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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Hartford Financial Services Group Inc | NYSE:HIG | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
1.56 | 1.55% | 102.17 | 102.67 | 101.30 | 101.50 | 1,924,823 | 22:30:00 |
☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
|
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13-3317783
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(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
Title of each class
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Trading Symbol(s)
|
Name of each exchange on which registered
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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
|
7.875% Fixed-to-Floating Rate Junior Subordinated Debentures due 2042
|
HGH
|
The New York Stock Exchange
|
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:
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• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Yes
|
☒
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No
|
☐
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• whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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Yes
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☒
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No
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☐
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• whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
|
☐
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Smaller reporting company
|
☐
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Emerging growth company
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☐
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• whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Yes
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☐
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No
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☒
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Item
|
Description
|
Page
|
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1.
|
FINANCIAL STATEMENTS
|
|
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
|
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
|
|
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CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF MARCH 31, 2020 AND DECEMBER 31, 2019
|
|
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
|
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CONDENSED CONOLIDATED STATEMENTS OF CASH FLOWS - FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
|
|
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
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3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
[a]
|
4.
|
CONTROLS AND PROCEDURES
|
|
|
|
|
1.
|
LEGAL PROCEEDINGS
|
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1A.
|
RISK FACTORS
|
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2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
6.
|
EXHIBITS
|
|
|
EXHIBITS INDEX
|
|
|
SIGNATURE
|
•
|
Risks relating to the pandemic caused by the spread of novel strain of coronavirus, specifically identified as the Coronavirus Disease 2019 (“COVID-19”) including impacts to the Company's insurance and product-related, regulatory/legal, recessionary and other global economic, capital and liquidity and operational risks
|
•
|
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 risks associated with the discontinuance of the London Inter-Bank Offered Rate ("LIBOR") on the securities we hold or may have issued, other financial instruments and any other assets and liabilities whose value is tied to LIBOR;
|
◦
|
the impacts associated with the withdrawal of the United Kingdom (“U.K.”) from the European Union (“E.U.”) on our international operations in the U.K. and E.U.
|
•
|
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 a pandemic, 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 storms, 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 property and casualty 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;
|
•
|
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, 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:
|
◦
|
risk 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 other-than-temporary impairments on available-for-sale securities;
|
◦
|
the potential for further impairments of our goodwill or the potential for changes in valuation allowances against deferred tax assets;
|
•
|
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, which may include acquisitions, divestitures or restructurings;
|
◦
|
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.
|
|
Three Months Ended March 31,
|
|||||
(in millions, except for per share data)
|
2020
|
2019
|
||||
|
(Unaudited)
|
|||||
Revenues
|
|
|
||||
Earned premiums
|
$
|
4,391
|
|
$
|
3,940
|
|
Fee income
|
320
|
|
314
|
|
||
Net investment income
|
459
|
|
470
|
|
||
Net realized capital (losses) gains
|
(231
|
)
|
163
|
|
||
Other revenues
|
17
|
|
53
|
|
||
Total revenues
|
4,956
|
|
4,940
|
|
||
Benefits, losses and expenses
|
|
|
||||
Benefits, losses and loss adjustment expenses
|
2,916
|
|
2,685
|
|
||
Amortization of deferred policy acquisition costs ("DAC")
|
437
|
|
355
|
|
||
Insurance operating costs and other expenses
|
1,176
|
|
1,048
|
|
||
Interest expense
|
64
|
|
64
|
|
||
Amortization of other intangible assets
|
19
|
|
13
|
|
||
Total benefits, losses and expenses
|
4,612
|
|
4,165
|
|
||
Income before income taxes
|
344
|
|
775
|
|
||
Income tax expense
|
71
|
|
145
|
|
||
Net income
|
273
|
|
630
|
|
||
Preferred stock dividends
|
5
|
|
5
|
|
||
Net income available to common stockholders
|
$
|
268
|
|
$
|
625
|
|
Net income available to common stockholders per common share
|
|
|
|
|||
Basic
|
$
|
0.75
|
|
$
|
1.74
|
|
Diluted
|
$
|
0.74
|
|
$
|
1.71
|
|
|
Three Months Ended March 31,
|
|||||
(in millions)
|
2020
|
2019
|
||||
|
(Unaudited)
|
|||||
Net income
|
$
|
273
|
|
$
|
630
|
|
Other comprehensive income (loss):
|
|
|
||||
Changes in net unrealized gain on fixed maturities
|
(1,057
|
)
|
679
|
|
||
Change in unrealized losses on fixed maturities for which an allowance for credit losses ("ACL") has been recorded
|
1
|
|
|
|
||
Changes in other-than-temporary impairment ("OTTI") losses recognized in other comprehensive income
|
|
1
|
|
|||
Changes in net gain on cash flow hedging instruments
|
44
|
|
5
|
|
||
Changes in foreign currency translation adjustments
|
(8
|
)
|
1
|
|
||
Changes in pension and other postretirement plan adjustments
|
11
|
|
8
|
|
||
OCI, net of tax
|
(1,009
|
)
|
694
|
|
||
Comprehensive income (loss)
|
$
|
(736
|
)
|
$
|
1,324
|
|
(in millions, except for share and per share data)
|
March 31,
2020 |
December 31, 2019
|
||||
|
(Unaudited)
|
|
||||
Assets
|
|
|||||
Investments:
|
|
|
||||
Fixed maturities, available-for-sale, at fair value (amortized cost of $39,473 and $40,078, and ACL of $12 and $0)
|
$
|
40,205
|
|
$
|
42,148
|
|
Fixed maturities, at fair value using the fair value option
|
8
|
|
11
|
|
||
Equity securities, at fair value
|
1,155
|
|
1,657
|
|
||
Mortgage loans (net of ACL of $21 and $0)
|
4,353
|
|
4,215
|
|
||
Limited partnerships and other alternative investments
|
1,839
|
|
1,758
|
|
||
Other investments
|
294
|
|
320
|
|
||
Short-term investments
|
2,505
|
|
2,921
|
|
||
Total investments
|
50,359
|
|
53,030
|
|
||
Cash
|
211
|
|
185
|
|
||
Restricted cash
|
90
|
|
77
|
|
||
Premiums receivable and agents' balances (net of ACL of $139 and $145)
|
4,558
|
|
4,384
|
|
||
Reinsurance recoverables (net of allowance for uncollectible reinsurance of $117 and $114)
|
5,596
|
|
5,527
|
|
||
Deferred policy acquisition costs
|
818
|
|
785
|
|
||
Deferred income taxes, net
|
502
|
|
299
|
|
||
Goodwill
|
1,913
|
|
1,913
|
|
||
Property and equipment, net
|
1,161
|
|
1,181
|
|
||
Other intangible assets, net
|
1,028
|
|
1,070
|
|
||
Other assets
|
2,488
|
|
2,366
|
|
||
Total assets
|
$
|
68,724
|
|
$
|
70,817
|
|
Liabilities
|
|
|
||||
Unpaid losses and loss adjustment expenses
|
$
|
36,582
|
|
$
|
36,517
|
|
Reserve for future policy benefits
|
629
|
|
635
|
|
||
Other policyholder funds and benefits payable
|
758
|
|
755
|
|
||
Unearned premiums
|
6,810
|
|
6,635
|
|
||
Short-term debt
|
—
|
|
500
|
|
||
Long-term debt
|
4,349
|
|
4,348
|
|
||
Other liabilities
|
4,330
|
|
5,157
|
|
||
Total liabilities
|
53,458
|
|
54,547
|
|
||
Commitments and Contingencies (Note 14)
|
|
|
||||
Stockholders’ Equity
|
|
|
||||
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 13,800 shares issued at March 31, 2020 and December 31, 2019, aggregate liquidation preference of $345
|
334
|
|
334
|
|
||
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 384,923,222 shares issued at March 31, 2020 and December 31, 2019
|
4
|
|
4
|
|
||
Additional paid-in capital
|
4,286
|
|
4,312
|
|
||
Retained earnings
|
12,819
|
|
12,685
|
|
||
Treasury stock, at cost — 26,988,876 and 25,352,977 shares
|
(1,220
|
)
|
(1,117
|
)
|
||
Accumulated other comprehensive income (loss), net of tax
|
(957
|
)
|
52
|
|
||
Total stockholders’ equity
|
15,266
|
|
16,270
|
|
||
Total liabilities and stockholders’ equity
|
$
|
68,724
|
|
$
|
70,817
|
|
|
Three Months Ended March 31,
|
|||||
(in millions, except for share data)
|
2020
|
2019
|
||||
|
(Unaudited)
|
|||||
Preferred Stock
|
$
|
334
|
|
$
|
334
|
|
Common Stock
|
4
|
|
4
|
|
||
Additional Paid-in Capital
|
|
|
||||
Additional Paid-in Capital, beginning of period
|
4,312
|
|
4,378
|
|
||
Issuance of shares under incentive and stock compensation plans
|
(79
|
)
|
(68
|
)
|
||
Stock-based compensation plans expense
|
53
|
|
55
|
|
||
Issuance of shares for warrant exercise
|
—
|
|
(36
|
)
|
||
Additional Paid-in Capital, end of period
|
4,286
|
|
4,329
|
|
||
Retained Earnings
|
|
|
||||
Retained Earnings, beginning of period
|
12,685
|
|
11,055
|
|
||
Cumulative effect of accounting changes, net of tax
|
(18
|
)
|
—
|
|
||
Adjusted balance, beginning of period
|
12,667
|
|
11,055
|
|
||
Net income
|
273
|
|
630
|
|
||
Dividends declared on preferred stock
|
(5
|
)
|
(5
|
)
|
||
Dividends declared on common stock
|
(116
|
)
|
(108
|
)
|
||
Retained Earnings, end of period
|
12,819
|
|
11,572
|
|
||
Treasury Stock, at cost
|
|
|
||||
Treasury Stock, at cost, beginning of period
|
(1,117
|
)
|
(1,091
|
)
|
||
Treasury stock acquired
|
(150
|
)
|
—
|
|
||
Issuance of shares under incentive and stock compensation plans
|
82
|
|
71
|
|
||
Net shares acquired related to employee incentive and stock compensation plans
|
(35
|
)
|
(30
|
)
|
||
Issuance of shares for warrant exercise
|
—
|
|
36
|
|
||
Treasury Stock, at cost, end of period
|
(1,220
|
)
|
(1,014
|
)
|
||
Accumulated Other Comprehensive Income (Loss), net of tax
|
|
|
||||
Accumulated Other Comprehensive Income (Loss), net of tax, beginning of period
|
52
|
|
(1,579
|
)
|
||
Total other comprehensive loss
|
(1,009
|
)
|
694
|
|
||
Accumulated Other Comprehensive Income (Loss), net of tax, end of period
|
(957
|
)
|
(885
|
)
|
||
Total Stockholders’ Equity
|
$
|
15,266
|
|
$
|
14,340
|
|
Preferred Shares Outstanding
|
|
|
||||
Preferred Shares Outstanding, beginning of period
|
13,800
|
|
13,800
|
|
||
Issuance of preferred shares
|
—
|
|
—
|
|
||
Preferred Shares Outstanding, end of period
|
13,800
|
|
13,800
|
|
||
Common Shares Outstanding
|
|
|
||||
Common Shares Outstanding, beginning of period (in thousands)
|
359,570
|
|
359,151
|
|
||
Treasury stock acquired
|
(2,661
|
)
|
—
|
|
||
Issuance of shares under incentive and stock compensation plans
|
1,685
|
|
1,534
|
|
||
Return of shares under incentive and stock compensation plans to treasury stock
|
(660
|
)
|
(601
|
)
|
||
Issuance of shares for warrant exercise
|
—
|
|
781
|
|
||
Common Shares Outstanding, at end of period
|
357,934
|
|
360,865
|
|
||
Cash dividends declared per common share
|
$
|
0.325
|
|
$
|
0.30
|
|
Cash dividends declared per preferred share
|
$
|
375.00
|
|
$
|
375.00
|
|
|
Three Months Ended March 31,
|
|||||
(in millions)
|
2020
|
2019
|
||||
Operating Activities
|
(Unaudited)
|
|||||
Net income
|
$
|
273
|
|
$
|
630
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
||||
Net realized capital losses (gains)
|
231
|
|
(163
|
)
|
||
Amortization of deferred policy acquisition costs
|
437
|
|
355
|
|
||
Additions to deferred policy acquisition costs
|
(447
|
)
|
(373
|
)
|
||
Depreciation and amortization
|
134
|
|
108
|
|
||
Other operating activities, net
|
79
|
|
37
|
|
||
Change in assets and liabilities:
|
|
|
||||
Decrease (increase) in reinsurance recoverables
|
(75
|
)
|
16
|
|
||
Net change in accrued and deferred income taxes
|
53
|
|
116
|
|
||
Increase in insurance liabilities
|
235
|
|
138
|
|
||
Net change in other assets and other liabilities
|
(622
|
)
|
(585
|
)
|
||
Net cash provided by operating activities
|
298
|
|
279
|
|
||
Investing Activities
|
|
|
||||
Proceeds from the sale/maturity/prepayment of:
|
|
|
||||
Fixed maturities, available-for-sale
|
3,906
|
|
5,072
|
|
||
Fixed maturities, fair value option
|
3
|
|
2
|
|
||
Equity securities, at fair value
|
645
|
|
619
|
|
||
Mortgage loans
|
329
|
|
100
|
|
||
Partnerships
|
34
|
|
68
|
|
||
Payments for the purchase of:
|
|
|
||||
Fixed maturities, available-for-sale
|
(3,578
|
)
|
(5,105
|
)
|
||
Equity securities, at fair value
|
(518
|
)
|
(607
|
)
|
||
Mortgage loans
|
(487
|
)
|
(31
|
)
|
||
Partnerships
|
(97
|
)
|
(78
|
)
|
||
Net proceeds from derivatives
|
161
|
|
26
|
|
||
Net additions of property and equipment
|
(23
|
)
|
(20
|
)
|
||
Net proceeds from short-term investments
|
407
|
|
82
|
|
||
Other investing activities, net
|
(5
|
)
|
1
|
|
||
Net cash provided by investing activities
|
777
|
|
129
|
|
||
Financing Activities
|
|
|
||||
Deposits and other additions to investment and universal life-type contracts
|
15
|
|
—
|
|
||
Withdrawals and other deductions from investment and universal life-type contracts
|
(10
|
)
|
(24
|
)
|
||
Federal Home Loan Bank of Boston ("FHLBB") advances
|
—
|
|
50
|
|
||
Net increase (decrease) in securities loaned or sold under agreements to repurchase
|
(237
|
)
|
102
|
|
||
Repayment of debt
|
(500
|
)
|
(413
|
)
|
||
Net return of shares under incentive and stock compensation plans
|
(32
|
)
|
(28
|
)
|
||
Treasury stock acquired
|
(150
|
)
|
—
|
|
||
Dividends paid on preferred stock
|
(5
|
)
|
(6
|
)
|
||
Dividends paid on common stock
|
(108
|
)
|
(109
|
)
|
||
Net cash used for financing activities
|
(1,027
|
)
|
(428
|
)
|
||
Foreign exchange rate effect on cash
|
(9
|
)
|
3
|
|
||
Net increase (decrease) in cash and restricted cash
|
39
|
|
(17
|
)
|
||
Cash and restricted cash – beginning of period
|
262
|
|
121
|
|
||
Cash and restricted cash– end of period
|
$
|
301
|
|
$
|
104
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
||||
Income tax paid
|
$
|
1
|
|
$
|
—
|
|
Interest paid
|
$
|
74
|
|
$
|
41
|
|
|
Balance as of January 1, 2020
|
||||||||
|
Opening Balance
|
Cumulative Effect of Accounting Change
|
Adjusted Opening Balance
|
||||||
Mortgage loans
|
$
|
4,215
|
|
$
|
—
|
|
$
|
4,215
|
|
ACL on mortgage loans
|
—
|
|
(19
|
)
|
(19
|
)
|
|||
Mortgage loans, net of ACL
|
4,215
|
|
(19
|
)
|
4,196
|
|
|||
Premiums receivable and agents’ balances
|
4,529
|
|
—
|
|
4,529
|
|
|||
ACL on premiums receivable and agents' balances
|
(145
|
)
|
23
|
|
(122
|
)
|
|||
Premiums receivable and agents' balances, net of ACL
|
4,384
|
|
23
|
|
4,407
|
|
|||
Reinsurance recoverables
|
5,641
|
|
—
|
|
5,641
|
|
|||
ACL and allowance for disputed amounts on reinsurance recoverables
|
(114
|
)
|
(2
|
)
|
(116
|
)
|
|||
Reinsurance recoverables, net of allowance for uncollectible reinsurance
|
5,527
|
|
(2
|
)
|
5,525
|
|
|||
Deferred income tax asset, net
|
299
|
|
5
|
|
304
|
|
|||
Other liabilities
|
(5,157
|
)
|
(25
|
)
|
(5,182
|
)
|
|||
Retained Earnings
|
$
|
12,685
|
|
$
|
(18
|
)
|
$
|
12,667
|
|
Net increase to ACL and LCL
|
$
|
(23
|
)
|
Net tax effects
|
5
|
|
|
Net decrease to retained earnings
|
$
|
(18
|
)
|
|
Three months ended March 31, 2019
|
||
Total Revenue
|
$
|
5,368
|
|
Net Income
|
$
|
625
|
|
|
Three Months Ended March 31,
|
|||||
|
2020
|
2019
|
||||
Commercial Lines
|
$
|
121
|
|
$
|
363
|
|
Personal Lines
|
98
|
|
96
|
|
||
Property & Casualty Other Operations
|
5
|
|
23
|
|
||
Group Benefits
|
104
|
|
118
|
|
||
Hartford Funds
|
36
|
|
30
|
|
||
Corporate
|
(91
|
)
|
—
|
|
||
Net income
|
273
|
|
630
|
|
||
Preferred stock dividends
|
5
|
|
5
|
|
||
Net income available to common stockholders
|
$
|
268
|
|
$
|
625
|
|
|
Three Months Ended March 31,
|
|||||
|
2020
|
2019
|
||||
Earned premiums and fee income:
|
|
|
||||
Commercial Lines
|
|
|
||||
Workers’ compensation
|
$
|
816
|
|
$
|
825
|
|
Liability
|
343
|
|
168
|
|
||
Marine
|
65
|
|
—
|
|
||
Package business
|
377
|
|
352
|
|
||
Property
|
205
|
|
156
|
|
||
Professional liability
|
143
|
|
68
|
|
||
Bond
|
70
|
|
60
|
|
||
Assumed reinsurance
|
66
|
|
—
|
|
||
Automobile
|
188
|
|
157
|
|
||
Total Commercial Lines
|
2,273
|
|
1,786
|
|
||
Personal Lines
|
|
|
|
|
||
Automobile
|
543
|
|
561
|
|
||
Homeowners
|
240
|
|
247
|
|
||
Total Personal Lines [1]
|
783
|
|
808
|
|
||
Group Benefits
|
|
|
|
|
||
Group disability
|
726
|
|
704
|
|
||
Group life
|
607
|
|
643
|
|
||
Other
|
58
|
|
62
|
|
||
Total Group Benefits
|
1,391
|
|
1,409
|
|
||
Hartford Funds
|
|
|
|
|
||
Mutual fund and Exchange-Traded Products ("ETP")
|
225
|
|
216
|
|
||
Talcott Resolution life and annuity separate accounts [2]
|
22
|
|
22
|
|
||
Total Hartford Funds
|
247
|
|
238
|
|
||
Corporate
|
17
|
|
13
|
|
||
Total earned premiums and fee income
|
4,711
|
|
4,254
|
|
||
Net investment income
|
459
|
|
470
|
|
||
Net realized capital gains (losses)
|
(231
|
)
|
163
|
|
||
Other revenues
|
17
|
|
53
|
|
||
Total revenues
|
$
|
4,956
|
|
$
|
4,940
|
|
[1]
|
For the three months ended March 31, 2020 and 2019, AARP members accounted for earned premiums of $707 and $722, respectively.
|
[2]
|
Represents revenues earned for investment advisory services on the life and annuity separate account AUM sold in May 2018 that is still managed by the Company's Hartford Funds segment.
|
|
|
Three months ended March 31,
|
|||||
|
Revenue Line Item
|
2020
|
2019
|
||||
Commercial Lines
|
|
|
|
||||
Installment billing fees
|
Fee income
|
$
|
8
|
|
$
|
9
|
|
Personal Lines
|
|
|
|
|
|
||
Installment billing fees
|
Fee income
|
9
|
|
9
|
|
||
Insurance servicing revenues
|
Other revenues
|
19
|
|
19
|
|
||
Group Benefits
|
|
|
|
|
|
||
Administrative services
|
Fee income
|
43
|
|
45
|
|
||
Hartford Funds
|
|
|
|
|
|
||
Advisor, distribution and other management fees
|
Fee income
|
224
|
|
217
|
|
||
Other fees
|
Fee income
|
23
|
|
21
|
|
||
Corporate
|
|
|
|
|
|
||
Investment management and other fees
|
Fee income
|
13
|
|
13
|
|
||
Transition service revenues
|
Other revenues
|
2
|
|
6
|
|
||
Total non-insurance revenues with customers
|
|
$
|
341
|
|
$
|
339
|
|
Level 1
|
Fair values based primarily on unadjusted quoted prices for identical assets or liabilities, in active markets that the Company has the ability to access at the measurement date.
|
Level 2
|
Fair values primarily based on observable inputs, other than quoted prices included in Level 1, or based on prices for similar assets and liabilities.
|
Level 3
|
Fair values derived when one or more of the significant inputs are unobservable (including
|
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of March 31, 2020
|
||||||||||||
|
Total
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
Significant
Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
||||||||
Assets accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Fixed maturities, AFS
|
|
|
|
|
||||||||
Asset-backed-securities ("ABS")
|
$
|
1,348
|
|
$
|
—
|
|
$
|
1,329
|
|
$
|
19
|
|
Collateralized loan obligations ("CLOs")
|
1,989
|
|
—
|
|
1,906
|
|
83
|
|
||||
Commercial mortgage-backed securities ("CMBS")
|
4,302
|
|
—
|
|
4,284
|
|
18
|
|
||||
Corporate
|
16,798
|
|
—
|
|
16,089
|
|
709
|
|
||||
Foreign government/government agencies
|
1,063
|
|
—
|
|
1,060
|
|
3
|
|
||||
Municipal
|
9,497
|
|
—
|
|
9,497
|
|
—
|
|
||||
Residential mortgage-backed securities ("RMBS")
|
4,086
|
|
—
|
|
3,599
|
|
487
|
|
||||
U.S. Treasuries
|
1,122
|
|
95
|
|
1,027
|
|
—
|
|
||||
Total fixed maturities
|
40,205
|
|
95
|
|
38,791
|
|
1,319
|
|
||||
Fixed maturities, FVO
|
8
|
|
—
|
|
8
|
|
—
|
|
||||
Equity securities, at fair value
|
1,155
|
|
822
|
|
264
|
|
69
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Credit derivatives
|
2
|
|
—
|
|
2
|
|
—
|
|
||||
Foreign exchange derivatives
|
8
|
|
—
|
|
8
|
|
—
|
|
||||
Total derivative assets [1]
|
10
|
|
—
|
|
10
|
|
—
|
|
||||
Short-term investments
|
2,505
|
|
1,649
|
|
842
|
|
14
|
|
||||
Total assets accounted for at fair value on a recurring basis
|
$
|
43,883
|
|
$
|
2,566
|
|
$
|
39,915
|
|
$
|
1,402
|
|
Liabilities accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Derivative liabilities
|
|
|
|
|
||||||||
Credit derivatives
|
$
|
3
|
|
$
|
—
|
|
$
|
3
|
|
$
|
—
|
|
Foreign exchange derivatives
|
19
|
|
—
|
|
19
|
|
—
|
|
||||
Interest rate derivatives
|
(88
|
)
|
—
|
|
(88
|
)
|
—
|
|
||||
Total derivative liabilities [2]
|
(66
|
)
|
—
|
|
(66
|
)
|
—
|
|
||||
Contingent consideration [3]
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Total liabilities accounted for at fair value on a recurring basis
|
$
|
(66
|
)
|
$
|
—
|
|
$
|
(66
|
)
|
$
|
—
|
|
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 2019
|
||||||||||||
|
Total
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
Significant
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Fixed maturities, AFS
|
|
|
|
|
||||||||
ABS
|
$
|
1,476
|
|
$
|
—
|
|
$
|
1,461
|
|
$
|
15
|
|
CLO
|
2,183
|
|
—
|
|
2,088
|
|
95
|
|
||||
CMBS
|
4,338
|
|
—
|
|
4,329
|
|
9
|
|
||||
Corporate
|
17,396
|
|
—
|
|
16,664
|
|
732
|
|
||||
Foreign government/government agencies
|
1,123
|
|
—
|
|
1,120
|
|
3
|
|
||||
Municipal
|
9,498
|
|
—
|
|
9,498
|
|
—
|
|
||||
RMBS
|
4,869
|
|
—
|
|
4,309
|
|
560
|
|
||||
U.S. Treasuries
|
1,265
|
|
330
|
|
935
|
|
—
|
|
||||
Total fixed maturities
|
42,148
|
|
330
|
|
40,404
|
|
1,414
|
|
||||
Fixed maturities, FVO
|
11
|
|
—
|
|
11
|
|
—
|
|
||||
Equity securities, at fair value
|
1,657
|
|
1,401
|
|
183
|
|
73
|
|
||||
Derivative assets
|
|
|
|
|
||||||||
Credit derivatives
|
11
|
|
—
|
|
11
|
|
—
|
|
||||
Interest rate derivatives
|
1
|
|
—
|
|
1
|
|
—
|
|
||||
Total derivative assets [1]
|
12
|
|
—
|
|
12
|
|
—
|
|
||||
Short-term investments
|
2,921
|
|
1,028
|
|
1,878
|
|
15
|
|
||||
Total assets accounted for at fair value on a recurring basis
|
$
|
46,749
|
|
$
|
2,759
|
|
$
|
42,488
|
|
$
|
1,502
|
|
Liabilities accounted for at fair value on a recurring basis
|
|
|
|
|
||||||||
Derivative liabilities
|
|
|
|
|
||||||||
Credit derivatives
|
$
|
(1
|
)
|
$
|
—
|
|
$
|
(1
|
)
|
$
|
—
|
|
Equity derivatives
|
(15
|
)
|
—
|
|
—
|
|
(15
|
)
|
||||
Foreign exchange derivatives
|
(2
|
)
|
—
|
|
(2
|
)
|
—
|
|
||||
Interest rate derivatives
|
(60
|
)
|
—
|
|
(60
|
)
|
—
|
|
||||
Total derivative liabilities [2]
|
(78
|
)
|
—
|
|
(63
|
)
|
(15
|
)
|
||||
Contingent consideration [3]
|
(22
|
)
|
—
|
|
—
|
|
(22
|
)
|
||||
Total liabilities accounted for at fair value on a recurring basis
|
$
|
(100
|
)
|
$
|
—
|
|
$
|
(63
|
)
|
$
|
(37
|
)
|
[1]
|
Includes derivative instruments in a net positive fair value position after consideration of the accrued interest and impact of collateral posting requirements which may be imposed by agreements and applicable law.
|
[2]
|
Includes derivative instruments in a net negative fair value position (derivative liability) after consideration of the accrued interest and impact of collateral posting requirements which may be imposed by agreements and applicable law.
|
[3]
|
For additional information see the Contingent Consideration section below.
|
•
|
Quoted prices, unadjusted, for identical assets or liabilities in active markets, which are classified as Level 1.
|
•
|
Prices from third-party pricing services, which primarily utilize a combination of techniques. These services utilize recently reported trades of identical, similar, or benchmark securities making adjustments for market observable inputs available through the reporting date. If there are no recently reported trades, they may use a discounted cash flow technique to develop a price using expected cash flows based upon the anticipated future performance of the underlying collateral discounted at an estimated market rate. Both techniques develop prices that consider the time value of
|
•
|
Internal matrix pricing, which is a valuation process internally developed for private placement securities for which the Company is unable to obtain a price from a third-party pricing service. Internal pricing matrices determine credit spreads that, when combined with risk-free rates, are applied to contractual cash flows to develop a price. The Company develops credit spreads using market based data for public securities adjusted for credit spread differentials between public and private securities, which are obtained from a survey of multiple private placement brokers. The market-based reference credit spread considers the issuer’s financial strength and term to maturity, using an independent public security index and trade information, while the credit spread differential considers the non-public nature of the security. Securities priced using internal matrix pricing are classified as Level 2 because the inputs are observable or can be corroborated with observable data.
|
•
|
Independent broker quotes, which are typically non-binding, use inputs that can be difficult to corroborate with observable market based data. Brokers may use present value techniques using assumptions specific to the security types, or they may use recent transactions of similar securities. Due to the lack of transparency in the process that brokers use to develop prices, valuations that are based on independent broker quotes are classified as Level 3.
|
Valuation Inputs Used in Levels 2 and 3 Measurements for Securities and Derivatives
|
|||
Level 2
Primary Observable Inputs
|
Level 3
Primary Unobservable Inputs
|
||
Fixed Maturity Investments
|
|||
Structured securities (includes ABS, CLOs, CMBS and RMBS)
|
|||
|
• Benchmark yields and spreads
• Monthly payment information • Collateral performance, which varies by vintage year and includes delinquency rates, loss severity rates and refinancing assumptions • Credit default swap indices Other inputs for ABS, CLOs and RMBS: • Estimate of future principal prepayments, derived from the characteristics of the underlying structure • Prepayment speeds previously experienced at the interest rate levels projected for the collateral |
|
• Independent broker quotes
• Credit spreads beyond observable curve
• Interest rates beyond observable curve
Other inputs for less liquid securities or those that trade less actively, including subprime RMBS:
• Estimated cash flows
• Credit spreads, which include illiquidity premium
• Constant prepayment rates
• Constant default rates
• Loss severity
|
Corporates
|
|||
|
• Benchmark yields and spreads
• Reported trades, bids, offers of the same or similar securities
• Issuer spreads and credit default swap curves
Other inputs for investment grade privately placed securities that utilize internal matrix pricing:
• Credit spreads for public securities of similar quality, maturity, and sector, adjusted for non-public nature
|
|
• Independent broker quotes
• Credit spreads beyond observable curve
• Interest rates beyond observable curve
Other inputs for below investment grade privately placed securities and private bank loans:
• Independent broker quotes
• Credit spreads for public securities of similar quality, maturity, and sector, adjusted for non-public nature
|
U.S. Treasuries, Municipals, and Foreign government/government agencies
|
|||
|
• Benchmark yields and spreads
• Issuer credit default swap curves • Political events in emerging market economies • Municipal Securities Rulemaking Board reported trades and material event notices • Issuer financial statements |
|
• Credit spreads beyond observable curve
• Interest rates beyond observable curve
|
Equity Securities
|
|||
|
• Quoted prices in markets that are not active
|
|
• For privately traded equity securities, internal discounted cash flow models utilizing earnings multiples or other cash flow assumptions that are not observable
|
Short-term Investments
|
|||
|
• Benchmark yields and spreads
• Reported trades, bids, offers
• Issuer spreads and credit default swap curves
• Material event notices and new issue money market rates
|
|
• Independent broker quotes
|
Derivatives
|
|||
Credit derivatives
|
|||
|
• Swap yield curve
• Credit default swap curves
|
|
Not applicable
|
Equity derivatives
|
|||
|
• Equity index levels
• Swap yield curve
|
|
• Independent broker quotes
• Equity volatility
|
Foreign exchange derivatives
|
|||
|
• Swap yield curve
• Currency spot and forward rates
• Cross currency basis curves
|
|
Not applicable
|
Interest rate derivatives
|
|||
|
• Swap yield curve
|
|
• Independent broker quotes
• Interest rate volatility
|
Significant Unobservable Inputs for Level 3 - Securities
|
|||||||||
Assets accounted for at fair value on a recurring basis
|
Fair
Value |
Predominant
Valuation Technique |
Significant
Unobservable Input
|
Minimum
|
Maximum
|
Weighted Average [1]
|
Impact of
Increase in Input on Fair Value [2] |
||
As of March 31, 2020
|
|||||||||
CLOs [3]
|
$
|
83
|
|
Discounted cash flows
|
Spread
|
684 bps
|
684 bps
|
684 bps
|
Decrease
|
Corporate [4]
|
$
|
594
|
|
Discounted cash flows
|
Spread
|
112 bps
|
1,219 bps
|
371 bps
|
Decrease
|
RMBS [3]
|
$
|
487
|
|
Discounted cash flows
|
Spread [6]
|
194 bps
|
975 bps
|
324 bps
|
Decrease
|
|
|
|
Constant prepayment rate [6]
|
—%
|
11%
|
6%
|
Decrease [5]
|
||
|
|
|
Constant default rate [6]
|
1%
|
7%
|
3%
|
Decrease
|
||
|
|
|
Loss severity [6]
|
—%
|
100%
|
74%
|
Decrease
|
||
As of December 31, 2019
|
|||||||||
CLOs [3]
|
$
|
95
|
|
Discounted cash flows
|
Spread
|
246 bps
|
246 bps
|
246 bps
|
Decrease
|
CMBS [3]
|
$
|
1
|
|
Discounted cash flows
|
Spread (encompasses prepayment, default risk and loss severity)
|
9 bps
|
1,832 bps
|
161 bps
|
Decrease
|
Corporate [4]
|
$
|
633
|
|
Discounted cash flows
|
Spread
|
93 bps
|
788 bps
|
236 bps
|
Decrease
|
RMBS [3]
|
$
|
560
|
|
Discounted cash flows
|
Spread [6]
|
5 bps
|
233 bps
|
79 bps
|
Decrease
|
|
|
|
Constant prepayment rate [6]
|
—%
|
11%
|
6%
|
Decrease [5]
|
||
|
|
|
Constant default rate [6]
|
1%
|
6%
|
3%
|
Decrease
|
||
|
|
|
Loss severity [6]
|
—%
|
100%
|
70%
|
Decrease
|
[1]
|
The weighted average is determined based on the fair value of the securities.
|
[2]
|
Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.
|
[3]
|
Excludes securities for which the Company bases fair value on broker quotations.
|
[4]
|
Excludes securities for which the Company bases fair value on broker quotations; however, included are broker priced lower-rated private placement securities for which the Company receives spread and yield information to corroborate the fair value.
|
[5]
|
Decrease for above market rate coupons and increase for below market rate coupons.
|
[6]
|
Generally, a change in the assumption used for the constant default rate would have been accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for constant prepayment rate and would have resulted in wider spreads.
|
[1]
|
The weighted average is determined based on the fair value of the derivatives.
|
[2]
|
Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table. Changes are based on long positions, unless otherwise noted. Changes in fair value will be inversely impacted for short positions.
|
Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended March 31, 2020
|
||||||||||||||||||||||||||||
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Fair value as of January 1, 2020
|
Included in net income [1]
|
Included in OCI [2]
|
Purchases
|
Settlements
|
Sales
|
Transfers into Level 3 [3]
|
Transfers out of Level 3 [3]
|
Fair value as of March 31, 2020
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
ABS
|
$
|
15
|
|
$
|
—
|
|
$
|
(1
|
)
|
$
|
20
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(15
|
)
|
$
|
19
|
|
|
CLOs
|
95
|
|
—
|
|
(6
|
)
|
—
|
|
(6
|
)
|
—
|
|
—
|
|
—
|
|
83
|
|
|||||||||
|
CMBS
|
9
|
|
—
|
|
—
|
|
10
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
18
|
|
|||||||||
|
Corporate
|
732
|
|
(10
|
)
|
(80
|
)
|
94
|
|
(36
|
)
|
(8
|
)
|
47
|
|
(30
|
)
|
709
|
|
|||||||||
|
Foreign Govt./Govt. Agencies
|
3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
|||||||||
|
RMBS
|
560
|
|
—
|
|
(25
|
)
|
5
|
|
(46
|
)
|
(7
|
)
|
—
|
|
—
|
|
487
|
|
|||||||||
Total Fixed Maturities, AFS
|
1,414
|
|
(10
|
)
|
(112
|
)
|
129
|
|
(89
|
)
|
(15
|
)
|
47
|
|
(45
|
)
|
1,319
|
|
||||||||||
Equity Securities, at fair value
|
73
|
|
(7
|
)
|
—
|
|
3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
69
|
|
||||||||||
Short-term investments
|
15
|
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
14
|
|
||||||||||
Total Assets
|
$
|
1,502
|
|
$
|
(17
|
)
|
$
|
(112
|
)
|
$
|
132
|
|
$
|
(90
|
)
|
$
|
(15
|
)
|
$
|
47
|
|
$
|
(45
|
)
|
$
|
1,402
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Contingent Consideration
|
$
|
(22
|
)
|
$
|
12
|
|
$
|
—
|
|
$
|
—
|
|
$
|
10
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Derivatives, net [4]
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Equity
|
(15
|
)
|
36
|
|
—
|
|
—
|
|
—
|
|
(21
|
)
|
—
|
|
—
|
|
—
|
|
|||||||||
Total Derivatives, net [4]
|
(15
|
)
|
36
|
|
—
|
|
—
|
|
—
|
|
(21
|
)
|
—
|
|
—
|
|
—
|
|
||||||||||
Total Liabilities
|
$
|
(37
|
)
|
$
|
48
|
|
$
|
—
|
|
$
|
—
|
|
$
|
10
|
|
$
|
(21
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended March 31, 2019
|
||||||||||||||||||||||||||||
|
Total realized/unrealized gains (losses)
|
|
|
|
|
|
|
|||||||||||||||||||||
|
|
Fair value as of January 1, 2019
|
Included in net income [1]
|
Included in OCI [2]
|
Purchases
|
Settlements
|
Sales
|
Transfers into Level 3 [3]
|
Transfers out of Level 3 [3]
|
Fair value as of March 31, 2019
|
||||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
ABS
|
$
|
10
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(1
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
9
|
|
|
CLOs
|
100
|
|
—
|
|
—
|
|
35
|
|
—
|
|
(6
|
)
|
—
|
|
(15
|
)
|
114
|
|
|||||||||
|
CMBS
|
12
|
|
—
|
|
1
|
|
—
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
12
|
|
|||||||||
|
Corporate
|
520
|
|
(1
|
)
|
7
|
|
37
|
|
(2
|
)
|
(25
|
)
|
12
|
|
(23
|
)
|
525
|
|
|||||||||
|
Foreign Govt./Govt. Agencies
|
3
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
|||||||||
|
RMBS
|
920
|
|
1
|
|
(2
|
)
|
44
|
|
(54
|
)
|
(35
|
)
|
—
|
|
(103
|
)
|
771
|
|
|||||||||
Total Fixed Maturities, AFS
|
1,565
|
|
—
|
|
6
|
|
116
|
|
(58
|
)
|
(66
|
)
|
12
|
|
(141
|
)
|
1,434
|
|
||||||||||
Equity Securities, at fair value
|
77
|
|
(1
|
)
|
—
|
|
5
|
|
—
|
|
(8
|
)
|
—
|
|
—
|
|
73
|
|
||||||||||
Derivatives, net [4]
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Equity
|
3
|
|
(2
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
|||||||||
|
Interest rate
|
1
|
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||||
Total Derivatives, net [4]
|
4
|
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
||||||||||
Total Assets
|
$
|
1,646
|
|
$
|
(4
|
)
|
$
|
6
|
|
$
|
121
|
|
$
|
(58
|
)
|
$
|
(74
|
)
|
$
|
12
|
|
$
|
(141
|
)
|
$
|
1,508
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Contingent Consideration
|
(35
|
)
|
(4
|
)
|
—
|
|
—
|
|
10
|
|
—
|
|
—
|
|
—
|
|
(29
|
)
|
||||||||||
Total Liabilities
|
$
|
(35
|
)
|
$
|
(4
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
10
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(29
|
)
|
[1]
|
Amounts in these columns are generally reported in net realized capital gains (losses). All amounts are before income taxes.
|
[2]
|
All amounts are before income taxes.
|
[3]
|
Transfers in and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.
|
[4]
|
Derivative instruments are reported in this table on a net basis for asset (liability) positions and reported in the Condensed Consolidated Balance Sheets in other investments and other liabilities.
|
|
Changes in Unrealized Gains (Losses) for Financial Instruments Classified as
Level 3 Still Held at End of Period
|
||||||||||||||
|
|
Three months ended March 31,
|
||||||||||||
|
|
2020
|
2019
|
|
2020
|
2019
|
||||||||
|
|
Changes in Unrealized Gain/(Loss) included in Net Income [1] [2]
|
|
Changes in Unrealized Gain/(Loss) included in OCI [3]
|
||||||||||
Assets
|
|
|
|
|
|
|||||||||
Fixed Maturities, AFS
|
|
|
|
|
|
|||||||||
|
ABS
|
$
|
—
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
$
|
—
|
|
|
CLOs
|
—
|
|
—
|
|
|
(6
|
)
|
—
|
|
||||
|
CMBS
|
—
|
|
—
|
|
|
—
|
|
1
|
|
||||
|
Corporate
|
—
|
|
(1
|
)
|
|
(79
|
)
|
7
|
|
||||
|
RMBS
|
—
|
|
—
|
|
|
(24
|
)
|
(1
|
)
|
||||
Total Fixed Maturities, AFS
|
—
|
|
(1
|
)
|
|
(110
|
)
|
7
|
|
|||||
Equity Securities, at fair value
|
(6
|
)
|
—
|
|
|
—
|
|
—
|
|
|||||
Derivatives, net
|
|
|
|
|
|
|||||||||
|
Equity
|
—
|
|
(2
|
)
|
|
—
|
|
—
|
|
||||
|
Interest rate
|
—
|
|
(1
|
)
|
|
—
|
|
—
|
|
||||
Total Derivatives, net
|
—
|
|
(3
|
)
|
|
—
|
|
—
|
|
|||||
Total Assets
|
$
|
(6
|
)
|
$
|
(4
|
)
|
|
$
|
(110
|
)
|
$
|
7
|
|
|
Liabilities
|
|
|
|
|
|
|||||||||
Contingent Consideration
|
$
|
12
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
$
|
—
|
|
|
Derivatives, net
|
|
|
|
|
|
|||||||||
|
Equity
|
—
|
|
—
|
|
|
—
|
|
—
|
|
||||
Total Derivatives, net
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|||||
Total Liabilities
|
$
|
12
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
$
|
—
|
|
[1]
|
All amounts in these rows are reported in net realized capital gains (losses). All amounts are before income taxes.
|
[2]
|
Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein.
|
[3]
|
Changes in unrealized gain (loss) on fixed maturities, AFS are reported in changes in net unrealized gain on securities in the Condensed Consolidated Statements of Comprehensive Income. Changes in interest rate derivatives are reported in changes in net gain on cash flow hedging instruments in the Condensed Consolidated Statements of Comprehensive Income.
|
Financial Assets and Liabilities Not Carried at Fair Value
|
|||||||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||
|
Fair Value Hierarchy Level
|
Carrying Amount
|
Fair Value
|
|
Fair Value Hierarchy Level
|
Carrying Amount
|
Fair Value
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Mortgage loans (net of ACL of $21 and $0)
|
Level 3
|
$
|
4,353
|
|
$
|
4,341
|
|
|
Level 3
|
$
|
4,215
|
|
$
|
4,350
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Other policyholder funds and benefits payable
|
Level 3
|
$
|
766
|
|
$
|
768
|
|
|
Level 3
|
$
|
763
|
|
$
|
765
|
|
Senior notes [1]
|
Level 2
|
$
|
3,260
|
|
$
|
3,706
|
|
|
Level 2
|
$
|
3,759
|
|
$
|
4,456
|
|
Junior subordinated debentures [1]
|
Level 2
|
$
|
1,089
|
|
$
|
962
|
|
|
Level 2
|
$
|
1,089
|
|
$
|
1,153
|
|
[1]
|
Included in long-term debt in the Condensed Consolidated Balance Sheets, except for current maturities, which are included in short-term debt.
|
[1]
|
The net unrealized gain (loss) on equity securities included in net realized capital gains (losses) related to equity securities still held as of March 31, 2020, was $(277) for the three months ended March 31, 2020 . The net unrealized gain (loss) on equity securities included in net realized capital gains (losses) related to equity securities still held as of March 31, 2019, was $68 for the three months ended March 31, 2019.
|
[2]
|
Represents the change in ACL recorded during the period following the adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies.
|
[3]
|
For the three months ended March 31, 2020 and 2019 gains (losses) from transactional foreign currency revaluation were $10 and $0, respectively. Also includes gains (losses) on non-qualifying derivatives of $92 and $15, respectively, for the three months ended March 31, 2020 and 2019.
|
ACL on Fixed Maturities, AFS by Type
|
||||||
Three months ended March 31, 2020
|
||||||
(Before tax)
|
Corporate
|
Total
|
||||
Balance, beginning of year
|
$
|
—
|
|
$
|
—
|
|
Credit losses on fixed maturities where credit losses were not previously recorded
|
(12
|
)
|
(12
|
)
|
||
Balance as of end of period
|
$
|
(12
|
)
|
$
|
(12
|
)
|
[1]
|
These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.
|
Fixed Maturities, AFS, by Type
|
|||||||||||||||||||||||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||||||||||
|
Amortized
Cost
|
ACL [1]
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
|
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Fair
Value
|
Non-Credit
OTTI [2]
|
||||||||||||||||||||
ABS
|
$
|
1,368
|
|
$
|
—
|
|
$
|
6
|
|
$
|
(26
|
)
|
$
|
1,348
|
|
|
$
|
1,461
|
|
$
|
18
|
|
$
|
(3
|
)
|
$
|
1,476
|
|
$
|
—
|
|
CLOs
|
2,168
|
|
—
|
|
—
|
|
(179
|
)
|
1,989
|
|
|
2,186
|
|
5
|
|
(8
|
)
|
2,183
|
|
—
|
|
||||||||||
CMBS
|
4,316
|
|
—
|
|
102
|
|
(116
|
)
|
4,302
|
|
|
4,210
|
|
141
|
|
(13
|
)
|
4,338
|
|
(4
|
)
|
||||||||||
Corporate
|
16,744
|
|
(12
|
)
|
585
|
|
(519
|
)
|
16,798
|
|
|
16,435
|
|
986
|
|
(25
|
)
|
17,396
|
|
—
|
|
||||||||||
Foreign govt./govt. agencies
|
1,058
|
|
—
|
|
28
|
|
(23
|
)
|
1,063
|
|
|
1,057
|
|
66
|
|
—
|
|
1,123
|
|
—
|
|
||||||||||
Municipal
|
8,843
|
|
—
|
|
684
|
|
(30
|
)
|
9,497
|
|
|
8,763
|
|
737
|
|
(2
|
)
|
9,498
|
|
—
|
|
||||||||||
RMBS
|
4,052
|
|
—
|
|
96
|
|
(62
|
)
|
4,086
|
|
|
4,775
|
|
97
|
|
(3
|
)
|
4,869
|
|
—
|
|
||||||||||
U.S. Treasuries
|
924
|
|
—
|
|
198
|
|
—
|
|
1,122
|
|
|
1,191
|
|
75
|
|
(1
|
)
|
1,265
|
|
—
|
|
||||||||||
Total fixed maturities, AFS
|
$
|
39,473
|
|
$
|
(12
|
)
|
$
|
1,699
|
|
$
|
(955
|
)
|
$
|
40,205
|
|
|
$
|
40,078
|
|
$
|
2,125
|
|
$
|
(55
|
)
|
$
|
42,148
|
|
$
|
(4
|
)
|
[1]
|
Represents the ACL recorded following the adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies.
|
[2]
|
Represents the amount of cumulative non-credit impairment losses recognized in OCI on fixed maturities that also had credit impairments. These losses are included in gross unrealized losses as of December 31, 2019.
|
Fixed Maturities, AFS, by Contractual Maturity Year
|
|||||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||
|
Amortized Cost
|
Fair Value
|
|
Amortized Cost
|
Fair Value
|
||||||||
One year or less
|
$
|
1,197
|
|
$
|
1,196
|
|
|
$
|
1,082
|
|
$
|
1,090
|
|
Over one year through five years
|
7,477
|
|
7,447
|
|
|
7,200
|
|
7,401
|
|
||||
Over five years through ten years
|
7,032
|
|
7,053
|
|
|
7,395
|
|
7,803
|
|
||||
Over ten years
|
11,863
|
|
12,784
|
|
|
11,769
|
|
12,988
|
|
||||
Subtotal
|
27,569
|
|
28,480
|
|
|
27,446
|
|
29,282
|
|
||||
Mortgage-backed and asset-backed securities
|
11,904
|
|
11,725
|
|
|
12,632
|
|
12,866
|
|
||||
Total fixed maturities, AFS
|
$
|
39,473
|
|
$
|
40,205
|
|
|
$
|
40,078
|
|
$
|
42,148
|
|
Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of March 31, 2020
|
||||||||||||||||||||
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
|||||||||||||||
|
Fair Value
|
Unrealized Losses
|
|
Fair Value
|
Unrealized Losses
|
|
Fair Value
|
Unrealized Losses
|
||||||||||||
ABS
|
$
|
1,045
|
|
$
|
(26
|
)
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
1,045
|
|
$
|
(26
|
)
|
CLOs
|
1,373
|
|
(123
|
)
|
|
616
|
|
(56
|
)
|
|
1,989
|
|
(179
|
)
|
||||||
CMBS
|
1,379
|
|
(111
|
)
|
|
18
|
|
(5
|
)
|
|
1,397
|
|
(116
|
)
|
||||||
Corporate
|
6,762
|
|
(493
|
)
|
|
183
|
|
(26
|
)
|
|
6,945
|
|
(519
|
)
|
||||||
Foreign govt./govt. agencies
|
439
|
|
(23
|
)
|
|
—
|
|
—
|
|
|
439
|
|
(23
|
)
|
||||||
Municipal
|
719
|
|
(30
|
)
|
|
—
|
|
—
|
|
|
719
|
|
(30
|
)
|
||||||
RMBS
|
1,604
|
|
(60
|
)
|
|
25
|
|
(2
|
)
|
|
1,629
|
|
(62
|
)
|
||||||
U.S. Treasuries
|
45
|
|
—
|
|
|
—
|
|
—
|
|
|
45
|
|
—
|
|
||||||
Total fixed maturities, AFS in an unrealized loss position
|
$
|
13,366
|
|
$
|
(866
|
)
|
|
$
|
842
|
|
$
|
(89
|
)
|
|
$
|
14,208
|
|
$
|
(955
|
)
|
ACL on Mortgage Loans
|
||||||
|
Three Months Ended March 31,
|
|||||
|
2020
|
2019
|
||||
ACL as of January 1,
|
$
|
—
|
|
$
|
(1
|
)
|
Cumulative effect of accounting changes [1]
|
(19
|
)
|
|
|||
Adjusted beginning ACL
|
(19
|
)
|
(1
|
)
|
||
Current period provision
|
(2
|
)
|
—
|
|
||
ACL as of March 31,
|
$
|
(21
|
)
|
$
|
(1
|
)
|
[1]
|
Represents the adjustment to the ACL recorded on adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies.
|
Mortgage Loans LTV & DSCR by Origination Year as of March 31, 2020
|
||||||||||||||||||||||||||||
|
2020
|
2019
|
2018
|
2017
|
2016
|
2015 & Prior
|
Total
|
|||||||||||||||||||||
Loan-to-value
|
Amortized Cost
|
Avg. DSCR
|
Amortized Cost
|
Avg. DSCR
|
Amortized Cost
|
Avg. DSCR
|
Amortized Cost
|
Avg. DSCR
|
Amortized Cost
|
Avg. DSCR
|
Amortized Cost
|
Avg. DSCR
|
Amortized Cost [1]
|
Avg. DSCR
|
||||||||||||||
65% - 80%
|
$
|
—
|
|
—
|
$
|
90
|
|
1.48x
|
$
|
175
|
|
1.80x
|
$
|
48
|
|
1.06x
|
$
|
33
|
|
1.35x
|
$
|
16
|
|
1.52x
|
$
|
362
|
|
1.57x
|
Less than 65%
|
202
|
|
2.51x
|
898
|
|
2.52x
|
523
|
|
2.01x
|
462
|
|
2.00x
|
255
|
|
2.83x
|
1,672
|
|
2.87x
|
4,012
|
|
2.56x
|
|||||||
Total mortgage loans
|
$
|
202
|
|
2.51x
|
$
|
988
|
|
2.43x
|
$
|
698
|
|
1.96x
|
$
|
510
|
|
1.91x
|
$
|
288
|
|
2.66x
|
$
|
1,688
|
|
2.86x
|
$
|
4,374
|
|
2.48x
|
Mortgage Loans LTV & DSCR
|
||||
|
December 31, 2019
|
|||
Loan-to-value
|
Amortized Cost
|
Avg. DSCR
|
||
65% - 80%
|
376
|
|
1.53x
|
|
Less than 65%
|
3,839
|
|
2.56x
|
|
Total mortgage loans
|
$
|
4,215
|
|
2.46x
|
Mortgage Loans by Region
|
|||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||||||
|
Amortized Cost [1]
|
Percent of Total
|
|
Amortized Cost
|
Percent of Total
|
||||||
East North Central
|
$
|
285
|
|
6.5
|
%
|
|
$
|
270
|
|
6.4
|
%
|
Middle Atlantic
|
327
|
|
7.5
|
%
|
|
319
|
|
7.5
|
%
|
||
Mountain
|
118
|
|
2.7
|
%
|
|
109
|
|
2.6
|
%
|
||
New England
|
338
|
|
7.7
|
%
|
|
344
|
|
8.2
|
%
|
||
Pacific
|
966
|
|
22.1
|
%
|
|
906
|
|
21.5
|
%
|
||
South Atlantic
|
986
|
|
22.5
|
%
|
|
944
|
|
22.4
|
%
|
||
West North Central
|
44
|
|
1.0
|
%
|
|
46
|
|
1.1
|
%
|
||
West South Central
|
476
|
|
10.9
|
%
|
|
439
|
|
10.4
|
%
|
||
Other [2]
|
834
|
|
19.1
|
%
|
|
838
|
|
19.9
|
%
|
||
Total mortgage loans
|
$
|
4,374
|
|
100.0
|
%
|
|
$
|
4,215
|
|
100.0
|
%
|
[1]
|
Amortized cost of mortgage loans excludes ACL of $21.
|
[2]
|
Primarily represents loans collateralized by multiple properties in various regions.
|
Mortgage Loans by Property Type
|
|||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||||||
|
Amortized Cost [1]
|
Percent of Total
|
|
Amortized Cost
|
Percent of Total
|
||||||
Commercial
|
|
|
|
|
|
||||||
Industrial
|
$
|
1,234
|
|
28.2
|
%
|
|
$
|
1,167
|
|
27.7
|
%
|
Multifamily
|
1,389
|
|
31.8
|
%
|
|
1,313
|
|
31.2
|
%
|
||
Office
|
741
|
|
16.9
|
%
|
|
723
|
|
17.2
|
%
|
||
Retail
|
835
|
|
19.1
|
%
|
|
735
|
|
17.4
|
%
|
||
Single Family
|
135
|
|
3.1
|
%
|
|
137
|
|
3.2
|
%
|
||
Other
|
40
|
|
0.9
|
%
|
|
140
|
|
3.3
|
%
|
||
Total mortgage loans
|
$
|
4,374
|
|
100.0
|
%
|
|
$
|
4,215
|
|
100.0
|
%
|
Securities Lending and Repurchase Agreements
|
||||||
|
March 31, 2020
|
December 31, 2019
|
||||
|
Fair Value
|
Fair Value
|
|
|||
Securities Lending Transactions:
|
|
|
||||
Gross amount of securities on loan
|
$
|
344
|
|
$
|
606
|
|
Gross amount of associated liability for collateral received [1]
|
$
|
352
|
|
$
|
621
|
|
|
|
|
||||
Repurchase agreements:
|
|
|
||||
Gross amount of recognized receivables for reverse repurchase agreements
|
$
|
14
|
|
$
|
15
|
|
[1]
|
Cash collateral received is reinvested in fixed maturities, AFS and short-term investments which are included in the Condensed Consolidated Balance Sheets. Amount includes additional securities collateral received of $0 and $34 which are excluded from the Company's Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, respectively.
|
Derivative Balance Sheet Presentation
|
||||||||||||||||||||||||||
|
Net Derivatives
|
|
Asset
Derivatives
|
|
Liability Derivatives
|
|||||||||||||||||||||
|
Notional Amount
|
Fair Value
|
|
Fair Value
|
|
Fair Value
|
||||||||||||||||||||
Hedge Designation/ Derivative Type
|
Mar. 31, 2020
|
Dec. 31, 2019
|
Mar. 31, 2020
|
Dec. 31, 2019
|
|
Mar. 31, 2020
|
Dec. 31, 2019
|
|
Mar. 31, 2020
|
Dec. 31, 2019
|
||||||||||||||||
Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps
|
$
|
2,340
|
|
$
|
2,040
|
|
$
|
1
|
|
$
|
—
|
|
|
$
|
1
|
|
$
|
1
|
|
|
$
|
—
|
|
$
|
(1
|
)
|
Foreign currency swaps
|
287
|
|
270
|
|
26
|
|
(1
|
)
|
|
26
|
|
3
|
|
|
—
|
|
(4
|
)
|
||||||||
Total cash flow hedges
|
2,627
|
|
2,310
|
|
27
|
|
(1
|
)
|
|
27
|
|
4
|
|
|
—
|
|
(5
|
)
|
||||||||
Non-qualifying strategies
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest rate swaps and futures
|
8,333
|
|
9,338
|
|
(89
|
)
|
(59
|
)
|
|
6
|
|
3
|
|
|
(95
|
)
|
(62
|
)
|
||||||||
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Foreign currency swaps and forwards
|
485
|
|
464
|
|
1
|
|
(1
|
)
|
|
2
|
|
—
|
|
|
(1
|
)
|
(1
|
)
|
||||||||
Credit contracts
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Credit derivatives that purchase credit protection
|
122
|
|
124
|
|
7
|
|
(3
|
)
|
|
7
|
|
—
|
|
|
—
|
|
(3
|
)
|
||||||||
Credit derivatives that assume credit risk [1]
|
250
|
|
500
|
|
(2
|
)
|
13
|
|
|
—
|
|
13
|
|
|
(2
|
)
|
—
|
|
||||||||
Credit derivatives in offsetting positions
|
26
|
|
29
|
|
—
|
|
—
|
|
|
4
|
|
5
|
|
|
(4
|
)
|
(5
|
)
|
||||||||
Equity contracts
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Equity index swaps and options
|
11
|
|
941
|
|
—
|
|
(15
|
)
|
|
1
|
|
15
|
|
|
(1
|
)
|
(30
|
)
|
||||||||
Total non-qualifying strategies
|
9,227
|
|
11,396
|
|
(83
|
)
|
(65
|
)
|
|
20
|
|
36
|
|
|
(103
|
)
|
(101
|
)
|
||||||||
Total cash flow hedges and non-qualifying strategies
|
$
|
11,854
|
|
$
|
13,706
|
|
$
|
(56
|
)
|
$
|
(66
|
)
|
|
$
|
47
|
|
$
|
40
|
|
|
$
|
(103
|
)
|
$
|
(106
|
)
|
Balance Sheet Location
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Fixed maturities, available-for-sale
|
$
|
253
|
|
$
|
244
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
$
|
—
|
|
Other investments
|
1,046
|
|
1,277
|
|
10
|
|
12
|
|
|
13
|
|
13
|
|
|
(3
|
)
|
(1
|
)
|
||||||||
Other liabilities
|
10,555
|
|
12,185
|
|
(66
|
)
|
(78
|
)
|
|
34
|
|
27
|
|
|
(100
|
)
|
(105
|
)
|
||||||||
Total derivatives
|
$
|
11,854
|
|
$
|
13,706
|
|
$
|
(56
|
)
|
$
|
(66
|
)
|
|
$
|
47
|
|
$
|
40
|
|
|
$
|
(103
|
)
|
$
|
(106
|
)
|
[1]
|
The derivative instruments related to this strategy are held for other investment purposes.
|
Offsetting Derivative Assets and Liabilities
|
||||||||||||||||||
|
(i)
|
(ii)
|
(iii) = (i) - (ii)
|
(iv)
|
(v) = (iii) - (iv)
|
|||||||||||||
|
|
|
Net Amounts Presented in the Statement of Financial Position
|
Collateral Disallowed for Offset in the Statement of Financial Position
|
|
|||||||||||||
|
Gross Amounts of Recognized Assets (Liabilities)
|
Gross Amounts Offset in the Statement of Financial Position
|
Derivative Assets [1] (Liabilities) [2]
|
Accrued Interest and Cash Collateral (Received) [3] Pledged [2]
|
Financial Collateral (Received) Pledged [4]
|
Net Amount
|
||||||||||||
As of March 31, 2020
|
|
|
|
|
|
|
||||||||||||
Other investments
|
$
|
47
|
|
$
|
43
|
|
$
|
10
|
|
$
|
(6
|
)
|
$
|
2
|
|
$
|
2
|
|
Other liabilities
|
$
|
(103
|
)
|
$
|
(13
|
)
|
$
|
(66
|
)
|
$
|
(24
|
)
|
$
|
(81
|
)
|
$
|
(9
|
)
|
As of December 31, 2019
|
|
|
|
|
|
|
||||||||||||
Other investments
|
$
|
40
|
|
$
|
37
|
|
$
|
12
|
|
$
|
(9
|
)
|
$
|
1
|
|
$
|
2
|
|
Other liabilities
|
$
|
(106
|
)
|
$
|
(23
|
)
|
$
|
(78
|
)
|
$
|
(5
|
)
|
$
|
(73
|
)
|
$
|
(10
|
)
|
[1]
|
Included in other investments in the Company's Condensed Consolidated Balance Sheets.
|
[2]
|
Included in other liabilities in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative payable associated with each counterparty.
|
[3]
|
Included in other investments in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative receivable associated with each counterparty.
|
[4]
|
Excludes collateral associated with exchange-traded derivative instruments.
|
Gain (Loss) Recognized in OCI
|
|||||||
|
|
Three Months Ended March 31,
|
|||||
|
|
2020
|
2019
|
||||
Interest rate swaps
|
|
$
|
32
|
|
$
|
7
|
|
Foreign currency swaps
|
|
28
|
|
—
|
|
||
Total
|
|
$
|
60
|
|
$
|
7
|
|
Gain (Loss) Reclassified from AOCI into Income
|
|||||||||||||
|
Three Months Ended March 31,
|
||||||||||||
|
2020
|
|
2019
|
||||||||||
|
Net Realized Capital Gain/(Loss)
|
Net Investment Income
|
|
Net Realized Capital Gain/(Loss)
|
Net Investment Income
|
||||||||
Interest rate swaps
|
$
|
—
|
|
$
|
3
|
|
|
$
|
—
|
|
$
|
—
|
|
Foreign currency swaps
|
—
|
|
1
|
|
|
—
|
|
1
|
|
||||
Total
|
$
|
—
|
|
$
|
4
|
|
|
$
|
—
|
|
$
|
1
|
|
|
|
|
|
|
|
||||||||
Total amounts presented on the Condensed Consolidated Statement of Operations
|
$
|
(231
|
)
|
$
|
459
|
|
|
$
|
163
|
|
$
|
470
|
|
Non-qualifying Strategies Recognized within Net Realized Capital Gains (Losses)
|
|||||||
|
|
Three Months Ended March 31,
|
|||||
|
|
2020
|
2019
|
||||
Foreign exchange contracts
|
|
|
|
||||
Foreign currency swaps and forwards
|
|
$
|
3
|
|
$
|
1
|
|
Interest rate contracts
|
|
|
|
||||
Interest rate swaps, swaptions, and futures
|
|
20
|
|
(8
|
)
|
||
Credit contracts
|
|
|
|
||||
Credit derivatives that purchase credit protection
|
|
6
|
|
1
|
|
||
Credit derivatives that assume credit risk
|
|
(12
|
)
|
21
|
|
||
Equity contracts
|
|
|
|
||||
Equity index swaps and options
|
|
75
|
|
—
|
|
||
Total [1]
|
|
$
|
92
|
|
$
|
15
|
|
[1]
|
Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements.
|
Credit Risk Assumed Derivatives by Type
|
|||||||||||||||
|
|
|
|
Underlying Referenced Credit
Obligation(s) [1]
|
|
|
|||||||||
|
Notional
Amount
[2]
|
Fair
Value
|
Weighted
Average
Years to
Maturity
|
Type
|
Average
Credit
Rating
|
Offsetting
Notional
Amount [3]
|
Offsetting
Fair
Value [3]
|
||||||||
As of March 31, 2020
|
|||||||||||||||
Single name credit default swaps
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
$
|
100
|
|
$
|
(1
|
)
|
5 years
|
Corporate Credit
|
A-
|
$
|
—
|
|
$
|
—
|
|
Basket credit default swaps [4]
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
150
|
|
(1
|
)
|
5 years
|
Corporate Credit
|
BBB+
|
—
|
|
—
|
|
||||
Below investment grade risk exposure
|
13
|
|
(4
|
)
|
Less than 1 year
|
CMBS Credit
|
CCC-
|
13
|
|
4
|
|
||||
Total [5]
|
$
|
263
|
|
$
|
(6
|
)
|
|
|
|
$
|
13
|
|
$
|
4
|
|
As of December 31, 2019
|
|||||||||||||||
Single name credit default swaps
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
$
|
100
|
|
$
|
3
|
|
5 years
|
Corporate Credit
|
A-
|
$
|
—
|
|
$
|
—
|
|
Basket credit default swaps [4]
|
|
|
|
|
|
|
|
||||||||
Investment grade risk exposure
|
400
|
|
10
|
|
5 years
|
Corporate Credit
|
BBB+
|
—
|
|
—
|
|
||||
Investment grade risk exposure
|
1
|
|
—
|
|
Less than 1 year
|
CMBS Credit
|
A
|
1
|
|
—
|
|
||||
Below investment grade risk exposure
|
14
|
|
(5
|
)
|
Less than 1 year
|
CMBS Credit
|
CCC-
|
14
|
|
5
|
|
||||
Total [5]
|
$
|
515
|
|
$
|
8
|
|
|
|
|
$
|
15
|
|
$
|
5
|
|
[1]
|
The average credit ratings are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used.
|
[2]
|
Notional amount is equal to the maximum potential future loss amount. These derivatives are governed by agreements and applicable law, which include collateral posting requirements. There is no additional specific collateral related to these contracts or recourse provisions included in the contracts to offset losses.
|
[3]
|
The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap.
|
[4]
|
Comprised of swaps of standard market indices of diversified portfolios of corporate and CMBS issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index.
|
[5]
|
Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements.
|
Premiums Receivable and Agents' Balances
|
|||
|
As of March 31, 2020
|
||
Premiums receivable, excluding receivables for losses within a deductible and retrospectively-rated policy premiums
|
$
|
4,074
|
|
Receivables for loss within a deductible and retrospectively-rated policy premiums, by credit quality:
|
|
||
AAA
|
—
|
|
|
AA
|
150
|
|
|
A
|
71
|
|
|
BBB
|
216
|
|
|
BB
|
112
|
|
|
Below BB
|
74
|
|
|
Total receivables for losses within a deductible and retrospectively-rated policy premiums
|
623
|
|
|
|
|
||
Total Premiums Receivable and Agents' Balances, Gross
|
4,697
|
|
|
ACL
|
(139
|
)
|
|
Total Premiums Receivable and Agents' Balances, Net of ACL
|
$
|
4,558
|
|
|
|||||||||
Rollforward of ACL on Premiums Receivable and Agents' Balances for the Three Months Ended March 31, 2020
|
|||||||||
|
Premiums Receivable and Agents' Balances, Excluding Receivables for Loss within a Deductible and Retrospectively-Rated Policy Premiums
|
Receivables for Loss within a Deductible and Retrospectively-Rated Policy Premiums
|
Total
|
||||||
Beginning ACL
|
$
|
(85
|
)
|
$
|
(60
|
)
|
$
|
(145
|
)
|
Cumulative effect of accounting change [1]
|
2
|
|
21
|
|
23
|
|
|||
Adjusted beginning ACL
|
(83
|
)
|
(39
|
)
|
(122
|
)
|
|||
Current period provision
|
(28
|
)
|
(2
|
)
|
(30
|
)
|
|||
Current period gross write-offs
|
15
|
|
—
|
|
15
|
|
|||
Current period gross recoveries
|
(2
|
)
|
—
|
|
(2
|
)
|
|||
Ending ACL
|
$
|
(98
|
)
|
$
|
(41
|
)
|
$
|
(139
|
)
|
[1]
|
Represents the adjustment to the ACL recorded on adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements.
|
Reinsurance Recoverables by Credit Quality Indicator as of March 31, 2020
|
||||||||||||
|
Property and Casualty
|
Group Benefits
|
Corporate
|
Total
|
||||||||
A.M. Best Financial Strength Rating
|
|
|
|
|
||||||||
A++
|
$
|
1,232
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,232
|
|
A+
|
1,735
|
|
236
|
|
316
|
|
2,287
|
|
||||
A
|
519
|
|
—
|
|
—
|
|
519
|
|
||||
A-
|
34
|
|
10
|
|
—
|
|
44
|
|
||||
B++
|
685
|
|
—
|
|
3
|
|
688
|
|
||||
Below B++
|
23
|
|
1
|
|
—
|
|
24
|
|
||||
Total Rated by A.M. Best
|
4,228
|
|
247
|
|
319
|
|
4,794
|
|
||||
Mandatory (Assigned) and Voluntary Risk Pools
|
261
|
|
—
|
|
—
|
|
261
|
|
||||
Captives
|
328
|
|
—
|
|
—
|
|
328
|
|
||||
Other not rated companies
|
322
|
|
8
|
|
—
|
|
330
|
|
||||
Gross Reinsurance Recoverables
|
5,139
|
|
255
|
|
319
|
|
5,713
|
|
||||
Allowance for uncollectible reinsurance
|
(114
|
)
|
(1
|
)
|
(2
|
)
|
(117
|
)
|
||||
Net Reinsurance Recoverables
|
$
|
5,025
|
|
$
|
254
|
|
$
|
317
|
|
$
|
5,596
|
|
Allowance for Uncollectible Reinsurance
|
||||||||||||
|
For the three months ended March 31, 2020
|
|||||||||||
|
Property and Casualty
|
Group Benefits
|
Corporate
|
Total
|
||||||||
Beginning allowance for uncollectible reinsurance
|
$
|
(114
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(114
|
)
|
Beginning allowance for disputed amounts
|
(66
|
)
|
—
|
|
—
|
|
(66
|
)
|
||||
Beginning ACL
|
(48
|
)
|
—
|
|
—
|
|
(48
|
)
|
||||
Cumulative effect of accounting change [1]
|
—
|
|
(1
|
)
|
(1
|
)
|
(2
|
)
|
||||
Adjusted beginning ACL
|
(48
|
)
|
(1
|
)
|
(1
|
)
|
(50
|
)
|
||||
Current period provision
|
(1
|
)
|
—
|
|
(1
|
)
|
(2
|
)
|
||||
Ending ACL
|
(49
|
)
|
(1
|
)
|
(2
|
)
|
(52
|
)
|
||||
Ending allowance for disputed amounts
|
(65
|
)
|
—
|
|
—
|
|
(65
|
)
|
||||
Ending allowance for uncollectible reinsurance
|
$
|
(114
|
)
|
$
|
(1
|
)
|
$
|
(2
|
)
|
$
|
(117
|
)
|
|
For the three months ended March 31,
|
|||||
|
2020
|
2019
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
28,261
|
|
$
|
24,584
|
|
Reinsurance and other recoverables
|
5,275
|
|
4,232
|
|
||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
22,986
|
|
20,352
|
|
||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||
Current accident year
|
1,883
|
|
1,641
|
|
||
Prior accident year development [1]
|
23
|
|
(11
|
)
|
||
Total provision for unpaid losses and loss adjustment expenses
|
1,906
|
|
1,630
|
|
||
Change in deferred gain on retroactive reinsurance included in other liabilities [1]
|
(29
|
)
|
—
|
|
||
Payments
|
|
|
|
|
||
Current accident year
|
(304
|
)
|
(271
|
)
|
||
Prior accident years
|
(1,491
|
)
|
(1,309
|
)
|
||
Total payments
|
(1,795
|
)
|
(1,580
|
)
|
||
Foreign currency adjustment
|
(20
|
)
|
—
|
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
23,048
|
|
20,402
|
|
||
Reinsurance and other recoverables
|
5,332
|
|
4,209
|
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
28,380
|
|
$
|
24,611
|
|
|
For the three months ended March 31,
|
|||||
|
2020
|
2019
|
||||
Workers’ compensation
|
$
|
(17
|
)
|
$
|
(20
|
)
|
Workers’ compensation discount accretion
|
9
|
|
8
|
|
||
General liability
|
12
|
|
6
|
|
||
Marine
|
—
|
|
—
|
|
||
Package business
|
1
|
|
5
|
|
||
Commercial property
|
(7
|
)
|
(2
|
)
|
||
Professional liability
|
1
|
|
—
|
|
||
Bond
|
—
|
|
—
|
|
||
Assumed reinsurance
|
—
|
|
—
|
|
||
Automobile liability - Commercial Lines
|
5
|
|
—
|
|
||
Automobile liability - Personal Lines
|
(6
|
)
|
(5
|
)
|
||
Homeowners
|
(2
|
)
|
1
|
|
||
Net asbestos reserves
|
—
|
|
—
|
|
||
Net environmental reserves
|
—
|
|
—
|
|
||
Catastrophes
|
(13
|
)
|
(8
|
)
|
||
Uncollectible reinsurance
|
—
|
|
—
|
|
||
Other reserve re-estimates, net
|
11
|
|
4
|
|
||
Prior accident year development before change in deferred gain
|
(6
|
)
|
(11
|
)
|
||
Change in deferred gain on retroactive reinsurance included in other liabilities [1]
|
29
|
|
—
|
|
||
Total prior accident year development
|
$
|
23
|
|
$
|
(11
|
)
|
|
For the three months ended March 31,
|
|||||
|
2020
|
2019
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
8,256
|
|
$
|
8,445
|
|
Reinsurance recoverables [1]
|
246
|
|
239
|
|
||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
8,010
|
|
8,206
|
|
||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||
Current incurral year
|
1,148
|
|
1,150
|
|
||
Prior year's discount accretion
|
57
|
|
58
|
|
||
Prior incurral year development [2]
|
(163
|
)
|
(120
|
)
|
||
Total provision for unpaid losses and loss adjustment expenses [3]
|
1,042
|
|
1,088
|
|
||
Payments
|
|
|
|
|
||
Current incurral year
|
(278
|
)
|
(314
|
)
|
||
Prior incurral years
|
(821
|
)
|
(855
|
)
|
||
Total payments
|
(1,099
|
)
|
(1,169
|
)
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
7,953
|
|
8,125
|
|
||
Reinsurance recoverables
|
249
|
|
237
|
|
||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
8,202
|
|
$
|
8,362
|
|
[1]
|
Reflects a cumulative effect adjustment of $(1) representing an adjustment to the ACL recorded on adoption of accounting guidance for credit losses on January 1, 2020. See Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements for further information.
|
[2]
|
Prior incurral year development represents the change in estimated ultimate incurred losses and loss adjustment expenses for prior incurral years on a discounted basis.
|
[3]
|
Includes unallocated loss adjustment expenses of $44 and $46 for the three months ended March 31, 2020 and 2019, respectively, that are recorded in insurance operating costs and other expenses in the Condensed Consolidated Statements of Operations.
|
Changes in Reserves for Future Policy Benefits[1]
|
|||
Liability balance, as of January 1, 2020
|
$
|
635
|
|
Incurred
|
18
|
|
|
Paid
|
(22
|
)
|
|
Change in unrealized investment gains and losses
|
(2
|
)
|
|
Liability balance, as of March 31, 2020
|
$
|
629
|
|
Reinsurance recoverable asset, as of January 1, 2020
|
$
|
31
|
|
Incurred
|
(1
|
)
|
|
Paid
|
—
|
|
|
Reinsurance recoverable asset, as of March 31, 2020
|
$
|
30
|
|
Liability balance, as of January 1, 2019
|
$
|
642
|
|
Incurred
|
27
|
|
|
Paid
|
(28
|
)
|
|
Change in unrealized investment gains and losses
|
7
|
|
|
Liability balance, as of March 31, 2019
|
$
|
648
|
|
Reinsurance recoverable asset, as of January 1, 2019
|
$
|
27
|
|
Incurred
|
5
|
|
|
Paid
|
(2
|
)
|
|
Reinsurance recoverable asset, as of March 31, 2019
|
$
|
30
|
|
Income Tax Rate Reconciliation
|
||||||
|
Three Months Ended March 31,
|
|||||
|
2020
|
2019
|
||||
Tax provision at U.S. federal statutory rate
|
$
|
72
|
|
$
|
163
|
|
Tax-exempt interest
|
(12
|
)
|
(15
|
)
|
||
Executive compensation
|
5
|
|
4
|
|
||
Increase in deferred tax valuation allowance
|
6
|
|
—
|
|
||
Stock-based compensation
|
(1
|
)
|
(3
|
)
|
||
Other
|
1
|
|
(4
|
)
|
||
Provision for income taxes
|
$
|
71
|
|
$
|
145
|
|
Rollforward of Unrecognized Tax Benefits
|
||||||
|
Three Months Ended March 31,
|
|||||
|
2020
|
2019
|
||||
Balance, beginning of period
|
$
|
14
|
|
$
|
14
|
|
Gross increases - tax positions in prior period
|
—
|
|
—
|
|
||
Gross decreases - tax positions in prior period
|
—
|
|
—
|
|
||
Balance, end of period
|
$
|
14
|
|
$
|
14
|
|
Changes in AOCI, Net of Tax for the Three Months Ended March 31, 2020
|
||||||||||||||||||
|
Changes in
|
|||||||||||||||||
|
Net Unrealized Gain on Fixed Maturities
|
Unrealized Loss on Fixed Maturities with ACL
|
Net Gain on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
AOCI,
net of tax |
||||||||||||
Beginning balance
|
$
|
1,684
|
|
$
|
(3
|
)
|
$
|
9
|
|
$
|
34
|
|
$
|
(1,672
|
)
|
$
|
52
|
|
OCI before reclassifications
|
(1,015
|
)
|
1
|
|
47
|
|
(8
|
)
|
(1
|
)
|
(976
|
)
|
||||||
Amounts reclassified from AOCI
|
(42
|
)
|
—
|
|
(3
|
)
|
—
|
|
12
|
|
(33
|
)
|
||||||
OCI, net of tax
|
(1,057
|
)
|
1
|
|
44
|
|
(8
|
)
|
11
|
|
(1,009
|
)
|
||||||
Ending balance
|
$
|
627
|
|
$
|
(2
|
)
|
$
|
53
|
|
$
|
26
|
|
$
|
(1,661
|
)
|
$
|
(957
|
)
|
|
Changes in AOCI, Net of Tax for the Three Months Ended March 31, 2019
|
||||||||||||||||||
|
Changes in
|
|||||||||||||||||
|
Net Unrealized Gain on Securities
|
OTTI Losses in OCI
|
Net Gain on Cash Flow Hedging Instruments
|
Foreign Currency Translation Adjustments
|
Pension and Other Postretirement Plan Adjustments
|
AOCI,
net of tax |
||||||||||||
Beginning balance
|
$
|
24
|
|
$
|
(4
|
)
|
$
|
(5
|
)
|
$
|
30
|
|
$
|
(1,624
|
)
|
$
|
(1,579
|
)
|
OCI before reclassifications
|
696
|
|
1
|
|
6
|
|
1
|
|
(1
|
)
|
703
|
|
||||||
Amounts reclassified from AOCI
|
(17
|
)
|
—
|
|
(1
|
)
|
—
|
|
9
|
|
(9
|
)
|
||||||
OCI, net of tax
|
679
|
|
1
|
|
5
|
|
1
|
|
8
|
|
694
|
|
||||||
Ending balance
|
$
|
703
|
|
$
|
(3
|
)
|
$
|
—
|
|
$
|
31
|
|
$
|
(1,616
|
)
|
$
|
(885
|
)
|
|
Net Periodic Cost (Benefit)
|
|||||||||||||
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||
|
Three Months Ended March 31,
|
|
Three Months Ended March 31,
|
||||||||||
|
2020
|
2019
|
|
2020
|
2019
|
||||||||
Service cost
|
$
|
1
|
|
$
|
1
|
|
|
$
|
—
|
|
$
|
—
|
|
Interest cost
|
32
|
|
39
|
|
|
2
|
|
2
|
|
||||
Expected return on plan assets
|
(54
|
)
|
(57
|
)
|
|
(1
|
)
|
(1
|
)
|
||||
Amortization of prior service credit
|
—
|
|
—
|
|
|
(2
|
)
|
(1
|
)
|
||||
Amortization of actuarial loss
|
15
|
|
11
|
|
|
2
|
|
1
|
|
||||
Net periodic cost (benefit)
|
$
|
(6
|
)
|
$
|
(6
|
)
|
|
$
|
1
|
|
$
|
1
|
|
Description
|
Page
|
Key Performance Measures and Ratios
|
|
Commercial Lines
|
|
Personal Lines
|
|
Hartford Funds
|
|
•
|
Certain realized capital gains and losses - Some realized capital 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 capital 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.
|
•
|
Integration and transaction costs in connection with an acquired business - As transaction costs are incurred upon acquisition of a business and integration costs are completed within a short period after an acquisition, they do not represent ongoing costs 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.
|
•
|
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.
|
•
|
Change in valuation allowance on deferred taxes related to non-core components of pre-tax income - These changes in valuation allowances are excluded from core earnings because they relate to non-core components of pre-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.
|
•
|
Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance agreements economically transfer risk to the reinsurers and including the full benefit from retroactive reinsurance in core earnings provides greater insight into the economics of the business.
|
Reconciliation of Net Income to Core Earnings
|
||||||
|
Three Months Ended March 31,
|
|||||
|
2020
|
2019
|
||||
Net income
|
$
|
273
|
|
$
|
630
|
|
Preferred stock dividends
|
5
|
|
5
|
|
||
Net income available to common stockholders
|
268
|
|
625
|
|
||
Adjustments to reconcile net income available to common stockholders to core earnings:
|
|
|
|
|
||
Net realized capital losses (gains) excluded from core earnings, before tax
|
232
|
|
(160
|
)
|
||
Integration and transaction costs associated with acquired business, before tax
|
13
|
|
10
|
|
||
Change in deferred gain on retroactive reinsurance, before tax
|
29
|
|
—
|
|
||
Income tax expense (benefit)
|
(57
|
)
|
32
|
|
||
Core earnings
|
$
|
485
|
|
$
|
507
|
|
Reconciliation of Net Income to Underwriting Gain (Loss)
|
||||||
|
For the three months ended March 31,
|
|||||
|
2020
|
2019
|
||||
Commercial Lines
|
||||||
Net income
|
$
|
121
|
|
$
|
363
|
|
Adjustments to reconcile net income to underwriting gain (loss):
|
|
|
||||
Net servicing income
|
(1
|
)
|
1
|
|
||
Net investment income
|
(277
|
)
|
(259
|
)
|
||
Net realized capital losses (gains)
|
143
|
|
(115
|
)
|
||
Other expense
|
6
|
|
1
|
|
||
Loss on reinsurance transaction
|
—
|
|
—
|
|
||
Income tax expense
|
28
|
|
79
|
|
||
Underwriting gain
|
$
|
20
|
|
$
|
70
|
|
Personal Lines
|
||||||
Net income (loss)
|
$
|
98
|
|
$
|
96
|
|
Adjustments to reconcile net income to underwriting gain (loss):
|
|
|
||||
Net servicing income
|
(2
|
)
|
(3
|
)
|
||
Net investment income
|
(41
|
)
|
(42
|
)
|
||
Net realized capital losses (gains)
|
23
|
|
(19
|
)
|
||
Other expense (income)
|
—
|
|
(1
|
)
|
||
Income tax expense
|
25
|
|
23
|
|
||
Underwriting gain
|
$
|
103
|
|
$
|
54
|
|
P&C Other Ops
|
||||||
Net Income
|
$
|
5
|
|
$
|
23
|
|
Adjustments to reconcile net income to underwriting gain (loss):
|
|
|
||||
Net investment income
|
(16
|
)
|
(22
|
)
|
||
Net realized capital losses (gains)
|
7
|
|
(9
|
)
|
||
Income tax expense
|
1
|
|
5
|
|
||
Underwriting loss
|
(3
|
)
|
(3
|
)
|
Net Income Available to Common Stockholders
|
|
Net Income Available to Common Stockholders per Diluted Share
|
|
Book Value per Diluted Share
|
Þ
|
Decreased $357 or 57%
|
|
Þ
|
Decreased $0.97 or 57%
|
|
Þ
|
Decreased $2.43 or 6%
|
|||
-
|
Net realized capital losses in 2020 versus net realized gains in 2019, lower net investment income, and lower income on the retained interest in Talcott
|
|
-
|
Decrease in net income
|
|
-
|
Decrease in common stockholders' equity largely due to a decrease in AOCI, primarily driven by the impact of wider credit spreads on unrealized capital gains (losses)
|
|||
|
+
|
Decrease in dilutive shares due, in part, to share repurchases
|
|
|||||||
-
|
Unfavorable prior accident year development in Commercial Lines
|
|
|
+
|
Net income in excess of stockholder dividends
|
|||||
-
|
Higher insurance operating costs and other expenses
|
|
|
|
|
+
|
Decrease in dilutive shares
|
|||
+
|
Lower overall Group Benefits loss ratio
|
|
|
|
|
|||||
+
|
Higher earnings from Hartford Funds
|
|
|
|
|
|
|
|||
+
|
Lower current accident year catastrophes
|
|
|
|
|
|
|
Investment Yield, After Tax
|
|
Property & Casualty Combined Ratio
|
|
Group Benefits Net Income Margin
|
Þ
|
Decreased 40 bps
|
|
Ý
|
Increased 0.8 points
|
|
Þ
|
Decreased 0.8 points
|
|||
-
|
Lower returns on equity fund investments due to the decline in equity market levels
|
|
+
|
Higher expense ratio, primarily in Commercial Lines
|
|
-
|
A change to net realized capital losses in 2020, lower net investment income, and lower premium volume
|
|||
-
|
Lower reinvestment rates and lower yield on variable rate securities due to the decline in interest rates
|
|
+
|
A change to unfavorable prior accident year development in Commercial Lines, partially offset by improved prior accident year development in Personal Lines homeowners
|
|
|||||
|
|
-
|
Higher insurance operating costs and other expenses
|
|||||||
|
|
|
|
|
+
|
A lower group life loss ratio, partially offset by a higher group disability loss ratio that was driven by COVID-19 claims
|
||||
|
|
|
-
|
Lower current accident year loss ratio in Personal Lines, partially offset by an increase in Commercial lines, primarily due to the inclusion of Navigators Group
|
|
|||||
|
|
|
|
|
|
|||||
|
|
|
-
|
Lower current accident year catastrophes
|
|
|
|
|
Three Months Ended March 31,
|
|||||||
|
2020
|
2019
|
Change
|
|||||
Earned premiums
|
$
|
4,391
|
|
$
|
3,940
|
|
11
|
%
|
Fee income
|
320
|
|
314
|
|
2
|
%
|
||
Net investment income
|
459
|
|
470
|
|
(2
|
%)
|
||
Net realized capital gains (losses)
|
(231
|
)
|
163
|
|
NM
|
|
||
Other revenues
|
17
|
|
53
|
|
(68
|
%)
|
||
Total revenues
|
4,956
|
|
4,940
|
|
—
|
%
|
||
Benefits, losses and loss adjustment expenses
|
2,916
|
|
2,685
|
|
9
|
%
|
||
Amortization of deferred policy acquisition costs
|
437
|
|
355
|
|
23
|
%
|
||
Insurance operating costs and other expenses
|
1,176
|
|
1,048
|
|
12
|
%
|
||
Interest expense
|
64
|
|
64
|
|
—
|
%
|
||
Amortization of other intangible assets
|
19
|
|
13
|
|
46
|
%
|
||
Total benefits, losses and expenses
|
4,612
|
|
4,165
|
|
11
|
%
|
||
Income, before tax
|
344
|
|
775
|
|
(56
|
%)
|
||
Income tax expense
|
71
|
|
145
|
|
(51
|
%)
|
||
Net income
|
273
|
|
630
|
|
(57
|
%)
|
||
Preferred stock dividends
|
5
|
|
5
|
|
—
|
%
|
||
Net income available to common stockholders
|
$
|
268
|
|
$
|
625
|
|
(57
|
%)
|
•
|
An increase in Property and Casualty reflecting a 27% increase in Commercial Lines, including the effect of the Navigators Group acquisition, partially offset by a 3% decline in Personal Lines.
|
•
|
A decrease in Group Benefits primarily related to group life.
|
•
|
Lower return on equity fund investments resulting from the decline in equity market levels.
|
•
|
A lower yield on fixed maturity investments resulting from reinvesting at lower rates and a lower yield on floating rate investments.
|
•
|
Partially offset by a higher level of invested assets, primarily due to the acquisition of Navigators Group.
|
•
|
Depreciation in the value of equity securities due to the significant decline in equity market levels as well as realized losses upon sales of equity securities.
|
•
|
Partially offset by gains realized upon termination of derivatives used to hedge against declines in equity market levels and, to a lesser extent, higher net gains on sales of fixed maturity securities in 2020, primarily driven by trades to manage duration and credit.
|
[1]
|
The three months ended March 31, 2020 included buyout premiums from one large account.
|
•
|
An increase in incurred losses for Property & Casualty, partially offset by a decrease in Group Benefits, driven by:
|
–
|
An increase in Property & Casualty current accident year ("CAY") loss and loss adjustment expenses before catastrophes primarily due to the effect of higher earned premium in Commercial Lines, including the impact of the Navigators Group acquisition, and a higher workers’ compensation and general liability loss ratio, partially offset by a lower homeowners and personal auto loss ratio, the effect of lower earned premium in Personal Lines, and lower non-catastrophe property losses on small commercial package business.
|
–
|
An unfavorable change in Property & Casualty net prior accident year reserve development of $34, before tax. Prior accident year reserve development in 2020 was an unfavorable $23 before tax and primarily included reserve increases for marine, general liability and workers' compensation pool participants, partially offset by reserve decreases for workers' compensation, and catastrophes. The $23 of net unfavorable reserve development in first quarter 2020 included $29 of adverse development as the result of recognizing a deferred gain on retroactive reinsurance. Prior accident year reserve development in 2019 was favorable $11, before tax, and primarily included reserve decreases for workers’ compensation, catastrophes, and auto liability, partially offset by reserve increases in general liability and package business. For further discussion, see Note 10 - Reserve for Unpaid Losses and Loss Adjustment
|
–
|
A decline in current accident year catastrophe losses of $30, before tax. Catastrophe losses in 2020 were primarily from tornado, wind and hail events in the Midwest and Southeast. Catastrophe losses in 2019 were primarily from winter storms across the country and, to a lesser extent, tornado and hail events in the South. For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.
|
•
|
Partially offsetting the increase in Property & Casualty was a decrease in Group Benefits driven by favorable mortality, including favorable prior incurral year development in group life, partially offset by a higher loss ratio in group disability driven by incurred losses for COVID-19 related claims in short-term disability and New York Paid Family Leave.
|
•
|
Operating costs and integration costs incurred in the 2020 period due to the Navigators Group acquisition in May of 2019.
|
•
|
An increase in the ACL on uncollectible premiums receivable in Property & Casualty in 2020 due to the economic impacts of COVID-19.
|
•
|
A reduction in state taxes and assessments in first quarter 2019 across Property & Casualty and Group Benefits.
|
•
|
An increase in Group Benefits due to higher sales and distribution costs, operating costs, and information technology costs.
|
Composition of Invested Assets
|
|||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||||||
|
Amount
|
Percent
|
|
Amount
|
Percent
|
||||||
Fixed maturities, available-for-sale ("AFS"), at fair value
|
$
|
40,205
|
|
79.8
|
%
|
|
$
|
42,148
|
|
79.5
|
%
|
Fixed maturities, at fair value using the fair value option ("FVO")
|
8
|
|
—
|
%
|
|
11
|
|
—
|
%
|
||
Equity securities, at fair value
|
1,155
|
|
2.3
|
%
|
|
1,657
|
|
3.1
|
%
|
||
Mortgage loans (net of ACL of $21 and $0)
|
4,353
|
|
8.6
|
%
|
|
4,215
|
|
8.0
|
%
|
||
Limited partnerships and other alternative investments
|
1,839
|
|
3.7
|
%
|
|
1,758
|
|
3.3
|
%
|
||
Other investments [1]
|
294
|
|
0.6
|
%
|
|
320
|
|
0.6
|
%
|
||
Short-term investments
|
2,505
|
|
5.0
|
%
|
|
2,921
|
|
5.5
|
%
|
||
Total investments
|
$
|
50,359
|
|
100.0
|
%
|
|
$
|
53,030
|
|
100.0
|
%
|
[1]
|
Primarily consists of consolidated investment funds and derivative instruments which are carried at fair value.
|
Net Investment Income
|
||||||||||
|
Three Months Ended March 31,
|
|||||||||
|
2020
|
2019
|
||||||||
(Before tax)
|
Amount
|
Yield [1]
|
Amount
|
Yield [1]
|
||||||
Fixed maturities [2]
|
$
|
377
|
|
3.6
|
%
|
$
|
381
|
|
3.9
|
%
|
Equity securities
|
12
|
|
3.0
|
%
|
7
|
|
2.3
|
%
|
||
Mortgage loans
|
42
|
|
3.9
|
%
|
40
|
|
4.4
|
%
|
||
Limited partnerships and other alternative investments
|
58
|
|
13.2
|
%
|
56
|
|
13.4
|
%
|
||
Other [3]
|
(12
|
)
|
|
9
|
|
|
||||
Investment expense
|
(18
|
)
|
|
(23
|
)
|
|
||||
Total net investment income
|
$
|
459
|
|
3.7
|
%
|
$
|
470
|
|
4.1
|
%
|
Total net investment income excluding limited partnerships and other alternative investments
|
$
|
401
|
|
3.3
|
%
|
$
|
414
|
|
3.7
|
%
|
[1]
|
Yields calculated using annualized net investment income divided by the monthly average invested assets at amortized cost, as applicable, excluding repurchase agreement and securities lending collateral, if any, and derivatives book value.
|
[2]
|
Includes net investment income on short-term investments.
|
[3]
|
Primarily includes income from derivatives that qualify for hedge accounting and hedge fixed maturities.
|
Net Realized Capital Gains (Losses)
|
||||||
|
Three Months Ended March 31,
|
|||||
(Before tax)
|
2020
|
2019
|
||||
Gross gains on sales
|
$
|
78
|
|
$
|
44
|
|
Gross losses on sales
|
(8
|
)
|
(21
|
)
|
||
Equity securities [1]
|
(386
|
)
|
132
|
|
||
Change in ACL on fixed maturities, AFS [2] [3]
|
(12
|
)
|
|
|||
Change in ACL on mortgage loans [2] [3]
|
(2
|
)
|
|
|||
Intent-to-sell impairments [3]
|
(5
|
)
|
—
|
|
||
Net other-than-temporary impairment ("OTTI") losses recognized in earnings [3]
|
|
(2
|
)
|
|||
Other, net [4]
|
104
|
|
10
|
|
||
Net realized capital gains (losses)
|
$
|
(231
|
)
|
$
|
163
|
|
[1]
|
The net unrealized gain (loss) on equity securities included in net realized capital gains (losses) related to equity securities still held as of March 31, 2020, was $(277) for the three months ended March 31, 2020. The net unrealized gain (loss) on equity securities included in net realized capital gains (losses) related to equity securities still held as of March 31, 2019, was $68 for the three months ended March 31, 2019.
|
[2]
|
Represents the change in ACL recorded during the period following the adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies.
|
[3]
|
See Intent-to-Sell Impairments and ACL on Fixed Maturities, AFS and ACL on Mortgage Loans within the Investment Portfolio Risks and Risk Management section of the MD&A.
|
[4]
|
Primarily consists of changes in value of non-qualifying derivatives, including credit derivatives, interest rate derivatives used to manage duration, and equity derivatives. Also includes transactional foreign currency revaluation.
|
•
|
property and casualty insurance product reserves, net of reinsurance;
|
•
|
group benefit long-term disability (LTD) reserves, net of reinsurance;
|
•
|
evaluation of goodwill for impairment;
|
•
|
valuation of investments and derivative instruments including evaluation of other-than-temporary impairments on available-for-sale securities and valuation allowances on mortgage loans;
|
•
|
valuation allowance on deferred tax assets; and
|
•
|
contingencies relating to corporate litigation and regulatory matters.
|
Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Three Months Ended March 31, 2020
|
|||||||||||||||
|
Commercial
Lines |
Personal
Lines |
Property & Casualty Other Operations
|
Corporate
|
Total Property & Casualty and Corporate
|
||||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
23,363
|
|
$
|
2,201
|
|
$
|
2,697
|
|
$
|
—
|
|
$
|
28,261
|
|
Reinsurance and other recoverables [1]
|
4,029
|
|
68
|
|
1,178
|
|
—
|
|
5,275
|
|
|||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
19,334
|
|
2,133
|
|
1,519
|
|
—
|
|
22,986
|
|
|||||
Transfer of Y-Risk reserves from Commercial Lines to Corporate
|
(5
|
)
|
—
|
|
—
|
|
5
|
|
—
|
|
|||||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
|
|
—
|
|
|
|
|||||
Current accident year before catastrophes
|
1,343
|
|
463
|
|
—
|
|
3
|
|
1,809
|
|
|||||
Current accident year ("CAY") catastrophes
|
55
|
|
19
|
|
—
|
|
—
|
|
74
|
|
|||||
Prior accident year development ("PYD") [2]
|
41
|
|
(18
|
)
|
—
|
|
—
|
|
23
|
|
|||||
Total provision for unpaid losses and loss adjustment expenses
|
1,439
|
|
464
|
|
—
|
|
3
|
|
1,906
|
|
|||||
Change in deferred gain on retroactive reinsurance included in other liabilities [2]
|
(29
|
)
|
—
|
|
—
|
|
—
|
|
(29
|
)
|
|||||
Payments
|
(1,194
|
)
|
(550
|
)
|
(50
|
)
|
(1
|
)
|
(1,795
|
)
|
|||||
Foreign currency adjustment
|
(20
|
)
|
—
|
|
—
|
|
—
|
|
(20
|
)
|
|||||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
19,525
|
|
2,047
|
|
1,469
|
|
7
|
|
23,048
|
|
|||||
Reinsurance and other recoverables
|
4,107
|
|
68
|
|
1,157
|
|
—
|
|
5,332
|
|
|||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
23,632
|
|
$
|
2,115
|
|
$
|
2,626
|
|
$
|
7
|
|
$
|
28,380
|
|
Earned premiums and fee income
|
$
|
2,273
|
|
$
|
783
|
|
|
|
|
||||||
Loss and loss expense paid ratio [3]
|
52.5
|
|
70.2
|
|
|
|
|
||||||||
Loss and loss expense incurred ratio
|
63.5
|
|
60.0
|
|
|
|
|
||||||||
Prior accident year development (pts) [4]
|
1.8
|
|
(2.3
|
)
|
|
|
|
[1]
|
Reflects a cumulative effect adjustment of $1 and $(1) for Commercial Lines and Property & Casualty Other Operations respectively, representing an adjustment to the ACL recorded on adoption of accounting guidance for credit losses on January 1, 2020. See Note 1 - Basis of Presentation and Significant Accounting Policies for further information.
|
[2]
|
Prior accident year development does not include the benefit of a portion of losses ceded under the Navigators adverse development cover ("Navigators ADC") which, under retroactive reinsurance accounting, is deferred and recognized over the period the ceded losses are recovered in cash from NICO. For additional information regarding the Navigators ADC agreement, please refer to Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements.
|
[3]
|
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
[4]
|
“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
|
Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Three Months Ended March 31, 2019
|
||||||||||||
|
Commercial
Lines
|
Personal
Lines
|
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
19,455
|
|
$
|
2,456
|
|
$
|
2,673
|
|
$
|
24,584
|
|
Reinsurance and other recoverables
|
3,137
|
|
108
|
|
987
|
|
4,232
|
|
||||
Beginning liabilities for unpaid losses and loss adjustment expenses, net
|
16,318
|
|
2,348
|
|
1,686
|
|
20,352
|
|
||||
Provision for unpaid losses and loss adjustment expenses
|
|
|
|
|
||||||||
Current accident year before catastrophes
|
1,037
|
|
500
|
|
—
|
|
1,537
|
|
||||
Current accident year catastrophes
|
70
|
|
34
|
|
—
|
|
104
|
|
||||
Prior accident year development
|
(10
|
)
|
(1
|
)
|
—
|
|
(11
|
)
|
||||
Total provision for unpaid losses and loss adjustment expenses
|
1,097
|
|
533
|
|
—
|
|
1,630
|
|
||||
Payments
|
(895
|
)
|
(640
|
)
|
(45
|
)
|
(1,580
|
)
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, net
|
16,520
|
|
2,241
|
|
1,641
|
|
20,402
|
|
||||
Reinsurance and other recoverables
|
3,111
|
|
111
|
|
987
|
|
4,209
|
|
||||
Ending liabilities for unpaid losses and loss adjustment expenses, gross
|
$
|
19,631
|
|
$
|
2,352
|
|
$
|
2,628
|
|
$
|
24,611
|
|
Earned premiums and fee income
|
$
|
1,786
|
|
$
|
808
|
|
|
|
||||
Loss and loss expense paid ratio [1]
|
50.1
|
|
79.2
|
|
|
|
||||||
Loss and loss expense incurred ratio
|
61.7
|
|
66.7
|
|
|
|
||||||
Prior accident year development (pts) [2]
|
(0.6
|
)
|
(0.1
|
)
|
|
|
[1]
|
The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
|
[2]
|
“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
|
Unfavorable (Favorable) Prior Accident Year Development for the Three Months Ended March 31, 2019
|
||||||||||||
|
Commercial Lines
|
Personal
Lines
|
Property & Casualty Other Operations
|
Total Property & Casualty Insurance
|
||||||||
Workers’ compensation
|
$
|
(20
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(20
|
)
|
Workers’ compensation discount accretion
|
8
|
|
—
|
|
—
|
|
8
|
|
||||
General liability
|
6
|
|
—
|
|
—
|
|
6
|
|
||||
Package business
|
5
|
|
—
|
|
—
|
|
5
|
|
||||
Commercial property
|
(2
|
)
|
—
|
|
—
|
|
(2
|
)
|
||||
Professional liability
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Bond
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Automobile liability
|
—
|
|
(5
|
)
|
—
|
|
(5
|
)
|
||||
Homeowners
|
—
|
|
1
|
|
—
|
|
1
|
|
||||
Net asbestos reserves
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Net environmental reserves
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Catastrophes
|
(12
|
)
|
4
|
|
—
|
|
(8
|
)
|
||||
Uncollectible reinsurance
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
Other reserve re-estimates, net
|
5
|
|
(1
|
)
|
—
|
|
4
|
|
||||
Total prior accident year development
|
$
|
(10
|
)
|
$
|
(1
|
)
|
$
|
—
|
|
$
|
(11
|
)
|
COMMERCIAL LINES
|
|
Three Months Ended March 31,
|
|||||||
|
2020
|
2019
|
Change
|
|||||
Written premiums
|
$
|
2,408
|
|
$
|
1,949
|
|
24
|
%
|
Change in unearned premium reserve
|
143
|
|
172
|
|
(17
|
%)
|
||
Earned premiums
|
2,265
|
|
1,777
|
|
27
|
%
|
||
Fee income
|
8
|
|
9
|
|
(11
|
%)
|
||
Losses and loss adjustment expenses
|
|
|
|
|
||||
Current accident year before catastrophes
|
1,343
|
|
1,037
|
|
30
|
%
|
||
Current accident year catastrophes [1]
|
55
|
|
70
|
|
(21
|
%)
|
||
Prior accident year development [1]
|
41
|
|
(10
|
)
|
NM
|
|
||
Total losses and loss adjustment expenses
|
1,439
|
|
1,097
|
|
31
|
%
|
||
Amortization of deferred policy acquisition costs
|
356
|
|
274
|
|
30
|
%
|
||
Underwriting expenses
|
443
|
|
337
|
|
31
|
%
|
||
Amortization of other intangible assets
|
7
|
|
2
|
|
NM
|
|
||
Dividends to policyholders
|
8
|
|
6
|
|
33
|
%
|
||
Underwriting gain
|
20
|
|
70
|
|
(71
|
%)
|
||
Net servicing income
|
1
|
|
(1
|
)
|
NM
|
|
||
Net investment income [2]
|
277
|
|
259
|
|
7
|
%
|
||
Net realized capital gains (losses) [2]
|
(143
|
)
|
115
|
|
NM
|
|
||
Other expenses
|
(6
|
)
|
(1
|
)
|
NM
|
|
||
Income before income taxes
|
149
|
|
442
|
|
(66
|
%)
|
||
Income tax expense [3]
|
28
|
|
79
|
|
(65
|
%)
|
||
Net income
|
$
|
121
|
|
$
|
363
|
|
(67
|
%)
|
[1]
|
For discussion of current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property and Casualty Insurance Product Reserves Development, Net of Reinsurance and Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements.
|
[2]
|
For discussion of consolidated investment results, see MD&A - Investment Results.
|
[3]
|
For discussion of income taxes, see Note 13 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
|
|
Three Months Ended March 31,
|
|||||
|
2020
|
2019
|
||||
Small commercial new business premium
|
$
|
157
|
|
$
|
175
|
|
Middle market new business premium
|
125
|
|
140
|
|
||
Small commercial policy count retention
|
84
|
%
|
84
|
%
|
||
Middle market policy count retention [1]
|
77
|
%
|
81
|
%
|
||
Standard commercial lines renewal written price increases [1] [2]
|
3.8
|
%
|
1.5
|
%
|
||
Standard commercial lines renewal earned price increases [1] [2]
|
3.1
|
%
|
2.3
|
%
|
||
Small commercial premium retention
|
86
|
%
|
85
|
%
|
||
Middle market premium retention [1]
|
82
|
%
|
84
|
%
|
||
Small commercial policies in-force as of end of period (in thousands)
|
1,291
|
|
1,280
|
|
||
Middle market policies in-force as of end of period (in thousands) [1]
|
62
|
|
64
|
|
[1]
|
Middle market disclosures exclude loss sensitive and programs businesses.
|
[2]
|
Small commercial and middle market lines within middle & large commercial are generally referred to as standard commercial lines.
|
|
Three Months Ended March 31,
|
|||||
|
2020
|
2019
|
Change
|
|||
Loss and loss adjustment expense ratio
|
|
|
|
|||
Current accident year before catastrophes
|
59.3
|
|
58.4
|
|
0.9
|
|
Current accident year catastrophes
|
2.4
|
|
3.9
|
|
(1.5
|
)
|
Prior accident year development
|
1.8
|
|
(0.6
|
)
|
2.4
|
|
Total loss and loss adjustment expense ratio
|
63.5
|
|
61.7
|
|
1.8
|
|
Expense ratio
|
35.2
|
|
34.0
|
|
1.2
|
|
Policyholder dividend ratio
|
0.4
|
|
0.3
|
|
0.1
|
|
Combined ratio
|
99.1
|
|
96.1
|
|
3.0
|
|
Impact of current accident year catastrophes and prior year development
|
(4.2
|
)
|
(3.3
|
)
|
(0.9
|
)
|
Underlying combined ratio
|
94.9
|
|
92.7
|
|
2.2
|
|
•
|
Small commercial written premium was relatively flat as growth in package business was offset by a decrease in workers’ compensation.
|
•
|
Middle and large commercial written premium increased driven by the acquisition of Navigators Group. Apart from Navigators Group, middle and large commercial premium increased slightly as growth in verticals, led by construction, and programs was largely offset by a decrease in workers’ compensation.
|
•
|
Global specialty written premium increased driven by the acquisition of Navigators Group. Apart from Navigators Group, global specialty decreased slightly due to a decline in wholesale business, partially offset by growth in professional liability.
|
PERSONAL LINES
|
|
Three Months Ended March 31,
|
|||||||
|
2020
|
2019
|
Change
|
|||||
Written premiums
|
$
|
744
|
|
$
|
771
|
|
(4
|
%)
|
Change in unearned premium reserve
|
(30
|
)
|
(28
|
)
|
(7
|
%)
|
||
Earned premiums
|
774
|
|
799
|
|
(3
|
%)
|
||
Fee income
|
9
|
|
9
|
|
—
|
%
|
||
Losses and loss adjustment expenses
|
|
|
|
|||||
Current accident year before catastrophes
|
463
|
|
500
|
|
(7
|
%)
|
||
Current accident year catastrophes [1]
|
19
|
|
34
|
|
(44
|
%)
|
||
Prior accident year development [1]
|
(18
|
)
|
(1
|
)
|
NM
|
|
||
Total losses and loss adjustment expenses
|
464
|
|
533
|
|
(13
|
%)
|
||
Amortization of DAC
|
64
|
|
65
|
|
(2
|
%)
|
||
Underwriting expenses
|
151
|
|
155
|
|
(3
|
%)
|
||
Amortization of other intangible assets
|
1
|
|
1
|
|
—
|
%
|
||
Underwriting gain
|
103
|
|
54
|
|
91
|
%
|
||
Net servicing income [2]
|
2
|
|
3
|
|
(33
|
%)
|
||
Net investment income [3]
|
41
|
|
42
|
|
(2
|
%)
|
||
Net realized capital gains (losses) [3]
|
(23
|
)
|
19
|
|
NM
|
|
||
Other income
|
—
|
|
1
|
|
(100
|
%)
|
||
Income before income taxes
|
123
|
|
119
|
|
3
|
%
|
||
Income tax expense [4]
|
25
|
|
23
|
|
9
|
%
|
||
Net income
|
$
|
98
|
|
$
|
96
|
|
2
|
%
|
[1]
|
For discussion of current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.
|
[2]
|
Includes servicing revenues of $19 for both the three months ended March 31, 2020 and 2019. Includes servicing expenses of $17 and $16 for the three months ended March 31, 2020 and 2019.
|
[3]
|
For discussion of consolidated investment results, see MD&A - Investment Results.
|
[4]
|
For discussion of income taxes, see Note 13 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
|
|
Three Months Ended March 31,
|
|||||||
Written Premiums
|
2020
|
2019
|
Change
|
|||||
Product Line
|
|
|
|
|||||
Automobile
|
$
|
534
|
|
$
|
555
|
|
(4
|
%)
|
Homeowners
|
210
|
|
216
|
|
(3
|
%)
|
||
Total
|
$
|
744
|
|
$
|
771
|
|
(4
|
%)
|
Earned Premiums
|
|
|
|
|||||
Product Line
|
|
|
|
|||||
Automobile
|
$
|
536
|
|
$
|
555
|
|
(3
|
%)
|
Homeowners
|
238
|
|
244
|
|
(2
|
%)
|
||
Total
|
$
|
774
|
|
$
|
799
|
|
(3
|
%)
|
|
Three Months Ended March 31,
|
|||||
Premium Measures
|
2020
|
2019
|
||||
Policies in-force end of period (in thousands)
|
|
|
||||
Automobile
|
1,410
|
|
1,485
|
|
||
Homeowners
|
868
|
|
913
|
|
||
New business written premium
|
|
|
||||
Automobile
|
$
|
58
|
|
$
|
56
|
|
Homeowners
|
$
|
17
|
|
$
|
16
|
|
Policy count retention
|
|
|
||||
Automobile
|
86
|
%
|
85
|
%
|
||
Homeowners
|
86
|
%
|
84
|
%
|
||
Renewal written price increase
|
|
|
||||
Automobile
|
3.1
|
%
|
5.5
|
%
|
||
Homeowners
|
4.8
|
%
|
7.9
|
%
|
||
Renewal earned price increase
|
|
|
||||
Automobile
|
4.2
|
%
|
6.5
|
%
|
||
Homeowners
|
6.1
|
%
|
9.6
|
%
|
||
Premium retention
|
|
|
||||
Automobile
|
86
|
%
|
87
|
%
|
||
Homeowners
|
89
|
%
|
89
|
%
|
|
Three Months Ended March 31,
|
|||||
Underwriting Ratios
|
2020
|
2019
|
Change
|
|||
Loss and loss adjustment expense ratio
|
|
|
|
|||
Current accident year before catastrophes
|
59.8
|
|
62.6
|
|
(2.8
|
)
|
Current accident year catastrophes
|
2.5
|
|
4.3
|
|
(1.8
|
)
|
Prior year development
|
(2.3
|
)
|
(0.1
|
)
|
(2.2
|
)
|
Total loss and loss adjustment expense ratio
|
59.9
|
|
66.7
|
|
(6.8
|
)
|
Expense ratio
|
26.7
|
|
26.5
|
|
0.2
|
|
Combined ratio
|
86.7
|
|
93.2
|
|
(6.5
|
)
|
Impact of current accident year catastrophes and prior year development
|
(0.2
|
)
|
(4.2
|
)
|
4.0
|
|
Underlying combined ratio
|
86.6
|
|
89.1
|
|
(2.5
|
)
|
|
Three Months Ended March 31,
|
|||||
|
2020
|
2019
|
Change
|
|||
Automobile
|
|
|
|
|
||
Combined ratio
|
89.8
|
|
93.1
|
|
(3.3
|
)
|
Underlying combined ratio
|
90.9
|
|
93.6
|
|
(2.7
|
)
|
Homeowners
|
|
|
|
|
||
Combined ratio
|
79.2
|
|
93.1
|
|
(13.9
|
)
|
Underlying combined ratio
|
76.2
|
|
78.4
|
|
(2.2
|
)
|
PROPERTY & CASUALTY OTHER OPERATIONS
|
|
Three Months Ended March 31,
|
|||||||
|
2020
|
2019
|
Change
|
|||||
Written Premiums
|
$
|
—
|
|
$
|
—
|
|
—
|
%
|
Change in unearned premium reserve
|
—
|
|
—
|
|
—
|
%
|
||
Earned premiums
|
—
|
|
—
|
|
—
|
%
|
||
Losses and loss adjustment expenses
|
|
|
|
|
||||
Prior accident year development [1]
|
—
|
|
—
|
|
—
|
%
|
||
Total losses and loss adjustment expenses
|
—
|
|
—
|
|
—
|
%
|
||
Underwriting expenses
|
3
|
|
3
|
|
—
|
%
|
||
Underwriting loss
|
(3
|
)
|
(3
|
)
|
—
|
%
|
||
Net investment income [2]
|
16
|
|
22
|
|
(27
|
%)
|
||
Net realized capital gains (losses) [2]
|
(7
|
)
|
9
|
|
(178
|
%)
|
||
Income before income taxes
|
6
|
|
28
|
|
(79
|
%)
|
||
Income tax expense [3]
|
1
|
|
5
|
|
(80
|
%)
|
||
Net income
|
$
|
5
|
|
$
|
23
|
|
(78
|
%)
|
[1]
|
For discussion of prior accident year development, see MD&A - Critical Accounting Estimates, Property and Casualty Insurance Product Reserves, Net of Reinsurance.
|
[2]
|
For discussion of consolidated investment results, see MD&A - Investment Results.
|
[3]
|
For discussion of income taxes, see Note 13 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
|
GROUP BENEFITS
|
Operating Summary
|
||||||||
|
Three Months Ended March 31,
|
|||||||
|
2020
|
2019
|
Change
|
|||||
Premiums and other considerations
|
$
|
1,391
|
|
$
|
1,409
|
|
(1
|
%)
|
Net investment income [1]
|
115
|
|
121
|
|
(5
|
%)
|
||
Net realized capital gains (losses) [1]
|
(8
|
)
|
5
|
|
NM
|
|
||
Total revenues
|
1,498
|
|
1,535
|
|
(2
|
%)
|
||
Benefits, losses and loss adjustment expenses
|
1,007
|
|
1,053
|
|
(4
|
%)
|
||
Amortization of DAC
|
13
|
|
13
|
|
—
|
%
|
||
Insurance operating costs and other expenses
|
339
|
|
315
|
|
8
|
%
|
||
Amortization of other intangible assets
|
11
|
|
10
|
|
10
|
%
|
||
Total benefits, losses and expenses
|
1,370
|
|
1,391
|
|
(2
|
%)
|
||
Income before income taxes
|
128
|
|
144
|
|
(11
|
%)
|
||
Income tax expense [2]
|
24
|
|
26
|
|
(8
|
%)
|
||
Net income
|
$
|
104
|
|
$
|
118
|
|
(12
|
%)
|
[1]
|
For discussion of consolidated investment results, see MD&A - Investment Results.
|
[2]
|
For discussion of income taxes, see Note 13 - Income Taxes of Notes to the Condensed Consolidated Financial Statements.
|
Premiums and Other Considerations
|
||||||||
|
Three Months Ended March 31,
|
|||||||
|
2020
|
2019
|
Change
|
|||||
Fully insured – ongoing premiums
|
$
|
1,323
|
|
$
|
1,362
|
|
(3
|
%)
|
Buyout premiums
|
25
|
|
2
|
|
NM
|
|
||
Fee income
|
43
|
|
45
|
|
(4
|
%)
|
||
Total premiums and other considerations
|
$
|
1,391
|
|
$
|
1,409
|
|
(1
|
%)
|
Fully insured ongoing sales, excluding buyouts
|
$
|
385
|
|
$
|
407
|
|
(5
|
%)
|
Ratios, Excluding Buyouts
|
|||||
|
Three Months Ended March 31,
|
||||
|
2020
|
2019
|
Change
|
||
Group disability loss ratio
|
71.5
|
%
|
69.6
|
%
|
1.9
|
Group life loss ratio
|
74.6
|
%
|
81.3
|
%
|
(6.7)
|
Total loss ratio
|
71.9
|
%
|
74.7
|
%
|
(2.8)
|
Expense ratio [1]
|
26.2
|
%
|
23.4
|
%
|
2.8
|
Margin
|
||||||
|
Three Months Ended March 31,
|
|||||
|
2020
|
2019
|
Change
|
|||
Net income margin
|
6.9
|
%
|
7.7
|
%
|
(0.8
|
)
|
Adjustments to reconcile net income margin to core earnings margin:
|
|
|
|
|||
Net realized capital losses (gains) excluded from core earnings, before tax
|
0.6
|
%
|
(0.3
|
%)
|
0.9
|
|
Integration and transaction costs associated with acquired business, before tax
|
0.3
|
%
|
0.6
|
%
|
(0.3
|
)
|
Income tax benefit
|
(0.1
|
%)
|
—
|
%
|
(0.1
|
)
|
Impact of excluding buyouts from denominator of core earnings margin
|
0.1
|
%
|
—
|
%
|
0.1
|
|
Core earnings margin
|
7.8
|
%
|
8.0
|
%
|
(0.2
|
)
|
HARTFORD FUNDS
|
|
Three Months Ended March 31,
|
|||||||
|
2020
|
2019
|
Change
|
|||||
Fee income and other revenue
|
$
|
247
|
|
$
|
238
|
|
4
|
%
|
Net investment income
|
1
|
|
2
|
|
(50
|
%)
|
||
Net realized capital gains
|
(11
|
)
|
2
|
|
NM
|
|
||
Total revenues
|
237
|
|
242
|
|
(2
|
%)
|
||
Amortization of DAC
|
4
|
|
3
|
|
33
|
%
|
||
Operating costs and other expenses
|
189
|
|
202
|
|
(6
|
%)
|
||
Total benefits, losses and expenses
|
193
|
|
205
|
|
(6
|
%)
|
||
Income before income taxes
|
44
|
|
37
|
|
19
|
%
|
||
Income tax expense [1]
|
8
|
|
7
|
|
14
|
%
|
||
Net income
|
$
|
36
|
|
$
|
30
|
|
20
|
%
|
Daily average Hartford Funds AUM
|
$
|
119,632
|
|
$
|
112,210
|
|
7
|
%
|
ROA [2]
|
12.0
|
|
10.9
|
|
10
|
%
|
||
Adjustment to reconcile ROA to ROA, core earnings:
|
|
|
|
|||||
Effect of net realized capital losses (gains) excluded from core earnings, before tax
|
3.7
|
|
(0.6
|
)
|
NM
|
|
||
Effect of income tax benefit
|
(1.0
|
)
|
—
|
|
NM
|
|
||
ROA, core earnings [2]
|
14.7
|
|
10.3
|
|
43
|
%
|
[1]
|
For discussion of income taxes, see Note 13 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
|
|
Three Months Ended March 31,
|
|||||||
|
2020
|
2019
|
Change
|
|||||
Mutual Fund and ETP AUM - beginning of period
|
$
|
112,533
|
|
$
|
91,557
|
|
23
|
%
|
Sales - mutual fund
|
8,121
|
|
6,312
|
|
29
|
%
|
||
Redemptions - mutual fund
|
(9,478
|
)
|
(5,900
|
)
|
(61
|
%)
|
||
Net flows - ETP
|
(67
|
)
|
462
|
|
(115
|
%)
|
||
Net flows - mutual fund and ETP
|
(1,424
|
)
|
874
|
|
NM
|
|
||
Change in market value and other
|
(20,494
|
)
|
10,794
|
|
NM
|
|
||
Mutual fund and ETP AUM - end of period
|
90,615
|
|
103,225
|
|
(12
|
%)
|
||
Talcott Resolution life and annuity separate account AUM [1]
|
11,538
|
|
14,364
|
|
(20
|
%)
|
||
Hartford Funds AUM - end of period
|
$
|
102,153
|
|
$
|
117,589
|
|
(13
|
%)
|
|
March 31,
|
|||||||
|
2020
|
2019
|
Change
|
|||||
Equity
|
$
|
55,076
|
|
$
|
66,158
|
|
(17
|
%)
|
Fixed Income
|
14,558
|
|
15,070
|
|
(3
|
%)
|
||
Multi-Strategy Investments [1]
|
18,407
|
|
19,540
|
|
(6
|
%)
|
||
Exchange-traded Products
|
2,574
|
|
2,457
|
|
5
|
%
|
||
Mutual Fund and ETP AUM
|
$
|
90,615
|
|
$
|
103,225
|
|
(12
|
%)
|
CORPORATE
|
|
Three Months Ended March 31,
|
|||||||
|
2020
|
2019
|
Change
|
|||||
Fee income
|
$
|
13
|
|
$
|
13
|
|
—
|
%
|
Earned Premium
|
4
|
|
—
|
|
NM
|
|
||
Other revenue
|
(2
|
)
|
34
|
|
(106
|
%)
|
||
Net investment income
|
9
|
|
24
|
|
(63
|
%)
|
||
Net realized capital gains (losses)
|
(39
|
)
|
13
|
|
NM
|
|
||
Total revenues
|
(15
|
)
|
84
|
|
(118
|
%)
|
||
Benefits, losses and loss adjustment expenses [1]
|
6
|
|
2
|
|
NM
|
|
||
Insurance operating costs and other expenses
|
21
|
|
13
|
|
62
|
%
|
||
Interest expense [2]
|
64
|
|
64
|
|
—
|
%
|
||
Total benefits, losses and expenses
|
91
|
|
79
|
|
15
|
%
|
||
Income (loss) before income taxes
|
(106
|
)
|
5
|
|
NM
|
|
||
Income tax expense (benefit) [3]
|
(15
|
)
|
5
|
|
NM
|
|
||
Net income (loss)
|
(91
|
)
|
—
|
|
NM
|
|
||
Preferred stock dividends
|
5
|
|
5
|
|
—
|
%
|
||
Net loss available to common stockholders
|
$
|
(96
|
)
|
$
|
(5
|
)
|
NM
|
|
[1]
|
Includes benefits expense on life and annuity business previously underwritten by the Company.
|
[2]
|
For discussion of debt, see Note 12 - Debt of Notes to Condensed Consolidated Financial Statements and Note 13- Debt of Notes to Consolidated Financial Statement in The Hartford's 2019 Form 10-K Annual Report.
|
[3]
|
For discussion of income taxes, see Note 13 - Income Taxes of Notes to the Condensed Consolidated Financial Statements.
|
|
•
|
risk identification and assessment;
|
•
|
the development of risk appetites, tolerances, and limits;
|
•
|
risk monitoring; and
|
•
|
internal and external risk reporting.
|
•
|
Property- Risk of loss to personal or commercial property from automobile related accidents, weather, explosions, smoke, shaking, fire, theft, vandalism, inadequate installation, faulty equipment, collisions and falling objects, and/or machinery mechanical breakdown resulting in physical damage and other covered perils.
|
•
|
Liability- Risk of loss from automobile related accidents, uninsured and underinsured drivers, lawsuits from accidents, defective products, breach of warranty, negligent acts by professional practitioners, environmental claims, latent exposures, fraud, coercion, forgery, failure to fulfill
|
•
|
Mortality- Risk of loss from unexpected trends in insured deaths impacting timing of payouts from group life insurance, personal or commercial automobile related accidents, and death of employees or executives during the course of employment, while on disability, or while collecting workers compensation benefits.
|
•
|
Morbidity- Risk of loss to an insured from illness incurred during the course of employment or illness from other covered perils.
|
•
|
Disability- Risk of loss incurred from personal or commercial automobile related losses, accidents arising outside of the workplace, injuries or accidents incurred during the course of employment, or from equipment, with each loss resulting in short term or long-term disability payments.
|
•
|
Longevity- Risk of loss from increased life expectancy trends among policyholders receiving long-term benefit payments.
|
•
|
Cyber Insurance- Risk of loss to property, breach of data and business interruption from various types of cyber-attacks.
|
|
Portion of losses reinsured
|
Portion of losses retained by The Hartford
|
Per Occurrence Property Catastrophe Treaty from 1/1/2020 to 12/31/2020 [1] [2]
|
|
|
Losses of $0 to $150
|
None
|
100% retained
|
Losses of $150 to $350 for named storms and earthquakes
|
None
|
100% retained
|
Losses of $150 to $350 from one event other than named storms and earthquakes
|
70% of $200 in excess of $150
|
30% co-participation
|
Losses of $350 to $500 from one event (all perils)
|
75% of $150 in excess of $350
|
25% co-participation
|
Losses of $500 to $1.1 billion from one event [3] (all perils)
|
90% of $600 in excess $500
|
10% co-participation
|
Aggregate Property Catastrophe Treaty for 1/1/2020 to 12/31/2020 [4]
|
|
|
$0 to $700 of aggregate losses
|
None
|
100% retained
|
$700 to $900 of aggregate losses
|
100%
|
None
|
Workers' Compensation Catastrophe Treaty for 1/1/2020 to 12/31/2020
|
|
|
Losses of $0 to $100 from one event
|
None
|
100% retained
|
Losses of $100 to $450 from one event [5]
|
80% of $350 in excess of $100
|
20% co-participation
|
[1]
|
As of January 1, 2020 Navigators Group (Global Specialty) is included in the Corporate Property Catastrophe treaties. These treaties do not cover the assumed reinsurance business which purchases its own retrocessional coverage.
|
[2]
|
In addition to the Property Occurrence Treaty, for Florida events, The Hartford has purchased the mandatory FHCF reinsurance for the period from 6/1/2019 to 5/30/2020. Retention and coverage varies by writing company. The writing company with the largest coverage under FHCF is Hartford Insurance Company of the Midwest, with coverage for approximately $67 of per event losses in excess of a $27 retention.
|
[3]
|
Portions of this layer of coverage extend beyond a traditional one year term.
|
[4]
|
The aggregate treaty is not limited to a single event; rather, it is designed to provide reinsurance protection for the aggregate of all catastrophe events (up to $350 per event), either designated by the Property Claim Services office of Verisk or, for international business, net losses arising from two or more risks involved in the same loss occurrence totaling at least $500 thousand. All catastrophe losses apply toward satisfying the $700 attachment point under the aggregate treaty.
|
[5]
|
In addition to the limits shown, the workers' compensation reinsurance includes a non-catastrophe, industrial accident layer, providing coverage for 80% of $30 in per event losses in excess of a $20 retention.
|
•
|
Activated our cross-functional Crisis Management Team (CMT) comprising of representatives from areas such as the Business Resiliency Office, IT, Corporate Health & Well-being, Employee Relations, Security, Facilities and Communications
|
•
|
Enabled the vast majority of employees to work from home with no material impacts to operations
|
•
|
Strengthened technology infrastructure and expanded policies for accessing the Company’s network remotely
|
•
|
Actively worked with sourcing partners to ensure they were implementing their business continuity plans
|
•
|
Provided support to employees through our Corporate, Health & Well-being team comprised of healthcare professionals to identify and isolate employees with potential COVID-19 exposure.
|
•
|
Investing in a portfolio of high-quality and diverse securities;
|
•
|
Selling investments subject to credit risk;
|
•
|
Hedging through use of credit default swaps;
|
•
|
Clearing transactions through central clearing houses that require daily variation margin;
|
•
|
Entering into contracts only with strong creditworthy institutions;
|
•
|
Requiring collateral; and
|
•
|
Non-renewing policies/contracts or reinsurance treaties.
|
|
As of April 7, 2020 [2]
|
|
As of December 31, 2019
|
||||||||||||||||
|
|
Shock to S&P 500
|
|
|
Shock to S&P 500
|
||||||||||||||
(Before tax)
|
Fair Value
|
+20%
|
-20%
|
|
Fair Value
|
+20%
|
-20%
|
||||||||||||
Investment Portfolio
|
$
|
2,257
|
|
$
|
278
|
|
$
|
(278
|
)
|
|
$
|
3,295
|
|
$
|
440
|
|
$
|
(407
|
)
|
Assets supporting pension and other post-retirement benefit plans
|
$
|
1,260
|
|
$
|
208
|
|
$
|
(208
|
)
|
|
$
|
1,372
|
|
$
|
230
|
|
$
|
(230
|
)
|
[1]
|
Table excludes the Company's investment in Hopmeadow Holdings LP which is reported in other assets on the Company's Consolidated Balance Sheets.
|
[2]
|
The fair value includes the effect of sales of equity securities through April 7, 2020.
|
Fixed Maturities, AFS by Credit Quality
|
|||||||||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||
|
Amortized Cost
|
Fair Value
|
Percent of Total Fair Value
|
|
Amortized Cost
|
Fair Value
|
Percent of Total Fair Value
|
||||||||||
United States Government/Government agencies
|
$
|
4,780
|
|
$
|
5,126
|
|
12.8
|
%
|
|
$
|
5,478
|
|
$
|
5,644
|
|
13.4
|
%
|
AAA
|
6,327
|
|
6,395
|
|
15.9
|
%
|
|
6,412
|
|
6,617
|
|
15.7
|
%
|
||||
AA
|
7,540
|
|
7,755
|
|
19.3
|
%
|
|
7,746
|
|
8,146
|
|
19.3
|
%
|
||||
A
|
10,146
|
|
10,541
|
|
26.2
|
%
|
|
10,144
|
|
10,843
|
|
25.7
|
%
|
||||
BBB
|
9,099
|
|
8,962
|
|
22.3
|
%
|
|
8,963
|
|
9,530
|
|
22.6
|
%
|
||||
BB & below
|
1,581
|
|
1,426
|
|
3.5
|
%
|
|
1,335
|
|
1,368
|
|
3.3
|
%
|
||||
Total fixed maturities, AFS
|
$
|
39,473
|
|
$
|
40,205
|
|
100.0
|
%
|
|
$
|
40,078
|
|
$
|
42,148
|
|
100.0
|
%
|
Fixed Maturities, AFS by Type
|
||||||||||||||||||||||||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
|||||||||||||||||||||||||||||
|
Amortized Cost
|
ACL [1]
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
Percent of Total Fair Value
|
|
Amortized Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Fair Value
|
Percent of Total Fair Value
|
||||||||||||||||||||
Asset-backed securities ("ABS")
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Consumer loans
|
$
|
1,253
|
|
$
|
—
|
|
$
|
5
|
|
$
|
(21
|
)
|
$
|
1,237
|
|
3.1
|
%
|
|
$
|
1,350
|
|
$
|
16
|
|
$
|
(3
|
)
|
$
|
1,363
|
|
3.2
|
%
|
Other
|
115
|
|
—
|
|
1
|
|
(5
|
)
|
111
|
|
0.3
|
%
|
|
111
|
|
2
|
|
—
|
|
113
|
|
0.3
|
%
|
|||||||||
Collateralized loan obligations ("CLOs")
|
2,168
|
|
—
|
|
—
|
|
(179
|
)
|
1,989
|
|
5.0
|
%
|
|
2,186
|
|
5
|
|
(8
|
)
|
2,183
|
|
5.2
|
%
|
|||||||||
CMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Agency [2]
|
1,997
|
|
—
|
|
70
|
|
(11
|
)
|
2,056
|
|
5.1
|
%
|
|
1,878
|
|
43
|
|
(7
|
)
|
1,914
|
|
4.5
|
%
|
|||||||||
Bonds
|
2,098
|
|
—
|
|
28
|
|
(100
|
)
|
2,026
|
|
5.0
|
%
|
|
2,108
|
|
86
|
|
(4
|
)
|
2,190
|
|
5.2
|
%
|
|||||||||
Interest only
|
221
|
|
—
|
|
4
|
|
(5
|
)
|
220
|
|
0.5
|
%
|
|
224
|
|
12
|
|
(2
|
)
|
234
|
|
0.6
|
%
|
|||||||||
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Basic industry
|
596
|
|
—
|
|
9
|
|
(34
|
)
|
571
|
|
1.4
|
%
|
|
539
|
|
31
|
|
(1
|
)
|
569
|
|
1.4
|
%
|
|||||||||
Capital goods
|
1,563
|
|
—
|
|
44
|
|
(44
|
)
|
1,563
|
|
3.9
|
%
|
|
1,495
|
|
72
|
|
(9
|
)
|
1,558
|
|
3.7
|
%
|
|||||||||
Consumer cyclical
|
1,030
|
|
(9
|
)
|
33
|
|
(40
|
)
|
1,014
|
|
2.5
|
%
|
|
991
|
|
57
|
|
(1
|
)
|
1,047
|
|
2.5
|
%
|
|||||||||
Consumer non-cyclical
|
2,444
|
|
(3
|
)
|
115
|
|
(45
|
)
|
2,511
|
|
6.2
|
%
|
|
2,372
|
|
137
|
|
(3
|
)
|
2,506
|
|
5.9
|
%
|
|||||||||
Energy
|
1,496
|
|
—
|
|
17
|
|
(204
|
)
|
1,309
|
|
3.3
|
%
|
|
1,550
|
|
96
|
|
(3
|
)
|
1,643
|
|
3.9
|
%
|
|||||||||
Financial services
|
4,124
|
|
—
|
|
96
|
|
(64
|
)
|
4,156
|
|
10.3
|
%
|
|
3,977
|
|
192
|
|
(4
|
)
|
4,165
|
|
9.9
|
%
|
|||||||||
Tech./comm.
|
2,392
|
|
—
|
|
181
|
|
(19
|
)
|
2,554
|
|
6.4
|
%
|
|
2,360
|
|
208
|
|
—
|
|
2,568
|
|
6.1
|
%
|
|||||||||
Transportation
|
709
|
|
—
|
|
21
|
|
(20
|
)
|
710
|
|
1.8
|
%
|
|
743
|
|
44
|
|
—
|
|
787
|
|
1.9
|
%
|
|||||||||
Utilities
|
1,972
|
|
—
|
|
67
|
|
(33
|
)
|
2,006
|
|
5.0
|
%
|
|
2,019
|
|
132
|
|
(4
|
)
|
2,147
|
|
5.1
|
%
|
|||||||||
Other
|
418
|
|
—
|
|
2
|
|
(16
|
)
|
404
|
|
1.0
|
%
|
|
389
|
|
17
|
|
—
|
|
406
|
|
1.0
|
%
|
|||||||||
Foreign govt./govt. agencies
|
1,058
|
|
—
|
|
28
|
|
(23
|
)
|
1,063
|
|
2.6
|
%
|
|
1,057
|
|
66
|
|
—
|
|
1,123
|
|
2.7
|
%
|
|||||||||
Municipal bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Taxable
|
939
|
|
—
|
|
47
|
|
(9
|
)
|
977
|
|
2.4
|
%
|
|
815
|
|
45
|
|
(1
|
)
|
859
|
|
2.0
|
%
|
|||||||||
Tax-exempt
|
7,904
|
|
—
|
|
637
|
|
(21
|
)
|
8,520
|
|
21.2
|
%
|
|
7,948
|
|
692
|
|
(1
|
)
|
8,639
|
|
20.5
|
%
|
|||||||||
RMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Agency
|
1,859
|
|
—
|
|
89
|
|
—
|
|
1,948
|
|
4.9
|
%
|
|
2,409
|
|
57
|
|
(1
|
)
|
2,465
|
|
5.8
|
%
|
|||||||||
Non-agency
|
1,664
|
|
—
|
|
5
|
|
(55
|
)
|
1,614
|
|
4.0
|
%
|
|
1,786
|
|
17
|
|
(2
|
)
|
1,801
|
|
4.2
|
%
|
|||||||||
Alt-A
|
38
|
|
—
|
|
—
|
|
—
|
|
38
|
|
0.1
|
%
|
|
40
|
|
3
|
|
—
|
|
43
|
|
0.1
|
%
|
|||||||||
Sub-prime
|
491
|
|
—
|
|
2
|
|
(7
|
)
|
486
|
|
1.2
|
%
|
|
540
|
|
20
|
|
—
|
|
560
|
|
1.3
|
%
|
|||||||||
U.S. Treasuries
|
924
|
|
—
|
|
198
|
|
—
|
|
1,122
|
|
2.8
|
%
|
|
1,191
|
|
75
|
|
(1
|
)
|
1,265
|
|
3.0
|
%
|
|||||||||
Total fixed maturities, AFS
|
$
|
39,473
|
|
$
|
(12
|
)
|
$
|
1,699
|
|
$
|
(955
|
)
|
$
|
40,205
|
|
100.0
|
%
|
|
$
|
40,078
|
|
$
|
2,125
|
|
$
|
(55
|
)
|
$
|
42,148
|
|
100.0
|
%
|
Fixed maturities, FVO
|
|
|
|
|
$
|
8
|
|
|
|
|
|
|
$
|
11
|
|
|
||||||||||||||||
Equity securities, at fair value
|
|
|
|
|
$
|
1,155
|
|
|
|
|
|
|
$
|
1,657
|
|
|
[1]
|
Represents the ACL recorded following the adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to Footnote 1 - Basis of Presentation and Significant Accounting Policies.
|
[2]
|
Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
|
Exposure to Energy
|
|||||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||
|
Amortized Cost
|
Fair Value
|
|
Amortized Cost
|
Fair Value
|
||||||||
Corporate securities, AFS and Equity securities, at fair value
|
|
|
|
|
|
||||||||
Investment grade
|
$
|
1,259
|
|
$
|
1,143
|
|
|
$
|
1,425
|
|
$
|
1,516
|
|
Below investment grade
|
237
|
|
166
|
|
|
125
|
|
127
|
|
||||
Equity securities, at fair value
|
24
|
|
24
|
|
|
45
|
|
45
|
|
||||
Total corporate, AFS and equity securities, at fair value
|
1,520
|
|
1,333
|
|
|
1,595
|
|
1,688
|
|
||||
Foreign govt./govt agencies
|
|
|
|
|
|
||||||||
Investment grade
|
245
|
|
251
|
|
|
232
|
|
254
|
|
||||
Below investment grade
|
9
|
|
9
|
|
|
9
|
|
10
|
|
||||
Total foreign govt./govt. agencies, AFS
|
254
|
|
260
|
|
|
241
|
|
264
|
|
||||
Other
|
5
|
|
6
|
|
|
20
|
|
21
|
|
||||
Total energy exposure
|
$
|
1,779
|
|
$
|
1,599
|
|
|
$
|
1,856
|
|
$
|
1,973
|
|
Exposure to CMBS & RMBS Bonds as of March 31, 2020
|
||||||||||||||||||||||||||||||||||||
|
AAA
|
AA
|
A
|
BBB
|
BB and Below
|
Total
|
||||||||||||||||||||||||||||||
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||||||||||||||||||
CMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Agency [1]
|
$
|
1,997
|
|
$
|
2,056
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,997
|
|
$
|
2,056
|
|
Bonds
|
1,026
|
|
1,045
|
|
514
|
|
497
|
|
432
|
|
368
|
|
126
|
|
116
|
|
—
|
|
—
|
|
2,098
|
|
2,026
|
|
||||||||||||
Interest Only
|
149
|
|
149
|
|
65
|
|
65
|
|
—
|
|
—
|
|
5
|
|
5
|
|
2
|
|
1
|
|
221
|
|
220
|
|
||||||||||||
Total CMBS
|
3,172
|
|
3,250
|
|
579
|
|
562
|
|
432
|
|
368
|
|
131
|
|
121
|
|
2
|
|
1
|
|
4,316
|
|
4,302
|
|
||||||||||||
RMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Agency
|
1,836
|
|
1,923
|
|
23
|
|
25
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,859
|
|
1,948
|
|
||||||||||||
Non-Agency
|
1,169
|
|
1,144
|
|
239
|
|
227
|
|
242
|
|
230
|
|
13
|
|
12
|
|
1
|
|
1
|
|
1,664
|
|
1,614
|
|
||||||||||||
Alt-A
|
—
|
|
—
|
|
7
|
|
7
|
|
4
|
|
4
|
|
8
|
|
8
|
|
19
|
|
19
|
|
38
|
|
38
|
|
||||||||||||
Sub-Prime
|
11
|
|
11
|
|
44
|
|
44
|
|
158
|
|
157
|
|
130
|
|
128
|
|
148
|
|
146
|
|
491
|
|
486
|
|
||||||||||||
Total RMBS
|
3,016
|
|
3,078
|
|
313
|
|
303
|
|
404
|
|
391
|
|
151
|
|
148
|
|
168
|
|
166
|
|
4,052
|
|
4,086
|
|
||||||||||||
Total CMBS & RMBS
|
$
|
6,188
|
|
$
|
6,328
|
|
$
|
892
|
|
$
|
865
|
|
$
|
836
|
|
$
|
759
|
|
$
|
282
|
|
$
|
269
|
|
$
|
170
|
|
$
|
167
|
|
$
|
8,368
|
|
$
|
8,388
|
|
Exposure to CMBS & RMBS Bonds as of December 31, 2019
|
||||||||||||||||||||||||||||||||||||
|
AAA
|
AA
|
A
|
BBB
|
BB and Below
|
Total
|
||||||||||||||||||||||||||||||
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
Amortized Cost
|
Fair Value
|
||||||||||||||||||||||||
CMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Agency [1]
|
$
|
1,878
|
|
$
|
1,914
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,878
|
|
$
|
1,914
|
|
Bonds
|
1,013
|
|
1,055
|
|
561
|
|
576
|
|
416
|
|
438
|
|
118
|
|
121
|
|
—
|
|
—
|
|
2,108
|
|
2,190
|
|
||||||||||||
Interest Only
|
150
|
|
158
|
|
67
|
|
70
|
|
—
|
|
—
|
|
5
|
|
5
|
|
2
|
|
1
|
|
224
|
|
234
|
|
||||||||||||
Total CMBS
|
3,041
|
|
3,127
|
|
628
|
|
646
|
|
416
|
|
438
|
|
123
|
|
126
|
|
2
|
|
1
|
|
4,210
|
|
4,338
|
|
||||||||||||
RMBS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Agency
|
2,386
|
|
2,441
|
|
23
|
|
24
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,409
|
|
2,465
|
|
||||||||||||
Non-Agency
|
1,215
|
|
1,226
|
|
300
|
|
304
|
|
257
|
|
257
|
|
13
|
|
13
|
|
1
|
|
1
|
|
1,786
|
|
1,801
|
|
||||||||||||
Alt-A
|
—
|
|
—
|
|
8
|
|
8
|
|
4
|
|
4
|
|
8
|
|
9
|
|
20
|
|
22
|
|
40
|
|
43
|
|
||||||||||||
Sub-Prime
|
9
|
|
9
|
|
56
|
|
57
|
|
167
|
|
173
|
|
164
|
|
171
|
|
144
|
|
150
|
|
540
|
|
560
|
|
||||||||||||
Total RMBS
|
3,610
|
|
3,676
|
|
387
|
|
393
|
|
428
|
|
434
|
|
185
|
|
193
|
|
165
|
|
173
|
|
4,775
|
|
4,869
|
|
||||||||||||
Total CMBS & RMBS
|
$
|
6,651
|
|
$
|
6,803
|
|
$
|
1,015
|
|
$
|
1,039
|
|
$
|
844
|
|
$
|
872
|
|
$
|
308
|
|
$
|
319
|
|
$
|
167
|
|
$
|
174
|
|
$
|
8,985
|
|
$
|
9,207
|
|
[1]
|
Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
|
Available For Sale Investments in Municipal Bonds
|
|||||||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||
|
Amortized Cost
|
Fair Value
|
Weighted Average Credit Quality
|
|
Amortized Cost
|
Fair Value
|
Weighted Average Credit Quality
|
||||||||
General Obligation
|
$
|
1,106
|
|
$
|
1,216
|
|
AA
|
|
$
|
1,157
|
|
$
|
1,268
|
|
AA
|
Pre-refunded [1]
|
973
|
|
1,023
|
|
AAA
|
|
936
|
|
985
|
|
AAA
|
||||
Revenue
|
|
|
|
|
|
|
|
||||||||
Transportation
|
1,473
|
|
1,605
|
|
A+
|
|
1,509
|
|
1,675
|
|
A+
|
||||
Health Care
|
1,444
|
|
1,526
|
|
A+
|
|
1,360
|
|
1,454
|
|
A+
|
||||
Leasing [2]
|
814
|
|
867
|
|
AA-
|
|
781
|
|
842
|
|
AA-
|
||||
Education
|
747
|
|
815
|
|
AA
|
|
784
|
|
853
|
|
AA
|
||||
Water & Sewer
|
688
|
|
724
|
|
AA
|
|
660
|
|
700
|
|
AA
|
||||
Sales Tax
|
472
|
|
530
|
|
AA
|
|
456
|
|
517
|
|
AA
|
||||
Power
|
327
|
|
356
|
|
A
|
|
339
|
|
374
|
|
A
|
||||
Housing
|
115
|
|
120
|
|
AA+
|
|
114
|
|
117
|
|
AA+
|
||||
Other
|
684
|
|
715
|
|
AA-
|
|
667
|
|
713
|
|
AA-
|
||||
Total Revenue
|
6,764
|
|
7,258
|
|
AA-
|
|
6,670
|
|
7,245
|
|
AA-
|
||||
Total Municipal
|
$
|
8,843
|
|
$
|
9,497
|
|
AA-
|
|
$
|
8,763
|
|
$
|
9,498
|
|
AA-
|
[1]
|
Pre-Refunded bonds are bonds for which an irrevocable trust containing sufficient U.S. treasury, agency, or other securities has been established to fund the remaining payments of principal and interest.
|
[2]
|
Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases facilities back to a municipality. The notes are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual appropriation by the municipality or the municipality may be obligated to appropriate general tax revenues to make lease payments.
|
Limited Partnerships and Other Alternative Investments - Net Investment Income
|
|||||||||||
|
Three Months Ended March 31,
|
||||||||||
|
2020
|
|
2019
|
||||||||
|
Amount
|
Yield
|
|
Amount
|
Yield
|
||||||
Hedge funds
|
$
|
1
|
|
6.4
|
%
|
|
$
|
1
|
|
5.1
|
%
|
Real estate funds
|
16
|
|
15.3
|
%
|
|
20
|
|
16.9
|
%
|
||
Private equity funds
|
34
|
|
16.0
|
%
|
|
27
|
|
14.2
|
%
|
||
Other alternative investments [1]
|
7
|
|
7.0
|
%
|
|
8
|
|
8.7
|
%
|
||
Total
|
$
|
58
|
|
13.2
|
%
|
|
$
|
56
|
|
13.4
|
%
|
Unrealized Loss Aging for Fixed Maturities, AFS Securities
|
|||||||||||||||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
Consecutive Months
|
Items
|
Amortized Cost
|
Unrealized Loss
|
Fair Value
|
|
Items
|
Amortized Cost
|
Unrealized Loss
|
Fair Value
|
||||||||||||||
Three months or less
|
1,890
|
|
$
|
13,827
|
|
$
|
(818
|
)
|
$
|
13,009
|
|
|
347
|
|
$
|
2,529
|
|
$
|
(15
|
)
|
$
|
2,514
|
|
Greater than three to six months
|
44
|
|
243
|
|
(23
|
)
|
220
|
|
|
114
|
|
712
|
|
(8
|
)
|
704
|
|
||||||
Greater than six to nine months
|
26
|
|
61
|
|
(12
|
)
|
49
|
|
|
50
|
|
190
|
|
(2
|
)
|
188
|
|
||||||
Greater than nine to eleven months
|
24
|
|
101
|
|
(13
|
)
|
88
|
|
|
15
|
|
24
|
|
(1
|
)
|
23
|
|
||||||
Twelve months or more
|
220
|
|
931
|
|
(89
|
)
|
842
|
|
|
345
|
|
1,440
|
|
(29
|
)
|
1,411
|
|
||||||
Total
|
2,204
|
|
$
|
15,163
|
|
$
|
(955
|
)
|
$
|
14,208
|
|
|
871
|
|
$
|
4,895
|
|
$
|
(55
|
)
|
$
|
4,840
|
|
Unrealized Loss Aging for Fixed Maturities, AFS Continuously Depressed Over 20%
|
|||||||||||||||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
Consecutive Months
|
Items
|
Amortized Cost
|
Unrealized Loss
|
Fair Value
|
|
Items
|
Amortized Cost
|
Unrealized Loss
|
Fair Value
|
||||||||||||||
Three months or less
|
110
|
|
$
|
596
|
|
$
|
(180
|
)
|
$
|
416
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
Greater than three to six months
|
—
|
|
—
|
|
—
|
|
—
|
|
|
5
|
|
2
|
|
(1
|
)
|
1
|
|
||||||
Twelve months or more
|
28
|
|
9
|
|
(4
|
)
|
5
|
|
|
32
|
|
10
|
|
(4
|
)
|
6
|
|
||||||
Total
|
138
|
|
$
|
605
|
|
$
|
(184
|
)
|
$
|
421
|
|
|
37
|
|
$
|
12
|
|
$
|
(5
|
)
|
$
|
7
|
|
|
|
•
|
$840 in fixed maturities, short-term investments, investment sales receivable and cash at The Hartford Financial Services Group, Inc, ("HFSG Holding Company").
|
•
|
A senior unsecured five-year revolving credit facility that provides for borrowing capacity up to $750 of unsecured credit through March 29, 2023.
|
•
|
Borrowings available under a commercial paper program to a maximum of $750. As of March 31, 2020 there was no commercial paper outstanding.
|
•
|
An intercompany liquidity agreement that allows for short-term advances of funds among the HFSG Holding Company and certain affiliates of up to $2.0 billion for liquidity and other general corporate purposes.
|
|
•
|
P&C - The Company's property and casualty insurance subsidiaries have dividend capacity of $1.6 billion for 2020, with $850 to $900 of net dividends expected in 2020.
|
•
|
Group Benefits - HLA has dividend capacity of $534 in 2020 with $300 to $350 of dividends expected in 2020.
|
•
|
Hartford Funds - HFSG Holding Company expects to receive $100 to $125 in dividends from Hartford Funds in 2020.
|
•
|
Cash tax receipts of approximately $520 to $540, including realization of net operating losses and AMT credits. Year to date HFSG holding company has received cash tax receipts of $46 from its subsidiaries.
|
|
•
|
$220 of interest on debt.
|
•
|
$21 dividends on preferred stock, subject to the discretion of the Board of Directors.
|
•
|
$470 of common stockholders' dividends, subject to the discretion of the Board of Directors and before share repurchases.
|
|
•
|
Under a $1.0 billion share repurchase authorization by the Board of Directors in February, 2019, during the three months ended March 31, 2020, the Company repurchased 2.7 million common shares for $150. During the period from April 1, 2020 to April 27, 2020, the Company did not repurchase any common shares under this authorization. Any repurchase of shares under the remaining equity repurchase authorization of $650 is dependent on market conditions and other factors including the extent to which COVID-19 impacts our business, results of operations, financial condition and liquidity.
|
|
Declared
|
Record
|
Payable
|
Amount per share
|
||
February 3, 2020
|
March 2, 2020
|
April 2, 2020
|
$
|
0.325
|
|
Declared
|
Record
|
Payable
|
Amount per share
|
||
February 20, 2020
|
May 1, 2020
|
May 15, 2020
|
$
|
375.00
|
|
Property & Casualty
|
|||
|
As of March 31, 2020
|
||
Fixed maturities
|
$
|
30,136
|
|
Short-term investments
|
1,306
|
|
|
Cash
|
190
|
|
|
Less: Derivative collateral
|
83
|
|
|
Total
|
$
|
31,549
|
|
Capital Structure
|
||||||||
|
March 31, 2020
|
December 31, 2019
|
Change
|
|||||
Short-term debt (includes current maturities of long-term debt)
|
$
|
—
|
|
$
|
500
|
|
(100
|
%)
|
Long-term debt
|
4,349
|
|
4,348
|
|
—
|
%
|
||
Total debt
|
4,349
|
|
4,848
|
|
(10
|
%)
|
||
Common stockholders' equity excluding AOCI, net of tax
|
15,889
|
|
15,884
|
|
—
|
%
|
||
Preferred stock
|
334
|
|
334
|
|
—
|
%
|
||
AOCI, net of tax
|
(957
|
)
|
52
|
|
NM
|
|
||
Total stockholders’ equity
|
15,266
|
|
16,270
|
|
(6
|
%)
|
||
Total capitalization
|
$
|
19,615
|
|
$
|
21,118
|
|
(7
|
%)
|
Debt to stockholders’ equity
|
28
|
%
|
30
|
%
|
|
|||
Debt to capitalization
|
22
|
%
|
23
|
%
|
|
|
Three Months Ended March 31,
|
|||||
|
2020
|
2019
|
||||
Net cash provided by operating activities
|
$
|
298
|
|
$
|
279
|
|
Net cash provided by investing activities
|
$
|
777
|
|
$
|
129
|
|
Net cash used for financing activities
|
$
|
(1,027
|
)
|
$
|
(428
|
)
|
Cash and restricted cash– end of period
|
$
|
301
|
|
$
|
104
|
|
[1]
|
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.
|
[2]
|
Excludes insurance operations in the U.K. and continental Europe.
|
•
|
Insurance and Product Related Risk - The Company may incur increased loss costs under insurance policies that we have written including for workers’ compensation, group life insurance, short-term disability, general liability, surety, director and officer liability, and employment practices liability, as well as property and package business. We may be required to pay workers’ compensation claims for lost wages and medical costs associated with COVID-19, if they are determined to be occupationally related to the work of the insured’s employees.
|
•
|
Regulatory/Legal Risk - We also cannot predict how legal and regulatory responses to concerns about COVID-19 and related public health issues will impact our business, including the possible extension of insurance coverage beyond our policy language, such as for business interruption, civil authority and other claims. Further, policyholders may elect to litigate coverage issues which would lead to increased costs to the Company. For additional information on legislative and regulatory risks, see Part I, Item 2, MD&A - Capital Resources and Liquidity, Contingencies, Legislative and Regulatory Developments.
|
•
|
Recessionary and other Global Economic Risk - As a result of COVID-19 containment efforts, many business operations, including many of the Company’s insureds, have either been shut down or significantly curtailed for an uncertain period of time. As such, with a recession increasingly likely, the economy has contracted and is likely to remain in a downturn for a sustained period. A recession could increase policy lapses and non-renewals, reduce demand for new business, and continue to reduce fee income from our Hartford Funds business until equity markets recover. In addition, employers have reduced and may continue to reduce their work forces, resulting in lower premiums for the Company’s workers’ compensation and group benefit products. The COVID-19 pandemic and resulting economic stress will likely result in, among other impacts, lower earned premiums, lower fee revenues, reduced net investment income due to losses on investments in limited partnerships and lower reinvestment rates, realized capital losses from a decline in the value of equity
|
•
|
Capital and Liquidity Risk - We may also experience liquidity pressures including the need to provide additional capital to certain insurance subsidiaries, reductions in the amount of available dividend capacity from our subsidiaries and the need to post more collateral due to declining investment valuations or due to requirements under derivative agreements. Further, among other possible actions, we may choose not to resume share repurchases and may continue to hold proceeds from maturing fixed maturities in short-term investments which earns lower returns.
|
•
|
Operational Risk - The Company also faces operational risks as a result of COVID-19. The Company has limited the number of employees working in its offices, resulting in the vast majority of employees working from home. While the Company has the technology in place to enable this arrangement and to facilitate communication with insureds, intermediaries, claimants and other third parties, there is a risk that business operations will be disrupted due to, among other things, cybersecurity attacks or data security incidents, higher than anticipated web traffic and call volumes as well as lack of sufficient broadband internet connectivity for employees and third parties working from home. If those disruptions become significant, it could result in, among other impacts, delays in settling claims, processing new business, renewals, cancellations and endorsements for insureds, billing and collecting premiums, transacting with reinsurers, contracting with and paying vendors, and disruptions to investment operations.
|
Repurchases of Common Stock by the Issuer for the Three Months Ended March 31, 2020
|
||||||||||
Period
|
Total Number
of Shares
Purchased
|
Average Price
Paid Per
Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Approximate Dollar Value
of Shares that May Yet Be
Purchased Under
the Plans or Programs
|
||||||
|
|
|
|
(in millions)
|
||||||
January 1, 2020 - January 31, 2020
|
896,292
|
|
$
|
59.75
|
|
896,292
|
|
$
|
746
|
|
February 1, 2020 - February 29, 2020
|
1,451,220
|
|
$
|
56.12
|
|
1,451,220
|
|
$
|
665
|
|
March 1, 2020 - March 31, 2020
|
313,165
|
|
$
|
47.72
|
|
313,165
|
|
$
|
650
|
|
Total
|
2,660,677
|
|
$
|
56.36
|
|
2,660,677
|
|
|
See Exhibits Index on page
|
114.
|
|
|
The Hartford Financial Services Group, Inc.
|
||
|
|
(Registrant)
|
||
|
|
|||
Date:
|
April 29, 2020
|
/s/ Scott R. Lewis
|
||
|
|
Scott R. Lewis
|
||
|
|
Senior Vice President and Controller
|
||
|
|
(Chief accounting officer and duly
authorized signatory)
|
1 Year Hartford Financial Servi... Chart |
1 Month Hartford Financial Servi... Chart |
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