | | $ | 1,191 | |
PROPERTY & CASUALTY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Total net investment income | $ | 460 | | $ | 415 | | $ | 392 | | $ | 469 | | $ | 360 | | $ | 407 | | $ | 382 | | | | $ | 1,267 | | $ | 1,149 | |
Adjustment for income from limited partnerships and other alternative investments | (60) | | (26) | | (21) | | (119) | | (44) | | (123) | | (97) | | | | (107) | | (264) | |
Net investment income excluding limited partnerships and other alternative investments | $ | 400 | | $ | 389 | | $ | 371 | | $ | 350 | | $ | 316 | | $ | 284 | | $ | 285 | | | | $ | 1,160 | | $ | 885 | |
GROUP BENEFITS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Total net investment income | $ | 121 | | $ | 113 | | $ | 110 | | $ | 154 | | $ | 117 | | $ | 130 | | $ | 123 | | | | $ | 344 | | $ | 370 | |
Adjustment for income from limited partnerships and other alternative investments | (12) | | (6) | | (5) | | (50) | | (18) | | (35) | | (29) | | | | (23) | | (82) | |
Net investment income excluding limited partnerships and other alternative investments | $ | 109 | | $ | 107 | | $ | 105 | | $ | 104 | | $ | 99 | | $ | 95 | | $ | 94 | | | | $ | 321 | | $ | 288 | |
Annualized investment yield, excluding limited partnerships and other alternative investments-This non-GAAP measure is calculated as (a) the annualized net investment income, on a Consolidated, P&C or Group Benefits level, excluding limited partnerships and other alternative investments, divided by (b) the monthly average invested assets at amortized cost, as applicable, excluding derivatives book value and limited partnerships and other alternative investments. The Company believes that annualized investment yield, excluding limited partnerships and other alternative investments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments. Annualized investment yield is the most directly comparable GAAP measure. A reconciliation of annualized investment yield to annualized investment yield, excluding limited partnerships and other alternative investments is set forth below.
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Annualized investment yield | 4.2 | % | 3.9 | % | 3.7 | % | 4.6 | % | 3.5 | % | 3.9 | % | 3.6 | % | | | 3.9 | % | 3.7 | % |
Adjustment for income from limited partnerships and other alternative investments | (0.1) | % | 0.1 | % | 0.1 | % | (0.9) | % | (0.2) | % | (0.9) | % | (0.7) | % | | | — | % | (0.6) | % |
Annualized investment yield excluding limited partnerships and other alternative investments | 4.1 | % | 4.0 | % | 3.8 | % | 3.7 | % | 3.3 | % | 3.0 | % | 2.9 | % | | | 3.9 | % | 3.1 | % |
PROPERTY & CASUALTY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Annualized investment yield | 4.3 | % | 3.9 | % | 3.6 | % | 4.4 | % | 3.4 | % | 3.9 | % | 3.7 | % | | | 3.9 | % | 3.7 | % |
Adjustment for income from limited partnerships and other alternative investments | (0.3) | % | 0.1 | % | 0.1 | % | (0.8) | % | (0.1) | % | (1.0) | % | (0.8) | % | | | — | % | (0.7) | % |
Annualized investment yield excluding limited partnerships and other alternative investments | 4.0 | % | 4.0 | % | 3.7 | % | 3.6 | % | 3.3 | % | 2.9 | % | 2.9 | % | | | 3.9 | % | 3.0 | % |
GROUP BENEFITS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2023 | Jun 30 2023 | Mar 31 2023 | Dec 31 2022 | Sept 30 2022 | Jun 30 2022 | Mar 31 2022 | | | Sept 30 2023 | Sept 30 2022 |
Annualized investment yield | 4.1 | % | 3.9 | % | 3.8 | % | 5.3 | % | 4.0 | % | 4.4 | % | 4.2 | % | | | 3.9 | % | 4.2 | % |
Adjustment for income from limited partnerships and other alternative investments | — | % | 0.1 | % | 0.1 | % | (1.5) | % | (0.4) | % | (1.0) | % | (0.8) | % | | | 0.1 | % | (0.7) | % |
Annualized investment yield excluding limited partnerships and other alternative investments | 4.1 | % | 4.0 | % | 3.9 | % | 3.8 | % | 3.6 | % | 3.4 | % | 3.4 | % | | | 4.0 | % | 3.5 | % |
v3.23.3
Cover Document and Entity information
|
Oct. 26, 2023 |
Document Type |
8-K
|
Document Period End Date |
Oct. 26, 2023
|
Entity Registrant Name |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
Entity Incorporation, State or Country Code |
DE
|
Entity File Number |
001-13958
|
Entity Tax Identification Number |
13-3317783
|
Entity Address, Address Line One |
One Hartford Plaza
|
Entity Address, City or Town |
Hartford
|
Entity Address, State or Province |
CT
|
Entity Address, Postal Zip Code |
06155
|
City Area Code |
860
|
Local Phone Number |
547-5000
|
Written Communications |
false
|
Soliciting Material |
false
|
Pre-commencement Tender Offer |
false
|
Pre-commencement Issuer Tender Offer |
false
|
Entity Emerging Growth Company |
false
|
Amendment Flag |
false
|
Entity Central Index Key |
0000874766
|
Common Stock, par value $0.01 per share |
|
Title of 12(b) Security |
Common Stock, par value $0.01 per share
|
Trading Symbol |
HIG
|
Security Exchange Name |
NYSE
|
6.10% Notes due October 1, 2041 |
|
Title of 12(b) Security |
6.10% Notes due October 1, 2041
|
Trading Symbol |
HIG 41
|
Security Exchange Name |
NYSE
|
Depositary Shares, Each Representing a 1/1,00th Interest in a Share of 6.000% Non-Cumulative Preferred Stock, Series G, par value $0.01 per share |
|
Title of 12(b) Security |
Depositary Shares, Each Representing a 1/1,000th Interest in a Share of 6.000% Non-Cumulative Preferred Stock, Series G, par value $0.01 per share
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Trading Symbol |
HIG PR G
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NYSE
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Hartford Financial Servi... (NYSE:HIG-G)
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Hartford Financial Servi... (NYSE:HIG-G)
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