2014 to 2018 and a reduction in estimated reserves for extra contractual liability claims.

Commercial property reserves were decreased primarily due to favorable development for the 2020 accident year in both middle & large commercial and global specialty.

Professional liability reserves were decreased due to lower estimated severity in both large and middle market directors’ and officers’ (“D&O”) insurance for older accident years. More than offsetting this favorable reserve development were reserve increases on legacy Navigators public company directors’ and officers’ insurance for 2018 and prior accident years which is reflected within the change in deferred gain on retroactive reinsurance in the above table.

Bond reserves were reduced mostly due to favorable emergence on contract surety claims driven by higher than previously anticipated recoveries, largely for the 2016 to 2017 accident years.

Automobile liability reserves were decreased in Personal Lines principally due to lower estimated severity on AARP Direct and Agency claims, primarily within accident years 2017 to 2020, and a reduction in estimated reserves for extra contractual liability claims.

Catastrophes reserves were decreased in both Commercial and Personal Lines primarily driven by a reduction in reserves for 2019 and 2020 wind and hail events, lower estimated losses from 2017 and 2018 hurricanes and a reduction in estimated losses from the 2017 and 2018 California wildfires, including an expected recovery of subrogation from a utility related to the 2018 Woolsey wildfire in California.

Uncollectible reinsurance reserves were decreased due to a higher than expected recovery from one reinsurer on which the Company had recognized an allowance for credit losses.

Other reserve re-estimates, net, were increased primarily due to an increase in reserves for sexual molestation and sexual abuse claims within P&C Other Operations, principally on assumed reinsurance.

Re-estimates of prior accident year reserves for the nine months ended September 30, 2020

Workers’ compensation reserves were reduced on national account business within middle & large commercial, driven by lower than previously estimated claim severity for the 2014 and prior accident years and were reduced in small commercial due to lower than expected claim severity for the 2013 to 2018 accident years.

General liability reserves were increased in part due to guaranteed cost construction business for accident years 2014 to 2019 as incurred losses are developing higher than previously expected for premises and operations claims and product liability claims, partly due to a change in industry mix and a heavier concentration of losses in California than initially assumed, as well as increased reserves for middle market and complex liability claims for accident year 2018 largely due to higher than expected severity. Also contributing were increases

in reserves on primary layer construction account business within global specialty, mainly related to accident years 2015-2017, which is included as a component of the change in deferred gain under retroactive reinsurance in the above table.

In addition, the Company recorded an increase in reserves for sexual molestation and abuse claims related to cases brought against religious and other institutions that were insureds of the Company which was partly offset by reserve decreases for other mass torts and extra contractual liability claims.

The Company increased reserves for sexual molestation claims by $129 considering the impact of recent bankruptcy filings and an expected increase in claim incidence largely driven by legislation passed in a number of states that provides an opportunity for claimants to file claims for a period of time despite the fact that the original statute of limitations had expired.

Marine reserves were increased principally due to an increase in domestic marine liability, mostly in accident years 2017 and 2018 due to a higher number of large losses. The increase in marine reserves is included as a component of the change in deferred gain under retroactive reinsurance in the above table.

Package business reserves decreased for accident years 2014 to 2017 largely due to lower estimates of allocated loss adjustment expenses.

Commercial property reserves were decreased for accident year 2019 due to favorable developments on marine and middle market property claims.

Professional liability reserves were decreased primarily due to lower estimated severity on non-security class action D&O claims and fewer than expected E&O claims with financial institutions for the 2011 to 2018 accident years, partially offset by an increase in D&O reserves for the 2019 accident year driven by higher frequency of class action lawsuits and an increase in large Syndicate D&O losses for the 2016 and 2017 accident years. These Syndicate reserve increases within Global Specialty are included as a component of the change in deferred gain under retroactive reinsurance in the above table.

Assumed reinsurance reserves were increased for accident year 2018 mostly due to higher accident and health reserve estimates for medical professionals on assumed casualty business. These reserve increases are included as a component of the change in deferred gain under retroactive reinsurance in the above table.

Automobile liability reserves were decreased in Personal Lines principally due to lower than previously expected AARP Direct automobile liability claim severity for the 2017 and 2018 accident years. Automobile liability reserves were increased in Commercial Lines primarily due to higher than expected large losses on national accounts in the first quarter of 2020 related to accident years 2015 to 2017 and due to large losses within middle & large commercial, primarily within the 2018 and 2019 accident years.

Catastrophes reserves were reduced, primarily due to a reduction in estimated reserves for 2017 and 2018 California wildfires and a reduction in estimated catastrophes for wind and hail events in the 2018 and 2019 accident years, partially offset

by an increase in reserves for 2019 typhoons Hagibis and Faxai in Asia. The reduction in reserves for the 2017 and 2018 wildfires was largely due to recognizing a $289 subrogation benefit in the second quarter of 2020 from PG&E Corporation and Pacific Gas and Electric Company (together, “PG&E”).

Settlement Agreement with Boy Scouts of America

On September 14, 2021, the Company announced that it entered into a new agreement-in-principle with the BSA, related to sexual molestation and sexual abuse claims associated with liability policies issued by various Hartford writing companies in the 1970s and early 1980s, superseding its prior agreement of April 16, 2021, which now includes the BSA, its local councils and the representatives of a majority of the sexual abuse claimants. As part of the agreement-in-principle, The Hartford will pay $787, before tax, for claims associated with policies mostly issued in the 1970s. In exchange for The Hartford’s payment, the BSA and its local councils will fully release The Hartford from any obligation under policies The Hartford issued to the BSA and its local councils. In addition, the representatives for the claimants joining this agreement-in-principle will support a plan of reorganization which incorporates the settlement. The prior agreement of April 16, 2021 to settle these claims for $650 did not include the local councils or representatives of a majority of the claimants.

The agreement-in-principle was reached in connection with BSA’s Chapter 11 bankruptcy and will become a final settlement upon the occurrence of certain conditions, including execution of a definitive settlement agreement, confirmation of the BSA’s global resolution plan, receipt of executed releases from the local councils, and approval from the bankruptcy court as part of BSA’s overall plan of reorganization. The parties to the agreement-in-principle expect to receive court approval of the settlement in early 2022. No assurance can be given that all the conditions precedent to the settlement will be satisfied or that bankruptcy court approval, if obtained, will not be delayed for various procedural reasons.

If the bankruptcy court ultimately does not approve BSA’s plan of reorganization including terms of the agreement-in-principle, it is possible that adverse outcomes, if any, could have a material adverse effect on the Company’s consolidated operating results.

Adverse Development Covers

The Company has an adverse development cover reinsurance agreement with NICO, a subsidiary of Berkshire Hathaway Inc., to reinsure loss development after 2016 on substantially all of the Company’s asbestos and environmental reserves (the “A&E ADC”). Under the A&E ADC, the Company paid a reinsurance premium of $650 for NICO to assume adverse net loss reserve development up to $1.5 billion above the Company’s existing net A&E reserves as of December 31, 2016 of approximately $1.7 billion including reserves for A&E exposure for accident years prior to 1986 that are reported in Property & Casualty Other Operations ("Run-off A&E") and reserves for A&E exposure for accident years 1986 and subsequent from policies underwritten prior to 2016 that are reported in ongoing Commercial Lines and Personal Lines. The $650 reinsurance premium was placed into a collateral trust account as security for NICO’s claim payment obligations to the Company. The Company has retained the risk of collection on amounts due from other third-party reinsurers and continues to be responsible

for claims handling and other administrative services, subject to certain conditions. The A&E ADC covers substantially all the Company’s A&E reserve development up to the reinsurance limit.

Under retroactive reinsurance accounting, net adverse A&E reserve development after December 31, 2016 will result in an offsetting reinsurance recoverable up to the $1.5 billion limit. Cumulative ceded losses up to the $650 reinsurance premium paid have been recognized as a dollar-for-dollar offset to direct losses incurred. Cumulative ceded losses exceeding the $650 reinsurance premium paid result in a deferred gain. As of September 30, 2021, the Company has incurred $860 in cumulative adverse development on asbestos and environmental reserves that have been ceded under the A&E ADC treaty with NICO with $640 of available limit remaining under the A&E ADC. As a result, the Company has recorded a $210 deferred gain within other liabilities, representing the difference between the reinsurance recoverable of $860 and ceded premium paid of $650. The deferred gain is recognized over the claim settlement period in the proportion of the amount of cumulative ceded losses collected from the reinsurer to the estimated ultimate reinsurance recoveries. Consequently, until periods when the deferred gain is recognized as a benefit to earnings, cumulative adverse development of asbestos and environmental claims will result in charges against earnings which may be significant.

Immediately after closing on the acquisition of Navigators Group, effective May 23, 2019, the Company purchased the Navigators ADC, an aggregate excess of loss reinsurance agreement covering adverse reserve development, from NICO, on behalf of Navigators Insurers. Under the Navigators ADC, the Navigators Insurers paid NICO a reinsurance premium of $91 in exchange for reinsurance coverage of $300 of adverse net loss reserve development that attaches $100 above the Navigators Insurers' existing net loss and allocated loss adjustment reserves as of December 31, 2018 subject to the treaty of $1.816 billion for accidents and losses prior to December 31, 2018.

As of September 30, 2021, the Company has recorded a reinsurance recoverable under the Navigators ADC of $282, as estimated cumulative loss development on the 2018 and prior accident year reserves of $382 exceed the $100 deductible. While the reinsurance recoverable is $282, the Company has also recorded a $191 cumulative deferred gain within other liabilities since, under retroactive reinsurance accounting, ceded losses in excess of the $91 of ceded premium paid must be recognized as a deferred gain. Of the $191 of cumulative ceded losses in excess of ceded premium paid, $73 was recognized as a deferred gain in 2021 and $97 was recognized as a deferred gain in 2020. As the Company has ceded $282 of the $300 available limit, there is $18 of remaining limit available as of September 30, 2021.

Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses


	For the nine months ended September 30,
	2021		2020
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	8,233	$	8,256
Reinsurance recoverables [1]	237		246
Beginning liabilities for unpaid losses and loss adjustment expenses, net	7,996		8,010

Provision for unpaid losses and loss adjustment expenses
Current incurral year	3,753		3,339
Prior year's discount accretion	155		160
Prior incurral year development [2]	(382)		(362)
Total provision for unpaid losses and loss adjustment expenses [3]	3,526		3,137
Payments
Current incurral year	(1,776)		(1,553)
Prior incurral years	(1,804)		(1,681)
Total payments	(3,580)		(3,234)
Ending liabilities for unpaid losses and loss adjustment expenses, net	7,942		7,913
Reinsurance recoverables	246		242
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	8,188	$	8,155

[1]Includes a cumulative effect adjustment of $(1) representing an adjustment to the ACL recorded on adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to 2020 10-K, Note 1 - Basis of Presentation and Significant Accounting Policies.

[2]Prior incurral year development represents the change in estimated ultimate incurred losses and loss adjustment expenses for prior incurral years on a discounted basis.

[3]Includes unallocated loss adjustment expenses ("ULAE") of $131 and $133 for the nine months ended September 30, 2021 and 2020, respectively, that are recorded in insurance operating costs and other expenses in the Condensed Consolidated Statements of Operations.

Re-estimates of prior incurral years reserves for the nine months ended September 30, 2021

Group disability- Prior period reserve estimates decreased by approximately $320 largely driven by group long-term disability claim incidence lower than prior assumptions together with strong recoveries on prior incurral year claims, and a New York Paid Family Leave refund.

Group life and accident (including group life premium waiver)- Prior period reserve estimates decreased by approximately $50 largely driven by lower-than-previously expected claim incidence in both Group Life Premium Waiver and Group Accidental Death & Dismemberment.

Supplemental Accident & Health- Prior period reserve estimates decreased by approximately $10 driven by lower-than-previously expected claim incidence during the pandemic.

Re-estimates of prior incurral years reserves for the nine months ended September 30, 2020

Group disability- Prior period reserve estimates decreased by approximately $293 largely driven by group long-term

disability lower claim incidence and higher recoveries on prior incurral year claims, and a refund on the New York Paid Family Leave program.

Supplemental Accident & Health- Prior period reserve estimates decreased by approximately $19 driven by lower-than-expected emergence of prior year claims, especially for voluntary critical Illness and voluntary accident products.

10. RESERVE FOR FUTURE POLICY BENEFITS


Changes in Reserves for Future Policy Benefits[1]
	For the nine months ended September 30,
	2021		2020
Beginning liability balance	$	638	$	635
Incurred	45		74
Paid	(74)		(67)
Change in unrealized investment gains and losses	(7)		8
Ending liability balance	$	602	$	650



Ending reinsurance recoverable asset	$	22	$	29

[1]Reserves for future policy benefits includes paid-up life insurance and whole-life policies resulting from conversion from group life policies included within the Group Benefits segment and reserves for run-off structured settlement and terminal funding agreement liabilities which are in the Corporate category.