INVESTOR FINANCIAL SUPPLEMENT
June 30, 2020
ifshartfordlogoa02a02a01a14.jpg





THE HARTFORD FINANCIAL SERVICES GROUP, INC.
 
 
 
 
 
 
 
 
 
 
 
As of July 28, 2020
 
 
 
 
 
 
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
 
 
Navigators Insurance Company
 
A+
 
A
 
NR
 
 
 
 
 
 
 
 
 
 
 
- 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 positive outlook at A.M. Best and on stable outlook at Standard and Poor's
http://www.thehartford.com
 
 
 
 
Other Ratings:
  
 
  
 
  
 
Contact:
 
Senior debt
  
a-
  
BBB+
  
Baa1
Susan Spivak Bernstein
 
Commercial paper
  
AMB-1
  
A-2
  
P-2
Senior Vice President
 
Preferred stock
 
bbb
 
BBB-
 
Baa3
Investor Relations
 
Junior subordinated debentures
 
bbb
 
BBB-
 
Baa2
Phone (860) 547-6233
 
 
 
 
 
 
 
 
 
- Hartford Financial Services Group, Inc. senior debt and junior subordinated debentures are on stable outlook at A.M. Best, Standard and Poor’s, and Moody's.
 
 
 
 
 
 
 
 
 
 
 
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
 
 
 
 
 
 
 
 
 
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
CONSOLIDATED
Consolidated Financial Results
1
 
Consolidated Statements of Operations
2
 
Operating Results by Segment
3
 
Consolidating Balance Sheets
4
 
Capital Structure
5
 
Statutory Capital to GAAP Stockholders’ Equity Reconciliation
6
 
Accumulated Other Comprehensive Income (Loss)
7
 
 
 
PROPERTY & CASUALTY
Property & Casualty Income Statements
8
 
Property & Casualty Income Statements (Continued)
9
 
Property & Casualty Underwriting Ratios
10
 
Commercial Lines Income Statements
11
 
Commercial Lines Income Statements (Continued)
12
 
Commercial Lines Underwriting Ratios
13
 
Commercial Lines Supplemental Data
14
 
Personal Lines Income Statements
15
 
Personal Lines Income Statements (Continued)
16
 
Personal Lines Underwriting Ratios
17
 
Personal Lines Supplemental Data
18
 
Personal Lines Supplemental Data (Continued)
19
 
P&C Other Operations Income Statements
20
 
 
 
GROUP BENEFITS
Income Statements
21
 
Supplemental Data
22
 
 
 
HARTFORD FUNDS
Income Statements
23
 
Asset Value Rollforward - Assets Under Management By Asset Class
24
 
 
 
 
 
 
CORPORATE
Income Statements
25
 
 
 
INVESTMENTS
Investment Earnings Before Tax - Consolidated
26
 
Investment Earnings Before Tax - Property & Casualty
27
 
Investment Earnings Before Tax - Group Benefits
28
 
Net Investment Income
29
 
Components of Net Realized Capital Gains (Losses)
30
 
Composition of Invested Assets
31
 
Invested Asset Exposures
32
 
 
 
APPENDIX
Basis of Presentation and Definitions
33
 
Discussion of Non-GAAP and Other Financial Measures
34




THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
HIGHLIGHTS
 
 
 
 
 
 
 
 
 
Net income
$
468

$
273

$
548

$
535

$
372

$
630

 
$
741

$
1,002

Net income available to common stockholders [1]
$
463

$
268

$
543

$
524

$
372

$
625

 
$
731

$
997

Core earnings*
$
438

$
485

$
522

$
548

$
485

$
507

 
$
923

$
992

Total revenues
$
5,068

$
4,956

$
5,361

$
5,347

$
5,092

$
4,940

 
$
10,024

$
10,032

Total assets
$
70,990

$
68,724

$
70,817

$
70,256

$
69,472

$63,324
 
 
 
PER SHARE AND SHARES DATA
 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
 
 
 
 
 
 
 
 
Net income available to common stockholders
$
1.29

$
0.75

$
1.51

$
1.45

$
1.03

$
1.74

 
$
2.04

$
2.76

Core earnings*
$
1.22

$
1.35

$
1.45

$
1.52

$
1.34

$
1.41

 
$
2.58

$
2.75

Diluted earnings per common share
 
 
 
 
 
 
 
 
 
Net income available to common stockholders
$
1.29

$
0.74

$
1.49

$
1.43

$
1.02

$
1.71

 
$
2.03

$
2.73

Core earnings*
$
1.22

$
1.34

$
1.43

$
1.50

$
1.33

$
1.39

 
$
2.56

$
2.72

Weighted average common shares outstanding (basic)
358.1

358.5

360.5

361.4

361.4

360.0

 
358.3

360.7

Dilutive effect of stock compensation
1.2

2.6

3.8

4.0

3.2

3.3

 
1.9

3.3

Dilutive effect of warrants [2]
—

—

—

—

0.5

1.4

 
—

0.9

Weighted average common shares outstanding and dilutive potential common shares (diluted)
359.3

361.1

364.3

365.4

365.1

364.7

 
360.2

364.9

Common shares outstanding
358.1

357.9

359.6

361.0

361.6

360.9

 
 
 
Book value per common share
$
46.74

$
41.72

$
44.32

$
43.61

$
41.37

$
38.81

 
 
 
Per common share impact of accumulated other comprehensive income [3]
(1.34
)
2.68

(0.15
)
(0.59
)
0.54

2.45

 
 
 
Book value per common share (excluding AOCI)*
$
45.40

$
44.40

$
44.17

$
43.02

$
41.91

$
41.26

 
 
 
Book value per diluted share
$
46.59

$
41.42

$
43.85

$
43.13

$
41.00

$
38.36

 
 
 
Per diluted share impact of AOCI
(1.34
)
2.65

(0.14
)
(0.58
)
0.55

2.43

 
 
 
Book value per diluted share (excluding AOCI)*
$
45.25

$
44.07

$
43.71

$
42.55

$
41.55

$
40.79

 
 
 
Common shares outstanding and dilutive potential common shares
359.3

360.5

363.4

365.0

364.8

365.1

 
 
 
RETURN ON COMMON STOCKHOLDER'S EQUITY ("ROE") [4]
 
 
 
 
 
 
 
 
 
Net income (loss) available to common stockholders' ROE ("Net income (loss) ROE")
11.3
%
11.8
%
14.4
%
12.0
%
11.8
%
13.5
%
 
 
 
Core earnings ROE*
12.7
%
13.3
%
13.6
%
12.3
%
11.7
%
11.5
%
 
 
 
[1]
Net income available to common stockholders includes the impact of preferred stock dividends.
[2]
On June 26, 2019, the Capital Purchase Program warrants issued in 2009 expired.
[3]
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 plan adjustments.
[4]
For reconciliation of Net income (loss) ROE to Core earnings ROE, see Appendix, page 36.


* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).

1


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Earned premiums
$
4,234

$
4,391

$
4,423

$
4,394

$
4,166

$
3,940

 
$
8,625

$
8,106

Fee income
298

320

331

330

326

314

 
618

640

Net investment income
339

459

503

490

488

470

 
798

958

Net realized capital gains (losses)
109

(231
)
63

89

80

163

 
(122
)
243

Other revenues
88

17

41

44

32

53

 
105

85

Total revenues
5,068

4,956

5,361

5,347

5,092

4,940

 
10,024

10,032

Benefits, losses and loss adjustment expenses [1]
2,847

2,916

2,939

2,914

2,934

2,685

 
5,763

5,619

Amortization of deferred acquisition costs ("DAC")
429

437

438

437

392

355

 
866

747

Insurance operating costs and other expenses
1,125

1,176

1,224

1,167

1,141

1,048

 
2,301

2,189

Loss on extinguishment of debt
—

—

—

90

—

—

 
—

—

Loss on reinsurance transaction [2]
—

—

—

—

91

—

 
—

91

Interest expense
57

64

65

67

63

64

 
121

127

Amortization of other intangible assets
18

19

19

19

15

13

 
37

28

Total benefits, losses and expenses
4,476

4,612

4,685

4,694

4,636

4,165

 
9,088

8,801

Income before income taxes
592

344

676

653

456

775

 
936

1,231

Income tax expense
124

71

128

118

84

145

 
195

229

Net income
468

273

548

535

372

630

 
741

1,002

Preferred stock dividends
5

5

5

11

—

5

 
10

5

Net income available to common stockholders
463

268

543

524

372

625

 
731

997

Adjustments to reconcile net income available to common stockholders to core earnings:
 
 
 
 
 
 
 
 
 
Net realized capital losses (gains), excluded from core earnings, before tax
(107
)
232

(62
)
(88
)
(79
)
(160
)
 
125

(239
)
Loss on extinguishment of debt, before tax
—

—

—

90

—

—

 
—

—

Loss on reinsurance transaction, before tax [2]
—

—

—

—

91

—

 
—

91

Integration and transaction costs associated with acquired business, before tax [3]
13

13

21

29

31

10

 
26

41

Change in loss reserves upon acquisition of a business, before tax [4]
—

—

—

—

97

—

 
—

97

Change in deferred gain on retroactive reinsurance, before tax [5]
54

29

16

—

—

—

 
83

—

Income tax expense (benefit) [6]
15

(57
)
4

(7
)
(27
)
32

 
(42
)
5

Core earnings
$
438

$
485

$
522

$
548

$
485

$
507

 
$
923

$
992

[1]
The three and six months ended June 30, 2020 included $251 and $267, respectively, of benefits, losses and loss adjustment expenses incurred arising from the Coronavirus Disease 2019 ("COVID-19") pandemic.
[2]
Immediately after closing on the acquisition of Navigators Group in May 2019, the Company purchased an adverse development cover ("ADC") from National Indemnity Company ("NICO") on behalf of Navigators Insurance Company and certain of its affiliates ("Navigators Insurers") for a ceded premium of $91. The ADC covers $300 of adverse development on 2018 and prior accident year reserves (subject to limited exceptions) that attaches at $100 above Navigators Insurers recorded net reserves as of December 31, 2018.
[3]
The three and six month periods ended June 30, 2020 included Navigators Group acquisition integration costs of $8 and $16, respectively, and integration costs related to the 2017 acquisition of Aetna's group benefits business of $5 and $10, respectively. The three and six month periods ended June 30, 2019 included Navigators Group acquisition transaction and integration costs of $21 as well as integration costs related to the 2017 acquisition of Aetna's group benefits business of $10 and $20, respectively.
[4]
Upon acquisition of Navigators Group and a review of Navigators Insurers reserves, the three and six months ended June 30, 2019 included $68 of prior accident year reserve increases and $29 of current accident year reserve increases included in net income.
[5]
As of June 30, 2020, the Company has cumulatively ceded $190 of losses to the Navigators adverse development cover ("Navigators ADC") that reinsures adverse development on Navigators' 2018 and prior accident year reserves, including $83 ceded in the six month period ended June 30, 2020. Of the $190 of cumulative losses ceded, $99 of the ceded losses has been recognized as a deferred gain within other liabilities as of June 30, 2020 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 $190 of the $300 available limit, there is $110 of remaining limit available as of June 30, 2020.
[6]
Represents federal income tax expense (benefit) related to before tax items not included in core earnings.

2


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Net income (loss):


 
 
 
 
 
 
 
 
Commercial Lines
$
(66
)
$
121

$
302

$
336

$
191

$
363

 
$
55

$
554

Personal Lines
371

98

66

94

62

96

 
469

158

P&C Other Operations
5

5

9

18

11

23

 
10

34

Property & Casualty ("P&C")
310

224

377

448

264

482

 
534

746

Group Benefits
101

104

159

146

113

118

 
205

231

Hartford Funds
39

36

41

40

38

30

 
75

68

Sub-total
450

364

577

634

415

630

 
814

1,045

Corporate
18

(91
)
(29
)
(99
)
(43
)
—

 
(73
)
(43
)
Net income
468

273

548

535

372

630

 
741

1,002

Preferred stock dividends
5

5

5

11

—

5


10

5

Net income available to common stockholders
$
463

$
268

$
543

$
524

$
372

$
625


$
731

$
997

 
 
 
 
 
 
 
 
 
 
Core earnings (losses):
 
 
 
 
 
 
 
 
 
Commercial Lines
$
(57
)
$
262

$
292

$
303

$
304

$
274

 
$
205

$
578

Personal Lines
364

117

61

87

55

82

 
481

137

P&C Other Operations
2

11

7

15

8

16

 
13

24

P&C
309

390

360

405

367

372

 
699

739

Group Benefits
102

115

161

141

115

122

 
217

237

Hartford Funds
33

44

40

39

38

28

 
77

66

Sub-total
444

549

561

585

520

522

 
993

1,042

Corporate
(6
)
(64
)
(39
)
(37
)
(35
)
(15
)
 
(70
)
(50
)
Core earnings
$
438

$
485

$
522

$
548

$
485

$
507

 
$
923

$
992




3


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS

 
PROPERTY & CASUALTY
 
GROUP BENEFITS
 
HARTFORD
FUNDS
 
CORPORATE
 
CONSOLIDATED
 
Jun 30 2020
Dec 31 2019
 
Jun 30 2020
Dec 31 2019
 
Jun 30 2020
Dec 31 2019
 
Jun 30 2020
Dec 31 2019
 
Jun 30 2020
Dec 31 2019
Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available-for-sale, at fair value
$
31,907

$
31,294

 
$
10,070

$
10,310

 
$
—

$
25

 
$
223

$
519

 
$
42,200

$
42,148

Fixed maturities, at fair value using the fair value option
1

8

 
—

3

 
—

—

 
—

—

 
1

11

Equity securities, at fair value
446

1,295


90

85


59

67


161

210


756

1,657

Mortgage loans
3,080

2,944

 
1,319

1,271

 
—

—

 
—

—

 
4,399

4,215

Limited partnerships and other alternative investments
1,505

1,463

 
321

295

 
—

—

 
—

—

 
1,826

1,758

Other investments
133

123

 
8

7

 
21

31

 
16

159

 
178

320

Short-term investments
1,710

1,476

 
471

361

 
219

185

 
1,268

899

 
3,668

2,921

Total investments [1]
38,782

38,603

 
12,279

12,332

 
299

308

 
1,668

1,787

 
53,028

53,030

Cash [1]
272

163

 
14

13

 
2

8

 
3

1

 
291

185

Restricted cash
68

72

 
13

5

 
—

—

 
—

—

 
81

77

Premiums receivable and agents’ balances, net
4,103

3,901

 
486

483

 
—

—

 
6

—

 
4,595

4,384

Reinsurance recoverables, net [2]
5,078

4,954

 
250

253

 
—

—

 
312

320

 
5,640

5,527

DAC
758

726

 
46

51

 
8

8

 
—

—

 
812

785

Deferred income taxes
(227
)
(168
)
 
(208
)
(179
)
 
4

6

 
561

640

 
130

299

Goodwill
778

780

 
723

723

 
181

181

 
229

229

 
1,911

1,913

Property and equipment, net
971

1,011

 
83

86

 
13

14

 
68

70

 
1,135

1,181

Other intangible assets
476

541

 
499

519

 
10

10

 
11

—

 
996

1,070

Other assets
1,407

1,328

 
322

309

 
81

99

 
561

630

 
2,371

2,366

Total assets
$
52,466

$
51,911

 
$
14,507

$
14,595

 
$
598

$
634

 
$
3,419

$
3,677

 
$
70,990

$
70,817

Unpaid losses and loss adjustment expenses
$
28,677

$
28,261

 
$
8,186

$
8,256

 
$
—

$
—

 
$
7

$
—

 
$
36,870

$
36,517

Reserves for future policy benefits [2]
—

—

 
430

411

 
—

—

 
222

224

 
652

635

Other policyholder funds and benefits payable [2]
—

—

 
458

459

 
—

—

 
292

296

 
750

755

Unearned premiums
6,835

6,596

 
34

39

 
—

—

 
3

—

 
6,872

6,635

Debt
—

—

 
—

—

 
—

—

 
4,350

4,848

 
4,350

4,848

Other liabilities
1,994

2,384

 
246

422

 
176

227

 
2,008

2,124

 
4,424

5,157

Total liabilities
37,506

37,241

 
9,354

9,587

 
176

227

 
6,882

7,492

 
53,918

54,547

Common stockholders' equity, excluding AOCI
13,496

13,520

 
4,533

4,547

 
422

407

 
(2,192
)
(2,590
)
 
16,259

15,884

Preferred stock
—

—


—

—


—

—


334

334


334

334

AOCI, net of tax
1,464

1,150

 
620

461

 
—

—

 
(1,605
)
(1,559
)
 
479

52

Total stockholders' equity
14,960

14,670

 
5,153

5,008

 
422

407

 
(3,463
)
(3,815
)
 
17,072

16,270

Total liabilities and equity
$
52,466

$
51,911

 
$
14,507

$
14,595

 
$
598

$
634

 
$
3,419

$
3,677

 
$
70,990

$
70,817

[1]
Corporate includes fixed maturities, short-term investments, investment sales receivable and cash of $1.3 billion and $1.2 billion as of June 30, 2020 and December 31, 2019, 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 reserves and reinsurance recoverables for run-off structured settlement and terminal funding agreement liabilities.


4



THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
DEBT





Short-term debt
$
—

$
—

$
500

$
500

$
500

Senior notes
3,260

3,260

3,259

3,257

2,961

Junior subordinated debentures
1,090

1,089

1,089

1,089

1,089

Total debt
$
4,350

$
4,349

$
4,848

$
4,846

$
4,550

STOCKHOLDERS’ EQUITY





Common stockholders' equity, excluding AOCI
$
16,259

$
15,889

$
15,884

$
15,530

$
15,156

Preferred stock
334

334

334

334

334

AOCI
479

(957
)
52

214

(198
)
Total stockholders’ equity
$
17,072

$
15,266

$
16,270

$
16,078

$
15,292

CAPITALIZATION





Total capitalization, including AOCI, net of tax
$
21,422

$
19,615

$
21,118

$
20,924

$
19,842

Total capitalization, excluding AOCI, net of tax
$
20,943

$
20,572

$
21,066

$
20,710

$
20,040

DEBT TO CAPITALIZATION RATIOS





Total debt to capitalization, including AOCI
20.3
%
22.2
%
23.0
%
23.2
%
22.9
%
Total debt to capitalization, excluding AOCI
20.8
%
21.1
%
23.0
%
23.4
%
22.7
%
Total debt and preferred stock to capitalization, including AOCI
21.9
%
23.9
%
24.5
%
24.8
%
24.6
%
Total debt and preferred stock to capitalization, excluding AOCI
22.4
%
22.8
%
24.6
%
25.0
%
24.4
%
Total rating agency adjusted debt to capitalization [1] [2]
23.5
%
25.6
%
26.1
%
26.6
%
26.6
%
FIXED CHARGE COVERAGE RATIOS










Total earnings to total fixed charges [3]
7.7:1

5.4:1

9.8:1

9.7:1

10.1:1

[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 $1.0 billion and $0.9 billion as of June 30, 2020 and 2019, 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.

5


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY CAPITAL TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
JUNE 30, 2020


 
P&C
GROUP BENEFITS
U.S. statutory net income [1][5]
$
760

$
253

U.S. statutory capital [2][5]
$
10,184

$
2,687

U.S. GAAP adjustments:
 
 
DAC
759

46

Non-admitted deferred tax assets [3]
166

163

Deferred taxes [4]
(934
)
(524
)
Goodwill
123

723

Other intangible assets
59

499

Non-admitted assets other than deferred taxes
795

129

Asset valuation and interest maintenance reserve
—

232

Benefit reserves
(66
)
(38
)
Unrealized gains on investments
1,778

816

Other, net
894

420

U.S. GAAP stockholders’ equity of U.S. insurance entities [5]
13,758

5,153

U.S. GAAP stockholders’ equity of international subsidiaries as well as goodwill and other intangible assets related to the acquisition of Navigators Group
1,202

—

Total U.S. GAAP stockholders’ equity
$
14,960

$
5,153

[1]
Statutory net income is for the six months ended June 30, 2020.
[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]
Excludes insurance operations in the U.K. and continental Europe.

6


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
 
 
AS OF
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
Fixed maturities net unrealized gain
$
2,055

$
627

$
1,684

$
1,768

$
1,367

$
703

Unrealized loss on fixed maturities with ACL [1]
(2
)
(2
)
 
 
 
 
OTTI losses recognized in AOCI
 
 
(3
)
(3
)
(3
)
(3
)
Net gains (losses) on cash flow hedging instruments
48

53

9

17

11

—

Total net unrealized gain
$
2,101

$
678

$
1,690

$
1,782

$
1,375

$
700

Foreign currency translation adjustments
27

26

34

30

34

31

Pension and other postretirement plan adjustments
(1,649
)
(1,661
)
(1,672
)
(1,598
)
(1,607
)
(1,616
)
Total AOCI
$
479

$
(957
)
$
52

$
214

$
(198
)
$
(885
)
[1]
On January 1, 2020, the Company adopted the Financial Accounting Standards Board's updated guidance for recognition and measurement of credit losses on financial instruments. For fixed maturities in an unrealized loss position where an ACL has been recorded, the excess of the present value of expected future cash flows over the fair value, if any, is reflected as a non-credit amount in OCI.

7



THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Written premiums
$
2,903

$
3,152

$
2,904

$
3,057

$
2,902

$
2,720

 
$
6,055

$
5,622

Change in unearned premium reserve
52

113

(169
)
4

114

144

 
165

258

Earned premiums
2,851

3,039

3,073

3,053

2,788

2,576

 
5,890

5,364

Fee income
14

17

18

17

19

18

 
31

37

Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
Current accident year before catastrophes [1][2]
1,828

1,806

1,900

1,867

1,696

1,537

 
3,634

3,233

Current accident year catastrophes
248

74

115

106

138

104

 
322

242

Prior accident year development [1][3]
(268
)
23

(42
)
(47
)
35

(11
)
 
(245
)
24

Total losses and loss adjustment expenses
1,808

1,903

1,973

1,926

1,869

1,630

 
3,711

3,499

Amortization of DAC
412

420

421

420

375

339

 
832

714

Underwriting expenses [4]
540

597

625

567

550

495

 
1,137

1,045

Amortization of other intangible assets
9

8

9

8

4

3

 
17

7

Dividends to policyholders
7

8

6

12

6

6

 
15

12

Underwriting gain* [5]
89

120

57

137

3

121

 
209

124

Net investment income
242

334

363

358

348

323

 
576

671

Net realized capital gains (losses)
74

(173
)
52

73

66

143

 
(99
)
209

Loss on reinsurance transaction [6]
—

—

—

—

(91
)
—

 
—

(91
)
Net servicing and other income (expense)
(7
)
(3
)
(10
)
(14
)
(2
)
2

 
(10
)
—

Income before income taxes
398

278

462

554

324

589

 
676

913

Income tax expense
88

54

85

106

60

107

 
142

167

Net income
310

224

377

448

264

482

 
534

746

Adjustments to reconcile net income to core earnings:
 
 
 
 
 
 
 
 
 
Net realized capital losses (gains), excluded from core earnings, before tax
(71
)
173

(52
)
(72
)
(65
)
(140
)
 
102

(205
)
Loss on reinsurance transaction, before tax [6]
—

—

—

—

91

—

 
—

91

Integration and transaction costs associated with an acquired business, before tax
8

8

12

19

6

1

 
16

7

Change in loss reserves upon acquisition of a business, before tax [1]
—

—

—

—

97

—

 
—

97

Change in deferred gain on retroactive reinsurance, before tax [3]
54

29

16

—

—

—

 
83

—

Income tax expense (benefit) [8]
8

(44
)
7

10

(26
)
29

 
(36
)
3

Core earnings
$
309

$
390

$
360

$
405

$
367

$
372

 
$
699

$
739

ROE
 
 
 
 
 
 
 
 
 
Net income available to common stockholders [7]
11.0
%
12.7
%
16.1
%
12.0
%
11.6
%
15.2
%
 
 
 
Adjustments to reconcile net income available to common stockholders to core earnings:
 
 
 
 
 
 
 
 
 
Net realized capital gains, excluded from core earnings, before tax
(0.2
%)
(0.2
%)
(3.7
%)
(1.6
%)
(1.2
%)
(1.2
%)
 
 
 
Loss on reinsurance transaction, before tax [6]
—
%
1.0
%
1.0
%
1.0
%
1.0
%
—
%
 
 
 
Integration and transaction costs associated with an acquired business, before tax
0.4
%
0.5
%
0.4
%
0.3
%
0.1
%
—
%
 
 
 
Changes in loss reserves upon acquisition of a business, before tax [1]
—
%
1.1
%
1.1
%
1.1
%
1.1
%
—
%
 
 
 
Change in deferred gain on retroactive reinsurance, before tax [3]
0.9
%
0.5
%
0.2
%
—
%
—
%
—
%
 
 
 
Income tax expense (benefit) [8]
(0.2
%)
(0.6
%)
0.2
%
(0.3
%)
(0.3
%)
0.1
%
 
 
 
Impact of AOCI, excluded from core earnings ROE
1.4
%
0.5
%
0.8
%
0.8
%
0.6
%
0.7
%
 
 
 
Core earnings [7]
13.3
%
15.5
%
16.1
%
13.3
%
12.9
%
14.8
%
 
 
 
[1]
See [4] on page 2 for impact of Navigators Group acquisition for the three and six months ended June 30, 2019.
[2]
The three and six months ended June 30, 2020 included $213 of losses and loss adjustment expenses incurred arising from the COVID-19 pandemic, including $141 for commercial property, $37 for financial lines and other and $35 for workers' compensation net of favorable frequency.
[3]
Prior accident year development does not include a benefit for the portion of losses ceded to National Indemnity Company ("NICO") under the Navigators ADC which are recognized as a deferred gain under retroactive reinsurance accounting.
[4]
The three and six months ended June 30, 2020 included an increase in the allowance for credit losses ("ACL") on premiums receivable of $30 and $48 respectively, due to the economic impacts of COVID-19.
[5]
Excluding the non-core change in loss reserves upon acquisition of Navigators Group (see [4] on page 2), underwriting gain for the three and six months ended June 30, 2019 was $100 and $221, respectively.
[6]
See [2] on page 2 for impact of Navigators Group Acquisition.
[7]
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.
[8]
Represents federal income tax expense (benefit) related to before tax items not included in core earnings.
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).

8


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS (CONTINUED)
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
UNFAVORABLE (FAVORABLE) PRIOR ACCIDENT YEAR DEVELOPMENT
 
 
 
 
 
 
 
 
 
Auto liability - Commercial Lines
$
22

$
5

$
—

$
25

$
2

$
—

 
$
27

$
2

Auto liability - Personal Lines
(15
)
(6
)
(10
)
(23
)
—

(5
)
 
(21
)
(5
)
Homeowners
2

(2
)
3

(1
)
—

1

 
—

1

Marine
1

—

—

(2
)
10

—

 
1

10

Professional liability
4

1

(3
)
(1
)
33

—

 
5

33

Package business
(7
)
1

(15
)
(23
)
(14
)
5

 
(6
)
(9
)
General liability [1]
102

12

(1
)
19

37

6

 
114

43

Bond
(10
)
—

(1
)
(2
)
—

—

 
(10
)
—

Assumed Reinsurance
(7
)
—

—

—

3

—

 
(7
)
3

Commercial property
5

(7
)
5

(1
)
(13
)
(2
)
 
(2
)
(15
)
Workers’ compensation
(21
)
(17
)
(30
)
(40
)
(30
)
(20
)
 
(38
)
(50
)
Workers' compensation discount accretion
9

9

8

8

9

8

 
18

17

Catastrophes [2]
(400
)
(13
)
(15
)
(5
)
(14
)
(8
)
 
(413
)
(22
)
Uncollectible reinsurance
(2
)
—

(30
)
—

—

—

 
(2
)
—

Other reserve re-estimates
(5
)
11

31

(1
)
12

4

 
6

16

Prior accident year development before change in deferred gain
(322
)
(6
)
(58
)
(47
)
35

(11
)
 
(328
)
24

Change in deferred gain on retroactive reinsurance included in other liabilities [3]
54

29

16

—

—

—

 
83

—

Total prior accident year development [4]
$
(268
)
$
23

$
(42
)
$
(47
)
$
35

$
(11
)
 
$
(245
)
$
24

[1]
For the three and six months ended June 30, 2020, general liability reserve development included a reserve increase of $102 for sexual molestation and abuse claims.
[2]
For the three and six months ended June 30, 2020, catastrophe reserve development included a $289 subrogation benefit related to 2017 and 2018 California wildfires, including $260 in Personal Lines and $29 in Commercial Lines.
[3]
See [3] on page 8 for discussion related to the deferred gain on retroactive reinsurance. For the three months ended June 30, 2020, the $54 of adverse development due to the increase in the deferred gain primarily included increased reserves for construction account business within general liability, professional liability, and assumed reinsurance.
[4]
The prior accident year reserve increase of $68 related to the Navigators Group acquisition for the three and six months ended June 30, 2019 (see [4] on page 2) represented increases of $34 for general liability, $25 for professional liability, $10 for marine, $3 for assumed reinsurance and $2 for commercial automobile liability, partially offset by a reserve decrease of $6 for commercial property.




9


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNDERWRITING RATIOS
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
UNDERWRITING GAIN (LOSS)
$
89

$
120

$
57

$
137

$
3

$
121

 
$
209

$
124

UNDERWRITING RATIOS
 
 
 
 
 
 
 
 
 
Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
Current accident year before catastrophes [1]
64.1

59.4

61.8

61.2

60.8

59.7

 
61.7

60.3

Current accident year catastrophes
8.7

2.4

3.7

3.5

4.9

4.0

 
5.5

4.5

Prior accident year development [2][3]
(9.4
)
0.8

(1.4
)
(1.5
)
1.3

(0.4
)
 
(4.2
)
0.4

Total losses and loss adjustment expenses
63.4

62.6

64.2

63.1

67.0

63.3

 
63.0

65.2

Expenses [4][5]
33.2

33.2

33.7

32.0

32.6

31.8

 
33.2

32.2

Policyholder dividends
0.2

0.3

0.2

0.4

0.2

0.2

 
0.3

0.2

Combined ratio
96.9

96.1

98.1

95.5

99.9

95.3

 
96.5

97.7

Adjustments to reconcile combined ratio to underlying combined ratio:
 
 
 
 
 
 
 
 
 
Current accident year catastrophes and prior accident year development [2]
0.7

(3.2
)
(2.3
)
(2.0
)
(6.2
)
(3.6
)
 
(1.3
)
(4.9
)
Current accident year change in loss reserves upon acquisition of a business
—

—

—

—

(1.1
)
—

 
—

(0.6
)
Underlying combined ratio *
97.6

92.9

95.8

93.6

92.6

91.7

 
95.1

92.2

[1]
The three and six months ended June 30, 2019, includes an increase in loss reserves of $29 upon acquisition of Navigators Group (see [4] on page 2).
[2]
Includes an increase in loss reserves of $68 upon acquisition of Navigators Group (see [4] on page 2). This adjustment represents 2.4 points and 1.3 points, respectively, of the combined ratio for the three and six months ended June 30, 2019.
[3]
See [3] on page 8 for discussion related to the deferred gain on retroactive reinsurance.
[4]
Integration and transaction costs related to the acquisition of Navigators Group are not included in the expense ratio.
[5]
The three and six months ended June 30, 2020 included an increase in the ACL on premiums receivable of $30 and $48 respectively, due to the economic impacts of COVID-19 representing 1.1 points and 0.8 points of the expense ratio, respectively.
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).

10


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Written premiums
$
2,165

$
2,408

$
2,190

$
2,235

$
2,078

$
1,949

 
$
4,573

$
4,027

Change in unearned premium reserve
8

143

(86
)
(15
)
91

172

 
151

263

Earned premiums
2,157

2,265

2,276

2,250

1,987

1,777

 
4,422

3,764

Fee income
5

8

9

8

9

9

 
13

18

Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
Current accident year before catastrophes [1][2]
1,472

1,343

1,361

1,336

1,179

1,037

 
2,815

2,216

Current accident year catastrophes
193

55

89

74

90

70

 
248

160

Prior accident year development [1][3]
77

41

(37
)
(19
)
22

(10
)
 
118

12

Total losses and loss adjustment expenses
1,742

1,439

1,413

1,391

1,291

1,097

 
3,181

2,388

Amortization of DAC [4]
351

356

356

356

310

274

 
707

584

Underwriting expenses
387

443

461

410

392

337

 
830

729

Amortization of other intangible assets
7

7

7

7

2

2

 
14

4

Dividends to policyholders
7

8

6

12

6

6

 
15

12

Underwriting gain (loss) [5]
(332
)
20

42

82

(5
)
70

 
(312
)
65

Net servicing income (loss)
—

1

(1
)
2

2

(1
)
 
1

1

Net investment income
204

277

298

291

281

259

 
481

540

Net realized capital gains (losses)
64

(143
)
42

60

54

115

 
(79
)
169

Loss on reinsurance transaction [6]
—

—

—

—

(91
)
—

 
—

(91
)
Other expenses
(11
)
(6
)
(11
)
(20
)
(6
)
(1
)
 
(17
)
(7
)
Income (loss) before income taxes
(75
)
149

370

415

235

442

 
74

677

Income tax expense (benefit)
(9
)
28

68

79

44

79

 
19

123

Net income (loss)
(66
)
121

302

336

191

363

 
55

554

Adjustments to reconcile net income to core earnings:
 
 
 
 
 
 
 
 
 
Net realized capital losses (gains), excluded from core earnings, before tax
(61
)
143

(42
)
(59
)
(54
)
(113
)
 
82

(167
)
Integration and transaction costs associated with an acquired business, before tax [7]
8

8

12

19

6

1

 
16

7

Change in loss reserves upon acquisition of a business, before tax [1]
—

—

—

—

97

—

 
—

97

Change in deferred gain on retroactive reinsurance, before tax
54

29

16

—

—

—

 
83

—

Loss on reinsurance transaction, before tax [6]
—

—

—

—

91

—

 
—

91

Income tax expense (benefit) [8]
8

(39
)
4

7

(27
)
23

 
(31
)
(4
)
Core earnings (loss)
$
(57
)
$
262

$
292

$
303

$
304

$
274

 
$
205

$
578

[1]
See [4] on page 2 for impact related to Navigators Group acquisition.
[2]
See [2] on page 8 for impact related to COVID-19.
[3]
See [3] on page 8 for discussion related to the deferred gain on retroactive reinsurance.
[4]
Includes amortization of the Value of Business Acquired ("VOBA") intangible asset arising from the acquisition of Navigators Group. The VOBA asset approximates the DAC that had been recognized by Navigators Group prior to the acquisition.
[5]
Excluding the non-core change in loss reserves upon acquisition of Navigators Group (see [4] on page 2), underwriting gain for the three and six moths ended June 30,2019 was $92 and $162, respectively.
[6]
See [2] on page 2 for impact from Navigators Group acquisition.
[7]
Includes Navigators Group integration costs.
[8]
Represents federal income tax expense (benefit) related to before tax items not included in core earnings.

11


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
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Auto liability
$
22

$
5

$
—

$
25

$
2

$
—

 
$
27

$
2

Professional liability
4

1

(3
)
(1
)
33

—

 
5

33

Package business
(7
)
1

(15
)
(23
)
(14
)
5

 
(6
)
(9
)
General liability
102

12

(1
)
19

37

6

 
114

43

Marine
1

—

—

(2
)
10

—

 
1

10

Bond
(10
)
—

(1
)
(2
)
—

—

 
(10
)
—

Assumed Reinsurance
(7
)
—

—

—

3

—

 
(7
)
3

Commercial property
5

(7
)
5

(1
)
(13
)
(2
)
 
(2
)
(15
)
Workers’ compensation
(21
)
(17
)
(30
)
(40
)
(30
)
(20
)
 
(38
)
(50
)
Workers' compensation discount accretion
9

9

8

8

9

8

 
18

17

Catastrophes
(67
)
(5
)
(7
)
(5
)
(16
)
(12
)
 
(72
)
(28
)
Uncollectible reinsurance
—

—

(5
)
—

—

—

 
—

—

Other reserve re-estimates
(8
)
13

(4
)
3

1

5

 
5

6

Prior accident year development before change in deferred gain [1][2]
23

12

(53
)
(19
)
22

(10
)
 
35

12

Change in deferred gain on retroactive reinsurance included in other liabilities [3]
54

29

16

—

—

—

 
83

—

Total prior accident year development
$
77

$
41

$
(37
)
$
(19
)
$
22

$
(10
)
 
$
118

$
12

[1]
The three and six months ended June 30, 2019 included a reserve increase of $68 upon acquisition of Navigators Group. See footnote [4] on page 2 for further information.
[2]
See [1] and [2] on page 9 for discussion related to general liability and catastrophes prior year development.
[3]
See [3] on page 9 for discussion related to the change in deferred gain on retroactive reinsurance for the three months ended June 30, 2020.

12


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
UNDERWRITING RATIOS 
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
UNDERWRITING GAIN (LOSS)
$
(332
)
$
20

$
42

$
82

$
(5
)
$
70

 
$
(312
)
$
65

UNDERWRITING RATIOS
 
 
 
 
 
 
 
 
 
Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
Current accident year before catastrophes [1]
68.2

59.3

59.8

59.4

59.3

58.4

 
63.7

58.9

Current accident year catastrophes
8.9

2.4

3.9

3.3

4.5

3.9

 
5.6

4.3

Prior accident year development [2][3]
3.6

1.8

(1.6
)
(0.8
)
1.1

(0.6
)
 
2.7

0.3

Total losses and loss adjustment expenses
80.8

63.5

62.1

61.8

65.0

61.7

 
71.9

63.4

Expenses [4] [5]
34.3

35.2

35.8

34.0

35.0

34.0

 
34.8

34.5

Policyholder dividends
0.3

0.4

0.3

0.5

0.3

0.3

 
0.3

0.3

Combined ratio [6]
115.4

99.1

98.2

96.4

100.3

96.1

 
107.1

98.3

Adjustments to reconcile combined ratio to underlying combined ratio:
 
 
 
 
 
 
 
 
 
Current accident year catastrophes and prior accident year development
(12.5
)
(4.2
)
(2.3
)
(2.5
)
(5.6
)
(3.3
)
 
(8.3
)
(4.6
)
Current accident year change in loss reserves upon acquisition of a business
—

—

—

—

(1.5
)
—

 
—

(0.8
)
Underlying combined ratio
102.9

94.9

95.9

93.9

93.2

92.7

 
98.8

92.9

 
 
 
 
 
 
 
 
 
 
COMBINED RATIOS BY LINE OF BUSINESS
 
 
 
 
 
 
 
 
 
SMALL COMMERCIAL
 
 
 
 
 
 
 
 
 
Combined ratio
97.4

93.2

93.0

86.6

89.2

92.4

 
95.3

90.7

Adjustments to reconcile combined ratio to underlying combined ratio:
 
 
 
 
 
 
 
 
 
Current accident year catastrophes
(13.2
)
(2.6
)
(4.4
)
(1.9
)
(5.6
)
(3.4
)
 
(7.8
)
(4.5
)
Prior accident year development
8.7

(1.3
)
3.1

3.2

4.3

(0.1
)
 
3.6

2.1

Underlying combined ratio
92.9

89.3

91.7

87.9

87.8

88.9

 
91.1

88.3

MIDDLE & LARGE COMMERCIAL
 
 
 
 
 
 
 
 
 
Combined ratio
124.3

103.8

100.5

107.3

105.8

103.0

 
113.7

104.4

Adjustments to reconcile combined ratio to underlying combined ratio:
 
 
 
 
 
 
 
 
 
Current accident year catastrophes
(9.8
)
(3.6
)
(4.2
)
(5.4
)
(4.1
)
(5.0
)
 
(6.6
)
(4.6
)
Prior accident year development [2]
(1.6
)
0.2

1.1

(2.4
)
(0.7
)
0.2

 
(0.7
)
(0.3
)
Underlying combined ratio
112.9

100.4

97.4

99.6

100.9

98.1

 
106.4

99.5

GLOBAL SPECIALTY
 
 
 
 
 
 
 
 
 
Combined ratio [3] [6]
113.8

102.2

104.5

97.9

120.4

85.7

 
108.1

109.0

Adjustments to reconcile combined ratio to underlying combined ratio:
 
 
 
 
 
 
 
 
 
Current accident year catastrophes
(1.2
)
(0.6
)
(2.7
)
(2.9
)
(2.3
)
(2.3
)
 
(0.9
)
(2.3
)
Prior accident year development [2] [3]
(7.1
)
(5.2
)
(1.1
)
1.1

(18.2
)
5.9

 
(6.2
)
(10.3
)
Current accident year change in loss reserves upon acquisition of a business [1]
—

—

—

—

(9.1
)
—

 
—

(6.1
)
Underlying combined ratio [7]
105.5

96.4

100.8

96.2

90.7

89.4

 
101.0

90.3

[1]
The current accident year reserve increases of $29 related to the Navigators Group acquisition for the three and six months ended June 30, 2019 represented 1.5 points and 0.8 points, respectively, of the commercial lines combined ratio and 9.2 point and 6.2 points, respectively, of the global specialty combined ratio.
[2]
The prior accident year reserve increases of $68 related to the Navigators Group acquisition for the three and six months ended June 30, 2019, including $5 in middle & large commercial and $63 in global specialty, represented 3.4 points and 1.8 points, respectively, of the Commercial Lines combined ratio, 0.7 points and 0.3 points, respectively, of the middle & large commercial combined ratio and 20.1 points and 13.5 points, respectively, of the global specialty combined ratio.
[3]
See [3] on page 8 for discussion related to the change in deferred gain on retroactive reinsurance for the three months ended June 30, 2020.
[4]
Integration and transaction costs related to the acquisition of Navigators Group are not included in the expense ratio.
[5]
The three months ended June 30, 2020 included a $27 before-tax increase in the ACL on premiums receivable due to the economic impacts of COVID-19 representing 1.3 points of the expense ratio.
[6]
The three and six months ended June 30, 2020 included a change in deferred gain on retroactive reinsurance of $54 and $83, respectively, representing 2.5 points and 1.9 points, respectively of the Commercial Lines combined ratio and 9.7 points and 7.5 points, respectively, of the global specialty combined ratio.
[7]
For the three and six months ended June 30, 2019, included an underlying combined ratio on the business acquired from Navigators Group of 96.3 for the period from May 23, 2019 acquisition date through June 30, 2019.

13


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
SUPPLEMENTAL DATA
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
WRITTEN PREMIUMS
 
 
 
 
 
 
 
 
 
Small Commercial
$
877

$
1,011

$
881

$
897

$
960

$
1,010

 
$
1,888

$
1,970

Middle & Large Commercial
683

797

779

768

757

757

 
1,480

1,514

Middle Market
609

680

673

675

673

641

 
1,289

1,314

National Accounts and Other
74

117

106

93

84

116

 
191

200

Global Specialty
595

589

519

559

353

171

 
1,184

524

U.S. [1]
389

379

364

376

274

171

 
768

445

International [2]
119

98

113

115

43

—

 
217

43

Global Re [3]
87

112

42

68

36

—

 
199

36

Other
10

11

11

11

8

11

 
21

19

Total
$
2,165

$
2,408

$
2,190

$
2,235

$
2,078

$
1,949

 
$
4,573

$
4,027

EARNED PREMIUMS
 
 
 
 
 
 
 
 
 
Small Commercial
$
877

$
930

$
939

$
936

$
933

$
910

 
$
1,807

$
1,843

Middle & Large Commercial
713

772

786

765

729

703

 
1,485

1,432

Middle Market
625

673

683

674

637

608

 
1,298

1,245

National Accounts and Other
88

99

103

91

92

95

 
187

187

Global Specialty
557

552

542

538

314

153

 
1,109

467

U.S. [1]
368

374

360

362

241

153

 
742

394

International [2]
117

112

106

101

44

—

 
229

44

Global Re [3]
72

66

76

75

29

—

 
138

29

Other
10

11

9

11

11

11

 
21

22

Total
$
2,157

$
2,265

$
2,276

$
2,250

$
1,987

$
1,777

 
$
4,422

$
3,764

 
 
 
 
 
 
 
 
 
 
U.S. STANDARD COMMERCIAL LINES STATISTICAL PREMIUM INFORMATION [4]
 
 
 
 
 
 
 
 
 
New Business Premium
 
 
 
 
 
 
 
 
 
Small Commercial
$
118

$
157

$
138

$
150

$
183

$
175

 
$
275

$
358

Middle Market
$
99

$
125

$
121

$
146

$
177

$
140

 
$
224

$
317

Renewal Price Increases [5]
 
 
 
 
 
 
 
 
 
Standard Commercial Lines - Written
3.6
%
4.3
%
3.6
%
3.0
%
2.1
%
1.5
%
 
3.9
%
1.8
%
Standard Commercial Lines - Earned
3.8
%
3.1
%
2.5
%
2.1
%
2.0
%
2.3
%
 
3.5
%
2.2
%
Policy Count Retention [5]
 
 
 
 
 
 
 
 
 
Small Commercial [6]
88
%
84
%
83
%
83
%
83
%
84
%
 
86
%
83
%
Middle Market
79
%
77
%
77
%
83
%
81
%
81
%
 
78
%
81
%
Premium Retention [5]
 
 
 
 
 
 
 
 
 
Small Commercial
86
%
86
%
86
%
85
%
86
%
85
%
 
86
%
86
%
Middle Market
77
%
82
%
81
%
83
%
86
%
84
%
 
79
%
85
%
Policies in Force (in thousands) [5]
 
 
 
 
 
 
 
 
 
Small Commercial
1,297

1,291

1,291

1,294

1,291

1,280

 
 
 
Middle Market
60

62

62

64

64

64

 
 
 
[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").
[2]
International represents Navigators Group business written in either Lloyd's market or other international markets, which includes U.S.-based exposures.
[3]
Global Re includes assumed premiums previously written by Navigators Re.
[4]
Small commercial and middle market lines within middle & large commercial are generally referred to as standard commercial lines.
[5]
Middle market disclosures exclude loss sensitive and programs businesses.
[6]
Policy count retention for small commercial increased in the three month period ended June 30, 2020 largely due to suspension of cancellations for non-payment of premium as a result of providing policyholders additional time to pay their premium. Policy count retention in the third quarter of 2020 will likely be lower than the recent historical average as more policies are expected to cancel in the third quarter.

14


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Written premiums [1]
$
738

$
744

$
714

$
822

$
824

$
771

 
$
1,482

$
1,595

Change in unearned premium reserve
44

(30
)
(81
)
19

23

(28
)
 
14

(5
)
Earned premiums [1]
694

774

795

803

801

799

 
1,468

1,600

Fee income
9

9

9

9

10

9

 
18

19

Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
Current accident year before catastrophes
356

463

539

531

517

500

 
819

1,017

Current accident year catastrophes
55

19

26

32

48

34

 
74

82

Prior accident year development
(349
)
(18
)
(17
)
(28
)
4

(1
)
 
(367
)
3

Total losses and loss adjustment expenses
62

464

548

535

569

533

 
526

1,102

Amortization of DAC
61

64

65

64

65

65

 
125

130

Underwriting expenses
150

151

161

154

155

155

 
301

310

Amortization of other intangible assets
2

1

2

1

2

1

 
3

3

Underwriting gain
428

103

28

58

20

54

 
531

74

Net servicing income
3

2

2

4

4

3

 
5

7

Net investment income
28

41

45

46

46

42

 
69

88

Net realized capital gains (losses)
8

(23
)
7

9

8

19

 
(15
)
27

Other income (expense)
1

—

—

—

(2
)
1

 
1

(1
)
Income before income taxes
468

123

82

117

76

119

 
591

195

Income tax expense
97

25

16

23

14

23

 
122

37

Net income
371

98

66

94

62

96

 
469

158

Adjustments to reconcile net income (loss) to core earnings (losses):
 
 
 
 
 
 
 
 
 
Net realized capital losses (gains), excluded from core earnings, before tax
(8
)
23

(7
)
(9
)
(8
)
(18
)
 
15

(26
)
Income tax expense (benefit) [2]
1

(4
)
2

2

1

4

 
(3
)
5

Core earnings
$
364

$
117

$
61

$
87

$
55

$
82

 
$
481

$
137

[1]
Written and earned premiums for the three months ended June 30, 2020 included a reduction of $81 for automobile premium credits given to policyholders because of the reduction in miles driven resulting from shelter-in-place guidelines due to COVID-19.
[2]
Represents federal income tax expense (benefit) related to before tax items not included in core earnings.

15


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
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Auto liability
$
(15
)
$
(6
)
$
(10
)
$
(23
)
$
—

$
(5
)
 
$
(21
)
$
(5
)
Homeowners
2

(2
)
3

(1
)
—

1

 
—

1

Catastrophes [1]
(333
)
(8
)
(8
)
—

2

4

 
(341
)
6

Other reserve re-estimates, net
(3
)
(2
)
(2
)
(4
)
2

(1
)
 
(5
)
4

Total prior accident year development
$
(349
)
$
(18
)
$
(17
)
$
(28
)
$
4

$
(1
)
 
$
(367
)
$
3

[1] The three months ended June 30, 2020 included reductions in catastrophe reserves for various 2018 and 2019 wind and hail events and for the 2017 and 2018 California wildfires, including a $260 subrogation benefit from PG&E. See note [2] on page 9 for further discussion.


16


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
UNDERWRITING RATIOS

 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
UNDERWRITING GAIN
$
428

$
103

$
28

$
58

$
20

$
54

 
$
531

$
74

UNDERWRITING RATIOS





 
 


Losses and loss adjustment expenses





 
 


Current accident year before catastrophes
51.3

59.8

67.8

66.1

64.5

62.6

 
55.8

63.6

Current accident year catastrophes
7.9

2.5

3.3

4.0

6.0

4.3

 
5.0

5.1

Prior accident year development [1]
(50.3
)
(2.3
)
(2.1
)
(3.5
)
0.5

(0.1
)
 
(25.0
)
0.2

Total losses and loss adjustment expenses
8.9

59.9

68.9

66.6

71.0

66.7

 
35.8

68.9

Expenses
29.4

26.7

27.5

26.2

26.5

26.5

 
28.0

26.5

Combined ratio
38.3

86.7

96.5

92.8

97.5

93.2

 
63.8

95.4

Adjustment to reconcile combined ratio to underlying combined ratio:
 
 
 
 
 
 
 
 
 
Current accident year catastrophes and prior accident year development
42.4

(0.2
)
(1.2
)
(0.5
)
(6.5
)
(4.2
)
 
20.0

(5.3
)
Underlying combined ratio
80.7

86.6

95.3

92.3

91.0

89.1

 
83.8

90.1

PRODUCT





 
 
 
 
Automobile










 
 
 
 
Combined ratio
82.5

89.8

100.3

95.7

97.2

93.1

 
86.4

95.2

Adjustment to reconcile combined ratio to underlying combined ratio:
 
 
 
 
 
 
 
 
 
Current accident year catastrophes
(1.8
)
(0.3
)
(0.6
)
(1.2
)
(0.9
)
(0.6
)
 
(1.0
)
(0.7
)
Prior accident year development
5.6

1.5

2.8

4.2

0.5

1.1

 
3.4

0.8

Underlying combined ratio
86.3

90.9

102.5

98.8

96.7

93.6

 
88.8

95.2

Homeowners










 
 




Combined ratio
(45.8
)
79.2

87.8

86.5

99.3

93.1

 
16.7

96.2

Adjustment to reconcile combined ratio to underlying combined ratio:
 
 
 
 
 
 
 
 
 
Current accident year catastrophes
(20.1
)
(7.0
)
(9.2
)
(10.6
)
(17.6
)
(12.7
)
 
(13.6
)
(15.1
)
Prior accident year development
136.0

4.0

0.4

0.7

(2.6
)
(2.1
)
 
70.0

(2.3
)
Underlying combined ratio
70.1

76.2

79.1

76.6

79.2

78.4

 
73.1

78.8

[1] See note [1] on page 16 for explanation of the reduction in prior accident year development in the three months ended June 30, 2020.

17


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA

 
THREE MONTHS ENDED

SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019

Jun 30 2020
Jun 30 2019
DISTRIBUTION









WRITTEN PREMIUMS









AARP Direct
$
627

$
627

$
590

$
690

$
692

$
643


$
1,254

$
1,335

AARP Agency
50

57

58

59

60

62


107

122

Other Agency
54

52

58

64

63

58


106

121

Other
7

8

8

9

9

8


15

17

Total
$
738

$
744

$
714

$
822

$
824

$
771


$
1,482

$
1,595

EARNED PREMIUMS









AARP Direct
$
581

$
647

$
664

$
667

$
663

$
657


$
1,228

$
1,320

AARP Agency
52

60

61

62

63

65


112

128

Other Agency
54

60

63

64

66

68


114

134

Other
7

7

7

10

9

9


14

18

Total
$
694

$
774

$
795

$
803

$
801

$
799


$
1,468

$
1,600

PRODUCT LINE









WRITTEN PREMIUMS









Automobile
$
481

$
534

$
495

$
562

$
564

$
555


$
1,015

$
1,119

Homeowners
257

210

219

260

260

216


467

476

Total
$
738

$
744

$
714

$
822

$
824

$
771


$
1,482

$
1,595

EARNED PREMIUMS









Automobile
$
456

$
536

$
551

$
558

$
557

$
555


$
992

$
1,112

Homeowners
238

238

244

245

244

244


476

488

Total
$
694

$
774

$
795

$
803

$
801

$
799

 
$
1,468

$
1,600



18


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA (CONTINUED)

 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR)
 
 
 
 
New Business Premium
 
 
 
 
 
 
 
 
 
Automobile
$
65

$
58

$
47

$
58

$
59

$
56

 
$
123

$
115

Homeowners
$
18

$
17

$
16

$
21

$
20

$
16

 
$
35

$
36

Renewal Written Price Increases
 
 
 
 
 
 
 
 
 
Automobile
2.5
%
3.2
%
3.8
%
4.1
%
4.8
%
5.5
%
 
2.8
%
5.1
%
Homeowners
5.2
%
4.7
%
5.1
%
5.9
%
7.0
%
7.9
%
 
5.0
%
7.4
%
Renewal Earned Price Increases
 
 
 
 
 
 
 
 
 
Automobile
3.6
%
4.2
%
4.6
%
5.1
%
5.6
%
6.5
%
 
3.9
%
6.1
%
Homeowners
5.4
%
6.1
%
7.0
%
8.0
%
8.9
%
9.6
%
 
5.7
%
9.2
%
Policy Count Retention [1]
 
 
 
 
 
 
 
 
 
Automobile
90
%
86
%
85
%
85
%
85
%
85
%
 
88
%
85
%
Homeowners
89
%
86
%
85
%
86
%
85
%
84
%
 
87
%
85
%
Premium Retention
 
 
 
 
 
 
 
 
 
Automobile [2]
74
%
86
%
86
%
87
%
87
%
87
%
 
80
%
87
%
Homeowners
92
%
89
%
88
%
90
%
90
%
89
%
 
91
%
90
%
Policies in Force (in thousands)
 
 
 
 
 
 
 
 
 
Automobile
1,416

1,410

1,422

1,445

1,465

1,485

 
 
 
Homeowners
865

868

877

893

903

913

 
 
 
[1] Policy count retention increased in the three month period ended June 30, 2020 largely due to suspension of cancellations for non-payment of premium as a result of providing policyholders additional time to pay their premium (until May 31, 2020 in most states). Policy count retention in the third quarter of 2020 will likely be lower than the recent historical average as more policies are expected to cancel in the third quarter.
[2] Premium retention for automobile decreased in the three month period ended June 30, 2020 largely due to $81 of premium credits given to automobile policyholders. Excluding the impact of the premium credits, automobile premium retention would have been 88% in second quarter 2020. See footnote [1] on page 15 for further information.

19


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C OTHER OPERATIONS
INCOME STATEMENTS
 
 
THREE MONTHS ENDED
 
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Written premiums
$
—

$
—

$
—

$
—

$
—

$
—

 
$
—

$
—

Change in unearned premium reserve
—

—

(2
)
—

—

—

 
—

—

Earned premiums
—

—

2

—

—

—

 
—

—

Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
Prior accident year development
4

—

12

—

9

—

 
4

9

Total losses and loss adjustment expenses
4

—

12

—

9

—

 
4

9

Underwriting expenses
3

3

3

3

3

3

 
6

6

Underwriting loss
(7
)
(3
)
(13
)
(3
)
(12
)
(3
)
 
(10
)
(15
)
Net investment income
10

16

20

21

21

22

 
26

43

Net realized capital gains (losses)
2

(7
)
3

4

4

9

 
(5
)
13

Income before income taxes
5

6

10

22

13

28

 
11

41

Income tax expense
—

1

1

4

2

5

 
1

7

Net income
5

5

9

18

11

23

 
10

34

Adjustments to reconcile net income to core earnings (losses):
 
 
 
 
 
 
 
 
 
Net realized capital losses (gains), excluded from core earnings, before tax
(2
)
7

(3
)
(4
)
(3
)
(9
)
 
5

(12
)
Income tax expense (benefit) [1]
(1
)
(1
)
1

1

—

2

 
(2
)
2

Core earnings
$
2

$
11

$
7

$
15

$
8

$
16

 
$
13

$
24

[1]
Represents federal income tax expense (benefit) related to before tax items not included in core earnings.


20


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
INCOME STATEMENTS
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Earned premiums
$
1,378

$
1,348

$
1,345

$
1,337

$
1,377

$
1,364

 
$
2,726

$
2,741

Fee income
45

43

45

45

45

45

 
88

90

Net investment income
92

115

123

121

121

121

 
207

242

Net realized capital gains (losses)
3

(8
)
8

14

7

5

 
(5
)
12

Total revenues
1,518

1,498

1,521

1,517

1,550

1,535

 
3,016

3,085

Benefits, losses and loss adjustment expenses [1]
1,033

1,007

957

983

1,062

1,053

 
2,040

2,115

Amortization of DAC
13

13

13

14

14

13

 
26

27

Insurance operating costs and other expenses [2]
340

339

343

329

324

315

 
679

639

Amortization of other intangible assets
9

11

10

10

11

10

 
20

21

Total benefits, losses and expenses
1,395

1,370

1,323

1,336

1,411

1,391

 
2,765

2,802

Income before income taxes
123

128

198

181

139

144

 
251

283

Income tax expense
22

24

39

35

26

26

 
46

52

Net income
101

104

159

146

113

118

 
205

231

Adjustments to reconcile net income to core earnings:
 
 
 
 
 
 
 
 
 
Net realized capital losses (gains), excluded from core earnings, before tax
(2
)
8

(7
)
(15
)
(6
)
(5
)
 
6

(11
)
Integration and transaction costs associated with acquired business, before tax
5

5

8

9

10

9

 
10

19

Income tax expense (benefit) [3]
(2
)
(2
)
1

1

(2
)
—

 
(4
)
(2
)
Core earnings
$
102

$
115

$
161

$
141

$
115

$
122

 
$
217

$
237

Margin
 
 
 
 
 
 
 
 
 
Net income margin
6.7
%
6.9
%
10.5
%
9.6
%
7.3
%
7.7
%
 
6.8
%
7.5
%
Core earnings margin*
6.9
%
7.8
%
10.6
%
9.4
%
7.5
%
8.0
%
 
7.3
%
7.7
%
ROE
 
 
 
 
 
 
 
 
 
Net income available to common stockholders [4]
12.0
%
13.4
%
14.2
%
12.9
%
11.2
%
11.1
%
 
 
 
Adjustments to reconcile net income available to common stockholders to core earnings:
 
 
 
 
 
 
 
 
 
Net realized capital losses (gains), excluded from core earnings, before tax
(0.4
%)
(0.6
%)
(1.0
%)
(0.1
%)
0.4
%
0.6
%
 
 
 
Integration and transaction costs associated with acquired business, before tax
0.7
%
0.9
%
1.1
%
1.2
%
1.3
%
1.4
%
 
 
 
Income tax benefit [3]
(0.1
%)
(0.1
%)
—
%
(0.4
%)
(0.1
%)
(0.1
%)
 
 
 
Impact of AOCI, excluded from core earnings ROE
1.5
%
0.6
%
0.5
%
0.7
%
0.5
%
0.3
%
 
 
 
Core earnings [4]
13.7
%
14.2
%
14.8
%
14.3
%
13.3
%
13.3
%
 
 
 
[1]
The three and six months ended June 30, 2020 included $38 and $54, respectively, of incurred benefits and losses arising from the COVID-19 pandemic, with benefits and losses in the six month period including $43 in group life claims and $11 in losses from short-term disability and New York Paid Family Leave claims.
[2]
The three and six months ended June 30, 2020 included $14 and $16, respectively, of before tax increases in the ACL on uncollectible premiums receivable due to the economic impacts of COVID-19.
[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.
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).

21


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
SUPPLEMENTAL DATA
 
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
PREMIUMS
 
 
 
 
 
 
 
 
 
Fully insured ongoing premiums
 
 
 
 
 
 
 
 
 
Group disability
$
672

$
660

$
657

$
652

$
679

$
659

 
$
1,332

$
1,338

Group life
605

605

620

621

633

641

 
1,210

1,274

Other [1]
72

58

67

64

61

62

 
130

123

Total fully insured ongoing premiums
1,349

1,323

1,344

1,337

1,373

1,362

 
2,672

2,735

Total buyouts [2]
29

25

1

—

4

2

 
54

6

Total premiums
$
1,378

$
1,348

$
1,345

$
1,337

$
1,377

$
1,364

 
$
2,726

$
2,741

SALES (GROSS ANNUALIZED NEW PREMIUMS)
 
 
 
 
 
 
 
 
 
Fully insured ongoing sales
 
 
 
 
 
 
 
 
 
Group disability
$
65

$
213

$
43

$
29

$
48

$
219

 
$
278

$
267

Group life
73

136

16

30

43

143

 
209

186

Other [1]
11

36

8

15

8

45

 
47

53

Total fully insured ongoing sales
149

385

67

74

99

407

 
534

506

Total buyouts [2]
29

25

1

—

4

2

 
54

6

Total sales
$
178

$
410

$
68

$
74

$
103

$
409

 
$
588

$
512

RATIOS, EXCLUDING BUYOUTS
 
 
 
 
 
 
 
 
 
Group disability loss ratio [3]
62.6
%
71.5
%
62.0
%
64.4
%
72.9
%
69.6
%
 
67.0
%
71.3
%
Group life loss ratio [4]
85.9
%
74.6
%
78.1
%
80.8
%
77.8
%
81.3
%
 
80.3
%
79.6
%
Total loss ratio
72.0
%
71.9
%
68.8
%
71.1
%
74.6
%
74.7
%
 
72.0
%
74.7
%
Expense ratio [5]
25.6
%
26.2
%
25.8
%
24.9
%
23.9
%
23.4
%
 
25.9
%
23.6
%
[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 six months ended June 30, 2020 included buyout premiums primarily from two large accounts.
[3]
The three months ended June 30, 2020 and March 31, 2020 included (0.7) points and 2.3 points, respectively, of incurred losses from COVID-19 short-term disability and New York paid family leave claims.
[4]
The three and six months ended June 30, 2020 included 7.1 points and 3.6 points, respectively, of incurred losses from COVID-19 group life claims.
[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.




22



THE HARTFORD FINANCIAL SERVICES GROUP, INC.
HARTFORD FUNDS
INCOME STATEMENTS
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Investment management fees
$
165

$
178

$
185

$
183

$
180

$
171

 
$
343

$
351

Shareholder servicing fees
20

22

22

22

21

21

 
42

42

Other revenue
43

48

51

50

52

48

 
91

100

Net realized capital gains (losses)
8

(11
)
2

1

—

2

 
(3
)
2

Total revenues
236

237

260

256

253

242

 
473

495

Sub-advisory expense
60

64

67

67

65

62

 
124

127

Employee compensation and benefits
28

32

28

26

28

32

 
60

60

Distribution and service
75

80

83

84

84

81

 
155

165

General, administrative and other [1]
23

17

31

28

29

30

 
40

59

Total expenses
186

193

209

205

206

205

 
379

411

Income before income taxes
50

44

51

51

47

37

 
94

84

Income tax expense
11

8

10

11

9

7

 
19

16

Net income
$
39

$
36

$
41

$
40

$
38

$
30

 
$
75

$
68

Adjustments to reconcile net income to core earnings:
 
 
 
 
 
 
 
 
 
Net realized capital losses (gains), excluded from core earnings, before tax
(8
)
11

(1
)
(1
)
—

(2
)
 
3

(2
)
Income tax expense (benefit) [2]
2

(3
)
—

—

—

—

 
(1
)
—

Core earnings
$
33

$
44

$
40

$
39

$
38

$
28

 
$
77

$
66

Daily average Hartford Funds AUM
$110,864
$119,632
$121,709
$119,738
$117,875
$112,210
 
$
115,248

$
115,058

Return on assets (bps, net of tax) [3]
 
 
 
 
 
 
 
 
 
Net income
14.1

12.0

13.0

13.3

12.9

10.9

 
13.0

11.9

Core earnings*
11.9

14.7

12.7

12.9

12.9

10.3

 
13.4

11.5

ROE
 
 
 
 
 
 
 
 
 
Net income available to common stockholders [4]
48.2
%
50.2
%
49.7
%
48.0
%
49.7
%
51.3
%
 
 
 
Adjustments to reconcile net income available to common stockholders to core earnings:
 
 
 
 
 
 
 
 
 
Net realized capital losses (gains) excluded from core earnings, before tax
0.3
%
3.0
%
(1.4
%)
—
%
0.4
%
0.7
%
 
 
 
Income tax benefit [2]
(0.3
%)
(1.0
%)
—
%
(0.3
%)
(0.4
%)
(0.4
%)
 
 
 
Impact of AOCI, excluded from core earnings ROE
0.1
%
(0.7
%)
(0.5
%)
(0.6
%)
(0.6
%)
(0.4
%)
 
 
 
Core earnings [4]
48.3
%
51.5
%
47.8
%
47.1
%
49.1
%
51.2
%
 
 
 
[1]
The three months ended March 31, 2020 and six months ended June 30, 2020 included a $12 reduction in contingent consideration payable related to the 2016 acquisition of Lattice Strategies.
[2]
Represents federal income tax 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.

* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).

23


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
HARTFORD FUNDS
ASSET VALUE ROLLFORWARD
ASSETS UNDER MANAGEMENT BY ASSET CLASS
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Equity Funds
 
 
 
 
 
 
 
 
 
Beginning balance
$
55,076

$
71,629

$
66,999

$
68,474

$
66,158

$
56,986

 
$
71,629

$
56,986

Sales
5,038

5,313

2,888

3,003

3,761

4,358

 
10,351

8,119

Redemptions
(5,083
)
(5,701
)
(3,554
)
(3,867
)
(4,153
)
(3,893
)
 
(10,784
)
(8,046
)
Net flows
(45
)
(388
)
(666
)
(864
)
(392
)
465

 
(433
)
73

Change in market value and other
11,807

(16,165
)
5,296

(611
)
2,708

8,707

 
(4,358
)
11,415

Ending balance
$
66,838

$
55,076

$
71,629

$
66,999

$
68,474

$
66,158

 
$
66,838

$
68,474

Fixed Income Funds
 
 
 
 
 
 
 
 
 
Beginning balance
$
14,558

$
16,130

$
15,685

$
15,569

$
15,070

$
14,467

 
$
16,130

$
14,467

Sales
1,667

1,782

1,421

1,420

1,274

1,314

 
3,449

2,588

Redemptions
(2,241
)
(2,632
)
(1,122
)
(1,491
)
(1,121
)
(1,138
)
 
(4,873
)
(2,259
)
Net flows
(574
)
(850
)
299

(71
)
153

176

 
(1,424
)
329

Change in market value and other
787

(722
)
146

187

346

427

 
65

773

Ending balance
$
14,771

$
14,558

$
16,130

$
15,685

$
15,569

$
15,070

 
$
14,771

$
15,569

Multi-Strategy Investments Funds [1]
 
 
 
 
 
 
 
 
 
Beginning balance
$
18,407

$
21,332

$
20,429

$
20,095

$
19,540

$
18,233

 
$
21,332

$
18,233

Sales
801

1,026

952

776

672

640

 
1,827

1,312

Redemptions
(733
)
(1,145
)
(825
)
(768
)
(823
)
(869
)
 
(1,878
)
(1,692
)
Net flows
68

(119
)
127

8

(151
)
(229
)
 
(51
)
(380
)
Change in market value and other
2,051

(2,806
)
776

326

706

1,536

 
(755
)
2,242

Ending balance
$
20,526

$
18,407

$
21,332

$
20,429

$
20,095

$
19,540

 
$
20,526

$
20,095

Exchange-traded Products ("ETP") AUM
 
 
 
 
 
 
 
 
 
Beginning balance
$
2,574

$
3,442

$
2,847

$
2,751

$
2,457

$
1,871

 
$
3,442

$
1,871

Net flows
(124
)
(67
)
458

127

285

462

 
(191
)
747

Change in market value and other
136

(801
)
137

(31
)
9

124

 
(665
)
133

Ending balance
$
2,586

$
2,574

$
3,442

$
2,847

$
2,751

$
2,457

 
$
2,586

$
2,751

Mutual Fund and ETP AUM
 
 
 
 
 
 
 
 
 
Beginning balance
$
90,615

$
112,533

$
105,960

$
106,889

$
103,225

$
91,557

 
$
112,533

$
91,557

Sales - mutual fund
7,506

8,121

5,261

5,199

5,707

6,312

 
15,627

12,019

Redemptions - mutual fund
(8,057
)
(9,478
)
(5,501
)
(6,126
)
(6,097
)
(5,900
)
 
(17,535
)
(11,997
)
Net flows - ETP
(124
)
(67
)
458

127

285

462

 
(191
)
747

Net flows - mutual fund and ETP
(675
)
(1,424
)
218

(800
)
(105
)
874

 
(2,099
)
769

Change in market value and other
14,781

(20,494
)
6,355

(129
)
3,769

10,794

 
(5,713
)
14,563

Ending balance
104,721

90,615

112,533

105,960

106,889

103,225

 
104,721

106,889

Talcott Resolution life and annuity separate account AUM [2]
13,123

11,538

14,425

14,021

14,412

14,364

 
13,123

14,412

Hartford Funds AUM
$
117,844

$
102,153

$
126,958

$
119,981

$
121,301

$
117,589

 
$
117,844

$
121,301

[1]
Includes balanced, allocation, and alternative investment products.
[2]
Represents AUM of the the life and annuity business sold in May 2018 that is still managed by the Company's Hartford Funds segment.

24



THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
 
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Fee income
$
12

$
13

$
12

$
14

$
11

$
13

 
$
25

$
24

Earned premiums
5

4

5

4

1

—

 
9

1

Other revenue [1]
68

(2
)
23

20

9

34

 
66

43

Net investment income
4

9

15

10

17

24

 
13

41

Net realized capital gains (losses)
24

(39
)
1

1

7

13

 
(15
)
20

Total revenues
113

(15
)
56

49

45

84

 
98

129

Benefits, losses and loss adjustment expenses [2]
6

6

9

5

3

2

 
12

5

Insurance operating costs and other expenses
29

21

17

20

33

13

 
50

46

Loss on extinguishment of debt
—

—

—

90

—

—

 
—

—

Interest expense
57

64

65

67

63

64

 
121

127

Total expenses
92

91

91

182

99

79

 
183

178

Income (loss) before income taxes
21

(106
)
(35
)
(133
)
(54
)
5

 
(85
)
(49
)
Income tax expense (benefit)
3

(15
)
(6
)
(34
)
(11
)
5

 
(12
)
(6
)
Net income (loss)
18

(91
)
(29
)
(99
)
(43
)
—

 
(73
)
(43
)
Preferred stock dividends
5

5

5

11

—

5

 
10

5

Net income (loss) available to common stockholders
13

(96
)
(34
)
(110
)
(43
)
(5
)
 
(83
)
(48
)
Adjustments to reconcile net income available to common stockholders to core earnings:
 
 
 
 
 
 
 
 
 
Net realized capital losses (gains), excluded from core earnings, before tax
(26
)
40

(2
)
—

(8
)
(13
)
 
14

(21
)
Loss on extinguishment of debt, before tax
—

—

—

90

—

—

 
—

—

Transaction costs, before tax [3]
—

—

1

1

15

—

 
—

15

Income tax expense (benefit) [4]
7

(8
)
(4
)
(18
)
1

3


(1
)
4

Core losses
$
(6
)
$
(64
)
$
(39
)
$
(37
)
$
(35
)
$
(15
)
 
$
(70
)
$
(50
)
[1]
The three months ended June 30, 2020 and 2019 include $68 and $3, respectively, and the six months ended June 30, 2020 and 2019 include $64 and $31, respectively, of income 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]
Related to transaction costs incurred in connection with the acquisition of Navigators Group that are included in insurance operating costs and other expenses.
[4]
Represents federal income tax expense (benefit) related to before tax items not included in core earnings.

25



THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
CONSOLIDATED

 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Net Investment Income
 
 
 
 
 
 
 
 
 
Fixed maturities [1]
 
 
 
 
 
 
 
 
 
Taxable
$
280

$
298

$
319

$
306

$
296

$
284

 
$
578

$
580

Tax-exempt
77

79

81

86

90

97

 
156

187

Total fixed maturities
357

377

400

392

386

381

 
734

767

Equity securities
6

12

15

12

12

7

 
18

19

Mortgage loans
42

42

47

37

41

40

 
84

81

Limited partnerships and other alternative investments [2]
(71
)
58

51

65

60

56

 
(13
)
116

Other [3]
21

(12
)
11

5

7

9

 
9

16

Subtotal
355

477

524

511

506

493

 
832

999

Investment expense
(16
)
(18
)
(21
)
(21
)
(18
)
(23
)
 
(34
)
(41
)
Total net investment income
$
339

$
459

$
503

$
490

$
488

$
470

 
$
798

$
958

Annualized investment yield, before tax [4]
2.7
%
3.7
%
4.0
%
4.0
%
4.2
%
4.1
%
 
3.2
%
4.1
%
Annualized limited partnerships and other alternative investment yield, before tax [4]
(15.3
%)
13.2
%
11.9
%
15.3
%
13.9
%
13.4
%
 
(1.5
%)
13.9
%
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4]*
3.4
%
3.3
%
3.8
%
3.6
%
3.8
%
3.7
%
 
3.4
%
3.8
%
Annualized investment yield, net of tax [4]
2.2
%
3.0
%
3.3
%
3.3
%
3.4
%
3.4
%
 
2.6
%
3.4
%
Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4]*
2.8
%
2.7
%
3.1
%
3.0
%
3.1
%
3.1
%
 
2.8
%
3.1
%
Average reinvestment rate [5]
2.7
%
2.9
%
3.1
%
3.1
%
3.5
%
4.1
%
 
2.8
%
3.7
%
Average sales/maturities yield [6]
3.6
%
3.3
%
3.8
%
4.1
%
4.0
%
4.1
%
 
3.5
%
4.0
%
Portfolio duration (in years) [7]
5.0

4.8

5.0

4.9

4.9

4.8

 
5.0

4.9

[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.
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).


26


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
PROPERTY & CASUALTY

 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Net Investment Income
 
 
 
 
 
 
 
 
 
Fixed maturities [1]
 
 
 
 
 
 
 
 
 
Taxable
$
206

$
216

$
232

$
218

$
201

$
182

 
$
422

$
383

Tax-exempt
57

58

59

65

68

73

 
115

141

Total fixed maturities
263

274

291

283

269

255

 
537

524

Equity securities
3

10

9

9

8

5

 
13

13

Mortgage loans
30

29

32

26

28

27

 
59

55

Limited partnerships and other alternative investments [2]
(62
)
48

38

52

50

46

 
(14
)
96

Other [3]
19

(14
)
9

3

7

7

 
5

14

Subtotal
253

347

379

373

362

340

 
600

702

Investment expense
(11
)
(13
)
(16
)
(15
)
(14
)
(17
)
 
(24
)
(31
)
Total net investment income
$
242

$
334

$
363

$
358

$
348

$
323

 
$
576

$
671

Annualized investment yield, before tax [4]
2.6
%
3.6
%
4.0
%
4.0
%
4.2
%
4.2
%
 
3.1
%
4.2
%
Annualized limited partnerships and other alternative investment yield, before tax [4]
(15.9
%)
13.1
%
10.6
%
14.6
%
13.9
%
13.0
%
 
(1.8
%)
13.6
%
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4]
3.5
%
3.2
%
3.7
%
3.6
%
3.8
%
3.8
%
 
3.3
%
3.8
%
Annualized investment yield, net of tax [4]
2.2
%
3.0
%
3.3
%
3.3
%
3.5
%
3.6
%
 
2.6
%
3.5
%
Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4]
2.9
%
2.7
%
3.1
%
3.0
%
3.2
%
3.2
%
 
2.8
%
3.2
%
Average reinvestment rate [5]
2.7
%
2.9
%
3.0
%
3.1
%
3.5
%
4.1
%
 
2.8
%
3.7
%
Average sales/maturities yield [6]
3.5
%
3.2
%
3.8
%
4.1
%
3.9
%
4.1
%
 
3.4
%
4.0
%
Portfolio duration (in years) [7]
4.9

4.7

4.8

4.8

4.8

4.9

 
4.9

4.8

Footnotes [1] through [7] are explained on page 26.



27


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
GROUP BENEFITS

 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Net Investment Income
 
 
 
 
 
 
 
 
 
Fixed maturities [1]
 
 
 
 
 
 
 
 
 
Taxable
$
73

$
76

$
79

$
81

$
81

$
81

 
$
149

$
162

Tax-exempt
18

19

20

20

20

22

 
37

42

Total fixed maturities
91

95

99

101

101

103

 
186

204

Equity securities
1

1

—

1

1

—

 
2

1

Mortgage loans
12

13

15

11

13

13

 
25

26

Limited partnerships and other alternative investments [2]
(9
)
10

13

13

10

10

 
1

20

Other [3]
2

1

1

1

—

1

 
3

1

Subtotal
97

120

128

127

125

127

 
217

252

Investment expense
(5
)
(5
)
(5
)
(6
)
(4
)
(6
)
 
(10
)
(10
)
Total net investment income
$
92

$
115

$
123

$
121

$
121

$
121

 
$
207

$
242

Annualized investment yield, before tax [4]
3.2
%
4.0
%
4.3
%
4.2
%
4.2
%
4.2
%
 
3.6
%
4.2
%
Annualized limited partnerships and other alternative investment yield, before tax [4]
(12.4
%)
14.0
%
18.2
%
19.0
%
14.0
%
15.6
%
 
0.3
%
15.2
%
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4]
3.6
%
3.7
%
3.9
%
3.8
%
3.9
%
3.9
%
 
3.7
%
3.9
%
Annualized investment yield, net of tax [4]
2.6
%
3.3
%
3.5
%
3.4
%
3.4
%
3.4
%
 
2.9
%
3.4
%
Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4]
3.0
%
3.0
%
3.2
%
3.1
%
3.2
%
3.2
%
 
3.0
%
3.2
%
Average reinvestment rate [5]
3.3
%
3.2
%
3.3
%
3.4
%
3.8
%
4.0
%
 
3.3
%
3.9
%
Average sales/maturities yield [6]
3.9
%
4.0
%
4.1
%
4.3
%
4.2
%
4.0
%
 
4.0
%
4.1
%
Portfolio duration (in years) [7]
6.1

5.9

6.1

6.0

5.9

5.8

 
6.1

5.9

Footnotes [1] through [7] are explained on page 26.





28


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET INVESTMENT INCOME
CONSOLIDATED

 
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Net Investment Income by Segment
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
 
Net Investment Income
 
 
 
 
 
 
 
 
 
 
Commercial Lines
$
204

$
277

$
298

$
291

$
281

$
259

 
$
481

$
540

 
Personal Lines
28

41

45

46

46

42

 
69

88

 
P&C Other Operations
10

16

20

21

21

22

 
26

43

 
Total Property & Casualty
242

334

363

358

348

323

 
576

671

 
Group Benefits
92

115

123

121

121

121

 
207

242

 
Hartford Funds
1

1

2

1

2

2

 
2

4

 
Corporate
4

9

15

10

17

24

 
13

41

 
Total net investment income by segment
$
339

$
459

$
503

$
490

$
488

$
470

 
$
798

$
958

 
 
 
 
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Net Investment Income From Limited Partnerships and Other Alternative Investments
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
 
Total Property & Casualty
$
(62
)
$
48

$
38

$
52

$
50

$
46

 
$
(14
)
$
96

 
Group Benefits
(9
)
10

13

13

10

10

 
1

20

 
Total net investment income from limited partnerships and other alternative investments [1]
$
(71
)
$
58

$
51

$
65

$
60

$
56

 
$
(13
)
$
116

[1]
Amounts are included above in total net investment income by segment.


29


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
CONSOLIDATED

 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Net Realized Capital Gains (Losses)
 
 
 
 
 
 
 
 
 
Gross gains on sales
$
96

$
78

$
44

$
77

$
69

$
44

 
$
174

$
113

Gross losses on sales
(22
)
(8
)
(12
)
(4
)
(19
)
(21
)
 
(30
)
(40
)
Equity securities [1]
75

(386
)
73

19

30

132

 
(311
)
162

Change in ACL on fixed maturities, AFS
(20
)
(12
)
 
 
 
 
 
(32
)


Change in ACL on mortgage loans
(22
)
(2
)
 
 
 
 
 
(24
)


Intent-to-sell impairments
—

(5
)
—

—

—

—

 
(5
)
—

Net impairment losses
 
 
—

(1
)
—

(2
)
 
 
(2
)
Valuation allowances on mortgage loans
 
 
—

—

1

—

 
 
1

Other net gains (losses) [2]
2

104

(42
)
(2
)
(1
)
10


106

9

Total net realized capital gains (losses)
109

(231
)
63

89

80

163

 
(122
)
243

Net realized capital gains, included in core earnings, before tax
(2
)
(1
)
(1
)
(1
)
(1
)
(3
)
 
(3
)
(4
)
Total net realized capital gains (losses) excluded from core earnings, before tax
107

(232
)
62

88

79

160

 
(125
)
239

Income tax benefit (expense) related to net realized capital gains (losses) excluded from core earnings
(21
)
48

(11
)
(18
)
(18
)
(34
)
 
27

(52
)
Total net realized capital gains (losses) excluded from core earnings, after tax
$
86

$
(184
)
$
51

$
70

$
61

$
126

 
$
(98
)
$
187

[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 three and six months ended June 30, 2020 included $0 and $75, respectively, of realized gains on terminated derivatives used to hedge against a decline in equity market levels.




30


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
 
Amount [1]
Percent
Amount
Percent
Amount [1]
Percent
Amount
Percent
Amount
Percent
Total investments
$
53,028

100.0
%
$
50,359

100.0
%
$
53,030

100.0
%
$
52,577

100.0
%
$
50,769

100.0
%
Asset-backed securities
$
1,416

3.3
%
$
1,348

3.4
%
$
1,476

3.5
%
$
1,337

3.1
%
$
1,029

2.5
%
Collateralized loan obligations
2,187

5.2
%
1,989

5.0
%
2,183

5.2
%
2,158

5.1
%
1,925

4.7
%
Commercial mortgage-backed securities
4,211

10.0
%
4,302

10.6
%
4,338

10.3
%
4,254

10.1
%
3,905

9.5
%
Corporate
18,563

44.0
%
16,798

41.8
%
17,396

41.4
%
17,801

42.0
%
16,748

40.7
%
Foreign government/government agencies
972

2.3
%
1,063

2.6
%
1,123

2.7
%
1,117

2.6
%
1,072

2.6
%
Municipal [2]
9,394

22.2
%
9,497

23.6
%
9,498

22.5
%
9,895

23.4
%
10,278

25.0
%
Residential mortgage-backed securities
3,895

9.3
%
4,086

10.2
%
4,869

11.4
%
4,732

11.1
%
4,566

11.0
%
U.S. Treasuries
1,562

3.7
%
1,122

2.8
%
1,265

3.0
%
1,095

2.6
%
1,643

4.0
%
Total fixed maturities, available-for-sale
$
42,200

100.0
%
$
40,205

100.0
%
$
42,148

100.0
%
$
42,389

100.0
%
$
41,166

100.0
%
U.S. government/government agencies
$
5,204

12.3
%
$
5,126

12.8
%
$
5,644

13.4
%
$
5,588

13.2
%
$
5,714

13.9
%
AAA
6,471

15.3
%
6,395

15.9
%
6,617

15.7
%
6,360

15.0
%
6,214

15.1
%
AA
8,013

19.0
%
7,755

19.3
%
8,146

19.3
%
8,202

19.4
%
7,890

19.1
%
A
11,289

26.8
%
10,541

26.2
%
10,843

25.7
%
10,894

25.7
%
10,552

25.6
%
BBB
9,590

22.7
%
8,962

22.3
%
9,530

22.6
%
9,850

23.2
%
9,246

22.5
%
BB
1,112

2.6
%
974

2.4
%
877

2.1
%
994

2.3
%
1,076

2.6
%
B
481

1.2
%
408

1.0
%
456

1.1
%
463

1.1
%
445

1.1
%
CCC
31

0.1
%
35

0.1
%
26

0.1
%
29

0.1
%
27

0.1
%
CC & below
9

—
%
9

—
%
9

—
%
9

—
%
2

—
%
Total fixed maturities, available-for-sale
$
42,200

100.0
%
$
40,205

100.0
%
$
42,148

100.0
%
$
42,389

100.0
%
$
41,166

100.0
%
[1]
Amount represents the value at which the assets are presented in the Consolidating Balance Sheets (page 4).
[2]
Primarily comprised of $6.9 billion in Property & Casualty, $2.3 billion in Group Benefits, and $0.2 billion in Corporate as of June 30, 2020.

31


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
JUNE 30, 2020

 
Cost or
Amortized Cost
Fair Value
Percent of Total
Invested Assets
Top Ten Corporate Fixed Maturity, AFS and Equity Exposures by Sector
 
 
 
Financial services
$
4,607

$
4,864

9.2
%
Consumer non-cyclical
2,713

2,954

5.6
%
Technology and communications
2,512

2,816

5.3
%
Utilities
1,992

2,182

4.1
%
Capital goods
1,551

1,625

3.1
%
Energy [1]
1,487

1,542

2.9
%
Consumer cyclical
1,168

1,237

2.3
%
Transportation
689

728

1.4
%
Basic industry
632

664

1.2
%
Other
688

707

1.3
%
Total
$
18,039

$
19,319

36.4
%
Top Ten Exposures by Issuer [2]
 
 
 
Commonwealth of Massachusetts
$
209

$
224

0.4
%
IBM Corporation
190

215

0.4
%
Comcast Corporation
177

209

0.4
%
Wells Fargo & Company
202

208

0.4
%
New York City Transitional Finance Authority
195

202

0.4
%
Apple Inc.
172

202

0.4
%
New York State Dormitory Authority
190

201

0.4
%
Bank of America Corporation
175

197

0.4
%
Morgan Stanley
170

191

0.3
%
Bristol-Myers Squibb Company
167

190

0.3
%
Total
$
1,847

$
2,039

3.8
%
[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.


32



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, 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, other expenses not allocated to the reporting segments and the results of Y-Risk, a business of the Company that provides insurance for businesses in the sharing and on-demand economy. 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 standard 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, new business, premium retention, policy count retention and renewal earned and written price increases. Premium retention is defined as renewal premium written in the current period divided by total premium written in the prior period. 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 earned price increases represent the portions of the prior and current period renewal written price increases that have been earned based on the period of time the underlying renewal policies have been in effect. 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 and includes the combined effect of rate changes, amount of insurance and other changes in exposure. 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.
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 manmade 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 underwriting 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.

33


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.
•
Integration and transaction costs in connection with an acquired business - As transaction costs are incurred upon acquisition of a business and integration costs are completed within a short period after an acquisition, they do not represent ongoing costs of the business.
•
Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before maturity, these losses are not a recurring operating expense of the business.
•
Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a business or to reinsure loss reserves, are not a recurring operating expense of the business.
•
Change in loss reserves upon acquisition of a business - These changes in loss reserves are excluded from core earnings because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition.
•
Change in valuation allowance on deferred taxes related to non-core components of pre-tax income - These changes in valuation allowances are excluded from core earnings because they relate to non-core components of pre-tax income, such as tax attributes like capital loss carryforwards.
•
Results of discontinued operations - These results are excluded from core earnings for businesses sold or held for sale because such results could obscure the ability to compare period over period results for our ongoing businesses.
•
Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance agreements economically transfer risk to the reinsurers and including the full benefit from retroactive reinsurance in core earnings provides greater insight into the economics of the business.
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.

34


BASIC EARNINGS PER SHARE
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Net Income available to common stockholders per share
$
1.29

$
0.75

$
1.51

$
1.45

$
1.03

$
1.74

 
$
2.04

$
2.76

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
(0.30
)
0.65

(0.17
)
(0.24
)
(0.22
)
(0.44
)
 
0.35

(0.66
)
Loss on extinguishment of debt, before tax
—

—

—

0.25

—

—

 
—

—

Loss on reinsurance transactions, before tax
—

—

—

—

0.25

—

 
—

0.25

Integration and transaction costs associated with an acquired business, before tax
0.04

0.04

0.06

0.08

0.09

0.03

 
0.07

0.11

Change in loss reserves upon acquisition of a business, before tax
—

—

—

—

0.27

—

 
—

0.27

Change in deferred gain on retroactive reinsurance, before tax
0.15

0.08

0.04

—

—

—

 
0.23

—

Income tax expense (benefit) on items excluded from core earnings
0.04

(0.17
)
0.01

(0.02
)
(0.08
)
0.08

 
(0.11
)
0.02

Core earnings per share
$
1.22

$
1.35

$
1.45

$
1.52

$
1.34

$
1.41

 
$
2.58

$
2.75

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
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Net Income available to common stockholders per diluted share
$
1.29

$
0.74

$
1.49

$
1.43

$
1.02

$
1.71

 
$
2.03

$
2.73

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
(0.30
)
0.64

(0.17
)
(0.24
)
(0.22
)
(0.44
)
 
0.35

(0.65
)
Loss on extinguishment of debt, before tax
—

—

—

0.25

—

—

 
—

—

Loss on reinsurance transactions, before tax
—

—

—

—

0.25

—

 
—

0.25

Integration and transaction costs associated with an acquired business, before tax
0.04

0.04

0.06

0.08

0.08

0.03

 
0.07

0.11

Change in loss reserves upon acquisition of a business, before tax
—

—

—

—

0.27

—

 
—

0.27

Change in deferred gain on retroactive reinsurance, before tax
0.15

0.08

0.04

—

—

—

 
0.23

—

Income tax expense (benefit) on items excluded from core earnings
0.04

(0.16
)
0.01

(0.02
)
(0.07
)
0.09

 
(0.12
)
0.01

Core earnings per diluted share
$
1.22

$
1.34

$
1.43

$
1.50

$
1.33

$
1.39

 
$
2.56

$
2.72

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.

35


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
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
Net income ROE
11.3
%
11.8
%
14.4
%
12.0
%
11.8
%
13.5
%
Adjustments to reconcile net income (loss) ROE to core earnings ROE:
 
 
 
 
 
 
Net realized capital gains, excluded from core earnings, before tax
(0.2
%)
—
%
(2.7
%)
(1.1
%)
(0.7
%)
(0.5
%)
Loss on extinguishment of debt, before tax
0.6
%
0.6
%
0.6
%
0.6
%
—
%
—
%
Loss on reinsurance transaction, before tax
—
%
0.6
%
0.6
%
0.6
%
0.7
%
—
%
Integration and transaction costs associated with an acquired business, before tax
0.5
%
0.6
%
0.6
%
0.6
%
0.5
%
0.3
%
Changes in loss reserves upon acquisition of a business, before tax
—
%
0.7
%
0.7
%
0.7
%
0.7
%
—
%
Change in deferred gain on retroactive reinsurance, before tax
0.6
%
0.3
%
0.1
%
—
%
—
%
—
%
Income tax expense (benefit) on items not included in core earnings
(0.3
%)
(0.6
%)
—
%
(0.7
%)
(0.5
%)
(0.3
%)
 Income from discontinued operations, net of tax
—
%
—
%
—
%
—
%
—
%
(1.1
%)
Impact of AOCI, excluded from denominator of core earnings ROE
0.2
%
(0.7
%)
(0.7
%)
(0.4
%)
(0.8
%)
(0.4
%)
Core earnings ROE
12.7
%
13.3
%
13.6
%
12.3
%
11.7
%
11.5
%
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.

36


PROPERTY & CASUALTY
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Net income
$
310

$
224

$
377

$
448

$
264

$
482

 
$
534

$
746

Adjustments to reconcile net income to underlying underwriting gain:
 
 
 
 
 
 
 
 
 
Net investment income
(242
)
(334
)
(363
)
(358
)
(348
)
(323
)
 
(576
)
(671
)
Net realized capital losses (gains)
(74
)
173

(52
)
(73
)
(66
)
(143
)
 
99

(209
)
Net servicing and other expense (income)
7

3

10

14

2

(2
)
 
10

—

Loss on reinsurance transaction
—

—

—

—

91

—

 
—

91

Income tax expense
88

54

85

106

60

107

 
142

167

Underwriting gain
89

120

57

137

3

121

 
209

124

Current accident year catastrophes
248

74

115

106

138

104

 
322

242

Prior accident year development
(268
)
23

(42
)
(47
)
35

(11
)
 
(245
)
24

Current accident year change in loss reserves upon acquisition of a business
—

—

—

—

29

—

 
—

29

Underlying underwriting gain
$
69

$
217

$
130

$
196

$
205

$
214


$
286

$
419

COMMERCIAL LINES

THREE MONTHS ENDED

SIX MONTHS ENDED

Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019

Jun 30 2020
Jun 30 2019
Net income
$
(66
)
$
121

$
302

$
336

$
191

$
363

 
$
55

$
554

Adjustments to reconcile net income to underlying underwriting gain:
 
 
 
 
 
 
 
 
 
Net servicing loss (income)
—

(1
)
1

(2
)
(2
)
1

 
(1
)
(1
)
Net investment income
(204
)
(277
)
(298
)
(291
)
(281
)
(259
)
 
(481
)
(540
)
Net realized capital losses (gains)
(64
)
143

(42
)
(60
)
(54
)
(115
)
 
79

(169
)
Other expense
11

6

11

20

6

1

 
17

7

Loss on reinsurance transaction
—

—

—

—

91

—

 
—

91

Income tax expense (benefit)
(9
)
28

68

79

44

79

 
19

123

Underwriting gain (loss)
(332
)
20

42

82

(5
)
70

 
(312
)
65

Current accident year catastrophes
193

55

89

74

90

70

 
248

160

Prior accident year development
77

41

(37
)
(19
)
22

(10
)
 
118

12

Current accident year change in loss reserves upon acquisition of a business
—

—

—

—

29

—

 
—

29

Underlying underwriting gain (loss)
$
(62
)
$
116

$
94

$
137

$
136

$
130


$
54

$
266









37


PERSONAL LINES

THREE MONTHS ENDED

SIX MONTHS ENDED

Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019

Jun 30 2020
Jun 30 2019
Net income (loss)
$
371

$
98

$
66

$
94

$
62

$
96

 
$
469

$
158

Adjustments to reconcile net income (loss) to underlying underwriting gain:
 
 
 
 
 
 
 
 
 
Net servicing income
(3
)
(2
)
(2
)
(4
)
(4
)
(3
)
 
(5
)
(7
)
Net investment income
(28
)
(41
)
(45
)
(46
)
(46
)
(42
)
 
(69
)
(88
)
Net realized capital losses (gains)
(8
)
23

(7
)
(9
)
(8
)
(19
)
 
15

(27
)
Other expense (income)
(1
)
—

—

—

2

(1
)
 
(1
)
1

Income tax expense
97

25

16

23

14

23


122

37

Underwriting gain
428

103

28

58

20

54


531

74

Current accident year catastrophes
55

19

26

32

48

34


74

82

Prior accident year development
(349
)
(18
)
(17
)
(28
)
4

(1
)

(367
)
3

Underlying underwriting gain
$
134

$
104

$
37

$
62

$
72

$
87


$
238

$
159

P&C OTHER OPERATIONS
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Net income
$
5

$
5

$
9

$
18

$
11

$
23

 
$
10

$
34

Adjustments to reconcile net income to underlying underwriting gain (loss):
 
 
 
 
 
 
 
 
 
Net investment income
(10
)
(16
)
(20
)
(21
)
(21
)
(22
)
 
(26
)
(43
)
Net realized capital gains (losses)
(2
)
7

(3
)
(4
)
(4
)
(9
)
 
5

(13
)
Income tax expense
—

1

1

4

2

5

 
1

7

Underwriting loss
(7
)
(3
)
(13
)
(3
)
(12
)
(3
)
 
(10
)
(15
)
Prior accident year development
4

—

12

—

9

—

 
4

9

Underlying underwriting loss
$
(3
)
$
(3
)
$
(1
)
$
(3
)
$
(3
)
$
(3
)
 
$
(6
)
$
(6
)
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.

38


Core earnings margin- The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues, excluding buyouts and realized gains (losses). Net income margin, calculated by dividing net income by revenues, is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and realized gains (losses) as well as other items excluded in the calculation of core earnings. Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance. A reconciliation of net income margin to core earnings margin is set forth below.
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Net income margin
6.7
 %
6.9
 %
10.5
 %
9.6
 %
7.3
 %
7.7
 %
 
6.8
%
7.5
%
Adjustments to reconcile net income margin to core earnings margin:
 
 
 
 
 
 
 
 
 
Net realized capital losses (gains) excluded from core earnings, before tax
(0.1
)%
0.6
 %
(0.5
)%
(0.9
)%
(0.4
)%
(0.3
)%
 
0.2
 %
(0.4
)%
Integration and transaction costs associated with acquired business, before tax
0.3
 %
0.3
 %
0.5
 %
0.6
 %
0.7
 %
0.6
 %
 
0.3
 %
0.7
 %
Income tax expense (benefit)
(0.1
)%
(0.1
)%
0.1
 %
0.1
 %
(0.1
)%
—
 %
 
(0.1
)%
(0.1
)%
Impact of excluding buyouts from denominator of core earnings margin
0.1
 %
0.1
 %
—
 %
—
 %
—
 %
—
 %
 
0.1
 %
—
 %
Core earnings margin
6.9
 %
7.8
 %
10.6
 %
9.4
 %
7.5
 %
8.0
 %
 
7.3
 %
7.7
 %
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
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Return on Assets ("ROA")
14.1

12.0

13.0

13.3

12.9

10.9

 
13.0

11.9

Adjustments to reconcile ROA to ROA, core earnings:
 
 
 
 
 
 
 
 
 
Effect of net realized capital losses, excluded from core earnings, before tax
(2.9
)
3.7

(0.3
)
(0.4
)
—

(0.6
)
 
0.7

(0.4
)
Effect of income tax expense
0.7

(1.0
)
—

—

—

—

 
(0.3
)
—

Return on Assets ("ROA"), core earnings
11.9

14.7

12.7

12.9

12.9

10.3

 
13.4

11.5



39


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

SIX MONTHS ENDED

Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019

Jun 30 2020
Jun 30 2019
Total net investment income
$
339

$
459

$
503

$
490

$
488

$
470


$
798

$
958

Adjustment for gain from limited partnerships and other alternative investments
71

(58
)
(51
)
(65
)
(60
)
(56
)
 
13

(116
)
Net investment income excluding limited partnerships and other alternative investments
$
410

$
401

$
452

$
425

$
428

$
414


$
811

$
842

PROPERTY & CASUALTY

THREE MONTHS ENDED

SIX MONTHS ENDED

Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019

Jun 30 2020
Jun 30 2019
Total net investment income
$
242

$
334

$
363

$
358

$
348

$
323


$
576

$
671

Adjustment for gain from limited partnerships and other alternative investments
62

(48
)
(38
)
(52
)
(50
)
(46
)
 
14

(96
)
Net investment income excluding limited partnerships and other alternative investments
$
304

$
286

$
325

$
306

$
298

$
277


$
590

$
575

GROUP BENEFITS

THREE MONTHS ENDED

SIX MONTHS ENDED

Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019

Jun 30 2020
Jun 30 2019
Total net investment income
$
92

$
115

$
123

$
121

$
121

$
121


$
207

$
242

Adjustment for gain from limited partnerships and other alternative investments
9

(10
)
(13
)
(13
)
(10
)
(10
)
 
(1
)
(20
)
Net investment income excluding limited partnerships and other alternative investments
$
101

$
105

$
110

$
108

$
111

$
111


$
206

$
222


40


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
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Annualized investment yield
2.7
%
3.7
 %
4.0
 %
4.0
 %
4.2
 %
4.1
 %
 
3.2
%
4.1
 %
Adjustment for gain from limited partnerships and other alternative investments
0.7
%
(0.4
)%
(0.2
)%
(0.4
)%
(0.4
)%
(0.4
)%

0.2
%
(0.3
)%
Annualized investment yield excluding limited partnerships and other alternative investments
3.4
%
3.3
 %
3.8
 %
3.6
 %
3.8
 %
3.7
 %
 
3.4
%
3.8
 %
PROPERTY & CASUALTY
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Annualized investment yield
2.6
%
3.6
 %
4.0
 %
4.0
 %
4.2
 %
4.2
 %
 
3.1
%
4.2
 %
Adjustment for gain from limited partnerships and other alternative investments
0.9
%
(0.4
)%
(0.3
)%
(0.4
)%
(0.4
)%
(0.4
)%

0.2
%
(0.4
)%
Annualized investment yield excluding limited partnerships and other alternative investments
3.5
%
3.2
 %
3.7
 %
3.6
 %
3.8
 %
3.8
 %
 
3.3
%
3.8
 %
GROUP BENEFITS
 
THREE MONTHS ENDED
 
SIX MONTHS ENDED
 
Jun 30 2020
Mar 31 2020
Dec 31 2019
Sept 30 2019
Jun 30 2019
Mar 31 2019
 
Jun 30 2020
Jun 30 2019
Annualized investment yield
3.2
%
4.0
 %
4.3
 %
4.2
 %
4.2
 %
4.2
 %
 
3.6
%
4.2
 %
Adjustment for gain from limited partnerships and other alternative investments
0.4
%
(0.3
)%
(0.4
)%
(0.4
)%
(0.3
)%
(0.3
)%

0.1
%
(0.3
)%
Annualized investment yield excluding limited partnerships and other alternative investments
3.6
%
3.7
 %
3.9
 %
3.8
 %
3.9
 %
3.9
 %
 
3.7
%
3.9
 %

41