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Debt | 12 Months Ended
--- | ---
Dec. 31, 2019
Debt Disclosure [Abstract] |
Debt | 13. DEBT The Company’s long-term debt securities are issued by HFSG Holding Company, are unsecured obligations of HFSG Holding Company, and rank on a parity with all other unsecured and unsubordinated indebtedness of HFSG Holding Company. Debt is carried net of discount and issuance cost. Interest expense on debt is included in the corporate category for segment reporting. Short-term and Long-term Debt by Issuance
| As of December 31,
| 2019 | 2018
Revolving Credit Facilities | $ | — |  | $ | — |
Senior Notes and Debentures |  |  |  |
6.0% Notes, due 2019 | — |  | 413 |
5.5% Notes, due 2020 | 500 |  | 500 |
5.125% Notes, due 2022 | — |  | 800 |
2.8% Notes, due 2029 | 600 |  | — |
5.95% Notes, due 2036 | 300 |  | 300 |
6.625% Notes, due 2040 | 295 |  | 295 |
6.1% Notes, due 2041 | 409 |  | 409 |
6.625% Notes, due 2042 | 178 |  | 178 |
4.4% Notes, due 2048 | 500 |  | 500 |
3.6% Notes, due 2049 | 800 |  | — |
4.3% Notes, due 2043 | 300 |  | 300 |
Junior Subordinated Debentures |  |  |  |
7.875% Notes, due 2042 | 600 |  | 600 |
3 Month LIBOR + 2.125% Notes, due 2067 [1] | 500 |  | 500 |
Total Notes and Debentures | 4,982 |  | 4,795 |
Unamortized discount and debt issuance cost [2] | (134 | ) | (117 | )
Total Debt | 4,848 |  | 4,678 |
Less: Current maturities | 500 |  | 413 |
Long-Term Debt | $ | 4,348 |  | $ | 4,265 |
[1] | In April 2017, the Company entered into an interest rate swap agreement expiring February 15, 2027 to effectively convert the variable interest payments for this debenture into fixed interest payments of approximately 4.39%.
[2] | This amount includes unamortized discount of $76 and $78 as of December 31, 2019 and 2018, respectively, on the 6.1% Notes, due 2041.
The effective interest rate on the 6.1% senior notes due 2041 is 7.9%. The effective interest rate on the remaining notes does not differ materially from the stated rate. The Company incurred interest expense of $259, $298 and $316 on debt for the years ended December 31, 2019, 2018 and 2017, respectively. Shelf Registrations On May 17, 2019, the Company filed with the Securities and Exchange Commission an automatic shelf registration statement (Registration No. 333-231592) for the potential offering and sale of debt and equity securities. The registration statement allows for the following types of securities to be offered: debt securities, junior subordinated debt securities, guarantees, preferred stock, common stock, depositary shares, warrants, stock purchase contracts, and stock purchase units. In that The Hartford is a well-known seasoned issuer, as defined in Rule 405 under the Securities Act of 1933, the registration statement went effective immediately upon filing and The Hartford may offer and sell an unlimited amount of securities under the registration statement during the three-year life of the registration statement. Senior Notes On January 15, 2019, The Hartford repaid at maturity the $413 principal amount of its 6.0% senior notes. In the Navigators Group acquisition, the Company assumed $265 par value 5.75% Senior notes due on October 15, 2023 with a fair value of $284 as of the acquisition date. On August 19, 2019, The Hartford issued $600 of 2.8% senior notes (“2.8% Notes”) due August 19, 2029 and $800 of 3.6% senior notes (“3.6% Notes”) due August 19, 2049 for net proceeds of approximately $1.38 billion, after deducting underwriting discounts and expenses. Under both senior note issuances, interest is payable semi-annually in arrears on August 19 and February 19, commencing February 19, 2020. The Hartford, at its option, can redeem the 2.8% Notes and the 3.6% Notes at any time, in whole or part, at a redemption price equal to the greater of 100% of the principal amount being redeemed or a make-whole amount based on a comparable maturity US Treasury plus a basis point spread, plus any accrued and unpaid interest, except the make-whole amount is not applicable within the final three months of maturity for the 2.8% Notes and the final six months of maturity for the 3.6% Notes. The spread over the comparable maturity US Treasury for determining the make-whole amount is 20 and 25 basis points for the 2.8% Notes and 3.6% Notes, respectively. After receiving proceeds from the issuance of the 2.8% Notes and 3.6% Notes, in third quarter 2019, The Hartford repaid $265 of 5.75% senior notes due 2023 that had been assumed in the Navigators Group acquisition and $800 of 5.125% senior notes due 2022 of the Hartford Financial Services Group, Inc., and recognized a loss on extinguishment of debt of $90. Junior Subordinated Debentures Junior Subordinated Debentures by Issuance as of December 31, 2019
Issue | 7.875% Debentures | 3 Month LIBOR + 2.125%
Face Value | $ | 600 |  | $ | 500 |
Interest Rate [1] | 7.875 | % | [2] | N/A | [3]
Call Date | April 15, 2022 | February 15, 2022 | [4]
Interest Rate Subsequent to Call Date [2] | 3 Month LIBOR + 5.596% | 3 Month LIBOR + 2.125% | [5]
Final Maturity | April 15, 2042 | February 12, 2067
[1] | Interest rate in effect until call date.
[2] | Payable quarterly in arrears.
[3] | Debentures were issued on call date.
[4] | The original call date was February 15, 2017. Replacement Capital Covenant associated with the debenture prohibits the Company from redeeming all or any portion of the notes on or prior to February 15, 2022, unless consent from covered bondholders is obtained.
[5] | In April 2017, the company entered into an interest rate swap agreement expiring February 15, 2027 to effectively convert the interest payments for the 3 Month LIBOR + 2.125% debenture into fixed interest payments of approximately 4.39%.
The debentures are unsecured, subordinated and junior in right of payment and upon liquidation to all of the Company’s existing and future senior indebtedness. In addition, the debentures are effectively subordinated to all of the Company’s subsidiaries’ existing and future indebtedness and other liabilities, including obligations to policyholders. The debentures do not limit the Company’s or the Company’s subsidiaries’ ability to incur additional debt, including debt that ranks senior in right of payment and upon liquidation to the debentures. The Company has the right to defer interest payments for up to a consecutive ten years without giving rise to an event of default. Deferred interest will continue to accrue and will accrue additional interest at the then applicable interest rate. If the Company defers interest payments, the Company generally may not make payments on or redeem or purchase any shares of its capital stock or any of its debt securities or guarantees that rank upon liquidation, dissolution or winding up equally with or junior to the debentures, subject to certain limited exceptions. The 7.875% and 3 Month LIBOR plus 2.125% debentures may be redeemed in whole prior to the call date upon certain tax or rating agency events, at a price equal to the greater of 100% of the principal amount being redeemed and the applicable make-whole amount plus any accrued and unpaid interest. The Company may elect to redeem the 7.875% and 3 Month LIBOR plus 2.125% debentures in whole or in part on or after the call date for the principal amount being redeemed plus accrued and unpaid interest to the date of redemption. In connection with the offering of the 3 Month LIBOR plus 2.125% debenture, the Company entered into a Replacement Capital Covenant ("RCC") for the benefit of holders of one or more designated series of the Company's indebtedness, initially the Company's 4.3% notes due 2043. Under the terms of the RCC, if the Company redeems the debenture any time prior to February 12, 2047 (or such earlier date on which the RCC terminates by its terms) it can only do so with the proceeds from the sale of certain qualifying replacement securities. The RCC also prohibits the Company from redeeming all or any portion of the notes on or prior to February 15, 2022. In July 2017, the U.K. Financial Conduct Authority announced that, by the end of 2021, it intends to stop persuading or compelling banks to report information used to set LIBOR, which could result in LIBOR no longer being published after 2021 or a determination by regulators that LIBOR is no longer representative of its underlying market. The Company continues to monitor and assess the potential impacts of the discontinuation of LIBOR on its outstanding junior subordinated debentures. Long-Term Debt Long-term Debt Maturities (at par value) as of December 31, 2019
2020 - Current maturities | $ | 500 |
2021 | $ | — |
2022 | $ | — |
2023 | $ | — |
2024 | $ | — |
Thereafter | $ | 4,482 |
Revolving Credit Facilities The Company has a senior unsecured five-year revolving credit facility (“Credit Facility”) that provides up to $750 of unsecured credit through March 29, 2023. Revolving loans from the Credit Facility may be in multiple currencies. U.S. dollar loans will bear interest at a floating rate equivalent to an indexed rate depending on the type of borrowing and a basis point spread based on The Hartford's credit rating and will mature no later than March 29, 2023. Letters of credit issued from the Credit Facility bear a fee based on The Hartford's credit rating and expire no later than March 29, 2024. The Credit Facility requires the Company to maintain a minimum consolidated net worth, excluding AOCI, of $9 billion, limit the ratio of senior debt to capitalization, excluding AOCI, at 35% and meet other customary covenants. The Credit Facility is for general corporate purposes. As of December 31, 2019, no borrowings were outstanding, $5 in letters of credit were issued under the Credit Facility and the Company was in compliance with all financial covenants. Lloyd's Letter of Credit As a result of the acquisition of Navigators Group, The Hartford has two letter of credit facility agreements: the Club Facility and the Bilateral Facility, which are used to provide a portion of the capital requirements at Lloyd's. In November of 2019, the Company issued £11 million of letters of credit under the Bilateral Facility. As of December 31, 2019, uncollateralized letters of credit with an aggregate face amount of $165 and £60 million were outstanding under the Club Facility and £18 was outstanding under the Bilateral Facility. As of December 31, 2019, the Bilateral Facility has unused capacity of $1 for issuance of additional letters of credit. Among other covenants, the Club Facility and Bilateral Facility contain financial covenants regarding tangible net worth and Funds at Lloyd's ("FAL"). As of December 31, 2019, Navigators Group was in compliance with all financial covenants. Commercial Paper As of December 31, 2019, the Hartford's maximum borrowings available under its commercial paper program was $750 and there was no commercial paper outstanding. The Company is dependent upon market conditions to access short-term financing through the issuance of commercial paper to investors. Collateralized Advances with Federal Home Loan Bank of Boston The Company’s subsidiaries, Hartford Fire Insurance Company (“Hartford Fire”) and HLA, are members of the Federal Home Loan Bank of Boston (“FHLBB”). Membership allows these subsidiaries access to collateralized advances, which may be short- or long-term with fixed or variable rates. FHLBB membership required the purchase of member stock and requires additional member stock ownership of 3% or 4% of any amount borrowed. Acceptable forms of collateral include real estate backed fixed maturities and mortgage loans and the amount of advances that can be taken is limited to a percentage of the fair value of the assets that ranges from a high of 97% for US government-backed fixed maturities maturing within 3 years to a low of 40% for A-rated commercial mortgage-backed fixed maturities maturing in 5 years or more. In its consolidated balance sheets, The Hartford presents the liability for advances taken based on use of the funds with advances for general corporate purposes presented in short- or long-term debt and advances to earn incremental investment income presented in other liabilities, consistent with other collateralized financing transactions such as securities lending and repurchase agreements. The Connecticut Department of Insurance permits Hartford Fire and HLA to pledge up to $1.2 billion and $0.6 billion in qualifying assets, respectively, without prior approval, to secure FHLBB advances in 2020. The pledge limit is determined annually based on statutory admitted assets and capital and surplus of Hartford Fire and HLA, respectively. As of December 31, 2019, there were no advances outstanding under the FHLBB facility.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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