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Business Acquisitions | 12 Months Ended
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Dec. 31, 2018
Business Combinations [Abstract] |
Business Acquisitions | 2. BUSINESS ACQUISITIONS Aetna Group Insurance On November 1, 2017, The Hartford acquired Aetna's U.S. group life and disability business through a reinsurance transaction for total consideration of $1.452 billion, comprised of cash of $1.450 billion and share-based awards of $2, and recorded provisional estimates of the fair value of the assets acquired and liabilities assumed. The acquisition enables the Company to increase its market share in the group life and disability industry. In 2018, The Hartford and Aetna agreed on the final assets acquired and liabilities assumed as of the acquisition date and The Hartford finalized its provisional estimates with a final cash settlement within the one year measurement period allowed under U.S. GAAP ("GAAP"). As a result, in the third quarter of 2018, The Hartford recorded additional assets and liabilities at fair value of $80 and $80, respectively, with no change in goodwill. The following table presents the preliminary allocation of the purchase price to the assets acquired and liabilities assumed as of the acquisition date, the measurement period adjustments recorded, and the final purchase price allocation. Fair Value of Assets Acquired and Liabilities Assumed at the Acquisition Date
| Preliminary Value as of November 1, 2017 (as previously reported as of December 31, 2017) | Measurement Period Adjustments | As Adjusted Value as of November 1, 2017
Assets |  |  |
Cash and invested assets | $ | 3,360 |  | $ | 45 |  | $ | 3,405 |
Premiums receivable | 96 |  | 7 |  | 103 |
Deferred income taxes, net | 56 |  | 13 |  | 69 |
Other intangible assets | 629 |  | — |  | 629 |
Property and equipment | 68 |  | — |  | 68 |
Reinsurance recoverables | — |  | 31 |  | 31 |
Other assets | 16 |  | (16 | ) | — |
Total Assets Acquired | 4,225 |  | 80 |  | 4,305 |
Liabilities |  |  |
Unpaid losses and loss adjustment expenses | 2,833 |  | 71 |  | 2,904 |
Reserve for future policy benefits payable | 346 |  | 1 |  | 347 |
Other policyholder funds and benefits payable | 245 |  | 1 |  | 246 |
Unearned premiums | 3 |  | 1 |  | 4 |
Other liabilities | 69 |  | 6 |  | 75 |
Total Liabilities Assumed | 3,496 |  | 80 |  | 3,576 |
Net identifiable assets acquired | 729 |  | — |  | 729 |
Goodwill [1] | 723 |  | — |  | 723 |
Net Assets Acquired | $ | 1,452 |  | $ | — |  | $ | 1,452 |
[1] | Approximately $610 is deductible for income tax purposes.
The effect of measurement period adjustments on the Consolidated Statements of Operations for the year ended December 31, 2018 was immaterial and was determined as if the accounting had been completed as of the acquisition date. Intangible Assets Recorded in Connection with the Acquisition
Asset | Amount | Estimated Useful Life
Value of in-force contracts | $ | 23 |  | 1 year
Customer relationships | 590 |  | 15 years
Marketing agreement with Aetna | 16 |  | 15 years
Total | $ | 629 |  |
The value of in-force contracts represents the estimated profits relating to the unexpired contracts in force at the acquisition date through expiry of the contracts. The value of customer relationships was estimated using net cash flows expected to come from the renewals of in-force contracts acquired less costs to service the related policies. The value of the marketing agreement with Aetna was estimated using net cash flows expected to come from incremental new business written during the three-year duration of the agreement, less costs to service the related contracts. The value for each of the identifiable intangible assets was estimated using a discounted cash flow method. Significant inputs to the valuation models include estimates of expected premiums, persistency rates, investment returns, claim costs, expenses and discount rates based on a weighted average cost of capital. Property and equipment represents an internally developed integrated absence management software acquired that was valued based on estimated replacement cost. The software is amortized over 5 years on a straight-line basis. Unpaid losses and loss adjustment expenses acquired were recorded at estimated fair value equal to the present value of expected future unpaid loss and loss adjustment expense payments discounted using the net investment yield estimated as of the acquisition date plus a risk margin. The fair value adjustment for the risk margin is amortized over 12 years based on the payout pattern of losses and loss expenses as estimated as of the acquisition date. The revenues and earnings of the business acquired are included in the Company's Consolidated Statements of Operations in the Group Benefits reporting segment and were $370 and $(37) in the year of acquisition, respectively. The $723 of goodwill recognized is largely attributable to the acquired employee workforce, expected expense synergies, economies of scale, and tax benefits not included within the value of identifiable intangibles. Goodwill is allocated to the Company's Group Benefits reporting segment. The Company recognized $17 of acquisition related costs in the year of acquisition. These costs are included in insurance operating costs and other expenses in the Consolidated Statement of Operations. The following table presents supplemental pro forma amounts of revenue and net income for the Company in 2016 and 2017 as though the business was acquired on January 1, 2016. Pro Forma Results (Unaudited)
| Twelve months ended December 31, 2017 [1] | Twelve months ended December 31, 2016 [1]
Total Revenue | $ | 18,899 |  | $ | 18,348 |
Net Income | $ | (3,077 | ) | $ | 953 |
[1]Pro forma adjustments include the revenue and earnings of the Aetna U.S. group life and disability business as well as amortization of identifiable intangible assets acquired and the fair value adjustment to acquired insurance reserves. Pro forma adjustments do not include retrospective adjustments to defer and amortize acquisition costs as would be recorded under the Company’s accounting policy. Maxum On July 29, 2016, the Company acquired 100% of the outstanding shares of Northern Homelands Company, the holding company of Maxum Specialty Insurance Group headquartered in Alpharetta, Georgia in a cash transaction for approximately $169. The acquisition adds excess and surplus lines capability to the Company's small commercial line of business. Maxum is maintaining its brand and limited wholesale distribution model. Maxum's revenues and earnings since the acquisition date are included in the Company's Consolidated Statements of Operations in the Commercial Lines reporting segment. Fair Value of Assets Acquired and Liabilities Assumed at the Acquisition Date
| As of July 29, 2016
Assets |
Cash and investments (including cash of $12) | $ | 274 |
Reinsurance recoverables | 113 |
Intangible assets [1] | 11 |
Other assets | 79 |
Total assets acquired | 477 |
Liabilities |
Unpaid losses | 235 |
Unearned premiums | 77 |
Other liabilities | 34 |
Total liabilities assumed | 346 |
Net identifiable assets acquired | 131 |
Goodwill [2] | 38 |
Net assets acquired | $ | 169 |
[1] | Comprised of indefinite lived intangibles of $4 related to state insurance licenses acquired and other intangibles of $7 related to agency distribution relationships of Maxum which are amortized over 10 years.
[2] | Non-deductible for income tax purposes.
The goodwill recognized is attributable to expected growth from the opportunity to sell both existing products and excess and surplus lines coverage to a broader customer base and has been allocated to the small commercial reporting unit within the Commercial Lines reporting segment. The Company recognized $1 of acquisition related costs for the year ended December 31, 2016. These costs are included in insurance operating costs and other expenses in the Consolidated Statement of Operations. Lattice On July 29, 2016, an indirect wholly-owned subsidiary of the Company acquired 100% of the membership interests outstanding of Lattice Strategies LLC, an investment management firm and provider of strategic beta exchange-traded products ("ETP") with approximately $200 of assets under management ("AUM") at the acquisition date. Fair Value of the Consideration Transferred at the Acquisition Date
Cash | $ | 19 |
Contingent consideration | 23 |
Total | $ | 42 |
Fair Value of Assets Acquired and Liabilities Assumed at the Acquisition Date
| As of July 29, 2016
Assets |
Intangible assets [1] | $ | 11 |
Cash | 1 |
Total assets acquired | 12 |
Liabilities |
Total liabilities assumed | 1 |
Net identifiable assets acquired | 11 |
Goodwill [2] | 31 |
Net assets acquired | $ | 42 |
[1] | Comprised of indefinite lived intangibles of $10 related to customer relationships and $1 of other intangibles, which are amortized over 5 to 8 years.
[2] | Deductible for federal income tax purposes.
Lattice's revenues and earnings since the acquisition date are included in the Company's Consolidated Statements of Operations in the Hartford Funds reporting segment. In addition to the initial cash consideration, the Company is required to make future payments to the former owners of Lattice of up to $60 based upon growth in ETP AUM over four years beginning on the date of acquisition. The contingent consideration was measured at fair value at the acquisition date by projecting future ETP AUM and discounting expected payments back to the valuation date. The projected ETP AUM and risk-adjusted discount rate are significant unobservable inputs to fair value. The goodwill recognized is attributable to the fact that the acquisition of Lattice enables the Company to offer ETPs which are expected to be a significant source of future revenue and earnings growth. Goodwill is allocated to the Hartford Funds reporting segment. The Company recognized $1 of acquisition related costs for the year ended December 31, 2016. These costs are included in insurance operating costs and other expenses in the Consolidated Statement of Operations.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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