NEWS RELEASE
The Hartford Announces First Quarter 2021 Results And Financial Targets
•Expects ‘Hartford Next’ savings to reach $540 million in 2022 and $625 million in 2023
•Increases share repurchase authorization to $2.5 billion; $1.5 billion in 2021
•Targets 13-14% ROE in 2022 and 2023
•Board unanimously rejects two additional Chubb proposals as not in the best interests of shareholders
HARTFORD, Conn., April 22, 2021 – The Hartford (NYSE: HIG) today announced financial results for the quarter ended Mar. 31, 2021. In the quarter, The Hartford earned $244 million in net income available to common stockholders, or $0.67 per diluted share, and core earnings* of $203 million, or $0.56 per diluted share. Reported results include the impact of the $650 million settlement with the Boy Scouts of America (BSA), $214 million in pre-tax net catastrophe (CAT) losses, mainly due to winter storms in Texas and other areas, and $185 million in COVID-19 related excess mortality losses in Group Benefits. Aside from these three items, underlying performance in the quarter remained very strong.
•Commercial Lines combined ratio of 109.7% with an underlying Commercial Lines combined ratio of 91.2%*, a 3.7 point improvement from 94.9% in the prior year quarter
•Small Commercial new business premiums were up 12% in the first quarter of 2021 driving record quarterly premium in this business
•Group Benefits net income margin was 0.6% while the core earnings margin was (0.2)%*; both the net income margin and core earnings margin included approximately 10.0 points in excess mortality and COVID-19 short-term disability losses
•Net investment income of $509 million grew 11% from the prior year quarter driven by strong annualized partnership returns of 21.1%
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
** All amounts and percentages set forth in this press release are approximate unless otherwise noted.
Improving operating efficiencies and a lower expense ratio from ‘Hartford Next’, the company’s cost transformation program, have been a contributor to margin expansion. To date, the program has delivered $233 million in pre-tax expense savings and is expected to deliver pre-tax savings of approximately $540 million in 2022 and $625 million in 2023.
“I have never been more excited about The Hartford’s future,” said The Hartford’s Chairman and CEO, Christopher Swift. "Going forward, the macroeconomic environment and favorable industry outlooks should provide significant tailwinds, which when coupled with our strong portfolio of businesses and the continued execution of our strategy, position us to deliver accelerated growth and continued margin expansion as evidenced by our strong underlying results this quarter.”
The Hartford's President Doug Elliot said, “Property and Casualty achieved outstanding underlying underwriting results in the first quarter. Each of our business lines realized underlying margin expansion. This quarter also marked an important inflection point for growth, with written premiums increasing four percent in Commercial Lines. New business in Small Commercial achieved record levels and our Global Specialty and Middle Market businesses are together producing strong cross-sell results. We continued to see a favorable pricing environment throughout the quarter, resulting in strong pricing performance. I am pleased with our momentum heading into the remainder of the year.”
Swift added, “With our impressive outlook for financial performance and strong capital position, we are increasing the share repurchase authorization to $2.5 billion through 2022 and accelerating initial buyback plans, expecting to utilize $1.5 billion by year-end. As a result, we expect to achieve a return on equity of 13-14 percent in 2022 and 2023, enhancing value creation for all our stakeholders.”
CONSOLIDATED RESULTS:
| | | | | | | | | | | |
| Three Months Ended |
| ($ in millions except per share data) | Mar 31 2021 | Mar 31 2020 | Change1 |
| Net income available to common stockholders | $244 | $268 | (9)% |
Net income available to common stockholders per diluted share1 | $0.67 | $0.74 | (9)% |
| | | |
Core earnings2 | $203 | $485 | (58)% |
Core earnings per diluted share2 | $0.56 | $1.34 | (58)% |
| | | |
| Book value per diluted share | $48.04 | $41.42 | 16% |
| Book value per diluted share (ex. AOCI) | $47.31 | $44.07 | 7% |
| | | |
Net income available to common stockholders' return on equity (ROE)3, last 12-months | 10.5% | 11.8% | (1.3) |
Core earnings ROE2,3, last 12-months | 10.9% | 13.3% | (2.4) |
[1] Includes dilutive potential common shares; for net income available to common stockholders per diluted share, the numerator is net income less preferred dividends
[2] Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
[3] Return on equity (ROE) is calculated based on last 12-months net income available to common stockholders and core earnings, respectively; for net income ROE, the denominator is stockholders’ equity including AOCI; for core earnings ROE, the denominator is stockholders’ equity excluding AOCI
First quarter 2021 net income available to common stockholders was $244 million, or $0.67 per diluted share, down 9% from first quarter 2020, primarily due to a $247 million, before tax, decrease in underwriting gain (loss) in first quarter 2021 as well as due to excess mortality in group life in first quarter 2021, largely offset by a $311 million, before tax, change to net realized capital gains in first quarter 2021 and an increase in net investment income.
First quarter core earnings of $203 million, or $0.56 per diluted share, declined 58% from first quarter 2020. The decrease was primarily due to:
•Unfavorable Property and Casualty (P&C) prior accident year development (PYD) within core earnings of $223 million, before tax, in first quarter 2021, compared to $6 million of favorable PYD in first quarter 2020. The $223 million of net unfavorable development in first quarter 2021 included a $307 million, before tax, reserve increase for general liability primarily due to the previously announced settlement with Boy Scouts of America on sexual molestation and sexual abuse claims, partially offset by decreases in reserves for workers' compensation, package business, auto liability and prior year catastrophes
•$185 million, before tax, of excess mortality in group life in first quarter 2021, primarily caused by direct and indirect impacts of the COVID-19 pandemic
•Higher P&C current accident year (CAY) CAT losses of $214 million, before tax, in first quarter 2021 primarily due to $176 million, before tax, from the February winter storms in Texas and other parts of the country, compared with $74 million of P&C CAT losses in first quarter 2020
•P&C COVID-19 incurred losses of $24 million, before tax, in first quarter 2021, driven by workers’ compensation losses
Partially offset by:
•An increase in net investment income to $509 million, before tax, from $459 million in first quarter 2020 with the increase driven by higher valuations of underlying investments within private equity funds. A higher return on equity fund investments and the effect of a higher level of invested assets was largely offset by a lower yield on fixed maturities resulting from reinvesting at lower rates and a lower yield on floating rate investments
•Underlying ex-COVID-19 P&C loss ratio* improvement of 2.6 points to 56.8% in first quarter 2021 from 59.4% in first quarter 2020
•P&C expense ratio improvement of 1.6 points, to 31.6 in first quarter 2021 from 33.2 in first quarter 2020, primarily driven by expense savings from our operational transformation and cost reduction plan (“Hartford Next”) and a reduction in bad debt expense
Mar. 31, 2021, book value per diluted share of $48.04 decreased 5% from $50.39 at Dec. 31, 2020, principally due to a decrease in net unrealized gains on investments within AOCI.
Book value per diluted share (excluding AOCI) of $47.31 as of Mar. 31, 2021, increased slightly from $47.16 at Dec. 31, 2020, as net income was largely offset by share repurchases and stockholder dividends during the first quarter of 2021.
Year-to-date 2021, The Hartford returned $239 million to stockholders, consisting of $116 million in common stockholder dividends paid and $123 million of common share repurchases.
Net income available to common stockholders' ROE (net income ROE) was 10.5% for the twelve month period ending Mar. 31, 2021.
Core earnings ROE for the twelve month period ending Mar. 31, 2021 was 10.9%, a decline of 2.4 points from first quarter 2020 due to lower trailing 12-month core earnings and higher average common stockholder's equity ex AOCI.
BUSINESS RESULTS:
Commercial Lines
| | | | | | | | | | | |
| Three Months Ended |
| ($ in millions, unless otherwise noted) | Mar 31 2021 | Mar 31 2020 | Change |
| Net income | $129 | $121 | 7% |
| Core earnings | $105 | $262 | (60%) |
| Written premiums | $2,503 | $2,408 | 4% |
Underwriting gain (loss)1,2 | $(216) | $20 | NM |
Underlying underwriting gain1 | $197 | $116 | 70% |
| Losses and loss adjustment expense ratio | | | |
| Current accident year before catastrophes | 58.0 | 59.3 | (1.3) |
| Current accident year catastrophes | 7.8 | 2.4 | 5.4 |
| Prior accident year development (PYD) | 10.6 | 1.8 | 8.8 |
| Expenses | 32.9 | 35.2 | (2.3) |
| Policyholder dividends | 0.3 | 0.4 | (0.1) |
| Combined ratio | 109.7 | 99.1 | 10.6 |
| Impact of catastrophes and PYD on combined ratio | (18.4) | (4.2) | (14.2) |
Underlying combined ratio1 | 91.2 | 94.9 | (3.7) |
[1] Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
[2] The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as "NM" or not meaningful
First quarter 2021 net income of $129 million increased from $121 million in first quarter 2020 principally due to a $187 million, before tax, change to net realized capital gains in first quarter 2021, as well as higher net investment income, largely offset by a $236 million, before tax, decrease in underwriting gain (loss).
Commercial Lines core earnings of $105 million in first quarter 2021 declined by $157 million from first quarter 2020, primarily from:
•Unfavorable P&C prior accident year development (PYD) within core earnings of $232 million, before tax, in first quarter 2021, compared to $12 million of unfavorable PYD in first quarter 2020. The $232 million of net unfavorable development in first quarter 2021 included a $307 million, before tax, reserve increase for general liability primarily due to the previously announced settlement with Boy Scouts of America on sexual molestation and sexual abuse claims, partially offset by reserve decreases in workers’ compensation, package business and commercial property
•A $120 million, before tax, increase in CAY CAT losses principally due to the February 2021 winter storms in Texas and other states across the country
•COVID-19 incurred losses of $24 million, before tax, in the quarter included $20 million in workers' compensation claims and $4 million in financial and other lines
Partially offset by:
•Higher net investment income, including higher returns on limited partnership (LP) investments
•Improved underlying margins before COVID-19 losses of 4.8 points, including a lower current accident year ex-COVID-19 loss ratio of 2.4 points and a lower expense ratio of 2.3 points
Combined ratio was 109.7 in first quarter 2021, 10.6 points higher than 99.1 in first quarter 2020, primarily due to an 8.8 point increase in unfavorable PYD, and 5.4 points of higher CAY CAT losses, partially offset by a lower underlying combined ratio. Underlying combined ratio was 91.2, improving 3.7 points from first quarter 2020 due to lower underwriting expenses and lower loss ratios, primarily in Global Specialty, partially offset by COVID-19 incurred losses of $24 million, before tax.
•Small Commercial underlying combined ratio of 88.3 improved by 1.0 point from first quarter 2020 driven primarily by lower expenses resulting from the Hartford Next initiative, partially offset by higher non-CAT property losses and COVID-19 workers’ compensation losses incurred in first quarter 2021
•Middle & Large Commercial underlying combined ratio of 95.3 improved by 5.1 points from first quarter 2020 primarily due to lower expenses, loss ratio improvement in workers’ compensation before considering COVID-19 losses, lower non-CAT property losses and lower loss costs in general liability, partially offset by COVID-19 workers’ compensation losses incurred in first quarter 2021
•Global Specialty underlying combined ratio of 89.9 improved by 6.5 points from first quarter 2020 due to lower expenses and lower current accident year loss ratios before catastrophes in Global Re, U.S. wholesale, and U.S. financial lines
First quarter 2021 written premiums of $2.5 billion were up 4% from first quarter 2020,reflecting an increase in new business premium in Small Commercial and Global Specialty, strong renewal written price increases in Middle Market and Global Specialty, and improved policy retention in both Small Commercial and Middle Market, partially offset by lower written premium in workers' compensation partly due to an exposure base that, while improving, is still down year over year due to the economic effects of the pandemic.
Personal Lines
| | | | | | | | | | | |
| Three Months Ended |
| ($ in millions, unless otherwise noted) | Mar 31 2021 | Mar 31 2020 | Change |
| Net income | $135 | $98 | 38% |
| Core earnings | $131 | $117 | 12% |
| Written premiums | $715 | $744 | (4)% |
| Underwriting gain | $124 | $103 | 20% |
| Underlying underwriting gain | $121 | $104 | 16% |
| Losses and loss adjustment expense ratio | | | |
| Current accident year before catastrophes | 56.4 | 59.8 | (3.4) |
| Current accident year catastrophes | 5.3 | 2.5 | 2.8 |
| Prior accident year development (PYD) | (5.7) | (2.3) | (3.4) |
| Expenses | 27.1 | 26.7 | 0.4 |
| Combined ratio | 83.1 | 86.7 | (3.6) |
| Impact of catastrophes and PYD on combined ratio | 0.4 | (0.2) | 0.6 |
| Underlying combined ratio | 83.5 | 86.6 | (3.1) |
Net income of $135 million in first quarter 2021 was up $37 million from first quarter 2020 largely driven by a change to net realized capital gains in first quarter 2021 and an increase in underwriting gain.
Personal Lines core earnings of $131 million rose by $14 million due to:
•An increase in underwriting gain, largely due to favorable auto claim frequency and higher net favorable PYD
•Partially offset by higher CAY CAT losses, a decrease in net investment income, and the effect of lower earned premiums
Combined ratio of 83.1 in first quarter 2021 improved by 3.6 points relative to first quarter 2020, primarily due to lower CAY loss costs before catastrophes and higher net favorable PYD, partially offset by higher CAY CAT losses. Underlying combined ratio of 83.5 was 3.1 points better than first quarter 2020, primarily due to lower auto claim frequency from fewer miles driven relative to the prior year period though miles driven have begun to increase again as we emerge from the pandemic. The auto underlying combined ratio of 86.3 improved 4.6 points
from first quarter 2020, primarily due to lower auto frequency resulting from fewer miles driven while the homeowners underlying combined ratio of 77.2 was up 1.0 point from 76.2 in first quarter 2020, primarily due to modestly higher non-CAT property losses.
Written premiums in first quarter 2021 were $715 million compared to $744 million in first quarter 2020 primarily due to:
•A reduction in auto as non-renewed premium exceeded new business
•Lower renewal written price increases in auto, though up slightly from fourth quarter 2020, due to moderating claim frequency
•Partially offset by renewal written price increases in homeowners of 9.4% in first quarter 2021
Group Benefits
| | | | | | | | | | | |
| Three Months Ended |
| ($ in millions, unless otherwise noted) | Mar 31 2021 | Mar 31 2020 | Change |
| Net income | $9 | $104 | (91)% |
| Core earnings (loss) | ($3) | $115 | (103)% |
| Fully insured ongoing premiums (ex. buyout premiums) | $1,372 | $1,323 | 4% |
| Loss ratio | 84.3% | 71.9% | 12.4 |
| Expense ratio | 25.3% | 26.2% | (0.9) |
| Net income margin | 0.6% | 6.9% | (6.3) |
| Core earnings margin | (0.2)% | 7.8% | (8.0) |
Net income and core earnings (loss) were $9 million and $(3) million, respectively, decreasing from $104 million and $115 million, respectively, in first quarter 2020, largely driven by $185 million, before tax, of excess mortality in group life, primarily caused by direct and indirect impacts of COVID-19, partially offset by higher net investment income and a lower group disability loss ratio, and, for the change in net income, a change to net realized capital gains in first quarter 2021.
Fully insured ongoing premiums were up 4%, compared to first quarter 2020, driven by higher employer group disability and supplemental health. Fully insured ongoing sales were $512 million in first quarter 2021, up 33% from the prior year period.
Loss ratio of 84.3% increased 12.4 points from first quarter 2020 with an increase in group life due to excess mortality, partially offset by a decrease in group disability:
•Total group life loss ratio increased 33.7 points, primarily due to excess mortality, primarily caused by direct and indirect impacts of COVID-19
•Total disability loss ratio of 68.4% improved 3.1 points compared with first quarter 2020, due to more favorable prior incurral year development driven by higher claim recoveries and continued improving claim incidence. The three month period ending March 2021 included $13 million, or 1.8 points, of losses on short-term disability and New York Paid Family Leave claims related to COVID-19 as compared to $16 million, or 2.3 points, for the three months ended March 2020
Expense ratio of 25.3% improved 0.9 points from first quarter 2020, primarily driven by expense savings from Hartford Next.
Hartford Funds
| | | | | | | | | | | |
| Three Months Ended |
| ($ in millions, unless otherwise noted) | Mar 31 2021 | Mar 31 2020 | Change |
| Net income | $47 | $36 | 31% |
| Core earnings | $45 | $44 | 2% |
| Daily average Hartford Funds AUM | $143,164 | $119,632 | 20% |
| Mutual Funds and exchange-traded products (ETP) net flows | $774 | $(1,424) | 154% |
| Total Hartford Funds assets under management (AUM) | $145,198 | $102,153 | 42% |
Net income of $47 million in first quarter 2021 increased from $36 million in first quarter 2020, largely due to a change to net realized capital gains in first quarter 2021.
Core earnings of $45 million increased from $44 million in first quarter 2020 as an increase in fee income, mostly attributable to higher daily average Hartford Funds AUM, was largely offset by higher operating costs and other expenses. Contributing to the increase in operating costs and other expenses were higher variable costs and the effect of a $12 million, before tax, reduction in contingent consideration payable in first quarter 2020 associated with the acquisition of Lattice.
Daily average AUM of $143 billion in first quarter 2021 rose 20% from first quarter 2020 driven by increases in market values.
Mutual fund and ETP net inflows totaled $774 million in first quarter 2021, compared with net outflows of $1,424 million in first quarter 2020.
Corporate
| | | | | | | | | | | |
| Three Months Ended |
| ($ in millions, unless otherwise noted) | Mar 31 2021 | Mar 31 2020 | Change |
| Net loss | $(58) | $(91) | 36% |
| Core loss | $(60) | $(64) | 6% |
Other revenue (loss)1 | $(8) | $2 | NM |
| Net investment income, before tax | $3 | $9 | (67)% |
| Interest expense and preferred dividends, before tax | $62 | $69 | (10)% |
Restructuring and other costs1 | $11 | $0 | NM |
[1] The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as "NM" or not meaningful
Net loss of $58 million in first quarter 2021 compared with a net loss of $91 million in first quarter 2020, driven by a change to net realized capital gains in first quarter 2021, partially offset by restructuring costs related to Hartford Next of $11 million, before tax, in the 2021 period.
First quarter 2021 core loss of $60 million improved $4 million compared with first quarter 2020 core loss of $64 million primarily due to lower interest expense and lower insurance operating costs and other expenses, partially offset by lower net investment income and a higher loss from the company's retained equity interest in Talcott Resolution.
INVESTMENT INCOME AND PORTFOLIO DATA:
| | | | | | | | | | | |
| Three Months Ended |
| ($ in millions, unless otherwise noted) | Mar 31 2021 | Mar 31 2020 | Change |
| | | |
| Net investment income, before tax | $509 | $459 | 11% |
| Annualized investment yield, before tax | 3.8% | 3.7% | 0.1 |
Annualized investment yield, before tax, excluding LPs1 | 3.1% | 3.3% | (0.2) |
| Annualized LP yield, before tax | 21.1% | 13.2% | 7.9 |
| Annualized investment yield, after tax | 3.1% | 3.0% | 0.1 |
[1] Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
First quarter 2021 consolidated net investment income of $509 million increased $50 million from $459 million in first quarter 2020 as higher income from LPs and other alternative investments and a higher return on equity fund investments was partially offset by lower income
from fixed maturities. Income from fixed maturities declined as a result of reinvesting at lower rates and lower rates on floating rate investments, partially offset by higher asset levels.
Income from LPs was $112 million, before tax, in first quarter 2021, increasing from $58 million, before tax, in first quarter 2020, mostly driven by higher valuations of underlying investments within private equity funds. Income from LPs, including from private equity and other funds, is generally reported on a three-month lag.
Total invested assets of $56 billion decreased 1% from Dec. 31, 2020, primarily due to a decrease in valuations of fixed maturities driven by higher interest rates, partially offset by tighter credit spreads. The decrease in fair value of fixed maturities was partially offset by an increase in other asset classes, including equity securities at fair value, mortgage loans and LPs and other alternative investments.
ADDITIONAL UNSOLICITED PROPOSALS FROM CHUBB:
The Hartford also announced the receipt of two additional unsolicited proposals from Chubb Limited to acquire the company. In a letter dated March 30, 2021, Chubb said it was prepared to offer “in excess of $67 per share” if The Hartford would engage in “meaningful discussion and due diligence.” The Hartford received another letter, dated April 14, 2021, in which Chubb said it was willing to increase its offer to “$70 per Hartford share, the top end of our range,” payable approximately 60% in cash and 40% in Chubb stock.
The Hartford’s board of directors, after consultation with its financial and legal advisors, unanimously rejected both proposals, determining that entering into discussions regarding a strategic transaction would not be in the best interests of the company and its shareholders. The board also unanimously reaffirmed its conviction and confidence in The Hartford’s strategic business plan.
The Hartford filed copies of both Chubb proposals and both response letters from The Hartford as exhibits to a Current Report on Form 8-K furnished today with the Securities and Exchange Commission.
CONFERENCE CALL
The Hartford will discuss its first quarter 2021 financial results on a webcast at 9 a.m. EDT on Thursday, April 22, 2021. The call can be accessed via a live listen-only webcast or as a replay through the Investor Relations section of The Hartford's website at https://ir.thehartford.com. The replay will be accessible approximately one hour after the conclusion of the call and will be available along with a transcript of the event for at least one year.
More detailed financial information can be found in The Hartford's Investor Financial Supplement for March 31, 2021, and the first quarter 2021 Financial Results Presentation, both of which are available at https://ir.thehartford.com.
About The Hartford
The Hartford is a leader in property and casualty insurance, group benefits and mutual funds. With more than 200 years of expertise, The Hartford is widely recognized for its service excellence, sustainability practices, trust and integrity. More information on the company and its financial performance is available at https://www.thehartford.com. Follow us on Twitter at https://twitter.com/thehartford_pr.
The Hartford Financial Services Group, Inc. (NYSE: HIG) operates through its subsidiaries under the brand name, The Hartford, and is headquartered in Hartford, Connecticut. For additional details, please read https://www.thehartford.com/legal-notice.
HIG-F
From time to time, The Hartford may use its website and/or social media outlets, such as Twitter and Facebook, to disseminate material company information. Financial and other important information regarding The Hartford is routinely accessible through and posted on our website at https://ir.thehartford.com, Twitter account at www.twitter.com/TheHartford_pr and Facebook at https://facebook.com/thehartford. In addition, you may automatically receive email alerts and other information about The Hartford when you enroll your email address by visiting the “Email Alerts” section at https://ir.thehartford.com.
Media Contacts: Investor Contact:
Michelle Loxton Susan Spivak Bernstein
860-547-7413 860-547-6233
Matthew Sturdevant
860-547-8664
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| THE HARTFORD FINANCIAL SERVICES GROUP, INC. |
| CONSOLIDATING INCOME STATEMENTS |
| Three Months Ended March 31, 2021 |
| ($ in millions) |
| Commercial Lines | Personal Lines | P&C Other Ops | Group Benefits | Hartford Funds | Corporate | | Consolidated |
| Earned premiums | $ | 2,235 | | $ | 734 | | $ | — | | $ | 1,374 | | $ | — | | $ | — | | | $ | 4,343 | |
| Fee income | 9 | | 8 | | — | | 44 | | 282 | | 12 | | | 355 | |
| Net investment income | 327 | | 35 | | 16 | | 127 | | 1 | | 3 | | | 509 | |
| Other revenue (loss) | 1 | | 19 | | — | | — | | — | | (8) | | | 12 | |
| Net realized capital gains | 44 | | 7 | | 2 | | 19 | | 2 | | 6 | | | 80 | |
| Total revenues | 2,616 | | 803 | | 18 | | 1,564 | | 285 | | 13 | | | 5,299 | |
| Benefits, losses, and loss adjustment expenses | 1,709 | | 411 | | 33 | | 1,196 | | — | | 1 | | | 3,350 | |
| Amortization of DAC | 344 | | 58 | | — | | 11 | | 3 | | — | | | 416 | |
| Insurance operating costs and other expenses | 403 | | 163 | | 2 | | 339 | | 224 | | 13 | | | 1,144 | |
| Restructuring and other costs | — | | — | | — | | — | | — | | 11 | | | 11 | |
| Interest expense | — | | — | | — | | — | | — | | 57 | | | 57 | |
| Amortization of other intangible assets | 7 | | 1 | | — | | 10 | | — | | — | | | 18 | |
| Total benefits, losses and expenses | 2,463 | | 633 | | 35 | | 1,556 | | 227 | | 82 | | | 4,996 | |
| Income (loss) before income taxes | 153 | | 170 | | (17) | | 8 | | 58 | | (69) | | | 303 | |
| Income tax expense (benefit) | 24 | | 35 | | (4) | | (1) | | 11 | | (11) | | | 54 | |
| Net income (loss) | 129 | | 135 | | (13) | | 9 | | 47 | | (58) | | | 249 | |
| Preferred stock dividends | — | | — | | — | | — | | — | | 5 | | | 5 | |
| Net income (loss) available to common stockholders | 129 | | 135 | | (13) | | 9 | | 47 | | (63) | | | 244 | |
| Adjustments to reconcile net income (loss) available to common stockholders to core earnings (losses) | | | | | | | | |
| Net realized capital gains, excluded from core earnings, before tax | (43) | | (6) | | (2) | | (18) | | (2) | | (6) | | | (77) | |
| Restructuring and other costs | — | | — | | — | | — | | — | | 11 | | | 11 | |
| Change in deferred gain on retroactive reinsurance, before tax | 6 | | — | | — | | — | | — | | — | | | | 6 | |
| Integration and transaction costs, before tax | 7 | | — | | — | | 2 | | — | | — | | | 9 | |
| Income tax expense (benefit) | 6 | | 2 | | — | | 4 | | — | | (2) | | | 10 | |
| Core earnings (losses) | $ | 105 | | $ | 131 | | $ | (15) | | $ | (3) | | $ | 45 | | $ | (60) | | | $ | 203 | |
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| THE HARTFORD FINANCIAL SERVICES GROUP, INC. |
| CONSOLIDATING INCOME STATEMENTS |
| Three Months Ended March 31, 2020 |
| ($ in millions) |
| Commercial Lines | Personal Lines | P&C Other Ops | Group Benefits | Hartford Funds | Corporate | | Consolidated |
| Earned premiums | $ | 2,265 | | $ | 774 | | $ | — | | $ | 1,348 | | $ | — | | $ | 4 | | | $ | 4,391 | |
| Fee income | 8 | | 9 | | — | | 43 | | 247 | | 13 | | | 320 | |
| Net investment income | 277 | | 41 | | 16 | | 115 | | 1 | | 9 | | | 459 | |
| Other revenue | — | | 19 | | — | | — | | — | | (2) | | | 17 | |
| Net realized capital losses | (143) | | (23) | | (7) | | (8) | | (11) | | (39) | | | (231) | |
| Total revenues | 2,407 | | 820 | | 9 | | 1,498 | | 237 | | (15) | | | 4,956 | |
| Benefits, losses, and loss adjustment expenses | 1,439 | | 464 | | — | | 1,007 | | — | | 6 | | | 2,916 | |
| Amortization of DAC | 356 | | 64 | | — | | 13 | | 4 | | — | | | 437 | |
| Insurance operating costs and other expenses | 456 | | 168 | | 3 | | 339 | | 189 | | 21 | | | 1,176 | |
| Interest expense | — | | — | | — | | — | | — | | 64 | | | 64 | |
| Amortization of other intangible assets | 7 | | 1 | | — | | 11 | | — | | — | | | 19 | |
| Total benefits, losses and expenses | 2,258 | | 697 | | 3 | | 1,370 | | 193 | | 91 | | | 4,612 | |
| Income (loss) before income taxes | 149 | | 123 | | 6 | | 128 | | 44 | | (106) | | | 344 | |
| Income tax expense (benefit) | 28 | | 25 | | 1 | | 24 | | 8 | | (15) | | | 71 | |
| Net income (loss) | 121 | | 98 | | 5 | | 104 | | 36 | | (91) | | | 273 | |
| Preferred stock dividends | — | | — | | — | | — | | — | | 5 | | | 5 | |
| Net income (loss) available to common stockholders | 121 | | 98 | | 5 | | 104 | | 36 | | (96) | | | 268 | |
| Adjustments to reconcile net income (loss) available to common stockholders to core earnings (losses) | | | | | | | | |
| Net realized capital losses, excluded from core earnings, before tax | 143 | | 23 | | 7 | | 8 | | 11 | | 40 | | | 232 | |
| Change in deferred gain on retroactive reinsurance, before tax | 29 | | — | | — | | — | | — | | — | | | 29 | |
| Integration and transaction costs, before tax | 8 | | — | | — | | 5 | | — | | — | | | 13 | |
| Income tax expense (benefit) | (39) | | (4) | | (1) | | (2) | | (3) | | (8) | | | (57) | |
| Core earnings (losses) | $ | 262 | | $ | 117 | | $ | 11 | | $ | 115 | | $ | 44 | | $ | (64) | | | $ | 485 | |
DISCUSSION OF NON-GAAP FINANCIAL MEASURES
The Hartford uses non-GAAP financial measures in this press release to assist investors in analyzing the company's operating performance for the periods presented herein. Because The Hartford's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing The Hartford's non-GAAP financial measures to those of other companies. Definitions and calculations of other financial measures used in this press release can be found below and in The Hartford's Investor Financial Supplement for first quarter 2021, which is available on The Hartford's website, https://ir.thehartford.com.
Annualized investment yield, excluding limited partnerships and other alternative investments - This non-GAAP measure is calculated as (a) the annualized net investment income, on a Consolidated, P&C or Group Benefits level, excluding limited partnerships and other alternative investments, divided by (b) the monthly average invested assets at amortized cost, excluding repurchase agreement and securities lending collateral, derivatives book value, and limited partnerships and other alternative investments. The Company believes that annualized investment yield, excluding limited partnerships and other alternative investments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments. Annualized investment yield is the most directly comparable GAAP measure.
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| Three Months Ended |
| Mar 31 2021 | Mar 31 2020 | Mar 31 2021 | Mar 31 2020 | Mar 31 2021 | Mar 31 2020 |
| Consolidated | P&C | Group Benefits |
| Annualized investment yield, before tax | 3.8 | % | 3.7 | % | 3.9 | % | 3.6 | % | 4.4 | % | 4.0 | % |
| Impact on annualized investment yield of limited partnerships and other alternative investments, before tax | (0.7) | % | (0.4) | % | (0.7) | % | (0.4) | % | (0.9) | % | (0.3) | % |
| Annualized investment yield excluding limited partnerships and other alternative investments, before tax | 3.1 | % | 3.3 | % | 3.2 | % | 3.2 | % | 3.5 | % | 3.7 | % |
Book value per diluted share (excluding AOCI) - This is a non-GAAP per share measure that is calculated by dividing (a) common stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding and dilutive potential common shares. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes that excluding AOCI from the numerator is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per diluted share is the most directly comparable U.S. GAAP measure.
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| As of |
| Mar 31 2021 | Dec 31 2020 | Change |
| Book value per diluted share | $48.04 | $50.39 | (5)% |
| Per diluted share impact of AOCI | $(0.73) | $(3.23) | 77% |
| Book value per diluted share (excluding AOCI) | $47.31 | $47.16 | — % |
Core earnings - The Hartford uses the non-GAAP measure core earnings as an important measure of the Company’s operating performance. The Hartford believes that core earnings provides investors with a valuable measure of the performance of the Company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain items. Therefore, the following items are excluded from core earnings:
•Certain realized 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.
•Restructuring and other costs - Costs incurred as part of a restructuring plan are not a recurring operating expense of the business.
•Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before maturity, these losses are not a recurring operating expense of the business.
•Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a business or to reinsure loss reserves, are not a recurring operating expense of the business.
•Integration and 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.
•Change in loss reserves upon acquisition of a business - These changes in loss reserves are excluded from core earnings because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition.
•Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance agreements economically transfer risk to the reinsurers and including the full benefit from retroactive reinsurance in core earnings provides greater insight into the economics of the business.
•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.
In addition to the above components of net income available to common stockholders that are excluded from core earnings, preferred stock dividends declared, which are excluded from net income available to common stockholders, are included in the determination of core earnings. Preferred stock dividends are a cost of financing more akin to interest expense on debt and are expected to be a recurring expense as long as the preferred stock is outstanding.
Net income (loss) and net income (loss) available to common stockholders are the most directly comparable U.S. GAAP measures to core earnings. Core earnings should not be considered as a substitute for net income (loss) or net income (loss) available to common stockholders and does not reflect the overall profitability of the Company’s business. Therefore, The Hartford believes that it is useful for investors to evaluate net income (loss), net income (loss) available to common stockholders, and core earnings when reviewing the Company’s performance.
A reconciliation of net income (loss) to core earnings for the quarterly periods ended March 31, 2021 and 2020, is included in this press release. A reconciliation of net income (loss) to core earnings for individual reporting segments can be found in this press release under the heading "The Hartford Financial Services Group, Inc. Consolidating Income Statements" and in The Hartford's Investor Financial Supplement for the quarter ended March 31, 2021.
Core earnings margin - The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues, excluding buyouts and realized gains (losses). Net income margin, calculated by dividing net income by revenues, is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and realized gains (losses) as well as other items excluded in the calculation of core earnings. Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance. A reconciliation of net income margin to core earnings margin for the quarterly periods ended March 31, 2021 and 2020, is set forth below.
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| Three Months Ended |
| Margin | Mar 31 2021 | Mar 31 2020 | Change |
| Net income margin | 0.6% | 6.9% | (6.3) |
| Adjustments to reconcile net income margin to core earnings margin | | | |
| Net realized capital losses (gains) excluded from core earnings, before tax | (1.1)% | 0.6% | (1.7) |
| Integration and transaction costs associated with acquired business, before tax | 0.1% | 0.3% | (0.2) |
| Income tax expense | 0.2% | (0.1)% | 0.3 |
| Impact of excluding buyouts from denominator of core earnings margin | —% | 0.1% | (0.1) |
| Core earnings margin | (0.2)% | 7.8% | (8.0) |
Core earnings per diluted share - This non-GAAP per share measure is calculated using the non-GAAP financial measure core earnings rather than the GAAP measure net income. The Company believes that core earnings per diluted share provides investors with a valuable measure of the Company's operating performance for the same reasons applicable to its underlying measure, core earnings. Net income (loss) available to common stockholders per diluted common share is the most directly comparable GAAP measures. Core earnings per diluted share should not be considered as a substitute for net income (loss) available to common stockholders per diluted common share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate net income (loss) available to common stockholders per diluted common share and core earnings per diluted share when reviewing the Company's performance. A reconciliation of net income (loss) available to common stockholders per diluted common share to core earnings per diluted share for the quarterly periods ended March 31, 2021 and 2020 is provided in the table below.
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| Three Months Ended |
| Mar 31 2021 | Mar 31 2020 | Change |
| PER SHARE DATA | | | |
| Diluted earnings per common share: | | | |
Net income available to common stockholders per share1 | $0.67 | $0.74 | (9)% |
| Adjustment made to reconcile net income available to common stockholders per share to core earnings per share | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (0.21) | 0.64 | NM |
| Restructuring and other costs, before tax | 0.03 | — | NM |
| Integration and transaction costs associated with an acquired business, before tax | 0.02 | 0.04 | (50)% |
| Change in deferred gain on retroactive reinsurance, before tax | 0.02 | 0.08 | (75)% |
| Income tax expense (benefit) on items excluded from core earnings | 0.03 | (0.16) | NM |
| Core earnings per diluted share | $0.56 | $1.34 | (58)% |
[1] Net income (loss) available to common stockholders includes dilutive potential common shares
Core Earnings Return on Equity - The Company provides different measures of the return on stockholders' equity (ROE). Core earnings ROE is calculated based on non-GAAP financial measures. Core earnings ROE is calculated by dividing (a) the non-GAAP measure core earnings for the prior four fiscal quarters by (b) the non-GAAP measure average common stockholders' equity, excluding AOCI. Net income ROE is the most directly comparable U.S. GAAP measure. The Company excludes AOCI in the calculation of core earnings ROE to provide investors with a measure of how effectively the Company is investing the portion of the Company's net worth that is primarily attributable to the Company's business operations. The Company provides to investors return on equity measures based on its non-GAAP core earnings financial measure for the reasons set forth in the core earnings definition.
A reconciliation of consolidated net income (loss) ROE to Consolidated Core earnings ROE is set forth below.
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| Last Twelve Months Ended |
| Mar 31 2021 | Mar 31 2020 |
| Net income (loss) available to common stockholders ROE | 10.5% | 11.8% |
| Adjustments to reconcile net income (loss) available to common stockholders ROE to core earnings ROE | | |
| Net realized capital losses (gains) excluded from core earnings, before tax | (1.8) | — |
| Restructuring and other costs, before tax | 0.7 | — |
| Loss on extinguishment of debt, before tax | — | 0.6 |
| Loss on reinsurance transactions, before tax | — | 0.6 |
| Integration and transaction costs associated with an acquired business, before tax | 0.3 | 0.6 |
| Changes in loss reserves upon acquisition of a business, before tax | — | 0.7 |
| Change in deferred gain on retroactive reinsurance, before tax | 1.8 | 0.3 |
| Income tax expense (benefit) on items not included in core earnings | (0.3) | (0.6) |
| Impact of AOCI, excluded from core earnings ROE | (0.3) | (0.7) |
| Core earnings ROE | 10.9% | 13.3% |
Net investment income, excluding limited partnerships and other alternative investments -This non-GAAP measure is the amount of net investment income, on a Consolidated, P&C or Group Benefits level earned from invested assets, excluding the net investment income related to limited partnerships and other alternative investments. The Company believes that net investment income, excluding limited partnerships and other alternative instruments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative instruments. Net investment income is the most directly comparable GAAP measure.
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| Three Months Ended |
| Mar 31 2021 | Mar 31 2020 | Mar 31 2021 | Mar 31 2020 | Mar 31 2021 | Mar 31 2020 |
| Consolidated | P&C | Group Benefits |
| Total net investment income | $509 | | $459 | | $378 | | $334 | | $127 | | $115 | |
| Loss (income) from limited partnerships and other alternative assets | (112) | | (58) | | (84) | | (48) | | (28) | | (10) | |
| Net investment income excluding limited partnerships and other alternative investments | $397 | | $401 | | $294 | | $286 | | $99 | | $105 | |
Underlying combined ratio- This non-GAAP financial measure of underwriting results represents the combined ratio before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable GAAP measure. The underlying combined ratio represents the combined ratio for the current accident year, excluding the impact of current accident year catastrophes and current accident year change in loss reserves upon acquisition of a business. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve development. The changes to loss reserves upon acquisition of a business are excluded from underlying combined ratio because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of the combined ratio to the underlying combined ratio for individual reporting segments can be found in this press release under the heading "Business Results" for Commercial Lines" and "Personal Lines"
Underwriting gain (loss) - The Hartford's management evaluates profitability of the Commercial and Personal Lines segments primarily on the basis of underwriting gain or loss. Underwriting gain (loss) is a before tax non-GAAP measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of The Hartford's pricing. Underwriting profitability over time is also greatly influenced by The Hartford's underwriting discipline, as management strives to manage exposure to loss through favorable risk selection and diversification, effective management of claims, use of reinsurance and its ability to manage its expenses. The Hartford believes that the measure underwriting gain (loss) provides investors with a valuable measure of profitability, before tax, derived from underwriting activities, which are managed separately from the Company's investing activities. A reconciliation of net income to underwriting results for the quarterly periods ended March 31, 2021 and 2020, is set forth below.
Underlying underwriting gain (loss) - This non-GAAP measure of underwriting profitability represents underwriting gain (loss) before current accident year catastrophes, PYD and current accident year change in loss reserves upon acquisition of a business. The most directly comparable GAAP measure is net income (loss). The Company believes underlying underwriting gain (loss) is important to understand the Company’s periodic earnings because the volatile and unpredictable nature (i.e., the timing and amount) of catastrophes and prior accident year reserve development could obscure underwriting trends. The changes to loss reserves upon acquisition of a business are also excluded from underlying underwriting gain (loss) because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of net income (loss) to underlying underwriting gain (loss) for individual reporting segments for the quarterly periods ended March 31, 2021 and 2020, is set forth below.
COMMERCIAL LINES
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| Three Months Ended |
| Mar 31 2021 | Mar 31 2020 |
| Net income | $ | 129 | | $ | 121 | |
| Adjustments to reconcile net income to underwriting gain | | |
| Net servicing loss (income) | (2) | | (1) | |
| Net investment income | (327) | | (277) | |
| Net realized capital losses (gains) | (44) | | 143 | |
| Other expense (income) | 4 | | 6 | |
| Income tax expense | 24 | | 28 | |
| Underwriting gain | (216) | | 20 | |
| Adjustments to reconcile underwriting gain to underlying underwriting gain | | |
| Current accident year catastrophes | 175 | | 55 | |
| Prior accident year development | 238 | | 41 | |
| Underlying underwriting gain | $ | 197 | | $ | 116 | |
PERSONAL LINES
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| Three Months Ended |
| Mar 31 2021 | Mar 31 2020 |
| Net income | $ | 135 | | $ | 98 | |
| Adjustments to reconcile net income to underwriting gain | | |
| Net servicing income | (4) | | (2) | |
| Net investment income | (35) | | (41) | |
| Net realized capital losses (gains) | (7) | | 23 | |
| Other expense | — | | — | |
| Income tax expense (benefit) | 35 | | 25 | |
| Underwriting gain | 124 | | 103 | |
| Adjustments to reconcile underwriting gain to underlying underwriting gain | | |
| Current accident year catastrophes | 39 | | 19 | |
| Prior accident year development | (42) | | (18) | |
| Underlying underwriting gain | $ | 121 | | $ | 104 | |
PROPERTY & CASUALTY
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| Three Months Ended |
| Mar 31 2021 | Mar 31 2020 |
| Net income | $ | 251 | | $ | 224 | |
| Adjustments to reconcile net income to underwriting gain | | |
| Net investment income | (378) | | (334) | |
| Net realized capital losses (gains) | (53) | | 173 | |
| Net servicing and other expense (income) | (2) | | 3 | |
| Income tax expense | 55 | | 54 | |
| Underwriting gain | (127) | | 120 | |
| Adjustments to reconcile underwriting gain to underlying underwriting gain | | |
| Current accident year catastrophes | 214 | | 74 | |
| Prior accident year development | 229 | | 23 | |
| Underlying underwriting gain | $ | 316 | | $ | 217 | |
Underlying loss and loss adjustment expense ratio before COVID-19 losses- This non-GAAP financial measure of the loss and loss adjustment expense ratio for Property & Casualty represents the loss and loss adjustment expense ratio before catastrophes, prior accident year development and COVID-19 incurred losses. The loss and loss adjustment expense ratio is the most directly comparable GAAP measure. The underlying loss and loss adjustment expense ratio before COVID-19 losses is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses, prior accident year reserve development and COVID-19 incurred losses. A reconciliation of the loss and loss adjustment expense ratio to the underlying loss and loss adjustment expense ratio before COVID-19 losses is set forth below.
Property & Casualty
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| Three Months Ended |
| | Mar 31 2021 | Mar 31 2020 | Change |
| Loss and loss adjustment expense ratio | | | | | | |
| Total losses and loss adjustment expenses | 72.5 | | 62.6 | | 9.9 | |
| Current accident year catastrophes | (7.2) | | (2.4) | | (4.8) | |
| Prior accident year development | (7.7) | | (0.8) | | (6.9) | |
| Underlying loss and loss adjustment expenses | 57.6 | | 59.4 | | (1.8) | |
| COVID-19 losses | (0.8) | | — | | (0.8) | |
| Underlying loss and loss and loss adjustment expenses before COVID-19 losses | 56.8 | | 59.4 | | (2.6) | |
SAFE HARBOR STATEMENT
Certain of the statements contained herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” and similar references to future periods.
Forward-looking statements are based on management's current expectations and assumptions regarding future economic, competitive, legislative and other developments and their potential effect upon The Hartford Financial Services Group, Inc. and its subsidiaries (collectively, the "Company" or "The Hartford"). Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from expectations, depending on the evolution of various factors, including the risks and uncertainties identified below, as well as factors described in such forward-looking statements or in The Hartford’s 2020 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings the Company makes with the Securities and Exchange Commission.
Risks relating to the pandemic caused by the spread of the 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 another pandemic, civil unrest, earthquake, or other natural or man-made disaster that may adversely affect our businesses; weather and other natural physical events, including the intensity and frequency of 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, rating agency capital models, Funds at Lloyd's and Solvency Capital Requirement, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results; losses due to nonperformance or defaults by others, including credit risk with counterparties associated with investments, derivatives, premiums receivable, reinsurance recoverables and indemnifications provided by third parties in connection with previous dispositions; the potential for losses due to our reinsurers' unwillingness or inability to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses; state and international regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends;
Risks Relating to Estimates, Assumptions and Valuations: 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 intent-to-sell impairments and allowance for credit losses on available-for-sale securities and mortgage loans; the potential for further impairments of our goodwill;
Strategic and Operational Risks: the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event; the potential for difficulties arising from outsourcing and similar third-party relationships; the risks, challenges and uncertainties associated with capital management plans, expense reduction initiatives and other actions, 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.
Any forward-looking statement made by the Company in this document speaks only as of the date of the filing of this release. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
INVESTOR FINANCIAL SUPPLEMENT
March 31, 2021
Measures used in these financial statements and exhibits that are not based on generally accepted accounting principles ("non-GAAP") are denoted with an asterisk (*) the first time they appear in this document. These measures are defined within the Discussion of Non-GAAP and Other Financial Measures section and are reconciled to the most directly comparable generally accepted accounting principles ("GAAP") measure herein.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
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| | As of April 20, 2021 | | | | | | |
| Address: | | | | | | | | |
| One Hartford Plaza | | | | A.M. Best | | Standard & Poor’s | | Moody’s |
| Hartford, CT 06155 | | Insurance Financial Strength Ratings: | | | | | | |
| | Hartford Fire Insurance Company | | A+ | | A+ | | A1 |
| | Hartford Life and Accident Insurance Company | | A+ | | A+ | | A2 |
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| | Navigators Insurance Company | | A+ | | A | | NR |
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| | - Hartford Fire Insurance Company ratings are on stable outlook at A.M. Best, Moody’s, and Standard and Poor’s |
| | - Hartford Life and Accident Insurance Company ratings are on stable outlook at A.M. Best, Moody’s, and Standard and Poor’s |
| Internet address: | | - Navigators Insurance Company ratings are on stable outlook at A.M. Best and Standard and Poor's |
| http://www.thehartford.com | | NR- Not Rated |
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| | Other Ratings: | | | | | | |
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| Contact: | | Senior debt | | a- | | BBB+ | | Baa1 |
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| Susan Spivak Bernstein | | Junior subordinated debentures | | bbb | | BBB- | | Baa2 |
| Senior Vice President | | Preferred stock | | bbb | | BBB- | | Baa3 |
| Investor Relations | | | | | | | | |
| Phone (860) 547-6233 | - Hartford Financial Services Group, Inc. senior debt, junior subordinated debentures, and preferred stock are on stable outlook at A.M. Best, Standard and Poor’s, and Moody's. |
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| | TRANSFER AGENT |
| | Stockholder correspondence should be mailed to: | | Overnight correspondence should be mailed to: |
| | Computershare | | Computershare |
| | P.O. Box 505000 | | 462 South 4th Street, Suite 1600 |
| | Louisville, KY 40233 | | Louisville, KY 40202 |
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Common stock and preferred stock of The Hartford Financial Services Group, Inc. are traded on the New York Stock Exchange under the symbols “HIG” and "HIG PR G", respectively.
This report is for information purposes only. It should be read in conjunction with documents filed by The Hartford Financial Services Group, Inc. with the U.S. Securities and Exchange
Commission, including, without limitation, the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTOR FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| HIGHLIGHTS | | | | | | | | | | | |
| | | | | | | | | | | |
| Net income | $ | 249 | | $ | 537 | | $ | 459 | | $ | 468 | | $ | 273 | | | | | | | |
| Net income available to common stockholders [1] | $ | 244 | | $ | 532 | | $ | 453 | | $ | 463 | | $ | 268 | | | | | | | |
| Core earnings* | $ | 203 | | $ | 636 | | $ | 527 | | $ | 438 | | $ | 485 | | | | | | | |
| Total revenues | $ | 5,299 | | $ | 5,328 | | $ | 5,171 | | $ | 5,068 | | $ | 4,956 | | | | | | | |
| Total assets | $ | 74,201 | | $ | 74,111 | | $ | 72,319 | | $ | 70,990 | | $ | 68,724 | | | | | | | |
| PER SHARE AND SHARES DATA | | | | | | | | | | | |
| Basic earnings per common share | | | | | | | | | | | |
| | | | | | | | | | | |
| Net income available to common stockholders | $ | 0.68 | | $ | 1.48 | | $ | 1.26 | | $ | 1.29 | | $ | 0.75 | | | | | | | |
| Core earnings* | $ | 0.57 | | $ | 1.77 | | $ | 1.47 | | $ | 1.22 | | $ | 1.35 | | | | | | | |
| Diluted earnings per common share | | | | | | | | | | | |
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| Net income available to common stockholders | $ | 0.67 | | $ | 1.47 | | $ | 1.26 | | $ | 1.29 | | $ | 0.74 | | | | | | | |
| Core earnings* | $ | 0.56 | | $ | 1.76 | | $ | 1.46 | | $ | 1.22 | | $ | 1.34 | | | | | | | |
| Weighted average common shares outstanding (basic) | 358.2 | | 358.4 | | 358.3 | | 358.1 | | 358.5 | | | | | | | |
| Dilutive effect of stock compensation | 4.0 | | 3.1 | | 2.2 | | 1.2 | | 2.6 | | | | | | | |
| | | | | | | | | | | |
| Weighted average common shares outstanding and dilutive potential common shares (diluted) | 362.2 | | 361.5 | | 360.5 | | 359.3 | | 361.1 | | | | | | | |
| Common shares outstanding | 357.5 | | 358.5 | | 358.2 | | 358.1 | | 357.9 | | | | | | | |
| Book value per common share | $ | 48.58 | | $ | 50.83 | | $ | 48.77 | | $ | 46.74 | | $ | 41.72 | | | | | | | |
| Per common share impact of accumulated other comprehensive income [2] | (0.74) | | (3.27) | | (2.39) | | (1.34) | | 2.68 | | | | | | | |
| Book value per common share (excluding AOCI)* | $ | 47.84 | | $ | 47.56 | | $ | 46.38 | | $ | 45.40 | | $ | 44.40 | | | | | | | |
| Book value per diluted share | $ | 48.04 | | $ | 50.39 | | $ | 48.47 | | $ | 46.59 | | $ | 41.42 | | | | | | | |
| Per diluted share impact of AOCI | (0.73) | | (3.23) | | (2.38) | | (1.34) | | 2.65 | | | | | | | |
| Book value per diluted share (excluding AOCI)* | $ | 47.31 | | $ | 47.16 | | $ | 46.09 | | $ | 45.25 | | $ | 44.07 | | | | | | | |
| Common shares outstanding and dilutive potential common shares | 361.5 | | 361.6 | | 360.4 | | 359.3 | | 360.5 | | | | | | | |
| RETURN ON COMMON STOCKHOLDER'S EQUITY ("ROE") [3] | | | | | | | | | | | |
| Net income available to common stockholders' ROE ("Net income ROE") | 10.5 | % | 10.0 | % | 10.4 | % | 11.3 | % | 11.8 | % | | | | | | |
| Core earnings ROE* | 10.9 | % | 12.7 | % | 12.3 | % | 12.7 | % | 13.3 | % | | | | | | |
[1]Net income available to common stockholders includes the impact of preferred stock dividends.
[2]Accumulated other comprehensive income ("AOCI") represents net of tax unrealized gain (loss) on fixed maturities, net gain (loss) on cash flow hedging instruments, foreign currency translation adjustments, and pension and other postretirement benefit plan adjustments.
[3]For reconciliation of Net income ROE to Core earnings ROE, see Appendix beginning on page 33.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
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| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Earned premiums | $ | 4,343 | | $ | 4,316 | | $ | 4,347 | | $ | 4,234 | | $ | 4,391 | | | | | | | |
| Fee income | 355 | | 336 | | 323 | | 298 | | 320 | | | | | | | |
| Net investment income | 509 | | 556 | | 492 | | 339 | | 459 | | | | | | | |
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| Net realized capital gains (losses) | 80 | | 102 | | 6 | | 109 | | (231) | | | | | | | |
| Other revenues | 12 | | 18 | | 3 | | 88 | | 17 | | | | | | | |
| Total revenues | 5,299 | | 5,328 | | 5,171 | | 5,068 | | 4,956 | | | | | | | |
| Benefits, losses and loss adjustment expenses [1] | 3,350 | | 3,080 | | 2,962 | | 2,847 | | 2,916 | | | | | | | |
| Amortization of deferred acquisition costs ("DAC") | 416 | | 419 | | 421 | | 429 | | 437 | | | | | | | |
| Insurance operating costs and other expenses | 1,144 | | 1,086 | | 1,093 | | 1,125 | | 1,176 | | | | | | | |
| | | | | | | | | | | |
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| Interest expense | 57 | | 57 | | 58 | | 57 | | 64 | | | | | | | |
| Amortization of other intangible assets | 18 | | 17 | | 18 | | 18 | | 19 | | | | | | | |
| Restructuring and other costs [2] | 11 | | 17 | | 87 | | — | | — | | | | | | | |
| Total benefits, losses and expenses | 4,996 | | 4,676 | | 4,639 | | 4,476 | | 4,612 | | | | | | | |
| Income before income taxes | 303 | | 652 | | 532 | | 592 | | 344 | | | | | | | |
| Income tax expense | 54 | | 115 | | 73 | | 124 | | 71 | | | | | | | |
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| | | | | | | | | | | |
| Net income | 249 | | 537 | | 459 | | 468 | | 273 | | | | | | | |
| Preferred stock dividends | 5 | | 5 | | 6 | | 5 | | 5 | | | | | | | |
| Net income available to common stockholders | 244 | | 532 | | 453 | | 463 | | 268 | | | | | | | |
| | | | | | | | | | | |
| Adjustments to reconcile net income available to common stockholders to core earnings: | | | | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (77) | | (101) | | (6) | | (107) | | 232 | | | | | | | |
| Restructuring and other costs, before tax [2] | 11 | | 17 | | 87 | | — | | — | | | | | | | |
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| Integration and transaction costs associated with acquired business, before tax [3] | 9 | | 11 | | 14 | | 13 | | 13 | | | | | | | |
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| Change in deferred gain on retroactive reinsurance, before tax [4] | 6 | | 215 | | 14 | | 54 | | 29 | | | | | | | |
| Income tax expense (benefit) [5] | 10 | | (38) | | (35) | | 15 | | (57) | | | | | | | |
| | | | | | | | | | | |
| Core earnings | $ | 203 | | $ | 636 | | $ | 527 | | $ | 438 | | $ | 485 | | | | | | | |
[1]The three months ended March 31, 2021 included $24 of P&C incurred losses arising from the Coronavirus Disease 2019 ("COVID-19") pandemic. In addition, for the three months ended March 31, 2021, Group Benefits included $185 of incurred losses from excess mortality, primarily caused by direct and indirect impacts of COVID-19. The three months ended March 31, 2021 and 2020 included $13 and $16, respectively of COVID-19 related losses from short-term disability and New York Paid Family Leave claims. The three months ended March 31, 2021 also included an increase in reserves for sexual molestation and sexual abuse claims, primarily related to an agreement to settle claims against the Boy Scouts of America. See note [1] on page 9 for more information.
[2]Represents restructuring costs related to the Company's Hartford Next operational transformation and cost reduction plan.
[3]The three months ended March 31, 2021 included Navigators Group acquisition integration costs of $7 and integration costs related to the 2017 acquisition of Aetna's group benefits business of $2. The three month period ended March 31, 2020 included Navigators Group acquisition transaction and integration costs of $8, as well as integration costs related to the 2017 acquisition of Aetna's group benefits business of $5.
[4]As of March 31, 2021, the Company has cumulatively ceded $215 of losses to the Navigators adverse development cover ("Navigators ADC") that reinsures adverse development on Navigators' 2018 and prior accident year reserves, including $6 ceded for the three months ended March 31, 2021. Of the $215 of cumulative losses ceded, $124 of the ceded losses has been recognized as a deferred gain within other liabilities as of March 31, 2021 since the Navigators ADC has been accounted for as retroactive reinsurance and cumulative losses ceded exceed the ceded premium paid of $91. As the Company has ceded $215 of the $300 available limit, there is $85 of remaining limit available as of March 31, 2021.
[5]Primarily represents federal income tax expense (benefit) related to before tax items not included in core earnings.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
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| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Net income (loss): | | | | | | | | | | | |
| Commercial Lines | $ | 129 | | $ | 478 | | $ | 323 | | $ | (66) | | $ | 121 | | | | | | | |
| Personal Lines | 135 | | 170 | | 79 | | 371 | | 98 | | | | | | | |
| P&C Other Operations | (13) | | (180) | | 2 | | 5 | | 5 | | | | | | | |
| Property & Casualty ("P&C") | 251 | | 468 | | 404 | | 310 | | 224 | | | | | | | |
| Group Benefits | 9 | | 59 | | 119 | | 101 | | 104 | | | | | | | |
| Hartford Funds | 47 | | 51 | | 44 | | 39 | | 36 | | | | | | | |
| Sub-total | 307 | | 578 | | 567 | | 450 | | 364 | | | | | | | |
| | | | | | | | | | | |
| Corporate | (58) | | (41) | | (108) | | 18 | | (91) | | | | | | | |
| Net income | 249 | | 537 | | 459 | | 468 | | 273 | | | | | | | |
| Preferred stock dividends | 5 | | 5 | | 6 | | 5 | | 5 | | | | | | | |
| Net income available to common stockholders | $ | 244 | | $ | 532 | | $ | 453 | | $ | 463 | | $ | 268 | | | | | | | |
| | | | | | | | | | | |
| Core earnings (losses): | | | | | | | | | | | |
| Commercial Lines | $ | 105 | | $ | 444 | | $ | 349 | | $ | (57) | | $ | 262 | | | | | | | |
| Personal Lines | 131 | | 164 | | 77 | | 364 | | 117 | | | | | | | |
| P&C Other Operations | (15) | | (16) | | 2 | | 2 | | 11 | | | | | | | |
| P&C | 221 | | 592 | | 428 | | 309 | | 390 | | | | | | | |
| Group Benefits | (3) | | 49 | | 116 | | 102 | | 115 | | | | | | | |
| Hartford Funds | 45 | | 46 | | 40 | | 33 | | 44 | | | | | | | |
| Sub-total | 263 | | 687 | | 584 | | 444 | | 549 | | | | | | | |
| | | | | | | | | | | |
| Corporate | (60) | | (51) | | (57) | | (6) | | (64) | | | | | | | |
| Core earnings | $ | 203 | | $ | 636 | | $ | 527 | | $ | 438 | | $ | 485 | | | | | | | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
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| | PROPERTY & CASUALTY | | GROUP BENEFITS | | HARTFORD
FUNDS | | CORPORATE [1] | | CONSOLIDATED |
| Mar 31 2021 | Dec 31 2020 | | Mar 31 2021 | Dec 31 2020 | | Mar 31 2021 | Dec 31 2020 | | Mar 31 2021 | Dec 31 2020 | | Mar 31 2021 | Dec 31 2020 |
| Investments | | | | | | | | | | | | | | |
| Fixed maturities, available-for-sale ("AFS"), at fair value | $ | 33,288 | | $ | 34,173 | | | $ | 9,927 | | $ | 10,521 | | | $ | — | | $ | — | | | $ | 392 | | $ | 341 | | | $ | 43,607 | | $ | 45,035 | |
| | | | | | | | | | | | | | |
| Equity securities, at fair value | 1,067 | | 961 | | | 280 | | 204 | | | 78 | | 74 | | | 207 | | 199 | | | 1,632 | | 1,438 | |
| Mortgage loans, net | 3,212 | | 3,133 | | | 1,376 | | 1,360 | | | — | | — | | | — | | — | | | 4,588 | | 4,493 | |
| Limited partnerships and other alternative investments | 1,899 | | 1,711 | | | 427 | | 371 | | | — | | — | | | — | | — | | | 2,326 | | 2,082 | |
| Other investments | 154 | | 143 | | | 6 | | 7 | | | 31 | | 30 | | | 16 | | 21 | | | 207 | | 201 | |
| Short-term investments | 1,155 | | 1,086 | | | 207 | | 254 | | | 273 | | 238 | | | 1,732 | | 1,705 | | | 3,367 | | 3,283 | |
| Total investments | 40,775 | | 41,207 | | | 12,223 | | 12,717 | | | 382 | | 342 | | | 2,347 | | 2,266 | | | 55,727 | | 56,532 | |
| Cash | 149 | | 120 | | | 12 | | 13 | | | 2 | | 15 | | | 13 | | 3 | | | 176 | | 151 | |
| Restricted cash | 95 | | 82 | | | 9 | | 6 | | | — | | — | | | — | | — | | | 104 | | 88 | |
| Premiums receivable and agents’ balances, net | 3,934 | | 3,779 | | | 553 | | 489 | | | — | | — | | | — | | — | | | 4,487 | | 4,268 | |
| Reinsurance recoverables, net [2] | 5,520 | | 5,461 | | | 256 | | 244 | | | — | | — | | | 307 | | 306 | | | 6,083 | | 6,011 | |
| DAC | 780 | | 744 | | | 40 | | 38 | | | 7 | | 7 | | | — | | — | | | 827 | | 789 | |
| | | | | | | | | | | | | | |
| Deferred income taxes | (109) | | (240) | | | (224) | | (277) | | | 1 | | 2 | | | 537 | | 561 | | | 205 | | 46 | |
| Goodwill | 778 | | 778 | | | 723 | | 723 | | | 181 | | 181 | | | 229 | | 229 | | | 1,911 | | 1,911 | |
| Property and equipment, net | 935 | | 961 | | | 80 | | 83 | | | 12 | | 12 | | | 65 | | 66 | | | 1,092 | | 1,122 | |
| Other intangible assets | 449 | | 462 | | | 468 | | 478 | | | 10 | | 10 | | | — | | — | | | 927 | | 950 | |
| Other assets | 1,778 | | 1,425 | | | 259 | | 218 | | | 97 | | 93 | | | 363 | | 330 | | | 2,497 | | 2,066 | |
| Assets held for sale [3] | 165 | | 177 | | | — | | — | | | — | | — | | | — | | — | | | 165 | | 177 | |
| Total assets | $ | 55,249 | | $ | 54,956 | | | $ | 14,399 | | $ | 14,732 | | | $ | 692 | | $ | 662 | | | $ | 3,861 | | $ | 3,761 | | | $ | 74,201 | | $ | 74,111 | |
| Unpaid losses and loss adjustment expenses | $ | 30,332 | | $ | 29,622 | | | $ | 8,208 | | $ | 8,233 | | | $ | — | | $ | — | | | $ | — | | $ | — | | | $ | 38,540 | | $ | 37,855 | |
| Reserves for future policy benefits [2] | — | | — | | | 415 | | 420 | | | — | | — | | | 226 | | 218 | | | 641 | | 638 | |
| Other policyholder funds and benefits payable [2] | — | | — | | | 413 | | 415 | | | — | | — | | | 268 | | 286 | | | 681 | | 701 | |
| Unearned premiums | 6,919 | | 6,589 | | | 39 | | 40 | | | — | | — | | | — | | — | | | 6,958 | | 6,629 | |
| Debt | — | | — | | | — | | — | | | — | | — | | | 4,353 | | 4,352 | | | 4,353 | | 4,352 | |
| Other liabilities | 2,578 | | 2,631 | | | 283 | | 259 | | | 239 | | 211 | | | 2,078 | | 2,121 | | | 5,178 | | 5,222 | |
| Liabilities held for sale [3] | 148 | | 158 | | | — | | — | | | — | | — | | | — | | — | | | 148 | | 158 | |
| Total liabilities | 39,977 | | 39,000 | | | 9,358 | | 9,367 | | | 239 | | 211 | | | 6,925 | | 6,977 | | | 56,499 | | 55,555 | |
| Common stockholders' equity, excluding AOCI* | 13,978 | | 13,997 | | | 4,521 | | 4,565 | | | 453 | | 451 | | | (1,848) | | (1,961) | | | 17,104 | | 17,052 | |
| Preferred stock | — | | — | | | — | | — | | | — | | — | | | 334 | | 334 | | | 334 | | 334 | |
| AOCI, net of tax | 1,294 | | 1,959 | | | 520 | | 800 | | | — | | — | | | (1,550) | | (1,589) | | | 264 | | 1,170 | |
| Total stockholders' equity | 15,272 | | 15,956 | | | 5,041 | | 5,365 | | | 453 | | 451 | | | (3,064) | | (3,216) | | | 17,702 | | 18,556 | |
| Total liabilities and stockholders' equity | $ | 55,249 | | $ | 54,956 | | | $ | 14,399 | | $ | 14,732 | | | $ | 692 | | $ | 662 | | | $ | 3,861 | | $ | 3,761 | | | $ | 74,201 | | $ | 74,111 | |
[1]Corporate includes fixed maturities, short-term investments, investment sales receivable and cash of $1.9 billion and $1.8 billion as of March 31, 2021 and December 31, 2020, respectively, held by the holding company of The Hartford Financial Services Group, Inc. Corporate also includes investments held by Hartford Life and Accident Insurance Company ("HLA") that support reserves for run-off structured settlement and terminal funding agreement liabilities.
[2]Corporate includes retained reserves and reinsurance recoverables for the run-off life and annuity business sold.
[3]Related to the sale of Continental Europe Operations classified as held for sale beginning in the third quarter of 2020.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
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| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | |
| DEBT | | | | | | | | |
| | | | | | | | |
| Senior notes | $ | 3,263 | | $ | 3,262 | | $ | 3,261 | | $ | 3,260 | | $ | 3,260 | | | | |
| Junior subordinated debentures | 1,090 | | 1,090 | | 1,090 | | 1,090 | | 1,089 | | | | |
| Total debt | $ | 4,353 | | $ | 4,352 | | $ | 4,351 | | $ | 4,350 | | $ | 4,349 | | | | |
| STOCKHOLDERS’ EQUITY | | | | | | | | |
| Total stockholders’ equity | $ | 17,702 | | $ | 18,556 | | $ | 17,802 | | $ | 17,072 | | $ | 15,266 | | | | |
| Less: Preferred stock | 334 | | 334 | | 334 | | 334 | | 334 | | | | |
| Less: AOCI | 264 | | 1,170 | | 856 | | 479 | | (957) | | | | |
| Common stockholders' equity, excluding AOCI | $ | 17,104 | | $ | 17,052 | | $ | 16,612 | | $ | 16,259 | | $ | 15,889 | | | | |
| CAPITALIZATION | | | | | | | | |
| Total capitalization, including AOCI, net of tax | $ | 22,055 | | $ | 22,908 | | $ | 22,153 | | $ | 21,422 | | $ | 19,615 | | | | |
| Total capitalization, excluding AOCI, net of tax* | $ | 21,791 | | $ | 21,738 | | $ | 21,297 | | $ | 20,943 | | $ | 20,572 | | | | |
| DEBT TO CAPITALIZATION RATIOS | | | | | | | | |
| Total debt to capitalization, including AOCI | 19.7 | % | 19.0 | % | 19.6 | % | 20.3 | % | 22.2 | % | | | |
| Total debt to capitalization, excluding AOCI* | 20.0 | % | 20.0 | % | 20.4 | % | 20.8 | % | 21.1 | % | | | |
| Total debt and preferred stock to capitalization, including AOCI | 21.3 | % | 20.5 | % | 21.1 | % | 21.9 | % | 23.9 | % | | | |
| Total debt and preferred stock to capitalization, excluding AOCI* | 21.5 | % | 21.6 | % | 22.0 | % | 22.4 | % | 22.8 | % | | | |
| Total rating agency adjusted debt to capitalization [1] [2] | 22.6 | % | 21.8 | % | 22.9 | % | 23.5 | % | 25.6 | % | | | |
| FIXED CHARGE COVERAGE RATIOS | | | | | | | | |
| Total earnings to total fixed charges [3] | 4.8:1 | 8.9:1 | 8.2:1 | 7.7:1 | 5.4:1 | | | |
[1]The leverage calculation reflects adjustments related to the Company’s defined benefit plans' unfunded pension liability, the Company's rental expense on operating leases and uncollateralized letters of credit for Lloyd's of London for a total adjustment of $0.9 billion and $1.0 billion as of March 31, 2021 and 2020, respectively.
[2]Reflects 25% equity credit for the Company's outstanding junior subordinated debentures and 50% equity credit for the Company’s outstanding preferred stock.
[3]Calculated as year to date total earnings divided by year to date total fixed charges. Total earnings represent income before income taxes and total fixed charges (excluding the impact of preferred stock dividends), less undistributed earnings from limited partnerships and other alternative investments. Total fixed charges include interest expense, preferred stock dividends, interest factor attributable to rent expense, capitalized interest and amortization of debt issuance costs.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY CAPITAL TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
MARCH 31, 2021
| | | | | | | | |
| P&C | GROUP BENEFITS |
| U.S. statutory net income (loss) [1][6] | $ | 109 | | $ | (40) | |
| U.S. statutory capital [2][6] | $ | 10,839 | | $ | 2,504 | |
| U.S. GAAP adjustments [6]: | | |
| DAC | 770 | | 40 | |
| Non-admitted deferred tax assets [3] | 222 | | 167 | |
| Deferred taxes [4] | (926) | | (542) | |
| Goodwill | 127 | | 723 | |
| Other intangible assets | 64 | | 468 | |
| Non-admitted assets other than deferred taxes | 802 | | 106 | |
| Asset valuation and interest maintenance reserve | — | | 279 | |
| Benefit reserves | (85) | | 103 | |
| Unrealized gains on investments | 1,581 | | 702 | |
| Deferred gain on retroactive reinsurance agreements [5] | (278) | | — | |
| Other, net | 971 | | 491 | |
| U.S. GAAP stockholders’ equity of U.S. insurance entities [6] | 14,087 | | 5,041 | |
| U.S. GAAP stockholders’ equity of international subsidiaries as well as goodwill and other intangible assets related to the acquisition of Navigators Group | 1,185 | | — | |
| Total U.S. GAAP stockholders’ equity | $ | 15,272 | | $ | 5,041 | |
[1]Statutory net income (loss) is for the three months ended March 31, 2021.
[2]For reporting purposes, statutory capital and surplus is referred to collectively as "statutory capital".
[3]Represents the limitations on the recognition of deferred tax assets under U.S. statutory accounting principles ("U.S. STAT").
[4]Represents the tax timing differences between U.S. GAAP and U.S. STAT.
[5]Represents the deferred gain on retroactive reinsurance associated with U.S. entities for losses ceded to the Navigators and A&E ADC agreements that is recognized within a special category of surplus under U.S. STAT but is recorded within other liabilities under U.S. GAAP.
[6]Excludes insurance operations in the U.K. and Continental Europe.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
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| | AS OF |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | |
| Net unrealized gain on fixed maturities, AFS | $ | 1,909 | | $ | 2,834 | | $ | 2,431 | | $ | 2,055 | | $ | 627 | | | | |
Unrealized loss on fixed maturities, AFS with allowance for credit losses ("ACL") | (2) | | (2) | | (2) | | (2) | | (2) | | | | |
| | | | | | | | |
| Net gains on cash flow hedging instruments | 17 | | 12 | | 31 | | 48 | | 53 | | | | |
| Total net unrealized gain | $ | 1,924 | | $ | 2,844 | | $ | 2,460 | | $ | 2,101 | | $ | 678 | | | | |
| Foreign currency translation adjustments | 44 | | 43 | | 33 | | 27 | | 26 | | | | |
| Pension and other postretirement plan adjustments | (1,704) | | (1,717) | | (1,637) | | (1,649) | | (1,661) | | | | |
| Total AOCI | $ | 264 | | $ | 1,170 | | $ | 856 | | $ | 479 | | $ | (957) | | | | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Written premiums | $ | 3,218 | | $ | 2,870 | | $ | 2,980 | | $ | 2,903 | | $ | 3,152 | | | | | | | |
| Change in unearned premium reserve | 249 | | (128) | | (50) | | 52 | | 113 | | | | | | | |
| Earned premiums | 2,969 | | 2,998 | | 3,030 | | 2,851 | | 3,039 | | | | | | | |
| Fee income | 17 | | 17 | | 16 | | 14 | | 17 | | | | | | | |
| Losses and loss adjustment expenses | | | | | | | | | | | |
| Current accident year before catastrophes [1] | 1,710 | | 1,747 | | 1,802 | | 1,828 | | 1,806 | | | | | | | |
| Current accident year catastrophes [2] | 214 | | 55 | | 229 | | 248 | | 74 | | | | | | | |
| Prior accident year development [3] | 229 | | 184 | | (75) | | (268) | | 23 | | | | | | | |
| Total losses and loss adjustment expenses | 2,153 | | 1,986 | | 1,956 | | 1,808 | | 1,903 | | | | | | | |
| Amortization of DAC | 402 | | 405 | | 404 | | 412 | | 420 | | | | | | | |
| Underwriting expenses [4] | 544 | | 520 | | 539 | | 540 | | 597 | | | | | | | |
| Amortization of other intangible assets | 8 | | 7 | | 8 | | 9 | | 8 | | | | | | | |
| Dividends to policyholders | 6 | | 6 | | 8 | | 7 | | 8 | | | | | | | |
| Underwriting gain (loss)* | (127) | | 91 | | 131 | | 89 | | 120 | | | | | | | |
| Net investment income | 378 | | 425 | | 371 | | 242 | | 334 | | | | | | | |
| Net realized capital gains (losses) | 53 | | 54 | | (21) | | 74 | | (173) | | | | | | | |
| | | | | | | | | | | |
| Net servicing and other income (expense) | 2 | | (3) | | (4) | | (7) | | (3) | | | | | | | |
| Income before income taxes | 306 | | 567 | | 477 | | 398 | | 278 | | | | | | | |
| Income tax expense | 55 | | 99 | | 73 | | 88 | | 54 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Net income | 251 | | 468 | | 404 | | 310 | | 224 | | | | | | | |
| Adjustments to reconcile net income to core earnings: | | | | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (51) | | (54) | | 20 | | (71) | | 173 | | | | | | | |
| | | | | | | | | | | |
| Integration and transaction costs associated with an acquired business, before tax | 7 | | 8 | | 9 | | 8 | | 8 | | | | | | | |
| | | | | | | | | | | |
| Change in deferred gain on retroactive reinsurance, before tax [3] | 6 | | 215 | | 14 | | 54 | | 29 | | | | | | | |
| Income tax expense (benefit) [5] | 8 | | (45) | | (19) | | 8 | | (44) | | | | | | | |
| Core earnings | $ | 221 | | $ | 592 | | $ | 428 | | $ | 309 | | $ | 390 | | | | | | | |
| ROE | | | | | | | | | | | |
| Net income available to common stockholders [6] | 11.5 | % | 10.6 | % | 10.2 | % | 11.0 | % | 12.7 | % | | | | | | |
| Adjustments to reconcile net income available to common stockholders to core earnings: | | | | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (1.4 | %) | 0.6 | % | 0.6 | % | (0.2 | %) | (0.2 | %) | | | | | | |
| Loss on reinsurance transaction, before tax | — | % | — | % | — | % | — | % | 1.0 | % | | | | | | |
| Integration and transaction costs associated with an acquired business, before tax | 0.3 | % | 0.3 | % | 0.3 | % | 0.4 | % | 0.5 | % | | | | | | |
| Changes in loss reserves upon acquisition of a business, before tax | — | % | — | % | — | % | — | % | 1.1 | % | | | | | | |
| Change in deferred gain on retroactive reinsurance, before tax [3] | 2.6 | % | 2.6 | % | 1.0 | % | 0.9 | % | 0.5 | % | | | | | | |
| Income tax expense (benefit) [5] | (0.4 | %) | (0.8 | %) | (0.4 | %) | (0.2 | %) | (0.6 | %) | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Impact of AOCI, excluded from core earnings ROE | 0.7 | % | 1.7 | % | 1.5 | % | 1.4 | % | 0.5 | % | | | | | | |
| Core earnings [6] | 13.3 | % | 15.0 | % | 13.2 | % | 13.3 | % | 15.5 | % | | | | | | |
[1]The three months ended March 31, 2021 included $24 of COVID-19 losses and loss adjustment expenses in Commercial Lines, including $20 in workers' compensation and $4 in financial lines and other.
[2]Catastrophe losses for the three months ended March 31, 2021 of $214, included $176 from February winter storms primarily in the South, with the remaining $38 from various wind and hail events, mostly concentrated in the South and along the Pacific Coast. The $176 of losses from the February winter storms is net of a $46 reinsurance recoverable under the Company's per occurrence catastrophe treaty that covers 70% of up to $250 of losses in excess of $100 on catastrophe events occurring within a 7-day period other than from earthquakes and named hurricanes and tropical storms, subject to a $50 annual aggregate deductible.
[3]Prior accident year development does not include a benefit for the portion of losses ceded to NICO in excess of ceded premium paid under the Navigators and A&E ADC agreements which is recognized as a deferred gain under retroactive reinsurance accounting. See [4] on page 2 for more information.
[4]The three months ended March 31, 2021 and 2020 included an increase (decrease) in the ACL on premiums receivable of ($4) and $18, respectively, related to the increasing (lessening) impacts of COVID-19.
[5]Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
[6]Net income ROE and Core earnings ROE are calculated by allocating a portion of debt, interest expense, preferred stock and preferred stock dividends accounted for within Corporate to Property & Casualty.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| UNFAVORABLE (FAVORABLE) PRIOR ACCIDENT YEAR DEVELOPMENT | | | | | | | | | | | |
| Auto liability - Commercial Lines | $ | — | | $ | — | | $ | — | | $ | 22 | | $ | 5 | | | | | | | |
| Auto liability - Personal Lines | (23) | | (8) | | (32) | | (15) | | (6) | | | | | | | |
| Homeowners | (3) | | 4 | | 3 | | 2 | | (2) | | | | | | | |
| | | | | | | | | | | |
| Marine | 6 | | 2 | | — | | 1 | | — | | | | | | | |
| Professional liability | (1) | | 2 | | (21) | | 4 | | 1 | | | | | | | |
| Package business | (27) | | (34) | | (18) | | (7) | | 1 | | | | | | | |
| General liability [1] | 307 | | 125 | | (2) | | 102 | | 12 | | | | | | | |
| Bond | — | | (9) | | — | | (10) | | — | | | | | | | |
| Assumed Reinsurance | 2 | | 1 | | — | | (7) | | — | | | | | | | |
| Commercial property | (13) | | 2 | | (4) | | 5 | | (7) | | | | | | | |
| Net asbestos reserves | — | | (2) | | — | | — | | — | | | | | | | |
| | | | | | | | | | | |
| Workers’ compensation | (40) | | (38) | | (34) | | (21) | | (17) | | | | | | | |
| | | | | | | | | | | |
| Workers' compensation discount accretion | 9 | | 8 | | 9 | | 9 | | 9 | | | | | | | |
| Catastrophes | (16) | | (116) | | — | | (400) | | (13) | | | | | | | |
| Uncollectible reinsurance | (9) | | — | | (6) | | (2) | | — | | | | | | | |
| Other reserve re-estimates | 31 | | 32 | | 16 | | (5) | | 11 | | | | | | | |
| | | | | | | | | | | |
| Prior accident year development before change in deferred gain | 223 | | (31) | | (89) | | (322) | | (6) | | | | | | | |
| Change in deferred gain on retroactive reinsurance included in other liabilities [2] | 6 | | 215 | | 14 | | 54 | | 29 | | | | | | | |
| Total prior accident year development | $ | 229 | | $ | 184 | | $ | (75) | | $ | (268) | | $ | 23 | | | | | | | |
[1]Three months ended March 31, 2021 includes an increase in reserves for sexual molestation and sexual abuse claims, primarily related to an agreement to settle claims against the Boy Scouts of America ("BSA"). Under the settlement agreement, the Company will pay $650, before tax, for sexual molestation and sexual abuse claims associated with policies mostly issued in the 1970s. The agreement becomes effective upon the occurrence of certain conditions, including confirmation of BSA's global resolution plan, executed releases from the local councils, and approval from the abuse claimants and bankruptcy court.
[2]See [3] on page 8 for discussion related to the deferred gain on retroactive reinsurance. For the three months ended March 31, 2021, the $6 increase in the deferred gain relates to ceding losses to the Navigators ADC in excess of ceded premium paid. For the three months ended March 31, 2021 and 2020, adverse development on Navigators 2018 and prior accident year reserves was primarily driven by marine for both periods and by commercial automobile liability in the 2021 period and prior accident year catastrophes in the 2020 period. For the three months ended December 31, 2020, the $215 increase in the deferred gain primarily represented adverse development for A&E of $210 in excess of the ceded premium paid for the A&E ADC.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNDERWRITING RATIOS
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| UNDERWRITING GAIN (LOSS) | $ | (127) | | $ | 91 | | $ | 131 | | $ | 89 | | $ | 120 | | | | | | | |
| UNDERWRITING RATIOS | | | | | | | | | | | |
| Losses and loss adjustment expenses | | | | | | | | | | | |
| Current accident year before catastrophes [1] | 57.6 | | 58.3 | | 59.5 | | 64.1 | | 59.4 | | | | | | | |
| Current accident year catastrophes | 7.2 | | 1.8 | | 7.6 | | 8.7 | | 2.4 | | | | | | | |
| Prior accident year development [2] | 7.7 | | 6.1 | | (2.5) | | (9.4) | | 0.8 | | | | | | | |
| Total losses and loss adjustment expenses | 72.5 | | 66.2 | | 64.6 | | 63.4 | | 62.6 | | | | | | | |
| Expenses [3][4] | 31.6 | | 30.5 | | 30.9 | | 33.2 | | 33.2 | | | | | | | |
| Policyholder dividends | 0.2 | | 0.2 | | 0.3 | | 0.2 | | 0.3 | | | | | | | |
| Combined ratio | 104.3 | | 97.0 | | 95.7 | | 96.9 | | 96.1 | | | | | | | |
| Adjustments to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
| Current accident year catastrophes and prior accident year development | (14.9) | | (7.9) | | (5.1) | | 0.7 | | (3.2) | | | | | | | |
| | | | | | | | | | | |
| Underlying combined ratio * | 89.4 | | 89.0 | | 90.6 | | 97.6 | | 92.9 | | | | | | | |
[1]The three months ended March 31, 2021 included COVID-19 losses of 0.8 points. See [1] on page 8.
[2]See [3] on page 8 for discussion related to the deferred gain on retroactive reinsurance.
[3]Integration and transaction costs related to the acquisition of Navigators Group are not included in the expense ratio.
[4]The three months ended March 31, 2021 and 2020 included an increase (decrease) in the ACL on premiums receivable of ($4) and $18 respectively, related to the increasing (lessening) impacts of COVID-19 representing (0.1) points and 0.6 points of the expense ratio, respectively.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Written premiums | $ | 2,503 | | $ | 2,197 | | $ | 2,199 | | $ | 2,165 | | $ | 2,408 | | | | | | | |
| Change in unearned premium reserve | 268 | | (40) | | (52) | | 8 | | 143 | | | | | | | |
| Earned premiums | 2,235 | | 2,237 | | 2,251 | | 2,157 | | 2,265 | | | | | | | |
| Fee income | 9 | | 9 | | 8 | | 5 | | 8 | | | | | | | |
| Losses and loss adjustment expenses | | | | | | | | | | | |
| Current accident year before catastrophes [1] | 1,296 | | 1,307 | | 1,366 | | 1,472 | | 1,343 | | | | | | | |
| Current accident year catastrophes [2] | 175 | | 42 | | 107 | | 193 | | 55 | | | | | | | |
| Prior accident year development [3] | 238 | | (17) | | (57) | | 77 | | 41 | | | | | | | |
| Total losses and loss adjustment expenses | 1,709 | | 1,332 | | 1,416 | | 1,742 | | 1,439 | | | | | | | |
| Amortization of DAC | 344 | | 346 | | 344 | | 351 | | 356 | | | | | | | |
| Underwriting expenses | 394 | | 373 | | 391 | | 387 | | 443 | | | | | | | |
| Amortization of other intangible assets | 7 | | 6 | | 8 | | 7 | | 7 | | | | | | | |
| Dividends to policyholders | 6 | | 6 | | 8 | | 7 | | 8 | | | | | | | |
| Underwriting gain (loss) | (216) | | 183 | | 92 | | (332) | | 20 | | | | | | | |
| Net servicing income | 2 | | 2 | | 1 | | — | | 1 | | | | | | | |
| Net investment income | 327 | | 363 | | 316 | | 204 | | 277 | | | | | | | |
| Net realized capital gains (losses) | 44 | | 45 | | (26) | | 64 | | (143) | | | | | | | |
| | | | | | | | | | | |
| Other expenses | (4) | | (10) | | (8) | | (11) | | (6) | | | | | | | |
| Income (loss) before income taxes | 153 | | 583 | | 375 | | (75) | | 149 | | | | | | | |
| Income tax expense (benefit) | 24 | | 105 | | 52 | | (9) | | 28 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Net income (loss) | 129 | | 478 | | 323 | | (66) | | 121 | | | | | | | |
| Adjustments to reconcile net income to core earnings: | | | | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (43) | | (46) | | 25 | | (61) | | 143 | | | | | | | |
| Integration and transaction costs associated with an acquired business, before tax [4] | 7 | | 8 | | 9 | | 8 | | 8 | | | | | | | |
| | | | | | | | | | | |
| Change in deferred gain on retroactive reinsurance, before tax [3] | 6 | | 5 | | 14 | | 54 | | 29 | | | | | | | |
| | | | | | | | | | | |
| Income tax expense (benefit) [5] | 6 | | (1) | | (22) | | 8 | | (39) | | | | | | | |
| Core earnings (losses) | $ | 105 | | $ | 444 | | $ | 349 | | $ | (57) | | $ | 262 | | | | | | | |
[1]See [1] on page 8 for impact related to COVID-19.
[2]Catastrophe losses for the three months ended March 31, 2021 of $175, included $154 from February winter storms primarily in the South, with the remaining $21 from various wind and hail events, mostly concentrated in the South and along the Pacific Coast. Refer to [2] on page 8 for more information.
[3]See [3] on page 8 for discussion related to the deferred gain on retroactive reinsurance. See [1] on page 9 for discussion related to general liability prior year development.
[4]Includes Navigators Group integration costs.
[5]Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS (CONTINUED)
Prior accident year development included the following unfavorable (favorable) reserve development:
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Auto liability | $ | — | | $ | — | | $ | — | | $ | 22 | | $ | 5 | | | | | | | |
| | | | | | | | | | | |
| Professional liability | (1) | | 2 | | (21) | | 4 | | 1 | | | | | | | |
| Package business | (27) | | (34) | | (18) | | (7) | | 1 | | | | | | | |
| General liability [1] | 307 | | 125 | | (2) | | 102 | | 12 | | | | | | | |
| Marine | 6 | | 2 | | — | | 1 | | — | | | | | | | |
| Bond | — | | (9) | | — | | (10) | | — | | | | | | | |
| Assumed Reinsurance | 2 | | 1 | | — | | (7) | | — | | | | | | | |
| Commercial property | (13) | | 2 | | (4) | | 5 | | (7) | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Workers’ compensation | (40) | | (38) | | (34) | | (21) | | (17) | | | | | | | |
| | | | | | | | | | | |
| Workers' compensation discount accretion | 9 | | 8 | | 9 | | 9 | | 9 | | | | | | | |
| Catastrophes | (4) | | (77) | | — | | (67) | | (5) | | | | | | | |
| Uncollectible reinsurance | (5) | | — | | — | | — | | — | | | | | | | |
| Other reserve re-estimates | (2) | | (4) | | (1) | | (8) | | 13 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Prior accident year development before change in deferred gain | 232 | | (22) | | (71) | | 23 | | 12 | | | | | | | |
| | | | | | | | | | | |
| Change in deferred gain on retroactive reinsurance included in other liabilities [2] | 6 | | 5 | | 14 | | 54 | | 29 | | | | | | | |
| Total prior accident year development | $ | 238 | | $ | (17) | | $ | (57) | | $ | 77 | | $ | 41 | | | | | | | |
[1]See [1] on page 9 for discussion related to general liability prior year development.
[2]See [4] on page 2 for discussion related to the deferred gain on retroactive reinsurance. The change in deferred gain on retroactive reinsurance for the three months ended March 31, 2021 relates to ceding losses to the Navigators ADC in excess of ceded premium paid resulting in a deferred reinsurance benefit.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
UNDERWRITING RATIOS
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| UNDERWRITING GAIN (LOSS) | $ | (216) | | $ | 183 | | $ | 92 | | $ | (332) | | $ | 20 | | | | | | | |
| UNDERWRITING RATIOS | | | | | | | | | | | |
| Losses and loss adjustment expenses | | | | | | | | | | | |
| Current accident year before catastrophes [1] | 58.0 | | 58.4 | | 60.7 | | 68.2 | | 59.3 | | | | | | | |
| Current accident year catastrophes | 7.8 | | 1.9 | | 4.8 | | 8.9 | | 2.4 | | | | | | | |
| Prior accident year development [2] | 10.6 | | (0.8) | | (2.5) | | 3.6 | | 1.8 | | | | | | | |
| Total losses and loss adjustment expenses | 76.5 | | 59.5 | | 62.9 | | 80.8 | | 63.5 | | | | | | | |
| Expenses [3] [4] | 32.9 | | 32.0 | | 32.7 | | 34.3 | | 35.2 | | | | | | | |
| Policyholder dividends | 0.3 | | 0.3 | | 0.4 | | 0.3 | | 0.4 | | | | | | | |
| Combined ratio [2] [5] | 109.7 | | 91.8 | | 95.9 | | 115.4 | | 99.1 | | | | | | | |
| Adjustments to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
| Current accident year catastrophes and prior accident year development | (18.4) | | (1.1) | | (2.3) | | (12.5) | | (4.2) | | | | | | | |
| | | | | | | | | | | |
| Underlying combined ratio | 91.2 | | 90.7 | | 93.7 | | 102.9 | | 94.9 | | | | | | | |
| | | | | | | | | | | |
| COMBINED RATIOS BY LINE OF BUSINESS | | | | | | | | | | | |
| SMALL COMMERCIAL | | | | | | | | | | | |
| Combined ratio | 95.4 | | 80.2 | | 89.5 | | 97.4 | | 93.2 | | | | | | | |
| Adjustments to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
| Current accident year catastrophes | (12.1) | | (2.9) | | (5.5) | | (13.2) | | (2.6) | | | | | | | |
| Prior accident year development | 5.0 | | 9.7 | | 3.7 | | 8.7 | | (1.3) | | | | | | | |
| | | | | | | | | | | |
| Underlying combined ratio | 88.3 | | 87.0 | | 87.7 | | 92.9 | | 89.3 | | | | | | | |
| MIDDLE & LARGE COMMERCIAL | | | | | | | | | | | |
| Combined ratio | 98.9 | | 86.5 | | 101.2 | | 124.3 | | 103.8 | | | | | | | |
| Adjustments to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
| Current accident year catastrophes | (7.0) | | 0.2 | | (5.1) | | (9.8) | | (3.6) | | | | | | | |
| Prior accident year development | 3.3 | | 6.3 | | 1.6 | | (1.6) | | 0.2 | | | | | | | |
| | | | | | | | | | | |
| Underlying combined ratio | 95.3 | | 93.0 | | 97.7 | | 112.9 | | 100.4 | | | | | | | |
| GLOBAL SPECIALTY | | | | | | | | | | | |
| Combined ratio [2] [5] | 92.4 | | 95.1 | | 99.6 | | 113.8 | | 102.2 | | | | | | | |
| Adjustments to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
| Current accident year catastrophes | (2.2) | | (3.0) | | (3.2) | | (1.2) | | (0.6) | | | | | | | |
| Prior accident year development [2] | (0.3) | | 1.3 | | 1.8 | | (7.1) | | (5.2) | | | | | | | |
| | | | | | | | | | | |
| Underlying combined ratio | 89.9 | | 93.3 | | 98.2 | | 105.5 | | 96.4 | | | | | | | |
[1]The three months ended March 31, 2021 included COVID-19 losses, of 1.1 points. See [1] on page 8.
[2]See [2] on page 9 for discussion related to the change in deferred gain on retroactive reinsurance for the three months ended March 31, 2021 and 2020.
[3]Integration and transaction costs related to the acquisition of Navigators Group are not included in the expense ratio.
[4]The three months ended March 31, 2021 and 2020 included a ($4) and $17, respectively, before-tax increase in the ACL on premiums receivable related to the increasing (lessening) impacts of COVID-19 representing (0.2) points and 0.8 points, respectively, of the expense ratio.
[5]The three months ended March 31, 2021 and 2020 included a change in deferred gain on retroactive reinsurance related to the Navigators ADC of $6 and $29, respectively, representing 0.3 and 1.3 points, respectively, of the Commercial Lines combined ratio and 1.1 points and 5.3 points, respectively, of the global specialty combined ratio.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
SUPPLEMENTAL DATA
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| WRITTEN PREMIUMS | | | | | | | | | | | |
| Small Commercial | $ | 1,053 | | $ | 873 | | $ | 890 | | $ | 877 | | $ | 1,011 | | | | | | | |
| Middle & Large Commercial | 775 | | 746 | | 750 | | 683 | | 797 | | | | | | | |
| Middle Market | 662 | | 647 | | 653 | | 609 | | 680 | | | | | | | |
| National Accounts and Other | 113 | | 99 | | 97 | | 74 | | 117 | | | | | | | |
| Global Specialty [1] | 665 | | 568 | | 549 | | 595 | | 589 | | | | | | | |
| U.S. | 421 | | 395 | | 395 | | 389 | | 379 | | | | | | | |
| International | 110 | | 107 | | 88 | | 119 | | 98 | | | | | | | |
| Global Re | 134 | | 66 | | 66 | | 87 | | 112 | | | | | | | |
| Other | 10 | | 10 | | 10 | | 10 | | 11 | | | | | | | |
| Total | $ | 2,503 | | $ | 2,197 | | $ | 2,199 | | $ | 2,165 | | $ | 2,408 | | | | | | | |
| EARNED PREMIUMS | | | | | | | | | | | |
| Small Commercial | $ | 916 | | $ | 908 | | $ | 935 | | $ | 877 | | $ | 930 | | | | | | | |
| Middle & Large Commercial | 752 | | 742 | | 749 | | 713 | | 772 | | | | | | | |
| Middle Market | 653 | | 649 | | 646 | | 625 | | 673 | | | | | | | |
| National Accounts and Other | 99 | | 93 | | 103 | | 88 | | 99 | | | | | | | |
| Global Specialty [1] | 556 | | 577 | | 555 | | 557 | | 552 | | | | | | | |
| U.S. | 386 | | 386 | | 387 | | 368 | | 374 | | | | | | | |
| International | 102 | | 99 | | 101 | | 117 | | 112 | | | | | | | |
| Global Re | 68 | | 92 | | 67 | | 72 | | 66 | | | | | | | |
| Other | 11 | | 10 | | 12 | | 10 | | 11 | | | | | | | |
| Total | $ | 2,235 | | $ | 2,237 | | $ | 2,251 | | $ | 2,157 | | $ | 2,265 | | | | | | | |
| | | | | | | | | | | |
| COMMERCIAL LINES STATISTICAL PREMIUM INFORMATION | | | | | | | | | | | |
| Small Commercial | | | | | | | | | | | |
| Net New Business Premium | $ | 176 | | $ | 153 | | $ | 129 | | $ | 118 | | $ | 157 | | | | | | | |
| Renewal Written Price Increases | 2.1 | % | 2.0 | % | 1.6 | % | 1.8 | % | 2.3 | % | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Policy Count Retention | 86 | % | 84 | % | 79 | % | 88 | % | 84 | % | | | | | | |
| Policies in Force (in thousands) | 1,304 | | 1,283 | | 1,278 | | 1,297 | | 1,291 | | | | | | | |
| Middle Market [2] | | | | | | | | | | | |
| Net New Business Premium | $ | 122 | | $ | 124 | | $ | 131 | | $ | 99 | | $ | 125 | | | | | | | |
| Renewal Written Price Increases | 6.0 | % | 7.3 | % | 7.9 | % | 7.2 | % | 7.6 | % | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Policy Count Retention | 81 | % | 77 | % | 77 | % | 79 | % | 77 | % | | | | | | |
| Policies in Force (in thousands) | 58 | | 59 | | 59 | | 60 | | 62 | | | | | | | |
| Global Specialty | | | | | | | | | | | |
| U.S. - Renewal Written Price Increases | 14.6 | % | 19.1 | % | 20.3 | % | 19.1 | % | 11.5 | % | | | | | | |
| International - Renewal Written Price Increases [3] | 27.7 | % | 49.0 | % | 53.7 | % | 46.4 | % | 22.0 | % | | | | | | |
| Gross New Business Premium [4] | $ | 216 | | $ | 184 | | $ | 185 | | $ | 186 | | $ | 197 | | | | | | | |
| | | | | | | | | | | |
[1]U.S. business includes a small amount of business issued by U.S. insurance entities to U.S. policyholders with international-based exposures ("multinational exposure"). International represents Navigators Group business written in either Lloyd's market or other international markets, which includes U.S.-based exposures.
[2]Middle market disclosures exclude loss sensitive and programs businesses.
[3]Excludes offshore energy policies, political violence and terrorism policies, and any business under which the managing agent of our Lloyd's Syndicate 1221 (our "Lloyd’s Syndicate") delegates underwriting authority to coverholders and other third parties.
[4]Excludes Global Re and Continental Europe Operations and is before ceded reinsurance.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Written premiums | $ | 715 | | $ | 673 | | $ | 781 | | $ | 738 | | $ | 744 | | | | | | | |
| Change in unearned premium reserve | (19) | | (88) | | 2 | | 44 | | (30) | | | | | | | |
| Earned premiums | 734 | | 761 | | 779 | | 694 | | 774 | | | | | | | |
| Fee income | 8 | | 8 | | 8 | | 9 | | 9 | | | | | | | |
| Losses and loss adjustment expenses | | | | | | | | | | | |
| Current accident year before catastrophes | 414 | | 440 | | 436 | | 356 | | 463 | | | | | | | |
| Current accident year catastrophes [1] | 39 | | 13 | | 122 | | 55 | | 19 | | | | | | | |
| Prior accident year development | (42) | | (42) | | (29) | | (349) | | (18) | | | | | | | |
| Total losses and loss adjustment expenses | 411 | | 411 | | 529 | | 62 | | 464 | | | | | | | |
| Amortization of DAC | 58 | | 59 | | 60 | | 61 | | 64 | | | | | | | |
| Underwriting expenses | 148 | | 144 | | 146 | | 150 | | 151 | | | | | | | |
| Amortization of other intangible assets | 1 | | 1 | | — | | 2 | | 1 | | | | | | | |
| Underwriting gain | 124 | | 154 | | 52 | | 428 | | 103 | | | | | | | |
| Net servicing income | 4 | | 4 | | 5 | | 3 | | 2 | | | | | | | |
| Net investment income | 35 | | 47 | | 41 | | 28 | | 41 | | | | | | | |
| Net realized capital gains (losses) | 7 | | 7 | | 3 | | 8 | | (23) | | | | | | | |
| Other income (expense) | — | | — | | (2) | | 1 | | — | | | | | | | |
| Income before income taxes | 170 | | 212 | | 99 | | 468 | | 123 | | | | | | | |
| Income tax expense | 35 | | 42 | | 20 | | 97 | | 25 | | | | | | | |
| Net income | 135 | | 170 | | 79 | | 371 | | 98 | | | | | | | |
| Adjustments to reconcile net income to core earnings: | | | | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (6) | | (6) | | (3) | | (8) | | 23 | | | | | | | |
| Income tax expense (benefit) [2] | 2 | | — | | 1 | | 1 | | (4) | | | | | | | |
| Core earnings | $ | 131 | | $ | 164 | | $ | 77 | | $ | 364 | | $ | 117 | | | | | | | |
[1]Catastrophe losses for the three months ended March 31, 2021 of $39, included $22 from February winter storms primarily in the South, with the remainder primarily from wind and hail events in the South and Pacific Coast. Refer to [2] on page 8 for more information.
[2]Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS (CONTINUED)
Prior accident year development included the following unfavorable (favorable) reserve development:
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Auto liability | $ | (23) | | $ | (8) | | $ | (32) | | $ | (15) | | $ | (6) | | | | | | | |
| Homeowners | (3) | | 4 | | 3 | | 2 | | (2) | | | | | | | |
| | | | | | | | | | | |
| Catastrophes | (12) | | (39) | | — | | (333) | | (8) | | | | | | | |
| Other reserve re-estimates, net | (4) | | 1 | | — | | (3) | | (2) | | | | | | | |
| | | | | | | | | | | |
| Total prior accident year development | $ | (42) | | $ | (42) | | $ | (29) | | $ | (349) | | $ | (18) | | | | | | | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
UNDERWRITING RATIOS
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| UNDERWRITING GAIN | $ | 124 | | $ | 154 | | $ | 52 | | $ | 428 | | $ | 103 | | | | | | | |
| UNDERWRITING RATIOS | | | | | | | | | | | |
| Losses and loss adjustment expenses | | | | | | | | | | | |
| Current accident year before catastrophes | 56.4 | | 57.8 | | 56.0 | | 51.3 | | 59.8 | | | | | | | |
| Current accident year catastrophes | 5.3 | | 1.7 | | 15.7 | | 7.9 | | 2.5 | | | | | | | |
| Prior accident year development | (5.7) | | (5.5) | | (3.7) | | (50.3) | | (2.3) | | | | | | | |
| Total losses and loss adjustment expenses | 56.0 | | 54.0 | | 67.9 | | 8.9 | | 59.9 | | | | | | | |
| Expenses | 27.1 | | 25.8 | | 25.4 | | 29.4 | | 26.7 | | | | | | | |
| Combined ratio | 83.1 | | 79.8 | | 93.3 | | 38.3 | | 86.7 | | | | | | | |
| Adjustment to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
Current accident year catastrophes and prior accident year development | 0.4 | | 3.8 | | (12.0) | | 42.4 | | (0.2) | | | | | | | |
| Underlying combined ratio | 83.5 | | 83.6 | | 81.4 | | 80.7 | | 86.6 | | | | | | | |
| PRODUCT | | | | | | | | | | | |
| Automobile | | | | | | | | | | | |
| Combined ratio | 83.5 | | 88.3 | | 81.3 | | 82.5 | | 89.8 | | | | | | | |
| Adjustment to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
| Current accident year catastrophes | (0.5) | | (0.5) | | (1.5) | | (1.8) | | (0.3) | | | | | | | |
| Prior accident year development | 3.3 | | 1.9 | | 5.2 | | 5.6 | | 1.5 | | | | | | | |
| Underlying combined ratio | 86.3 | | 89.6 | | 84.9 | | 86.3 | | 90.9 | | | | | | | |
| Homeowners | | | | | | | | | | | |
| Combined ratio | 86.8 | | 60.3 | | 122.9 | | (45.8) | | 79.2 | | | | | | | |
| Adjustment to reconcile combined ratio to underlying combined ratio: | | | | | | | | | | | |
| Current accident year catastrophes | (15.9) | | (4.5) | | (47.7) | | (20.1) | | (7.0) | | | | | | | |
| Prior accident year development | 6.3 | | 14.0 | | (1.2) | | 136.0 | | 4.0 | | | | | | | |
| Underlying combined ratio | 77.2 | | 69.9 | | 74.0 | | 70.1 | | 76.2 | | | | | | | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| DISTRIBUTION | | | | | | | | | | | |
| WRITTEN PREMIUMS | | | | | | | | | | | |
| AARP Direct | $ | 612 | | $ | 564 | | $ | 666 | | $ | 627 | | $ | 627 | | | | | | | |
| AARP Agency | 51 | | 53 | | 53 | | 50 | | 57 | | | | | | | |
| Other Agency | 45 | | 51 | | 54 | | 54 | | 52 | | | | | | | |
| Other | 7 | | 5 | | 8 | | 7 | | 8 | | | | | | | |
| Total | $ | 715 | | $ | 673 | | $ | 781 | | $ | 738 | | $ | 744 | | | | | | | |
| EARNED PREMIUMS | | | | | | | | | | | |
| AARP Direct | $ | 623 | | $ | 644 | | $ | 657 | | $ | 581 | | $ | 647 | | | | | | | |
| AARP Agency | 53 | | 56 | | 56 | | 52 | | 60 | | | | | | | |
| Other Agency | 51 | | 54 | | 57 | | 54 | | 60 | | | | | | | |
| Other | 7 | | 7 | | 9 | | 7 | | 7 | | | | | | | |
| Total | $ | 734 | | $ | 761 | | $ | 779 | | $ | 694 | | $ | 774 | | | | | | | |
| PRODUCT LINE | | | | | | | | | | | |
| WRITTEN PREMIUMS | | | | | | | | | | | |
| Automobile | $ | 508 | | $ | 459 | | $ | 529 | | $ | 481 | | $ | 534 | | | | | | | |
| Homeowners | 207 | | 214 | | 252 | | 257 | | 210 | | | | | | | |
| Total | $ | 715 | | $ | 673 | | $ | 781 | | $ | 738 | | $ | 744 | | | | | | | |
| EARNED PREMIUMS | | | | | | | | | | | |
| Automobile | $ | 507 | | $ | 525 | | $ | 541 | | $ | 456 | | $ | 536 | | | | | | | |
| Homeowners | 227 | | 236 | | 238 | | 238 | | 238 | | | | | | | |
| Total | $ | 734 | | $ | 761 | | $ | 779 | | $ | 694 | | $ | 774 | | | | | | | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA (CONTINUED)
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | | | | | | |
| Net New Business Premium | | | | | | | | | | | |
| Automobile | $ | 53 | | $ | 45 | | $ | 55 | | $ | 65 | | $ | 58 | | | | | | | |
| Homeowners | $ | 13 | | $ | 12 | | $ | 16 | | $ | 18 | | $ | 17 | | | | | | | |
| Renewal Written Price Increases | | | | | | | | | | | |
| Automobile | 1.9 | % | 1.8 | % | 2.1 | % | 2.5 | % | 3.1 | % | | | | | | |
| Homeowners | 9.4 | % | 8.7 | % | 7.1 | % | 5.1 | % | 4.7 | % | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Policy Count Retention | | | | | | | | | | | |
| Automobile | 85 | % | 84 | % | 84 | % | 90 | % | 86 | % | | | | | | |
| Homeowners | 85 | % | 84 | % | 84 | % | 89 | % | 86 | % | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Policies in Force (in thousands) | | | | | | | | | | | |
| Automobile | 1,357 | | 1,369 | | 1,392 | | 1,416 | | 1,410 | | | | | | | |
| Homeowners | 815 | | 826 | | 846 | | 865 | | 868 | | | | | | | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C OTHER OPERATIONS
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Losses and loss adjustment expenses | | | | | | | | | | | |
| | | | | | | | | | | |
| Prior accident year development | $ | 33 | | $ | 243 | | $ | 11 | | $ | 4 | | $ | — | | | | | | | |
| Total losses and loss adjustment expenses | 33 | | 243 | | 11 | | 4 | | — | | | | | | | |
| Underwriting expenses | 2 | | 3 | | 2 | | 3 | | 3 | | | | | | | |
| Underwriting loss | (35) | | (246) | | (13) | | (7) | | (3) | | | | | | | |
| | | | | | | | | | | |
| Net investment income | 16 | | 15 | | 14 | | 10 | | 16 | | | | | | | |
| Net realized capital gains (losses) | 2 | | 2 | | 2 | | 2 | | (7) | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Other income | — | | 1 | | — | | — | | — | | | | | | | |
| Income (loss) before income taxes | (17) | | (228) | | 3 | | 5 | | 6 | | | | | | | |
| Income tax expense (benefit) | (4) | | (48) | | 1 | | — | | 1 | | | | | | | |
| Net income (loss) | (13) | | (180) | | 2 | | 5 | | 5 | | | | | | | |
| | | | | | | | | | | |
| Adjustments to reconcile net income to core earnings (losses): | | | | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (2) | | (2) | | (2) | | (2) | | 7 | | | | | | | |
| | | | | | | | | | | |
| Change in deferred gain on retroactive reinsurance, before tax | — | | 210 | | — | | — | | — | | | | | | | |
| Income tax expense (benefit) [1] | — | | (44) | | 2 | | (1) | | (1) | | | | | | | |
| Core earnings (losses) | $ | (15) | | $ | (16) | | $ | 2 | | $ | 2 | | $ | 11 | | | | | | | |
[1]Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Earned premiums | $ | 1,374 | | $ | 1,318 | | $ | 1,317 | | $ | 1,378 | | $ | 1,348 | | | | | | | |
| Fee income | 44 | | 43 | | 44 | | 45 | | 43 | | | | | | | |
| Net investment income | 127 | | 124 | | 117 | | 92 | | 115 | | | | | | | |
| Net realized capital gains (losses) | 19 | | 18 | | 9 | | 3 | | (8) | | | | | | | |
| Total revenues | 1,564 | | 1,503 | | 1,487 | | 1,518 | | 1,498 | | | | | | | |
| Benefits, losses and loss adjustment expenses [1] | 1,196 | | 1,092 | | 1,005 | | 1,033 | | 1,007 | | | | | | | |
| Amortization of DAC | 11 | | 11 | | 13 | | 13 | | 13 | | | | | | | |
| Insurance operating costs and other expenses [2] | 339 | | 317 | | 312 | | 340 | | 339 | | | | | | | |
| Amortization of other intangible assets | 10 | | 10 | | 10 | | 9 | | 11 | | | | | | | |
| Total benefits, losses and expenses | 1,556 | | 1,430 | | 1,340 | | 1,395 | | 1,370 | | | | | | | |
| Income before income taxes | 8 | | 73 | | 147 | | 123 | | 128 | | | | | | | |
| Income tax expense (benefit) | (1) | | 14 | | 28 | | 22 | | 24 | | | | | | | |
| Net income | 9 | | 59 | | 119 | | 101 | | 104 | | | | | | | |
| Adjustments to reconcile net income to core earnings: | | | | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (18) | | (17) | | (9) | | (2) | | 8 | | | | | | | |
| Integration and transaction costs associated with acquired business, before tax | 2 | | 3 | | 5 | | 5 | | 5 | | | | | | | |
| Income tax expense (benefit) [3] | 4 | | 4 | | 1 | | (2) | | (2) | | | | | | | |
| Core earnings (losses) | $ | (3) | | $ | 49 | | $ | 116 | | $ | 102 | | $ | 115 | | | | | | | |
| Margin | | | | | | | | | | | |
| Net income margin | 0.6 | % | 3.9 | % | 8.0 | % | 6.7 | % | 6.9 | % | | | | | | |
| Core earnings margin* | (0.2 | %) | 3.3 | % | 7.9 | % | 6.9 | % | 7.8 | % | | | | | | |
| ROE | | | | | | | | | | | |
| Net income available to common stockholders [4] | 6.4 | % | 8.3 | % | 11.0 | % | 12.0 | % | 13.4 | % | | | | | | |
| Adjustments to reconcile net income available to common stockholders to core earnings: | | | | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (1.2 | %) | (0.5 | %) | (0.3 | %) | (0.4 | %) | (0.6 | %) | | | | | | |
| Integration and transaction costs associated with acquired business, before tax | 0.4 | % | 0.4 | % | 0.6 | % | 0.7 | % | 0.9 | % | | | | | | |
| Income tax expense (benefit) [3] | 0.2 | % | — | % | (0.1 | %) | (0.1 | %) | (0.1 | %) | | | | | | |
| Impact of AOCI, excluded from core earnings ROE | 0.5 | % | 1.4 | % | 1.8 | % | 1.5 | % | 0.6 | % | | | | | | |
| Core earnings [4] | 6.3 | % | 9.6 | % | 13.0 | % | 13.7 | % | 14.2 | % | | | | | | |
[1]The three months ended March 31, 2021 and 2020 included $185 and $0, respectively, of incurred losses from excess mortality, primarily caused by direct and indirect impacts of COVID-19. The three months ended March 31, 2021 and 2020 also included net losses of $13 and $16, respectively on COVID-19 related losses from short-term disability claims.
[2]The three months ended March 31, 2021 and 2020 included $4 and $1, respectively, of before tax decreases in the ACL on uncollectible premiums receivable.
[3]Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
[4]Net income ROE and core earnings ROE are calculated by allocating a portion of debt, interest expense, preferred stock and preferred stock dividends accounted for within Corporate to Group Benefits.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
SUPPLEMENTAL DATA
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| PREMIUMS | | | | | | | | | | | |
| Fully insured ongoing premiums | | | | | | | | | | | |
| Group disability | $ | 693 | | $ | 646 | | $ | 652 | | $ | 672 | | $ | 660 | | | | | | | |
| Group life | 602 | | 601 | | 594 | | 605 | | 605 | | | | | | | |
| Other [1] | 77 | | 70 | | 70 | | 72 | | 58 | | | | | | | |
| Total fully insured ongoing premiums | 1,372 | | 1,317 | | 1,316 | | 1,349 | | 1,323 | | | | | | | |
| Total buyouts [2] | 2 | | 1 | | 1 | | 29 | | 25 | | | | | | | |
| Total premiums | $ | 1,374 | | $ | 1,318 | | $ | 1,317 | | $ | 1,378 | | $ | 1,348 | | | | | | | |
| SALES (GROSS ANNUALIZED NEW PREMIUMS) | | | | | | | | | | | |
| Fully insured ongoing sales | | | | | | | | | | | |
| Group disability | $ | 321 | | $ | 28 | | $ | 55 | | $ | 65 | | $ | 213 | | | | | | | |
| Group life | 151 | | 15 | | 69 | | 73 | | 136 | | | | | | | |
| Other [1] | 40 | | 6 | | 10 | | 11 | | 36 | | | | | | | |
| Total fully insured ongoing sales | 512 | | 49 | | 134 | | 149 | | 385 | | | | | | | |
| Total buyouts [2] | 2 | | 1 | | 1 | | 29 | | 25 | | | | | | | |
| Total sales | $ | 514 | | $ | 50 | | $ | 135 | | $ | 178 | | $ | 410 | | | | | | | |
| RATIOS, EXCLUDING BUYOUTS | | | | | | | | | | | |
| Group disability loss ratio [3] | 68.4 | % | 65.1 | % | 65.3 | % | 62.6 | % | 71.5 | % | | | | | | |
| Group life loss ratio [4] | 108.3 | % | 102.0 | % | 87.5 | % | 85.9 | % | 74.6 | % | | | | | | |
| Total loss ratio | 84.3 | % | 80.2 | % | 73.8 | % | 72.0 | % | 71.9 | % | | | | | | |
| Expense ratio [5] | 25.3 | % | 24.6 | % | 24.3 | % | 25.6 | % | 26.2 | % | | | | | | |
[1]Includes other group coverages such as retiree health insurance, critical illness, accident, hospital indemnity and participant accident coverages.
[2]Takeover of open claim liabilities and other non-recurring premium amounts. The three months ended March 31, 2020 included buyout premiums primarily from one large account.
[3]The group disability loss ratio decreased 3.1 points from first quarter 2020 to first quarter 2021, primarily due to more favorable prior incurral year development driven by higher claim recoveries and continued improving claim incidence. The three months period ending March 31, 2021 includes $13 of losses on short-term disability and New York Paid Family Leave claims related to COVID-19 as compared to $16 for the three months ended March 31, 2020.
[4]The three months ended March 31, 2021 and 2020 included 30.7 points and 0.0 points, respectively, of incurred losses from excess mortality, primarily caused by direct and indirect impacts of COVID-19.
[5]Integration and transaction costs related to the acquisition of Aetna's U.S. group life and disability business are not included in the expense ratio.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
HARTFORD FUNDS
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Investment management fees | $ | 208 | | $ | 194 | | $ | 182 | | $ | 165 | | $ | 178 | | | | | | | |
| Shareholder servicing fees | 24 | | 22 | | 22 | | 20 | | 22 | | | | | | | |
| Other revenue | 51 | | 50 | | 47 | | 43 | | 48 | | | | | | | |
| Net realized capital gains (losses) | 2 | | 6 | | 5 | | 8 | | (11) | | | | | | | |
| Total revenues | 285 | | 272 | | 256 | | 236 | | 237 | | | | | | | |
| Sub-advisory expense | 75 | | 70 | | 66 | | 60 | | 64 | | | | | | | |
| Employee compensation and benefits | 37 | | 30 | | 29 | | 28 | | 32 | | | | | | | |
| Distribution and service | 90 | | 84 | | 82 | | 75 | | 80 | | | | | | | |
| General, administrative and other [1] | 25 | | 23 | | 24 | | 23 | | 17 | | | | | | | |
| | | | | | | | | | | |
| Total expenses | 227 | | 207 | | 201 | | 186 | | 193 | | | | | | | |
| Income before income taxes | 58 | | 65 | | 55 | | 50 | | 44 | | | | | | | |
| Income tax expense | 11 | | 14 | | 11 | | 11 | | 8 | | | | | | | |
| Net income | $ | 47 | | $ | 51 | | $ | 44 | | $ | 39 | | $ | 36 | | | | | | | |
| Adjustments to reconcile net income to core earnings: | | | | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (2) | | (6) | | (5) | | (8) | | 11 | | | | | | | |
| Income tax expense (benefit) [2] | — | | 1 | | 1 | | 2 | | (3) | | | | | | | |
| Core earnings | $ | 45 | | $ | 46 | | $ | 40 | | $ | 33 | | $ | 44 | | | | | | | |
| Daily average Hartford Funds AUM | $ | 143,164 | | $ | 130,485 | | $ | 122,528 | | $ | 110,864 | | $ | 119,632 | | | | | | | |
| Return on assets (bps, net of tax) [3] | | | | | | | | | | | |
| Net income | 13.1 | | 15.6 | | 14.4 | | 14.1 | | 12.0 | | | | | | | |
| Core earnings* | 12.6 | | 14.1 | | 13.1 | | 11.9 | | 14.7 | | | | | | | |
| ROE | | | | | | | | | | | |
| Net income available to common stockholders [4] | 52.9 | % | 49.9 | % | 48.2 | % | 48.2 | % | 50.2 | % | | | | | | |
| | | | | | | | | | | |
| Adjustments to reconcile net income available to common stockholders to core earnings: | | | | | | | | | | | |
| Net realized capital losses (gains) excluded from core earnings, before tax | (6.3 | %) | (2.4 | %) | (0.9 | %) | 0.3 | % | 3.0 | % | | | | | | |
| Income tax expense (benefit) [2] | 1.2 | % | 0.3 | % | — | % | (0.3 | %) | (1.0 | %) | | | | | | |
| Impact of AOCI, excluded from core earnings ROE | (0.2 | %) | 0.3 | % | 0.3 | % | 0.1 | % | (0.7 | %) | | | | | | |
| Core earnings [4] | 47.6 | % | 48.1 | % | 47.6 | % | 48.3 | % | 51.5 | % | | | | | | |
[1]The three months ended March 31, 2020 included a $12 reduction in contingent consideration payable related to the 2016 acquisition of Lattice Strategies.
[2]Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
[3]Represents annualized earnings divided by daily average assets under management ("AUM"), as measured in basis points ("bps") which represents one hundredth of one percent.
[4]Net income ROE and core earnings ROE are calculated by allocating a portion of debt, interest expense, preferred stock and preferred stock dividends accounted for within Corporate to Hartford Funds.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
HARTFORD FUNDS
ASSET VALUE ROLLFORWARD
ASSETS UNDER MANAGEMENT BY ASSET CLASS
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Equity Funds | | | | | | | | | | | |
| Beginning balance | $ | 82,123 | | $ | 70,649 | | $ | 66,838 | | $ | 55,076 | | $ | 71,629 | | | | | | | |
| Sales | 6,202 | | 4,303 | | 3,545 | | 5,038 | | 5,313 | | | | | | | |
| Redemptions | (5,191) | | (4,873) | | (5,102) | | (5,083) | | (5,701) | | | | | | | |
| Net flows | 1,011 | | (570) | | (1,557) | | (45) | | (388) | | | | | | | |
| Change in market value and other | 4,322 | | 12,044 | | 5,368 | | 11,807 | | (16,165) | | | | | | | |
| Ending balance | $ | 87,456 | | $ | 82,123 | | $ | 70,649 | | $ | 66,838 | | $ | 55,076 | | | | | | | |
| Fixed Income Funds | | | | | | | | | | | |
| Beginning balance | $ | 17,034 | | $ | 15,655 | | $ | 14,771 | | $ | 14,558 | | $ | 16,130 | | | | | | | |
| Sales | 2,258 | | 2,108 | | 1,640 | | 1,667 | | 1,782 | | | | | | | |
| Redemptions | (1,486) | | (1,142) | | (1,121) | | (2,241) | | (2,632) | | | | | | | |
| Net flows | 772 | | 966 | | 519 | | (574) | | (850) | | | | | | | |
| Change in market value and other | (101) | | 413 | | 365 | | 787 | | (722) | | | | | | | |
| Ending balance | $ | 17,705 | | $ | 17,034 | | $ | 15,655 | | $ | 14,771 | | $ | 14,558 | | | | | | | |
| Multi-Strategy Investments Funds [1] | | | | | | | | | | | |
| Beginning balance | $ | 22,645 | | $ | 21,116 | | $ | 20,526 | | $ | 18,407 | | $ | 21,332 | | | | | | | |
| Sales | 738 | | 688 | | 693 | | 801 | | 1,026 | | | | | | | |
| Redemptions | (1,751) | | (798) | | (841) | | (733) | | (1,145) | | | | | | | |
| Net flows | (1,013) | | (110) | | (148) | | 68 | | (119) | | | | | | | |
| Change in market value and other | 538 | | 1,639 | | 738 | | 2,051 | | (2,806) | | | | | | | |
| Ending balance | $ | 22,170 | | $ | 22,645 | | $ | 21,116 | | $ | 20,526 | | $ | 18,407 | | | | | | | |
| Exchange-traded Products ("ETP") AUM | | | | | | | | | | | |
| Beginning balance | $ | 2,825 | | $ | 2,621 | | $ | 2,586 | | $ | 2,574 | | $ | 3,442 | | | | | | | |
| Net flows | 4 | | (5) | | (80) | | (124) | | (67) | | | | | | | |
| Change in market value and other | 94 | | 209 | | 115 | | 136 | | (801) | | | | | | | |
| Ending balance | $ | 2,923 | | $ | 2,825 | | $ | 2,621 | | $ | 2,586 | | $ | 2,574 | | | | | | | |
| Mutual Fund and ETP AUM | | | | | | | | | | | |
| Beginning balance | $ | 124,627 | | $ | 110,041 | | $ | 104,721 | | $ | 90,615 | | $ | 112,533 | | | | | | | |
| Sales - mutual fund | 9,198 | | 7,099 | | 5,878 | | 7,506 | | 8,121 | | | | | | | |
| Redemptions - mutual fund | (8,428) | | (6,813) | | (7,064) | | (8,057) | | (9,478) | | | | | | | |
| Net flows - ETP | 4 | | (5) | | (80) | | (124) | | (67) | | | | | | | |
| Net flows - mutual fund and ETP | 774 | | 281 | | (1,266) | | (675) | | (1,424) | | | | | | | |
| Change in market value and other | 4,853 | | 14,305 | | 6,586 | | 14,781 | | (20,494) | | | | | | | |
Ending balance | 130,254 | | 124,627 | | 110,041 | | 104,721 | | 90,615 | | | | | | | |
| Talcott Resolution life and annuity separate account AUM [2] | 14,944 | | 14,809 | | 13,669 | | 13,123 | | 11,538 | | | | | | | |
| Hartford Funds AUM | $ | 145,198 | | $ | 139,436 | | $ | 123,710 | | $ | 117,844 | | $ | 102,153 | | | | | | | |
[1]Includes balanced, allocation, and alternative investment products.
[2]Represents AUM of the life and annuity business sold in May 2018 that is still managed by the Company's Hartford Funds segment.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Fee income | $ | 12 | | $ | 11 | | $ | 13 | | $ | 12 | | $ | 13 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Other revenue (loss) [1] | (8) | | (1) | | (21) | | 73 | | 2 | | | | | | | |
| Net investment income | 3 | | 6 | | 3 | | 4 | | 9 | | | | | | | |
| Net realized capital gains (losses) | 6 | | 24 | | 13 | | 24 | | (39) | | | | | | | |
| Total revenues | 13 | | 40 | | 8 | | 113 | | (15) | | | | | | | |
| Benefits, losses and loss adjustment expenses [2] | 1 | | 2 | | 1 | | 6 | | 6 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Insurance operating costs and other expenses | 13 | | 17 | | 9 | | 29 | | 21 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Interest expense | 57 | | 57 | | 58 | | 57 | | 64 | | | | | | | |
| | | | | | | | | | | |
| Restructuring and other costs | 11 | | 17 | | 87 | | — | | — | | | | | | | |
| Total expenses | 82 | | 93 | | 155 | | 92 | | 91 | | | | | | | |
| Income (loss) before income taxes | (69) | | (53) | | (147) | | 21 | | (106) | | | | | | | |
| Income tax expense (benefit) | (11) | | (12) | | (39) | | 3 | | (15) | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Net income (loss) | (58) | | (41) | | (108) | | 18 | | (91) | | | | | | | |
| Preferred stock dividends | 5 | | 5 | | 6 | | 5 | | 5 | | | | | | | |
| Net income (loss) available to common stockholders | (63) | | (46) | | (114) | | 13 | | (96) | | | | | | | |
| Adjustments to reconcile net income available to common stockholders to core earnings: | | | | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (6) | | (24) | | (12) | | (26) | | 40 | | | | | | | |
| Restructuring and other costs, before tax | 11 | | 17 | | 87 | | — | | — | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Income tax expense (benefit) [3] | (2) | | 2 | | (18) | | 7 | | (8) | | | | | | | |
| | | | | | | | | | | |
| Core losses | $ | (60) | | $ | (51) | | $ | (57) | | $ | (6) | | $ | (64) | | | | | | | |
[1]The three months ended March 31, 2021 and 2020 include $(8) and $(4), respectively, of loss before tax from the Company's retained 9.7% equity interest in the limited partnership that acquired the life and annuity business sold in May 2018.
[2]Includes benefits, losses and loss adjustment expenses for run-off structured settlement and terminal funding agreement liabilities.
[3]Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Net Investment Income (Loss) | | | | | | | | | | | |
| Fixed maturities [1] | | | | | | | | | | | |
| Taxable | $ | 279 | | $ | 280 | | $ | 287 | | $ | 280 | | $ | 298 | | | | | | | |
| Tax-exempt | 70 | | 69 | | 72 | | 77 | | 79 | | | | | | | |
| Total fixed maturities | 349 | | 349 | | 359 | | 357 | | 377 | | | | | | | |
| Equity securities | 10 | | 12 | | 9 | | 6 | | 12 | | | | | | | |
| Mortgage loans | 43 | | 44 | | 44 | | 42 | | 42 | | | | | | | |
| Limited partnerships and other alternative investments [2] | 112 | | 152 | | 83 | | (71) | | 58 | | | | | | | |
| Other [3] | 14 | | 19 | | 14 | | 21 | | (12) | | | | | | | |
| Subtotal | 528 | | 576 | | 509 | | 355 | | 477 | | | | | | | |
| Investment expense | (19) | | (20) | | (17) | | (16) | | (18) | | | | | | | |
| Total net investment income | $ | 509 | | $ | 556 | | $ | 492 | | $ | 339 | | $ | 459 | | | | | | | |
| Annualized investment yield, before tax [4] | 3.8 | % | 4.3 | % | 3.8 | % | 2.7 | % | 3.7 | % | | | | | | |
| Annualized limited partnerships and other alternative investment yield, before tax [4] | 21.1 | % | 32.3 | % | 18.3 | % | (15.3 | %) | 13.2 | % | | | | | | |
| Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4]* | 3.1 | % | 3.2 | % | 3.3 | % | 3.4 | % | 3.3 | % | | | | | | |
| Annualized investment yield, net of tax [4] | 3.1 | % | 3.5 | % | 3.2 | % | 2.2 | % | 3.0 | % | | | | | | |
| Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4]* | 2.6 | % | 2.6 | % | 2.7 | % | 2.8 | % | 2.7 | % | | | | | | |
| Average reinvestment rate [5] | 2.3 | % | 2.5 | % | 2.1 | % | 2.7 | % | 2.9 | % | | | | | | |
| Average sales/maturities yield [6] | 2.9 | % | 3.2 | % | 3.5 | % | 3.6 | % | 3.3 | % | | | | | | |
| Portfolio duration (in years) [7] | 4.8 | | 4.9 | | 5.0 | | 5.0 | | 4.8 | | | | | | | |
[1]Includes income on short-term investments.
[2]Other alternative investments include an insurer-owned life insurance policy, which is primarily invested in fixed income, private equity, and hedge funds.
[3]Includes changes in fair value of certain equity fund investments and income from derivatives that qualify for hedge accounting and are used to hedge fixed maturities.
[4]Represents annualized net investment income divided by the monthly average invested assets at amortized cost as applicable, excluding repurchase agreement and securities lending collateral, if any, and derivatives book value.
[5]Represents the annualized yield on fixed maturities and mortgage loans that were purchased during the respective period. Excludes U.S. Treasury securities and repurchase agreement and securities lending collateral, if any.
[6]Represents the annualized yield on fixed maturities and mortgage loans that were sold, matured, or redeemed, including calls and pay-downs, during the respective period. Excludes U.S. Treasury securities, cash equivalent securities, and repurchase agreement and securities lending collateral, if any.
[7]Excludes certain short-term investments.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
PROPERTY & CASUALTY
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Net Investment Income (Loss) | | | | | | | | | | | |
| Fixed maturities [1] | | | | | | | | | | | |
| Taxable | $ | 207 | | $ | 207 | | $ | 210 | | $ | 206 | | $ | 216 | | | | | | | |
| Tax-exempt | 52 | | 52 | | 53 | | 57 | | 58 | | | | | | | |
| Total fixed maturities | 259 | | 259 | | 263 | | 263 | | 274 | | | | | | | |
| Equity securities | 7 | | 7 | | 6 | | 3 | | 10 | | | | | | | |
| Mortgage loans | 30 | | 30 | | 31 | | 30 | | 29 | | | | | | | |
| Limited partnerships and other alternative investments [2] | 84 | | 128 | | 72 | | (62) | | 48 | | | | | | | |
| Other [3] | 12 | | 15 | | 12 | | 19 | | (14) | | | | | | | |
| Subtotal | 392 | | 439 | | 384 | | 253 | | 347 | | | | | | | |
| Investment expense | (14) | | (14) | | (13) | | (11) | | (13) | | | | | | | |
| Total net investment income | $ | 378 | | $ | 425 | | $ | 371 | | $ | 242 | | $ | 334 | | | | | | | |
| Annualized investment yield, before tax [4] | 3.9 | % | 4.4 | % | 3.9 | % | 2.6 | % | 3.6 | % | | | | | | |
| Annualized limited partnerships and other alternative investment yield, before tax [4] | 19.2 | % | 32.9 | % | 19.2 | % | (15.9 | %) | 13.1 | % | | | | | | |
| Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] | 3.2 | % | 3.2 | % | 3.3 | % | 3.5 | % | 3.2 | % | | | | | | |
| Annualized investment yield, net of tax [4] | 3.2 | % | 3.6 | % | 3.3 | % | 2.2 | % | 3.0 | % | | | | | | |
| Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4] | 2.6 | % | 2.6 | % | 2.7 | % | 2.9 | % | 2.7 | % | | | | | | |
| Average reinvestment rate [5] | 2.3 | % | 2.6 | % | 2.0 | % | 2.7 | % | 2.9 | % | | | | | | |
| Average sales/maturities yield [6] | 2.8 | % | 3.0 | % | 3.4 | % | 3.5 | % | 3.2 | % | | | | | | |
| Portfolio duration (in years) [7] | 4.7 | | 4.9 | | 5.0 | | 4.9 | | 4.7 | | | | | | | |
Footnotes [1] through [7] are explained on page 26.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
GROUP BENEFITS
| | | | | | | | | | | | | | | | | | | | | | | |
| | THREE MONTHS ENDED | | |
| | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Net Investment Income (Loss) | | | | | | | | | | | |
| Fixed maturities [1] | | | | | | | | | | | |
| Taxable | $ | 71 | | $ | 72 | | $ | 76 | | $ | 73 | | $ | 76 | | | | | | | |
| Tax-exempt | 16 | | 16 | | 17 | | 18 | | 19 | | | | | | | |
| Total fixed maturities | 87 | | 88 | | 93 | | 91 | | 95 | | | | | | | |
| Equity securities | 2 | | 1 | | 2 | | 1 | | 1 | | | | | | | |
| Mortgage loans | 13 | | 14 | | 13 | | 12 | | 13 | | | | | | | |
| Limited partnerships and other alternative investments [2] | 28 | | 24 | | 11 | | (9) | | 10 | | | | | | | |
| Other [3] | 2 | | 3 | | 2 | | 2 | | 1 | | | | | | | |
| Subtotal | 132 | | 130 | | 121 | | 97 | | 120 | | | | | | | |
| Investment expense | (5) | | (6) | | (4) | | (5) | | (5) | | | | | | | |
| Total net investment income | $ | 127 | | $ | 124 | | $ | 117 | | $ | 92 | | $ | 115 | | | | | | | |
| Annualized investment yield, before tax [4] | 4.4 | % | 4.3 | % | 4.1 | % | 3.2 | % | 4.0 | % | | | | | | |
| Annualized limited partnerships and other alternative investment yield, before tax [4] | 29.8 | % | 29.4 | % | 13.8 | % | (12.4 | %) | 14.0 | % | | | | | | |
| Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] | 3.5 | % | 3.5 | % | 3.8 | % | 3.6 | % | 3.7 | % | | | | | | |
| Annualized investment yield, net of tax [4] | 3.5 | % | 3.5 | % | 3.3 | % | 2.6 | % | 3.3 | % | | | | | | |
| Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4] | 2.9 | % | 2.9 | % | 3.1 | % | 3.0 | % | 3.0 | % | | | | | | |
| Average reinvestment rate [5] | 2.8 | % | 2.7 | % | 2.4 | % | 3.3 | % | 3.2 | % | | | | | | |
| Average sales/maturities yield [6] | 3.3 | % | 4.0 | % | 3.8 | % | 3.9 | % | 4.0 | % | | | | | | |
| Portfolio duration (in years) [7] | 5.8 | | 6.0 | | 6.2 | | 6.1 | | 5.9 | | | | | | | |
Footnotes [1] through [7] are explained on page 26.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET INVESTMENT INCOME
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | | | |
| Net Investment Income by Segment | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | | | | |
| Net Investment Income | | | | | | | | | | | | | | |
| Commercial Lines | $ | 327 | | $ | 363 | | $ | 316 | | $ | 204 | | $ | 277 | | | | | | | | | | |
| Personal Lines | 35 | | 47 | | 41 | | 28 | | 41 | | | | | | | | | | |
| P&C Other Operations | 16 | | 15 | | 14 | | 10 | | 16 | | | | | | | | | | |
| Total Property & Casualty | 378 | | 425 | | 371 | | 242 | | 334 | | | | | | | | | | |
| Group Benefits | 127 | | 124 | | 117 | | 92 | | 115 | | | | | | | | | | |
| Hartford Funds | 1 | | 1 | | 1 | | 1 | | 1 | | | | | | | | | | |
| Corporate | 3 | | 6 | | 3 | | 4 | | 9 | | | | | | | | | | |
| Total net investment income by segment | $ | 509 | | $ | 556 | | $ | 492 | | $ | 339 | | $ | 459 | | | | | | | | | | |
| | | |
| | |
| THREE MONTHS ENDED | | | | | | |
| Net Investment Income (Loss) From Limited Partnerships and Other Alternative Investments | Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | | | | |
| Total Property & Casualty | $ | 84 | | $ | 128 | | $ | 72 | | $ | (62) | | $ | 48 | | | | | | | | | | |
| Group Benefits | 28 | | 24 | | 11 | | (9) | | 10 | | | | | | | | | | |
| Total net investment income (loss) from limited partnerships and other alternative investments [1] | $ | 112 | | $ | 152 | | $ | 83 | | $ | (71) | | $ | 58 | | | | | | | | | | |
[1]Amounts are included above in total net investment income by segment.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Net Realized Capital Gains (Losses) | | | | | | | | | | | |
| Gross gains on sales | $ | 31 | | $ | 54 | | $ | 27 | | $ | 96 | | $ | 78 | | | | | | | |
| Gross losses on sales | (31) | | (8) | | (12) | | (22) | | (8) | | | | | | | |
| Equity securities [1] | 43 | | 55 | | 42 | | 75 | | (386) | | | | | | | |
| Net credit losses on fixed maturities, AFS | 4 | | 5 | | (1) | | (20) | | (12) | | | | | | | |
| Change in ACL on mortgage loans | 4 | | — | | 5 | | (22) | | (2) | | | | | | | |
| Intent-to-sell impairments | — | | — | | — | | — | | (5) | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Other net gains (losses) [2] | 29 | | (4) | | (55) | | 2 | | 104 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Total net realized capital gains (losses) | 80 | | 102 | | 6 | | 109 | | (231) | | | | | | | |
| Net realized capital gains, included in core earnings, before tax | (3) | | (1) | | — | | (2) | | (1) | | | | | | | |
| Total net realized capital gains (losses) excluded from core earnings, before tax | 77 | | 101 | | 6 | | 107 | | (232) | | | | | | | |
| Income tax benefit (expense) related to net realized capital gains (losses) excluded from core earnings | (15) | | (21) | | 5 | | (21) | | 48 | | | | | | | |
| Total net realized capital gains (losses) excluded from core earnings, after tax | $ | 62 | | $ | 80 | | $ | 11 | | $ | 86 | | $ | (184) | | | | | | | |
[1]Includes all changes in fair value and trading gains and losses for equity securities.
[2]Includes changes in value of non-qualifying derivatives, including credit derivatives, interest rate derivatives used to manage duration, and equity derivatives. Also includes periodic net coupon settlements on credit derivatives, which are included in core earnings, as well as transactional foreign currency revaluation.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 |
| | Amount [1] | Percent | Amount [1] | Percent | Amount | Percent | Amount | Percent | Amount | Percent |
| Total investments | $ | 55,727 | | 100.0 | % | $ | 56,532 | | 100.0 | % | $ | 54,778 | | 100.0 | % | $ | 53,028 | | 100.0 | % | $ | 50,359 | | 100.0 | % |
| Asset-backed securities | $ | 1,435 | | 3.2 | % | $ | 1,564 | | 3.5 | % | $ | 1,490 | | 3.4 | % | $ | 1,416 | | 3.3 | % | $ | 1,348 | | 3.4 | % |
| Collateralized loan obligations | 3,049 | | 7.0 | % | 2,780 | | 6.2 | % | 2,449 | | 5.6 | % | 2,187 | | 5.2 | % | 1,989 | | 5.0 | % |
| Commercial mortgage-backed securities | 4,167 | | 9.5 | % | 4,484 | | 9.9 | % | 4,444 | | 10.1 | % | 4,211 | | 10.0 | % | 4,302 | | 10.6 | % |
| Corporate | 19,495 | | 44.8 | % | 20,273 | | 45.0 | % | 19,416 | | 44.1 | % | 18,563 | | 44.0 | % | 16,798 | | 41.8 | % |
| Foreign government/government agencies | 868 | | 2.0 | % | 919 | | 2.0 | % | 984 | | 2.2 | % | 972 | | 2.3 | % | 1,063 | | 2.6 | % |
| Municipal [2] | 9,214 | | 21.1 | % | 9,503 | | 21.1 | % | 9,310 | | 21.1 | % | 9,394 | | 22.2 | % | 9,497 | | 23.6 | % |
| Residential mortgage-backed securities | 4,025 | | 9.3 | % | 4,107 | | 9.2 | % | 4,548 | | 10.3 | % | 3,895 | | 9.3 | % | 4,086 | | 10.2 | % |
| U.S. Treasuries | 1,354 | | 3.1 | % | 1,405 | | 3.1 | % | 1,403 | | 3.2 | % | 1,562 | | 3.7 | % | 1,122 | | 2.8 | % |
| Total fixed maturities, AFS | $ | 43,607 | | 100.0 | % | $ | 45,035 | | 100.0 | % | $ | 44,044 | | 100.0 | % | $ | 42,200 | | 100.0 | % | $ | 40,205 | | 100.0 | % |
| U.S. government/government agencies | $ | 4,837 | | 11.1 | % | $ | 5,214 | | 11.6 | % | $ | 5,650 | | 12.8 | % | $ | 5,204 | | 12.3 | % | $ | 5,126 | | 12.8 | % |
| AAA | 6,759 | | 15.5 | % | 6,848 | | 15.2 | % | 6,789 | | 15.4 | % | 6,471 | | 15.3 | % | 6,395 | | 15.9 | % |
| AA | 8,327 | | 19.1 | % | 8,453 | | 18.8 | % | 8,152 | | 18.5 | % | 8,013 | | 19.0 | % | 7,755 | | 19.3 | % |
| A | 11,109 | | 25.5 | % | 11,595 | | 25.7 | % | 11,414 | | 25.9 | % | 11,289 | | 26.8 | % | 10,541 | | 26.2 | % |
| BBB | 10,359 | | 23.7 | % | 10,856 | | 24.1 | % | 10,291 | | 23.4 | % | 9,590 | | 22.7 | % | 8,962 | | 22.3 | % |
| BB | 1,604 | | 3.7 | % | 1,507 | | 3.3 | % | 1,222 | | 2.8 | % | 1,112 | | 2.6 | % | 974 | | 2.4 | % |
| B | 557 | | 1.3 | % | 523 | | 1.2 | % | 480 | | 1.1 | % | 481 | | 1.2 | % | 408 | | 1.0 | % |
| CCC | 47 | | 0.1 | % | 31 | | 0.1 | % | 37 | | 0.1 | % | 31 | | 0.1 | % | 35 | | 0.1 | % |
| CC & below | 8 | | — | % | 8 | | — | % | 9 | | — | % | 9 | | — | % | 9 | | — | % |
| Total fixed maturities, AFS | $ | 43,607 | | 100.0 | % | $ | 45,035 | | 100.0 | % | $ | 44,044 | | 100.0 | % | $ | 42,200 | | 100.0 | % | $ | 40,205 | | 100.0 | % |
[1]Amount represents the value at which the assets are presented in the Consolidating Balance Sheets (page 4).
[2]Primarily comprised of $6.8 billion in Property & Casualty, $2.2 billion in Group Benefits, and $0.2 billion in Corporate as of March 31, 2021.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
MARCH 31, 2021
| | | | | | | | | | | |
| |
| Cost or
Amortized Cost | Fair Value | Percent of Total
Invested Assets |
| Top Ten Corporate Fixed Maturity, AFS and Equity Exposures by Sector | | | |
| Financial services | $ | 5,150 | | $ | 5,372 | | 9.6 | % |
| Technology and communications | 2,976 | | 3,187 | | 5.7 | % |
| Consumer non-cyclical | 2,877 | | 3,049 | | 5.5 | % |
| Utilities | 1,971 | | 2,114 | | 3.8 | % |
| Capital goods | 1,587 | | 1,672 | | 3.0 | % |
| Energy [1] | 1,523 | | 1,626 | | 2.9 | % |
| Consumer cyclical | 1,530 | | 1,589 | | 2.9 | % |
| Basic industry | 795 | | 838 | | 1.5 | % |
| Transportation | 757 | | 803 | | 1.4 | % |
| Other | 851 | | 877 | | 1.6 | % |
| Total | $ | 20,017 | | $ | 21,127 | | 37.9 | % |
| Top Ten Exposures by Issuer [2] | | | |
| Apple Inc. | $ | 217 | | $ | 238 | | 0.4 | % |
| New York State Dormitory Authority | 200 | | 208 | | 0.4 | % |
| IBM Corporation | 187 | | 204 | | 0.4 | % |
| Government of Canada | 196 | | 199 | | 0.4 | % |
| Bank of America Corporation | 186 | | 199 | | 0.4 | % |
| Citigroup Inc. | 188 | | 195 | | 0.4 | % |
| New York City Municipal Water Finance Authority | 184 | | 194 | | 0.3 | % |
| Comcast Corporation | 170 | | 193 | | 0.3 | % |
| Commonwealth of Massachusetts | 181 | | 192 | | 0.3 | % |
| Morgan Stanley | 170 | | 184 | | 0.3 | % |
| Total | $ | 1,879 | | $ | 2,006 | | 3.6 | % |
[1]Excludes investments in foreign government, government agency securities or other fixed maturities that are correlated to energy exposure but are not direct obligations of, or exposures to, energy-related companies.
[2]Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, exchange-traded mutual funds, and exposures resulting from derivative transactions.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
APPENDIX
BASIS OF PRESENTATION AND DEFINITIONS
All amounts are in millions, except for per share and ratio information, unless otherwise stated. Amounts presented throughout this document have been rounded for presentation purposes.
The Hartford Financial Services Group, Inc. (the "Company", "we", or "our") currently conducts business principally in five reporting segments: Commercial Lines, Personal Lines, Property & Casualty Other Operations ("P&C Other Operations"), Group Benefits and Hartford Funds, as well as a Corporate category.
Property & Casualty ("P&C") businesses consist of three reporting segments: Commercial Lines, Personal Lines and P&C Other Operations. Commercial Lines provides workers’ compensation, property, automobile, general liability, umbrella, professional liability, bond, marine, livestock and accident and health reinsurance to businesses in the United States ("U.S.") and internationally. Commercial Lines generally consists of products written for small businesses, middle market companies as well as national and multi-national accounts, largely distributed through retail agents and brokers, wholesale agents and global and specialty reinsurance brokers. Small commercial and middle market lines within middle & large commercial are generally referred to as standard commercial lines. Global specialty provides a variety of customized insurance products, including reinsurance. Personal Lines provides automobile, homeowners and personal umbrella coverages to individuals across the U.S., including a special program designed exclusively for members of AARP. P&C Other Operations includes certain property and casualty operations, managed by the Company, that have discontinued writing new business and represent approximately 90% of the Company's asbestos and environmental exposures.
Group Benefits provides group life, accident and disability coverage, group retiree health and voluntary benefits to individual members of employer groups and associations. Group Benefits offers disability underwriting, administration, claims processing and reinsurance to other insurers and self-funded employer plans.
Hartford Funds provides investment management, administration, distribution and related services to investors through investment products in domestic markets. Mutual fund and exchange-traded products are sold primarily through retail, bank trust and registered investment advisor channels.
The Company includes in the Corporate category reserves for run-off structured settlement and terminal funding agreement liabilities, restructuring costs, capital raising activities (including equity financing, debt financing and related interest expense), transaction expenses incurred in connection with an acquisition, purchase accounting adjustments related to goodwill, and other expenses not allocated to the reporting segments. Corporate also includes investment management fees and expenses related to managing third party business, including management of the invested assets of Talcott Resolution Life, Inc. and its subsidiaries ("Talcott Resolution"). Talcott Resolution is the holding company of the life and annuity business that we sold in May 2018. In addition, Corporate includes a 9.7% ownership interest in the legal entity that acquired the life and annuity business sold.
Certain operating and statistical measures for P&C Commercial Lines and for Personal Lines have been incorporated herein to provide supplemental data that indicate current trends in the Company's business. These measures include policies in-force, net new business premium, gross new business premium, policy count retention and renewal written price increases. Policy count retention represents the ratio of the number of policies renewed during the period divided by the number of policies from the previous policy term period. Renewal written price increases for Commercial Lines represent the combined effect of rate changes, amount of insurance and individual risk pricing decisions per unit of exposure since the prior year on policies that renewed. For Personal Lines, renewal written price increases represent the total change in premium per policy since the prior year on those policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Lines, other changes in exposure include, but are not limited to, the effect of changes in number of drivers, vehicles and incidents, as well as changes in customer policy elections, such as deductibles and limits. Net new business premium represents the amount of premiums charged, after ceded reinsurance, for policies issued to customers who were not insured with the Company in the previous policy term. Net new business premium plus renewal written premium equals total written premium. Gross new business premium represents the amount of premiums charged, before ceded reinsurance, for policies issued to customers who were not insured with the Company in the previous policy term. Gross new business premium plus gross renewal written premium less ceded reinsurance equals total written premium. For global specialty, gross new business premium is used by management, as it is thought to be more indicative of new business growth trends, in part because global specialty includes the Global Re assumed reinsurance book of business.
The Company, along with others in the property and casualty insurance industry, uses underwriting ratios as measures of performance. The loss and loss adjustment expense ratio is the ratio of losses and loss adjustment expenses to earned premiums. The expense ratio is the ratio of underwriting expenses less fee income to earned premiums. Underwriting expenses included in the expense ratio consists of amortization of deferred policy acquisition costs and insurance operating costs and expenses, including certain centralized services and bad debt expense, but excluding integration and transaction costs associated with an acquired business. The policyholder dividend ratio is the ratio of policyholder dividends to earned premiums. The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. These ratios are relative measurements that describe the related cost of losses, expenses and policyholder dividends for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses. The current accident year catastrophe ratio (a component of the loss ratio) represents the ratio of catastrophe losses and loss adjustment expenses incurred in the current accident year to earned premiums. The prior accident year loss and loss adjustment expense ratio (a component of the loss ratio) represents the increase (decrease) in the estimated cost of settling catastrophe and non-catastrophe claims incurred in prior accident years as recorded in the current calendar year divided by earned premiums.
A catastrophe is a severe loss, resulting from natural or man-made events, including risks such as fire, earthquake, windstorm, explosion, terrorist attack, civil unrest and similar events. Each catastrophe has unique characteristics and the events are unpredictable as to timing or loss amount. Catastrophe losses are not included in either earnings or in losses and loss adjustment expense reserves prior to occurrence of the catastrophe event. The Company believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings. For U.S. events, a catastrophe is an event that causes $25 or more in industry insured property losses and affects a significant number of property and casualty policyholders and insurers, as defined by the Property Claim Service office of Verisk. For international events, the Company's approach is similar, informed, in part, by how Lloyd's of London defines catastrophes. The Company does not treat incurred benefits and losses arising from the COVID-19 pandemic as catastrophe losses.
The Company, along with others in the insurance industry, uses loss and expense ratios as measures of the Group Benefits segment's performance. The loss ratio is the ratio of benefits, losses and loss adjustment expenses, excluding those related to buyout premiums, to premiums and other considerations, excluding buyout premiums. The expense ratio is the ratio of insurance operating costs and other expenses (excluding integration and transaction costs associated with an acquired business) to premiums and other considerations, excluding buyout premiums. Buyout premiums represent takeover of open claim liabilities and other non-recurring premium amounts.
The Hartford Funds segment provides supplemental data on sales, redemptions, net flows and account value that indicate current trends in that segment.
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES
The Company uses non-GAAP and other financial measures in this Investor Financial Supplement to assist investors in analyzing the Company's operating performance. Because the Company's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing the Company's non-GAAP and other financial measures to those of other companies. Non-GAAP measures are indicated with an asterisk the first time they appear in this document.
Core earnings- The Hartford uses the non-GAAP measure core earnings as an important measure of the Company’s operating performance. The Hartford believes that core earnings provides investors with a valuable measure of the performance of the Company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain items. Therefore, the following items are excluded from core earnings:
•Certain realized 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.
•Restructuring and other costs - Costs incurred as part of a restructuring plan are not a recurring operating expense of the business.
•Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before maturity, these losses are not a recurring operating expense of the business.
•Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a business or to reinsure loss reserves, are not a recurring operating expense of the business.
•Integration and 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.
•Change in loss reserves upon acquisition of a business - These changes in loss reserves are excluded from core earnings because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition.
•Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance agreements economically transfer risk to the reinsurers and including the full benefit from retroactive reinsurance in core earnings provides greater insight into the economics of the business.
•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.
In addition to the above components of net income available to common stockholders that are excluded from core earnings, preferred stock dividends declared, which are excluded from net income available to common stockholders, are included in the determination of core earnings. Preferred stock dividends are a cost of financing more akin to interest expense on debt and are expected to be a recurring expense as long as the preferred stock is outstanding.
Net income (loss) and net income (loss) available to common stockholders are the most directly comparable U.S. GAAP measures to core earnings. Core earnings should not be considered as a substitute for net income (loss) or net income (loss) available to common stockholders and does not reflect the overall profitability of the Company’s business. Therefore, The Hartford believes that it is useful for investors to evaluate net income (loss), net income (loss) available to common stockholders, and core earnings when reviewing the Company’s performance. A reconciliation of net income (loss) available to common stockholders to core earnings is set forth on page 2.
Core earnings per share-This is a non-GAAP per share measure calculated using the non-GAAP financial measure core earnings rather than the GAAP measure net income. The Company believes that core earnings per share provides investors with a valuable measure of the Company's operating performance for the same reasons applicable to its underlying measure, core earnings. Net income (loss) available to common stockholders per share (defined as "net income (loss) per share") is the most directly comparable U.S. GAAP measures. Core earnings per share should not be considered as a substitute for net income (loss) per share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate net income (loss) per share and core earnings per share when reviewing our performance. A reconciliation of net income (loss) available to common stockholders per share to core earnings per share is set forth below.
BASIC EARNINGS PER SHARE
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
Net Income available to common stockholders per share | $ | 0.68 | | $ | 1.48 | | $ | 1.26 | | $ | 1.29 | | $ | 0.75 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Adjustments made to reconcile net income available to common stockholders per share to core earnings per share: | | | | | | | | | | | |
Net realized capital losses (gains), excluded from core earnings, before tax | (0.21) | | (0.28) | | (0.02) | | (0.30) | | 0.65 | | | | | | | |
| Restructuring and other costs, before tax | 0.03 | | 0.05 | | 0.24 | | — | | — | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Integration and transaction costs associated with an acquired business, before tax | 0.03 | | 0.03 | | 0.04 | | 0.04 | | 0.04 | | | | | | | |
| | | | | | | | | | | |
Change in deferred gain on retroactive reinsurance, before tax | 0.02 | | 0.60 | | 0.04 | | 0.15 | | 0.08 | | | | | | | |
Income tax expense (benefit) on items excluded from core earnings | 0.02 | | (0.11) | | (0.09) | | 0.04 | | (0.17) | | | | | | | |
| | | | | | | | | | | |
| Core earnings per share | $ | 0.57 | | $ | 1.77 | | $ | 1.47 | | $ | 1.22 | | $ | 1.35 | | | | | | | |
Core earnings per diluted share-This non-GAAP per share measure is calculated using the non-GAAP financial measure core earnings rather than the GAAP measure net income. The Company believes that core earnings per diluted share provides investors with a valuable measure of the Company's operating performance for the same reasons applicable to its underlying measure, core earnings. Net income (loss) available to common stockholders per diluted common share is the most directly comparable GAAP measures. Core earnings per diluted share should not be considered as a substitute for net income (loss) available to common stockholders per diluted common share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate net income (loss) available to common stockholders per diluted common share and core earnings per diluted share when reviewing the Company's performance. A reconciliation of net income available to common stockholders per diluted share to core earnings per diluted share is set forth below.
DILUTED EARNINGS PER SHARE
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Net Income available to common stockholders per diluted share | $ | 0.67 | | $ | 1.47 | | $ | 1.26 | | $ | 1.29 | | $ | 0.74 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Adjustments made to reconcile net income available to common stockholders per diluted share to core earnings per diluted share: | | | | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (0.21) | | (0.28) | | (0.02) | | (0.30) | | 0.64 | | | | | | | |
| Restructuring and other costs, before tax | 0.03 | | 0.05 | | 0.24 | | — | | — | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Integration and transaction costs associated with an acquired business, before tax | 0.02 | | 0.03 | | 0.04 | | 0.04 | | 0.04 | | | | | | | |
| | | | | | | | | | | |
Change in deferred gain on retroactive reinsurance, before tax | 0.02 | | 0.59 | | 0.04 | | 0.15 | | 0.08 | | | | | | | |
Income tax expense (benefit) on items excluded from core earnings | 0.03 | | (0.10) | | (0.10) | | 0.04 | | (0.16) | | | | | | | |
Core earnings per diluted share | $ | 0.56 | | $ | 1.76 | | $ | 1.46 | | $ | 1.22 | | $ | 1.34 | | | | | | | |
Book value per diluted share (excluding AOCI)-This is a non-GAAP per share measure that is calculated by dividing (a) common stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding and dilutive potential common shares. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes that excluding AOCI from the numerator is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per diluted share is the most directly comparable U.S. GAAP measure. Reconciliations of book value per common share and book value per diluted share to book value per common share, excluding AOCI and book value per diluted share, excluding AOCI, are set forth on page 1.
Core Earnings Return on Equity- The Company provides different measures of the return on stockholders' equity (ROE). Core earnings ROE is calculated based on non-GAAP financial measures. Core earnings ROE is calculated by dividing (a) the non-GAAP measure core earnings for the prior four fiscal quarters by (b) the non-GAAP measure average common stockholders' equity, excluding AOCI. Net income ROE is the most directly comparable U.S. GAAP measure. The Company excludes AOCI in the calculation of core earnings ROE to provide investors with a measure of how effectively the Company is investing the portion of the Company's net worth that is primarily attributable to the Company's business operations. The Company provides to investors return on equity measures based on its non-GAAP core earnings financial measure for the reasons set forth in the core earnings definition. A reconciliation of Net income (loss) ROE to Core earnings ROE is set forth below:
| | | | | | | | | | | | | | | | | | | | |
| LAST TWELVE MONTHS ENDED |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | |
| Net income ROE | 10.5 | % | 10.0 | % | 10.4 | % | 11.3 | % | 11.8 | % | | | |
| | | | | | | | |
| Adjustments to reconcile net income (loss) ROE to core earnings ROE: | | | | | | | | |
| Net realized capital losses (gains), excluded from core earnings, before tax | (1.8 | %) | 0.1 | % | 0.3 | % | (0.2 | %) | — | % | | | |
| | | | | | | | |
| Restructuring and other costs, before tax | 0.7 | % | 0.6 | % | 0.5 | % | — | % | — | % | | | |
Loss on extinguishment of debt, before tax | — | % | — | % | — | % | 0.6 | % | 0.6 | % | | | |
Loss on reinsurance transaction, before tax | — | % | — | % | — | % | — | % | 0.6 | % | | | |
| | | | | | | | |
Integration and transaction costs associated with an acquired business, before tax | 0.3 | % | 0.3 | % | 0.4 | % | 0.5 | % | 0.6 | % | | | |
| Changes in loss reserves upon acquisition of a business, before tax | — | % | — | % | — | % | — | % | 0.7 | % | | | |
| Change in deferred gain on retroactive reinsurance, before tax | 1.8 | % | 1.8 | % | 0.7 | % | 0.6 | % | 0.3 | % | | | |
| Income tax expense (benefit) on items not included in core earnings | (0.3 | %) | (0.7 | %) | (0.4 | %) | (0.3 | %) | (0.6 | %) | | | |
| | | | | | | | |
| | | | | | | | |
| Impact of AOCI, excluded from denominator of core earnings ROE | (0.3 | %) | 0.6 | % | 0.4 | % | 0.2 | % | (0.7 | %) | | | |
| Core earnings ROE | 10.9 | % | 12.7 | % | 12.3 | % | 12.7 | % | 13.3 | % | | | |
Common stockholders' equity, excluding AOCI- This non-GAAP measure is calculated as total stockholders' equity less preferred stock and AOCI. Total stockholders' equity is the most directly comparable GAAP measure. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes that excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. A reconciliation of common stockholders' equity to its most directly comparable GAAP measure, total stockholders' equity, is set forth on page 5.
Total capitalization, excluding AOCI, net of tax- This non-GAAP measure is calculated as total debt plus total stockholders' equity, excluding the impacts of AOCI included in shareholders’ equity. Total capitalization, including AOCI, net of tax is the most directly comparable GAAP measure. Total debt to capitalization ratio excluding, AOCI is calculated by dividing total debt to total capitalization excluding, AOCI, net of tax. The Company provides this measure to enable investors to analyze the Company’s financial leverage. The Company believes that excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Reconciliations of capitalization metrics, are set forth on page 5.
Underwriting gain (loss)- The Hartford's management evaluates profitability of the Commercial and Personal Lines segments primarily on the basis of underwriting gain or loss. Underwriting gain (loss) is a before tax non-GAAP measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of The Hartford's pricing. Underwriting profitability over time is also greatly influenced by The Hartford's underwriting discipline, as management strives to manage exposure to loss through favorable risk selection and diversification, effective management of claims, use of reinsurance and its ability to manage its expenses. The Hartford believes that the measure underwriting gain (loss) provides investors with a valuable measure of profitability, before tax, derived from underwriting activities, which are managed separately from the Company's investing activities. Reconciliations of net income (loss) to underwriting gain (loss) for the Company's P&C businesses are set forth below.
Underlying underwriting gain (loss)-This non-GAAP measure of underwriting profitability represents underwriting gain (loss) before current accident year catastrophes, PYD and current accident year change in loss reserves upon acquisition of a business. The most directly comparable GAAP measure is net income (loss). The Company believes underlying underwriting gain (loss) is important to understand the Company’s periodic earnings because the volatile and unpredictable nature (i.e., the timing and amount) of catastrophes and prior accident year reserve development could obscure underwriting trends. The changes to loss reserves upon acquisition of a business are also excluded from underlying underwriting gain (loss) because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. Reconciliation of net income (loss) to underlying underwriting gain (loss) for the Company's P&C businesses are set forth below.
PROPERTY & CASUALTY
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Net income | $ | 251 | | $ | 468 | | $ | 404 | | $ | 310 | | $ | 224 | | | | | | | |
| Adjustments to reconcile net income to underlying underwriting gain: | | | | | | | | | | | |
| Net investment income | (378) | | (425) | | (371) | | (242) | | (334) | | | | | | | |
| Net realized capital losses (gains) | (53) | | (54) | | 21 | | (74) | | 173 | | | | | | | |
| Net servicing and other expense (income) | (2) | | 3 | | 4 | | 7 | | 3 | | | | | | | |
| | | | | | | | | | | |
| Income tax expense | 55 | | 99 | | 73 | | 88 | | 54 | | | | | | | |
| Underwriting gain | (127) | | 91 | | 131 | | 89 | | 120 | | | | | | | |
| Current accident year catastrophes | 214 | | 55 | | 229 | | 248 | | 74 | | | | | | | |
| Prior accident year development | 229 | | 184 | | (75) | | (268) | | 23 | | | | | | | |
| | | | | | | | | | | |
| Underlying underwriting gain | $ | 316 | | $ | 330 | | $ | 285 | | $ | 69 | | $ | 217 | | | | | | | |
COMMERCIAL LINES
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Net income | $ | 129 | | $ | 478 | | $ | 323 | | $ | (66) | | $ | 121 | | | | | | | |
| Adjustments to reconcile net income to underlying underwriting gain: | | | | | | | | | | | |
| Net servicing income | (2) | | (2) | | (1) | | — | | (1) | | | | | | | |
| Net investment income | (327) | | (363) | | (316) | | (204) | | (277) | | | | | | | |
| Net realized capital losses (gains) | (44) | | (45) | | 26 | | (64) | | 143 | | | | | | | |
| Other expense | 4 | | 10 | | 8 | | 11 | | 6 | | | | | | | |
| | | | | | | | | | | |
| Income tax expense (benefit) | 24 | | 105 | | 52 | | (9) | | 28 | | | | | | | |
| Underwriting gain (loss) | (216) | | 183 | | 92 | | (332) | | 20 | | | | | | | |
| Current accident year catastrophes | 175 | | 42 | | 107 | | 193 | | 55 | | | | | | | |
| Prior accident year development | 238 | | (17) | | (57) | | 77 | | 41 | | | | | | | |
| | | | | | | | | | | |
| Underlying underwriting gain (loss) | $ | 197 | | $ | 208 | | $ | 142 | | $ | (62) | | $ | 116 | | | | | | | |
PERSONAL LINES
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Net income | $ | 135 | | $ | 170 | | $ | 79 | | $ | 371 | | $ | 98 | | | | | | | |
| Adjustments to reconcile net income (loss) to underlying underwriting gain: | | | | | | | | | | | |
| Net servicing income | (4) | | (4) | | (5) | | (3) | | (2) | | | | | | | |
| Net investment income | (35) | | (47) | | (41) | | (28) | | (41) | | | | | | | |
| Net realized capital losses (gains) | (7) | | (7) | | (3) | | (8) | | 23 | | | | | | | |
| Other expense (income) | — | | — | | 2 | | (1) | | — | | | | | | | |
| Income tax expense | 35 | | 42 | | 20 | | 97 | | 25 | | | | | | | |
| Underwriting gain | 124 | | 154 | | 52 | | 428 | | 103 | | | | | | | |
| Current accident year catastrophes | 39 | | 13 | | 122 | | 55 | | 19 | | | | | | | |
| Prior accident year development | (42) | | (42) | | (29) | | (349) | | (18) | | | | | | | |
| Underlying underwriting gain | $ | 121 | | $ | 125 | | $ | 145 | | $ | 134 | | $ | 104 | | | | | | | |
P&C OTHER OPERATIONS
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Net income (loss) | $ | (13) | | $ | (180) | | $ | 2 | | $ | 5 | | $ | 5 | | | | | | | |
| Adjustments to reconcile net income to underlying underwriting gain (loss): | | | | | | | | | | | |
| Net investment income | (16) | | (15) | | (14) | | (10) | | (16) | | | | | | | |
| Net realized capital losses (gains) | (2) | | (2) | | (2) | | (2) | | 7 | | | | | | | |
| | | | | | | | | | | |
| Other expense (income) | — | | (1) | | — | | — | | — | | | | | | | |
| Income tax expense (benefit) | (4) | | (48) | | 1 | | — | | 1 | | | | | | | |
| Underwriting loss | (35) | | (246) | | (13) | | (7) | | (3) | | | | | | | |
| | | | | | | | | | | |
| Prior accident year development | 33 | | 243 | | 11 | | 4 | | — | | | | | | | |
| Underlying underwriting loss | $ | (2) | | $ | (3) | | $ | (2) | | $ | (3) | | $ | (3) | | | | | | | |
Underlying combined ratio-This non-GAAP financial measure of underwriting results represents the combined ratio before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable GAAP measure. The underlying combined ratio represents the combined ratio for the current accident year, excluding the impact of current accident year catastrophes and current accident year change in loss reserves upon acquisition of a business. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve development. The changes to loss reserves upon acquisition of a business are excluded from underlying combined ratio because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of the combined ratio to the underlying combined ratio for Property & Casualty, Commercial Lines, and Personal Lines is set forth on pages 10, 13 and 17, respectively.
Core earnings margin- The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues, excluding buyouts and realized gains (losses). Net income margin, calculated by dividing net income by revenues, is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and realized gains (losses) as well as other items excluded in the calculation of core earnings. Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance. A reconciliation of net income margin to core earnings margin is set forth below.
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| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Net income margin | 0.6 | % | 3.9 | % | 8.0 | % | 6.7 | % | 6.9 | % | | | | | | |
| Adjustments to reconcile net income margin to core earnings margin: | | | | | | | | | | | |
| Net realized capital losses (gains) excluded from core earnings, before tax | (1.1) | % | (1.1) | % | (0.6) | % | (0.1) | % | 0.6 | % | | | | | | |
| Integration and transaction costs associated with acquired business, before tax | 0.1 | % | 0.2 | % | 0.3 | % | 0.3 | % | 0.3 | % | | | | | | |
| Income tax expense (benefit) | 0.2 | % | 0.3 | % | 0.2 | % | (0.1) | % | (0.1) | % | | | | | | |
| Impact of excluding buyouts from denominator of core earnings margin | — | % | — | % | — | % | 0.1 | % | 0.1 | % | | | | | | |
| Core earnings margin | (0.2) | % | 3.3 | % | 7.9 | % | 6.9 | % | 7.8 | % | | | | | | |
Return on Assets ("ROA"), Core Earnings- The Company uses this non-GAAP financial measure to evaluate, and believes is an important measure of, the Hartford Funds segment’s operating performance. ROA, core earnings is calculated by dividing annualized core earnings by a daily average AUM. ROA is the most directly comparable U.S. GAAP measure. The Company believes that ROA, core earnings, provides investors with a valuable measure of the performance of the Hartford Funds segment because it reveals trends in our business that may be obscured by the effect of items excluded in the calculation of core earnings. ROA, core earnings, should not be considered as a substitute for ROA and does not reflect the overall profitability of our Hartford Funds business. Therefore, the Company believes it is important for investors to evaluate both ROA, and ROA, core earnings when reviewing the Hartford Funds segment performance. A reconciliation of ROA to ROA, core earnings is set forth below.
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Return on Assets ("ROA") | 13.1 | | 15.6 | | 14.4 | | 14.1 | | 12.0 | | | | | | | |
| Adjustments to reconcile ROA to ROA, core earnings: | | | | | | | | | | | |
| Effect of net realized capital losses (gains), excluded from core earnings, before tax | (0.5) | | (1.8) | | (1.6) | | (2.9) | | 3.7 | | | | | | | |
| Effect of income tax expense | — | | 0.3 | | 0.3 | | 0.7 | | (1.0) | | | | | | | |
| Return on Assets ("ROA"), core earnings | 12.6 | | 14.1 | | 13.1 | | 11.9 | | 14.7 | | | | | | | |
Net investment income, excluding limited partnerships and other alternative investments- This non-GAAP measure is the amount of net investment income, on a Consolidated, P&C or Group Benefits level earned from invested assets, excluding the net investment income related to limited partnerships and other alternative investments. The Company believes that net investment income, excluding limited partnerships and other alternative instruments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative instruments. Net investment income is the most directly comparable GAAP measure. A reconciliation of net investment income to net investment income, excluding limited partnerships and other alternative investments is set forth below.
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Total net investment income | $ | 509 | | $ | 556 | | $ | 492 | | $ | 339 | | $ | 459 | | | | | | | |
| Adjustment for loss (gain) from limited partnerships and other alternative investments | (112) | | (152) | | (83) | | 71 | | (58) | | | | | | | |
| Net investment income excluding limited partnerships and other alternative investments | $ | 397 | | $ | 404 | | $ | 409 | | $ | 410 | | $ | 401 | | | | | | | |
PROPERTY & CASUALTY
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Total net investment income | $ | 378 | | $ | 425 | | $ | 371 | | $ | 242 | | $ | 334 | | | | | | | |
| Adjustment for loss (gain) from limited partnerships and other alternative investments | (84) | | (128) | | (72) | | 62 | | (48) | | | | | | | |
| Net investment income excluding limited partnerships and other alternative investments | $ | 294 | | $ | 297 | | $ | 299 | | $ | 304 | | $ | 286 | | | | | | | |
GROUP BENEFITS
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Total net investment income | $ | 127 | | $ | 124 | | $ | 117 | | $ | 92 | | $ | 115 | | | | | | | |
| Adjustment for loss (gain) from limited partnerships and other alternative investments | (28) | | (24) | | (11) | | 9 | | (10) | | | | | | | |
| Net investment income excluding limited partnerships and other alternative investments | $ | 99 | | $ | 100 | | $ | 106 | | $ | 101 | | $ | 105 | | | | | | | |
Annualized investment yield, excluding limited partnerships and other alternative investments-This non-GAAP measure is calculated as (a) the annualized net investment income, on a Consolidated, P&C or Group Benefits level, excluding limited partnerships and other alternative investments, divided by (b) the monthly average invested assets at amortized cost, excluding repurchase agreement and securities lending collateral, derivatives book value, and limited partnerships and other alternative investments. The Company believes that annualized investment yield, excluding limited partnerships and other alternative investments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments. Annualized investment yield is the most directly comparable GAAP measure. A reconciliation of annualized investment yield to annualized investment yield, excluding limited partnerships and other alternative investments is set forth below.
CONSOLIDATED
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Annualized investment yield | 3.8 | % | 4.3 | % | 3.8 | % | 2.7 | % | 3.7 | % | | | | | | |
| Adjustment for loss (gain) from limited partnerships and other alternative investments | (0.7) | % | (1.1) | % | (0.5) | % | 0.7 | % | (0.4) | % | | | | | | |
| Annualized investment yield excluding limited partnerships and other alternative investments | 3.1 | % | 3.2 | % | 3.3 | % | 3.4 | % | 3.3 | % | | | | | | |
PROPERTY & CASUALTY
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Annualized investment yield | 3.9 | % | 4.4 | % | 3.9 | % | 2.6 | % | 3.6 | % | | | | | | |
| Adjustment for loss (gain) from limited partnerships and other alternative investments | (0.7) | % | (1.2) | % | (0.6) | % | 0.9 | % | (0.4) | % | | | | | | |
| Annualized investment yield excluding limited partnerships and other alternative investments | 3.2 | % | 3.2 | % | 3.3 | % | 3.5 | % | 3.2 | % | | | | | | |
GROUP BENEFITS
| | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | |
| Mar 31 2021 | Dec 31 2020 | Sept 30 2020 | Jun 30 2020 | Mar 31 2020 | | | | | | |
| Annualized investment yield | 4.4 | % | 4.3 | % | 4.1 | % | 3.2 | % | 4.0 | % | | | | | | |
| Adjustment for loss (gain) from limited partnerships and other alternative investments | (0.9) | % | (0.8) | % | (0.3) | % | 0.4 | % | (0.3) | % | | | | | | |
| Annualized investment yield excluding limited partnerships and other alternative investments | 3.5 | % | 3.5 | % | 3.8 | % | 3.6 | % | 3.7 | % | | | | | | |
