UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________ 
FORM 10-Q
 ____________________________________
(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2021
or
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number 001-13958
____________________________________ 
hig-20210331_g1.jpg
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware13-3317783
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
One Hartford Plaza, Hartford, Connecticut 06155
(Address of principal executive offices) (Zip Code)
(860)(860) 547-5000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareHIGThe New York Stock Exchange
6.10% Notes due October 1, 2041HIG 41The New York Stock Exchange
7.875% Fixed-to-Floating Rate Junior Subordinated Debentures due 2042HGHThe New York Stock Exchange
Depositary Shares, Each Representing a 1/1,000th Interest in a Share of 6.000% Non-Cumulative Preferred Stock, Series G, par value $0.01 per shareHIG PR GThe New York Stock Exchange
1



Indicate by check mark:
Indicate by check mark:YesNo
•     whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.ýYes☒¨No☐
•     whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).ýYes☒¨No☐
•     whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerx
☒
Accelerated filer¨
☐
Non-accelerated filer¨
☐
Smaller reporting company¨
☐
Emerging growth company¨☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
•     whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)Act).¨Yes☐ýNo☒
As of October 24, 2017,April 26, 2021, there were outstanding 356,718,683357,191,014 shares of Common Stock, $0.01$0.01 par value per share, of the registrant.


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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017MARCH 31, 2021
TABLE OF CONTENTS
ItemDescriptionPage
1. 
6
7
8
9
10
11
12
12
          NOTE 2 - EARNINGS PER SHARE
13
          NOTE 3 - SEGMENT INFORMATION
13
15
          NOTE 5 - INVESTMENTS
23
          NOTE 6 - DERIVATIVES
29
34
          NOTE 8 - REINSURANCE
35
38
42
          NOTE 11 - INCOME TAXES
42
42
          NOTE 13 - EQUITY
45
45
47
          NOTE 16 - BUSINESS DISPOSITION
47
48
2. 
49
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK[a]
4. 
103
1. 
104
1A.   
104
2. 
104
6. 
104
105
106
[a]The information required by this item is set forth in the Enterprise Risk Management section of Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference.
3
ItemDescriptionPage
 
Part I
 
1.      FINANCIAL STATEMENTS 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
5
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
6
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
7
 CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF SEPTEMBER 30, 2017 AND DECEMBER 31, 2016
8
 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
9
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
10
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
11
2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
67
3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
131
4.      CONTROLS AND PROCEDURES
132
 
PART II. OTHER INFORMATION
 
1.      LEGAL PROCEEDINGS
133
1A.   RISK FACTORS
134
2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
135
6.      EXHIBITS
136
   
 SIGNATURE
137
 EXHIBITS INDEX
138






Forward-LookingForward-looking Statements
Certain of the statements contained herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” and similar references to future periods.
Forward-looking statements are based on management's current expectations and assumptions regarding future economic, competitive, legislative and other developments and their potential effect upon The Hartford Financial Services Group, Inc. and its subsidiaries (collectively, the "Company" or "The Hartford"). Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from expectations, depending on the evolution of various factors, including the risks and uncertainties identified below, as well as factors described in such forward-looking statementsstatements; or in Part I, Item 1A, Risk Factors, in The Hartford’s 2016 Form 10-K Annual Report,Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and those identified from time to time in our other filings with the Securities and Exchange Commission ("SEC").Commission.
•Risks Relatedrelating to the pandemic caused by the spread of the novel strain of coronavirus, specifically identified as the Coronavirus Disease 2019 (“COVID-19”) including impacts to the Company's insurance and product-related, regulatory/legal, recessionary and other global economic, capital and liquidity and operational risks
•Risks Relating to Economic, Political and Global Market Conditions:
◦challenges related to the Company’s current operating environment, including global political, economic and market conditions, and the effect of financial market disruptions, economic downturns or other potentially adverse macroeconomic developments on the demand for our products, returns in our investment portfolios and the hedging costs associated with our run-off annuity block;
◦financial risk related to the continued reinvestment of our investment portfolios and performance of our hedge program for our run-off annuity block;
◦market risks associated with our business, including changes in credit spreads, equity prices, interest rates, inflation rate, market volatility and foreign exchange rates;
◦the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;
◦challenges related to the Company’s current operating environment, including global political, economic and market conditions, and the effect of financial market disruptions, economic downturns, changes in trade regulation including tariffs and other barriers or other potentially adverse macroeconomic developments on the demand for our products and returns in our investment portfolios;
◦market risks associated with our business, including changes in credit spreads, equity prices, interest rates, inflation rate, foreign currency exchange rates and market volatility;
◦the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;
◦the impacts of changing climate and weather patterns on our businesses, operations and investment portfolio including on claims, demand and pricing of our products, the availability and cost of reinsurance, our modeling data used to evaluate and manage risks of catastrophes and severe weather events, the value of our investment portfolios and credit risk with reinsurers and other counterparties;
◦the risks associated with the discontinuance of the London Inter-Bank Offered Rate ("LIBOR") on the securities we hold or may have issued, other financial instruments and any other assets and liabilities whose value is tied to LIBOR;
◦the impacts associated with the withdrawal of the United Kingdom (“U.K.”) from the European Union (“E.U.”) on our international operations in the U.K. and E.U.
•Insurance Industry and Product-Related Risks:
◦the possibility of unfavorable loss development, including with respect to long-tailed exposures;
◦the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses;
◦weather and other natural physical events, including the severity and frequency of storms, hail, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns;
◦the possible occurrence of terrorist attacks and the Company’s inability to contain its exposure as a result of, among other factors, the inability to exclude coverage for terrorist attacks from workers' compensation policies and limitations on reinsurance coverage from the federal government under applicable laws;
◦the Company’s ability to effectively price its property and casualty policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines;
◦actions by competitors that may be larger or have greater financial resources than we do;
◦technology changes, such as usage-based methods of determining premiums, advancement in automotive safety features, the development of autonomous vehicles, and platforms that facilitate ride sharing, which may alter demand for the Company's products, impact the frequency or severity of losses, and/or impact the way the Company markets, distributes and underwrites its products;
◦the Company’s ability to market, distribute and provide insurance products and investment advisory services through current and future distribution channels and advisory firms;
◦the uncertain effects of emerging claim and coverage issues;
◦volatility in our statutory and United States ("U.S.") Generally Accepted Accounting Principles ("GAAP") earnings and potential material changes to our results resulting from our risk management program to emphasize protection of economic value;
◦the possibility of unfavorable loss development, including with respect to long-tailed exposures;
◦the significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental claims;
◦the possibility of another pandemic, civil unrest, earthquake, or other natural or man-made disaster that may adversely affect our businesses;
◦weather and other natural physical events, including the intensity and frequency of storms, hail, wildfires, flooding, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns;
◦the possible occurrence of terrorist attacks and the Company’s inability to contain its exposure as a result of, among other factors, the inability to exclude coverage for terrorist attacks from workers' compensation policies and limitations on reinsurance coverage from the federal government under applicable laws;
◦the Company’s ability to effectively price its property and casualty policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines;
◦actions by competitors that may be larger or have greater financial resources than we do;
◦technological changes, including usage-based methods of determining premiums, advancements in automotive safety features, the development of autonomous vehicles, and platforms that facilitate ride sharing,
◦the Company's ability to market, distribute and provide insurance products and investment advisory services through current and future distribution channels and advisory firms;
◦political instability, politically motivated violence or civil unrest, may increase the frequency and severity of insured losses;
•Financial Strength, Credit and Counterparty Risks:
◦risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments;
◦the impact on our statutory capital of various factors, including many that are outside the Company’s control, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results;
◦losses due to nonperformance or defaults by others, including sourcing partners, derivative counterparties and other third parties;


4
◦the potential for losses due to our reinsurers’ unwillingness or inability to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses;



◦risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments;
◦capital requirements which are subject to many factors, including many that are outside the Company’s control, such as National Association of Insurance Commissioners ("NAIC") risk based capital formulas, rating agency capital models, Funds at Lloyd's and Solvency Capital Requirement, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results;
◦losses due to nonperformance or defaults by others, including credit risk with counterparties associated with investments, derivatives, premiums receivable, reinsurance recoverables and indemnifications provided by third parties in connection with previous dispositions;
◦the potential for losses due to our reinsurers' unwillingness or inability to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses;
◦state and international regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends;
•Risks Relating to Estimates, Assumptions and Valuations;Valuations:
◦risk associated with the use of analytical models in making decisions in key areas such as underwriting, capital management, hedging, reserving, and catastrophe risk management;
◦the potential for differing interpretations of the methodologies, estimations and assumptions that underlie Company’s fair value estimates for its investments and the evaluation of other-than-temporary impairments on available-for-sale securities;
◦the potential for further acceleration of deferred policy acquisition cost amortization and an increase in reserve for certain guaranteed benefits in our variable annuities;
◦the potential for further impairments of our goodwill or the potential for changes in valuation allowances against deferred tax assets;
◦the significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental claims;
◦risk associated with the use of analytical models in making decisions in key areas such as underwriting, pricing, capital management, reserving, investments, reinsurance and catastrophe risk management;
◦the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the Company’s fair value estimates for its investments and the evaluation of intent-to-sell impairments and allowance for credit losses on available-for-sale securities and mortgage loans;
◦the potential for further impairments of our goodwill;
•Strategic and Operational Risks:
◦risks associated with the run off of our Talcott Resolution business;
◦the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event;
◦the risks, challenges and uncertainties associated with our capital management plan, expense reduction initiatives and other actions, which may include acquisitions, divestitures or restructurings;
◦the potential for difficulties arising from outsourcing and similar third-party relationships;
◦the Company’s ability to protect its intellectual property and defend against claims of infringement;
◦the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event;
◦the potential for difficulties arising from outsourcing and similar third-party relationships;
◦the risks, challenges and uncertainties associated with capital management plans, expense reduction initiatives and other actions, which may include acquisitions, divestitures or restructurings;
◦risks associated with acquisitions and divestitures, including the challenges of integrating acquired companies or businesses, which may result in our inability to achieve the anticipated benefits and synergies and may result in unintended consequences;
◦difficulty in attracting and retaining talented and qualified personnel, including key employees, such as executives, managers and employees with strong technological, analytical and other specialized skills;
◦the Company’s ability to protect its intellectual property and defend against claims of infringement;
•Regulatory and Legal Risks:
◦the cost and other potential effects of increased regulatory and legislative developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels;
◦unfavorable judicial or legislative developments;
◦the impact of changes in federal or state tax laws;
◦regulatory requirements that could delay, deter or prevent a takeover attempt that shareholders might consider in their best interests; and
◦the impact of potential changes in accounting principles and related financial reporting requirements.
◦the cost and other potential effects of increased federal, state and international regulatory and legislative developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels;
◦unfavorable judicial or legislative developments;
◦the impact of changes in federal, state or foreign tax laws;
◦regulatory requirements that could delay, deter or prevent a takeover attempt that stockholders might consider in their best interests; and
◦the impact of potential changes in accounting principles and related financial reporting requirements.
Any forward-looking statement made by the Company in this document speaks only as of the date of the filing of this Form 10-Q. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

5
4



Part I - Item 1. Financial Statements



Item 1. Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of
The Hartford Financial Services Group, Inc.
Hartford, Connecticut


Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of The Hartford Financial Services Group, Inc. and subsidiaries (the "Company") as of September 30, 2017, andMarch 31, 2021, the related condensed consolidated statements of operations, and comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2017 and 2016, and statements of, changes in stockholders' equity, and cash flows for the nine-monththree-month periods ended September 30, 2017March 31, 2021 and 2016. These2020, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements areinformation for it to be in conformity with accounting principles generally accepted in the responsibilityUnited States of the Company's management.America.
We conducted our reviewshave previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 19, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States),PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2016, and the related consolidated statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated February 24, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2016 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP


Hartford, Connecticut
October 26, 2017April 27, 2021





5
6
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Condensed Consolidated Statements of Operations

Three Months Ended March 31,
Three Months Ended September 30, Nine Months Ended September 30,
(In millions, except for per share data)20172016 20172016
(in millions, except for per share data)(in millions, except for per share data)20212020
(Unaudited)(Unaudited)
Revenues   Revenues
Earned premiums$3,474
$3,484
 $10,437
$10,332
Earned premiums$4,343 $4,391 
Fee income460
452
 1,381
1,338
Fee income355 320 
Net investment income729
772
 2,172
2,203
Net investment income509 459 
Net realized capital gains (losses):
  
Total other-than-temporary impairment ("OTTI") losses(5)(15) (24)(50)
OTTI losses recognized in other comprehensive income (“OCI”)3
1
 7
6
Net OTTI losses recognized in earnings(2)(14) (17)(44)
Other net realized capital gains (losses)(1)(3) 69
(75)
Total net realized capital gains (losses)(3)(17) 52
(119)
Net realized capital gains (losses)Net realized capital gains (losses)80 (231)
Other revenues24
24
 66
67
Other revenues12 17 
Total revenues4,684
4,715
 14,108
13,821
Total revenues5,299 4,956 
Benefits, losses and expenses
  Benefits, losses and expenses
Benefits, losses and loss adjustment expenses2,994
2,780
 8,518
8,563
Benefits, losses and loss adjustment expenses3,350 2,916 
Amortization of deferred policy acquisition costs ("DAC")357
403
 1,088
1,145
Amortization of deferred policy acquisition costs ("DAC")416 437 
Insurance operating costs and other expenses995
918
 3,652
2,777
Insurance operating costs and other expenses1,144 1,176 
Interest expense82
86
 246
257
Interest expense57 64 
Amortization of other intangible assetsAmortization of other intangible assets18 19 
Restructuring and other costsRestructuring and other costs11 0 
Total benefits, losses and expenses4,428
4,187
 13,504
12,742
Total benefits, losses and expenses4,996 4,612 
Income before income taxes256
528
 604
1,079
Income before income taxes303 344 
Income tax expense22
90
 32
102
 Income tax expense54 71 
Net income$234
$438
 $572
$977
Net income249 273 
Net income per common share


  
Preferred stock dividendsPreferred stock dividends5 5 
Net income available to common stockholdersNet income available to common stockholders$244 $268 
Net income available to common stockholders per common shareNet income available to common stockholders per common share
Basic$0.65
$1.14
 $1.56
$2.50
Basic$0.68 $0.75 
Diluted$0.64
$1.12
 $1.54
$2.45
Diluted$0.67 $0.74 
Cash dividends declared per common share$0.23
$0.21
 $0.69
$0.63
See Notes to Condensed Consolidated Financial Statements.

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6
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)

 Three Months Ended September 30, Nine Months Ended September 30,
(In millions)20172016 20172016
 (Unaudited)
Net income (loss)$234
$438
 $572
$977
Other comprehensive income (loss):     
Changes in net unrealized gain on securities85
22
 564
1,180
Changes in OTTI losses recognized in other comprehensive income(1)5
 (1)2
Changes in net gain on cash flow hedging instruments(14)(28) (33)42
Changes in foreign currency translation adjustments14
78
 21
65
Changes in pension and other postretirement plan adjustments7
10
 371
27
OCI, net of tax91
87
 922
1,316
Comprehensive income$325
$525
 $1,494
$2,293
 Three Months Ended March 31,
(in millions)20212020
 (Unaudited)
Net income$249 $273 
Other comprehensive income (loss) ("OCI"):
Change in net unrealized gain on fixed maturities(925)(1,057)
Change in unrealized losses on fixed maturities for which an allowance for credit losses ("ACL") has been recorded0 1 
Change in net gain on cash flow hedging instruments5 44 
Change in foreign currency translation adjustments1 (8)
Changes in pension and other postretirement plan adjustments13 11 
Other comprehensive loss, net of tax(906)(1,009)
Comprehensive loss$(657)$(736)
See Notes to Condensed Consolidated Financial Statements.

8
7
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Condensed Consolidated Balance Sheets

(In millions, except for share and per share data)September 30,
2017		December 31, 2016
(in millions, except for share and per share data)(in millions, except for share and per share data)March 31,
2021		December 31, 2020
(Unaudited) (Unaudited)
Assets Assets
Investments: Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost of $54,478 and $53,805)$57,669
$56,003
Fixed maturities, at fair value using the fair value option82
293
Equity securities, available-for-sale, at fair value (cost of $1,010 and $1,020)1,112
1,097
Mortgage loans (net of allowances for loan losses of $1 and $19)6,058
5,697
Policy loans, at outstanding balance1,418
1,444
Fixed maturities, available-for-sale, at fair value (amortized cost of $41,317 and $41,561, and ACL of $19 and $23)Fixed maturities, available-for-sale, at fair value (amortized cost of $41,317 and $41,561, and ACL of $19 and $23)$43,607 $45,035 
Equity securities, at fair valueEquity securities, at fair value1,632 1,438 
Mortgage loans (net of ACL of $34 and $38)Mortgage loans (net of ACL of $34 and $38)4,588 4,493 
Limited partnerships and other alternative investments2,533
2,456
Limited partnerships and other alternative investments2,326 2,082 
Other investments365
403
Other investments207 201 
Short-term investments3,756
3,244
Short-term investments3,367 3,283 
Total investments72,993
70,637
Total investments55,727 56,532 
Cash (includes variable interest entity assets, at fair value, of $0 and $5)333
882
Premiums receivable and agents’ balances, net3,804
3,731
Reinsurance recoverables, net23,323
23,311
CashCash176 151 
Restricted cashRestricted cash104 88 
Premiums receivable and agents' balances (net of ACL of $144 and $152)Premiums receivable and agents' balances (net of ACL of $144 and $152)4,487 4,268 
Reinsurance recoverables (net of allowance for uncollectible reinsurance of $98 and $108)Reinsurance recoverables (net of allowance for uncollectible reinsurance of $98 and $108)6,083 6,011 
Deferred policy acquisition costs1,635
1,711
Deferred policy acquisition costs827 789 
Deferred income taxes, net2,766
3,281
Deferred income taxes, net205 46 
Goodwill567
567
Goodwill1,911 1,911 
Property and equipment, net962
991
Property and equipment, net1,092 1,122 
Other intangible assets, netOther intangible assets, net927 950 
Other assets2,202
1,786
Other assets2,497 2,066 
Assets held for sale—
870
Assets held for sale165 177 
Separate account assets115,626
115,665
Total assets$224,211
$223,432
Total assets$74,201 $74,111 
Liabilities
Liabilities
Unpaid losses and loss adjustment expenses$28,232
$27,605
Unpaid losses and loss adjustment expenses$38,540 $37,855 
Reserve for future policy benefits14,247
13,929
Reserve for future policy benefits641 638 
Other policyholder funds and benefits payable30,151
31,176
Other policyholder funds and benefits payable681 701 
Unearned premiums5,528
5,499
Unearned premiums6,958 6,629 
Short-term debt320
416
Long-term debt4,818
4,636
Long-term debt4,353 4,352 
Other liabilities (includes variable interest entity liabilities of $0 and $5)8,056
6,992
Other liabilitiesOther liabilities5,178 5,222 
Liabilities held for sale—
611
Liabilities held for sale148 158 
Separate account liabilities115,626
115,665
Total liabilities$206,978
$206,529
Total liabilities56,499 55,555 
Commitments and Contingencies (Note 12) Commitments and Contingencies (Note 12)
Stockholders’ Equity Stockholders’ Equity
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 402,923,222 and 402,923,222 shares issued$4
$4
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 13,800 shares issued at March 31, 2021 and December 31, 2020, aggregate liquidation preference of $345Preferred stock, $0.01 par value — 50,000,000 shares authorized, 13,800 shares issued at March 31, 2021 and December 31, 2020, aggregate liquidation preference of $345334 334 
Common stock, $0.01 par value —1,500,000,000 shares authorized, 384,923,222 shares issued at March 31, 2021 and December 31, 2020Common stock, $0.01 par value —1,500,000,000 shares authorized, 384,923,222 shares issued at March 31, 2021 and December 31, 20204 4 
Additional paid-in capital5,191
5,247
Additional paid-in capital4,310 4,322 
Retained earnings13,434
13,114
Retained earnings14,036 13,918 
Treasury stock, at cost — 45,382,811 and 28,974,069 shares(1,981)(1,125)
Accumulated other comprehensive income ("AOCI"), net of tax585
(337)
Treasury stock, at cost 27,406,740 and 26,434,682 sharesTreasury stock, at cost 27,406,740 and 26,434,682 shares(1,246)(1,192)
Accumulated other comprehensive income, net of taxAccumulated other comprehensive income, net of tax264 1,170 
Total stockholders’ equity$17,233
$16,903
Total stockholders’ equity17,702 18,556 
Total liabilities and stockholders’ equity$224,211
$223,432
Total liabilities and stockholders’ equity$74,201 $74,111 
See Notes to Condensed Consolidated Financial Statements.

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8
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity

Three Months Ended March 31,
(in millions, except for share and per share data)(in millions, except for share and per share data)20212020
Nine Months Ended September 30, (Unaudited)
(In millions, except for share data)20172016
(Unaudited)
Preferred StockPreferred Stock$334 $334 
Common Stock$4
$5
Common Stock4 4 
Additional Paid-in Capital Additional Paid-in Capital
Additional Paid-in Capital, beginning of period5,247
8,973
Additional Paid-in Capital, beginning of period4,322 4,312 
Issuance of shares under incentive and stock compensation plans(68)(129)Issuance of shares under incentive and stock compensation plans(69)(79)
Stock-based compensation plans expense77
58
Stock-based compensation plans expense57 53 
Tax benefit on employee stock options and share-based awards—
2
Issuance of shares for warrant exercise(65)(11)
Additional Paid-in Capital, end of period5,191
8,893
Additional Paid-in Capital, end of period4,310 4,286 
Retained Earnings Retained Earnings
Retained Earnings, beginning of period13,114
12,550
Retained Earnings, beginning of period13,918 12,685 
Cumulative effect of accounting changes, net of taxCumulative effect of accounting changes, net of tax0 (18)
Adjusted balance, beginning of periodAdjusted balance, beginning of period13,918 12,667 
Net income572
977
Net income249 273 
Dividends declared on preferred stockDividends declared on preferred stock(5)(5)
Dividends declared on common stock(252)(245)Dividends declared on common stock(126)(116)
Retained Earnings, end of period13,434
13,282
Retained Earnings, end of period14,036 12,819 
Treasury Stock, at cost Treasury Stock, at cost
Treasury Stock, at cost, beginning of period(1,125)(3,557)Treasury Stock, at cost, beginning of period(1,192)(1,117)
Treasury stock acquired(975)(1,050)Treasury stock acquired(123)(150)
Issuance of shares under incentive and stock compensation plans90
134
Issuance of shares under incentive and stock compensation plans94 82 
Net shares acquired related to employee incentive and stock compensation plans(36)(47)Net shares acquired related to employee incentive and stock compensation plans(25)(35)
Issuance of shares for warrant exercise65
11
Treasury Stock, at cost, end of period(1,981)(4,509)Treasury Stock, at cost, end of period(1,246)(1,220)
Accumulated Other Comprehensive Income (Loss), net of tax Accumulated Other Comprehensive Income (Loss), net of tax
Accumulated Other Comprehensive Loss, net of tax, beginning of period(337)(329)
Total other comprehensive income922
1,316
Accumulated Other Comprehensive Income, net of tax, end of period585
987
Accumulated Other Comprehensive Income, net of tax, beginning of periodAccumulated Other Comprehensive Income, net of tax, beginning of period1,170 52 
Total other comprehensive lossTotal other comprehensive loss(906)(1,009)
Accumulated Other Comprehensive Income (Loss), net of tax, end of periodAccumulated Other Comprehensive Income (Loss), net of tax, end of period264 (957)
Total Stockholders’ Equity$17,233
$18,658
Total Stockholders’ Equity$17,702 $15,266 
 
Preferred Shares OutstandingPreferred Shares Outstanding
Preferred Shares Outstanding, beginning of periodPreferred Shares Outstanding, beginning of period13,800 13,800 
Issuance of preferred sharesIssuance of preferred shares0 0 
Preferred Shares Outstanding, end of periodPreferred Shares Outstanding, end of period13,800 13,800 
Common Shares Outstanding Common Shares Outstanding
Common Shares Outstanding, beginning of period (in thousands)373,949
401,821
Common Shares Outstanding, beginning of period (in thousands)358,489 359,570 
Treasury stock acquired(19,281)(24,652)Treasury stock acquired(2,386)(2,661)
Issuance of shares under incentive and stock compensation plans2,078
3,297
Issuance of shares under incentive and stock compensation plans1,914 1,685 
Return of shares under incentive and stock compensation plans to treasury stock(718)(1,091)Return of shares under incentive and stock compensation plans to treasury stock(500)(660)
Issuance of shares for warrant exercise1,512
273
Common Shares Outstanding, at end of period357,540
379,648
Common Shares Outstanding, at end of period357,517 357,934 
Cash dividends declared per common shareCash dividends declared per common share$0.350 $0.325 
Cash dividends declared per preferred shareCash dividends declared per preferred share$375.00 $375.00 
See Notes to Condensed Consolidated Financial Statements.

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9
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,
(in millions)(in millions)20212020
Operating ActivitiesOperating Activities(Unaudited)
Net incomeNet income$249 $273 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Net realized capital losses (gains)Net realized capital losses (gains)(80)231 
Amortization of deferred policy acquisition costsAmortization of deferred policy acquisition costs416 437 
Additions to deferred policy acquisition costsAdditions to deferred policy acquisition costs(449)(447)
Depreciation and amortizationDepreciation and amortization174 134 
Nine Months Ended September 30,
(In millions)20172016
Operating Activities(Unaudited)
Net income$572
$977
Adjustments to reconcile net income to net cash provided by operating activities: 
Net realized capital (gains) losses(52)119
Amortization of deferred policy acquisition costs1,088
1,145
Additions to deferred policy acquisition costs(1,039)(1,052)
Depreciation and amortization300
296
Pension settlement747
—
Other operating activities, net328
119
Other operating activities, net15 79 
Change in assets and liabilities: Change in assets and liabilities:
Decrease in reinsurance recoverables43
349
Increase (decrease) in deferred and accrued income taxes64
(51)
Increase in unpaid losses and loss adjustment expenses, reserve for future policy benefits, and unearned premiums845
403
Increase in reinsurance recoverablesIncrease in reinsurance recoverables(66)(75)
Net change in accrued and deferred income taxesNet change in accrued and deferred income taxes70 53 
Increase in insurance liabilitiesIncrease in insurance liabilities996 235 
Net change in other assets and other liabilities(1,372)(900)Net change in other assets and other liabilities(566)(622)
Net cash provided by operating activities1,524
1,405
Net cash provided by operating activities759 298 
Investing Activities Investing Activities
Proceeds from the sale/maturity/prepayment of: Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale21,371
17,007
Fixed maturities, available-for-sale5,536 3,906 
Fixed maturities, fair value option140
163
Equity securities, available-for-sale599
562
Equity securities, at fair valueEquity securities, at fair value157 645 
Mortgage loans558
325
Mortgage loans307 329 
Partnerships190
656
Partnerships56 34 
Payments for the purchase of: Payments for the purchase of:
Fixed maturities, available-for-sale(22,021)(16,141)Fixed maturities, available-for-sale(5,049)(3,578)
Fixed maturities, fair value option—
(94)
Equity securities, available-for-sale(517)(384)
Equity securities, at fair valueEquity securities, at fair value(756)(518)
Mortgage loans(943)(305)Mortgage loans(400)(487)
Partnerships(344)(298)Partnerships(245)(97)
Net (payments for) proceeds from derivatives(98)154
Net increase in policy loans27
14
Net additions to property and equipment(129)(183)
Net payments for short-term investments(523)(388)
Net proceeds from derivativesNet proceeds from derivatives27 161 
Net additions of property and equipmentNet additions of property and equipment(23)(23)
Net proceeds from (payments for) short-term investmentsNet proceeds from (payments for) short-term investments(54)407 
Other investing activities, net(17)32
Other investing activities, net(6)(2)
Proceeds from business sold, net of cash transferred222
—
Acquisitions, net of cash acquired—
(175)
Net cash provided (used) by investing activities(1,485)945
Net cash provided by (used for) investing activitiesNet cash provided by (used for) investing activities(450)777 
Financing Activities Financing Activities
Deposits and other additions to investment and universal life-type contracts3,628
3,381
Deposits and other additions to investment and universal life-type contracts22 15 
Withdrawals and other deductions from investment and universal life-type contracts(10,623)(11,737)Withdrawals and other deductions from investment and universal life-type contracts(44)(10)
Net transfers from separate accounts related to investment and universal life-type contracts6,080
7,734
Repayments at maturity or settlement of consumer notes(12)(14)
Net increase (decrease) in securities loaned or sold under agreements to repurchase1,434
(38)
Net decrease in securities loaned or sold under agreements to repurchaseNet decrease in securities loaned or sold under agreements to repurchase0 (237)
Repayment of debt(416)—
Repayment of debt0 (500)
Proceeds from the issuance of debt500
—
Net (return) issuance of shares under incentive and stock compensation plans(16)10
Net return of shares under incentive and stock compensation plansNet return of shares under incentive and stock compensation plans0 (32)
Treasury stock acquired(975)(1,050)Treasury stock acquired(123)(150)
Dividends paid on preferred stockDividends paid on preferred stock(5)(5)
Dividends paid on common stock(258)(253)Dividends paid on common stock(116)(108)
Net cash used for financing activities(658)(1,967)Net cash used for financing activities(266)(1,027)
Foreign exchange rate effect on cash70
(21)Foreign exchange rate effect on cash(3)(9)
Net (decrease) increase in cash(549)362
Cash – beginning of period882
448
Cash – end of period$333
$810
Net increase in cash and restricted cash, including cash classified within assets held for saleNet increase in cash and restricted cash, including cash classified within assets held for sale40 39 
Less: Net decrease in cash classified within assets held for saleLess: Net decrease in cash classified within assets held for sale(1)0 
Net increase in cash and restricted cashNet increase in cash and restricted cash41 39 
Cash and restricted cash – beginning of periodCash and restricted cash – beginning of period239 262 
Cash and restricted cash– end of periodCash and restricted cash– end of period$280 $301 
Supplemental Disclosure of Cash Flow Information Supplemental Disclosure of Cash Flow Information
Income tax received (paid)$3
$(131)Income tax received (paid)$32 $(1)
Interest paid$205
$239
Interest paid$58 $74 
See Notes to Condensed Consolidated Financial Statements

Statements.
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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in millions, except for per share data, unless otherwise stated)
1. Basis of Presentation and Significant Accounting Policies(Unaudited)







1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Hartford Financial Services Group, Inc. is a holding company for insurance and financial services subsidiaries that provide property and casualty insurance, group life and disability products and mutual funds and exchange-traded products to individual and business customers in the United States as well as in the United Kingdom, continental Europe and other international locations (collectively, “The Hartford”, the “Company”, “we” or “our”). Also,
On September 30, 2020, the Company continuesentered into a definitive agreement to run off lifesell all of the issued and annuity products previously sold.
On May 10, 2017, the Company completed the saleoutstanding equity of Navigators Holdings (Europe) N.V., a Belgium holding company, and its United Kingdom ("U.K."subsidiaries, Bracht, Deckers & Mackelbert N.V. (“BDM”) property and casualty run-off subsidiaries.Assurances Contintales Contintale Verzekeringen N.V. (“ASCO”), (collectively referred to as "Continental Europe Operations"). For further discussion of this transaction see Note 216 - Business Disposition of Notes to Condensed Consolidated Financial Statements..
The CondensedCondensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, which differ materially from the accounting practices prescribed by various insurance regulatory authorities. These Condensed Consolidated Financial Statements and Notes should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's 20162020 Form 10-K Annual Report. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year.
The accompanying Condensed Consolidated Financial Statements and Notes are unaudited. These financial statements reflect all adjustments (generally consisting only of normal accruals) which are, in the opinion of management, necessary for the fair presentationstatement of the financial position, results of operations and cash flows for the interim periods. The Company's significant accounting policies are summarized in Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements included in the Company's 20162020 Form 10-K Annual Report.
Consolidation
The Condensed Consolidated Financial Statements include the accounts of The Hartford Financial Services Group, Inc., and entities in which the Company directly or indirectly has a controlling financial interest. Entities in which the Company has significant influence over the operating and financing decisions but does not control are reported using the equity method. All intercompanyIntercompany transactions and balances between The Hartford and its subsidiaries and affiliates have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The most significant estimates include those used in determining property and casualty and group long-term disability (LTD) insurance product reserves, net of reinsurance; estimated gross profits used in the valuation and amortization of assets and
liabilities associated with variable annuity and other universal life-type contracts; living benefits required to be fair valued; evaluation of goodwill for impairment; valuation of investments and derivative instruments, including evaluation of other-than-temporary impairments on available-for-sale securities; valuation allowance on deferred tax assets;instruments; and contingencies relating to corporate litigation and regulatory matters. Certain
The novel strain of these estimates are particularly sensitivecoronavirus, specifically identified as the Coronavirus Disease 2019 (“COVID-19”), continues to market conditions,impact the global economy. The ultimate impact of COVID-19 and deterioration and/or volatility in the worldwide debt or equity markets could have a materialextent to which COVID-19 continues to impact the Company’s business, results of operations and financial condition will depend on the Condensed Consolidated Financial Statements.duration and severity of the pandemic, the duration and severity of the economic downturn and the degree to which federal, state and local government actions to vaccinate the public and stimulate the economy are effective. Our estimates, judgments and assumptions related to COVID-19 could ultimately differ over time.
Reclassifications
Certain reclassifications have been made to prior year financial information to conform to the current year presentation. In particular, billing installment fees that were previously reflected as an offset to insurance operating costs and other expenses are now classified as revenues.
Adoption of New Accounting Standards
Stock Compensation
On January 1, 2017 the Company adopted new stock compensation guidance issued by the Financial Accounting Standards Board ("FASB") on a prospective basis. The updated guidance requires the excess tax benefit or tax deficiency on vesting or settlement of stock-based awards to be recognized in earnings as an income tax benefit or expense, respectively, instead of as an adjustment to additional paid-in capital. The new guidance also requires the related cash flows to be presented in operating activities instead of in financing activities. The amount of excess tax benefit or tax deficiency realized on vesting or settlement of awards depends upon the difference between the market value of awards at vesting or settlement and the grant date fair value recognized through compensation expense. The excess tax benefit or tax deficiency is a discrete item in the reporting period in which it occurs and is not considered in determining the annual estimated effective tax rate for interim reporting. The excess tax benefit recognized in earnings for the three and nine months ended September 30, 2017 was $4 and $12, respectively, and the excess tax benefit recognized in additional paid-in capital for the nine months ended September 30, 2016 was $2.
Future Adoption of New Accounting Standards
Hedging Activities
In August 2017, the FASB issued updated guidance on hedge accounting. The updates allow hedge accounting for new types of interest rate hedges of financial instruments and simplify documentation requirements to qualify for hedge accounting. In addition, any gain or loss from hedge ineffectiveness will be reported in the same income statement line with the effective hedge results and the hedged transaction. For cash flow hedges, the ineffectiveness will be recognized in earnings only when the hedged transaction affects earnings; otherwise, the

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Note 2 - Earnings Per Common Share
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Basis of Presentation and Significant Accounting Policies (continued)


2. EARNINGS PER COMMON SHARE
Computation of Basic and Diluted Earnings per Common Share
Three Months Ended March 31,
(In millions, except for per share data)20212020
Earnings
Net income$249 $273 
Less: Preferred stock dividends5 5 
Net income available to common stockholders$244 $268 
Shares
Weighted average common shares outstanding, basic358.2 358.5 
Dilutive effect of stock-based awards under compensation plans4.0 2.6 
Weighted average common shares outstanding and dilutive potential common shares362.2 361.1 
Net income available to common stockholders per common share
Basic$0.68 $0.75 
Diluted$0.67 $0.74 
3. SEGMENT INFORMATION
ineffectiveness gains or losses will remain in accumulated other comprehensive income (AOCI). Under current accounting, total hedge ineffectiveness is reported separately in realized gains and losses apart from the hedged transaction. The updated guidance is effective January 1, 2019 through a cumulative effect adjustment that will reclassify cumulative ineffectiveness on open cash flow hedges from retained earnings to AOCI. Early adoption is permitted as of the beginning of a year. The Company has not yet determined the timing for adoption or estimated the effect on the Company’s financial statements.
Revenue Recognition
In May 2014, the FASB issued updated guidance for recognizing revenue. The guidance excludes insurance contracts and financial instruments. Revenue is to be recognized when, or as, goods or services are transferred to customers in an amount that reflects the consideration that an entity is expected to be entitled in exchange for those goods or services, and this accounting guidance is similar to current accounting for many transactions. This guidance is effective retrospectively on January 1, 2018, with a choice of restating prior periods or recognizing a cumulative effect for contracts in place as of the adoption. The Company will adopt on January 1, 2018, and has not determined its method for adoption.  Based on current evaluations, the Company will likely present fee income within the Mutual Funds segment gross of related distribution costs that are currently netted against revenues.  Fee income has been reported net of distribution costs of $139 and$184 for the nine months ended September 30, 2017, and the year ended December 31, 2016, respectively. The adoption is not expected to have a material effect on the Company’s financial position, cash flows or net income.



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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Business Disposition

Sale of U.K. business
On May 10, 2017, the Company completed the sale of its U.K. property and casualty run-off subsidiaries, Hartford Financial Products International Limited and Downlands Liability Management Limited, in a cash transaction to Catalina Holdings U.K. Limited ("buyer"), for approximately $272, net of transaction costs. The Company's U.K. property and casualty run-off subsidiaries are included in the P&C Other Operations reporting segment. Prior to sale, revenues and earnings for 2017 and 2016 were not material to the Company's consolidated results of operations.
The sale resulted in an after-tax capital loss from the transaction of $5 in 2016.
Major Classes of Assets and Liabilities Transferred by the Company to the Buyer in Connection with the Sale
 Carrying Value as of
 ClosingDecember 31, 2016 [2]
Assets  
Cash and investments$669$657
Reinsurance recoverables and other [1]268213
 $937$870
Liabilities
 
Reserve for future policy benefits and unpaid losses and loss adjustment expenses$653$600
Other liabilities1211
 $665$611
[1]
Includes intercompany reinsurance recoverables of $71 settled in cash at closing.
[2]Classified as assets and liabilities held for sale.


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Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Earnings Per Common Share



Computation of Basic and Diluted Earnings per Common Share
 Three Months Ended September 30, Nine Months Ended September 30,
(In millions, except for per share data)20172016 20172016
Earnings     
Net income$234
$438
 $572
$977
Shares     
Weighted average common shares outstanding, basic360.2
383.8
 365.9
391.4
Dilutive effect of stock compensation plans4.5
3.2
 4.1
3.5
Dilutive effect of warrants2.3
3.5
 2.6
3.6
Weighted average common shares outstanding and dilutive potential common shares367.0
390.5
 372.6
398.5
Net income per common share     
Basic$0.65
$1.14
 $1.56
$2.50
Diluted$0.64
$1.12
 $1.54
$2.45



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Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Segment Information

The Company currently conducts business principally in six5 reporting segments including Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits Mutualand Hartford Funds, and Talcott Resolution, as well as a Corporate category.Category.
The Company's revenues are generated primarily in the United States ("U.S."). Any foreign sourced revenue is immaterial.
Net Income (Loss)

Three Months Ended March 31,
20212020
Commercial Lines$129 $121 
Personal Lines135 98 
Property & Casualty Other Operations(13)5 
Group Benefits9 104 
Hartford Funds47 36 
Corporate(58)(91)
Net income249 273 
Preferred stock dividends5 5 
Net income available to common stockholders$244 $268 
13
 Three Months Ended September 30, Nine Months Ended September 30,
 20172016 20172016
Commercial Lines [1]$90
$268
 $579
$730
Personal Lines [1]8
33
 65
6
Property & Casualty Other Operations18
31
 62
(106)
Group Benefits71
62
 185
167
Mutual Funds26
21
 73
61
Talcott Resolution80
78
 253
199
Corporate(59)(55) (645)(80)
Net income$234
$438
 $572
$977
[1]
For the three and nine months endedSeptember 30, 2016 there was a segment change which resulted in a movement from Commercial Lines to Personal Lines of $4 and $10, respectively, of net servicing income associated with our participation in the National Flood Insurance Program.
Note 3 - Segment Information

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Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Segment Information (continued)


Revenues
Three Months Ended March 31,
20212020
Earned premiums and fee income:
Commercial Lines
Workers’ compensation$738 $816 
Liability375 343 
Marine58 65 
Package business393 377 
Property200 205 
Professional liability155 143 
Bond69 70 
Assumed reinsurance68 66 
Automobile188 188 
Total Commercial Lines2,244 2,273 
Personal Lines
Automobile512 543 
Homeowners230 240 
Total Personal Lines [1]742 783 
Group Benefits
Group disability739 726 
Group life602 607 
Other77 58 
Total Group Benefits1,418 1,391 
Hartford Funds
Mutual fund and Exchange-Traded Products ("ETP")259 225 
Talcott Resolution life and annuity separate accounts [2]23 22 
Total Hartford Funds282 247 
Corporate12 17 
Total earned premiums and fee income4,698 4,711 
Net investment income509 459 
Net realized capital gains (losses)80 (231)
Other revenues12 17 
Total revenues$5,299 $4,956 
[1]For the three months ended March 31, 2021 and 2020, AARP members accounted for earned premiums of $676 and $707, respectively.
[2]Represents revenues earned for investment advisory services on the life and annuity separate account AUM sold in May 2018 that is still managed by the Company's Hartford Funds segment.
14
 Three Months Ended September 30, Nine Months Ended September 30,

20172016 20172016
Earned premiums and fee income     
Commercial Lines     
Workers’ compensation$828
$775
 $2,461
$2,309
Liability150
156
 450
447
Package business325
318
 965
940
Automobile155
162
 477
474
Professional liability63
58
 183
166
Bond59
56
 172
163
Property152
162
 451
480
Total Commercial Lines [1]1,732
1,687
 5,159
4,979
Personal Lines



   
Automobile653
693
 1,975
2,065
Homeowners279
297
 843
895
Total Personal Lines [1] [2]932
990
 2,818
2,960
Group Benefits     
Group disability386
378
 1,146
1,128
Group life383
383
 1,176
1,134
Other53
51
 159
153
Total Group Benefits822
812
 2,481
2,415
Mutual Funds     
Mutual Fund179
153
 522
442
Talcott24
25
 73
75
Total Mutual Funds203
178
 595
517
Talcott Resolution245
268
 763
796
Corporate—
1
 2
3
Total earned premiums and fee income3,934
3,936
 11,818
11,670
Net investment income729
772
 2,172
2,203
Net realized capital gains (losses)(3)(17) 52
(119)
Other revenues24
24
 66
67
Total revenues$4,684
$4,715
 $14,108
$13,821
[1]
Commercial Lines includes installment fees of $9 and $28, respectively, for the three and nine months endedSeptember 30, 2017 and $10 and $29, respectively, for the three and nine months endedSeptember 30, 2016. Personal Lines includes installment fees of $11 and $33, respectively, for the three and nine months endedSeptember 30, 2017 and $10 and $29, respectively, for the three and nine months endedSeptember 30, 2016.
Note 3 - Segment Information
[2]
For the three months endedSeptember 30, 2017 and 2016, AARP members accounted for earned premiums of $801 and $825, respectively. For the nine months endedSeptember 30, 2017 and 2016, AARP members accounted for earned premiums of $2.4 billion and $2.4 billion, respectively.


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Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements


Revenue from Non-Insurance Contracts with Customers
Three Months Ended March 31,
Revenue Line Item20212020
Commercial Lines
Installment billing feesFee income$9 $8 
Personal Lines
Installment billing feesFee income8 9 
Insurance servicing revenuesOther revenues19 19 
Group Benefits
Administrative servicesFee income44 43 
Hartford Funds
Advisor, distribution and other management feesFee income257 224 
Other feesFee income25 23 
Corporate
Investment management and other feesFee income12 13 
Transition service revenuesOther revenues0 2 
Total non-insurance revenues with customers$374 $341 
4. FAIR VALUE MEASUREMENTS
The Company carries certain financial assets and liabilities at estimated fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants. Our fair value framework includes a hierarchy that gives the highest priority to the use of quoted prices in active markets, followed by the use of market observable inputs, followed by the use of unobservable inputs. The fair value hierarchy levels are as follows:
Level 1
Level 1    Fair values based primarily on unadjusted quoted prices for identical assets or liabilities, in active markets that the Company has the ability to access at the measurement date.
Level 2Fair values primarily based on observable inputs, other than quoted prices included in Level 1, or based on prices for similar assets and liabilities.
Level 2    Fair values primarily based on observable inputs, other than quoted prices included in Level 1, or based on prices for similar assets and liabilities.
Level 3Fair values derived when one or more of the significant inputs are unobservable (including assumptions about risk). With little or no observable market, the determination of fair values uses considerable judgment and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability. Also included are securities that are traded within illiquid markets and/or priced by independent brokers.
Level 3    Fair values derived when one or more of the significant inputs are unobservable (including assumptions about risk). With little or no observable market, the determination of fair values uses considerable judgment and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability. Also included are securities that are traded within illiquid markets and/or priced by independent brokers.
The Company will classify the financial asset or liability by level based upon the lowest level input that is significant to the determination of the fair value. In most cases, both observable inputs (e.g., changes in interest rates) and unobservable inputs (e.g., changes in risk assumptions) are used to determine fair values that the Company has classified within Level 3.

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Note 4 - Fair Value Measurements
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of March 31, 2021
TotalQuoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets accounted for at fair value on a recurring basis
Fixed maturities, AFS
Asset backed securities ("ABS")$1,435 $0 $1,429 $6 
Collateralized loan obligations ("CLOs")3,049 0 2,623 426 
Commercial mortgage-backed securities ("CMBS")4,167 0 4,106 61 
Corporate19,495 0 18,551 944 
Foreign government/government agencies868 0 868 0 
Municipal9,214 0 9,214 0 
Residential mortgage-backed securities ("RMBS")4,025 0 3,544 481 
U.S. Treasuries1,354 547 807 0 
Total fixed maturities43,607 547 41,142 1,918 
Equity securities, at fair value1,632 1,022 540 70 
Derivative assets
Credit derivatives21 0 21 0 
Interest rate derivatives1 0 1 0 
Total derivative assets [1]22 0 22 0 
Short-term investments3,367 1,754 1,597 16 
Total assets accounted for at fair value on a recurring basis$48,628 $3,323 $43,301 $2,004 
Liabilities accounted for at fair value on a recurring basis
Derivative liabilities
Foreign exchange derivatives$(10)$0 $(10)$0 
Interest rate derivatives(45)0 (45)0 
Total derivative liabilities [2](55)0 (55)0 
Total liabilities accounted for at fair value on a recurring basis$(55)$0 $(55)$0 
16
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of September 30, 2017
 TotalQuoted Prices in
Active Markets
for Identical
Assets
(Level 1)		Significant
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets accounted for at fair value on a recurring basis    
Fixed maturities, AFS    
Asset-backed-securities ("ABS")$2,305
$—
$2,249
$56
Collateralized debt obligations ("CDOs")2,395
—
2,207
188
Commercial mortgage-backed securities ("CMBS")5,120
—
5,027
93
Corporate25,746
—
24,707
1,039
Foreign government/government agencies1,365
—
1,332
33
Bonds of municipalities and political subdivisions ("municipal bonds")12,435
—
12,349
86
Residential mortgage-backed securities ("RMBS")4,205
—
2,255
1,950
U.S. Treasuries4,098
338
3,760
—
Total fixed maturities57,669
338
53,886
3,445
Fixed maturities, FVO82
—
82
—
Equity securities, trading [1]11
11
—
—
Equity securities, AFS1,112
840
155
117
Derivative assets    
Credit derivatives8
—
8
—
Foreign exchange derivatives(4)—
(4)—
Interest rate derivatives2
—
2
—
Guaranteed minimum withdrawal benefit ("GMWB") hedging instruments39
—
(1)40
Macro hedge program158
—
—
158
Total derivative assets [2]203
—
5
198
Short-term investments3,756
1,922
1,834
—
Reinsurance recoverable for GMWB51
—
—
51
Modified coinsurance reinsurance contracts57
—
57
—
Separate account assets [3]113,197
74,053
38,019
226
Total assets accounted for at fair value on a recurring basis$176,138
$77,164
$94,038
$4,037
Liabilities accounted for at fair value on a recurring basis    
Other policyholder funds and benefits payable
(GMWB embedded derivative)
$(93)$—
$—
$(93)
Derivative liabilities    
Credit derivatives(3)—
(3)—
Equity derivatives2
—
—
2
Foreign exchange derivatives(270)—
(270)—
Interest rate derivatives(479)—
(452)(27)
GMWB hedging instruments26
—
42
(16)
Macro hedge program8
—
(17)25
Total derivative liabilities [4](716)—
(700)(16)
Contingent consideration [5](28)—
—
(28)
Total liabilities accounted for at fair value on a recurring basis$(837)$—
$(700)$(137)

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Note 4 - Fair Value Measurements
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 2020
Total
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets accounted for at fair value on a recurring basis
Fixed maturities, AFS
ABS$1,564 $0 $1,564 $0 
CLOs2,780 0 2,420 360 
CMBS4,484 0 4,407 77 
Corporate20,273 0 19,392 881 
Foreign government/government agencies919 0 913 6 
Municipal9,503 0 9,503 0 
RMBS4,107 0 3,726 381 
U.S. Treasuries1,405 529 876 0 
Total fixed maturities45,035 529 42,801 1,705 
Equity securities, at fair value1,438 872 496 70 
Derivative assets
Credit derivatives21 0 21 0 
Foreign exchange derivatives1 0 1 0 
Interest rate derivatives1 0 1 0 
Total derivative assets [1]23 0 23 0 
Short-term investments3,283 2,663 590 30 
Total assets accounted for at fair value on a recurring basis$49,779 $4,064 $43,910 $1,805 
Liabilities accounted for at fair value on a recurring basis
Derivative liabilities
Foreign exchange derivatives(14)0 (14)0 
Interest rate derivatives(70)0 (70)0 
Total derivative liabilities [2](84)0 (84)0 
Total liabilities accounted for at fair value on a recurring basis$(84)$0 $(84)$0 
[1]Includes derivative instruments in a net positive fair value position after consideration of the accrued interest and impact of collateral posting requirements which may be imposed by agreements and applicable law. See footnote 2 to this table for derivative liabilities.
[2]Includes derivative instruments in a net negative fair value position (derivative liability) after consideration of the accrued interest and impact of collateral posting requirements which may be imposed by agreements and applicable law.
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 2016
 Total
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets accounted for at fair value on a recurring basis    
Fixed maturities, AFS    
ABS$2,382
$—
$2,300
$82
CDOs1,916
—
1,502
414
CMBS4,936
—
4,856
80
Corporate25,666
—
24,586
1,080
Foreign government/government agencies1,171
—
1,107
64
Municipal bonds11,486
—
11,368
118
RMBS4,767
—
2,795
1,972
U.S. Treasuries3,679
620
3,059
—
Total fixed maturities56,003
620
51,573
3,810
Fixed maturities, FVO293
1
281
11
Equity securities, trading [1]11
11
—
—
Equity securities, AFS1,097
821
177
99
Derivative assets    
Credit derivatives17
—
17
—
Foreign exchange derivatives27
—
27
—
Interest rate derivatives(427)—
(427)—
GMWB hedging instruments74
—
14
60
Macro hedge program128
—
8
120
Other derivative contracts1
—
—
1
Total derivative assets [2](180)—
(361)181
Short-term investments3,244
878
2,366
—
Reinsurance recoverable for GMWB73
—
—
73
Modified coinsurance reinsurance contracts68
—
68
—
Separate account assets [3]111,634
71,606
38,856
201
Total assets accounted for at fair value on a recurring basis$172,243
$73,937
$92,960
$4,375
Liabilities accounted for at fair value on a recurring basis    
Other policyholder funds and benefits payable    
GMWB embedded derivative$(241)$—
$—
$(241)
Equity linked notes(33)—
—
(33)
Total other policyholder funds and benefits payable(274)—
—
(274)
Derivative liabilities    
Credit derivatives(13)—
(13)—
Equity derivatives33
—
33
—
Foreign exchange derivatives(237)—
(237)—
Interest rate derivatives(542)—
(521)(21)
GMWB hedging instruments20
—
(1)21
Macro hedge program50
—
3
47
Total derivative liabilities [4](689)—
(736)47
Contingent consideration [5](25)—
—
(25)
Total liabilities accounted for at fair value on a recurring basis$(988)$—
$(736)$(252)
[1]Included in other investments on the Condensed Consolidated Balance Sheets.
[2]Includes OTC and OTC-cleared derivative instruments in a net positive fair value position after consideration of the accrued interest and impact of collateral posting requirements which may be imposed by agreements, clearing house rules and applicable law. See footnote 4 to this table for derivative liabilities.

19
TableIn connection with the acquisition of ContentsNavigators Group, the Company has overseas deposits in Other Invested Assets of $61 and $54 as of March 31, 2021 and December 31, 2020, respectively, which are measured at fair value using the net asset value as a practical expedient.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


[3]
Approximately $2.4 billion and $4.0 billion of investment sales receivable, as of September 30, 2017, and December 31, 2016, respectively, are excluded from this disclosure requirement because they are trade receivables in the ordinary course of business where the carrying amount approximates fair value. Included in the total fair value amount are $899 and $1.0 billion of investments, as of September 30, 2017 and December 31, 2016, respectively, for which the fair value is estimated using the net asset value per unit as a practical expedient which are excluded from the disclosure requirement to classify amounts in the fair value hierarchy.
[4]Includes OTC and OTC-cleared derivative instruments in a net negative fair value position (derivative liability) after consideration of the accrued interest and impact of collateral posting requirements, which may be imposed by agreements, clearing house rules and applicable law.
[5]For additional information see the Contingent Consideration section below.
Fixed Maturities, Equity Securities, Short-term Investments, and Free-standing Derivatives
Valuation Techniques
The Company generally determines fair values using valuation techniques that use prices, rates, and other relevant information evident from market transactions involving identical or similar instruments. Valuation techniques also include, where appropriate, estimates of future cash flows that are converted into a single discounted amount using current market expectations. The Company uses a "waterfall" approach comprised of the following pricing sources and techniques, which are listed in priority order:
•Quoted prices, unadjusted, for identical assets or liabilities in active markets, which are classified as Level 1.
•Prices from third-party pricing services, which primarily utilize a combination of techniques. These services utilize recently reported trades of identical, similar, or benchmark securities making adjustments for market observable inputs available through the reporting date. If there are no recently reported trades, they may use a discounted cash flow technique to develop a price using expected cash flows based upon the anticipated future performance of the underlying collateral discounted at an estimated market rate. Both techniques develop prices that consider the time value of future cash flows and provide a margin for risk, including liquidity and credit risk. Most prices provided by third-party pricing services are classified as Level 2 because the inputs used in pricing the securities are observable. However, some securities that are less liquid or trade less actively are classified as Level 3. Additionally, certain long-dated securities, including certainsuch as municipal securities, foreign government/government agency securities and bank loans, include benchmark interest rate or credit spread assumptions that are not observable in the marketplace and are thus classified as Level 3.
17
Note 4 - Fair Value Measurements
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
•Internal matrix pricing, which is a valuation process internally developed for private placement securities for which the Company is unable to obtain a price from a third-party pricing service. Internal pricing matrices determine credit spreads that, when combined with risk-free rates, are applied to contractual cash flows to develop a price. The Company develops credit spreads using market based data for public securities adjusted for credit spread differentials between public and private securities, which are obtained from a survey of multiple private placement brokers. The market-based reference credit spread considers the issuer’s financial strength and term to maturity, using an
independent public security index, and trade information, while the credit spread differential considers the non-public nature of the security. Securities priced using internal matrix pricing are classified as Level 2 because the significant inputs are observable or can be corroborated with observable data.
•Independent broker quotes, which are typically non-binding, and use inputs that can be difficult to corroborate with observable market based data. Brokers may use present value techniques using assumptions specific to the security types, or they may use recent transactions of similar securities. Due to the lack of transparency in the process that brokers use to develop prices, valuations that are based on independent broker quotes are classified as Level 3.
The fair value of free-standing derivative instruments is determined primarily using a discounted cash flow model or option model technique and incorporateincorporates counterparty credit risk. In some cases, quoted market prices for exchange-traded and OTC-clearedover-the-counter ("OTC") cleared derivatives may be used and in other cases independent broker quotes may be used. The pricing valuation models primarily use inputs that are observable in the market or can be corroborated by observable market data. The valuation of certain derivatives may include significant inputs that are unobservable, such as volatility levels, and reflect the Company’s view of what other market participants would use when pricing such instruments. Unobservable market data is used in the valuation of customized derivatives that are used to hedge certain GMWB variable annuity riders. See the section “GMWB Embedded, Customized, and Reinsurance Derivatives” below for further discussion of the valuation model used to value these customized derivatives.
Valuation Controls
The process for determining the fair value process forof investments is monitored by the Valuation Committee, which is a cross-functionalcross-
functional group of senior management within the Company that meets at least quarterly.Company. The purpose of the committeeValuation Committee is to overseeprovide oversight of the pricing policy, procedures and procedures, as well as to approve changes tocontrols, including approval of valuation methodologies and pricing sources. The Valuation Committee reviews market data trends, pricing statistics and trading statistics to ensure that prices are reasonable and consistent with our fair value framework. Controls and procedures used to assess third-party pricing services are reviewed by the Valuation Committee, including the results of annual due-diligence reviews.
There Controls include, but are also two working groups under the Valuation Committee: a Securities Fair Value Working Group (“Securities Working Group”)not limited to, reviewing daily and a Derivatives Fair Value Working Group ("Derivatives Working Group"). The working groups, which include various investment, operations, accountingmonthly price changes, stale prices, and risk management professionals, meet monthlymissing prices and comparing new trade prices to review market data trends, pricing and trading statistics and results, and any proposed pricing methodology changes.
The Securities Working Group reviews prices received from third parties to ensure that the prices represent a reasonable estimate of the fair value. The group considers trading volume, new

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


issuance activity, market trends, new regulatory rulings and other factors to determine whether the market activity is significantly different than normal activity in an active market. A dedicated pricing unit follows up with trading and investment sector professionals and challenges prices of third-party pricing services, when the estimated assumptions used differ from what the unit believes a market participant would use. If the available evidence indicates that pricing from third-party pricing services or broker quotes is based upon transactions that are stale or not from trades made in an orderly market, the Company places little, if any, weight on the third party service’s transaction price and will estimate fair value using an internal process, such as a pricing matrix.
The Derivatives Working Group reviews the inputs, assumptions and methodologies used to ensure that the prices represent a reasonable estimate of the fair value. A dedicated pricing team works directly with investment sector professionals to investigate the impacts of changes in the market environment on prices or valuations of derivatives. New models and any changes to current models are required to have detailed documentation and are validated to a second source. The model validation documentation and results of validation are presented to the Valuation Committee for approval.
The Company conducts other monitoring controls around securities and derivatives pricing including, but not limited to, the following:
Review of daily price changes over specific thresholds and new trade comparison to third-party pricing services.
Daily comparison of OTC derivative market valuations to counterparty valuations.
Review of weekly price changes compared to published bond prices of a corporate bond index.
Monthly reviews ofindex, and daily OTC derivative market valuations to counterparty valuations. The Company has a dedicated pricing unit that works with trading and investment professionals to challenge the price received by a third party pricing source if the Company believes that the valuation received does not accurately reflect the fair value. New valuation models and changes over thresholds, stale prices, missing prices, and zero prices.
Monthly validation of prices to a second source for securities in most sectors and for certain derivatives.
current models require approval by the Valuation Committee. In addition, the Company’s enterprise-wide Operational Risk Management function led by the Chief Risk Officer, is responsible for model risk management and provides an independent review of the suitability and reliability of model inputs, as well as an analysis of significant changes to current models.
Valuation Inputs
Quoted prices for identical assets in active markets are considered Level 1 and consist of on-the-run U.S. Treasuries, money market funds, exchange-traded equity securities, open-ended mutual funds, certain short-term investments, and exchange traded futures and option contracts.

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Note 4 - Fair Value Measurements
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


Valuation Inputs Used in Levels 2 and 3 Measurements for Securities and Freestanding Derivatives
Level 2
Primary Observable Inputs
Level 3
Primary Unobservable Inputs
Fixed Maturity Investments
Structured securities (includes ABS, CDOs,CLOs, CMBS and RMBS)
• Benchmark yields and spreads

• Monthly payment information

• Collateral performance, which varies by vintage year and includes delinquency rates, loss severity rates and refinancing assumptions

• Credit default swap indices



Other inputs for ABS, CLOs and RMBS:

• Estimate of future principal prepayments, derived from the characteristics of the underlying structure

• Prepayment speeds previously experienced at the interest rate levels projected for the collateral
• Independent broker quotes
• Credit spreads beyond observable curve
• Interest rates beyond observable curve


Other inputs for less liquid securities or those that trade less actively, including subprime RMBS:
• Estimated cash flows
• Credit spreads, which include illiquidity premium
• Constant prepayment rates
• Constant default rates
• Loss severity
Corporates
• Benchmark yields and spreads
• Reported trades, bids, offers of the same or similar securities
• Issuer spreads and credit default swap curves


Other inputs for investment grade privately placed securities that utilize internal matrix pricing:
• Credit spreads for public securities of similar quality, maturity, and sector, adjusted for non-public nature
• Independent broker quotes

• Credit spreads beyond observable curve

• Interest rates beyond observable curve



Other inputs for below investment grade privately placed securities:
• Independent broker quotes
securities and private bank loans:
• Credit spreads for public securities of similar quality, maturity, and sector, adjusted for non-public nature
U.SU.S. Treasuries, Municipals, and Foreign government/government agencies
• Benchmark yields and spreads

• Issuer credit default swap curves

• Political events in emerging market economies

• Municipal Securities Rulemaking Board reported trades and material event notices

• Issuer financial statements
• Independent broker quotes
• Credit spreads beyond observable curve
• Interest rates beyond observable curve
Equity Securities
• Quoted prices in markets that are not active• For privately traded equity securities, internal discounted cash flow models utilizing earnings multiples or other cash flow assumptions that are not observable; or they may be held at costobservable
Short TermShort-term Investments
• Benchmark yields and spreads
• Reported trades, bids, offers
• Issuer spreads and credit default swap curves
• Material event notices and new issue money market rates
Not applicable • Independent broker quotes
Derivatives
Credit derivatives
• Swap yield curve
• Credit default swap curves
• Independent broker quotes
• Yield curves beyond observable limits
Not applicable
Equity derivatives
• Equity index levels
• Swap yield curve
• Independent broker quotes
• Equity volatility
Foreign exchange derivatives
• Swap yield curve
• Currency spot and forward rates
• Cross currency basis curves
• Independent broker quotesNot applicable
Interest rate derivatives
• Swap yield curve
• Independent broker quotes
• Interest rate volatility
Not applicable

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Note 4 - Fair Value Measurements
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


Significant Unobservable Inputs for Level 3 - Securities
Assets accounted for at fair value on a recurring basisFair
Value		Predominant
Valuation
Technique
Significant
Unobservable Input
MinimumMaximumWeighted Average [1]Impact of
Increase in Input
on Fair Value [2]
As of March 31, 2021
CLOs [3]$331 Discounted cash flowsSpread232 bps332 bps312 bpsDecrease
CMBS [3]$21 Discounted cash flowsSpread (encompasses prepayment, default risk and loss severity)255 bps670 bps555 bpsDecrease
Corporate [4]$844 Discounted cash flowsSpread91 bps1,231 bps330 bpsDecrease
RMBS [3]$450 Discounted cash flowsSpread [6]2 bps1,499 bps100 bpsDecrease
Constant prepayment rate [6]0%12%6% Decrease [5]
Constant default rate [6]1%10%3%Decrease
Loss severity [6]0%100%76%Decrease
As of December 31, 2020
CLOs [3]$340 Discounted cash flowsSpread304 bps305 bps304 bpsDecrease
CMBS [3]$20 Discounted cash flowsSpread (encompasses prepayment, default risk and loss severity)255 bps975 bps688 bpsDecrease
Corporate [4]$749 Discounted cash flowsSpread110 bps692 bps293 bpsDecrease
RMBS [3]$364 Discounted cash flowsSpread [6]7 bps937 bps119 bpsDecrease
Constant prepayment rate [6]0%10%5%Decrease [5]
Constant default rate [6]2%6%3%Decrease
Loss severity [6]0%100%84%Decrease
[1]The weighted average is determined based on the fair value of the securities.
[2]Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.
[3]Excludes securities for which the Company bases fair value on broker quotations.
[4]Excludes securities for which the Company bases fair value on broker quotations; however, included are broker priced lower-rated private placement securities for which the Company receives spread and yield information to corroborate the fair value.
[5]Decrease for above market rate coupons and increase for below market rate coupons.
[6]Generally, a change in the assumption used for the constant default rate would have been accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for constant prepayment rate and would have resulted in wider spreads.
As of March 31, 2021 and December 31, 2020, the fair values of the Company's level 3 derivatives were $0 and less than $1, respectively.
Significant Unobservable Inputs for Level 3 - Securities
Assets accounted for at fair value on a recurring basisFair
Value		Predominant
Valuation
Technique
Significant
Unobservable Input
MinimumMaximumWeighted Average [1]Impact of
Increase in Input
on Fair Value [2]
As of September 30, 2017
CMBS [3]$49
Discounted cash flowsSpread (encompasses prepayment, default risk and loss severity)9 bps1,816 bps352 bpsDecrease
Corporate [4]$496
Discounted cash flowsSpread102 bps940 bps270 bpsDecrease
Municipal [3]$70
Discounted cash flowsSpread184 bps239 bps201 bpsDecrease
RMBS [3]$1,950
Discounted cash flowsSpread26 bps501 bps76 bpsDecrease
   Constant prepayment rate—%13%5% Decrease [5]
   Constant default rate2%9%4%Decrease
   Loss severity—%100%68%Decrease
As of December 31, 2016
CMBS [3]$52
Discounted cash flowsSpread (encompasses prepayment, default risk and loss severity)10 bps1,273 bps366 bpsDecrease
Corporate [4]$510
Discounted cash flowsSpread122 bps1,302 bps359 bpsDecrease
Municipal [3]$101
Discounted cash flowsSpread135 bps286 bps221 bpsDecrease
RMBS [3]$1,963
Discounted cash flowsSpread16 bps1,830 bps192 bpsDecrease
   Constant prepayment rate—%20%4%Decrease [5]
   Constant default rate—%11%5%Decrease
   Loss severity—%100%75%Decrease
[1]The weighted average is determined based on the fair value of the securities.
[2]Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.
[3]Excludes securities for which the Company based fair value on broker quotations.
[4]Excludes securities for which the Company bases fair value on broker quotations; however, included are broker priced lower-rated private placement securities for which the Company receives spread and yield information to corroborate the fair value.
[5]Decrease for above market rate coupons and increase for below market rate coupons.

23
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


Significant Unobservable Inputs for Level 3 - Freestanding Derivatives
 Fair
Value		Predominant
Valuation 
Technique		Significant Unobservable InputMinimumMaximumImpact of 
Increase in Input on 
Fair Value [1]
As of September 30, 2017
Interest rate derivatives      
Interest rate swaps$(29)Discounted cash flowsSwap curve beyond 30 years2%3%Decrease
Interest rate swaptions [2]$2
Option modelInterest rate volatility2%3%Increase
GMWB hedging instruments      
Equity variance swaps$(40)Option modelEquity volatility12%19%Increase
Equity options$2
Option modelEquity volatility27%27%Increase
Customized swaps$62
Discounted cash flowsEquity volatility7%30%Increase
Macro hedge program [3]      
Equity options$190
Option modelEquity volatility15%30%Increase
As of December 31, 2016
Interest rate derivatives      
Interest rate swaps$(29)Discounted cash flowsSwap curve beyond 30 years3%3%Decrease
Interest rate swaptions [2]$8
Option modelInterest rate volatility2%2%Increase
GMWB hedging instruments      
Equity variance swaps$(36)Option modelEquity volatility20%23%Increase
Equity options$17
Option modelEquity volatility27%30%Increase
Customized swaps$100
Discounted cash flowsEquity volatility12%30%Increase
Macro hedge program [3]      
Equity options$188
Option modelEquity volatility17%28%Increase
[1]Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table. Changes are based on long positions, unless otherwise noted. Changes in fair value will be inversely impacted for short positions.
[2]The swaptions presented are purchased options that have the right to enter into a pay-fixed swap.
[3]Excludes derivatives for which the Company bases fair value on broker quotations.
The tablestable above exclude the portion of ABS, index options andexcludes certain corporate securities for which fair values are predominately based on independent broker quotes. While the Company does not have access to the significant unobservable inputs that independent brokers may use in their pricing process, the Company believes brokers likely use inputs similar to those used by the Company and third-party pricing services to price similar instruments. As such, in their pricing models, brokers likely use estimated loss severity rates, prepayment rates, constant default rates and credit spreads. Therefore, similar to non-broker priced securities, increases in these inputs would generally cause fair values to decrease. For the three and nine months ended September 30, 2017, noAs of March 31, 2021, 0 significant adjustments were made by the Company to broker prices received.

Transfers between Levels
Transfers of securities among the levels occur at the beginning of the reporting period. The amount of transfers from Level 1 to Level 2 was $463 and $1.8 billion for the three and nine months ended September 30, 2017 and $508 and $1.3 billion for three and nine months ended September 30, 2016, respectively, which represented previously on-the-run U.S. Treasury securities that are now off-the-run. For the three and nine months ended September 30, 2017 and 2016, there were no transfers from Level 2 to Level 1. See the fair value roll-forward tables for the three and nine months ended September 30, 2017 and 2016, for the transfers into and out of Level 3.

24
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


GMWB Embedded, Customized and Reinsurance Derivatives
GMWB Embedded DerivativesThe Company formerly offered certain variable annuity products with GMWB riders that provide the policyholder with a guaranteed remaining balance ("GRB") which is generally equal to premiums less withdrawals. If the policyholder’s account value is reduced to a specified level through a combination of market declines and withdrawals but the GRB still has value, the Company is obligated to continue to make annuity payments to the policyholder until the GRB is exhausted. When payments of the GRB are not life-contingent, the GMWB represents an embedded derivative carried at fair value reported in other policyholder funds and benefits payable in the Condensed Consolidated Balance Sheets with changes in fair value reported in net realized capital gains and losses.
Free-standing Customized DerivativesThe Company holds free-standing customized derivative contracts to provide protection from certain capital markets risks for the remaining term of specified blocks of non-reinsured GMWB riders. These customized derivatives are based on policyholder behavior assumptions specified at the inception of the derivative contracts. The Company retains the risk for differences between assumed and actual policyholder behavior and between the performance of the actively managed funds underlying the separate accounts and their respective indices. These derivatives are reported in the Condensed Consolidated Balance Sheets within other investments or other liabilities, as appropriate, after considering the impact of master netting agreements.
GMWB Reinsurance DerivativeThe Company has reinsurance arrangements in place to transfer a portion of its risk of loss due to GMWB. These arrangements are recognized as derivatives carried at fair value and reported in reinsurance recoverables in the Condensed Consolidated Balance Sheets. Changes in the fair value of the reinsurance agreements are reported in net realized capital gains and losses.
Valuation Techniques
Fair values for GMWB embedded derivatives, free-standing customized derivatives and reinsurance derivatives are classified as Level 3 in the fair value hierarchy and are calculated using internally developed models that utilize significant unobservable inputs because active, observable markets do not exist for these items. In valuing the GMWB embedded derivative, the Company attributes to the derivative a portion of the expected fees to be collected over the expected life of the contract from the contract holder equal to the present value of future GMWB claims. The excess of fees collected from the contract holder in the current period over the portion of fees attributed to the embedded derivative in the current period are associated with the host variable annuity contract and reported in fee income.
Valuation Controls
Oversight of the Company's valuation policies and processes for GMWB embedded, reinsurance, and customized derivatives is performed by a multidisciplinary group comprised of finance, actuarial and risk management professionals. This multidisciplinary group reviews and approves changes and enhancements to the Company's valuation model as well as associated controls.
Valuation Inputs
The fair value for each of the non-life contingent GMWBs, the free-standing customized derivatives and the GMWB reinsurance derivative is calculated as an aggregation of the following components: Best Estimate Claim Payments; Credit Standing Adjustment; and Margins. The Company believes the aggregation of these components results in an amount that a market participant in an active liquid market would require, if such a market existed, to assume the risks associated with the guaranteed minimum benefits and the related reinsurance and customized derivatives. Each component described in the following discussion is unobservable in the marketplace and requires subjectivity by the Company in determining its value.
Best Estimate Claim Payments
The Best Estimate Claim Payments are calculated based on actuarial and capital market assumptions related to projected cash flows, including the present value of benefits and related contract charges, over the lives of the contracts, incorporating unobservable inputs including expectations concerning policyholder behavior. These assumptions are input into a stochastic risk neutral scenario process that is used to determine the valuation and involves numerous estimates and subjective judgments regarding a number of variables.
The Company monitors various aspects of policyholder behavior and may modify certain of its assumptions, including living benefit lapses and withdrawal rates, if credible emerging data indicates that changes are warranted. In addition, the Company will continue to evaluate policyholder behavior assumptions should we implement initiatives to reduce the size of the variable annuity business. At a minimum, all policyholder behavior assumptions are reviewed and updated at least annually as part of the Company’s annual fourth-quarter comprehensive study to refine its estimate of future gross profits. In addition, the Company recognizes non-market-based updates driven by the relative outperformance (underperformance) of the underlying actively managed funds as compared to their respective indices.
Credit Standing Adjustment
The credit standing adjustment is an estimate of the additional amount that market participants would require in determining fair value to reflect the risk that GMWB benefit obligations or the GMWB reinsurance recoverables will not be fulfilled. The Company incorporates a blend of observable Company and reinsurer credit default spreads from capital markets, adjusted for market recoverability.
Margins
The behavior risk margin adds a margin that market participants would require, in determining fair value, for the risk that the Company’s assumptions about policyholder behavior could differ from actual experience. The behavior risk margin is calculated by taking the difference between adverse policyholder behavior assumptions and best estimate assumptions.

25
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


Valuation Inputs Used in Levels 2 and 3 Measurements for GMWB Embedded, Customized and Reinsurance Derivatives
Level 2
Primary Observable Inputs		Level 3
Primary Unobservable Inputs
• Risk-free rates as represented by the Eurodollar futures, LIBOR deposits and swap rates to derive forward curve rates
• Correlations of 10 years of observed historical returns across underlying well-known market indices
• Correlations of historical index returns compared to separate account fund returns
• Equity index levels
• Market implied equity volatility assumptions

Assumptions about policyholder behavior, including:
• Withdrawal utilization
• Withdrawal rates
• Lapse rates
• Reset elections
Significant Unobservable Inputs for Level 3 GMWB Embedded Customized and Reinsurance Derivatives
As of September 30, 2017
Significant Unobservable InputUnobservable Inputs (Minimum)Unobservable Inputs (Maximum)Impact of Increase in Input
on Fair Value Measurement [1]
Withdrawal Utilization [2]15%100%Increase
Withdrawal Rates [3]—%8%Increase
Lapse Rates [4]—%40%Decrease
Reset Elections [5]20%75%Increase
Equity Volatility [6]7%30%Increase
As of December 31, 2016
Significant Unobservable InputUnobservable Inputs (Minimum)Unobservable Inputs (Maximum)Impact of Increase in Input
on Fair Value Measurement [1]
Withdrawal Utilization [2]15%100%Increase
Withdrawal Rates [3]—%8%Increase
Lapse Rates [4]—%40%Decrease
Reset Elections [5]20%75%Increase
Equity Volatility [6]12%30%Increase
[1]Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.
[2]Range represents assumed cumulative percentages of policyholders taking withdrawals.
[3]Range represents assumed cumulative annual amount withdrawn by policyholders.
[4]Range represents assumed annual percentages of full surrender of the underlying variable annuity contracts across all policy durations for in force business.
[5]Range represents assumed cumulative percentages of policyholders that would elect to reset their guaranteed benefit base.
[6]Range represents implied market volatilities for equity indices based on multiple pricing sources.
Separate Account Assets
Separate account assets are primarily invested in mutual funds. Other separate account assets include fixed maturities, limited partnerships, equity securities, short-term investments and derivatives that are valued in the same manner, and using the same pricing sources and inputs, as those investments held by the Company. For limited partnerships in which fair value represents the separate account's share of the NAV, 45% and 39% were subject to significant liquidation restrictions as of September 30, 2017 and December 31, 2016, respectively. Total limited partnerships that do not allow any form of redemption were 16% and 11% as of September 30, 2017 and December 31, 2016, respectively. Separate account assets classified as Level 3 primarily include subprime RMBS and commercial mortgage loans.
Contingent Consideration
The acquisition of Lattice Strategies LLC ("Lattice") in 2016 requires the Company to make payments to former owners of Lattice of up to $60 contingent upon growth in exchange-traded products ("ETP") AUM over a four-year period beginning on the date of acquisition. The contingent consideration is measured at fair value on a quarterly basis by projecting future eligible ETP AUM over the contingency period to estimate the amount of expected payout. The future expected payout is discounted back to the valuation date using a risk-adjusted discount rate of 18.8%. The risk-adjusted discount rate is an internally generated and significant unobservable input to fair value.

26
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs
The Company uses derivative instruments to manage the risk associated with certain assets and liabilities. However, the
derivative instrument may not be classified withwithin the same fair value hierarchy level as the associated asset or liability. Therefore, the realized and unrealized gains and losses on derivatives reported in the Level 3 roll-forwardrollforward may be offset by realized and unrealized gains and losses of the associated assets and liabilities in other line items of the financial statements.
20
Fair Value Roll-forwards for Financial Instruments Classified as Level 3 for the Three Months Ended September 30, 2017
 Total realized/unrealized gains (losses)      
  Fair value as of June 30, 2017Included in net income [1] [2] [6]Included in OCI [3]PurchasesSettlementsSalesTransfers into Level 3 [4]Transfers out of Level 3 [4]Fair value as of September 30, 2017
Assets         
Fixed Maturities, AFS         
 ABS$96
$—
$—
$—
$(6)$(6)$7
$(35)$56
 CDOs339
—
(1)29
—
—
—
(179)188
 CMBS98
(1)—
—
(4)—
—
—
93
 Corporate1,136
(1)8
42
1
(40)19
(126)1,039
 Foreign Govt./Govt. Agencies29
—
1
9
—
—
—
(6)33
 Municipal86
—
—
—
—
—
—
—
86
 RMBS2,011
—
27
40
(119)—
—
(9)1,950
Total Fixed Maturities, AFS3,795
(2)35
120
(128)(46)26
(355)3,445
Equity Securities, AFS98
—
(4)23
—
—
—
—
117
Freestanding Derivatives, net [5]         
 Equity2
—
—
—
—
—
—
—
2
 Interest rate(26)(1)—
—
—
—
—
—
(27)
 GMWB hedging instruments40
(16)—
—
—
—
—
—
24
 Macro hedge program160
14
—
9
—
—
—
—
183
Total Freestanding Derivatives, net [5]176
(3)—
9
—
—
—
—
182
Reinsurance Recoverable for GMWB57
(9)—
—
3
—
—
—
51
Separate Accounts192
—
3
37
(1)(2)—
(3)226
Total Assets$4,318
$(14)$34
$189
$(126)$(48)$26
$(358)$4,021
Liabilities         
Other Policyholder Funds and Benefits Payable         
 Guaranteed Withdrawal Benefits$(134)$58
$—
$—
$(17)$—
$—
$—
$(93)
 Equity Linked Notes(37)—
—
—
37
—
—
—
—
Total Other Policyholder Funds and Benefits Payable(171)58
—
—
20
—
—
—
(93)
Contingent Consideration [7](27)(1)—
—
—
—
—
—
(28)
Total Liabilities$(198)$57
$—
$—
$20
$—
$—
$—
$(121)

27
Table of Contents
Note 4 - Fair Value Measurements
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended March 31, 2021
Total realized/unrealized gains (losses)
Fair value as of January 1, 2021Included in net income [1]Included in OCI [2]PurchasesSettlementsSalesTransfers into Level 3 [3]Transfers out of Level 3 [3]Fair value as of March 31, 2021
Assets
Fixed Maturities, AFS
ABS$0 $0 $0 $6 $0 $0 $0 $0 $6 
CLOs360 0 0 140 (15)0 0 (59)426 
CMBS77 0 0 1 (2)0 0 (15)61 
Corporate881 5 (13)73 (7)(7)48 (36)944 
Foreign Govt./Govt. Agencies6 0 0 0 0 (6)0 0 0 
RMBS381 0 (1)151 (46)(4)0 0 481 
Total Fixed Maturities, AFS1,705 5 (14)371 (70)(17)48 (110)1,918 
Equity Securities, at fair value70 0 0 0 0 0 0 0 70 
Short-term investments30 0 0 0 (14)0 0 0 16 
Total Assets$1,805 $5 $(14)$371 $(84)$(17)$48 $(110)$2,004 



Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended March 31, 2020
Total realized/unrealized gains (losses)
Fair value as of January 1, 2020Included in net income [1]Included in OCI [2]PurchasesSettlementsSalesTransfers into Level 3 [3]Transfers out of Level 3 [3]Fair value as of March 31, 2020
Assets
Fixed Maturities, AFS
ABS$15 $0 $(1)$20 $0 $0 $0 $(15)$19 
CLOs95 0 (6)0 (6)0 0 0 83 
CMBS9 0 0 10 (1)0 0 0 18 
Corporate732 (10)(80)94 (36)(8)47 (30)709 
Foreign Govt./Govt. Agencies3 0 0 0 0 0 0 0 3 
RMBS560 0 (25)5 (46)(7)0 0 487 
Total Fixed Maturities, AFS1,414 (10)(112)129 (89)(15)47 (45)1,319 
Equity Securities, at fair value73 (7)0 3 0 0 0 0 69 
Short-term investments15 0 0 0 (1)0 0 0 14 
Total Assets$1,502 $(17)$(112)$132 $(90)$(15)$47 $(45)$1,402 
Liabilities
Contingent Consideration(22)12 0 0 10 0 0 0 0 
Derivatives, net [4]
Equity(15)36 0 0 (21)0 0 0 0 
Total Derivatives, net [4](15)36 0 0 (21)0 0 0 0 
Total Liabilities$(37)$48 $0 $0 $(11)$0 $0 $0 $0 
[1]Amounts in these columns are generally reported in net realized capital gains (losses). All amounts are before income taxes.
[2]All amounts are before income taxes.
[3]Transfers in and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.
[4]Derivative instruments are reported in this table on a net basis for asset (liability) positions and reported in the Condensed Consolidated Balance Sheets in other investments and other liabilities.
21
Note 4 - Fair Value Measurements
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Changes in Unrealized Gains (Losses) for Financial Instruments Classified as
Level 3 Still Held at End of Period
Three Months Ended March 31,
2021202020212020
Changes in Unrealized Gain/(Loss) included in Net Income [1] [2]Changes in Unrealized Gain/(Loss) included in OCI [3]
Assets
Fixed Maturities, AFS
ABS$0 $0 $0 $(1)
CLOs0 0 0 (6)
Corporate5 0 (13)(79)
RMBS0 0 (1)(24)
Total Fixed Maturities, AFS5 0 (14)(110)
Equity Securities, at fair value0 (6)0 0 
Total Assets$5 $(6)$(14)$(110)
Liabilities
Contingent Consideration$0 $12 $0 $0 
Total Liabilities$0 $12 $0 $0 
[1]All amounts in these rows are reported in net realized capital gains (losses). All amounts are before income taxes.
[2]Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein.
[3]Changes in unrealized gain (loss) on fixed maturities, AFS are reported in changes in net unrealized gain on securities in the Condensed Consolidated Statements of Comprehensive Income.
Financial Instruments Not Carried at Fair Value
Financial Assets and Liabilities Not Carried at Fair Value
March 31, 2021December 31, 2020
Fair Value Hierarchy LevelCarrying Amount [1]Fair ValueFair Value Hierarchy LevelCarrying Amount [1]Fair Value
Assets
Mortgage loansLevel 3$4,588 $4,768 Level 3$4,493 $4,792 
Liabilities
Other policyholder funds and benefits payableLevel 3$681 $683 Level 3$701 $703 
Senior notes [2]Level 2$3,263 $3,965 Level 2$3,262 $4,363 
Junior subordinated debentures [2]Level 2$1,090 $1,128 Level 2$1,090 $1,107 
[1]As of March 31, 2021 and December 31, 2020, carrying amount of mortgage loans is net of ACL of $34 and $38, respectively.
[2]Included in long-term debt in the Condensed Consolidated Balance Sheets, except for current maturities, which are included in short-term debt.
22
Note 5 - Investments
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)INVESTMENTS

Net Realized Capital Gains (Losses)
 Three Months Ended March 31,
(Before tax)20212020
Gross gains on sales$31 $78 
Gross losses on sales(31)(8)
Equity securities [1]43 (386)
Net credit losses on fixed maturities, AFS4 (12)
Change in ACL on mortgage loans4 (2)
Intent-to-sell impairments0 (5)
Other, net [2]29 104 
Net realized capital gains (losses)$80 $(231)

Fair Value Roll-forwards for Financial Instruments Classified as Level 3 for the Nine Months Ended September 30, 2017
 Total realized/unrealized gains (losses)      
  Fair value as of January 1, 2017Included in net income [1] [2] [6]Included in OCI [3]PurchasesSettlementsSalesTransfers into Level 3 [4]Transfers out of Level 3 [4]Fair value as of September 30, 2017
Assets         
Fixed Maturities, AFS         
 ABS$82
$—
$—
$70
$(12)$(6)$33
$(111)$56
 CDOs414
—
(2)329
(208)—
—
(345)188
 CMBS80
(2)1
75
(10)—
—
(51)93
 Corporate1,080
(7)38
257
(39)(230)111
(171)1,039
 Foreign Govt./Govt. Agencies64
—
4
15
(2)(2)—
(46)33
 Municipal118
4
4
—
—
(40)—
—
86
 RMBS1,972
—
60
263
(329)(7)—
(9)1,950
Total Fixed Maturities, AFS3,810
(5)105
1,009
(600)(285)144
(733)3,445
Fixed Maturities, FVO11
—
—
4
(2)(13)—
—
—
Equity Securities, AFS99
—
(9)27
—
—
—
—
117
Freestanding Derivatives, net [5]         
 Equity—
(3)—
5
—
—
—
—
2
 Interest rate(21)(6)—
—
—
—
—
—
(27)
 GMWB hedging instruments81
(57)—
—
—
—
—
—
24
 Macro hedge program167
7
—
9
—
—
—
—
183
 Other contracts1
(1)—
—
—
—
—
—
—
Total Freestanding Derivatives, net [5]228
(60)—
14
—
—
—
—
182
Reinsurance Recoverable for GMWB73
(33)—
—
11
—
—
—
51
Separate Accounts201
3
5
148
(7)(45)10
(89)226
Total Assets$4,422
$(95)$101
$1,202
$(598)$(343)$154
$(822)$4,021
Liabilities         
Other Policyholder Funds and Benefits Payable         
 Guaranteed Withdrawal Benefits$(241)$197
$—
$—
$(49)$—
$—
$—
$(93)
 Equity Linked Notes(33)(4)—
—
37
—
—
—
—
Total Other Policyholder Funds and Benefits Payable(274)193
—
—
(12)—
—
—
(93)
Contingent Consideration [7](25)(3)—
—
—
—
—
—
(28)
Total Liabilities$(299)$190
$—
$—
$(12)$—
$—
$—
$(121)

28
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)



Fair Value Roll-forwards for Financial Instruments Classified as Level 3 for the Three Months Ended September 30, 2016
 Total realized/unrealized gains (losses)      
  Fair value as of June 30, 2016Included in net income [1] [2] [6]Included in OCI [3]PurchasesSettlementsSalesTransfers into Level 3 [4]Transfers out of Level 3 [4]Fair value as of September 30, 2016
Assets         
Fixed Maturities, AFS         
 ABS$41
$—
$—
$18
$—
$(2)$—
$(26)$31
 CDOs478
—
(3)1
(7)—
—
—
469
 CMBS79
(1)—
15
(6)—
—
(10)77
 Corporate1,136
(12)27
69
3
(52)115
(192)1,094
 Foreign Govt./Govt. Agencies72
—
2
9
(1)(8)—
—
74
 Municipal90
—
2
34
—
—
—
—
126
 RMBS1,873
—
15
253
(78)(8)—
—
2,055
Total Fixed Maturities, AFS3,769
(13)43
399
(89)(70)115
(228)3,926
Fixed Maturities, FVO6
—
—
5
(1)(1)—
—
9
Equity Securities, AFS97
(1)—
4
—
—
—
—
100
Freestanding Derivatives, net [5]         
 Equity1
(1)—
—
—
—
—
—
—
 Interest rate(32)—
—
—
—
—
—
—
(32)
 GMWB hedging instruments165
(34)—
—
—
—
—
—
131
 Macro hedge program141
(32)—
63
(4)—
—
—
168
 Other contracts4
(2)—
—
—
—
—
—
2
Total Freestanding Derivatives, net [5]279
(69)—
63
(4)—
—
—
269
Reinsurance Recoverable for GMWB106
(12)—
—
4
—
—
—
98
Separate Accounts171
1
(1)165
(3)(11)10
(7)325
Total Assets$4,428
$(94)$42
$636
$(93)$(82)$125
$(235)$4,727
Liabilities         
Other Policyholder Funds and Benefits Payable         
 Guaranteed Withdrawal Benefits$(412)$81
$—
$—
$(17)$—
$—
$—
$(348)
 Equity Linked Notes(28)(3)—
—
—
—
—
—
(31)
Total Other Policyholder Funds and Benefits Payable(440)78
—
—
(17)—
—
—
(379)
Contingent Consideration [7]—
23
—
—
—
—
—
—
23
Total Liabilities$(440)$101
$—
$—
$(17)$—
$—
$—
$(356)


29
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


Fair Value Roll-forwards for Financial Instruments Classified as Level 3 for the Nine Months Ended September 30, 2016
 Total realized/unrealized gains (losses)      
  Fair value as of January 1, 2016Included in net income [1] [2] [6]Included in OCI [3]PurchasesSettlementsSalesTransfers into Level 3 [4]Transfers out of Level 3 [4]Fair value as of September 30, 2016
Assets         
Fixed Maturities, AFS         
 ABS$37
$—
$—
$18
$(7)$(2)$18
$(33)$31
 CDOs541
(1)(5)1
(67)—
—
—
469
 CMBS150
(2)(3)65
(24)(3)1
(107)77
 Corporate854
(26)39
136
(52)(143)628
(342)1,094
 Foreign Govt./Govt. Agencies60
1
11
24
(3)(19)—
—
74
 Municipal49
—
7
54
—
—
16
—
126
 RMBS1,622
—
11
683
(236)(8)5
(22)2,055
Total Fixed Maturities, AFS3,313
(28)60
981
(389)(175)668
(504)3,926
Fixed Maturities, FVO16
(1)—
11
(3)(4)—
(10)9
Equity Securities, AFS93
(1)7
6
—
(5)—
—
100
Freestanding Derivatives, net [5]         
 Equity—
(16)—
16
—
—
—
—
—
 Interest rate(22)(10)—
—
—
—
—
—
(32)
 GMWB hedging instruments135
(10)—
—
—
—
—
6
131
 Macro hedge program147
(36)—
63
(6)—
—
—
168
 Other contracts7
(5)—
—
—
—
—
—
2
Total Freestanding Derivatives, net [5]267
(77)—
79
(6)—
—
6
269
Reinsurance Recoverable for GMWB83
4
—
—
11
—
—
—
98
Separate Accounts139
1
5
226
(12)(27)16
(23)325
Total Assets$3,911
$(102)$72
$1,303
$(399)$(211)$684
$(531)$4,727
Liabilities         
Other Policyholder Funds and Benefits Payable         
 Guaranteed Withdrawal Benefits$(262)$(36)$—
$—
$(50)$—
$—
$—
$(348)
 Equity Linked Notes(26)(5)—
—
—
—
—
—
(31)
Total Other Policyholder Funds and Benefits Payable(288)(41)—
—
(50)—
—
—
(379)
Contingent Consideration [7]—
23
—
—
—
—
—
—
23
Total Liabilities$(288)$(18)$—
$—
$(50)$—
$—
$—
$(356)
[1]The Company classifies realized and unrealized gains (losses) on GMWB reinsurance derivatives and GMWB embedded derivatives as unrealized gains (losses) for purposes of disclosure in this table because it is impracticable to track on a contract-by-contract basis the realized gains (losses) for these derivatives and embedded derivatives.
[2]Amounts in these rows are generally reported[1] The net unrealized gains (losses) on equity securities included in net realized capital gains (losses). The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. All amounts are before income taxes and amortization of DAC.
[3]All amounts are before income taxes and amortization of DAC.
[4]Transfers in and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.
[5]Derivative instruments are reported in this table on a net basis for asset (liability) positions and reported in the Condensed Consolidated Balance Sheets in other investments and other liabilities.
[6]Includes both market and non-market impacts in deriving realized and unrealized gains (losses).
[7]
For additional information, see the Contingent Consideration section of this Note 5 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements.


30
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


Changes in Unrealized Gains (Losses) Included in Net Income for Financial Instruments Classified as Level 3 Still Held at End of Period
  Three months ended September 30,Nine months ended September 30,
  2017 [1] [2]2016 [1] [2]2017 [1] [2]2016 [1] [2]
Assets    
Fixed Maturities, AFS    
 CMBS$—
$—
$(1)$(1)
 Corporate(1)(13)(13)(14)
Total Fixed Maturities, AFS(1)(13)(14)(15)
Fixed Maturities, FVO—
—
—
—
Equity Securities, AFS—
(1)—
(1)
Freestanding Derivatives, net    
 Equity—
—
(2)—
 Interest rate(1)—
(6)(10)
 GMWB hedging instruments(16)(34)(57)(2)
 Macro hedge program14
(34)8
(31)
 Other Contracts—
(2)—
(5)
Total Freestanding Derivatives, net(3)(70)(57)(48)
Reinsurance Recoverable for GMWB(9)(12)(33)4
Separate Accounts—
—
1
—
Total Assets$(13)$(96)$(103)$(60)
Liabilities    
Other Policyholder Funds and Benefits Payable    
 Guaranteed Withdrawal Benefits$58
$81
$197
$(36)
 Equity Linked Notes—
(3)(4)(5)
Total Other Policyholder Funds and Benefits Payable58
78
193
(41)
Contingent Consideration [3](1)—
(3)—
Total Liabilities$57
$78
$190
$(41)
[1]All amounts in these rows are reported in net realized capital gains (losses). The realized/unrealized gains (losses) included in net income for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. All amounts are before income taxes and amortization of DAC.
[2]Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein.
[3]
For additional information, see the Contingent Consideration section of this Note 5 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements.
Fair Value Option
The Company has elected the fair value option for certain securities that contain embedded credit derivatives with underlying credit risk primarily related to residential real estate,equity securities still held as of March 31, 2021, were $40 for the three months ended March 31, 2021. The net unrealized gains (losses) on equity securities included in net realized capital gains (losses) related to equity securities still held as of March 31, 2020, were $(277) for the three months ended March 31, 2020.
[2] For the three months ended March 31, 2021, primarily includes gains (losses) from transactional foreign currency revaluation of ($7) and these securities are included withingains (losses) on non-qualifying derivatives of $35. For the three months ended March 31, 2020, includes gains (losses) from transactional foreign currency revaluation of $10 and gains (losses) on non-qualifying derivatives of $92.
Proceeds from the sales of fixed maturities, AFS totaled $4.2 billion and $3.1 billion for the three months ended March 31, 2021 and 2020, respectively.
Accrued Interest Receivable on Fixed Maturities, FVOAFS and Mortgage Loans
As of March 31, 2021 and December 31, 2020, the Company reported accrued interest receivable related to fixed maturities, AFS of $334 and $327, respectively, and accrued interest receivable related to mortgage loans of $15 and $14, respectively. These amounts are recorded in other assets on the Condensed Consolidated Balance Sheets.Sheets and are not included in the carrying value of the fixed maturities or mortgage loans. The Company previously classifieddoes not include the underlying fixed maturities held in certain consolidated investment funds within Fixed Maturities, FVO.current accrued interest receivable balance when estimating the ACL. The Company reported the underlying fixed maturitieshas a policy to write-off accrued interest receivable balances that are more than 90 days past due. Write-offs of these consolidated investment companies at fair value with changes in the fair valueaccrued interest receivable are recorded as a credit loss component of these securities recognized in net realized capital gains and losses, which is consistent with accounting requirements for investment companies.losses.
The Company also previously elected the fair value option for certain equity securities in order to align the accounting with total return swap contracts that hedged the risk associated with the investments. The swaps did not qualify for hedge accountingInterest income on fixed maturities and the change in value of both the equity securities and the total return swaps were recorded in net realized capital gains and
losses. These equity securities were classified within equity securities, AFS on the Condensed Consolidated Balance Sheets. Income earned from FVO securities was recorded in net investment income and changes in fair value were recorded in net realized capital gains and losses. The Company did not hold any of these equity securities as of September 30, 2017 or December 31, 2016.

31
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


Changes in Fair Value of Assets using Fair Value Option
 Three Months Ended September 30, Nine Months Ended September 30,
 20172016 20172016
Assets     
Fixed maturities, FVO     
Corporate$—
$1
 $(1)$1
Foreign government—
—
 —
(1)
RMBS(1)3
 —
8
Total fixed maturities, FVO(1)4
 (1)8
Equity, FVO—
—
 2
(34)
Total realized capital gains (losses)$(1)$4
 $1
$(26)
Fair Value of Assets and Liabilities using the Fair Value Option
 September 30, 2017December 31, 2016
Assets  
Fixed maturities, FVO  
ABS$—
$7
CDOs—
3
CMBS—
8
Corporate—
40
U.S government—
7
RMBS82
228
Total fixed maturities, FVO$82
$293

Financial Assets and Liabilities Not Carried at Fair Value
 Fair Value Hierarchy LevelCarrying AmountFair Value
September 30, 2017
Assets   
Policy loansLevel 3$1,418
$1,418
Mortgage loansLevel 3$6,058
$6,215
Liabilities   
Other policyholder funds and benefits payable [1]Level 3$6,285
$6,484
Senior notes [2]Level 2$3,556
$4,218
Junior subordinated debentures [2]Level 2$1,582
$1,724
Consumer notes [3] [4]Level 3$9
$9
Assumed investment contracts [3]Level 3$517
$540
December 31, 2016
Assets   
Policy loansLevel 3$1,444
$1,444
Mortgage loansLevel 3$5,697
$5,721
Liabilities   
Other policyholder funds and benefits payable [1]Level 3$6,714
$6,906
Senior notes [2]Level 2$3,969
$4,487
Junior subordinated debentures [2]Level 2$1,083
$1,246
Consumer notes [3] [4]Level 3$20
$20
Assumed investment contracts [3]Level 3$487
$526
[1]Excludes guarantees on variable annuities, group accident and health and universal life insurance contracts, including corporate owned life insurance.
[2]Included in long-term debt in the Condensed Consolidated Balance Sheets, except for current maturities, which are included in short-term debt.
[3]Excludes amounts carried at fair value and included in preceding disclosures.
[4]Included in other liabilities in the Condensed Consolidated Balance Sheets.
Fair values for policy loans were determined using current loan coupon rates, which reflect the current rates available under the contracts. As a result, the fair value approximates the carrying value of the policy loans.
Fair values for mortgage loans were estimated using discounted cash flow calculations based on current lending rates for similar type loans. Current lending rates reflect changes in credit spreads andis accrued unless it is past due over 90 days or management deems the remaining terms of the loans.
Fair values for other policyholder funds and benefits payable and assumed investment contracts, not carried at fair value, are estimated based on the cash surrender values of the underlying policies or by estimating future cash flows discounted at current interest rates adjusted for credit risk.
Fair values for senior notes and junior subordinated debentures are determined using the market approach based on reported trades, benchmark interest rates and issuer spread for the Company which may consider credit default swaps.

32
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Fair Value Measurements (continued)


Fair values for consumer notes were estimated using discounted cash flow calculations using current interest rates adjusted for estimated loan durations.


33
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Investments

Net Realized Capital Gains (Losses)
 Three Months Ended September 30,Nine Months Ended September 30,
(Before tax)2017201620172016
Gross gains on sales$80
$114
$332
$328
Gross losses on sales(26)(24)(132)(157)
Net OTTI losses recognized in earnings(2)(14)(17)(44)
Valuation allowances on mortgage loans—
—
2
—
Results of variable annuity hedge program 
 

GMWB derivatives, net15
6
53
(8)
Macro hedge program(65)(64)(189)(98)
Total results of variable annuity hedge program(50)(58)(136)(106)
Transactional foreign currency revaluation2
(13)2
(144)
Non-qualifying foreign currency derivatives(3)17
(9)138
Other, net [1](4)(39)10
(134)
Net realized capital gains (losses)$(3)$(17)$52
$(119)
[1]
Includes non-qualifying derivatives, excluding variable annuity hedge program and foreign currency derivatives, of $(5) and $6, respectively for the three months ended September 30, 2017 and 2016. For the nine months ended September 30, 2017 and 2016, the non-qualifying derivatives, excluding variable annuity hedge program and foreign currency derivatives were $0 and $(50), respectively.
Net realized capital gains and losses from investment sales are reported as a component of revenues and are determined on a specific identification basis. Before tax, net gains (and losses) on sales and impairments previously reported as unrealized gains (or losses) in AOCI were $52 and $183 for the three and nine months ended September 30, 2017, and $77 and $128 for the three and nine months ended September 30, 2016. Proceeds from sales of AFS securities totaled $4.3 billion and $17.3 billion for the three and nine months ended September 30, 2017, and $4.3 billion and $13.3 billion for the three and nine months ended September 30, 2016.uncollectible.
Recognition and Presentation of Other-Than-TemporaryIntent-to-Sell Impairments and ACL on Fixed Maturities, AFS
The Company will record an other-than-temporary impairment (“OTTI”) for"intent-to-sell impairment" as a reduction to the amortized cost of fixed maturities, and certain equity securities with debt-like characteristics (collectively “debt securities”)AFS in an unrealized loss position if the Company intends to sell or it is more likely than not that the Company will be required to sell the securityfixed maturity before a recovery in value. A corresponding charge is recorded in net realized capital losses equal to the difference between the fair value on the impairment date and the amortized cost basis of the security.fixed maturity before recognizing the impairment.
The Company will also recordWhen fixed maturities are in an OTTI for those debt securities for whichunrealized loss position and the Company does not expectrecord an intent-to-sell impairment, the Company will record an ACL for the portion of the unrealized loss
due to recovera credit loss. Any remaining unrealized loss on a fixed maturity after recording an ACL is the entire amortized cost basis. For these securities,non-credit amount and is recorded in OCI. The ACL is the excess of the amortized cost basis over itsthe greater of the Company's best estimate of the present value of expected future cash flows or the security's fair value. Cash flows are discounted at the effective yield that is used to record interest income. The ACL cannot exceed the unrealized loss and, therefore, it may fluctuate with changes in the fair value of the fixed maturity if the fair value is separated intogreater than the
portion representing a credit OTTI, which is Company's best estimate of the present value of expected future cash flows. The initial ACL and any subsequent changes are recorded in net realized capital losses,gains and the remaining non-credit amount, whichlosses. The ACL is recorded in OCI. The credit OTTI amount iswritten off against the excess of its amortized cost basis overin the Company’s best estimate of discounted expected future cash flows. The non-credit amount is the excessperiod in which all or a portion of the best estimate ofrelated fixed maturity is determined to be uncollectible.
Developing the discounted expected future cash flows over the fair value. The Company’s best estimate of discounted expected future cash flows becomes the new cost basis and accretes prospectively into net investment income over the estimated remaining life of the security.
The Company’s best estimate of expected future cash flows is a quantitative and qualitative process that incorporates information received from third-party sources along with certain internal assumptions regarding the future performance. The Company's considerations include, but are not limited to, (a) changes in the financial condition of the issuer andand/or the underlying collateral, (b) whether the issuer is current on contractually obligated interest and principal payments, (c) credit ratings, (d) payment structure of the security and (e) the extent to which the fair value has been less than the amortized cost of the security.
For non-structured securities, assumptions include, but are not limited to, economic and industry-specific trends and fundamentals, security-specificinstrument-specific developments including changes in credit ratings, industry earnings multiples and the issuer’s ability to restructure, access capital markets, and execute asset sales.
For structured securities, assumptions include, but are not limited to, various performance indicators such as historical and projected default and recovery rates, credit ratings, current and projected delinquency rates, loan-to-value ratios ("LTV"LTVs") ratios,, average cumulative collateral loss rates that vary by vintage year, prepayment speeds, and property value declines. These assumptions require the use of significant management judgment
23
Note 5 - Investments
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
and include the probability of issuer default and estimates regarding timing and amount of expected recoveries which may include estimating the underlying collateral value.
The Company will also record an OTTI for equity securities where the decline in the fair value is deemed to be other-than-temporary. A corresponding charge is recorded in net realized capital losses equal to the difference between the fair value and cost basis of the security. The previous cost basis less the impairment becomes the new cost basis. The Company’s evaluation and assumptions used to determine an equity OTTI include, but are not limited to, (a) the length of time and extent to which the fair value has been less than the cost of the security, (b) changes in the financial condition, credit rating and near-term prospects of the issuer, (c) whether the issuer is current on preferred stock dividends and (d) the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery. For the remaining equity securities which are determined to be temporarily impaired, the Company asserts its intent and ability to retain those equity securities until the price recovers.

34
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Investments (continued)


Impairments in Earnings by Type
 Three Months Ended September 30,Nine Months Ended September 30,
 2017201620172016
Credit impairments$1
$13
$15
$36
Intent-to-sell impairments—
—
—
3
Impairments on equity securities1
1
2
5
Total impairments$2
$14
$17
$44
Cumulative Credit Impairments
 Three Months Ended September 30,Nine Months Ended September 30,
(Before tax)2017201620172016
Balance as of beginning of period$(236)$(293)$(280)$(324)
Additions for credit impairments recognized on [1]:    
Securities not previously impaired—
(4)(1)(25)
Securities previously impaired(1)(9)(14)(11)
Reductions for credit impairments previously recognized on:    
Securities that matured or were sold during the period2
14
43
50
Securities due to an increase in expected cash flows6
5
23
23
Balance as of end of period$(229)$(287)$(229)$(287)
[1]These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.
ACL on Fixed Maturities, AFS by Type
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
(Before tax)CorporateTotalCorporateTotal
Balance as of beginning of period$23 $23 $0 $0 
Credit losses on fixed maturities where an allowance was not previously recorded2 2 12 12 
Net increases (decreases) on fixed maturities where an allowance was previously recorded(6)(6)0 0 
Balance as of end of period$19 $19 $12 $12 

Fixed Maturities, AFS, by Type
March 31, 2021December 31, 2020

Amortized
Cost
ACL
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value

Amortized
Cost
ACL
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
ABS$1,405 $0 $30 $0 $1,435 $1,525 $0 $39 $0 $1,564 
CLOs3,040 0 10 (1)3,049 2,780 0 7 (7)2,780 
CMBS3,979 0 206 (18)4,167 4,219 0 286 (21)4,484 
Corporate18,385 (19)1,216 (87)19,495 18,401 (23)1,926 (31)20,273 
Foreign govt./govt. agencies825 0 47 (4)868 842 0 77 0 919 
Municipal8,471 0 762 (19)9,214 8,564 0 940 (1)9,503 
RMBS3,924 0 110 (9)4,025 3,966 0 144 (3)4,107 
U.S. Treasuries1,288 0 69 (3)1,354 1,264 0 141 0 1,405 
Total fixed maturities, AFS$41,317 $(19)$2,450 $(141)$43,607 $41,561 $(23)$3,560 $(63)$45,035 
35
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Investments (continued)


Available-for-Sale Securities
AFS Securities by Type
 September 30, 2017December 31, 2016
 
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Non-Credit
OTTI [1]
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Non-Credit
OTTI [1]
ABS$2,300
$20
$(15)$2,305
$—
$2,396
$17
$(31)$2,382
$—
CDOs2,364
33
(2)2,395
—
1,853
67
(4)1,916
—
CMBS5,034
123
(37)5,120
(6)4,907
97
(68)4,936
(6)
Corporate23,925
1,901
(80)25,746
—
24,380
1,510
(224)25,666
—
Foreign govt./govt. agencies1,300
71
(6)1,365
—
1,164
33
(26)1,171
—
Municipal11,585
869
(19)12,435
—
10,825
732
(71)11,486
—
RMBS4,083
127
(5)4,205
—
4,738
66
(37)4,767
—
U.S. Treasuries3,887
224
(13)4,098
—
3,542
182
(45)3,679
—
Total fixed maturities, AFS54,478
3,368
(177)57,669
(6)53,805
2,704
(506)56,003
(6)
Equity securities, AFS1,010
130
(28)1,112
—
1,020
96
(19)1,097
—
Total AFS securities$55,488
$3,498
$(205)$58,781
$(6)$54,825
$2,800
$(525)$57,100
$(6)
[1]
Represents the amount of cumulative non-credit OTTI losses recognized in OCI on securities that also had credit impairments. These losses are included in gross unrealized losses as of September 30, 2017, and December 31, 2016.
Fixed maturities, AFS, by Contractual Maturity Year
Fixed Maturities, AFS, by Contractual Maturity YearFixed Maturities, AFS, by Contractual Maturity Year
September 30, 2017December 31, 2016March 31, 2021December 31, 2020

Amortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair Value
One year or less$2,289
$2,305
$1,896
$1,912
One year or less$1,394 $1,411 $1,411 $1,432 
Over one year through five years8,896
9,168
9,015
9,289
Over one year through five years7,706 8,108 7,832 8,286 
Over five years through ten years8,975
9,352
9,038
9,245
Over five years through ten years7,755 8,158 7,622 8,354 
Over ten years20,537
22,819
19,962
21,556
Over ten years12,114 13,254 12,206 14,028 
Subtotal40,697
43,644
39,911
42,002
Subtotal28,969 30,931 29,071 32,100 
Mortgage-backed and asset-backed securities13,781
14,025
13,894
14,001
Mortgage-backed and asset-backed securities12,348 12,676 12,490 12,935 
Total fixed maturities, AFS$54,478
$57,669
$53,805
$56,003
Total fixed maturities, AFS$41,317 $43,607 $41,561 $45,035 
Estimated maturities may differ from contractual maturities due to security call or prepayment provisions. Due to the potential for variability in payment speeds (i.e. prepayments or extensions), mortgage-backed and asset-backed securities are not categorized by contractual maturity.
Concentration of Credit Risk
The Company aims to maintain a diversified investment portfolio including issuer, sector and geographic stratification, where
applicable, and has established certain exposure limits, diversification standards and review procedures to mitigate credit risk. The Company had no0 investment exposure to any credit concentration risk of a single issuer greater than 10% of the Company's stockholders' equity as of March 31, 2021 or December 31, 2020 other than the U.S. government securities and certain U.S. government agencies as of September 30, 2017 and December 31, 2016.agencies.

3624
Table of Contents
Note 5 - Investments
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Investments (continued)


Unrealized Losses on Fixed Maturities, AFS Securities
Unrealized Loss Aging for AFS Securities by Type and Length of Time as of September 30, 2017
Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of March 31, 2021Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of March 31, 2021
Less Than 12 Months12 Months or MoreTotalLess Than 12 Months12 Months or MoreTotal
Amortized CostFair ValueUnrealized LossesAmortized CostFair ValueUnrealized LossesAmortized CostFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
ABS$523
$522
$(1)$230
$216
$(14)$753
$738
$(15)ABS$99 $0 $0 $0 $99 $0 
CDOs1,138
1,136
(2)145
145
—
1,283
1,281
(2)
CLOsCLOs278 0 458 (1)736 (1)
CMBS1,490
1,472
(18)288
269
(19)1,778
1,741
(37)CMBS360 (8)127 (10)487 (18)
Corporate2,317
2,289
(28)1,447
1,395
(52)3,764
3,684
(80)Corporate2,451 (72)300 (15)2,751 (87)
Foreign govt./govt. agencies170
167
(3)59
56
(3)229
223
(6)Foreign govt./govt. agencies173 (4)0 0 173 (4)
Municipal783
774
(9)156
146
(10)939
920
(19)Municipal796 (19)0 0 796 (19)
RMBS363
359
(4)60
59
(1)423
418
(5)RMBS953 (9)13 0 966 (9)
U.S. Treasuries1,716
1,705
(11)30
28
(2)1,746
1,733
(13)U.S. Treasuries560 (3)0 0 560 (3)
Total fixed maturities, AFS8,500
8,424
(76)2,415
2,314
(101)10,915
10,738
(177)
Equity securities, AFS195
170
(25)29
26
(3)224
196
(28)
Total securities in an unrealized loss position$8,695
$8,594
$(101)$2,444
$2,340
$(104)$11,139
$10,934
$(205)
Total fixed maturities, AFS in an unrealized loss positionTotal fixed maturities, AFS in an unrealized loss position$5,670 $(115)$898 $(26)$6,568 $(141)

Unrealized Loss Aging for AFS Securities by Type and Length of Time as of December 31, 2016
Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of December 31, 2020Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of December 31, 2020
Less Than 12 Months12 Months or MoreTotal Less Than 12 Months12 Months or MoreTotal
Amortized CostFair ValueUnrealized LossesAmortized CostFair ValueUnrealized LossesAmortized CostFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
ABS$582
$579
$(3)$368
$340
$(28)$950
$919
$(31)ABS$44 $0 $0 $0 $44 $0 
CDOs641
640
(1)370
367
(3)1,011
1,007
(4)
CLOsCLOs758 (2)715 (5)1,473 (7)
CMBS2,076
2,027
(49)293
274
(19)2,369
2,301
(68)CMBS410 (17)19 (4)429 (21)
Corporate5,418
5,248
(170)835
781
(54)6,253
6,029
(224)Corporate466 (13)212 (18)678 (31)
Foreign govt./govt. agencies573
550
(23)27
24
(3)600
574
(26)Foreign govt./govt. agencies24 0 0 0 24 0 
Municipal1,567
1,498
(69)43
41
(2)1,610
1,539
(71)Municipal34 (1)0 0 34 (1)
RMBS1,655
1,624
(31)591
585
(6)2,246
2,209
(37)RMBS461 (3)21 0 482 (3)
U.S. Treasuries1,432
1,387
(45)—
—
—
1,432
1,387
(45)U.S. Treasuries39 0 0 0 39 0 
Total fixed maturities, AFS13,944
13,553
(391)2,527
2,412
(115)16,471
15,965
(506)
Equity securities, AFS330
315
(15)38
34
(4)368
349
(19)
Total securities in an unrealized loss position$14,274
$13,868
$(406)$2,565
$2,446
$(119)$16,839
$16,314
$(525)
Total fixed maturities, AFS in an unrealized loss positionTotal fixed maturities, AFS in an unrealized loss position$2,236 $(36)$967 $(27)$3,203 $(63)
As of September 30, 2017,March 31, 2021, fixed maturities, AFS securities in an unrealized loss position consisted of 2,491 securities,978 instruments, primarily in the corporate sector,sectors, most notably technology and communications and financial services, as well as municipal bonds and CMBS which were depressed primarilylargely due to an increase inhigher interest rates and/or widening ofwider credit spreads since the securities were purchased.purchase date. As of September 30, 2017, 92%March 31, 2021, 97% of these securitiesfixed maturities were depressed less than 20% of cost or amortized cost. The decreaseincrease in unrealized losses during the ninethree months ended September 30, 2017March 31, 2021 was primarily attributable to higher interest rates, partially offset by tighter credit spreads and a decrease in long-term interest rates.spreads.
Most of the securitiesfixed maturities depressed for twelve months or more relate to the corporate securities, student loan ABS and structured securities with exposure to commercial real estate. Corporate financial services securities and student loan ABSCMBS sectors which were primarily
depressed because the securities have floating-rate coupons and long-dated maturities, and current creditmarket spreads are wider than when these securities were purchased. For certain other corporate securities and commercial real estate securities, current spreads are wider than market spreads at the securities' respective purchase dates. Additionally, certain corporate fixed maturities were also depressed because of their variable-rate coupons and long-dated maturities. The Company neither has an intention to sell nor does it expect to be required to sell the securitiesfixed maturities outlined in the preceding discussion. The decision to record credit losses on fixed maturities, AFS in the form of an ACL requires us to make qualitative and quantitative estimates of expected future cash flows. Given the uncertainty about the ultimate impact of the COVID-19 pandemic on issuers of these securities, actual cash flows could ultimately deviate significantly from our expectations resulting in realized losses in future periods.
25
Note 5 - Investments
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Mortgage Loans
ACL on Mortgage Loan Valuation AllowancesLoans
Commercial mortgage loans are considered to be impaired when management estimates that, based upon current information and

37
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Investments (continued)


events, it is probable that the Company will be unable to collect amounts due according to the contractual terms of the loan agreement. The Company reviews mortgage loans on a quarterly basis to identify potentialestimate the ACL with changes in the ACL recorded in net realized capital gains and losses. Apart from an ACL recorded on individual mortgage loans where the borrower is experiencing financial difficulties, the Company records an ACL on the pool of mortgage loans based on lifetime expected credit losses. Among other factors, management reviews current and projectedThe Company utilizes a third-party forecasting model to estimate lifetime expected credit losses at a loan level under multiple economic scenarios. The scenarios use macroeconomic trends, such as unemployment rates and property-specificdata provided by an internationally recognized economics firm that generates forecasts of varying economic factors such as rentalGDP growth, unemployment and interest rates. The economic scenarios are projected over 10 years. The first two to four years of the 10-year period assume a specific modeled economic scenario (including moderate upside, moderate recession and severe recession scenarios) and then revert to historical long-term assumptions over the remaining period. Using these economic scenarios, the forecasting model projects property-specific operating income and capitalization rates occupancy levels, LTV ratiosused to estimate the value of a future operating income stream. The operating income and the property valuations derived from capitalization rates are compared to loan payment and principal amounts to create debt service coverage ratios (“DSCR”("DSCRs"). In addition, and loan-to-value ratios ("LTVs") over the forecast period. The model overlays historical data about mortgage loan performance based on DSCRs and LTVs and projects the probability of default, amount of loss given a default and resulting expected loss through maturity for each loan under each economic scenario. Economic scenarios are probability-weighted based on a statistical analysis of the forecasted economic factors and qualitative analysis. The Company records the change in the ACL on mortgage loans based on the weighted-average expected credit losses across the selected economic scenarios.
When a borrower is experiencing financial difficulty, including when foreclosure is probable, the Company considers historical, currentmeasures an ACL on individual mortgage loans. The ACL is established for any shortfall between the amortized cost of the loan and projected delinquency rates and property values.the fair value of the collateral less costs to sell. Estimates of collectibility from an individual borrower require the use of significant management judgment and include the probability and timing of borrower default and loss severity estimates. In addition, cash flow projections may change based upon new information about the borrower's ability to pay and/or the value of underlying collateral such as changes in projected property value estimates.
For As of March 31, 2021, the Company did 0t have any mortgage loans that are deemed impaired, a valuation allowance isfor which an ACL was established for the difference between the carrying amount and estimated fair value. The mortgage loan's estimated fair value is most frequently the Company's share of the fair value of the collateral but may also be the Company’s share of either (a) the present value of the expected future cash flows discounted at the loan’s effective interest rate or (b) the loan’s observable market price. A valuation allowance may be recorded foron an individual loan or for a group of loans that have an LTV ratio of 90% or greater, a low DSCR or have other lower credit quality characteristics. Changes in valuation allowances are recorded in net realized capital gains and losses. Interest income on impaired loans is accrued to the extent it is deemed collectible and the borrowers continue to make payments under the original or restructured loan terms. The Company stops accruing interest income on loans when it is probable that the Company will not receive interest and principal payments according to the contractual terms of the loan agreement. The Company resumes accruing interest income when it determines that sufficient collateral exists to satisfy the full amount of the loan principal and interest payments and when it is probable cash will be received in the foreseeable future. Interest income on defaulted loans is recognized when received.basis.
As of September 30, 2017, commercial mortgage loans had an amortized cost of $6.1 billion, with a valuation allowance of $1 and a carrying value of $6.1 billion. As of December 31, 2016, commercial mortgage loans had an amortized cost of $5.7 billion, with a valuation allowance of $19 and a carrying value of $5.7 billion.
As of September 30, 2017 and December 31, 2016, the carrying value of mortgage loans that had a valuation allowance was $43 and $31, respectively.
There were no0 mortgage loans held-for-sale as of September 30, 2017March 31, 2021 or December 31, 2016. As of September 30, 2017,2020. For the three months ended March 31, 2021 and 2020, respectively, the Company had an immaterial amount of0 mortgage loans that have had extensions or restructurings other than what is allowable under the original terms of the contract.

ACL on Mortgage Loans
Three Months Ended March 31,
20212020
ACL as of beginning of period$38 $0 
Cumulative effect of accounting changes [1]19 
Adjusted beginning ACL38 19 
Current period provision (release)(4)2 
ACL as of March 31,$34 $21 
[1] Represents the adjustment to the ACL recorded on adoption of accounting guidance for credit losses on January 1, 2020. For further information, see the Financial Instruments - Credit Losses section within Note 1 - Basis of Presentation and Significant Accounting Policies, included in The following table presentsHartford's 2020 Form 10-K Annual Report.
During 2020, the activity withinCompany increased the Company’s valuationestimate of the ACL in response to significant economic stress experienced as a result of the COVID-19 pandemic. The decrease in the allowance for the three months ended March 31, 2021, is the result of improved economic scenarios, including improved GDP growth and unemployment, and higher property valuations as compared to the prior quarter. We continue to monitor the impact on our mortgage loans. These loansloan portfolio from borrower behavior in response to the economic stress. Borrowers with lower LTVs have been evaluated both individually and collectively for impairment. Loans evaluated collectively for impairment are immaterial.
an incentive to continue to make payments of principal and/or interest in order to preserve the equity they have in the underlying commercial real estate properties.
Valuation Allowance Activity
 20172016
Balance, as of January 1$(19)$(23)
(Additions)/Reversals(2)—
Deductions20
4
Balance, as of September 30$(1)$(19)
The weighted-average LTV ratio of the Company’s commercial mortgage loan portfolio was 50%55% as of September 30, 2017,March 31, 2021, while the weighted-average LTV ratio at origination of these loans was 62%61%. LTV ratios compare the loan amount to the value of the underlying property collateralizing the loan. The loan collateralwith property values arebased on appraisals updated no less than annually through reviews of the underlying properties.annually. Factors considered in estimating property values include, among other things, actual and expected property cash flows, geographic market data and the ratio of the property's net operating income to its value. DSCR compares a property’s net operating income to the borrower’s principal and interest payments. Aspayments and are updated no less than annually through reviews of September 30, 2017, the Company held no delinquent commercialunderlying properties.
Mortgage Loans LTV & DSCR by Origination Year as of March 31, 2021
202120202019201820172016 & PriorTotal
Loan-to-valueAmortized CostAvg. DSCRAmortized CostAvg. DSCRAmortized CostAvg. DSCRAmortized CostAvg. DSCRAmortized CostAvg. DSCRAmortized CostAvg. DSCRAmortized Cost [1]Avg. DSCR
65% - 80%$26 2.28x$57 2.12x$223 1.59x$210 1.32x$45 1.83x$166 1.57x$727 1.59x
Less than 65%149 2.62x637 2.71x695 2.74x410 2.16x423 1.88x1,581 2.53x3,895 2.49x
Total mortgage loans$175 2.57x$694 2.66x$918 2.46x$620 1.87x$468 1.88x$1,747 2.44x$4,622 2.35x
[1] Amortized cost of mortgage loans past due by 90 days or more. Asexcludes ACL of December 31, 2016, the Company held one delinquent commercial mortgage loan past due by 90 days or more. The loan had a total carrying value and valuation allowance of $15 and $16, respectively, and was not accruing income. Following the conclusion of the loan's foreclosure process, the property transferred at its carrying value, net of the valuation allowance, to a real-estate owned investment during 2017.
Commercial Mortgage Loans Credit Quality
 September 30, 2017December 31, 2016
Loan-to-valueCarrying ValueAvg. Debt-Service Coverage RatioCarrying ValueAvg. Debt-Service Coverage Ratio
Greater than 80%$5
1.36x$20
0.59x
65% - 80%371
2.07x568
2.17x
Less than 65%5,682
2.71x5,109
2.78x
Total commercial mortgage loans$6,058
2.67x$5,697
2.70x

$34.
38
26
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Note 5 - Investments
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Investments (continued)


Mortgage Loans LTV & DSCR by Origination Year as of December 31, 2020
202020192018201720162015 & PriorTotal
Loan-to-valueAmortized CostAvg. DSCRAmortized CostAvg. DSCRAmortized CostAvg. DSCRAmortized CostAvg. DSCRAmortized CostAvg. DSCRAmortized CostAvg. DSCRAmortized Cost [1]Avg. DSCR
65% - 80%$28 1.62x$243 1.58x$212 1.33x$45 2.02x$51 1.92x$115 1.74x$694 1.59x
Less than 65%659 2.56x676 2.85x410 2.25x446 1.89x235 2.99x1,411 3.01x3,837 2.69x
Total mortgage loans$687 2.52x$919 2.51x$622 1.94x$491 1.90x$286 2.80x$1,526 2.92x$4,531 2.52x
[1] Amortized cost of mortgage loans excludes ACL of $38.
Mortgage Loans by Region
March 31, 2021December 31, 2020
Amortized CostPercent of TotalAmortized CostPercent of Total
East North Central$279 6.0 %$290 6.4 %
Middle Atlantic290 6.3 %291 6.4 %
Mountain295 6.4 %254 5.6 %
New England396 8.6 %397 8.8 %
Pacific1,044 22.6 %1,001 22.1 %
South Atlantic1,062 23.0 %1,038 22.9 %
West North Central44 0.9 %44 1.0 %
West South Central431 9.3 %433 9.5 %
Other [1]781 16.9 %783 17.3 %
Total mortgage loans4,622 100.0 %4,531 100.0 %
ACL(34)(38)
Total mortgage loans, net of ACL$4,588 $4,493 
Mortgage Loans by Region
 September 30, 2017December 31, 2016
 Carrying ValuePercent of TotalCarrying ValuePercent of Total
East North Central$305
5.0%$293
5.1%
East South Central14
0.2%14
0.2%
Middle Atlantic592
9.8%534
9.4%
Mountain85
1.4%61
1.1%
New England386
6.4%345
6.1%
Pacific1,604
26.5%1,609
28.3%
South Atlantic1,296
21.4%1,198
21.0%
West North Central149
2.5%40
0.7%
West South Central474
7.8%338
5.9%
Other [1]1,153
19.0%1,265
22.2%
Total mortgage loans$6,058
100.0%$5,697
100.0%
[1]Primarily represents loans collateralized by multiple properties in various regions.
Mortgage Loans by Property Type
March 31, 2021December 31, 2020
Amortized CostPercent of TotalAmortized CostPercent of Total
Commercial
Industrial$1,472 31.8 %$1,339 29.5 %
Multifamily1,499 32.4 %1,498 33.1 %
Office712 15.4 %774 17.1 %
Retail807 17.5 %788 17.4 %
Single Family92 2.0 %92 2.0 %
Other40 0.9 %40 0.9 %
Total mortgage loans4,622 100.0 %4,531 100.0 %
ACL(34)(38)
Total mortgage loans, net of ACL$4,588 $4,493 
[1]Primarily represents loans collateralized by multiple properties in various regions.
Past-Due Mortgage Loans
Mortgage loans are considered past due if a payment of principal or interest is not received according to the contractual terms of the loan agreement, which typically includes a grace period. As of
Mortgage Loans by Property Type
 September 30, 2017December 31, 2016
 Carrying ValuePercent of TotalCarrying
Value		Percent of Total
Commercial    
Industrial$1,495
24.7%$1,468
25.7%
Lodging25
0.4%25
0.4%
Multifamily1,699
28.0%1,365
24.0%
Office1,436
23.7%1,361
23.9%
Retail967
16.0%1,036
18.2%
Other436
7.2%442
7.8%
Total mortgage loans$6,058
100.0%$5,697
100.0%
March 31, 2021 and December 31, 2020, the Company held 0 mortgage loans considered past due.
Mortgage Servicing
The Company originates, sells and services commercial mortgage loans on behalf of third parties and recognizes servicing fee income over the period that services are performed. As of September 30, 2017,March 31, 2021, under this program, the Company serviced commercial mortgage loans with a total outstanding principal of $1.3$7.1 billion, of which $379$3.8 billion was serviced on behalf of third parties and $879$3.3 billion was retained and reported in total investments on the Company’sCompany's Condensed Consolidated Balance Sheets, including $140 in separate account assets.Sheets. As of December 31, 2016,2020, the Company serviced commercial mortgage loans with a total outstanding principal balance of $901,$6.9 billion, of which $251$3.7 billion was serviced on behalf of third parties and $650$3.2 billion was retained and reported as assetsin total investments on the Company’sCompany's Condensed Consolidated Balance Sheets, including $124 in separate account assets.Sheets. Servicing rights are carried at the lower of cost or fair value and were zero$0 as of September 30, 2017March 31, 2021 and December 31, 2016,2020, because servicing fees were market-level fees at origination and remain adequate to
compensate the Company for servicing the loans.
Variable Interest Entities
The Company is engaged with various special purpose entities and other entities that are deemed to be VIEs primarily as an investor through normal investment activities but also as an investment manager and previously as a means of accessing capital through a contingent capital facility ("facility").manager.
A VIE is an entity that either has investors that lack certain essential characteristics of a controlling financial interest, such as simple majority kick-out rights, or lacks sufficient funds to finance its own activities without financial support provided by other entities. The Company performs ongoing qualitative assessments of its VIEs to determine whether the Company has a controlling financial interest in the VIE and therefore is the primary beneficiary. The Company is deemed to have a controlling financial interest when it has both the ability to direct the activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or right to receive benefits from the VIE that could potentially be significant to the VIE. Based on the Company’s assessment, if it determines it is the primary beneficiary, the Company consolidates the VIE in the Company’s Condensed Consolidated Financial Statements.
Consolidated VIEs
As of September 30, 2017,March 31, 2021 and December 31, 2020, the Company did not0t hold any securities for which it is the primary beneficiary. As of December 31, 2016, the Company held one CDO for which it was the primary beneficiary. The CDO represented a structured investment vehicle for which the Company had a controlling financial interest. As of December 31, 2016 the Company held total CDO assets of $5 included in cash with an associated liability of $5 included in other liabilities on the Company's Condensed Consolidated Balance Sheets. The Company did not have any additional exposure to loss associated with this investment.
27
Note 5 - Investments
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Non-Consolidated VIEs
The Company, through normal investment activities, makes passive investments in limited partnerships and other alternative investments. For these non-consolidated VIEs, the Company has determined it is not the primary beneficiary as it has no ability to direct activities that could significantly affect the economic performance of the investments. The Company’s maximum exposure to loss as of September 30, 2017March 31, 2021 and December 31, 20162020 was limited to the total carrying value of $1.8$1.4 billion and $1.7$1.3 billion, respectively, which are included in limited partnerships and other alternative investments in the Company's Condensed Consolidated Balance Sheets. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company has outstanding commitments totaling $1.0 billion$801 and $1.2 billion,$768, respectively, whereby the Company is committed to fund these investments and may be called by the partnership during the commitment period to fund the purchase of new investments and partnership expenses. These investments are generally of a passive nature in that the Company does not take an active role in management. For further discussion of these investments, see Equity Method Investments within Note 6 - Investments of Notes to

39
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Investments (continued)


Consolidated Financial Statements included in the Company’s 20162020 Form 10-K Annual Report.
In addition, the Company also makes passive investments in structured securities issued by VIEs for which the Company is not the manager and, therefore, does not consolidate.manager. These investments are included in ABS, CDOs,CLOs, CMBS, and RMBS and are reported in the Available-for-Sale Securities table and fixed maturities, FVO, in the Company’s Condensed Consolidated Balance Sheets.available-for-sale. The Company has not provided financial or other support with respect to these investments other than its original investment. For these investments, the Company determined it is not the primary beneficiary due to the relative size of the Company’s investment in comparison to the principal amount of the structured securities issued by the VIEs, the level of credit subordination which reduces the Company’s obligation to absorb losses or right to receive benefits and the Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment.
As of December 31, 2016, the Company held a significant variable interest in a VIE for which it is not the primary beneficiary. This VIE represented a contingent capital facility that was held by the Company since February 2007. Assets and liabilities recorded were $1 and $3, respectively, as of December 31, 2016, as well as a maximum exposure to loss of $3. The Company did not have a controlling financial interest and as such, did not consolidate its variable interest in the facility. As of September 30, 2017, the Company no longer held an interest in the facility. For further information on the facility, see Note 10 - Debt of Notes to Condensed Consolidated Financial Statements.
Securities Lending, Reverse Repurchase Agreements, and Other Collateral Transactions
The Company enters into securities financing transactions as a way to earn additional income or manage liquidity, primarily through securities lending and repurchase agreements.Restricted Investments
Securities Lending
Under a securities lending program, the Company lends certain fixed maturities within the corporate, foreign government/government agencies, and municipal sectors as well as equity securities to qualifying third-party borrowers in return for collateral in the form of cash or securities. For domestic and non-domestic loaned securities, respectively, borrowers provide collateral of 102% and 105% of the fair value of the securities lent at the time of the loan. Borrowers will return the securities to the Company for cash or securities collateral at maturity dates generally of 90 days or less. Security collateral on deposit from counterparties in connection with securities lending transactions may not be sold or re-pledged, except in the event of default by the counterparty, and is not reflected on the Company’s Condensed Consolidated Balance Sheets. Additional collateral is obtained if the fair value of the collateral falls below 100% of the
fair value of the loaned securities. The agreements are continuous and do not have stated maturity dates and provide the counterparty the right to sell or re-pledge the securities loaned. If
cash, rather than securities, is received as collateral, the cash is typically invested in short-term investments or fixed maturities and is reported as an asset on the Company's Condensed Consolidated Balance Sheets. Income associated with securities lending transactions is reported as a component of net investment income in the Company’s Condensed Consolidated Statements of Operations.
Repurchase Agreements
From time to time, While the Company enters into repurchase agreements to manage liquidity or to earn incremental income. A repurchase agreement is a transaction in which one party (transferor) agrees to selldid have securities to another party (transferee) in return for cash (or securities), with a simultaneous agreement to repurchase the same securities at a specified price at a later date. These transactions generally have a contractual maturity of ninety days or less. Repurchase agreements include master netting provisions that provide both counterparties the right to offset claims and apply securities held by them with respect to their obligations in the eventon loan as part of a default. Althoughsecurities lending program during 2020, as of March 31, 2021 and December 31, 2020, the Company has the contractual right to offset claims, the Company's current positions do not meet the specific conditions for net presentation.did 0t have any securities on loan as part of a securities lending program.
Under repurchase agreements, the Company transfers collateral of U.S. government and government agency securities and receives cash. For repurchase agreements, the Company obtains cash in an amount equal to at least 95% of the fair value of the securities transferred. The agreements require additional collateral to be transferred when necessary and provide the counterparty the right to sell or re-pledge the securities transferred. The cash received from the repurchase program is typically invested in short-term investments or fixed maturities and is reported as an asset on the Company's Condensed Consolidated Balance Sheets. The Company accounts for the repurchase agreements as collateralized borrowings. The securities transferred under repurchase agreements are included in fixed maturities, AFS with the obligation to repurchase those securities recorded in other liabilities on the Company's Condensed Consolidated Balance Sheets.Reverse Repurchase Agreements
From time to time, the Company enters into reverse repurchase agreements where the Company purchases securities and simultaneously agrees to resell the same or substantially the same securities. The maturity of these transactions is generally within one year. The agreements require additional collateral to be transferred to the Company when necessaryunder specified conditions and the Company has the right to sell or re-pledge the securities received. The Company accounts for reverse repurchase agreements as collateralized financing.




40
Table As of ContentsMarch 31, 2021 and December 31, 2020, the Company reported $16 and $30, respectively, within short-term investments on the Condensed Consolidated Balance Sheets representing a receivable for the amount of cash transferred to purchase the securities.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Investments (continued)


Securities Lending and Repurchase Agreements
 September 30, 2017December 31, 2016
 Fair ValueFair Value
Securities Lending Transactions:  
Gross amount of securities on loan$1,584
$488
Gross amount of associated liability for collateral received [1]$1,623
$500
   
Repurchase agreements:  
Gross amount of recognized liabilities for repurchase agreements$520
$241
Gross amount of collateral pledged related to repurchase agreements [2]$524
$248
[1]
Cash collateral received is reinvested in fixed maturities, AFS and short term investments which are included in the Condensed Consolidated Balance Sheets. Amount includes additional securities collateral received of $10 and $39 million which are excluded from the Company's Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016, respectively.
[2]Collateral pledged is included within fixed maturities, AFS and short term investments in the Company's Condensed Consolidated Balance Sheets.
Other Collateral Transactions
The Company is required by law to deposit securities with government agencies in certain states in which it conducts business. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the fair value of securities on deposit was $2.6 billion and $2.5 billion, respectively.
As of September 30, 2017 and December 31, 2016, the Company has pledged collateral of $102$9 and $102,$34, respectively, of U.S. government securities and government agency securities or cash primarily related to certain bank loan participations committed to through a limited partnership agreement. These amountsAmounts also include collateral related to letters of credit.
For disclosure of collateral in support of derivative transactions, refer to the Derivative Collateral Arrangements section ofin Note 76 - Derivative InstrumentsDerivatives of Notes to Condensed Consolidated Financial Statements.
Other Restricted Investments
The Company is required by law to deposit securities with government agencies in certain states in which it conducts business. As of March 31, 2021 and December 31, 2020, the fair value of securities on deposit was $2.5 billion and $2.6 billion, respectively.
In addition, as of March 31, 2021, the Company held fixed maturities and short-term investments of $673 and $4, respectively, in trust for the benefit of syndicate policyholders, held fixed maturities of $171 in a Lloyd's of London ("Lloyd's") trust account to provide a portion of the required capital, and maintained other investments of $61 primarily consisting of overseas deposits in various countries with Lloyd's to support underwriting activities in those countries. As of December 31, 2020, the Company held fixed maturities and short-term investments of $661 and $26, respectively, in trust for the benefit of syndicate policyholders, held fixed maturities of $175 in a Lloyd's trust account to provide a portion of the required capital, and maintained other investments of $54 primarily consisting of overseas deposits in various countries with Lloyd's to support

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Note 5 - Investments
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Derivative Instruments



underwriting activities in those countries. Lloyd's is an insurance market-place operating worldwide. Lloyd's does not underwrite
risks. The Company accepts risks as the sole member of Lloyd's Syndicate 1221 ("Lloyd's Syndicate").
6. DERIVATIVES
The Company utilizes a variety of OTC, OTC-cleared and exchange traded derivative instruments as a part of its overall risk management strategy as well as to enter into replication transactions or income generation covered call transactions. Derivative instruments are used to manage risk associated with interest rate, equity market, credit spread, issuer default, price, and currency exchange rate risk or volatility. Replication transactions are used as an economical means to synthetically replicate the characteristics and performance of assets that are permissible investments under the Company’s investment policies. The Company also may enter into and has previously issued financial instruments and products that either are accounted for as free-standing derivatives, such as certain reinsurance contracts, or as embedded derivative instruments, such as GMWB riders included with certain variable annuity products.
Strategies that Qualify for Hedge Accounting
Some of the Company's derivatives satisfy the hedge accounting requirements as outlined in Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements, included in The Hartford’s 20162020 Form 10-K Annual Report. Typically, these hedging instruments include interest rate swaps and, to a lesser extent, foreign currency swaps where the terms or expected cash flows of the hedged item closely match the terms of the swap. The interest rate swaps are typically used to manage interest rate duration of certain fixed maturity securities or liability contracts. The hedge strategies by hedge accounting designation include:debt instruments issued.
Cash Flow Hedges
Interest rate swaps are predominantly used to manage portfolio duration and better match cash receipts from assets with cash disbursements required to fund liabilities. These derivatives primarily convert interest receipts on floating-ratevariable-rate fixed maturity securities to fixed rates. During 2017, theThe Company has also entered into interest rate swaps to convert the variable interest payments on 3 month LIBOR + 2.125% junior subordinated debt to fixed interest payments. For further information, see the Junior Subordinated Debentures section within Note 1014 - Debt of Notes to the Condensed Consolidated Financial Statements.Statements, included in The Hartford's 2020 Form 10-K Annual Report.
Foreign currency swaps are used to convert foreign currency denominated cash flows related to certain investment receipts to U.S. dollars in order to reduce cash flow fluctuations due to changes in currency rates.
The Company also enterspreviously entered into forward starting swap agreements to hedge the interest rate exposure related to the future purchase of fixed-rate securities, primarily to hedge interest rate risk inherent in the assumptions used to price certain productgroup benefits liabilities.
Foreign currency swaps are used to convert foreign currency-denominated cash flows related to certain investment receipts and liability payments to U.S. dollars in order to reduce cash flow fluctuations due to changes in currency rates.
Fair Value Hedges
The Company previously used interest rate swaps to hedge the changes in fair value of fixed maturity securities due to fluctuations in interest rates. These swaps were typically used to manage interest rate duration.
Non-qualifyingNon-Qualifying Strategies
Derivative relationships that do not qualify for hedge accounting (“non-qualifying strategies”) primarily include the hedge program for the Company's variable annuity products as well as the hedging and replication strategies that utilize credit default swaps. In addition, hedges of interest rate, foreign currency and equity risk of certain fixed maturities equities and liabilitiesequities. In addition, hedging and replication strategies that utilize credit default swaps do not qualify for hedge accounting. The non-qualifying strategies include:
Interest Rate Swaps, Swaptions and Futures
The Company uses interest rate swaps, swaptions and futures to manage interest rate duration between assets and liabilities in certain investment portfolios. In addition, the Company enters into interest rate swaps to terminate existing swaps, thereby offsetting the changes in value of the original swap. As of September 30, 2017 and December 31, 2016, the notional amount of interest rate swaps in offsetting relationships was $9.9 billion and $10.6 billion, respectively.
Foreign Currency Swaps and Forwards
The Company enters into foreign currency swaps to convert the foreign currency exposures of certain foreign currency-denominated fixed maturity investments to U.S. dollars. The Company previously entered into foreign currency forwards to hedge currency impacts on changes in equity of the U.K. property and casualty run-off subsidiaries that were sold in May 2017. For further information on the disposition, see Note 2 - Business Acquisitions and Dispositions of Notes to Consolidated Financial Statements. The Company also previously entered into foreign currency forwards to hedge non-U.S. dollar denominated cash and equity securities.
Fixed Payout Annuity Hedge
The Company has obligations for certain yen denominated fixed payout annuities under an assumed reinsurance contract. The Company invests in U.S. dollar denominated assets to support the assumed reinsurance liability. The Company has in place pay U.S. dollar, receive yen swap contracts to hedge the currency and yen interest rate exposure between the U.S. dollar denominated assets and the yen denominated fixed liability reinsurance payments.
Credit Contracts
Credit default swaps are used to purchase credit protection on an individual entity or referenced index to economically hedge against default risk and credit-related changes in the value of fixed maturity securities. Credit default swaps are also used to assume credit risk related to an individual entity or referenced index as a part of replication transactions. These contracts require the Company to pay or receive a periodic fee in exchange for compensation from the counterparty or the Company should the referenced security issuers experience a credit event, as defined in the contract. In addition, theThe Company also enters into credit default swaps to terminate existing credit default swaps, thereby offsetting the changes in value of the original swap going forward.
Interest Rate Swaps, Swaptions and Futures

The Company uses interest rate swaps, swaptions and futures to manage interest rate duration between assets and liabilities. In addition, the Company enters into interest rate swaps to terminate existing swaps, thereby offsetting the changes in value of the original swap going forward. As of March 31, 2021 and December 31, 2020, the notional amount of interest rate swaps in offsetting relationships was $7.6 billion.
Foreign Currency Swaps and Forwards
42
TableThe Company enters into foreign currency swaps to convert the foreign currency exposures of Contentscertain foreign currency-denominated fixed maturity investments to U.S. dollars.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Derivative Instruments (continued)


Equity Index Swaps and Options
The Company enters into equity index options to hedge the impact of a decline in the equity markets on the investment portfolio. The Company previously enteredalso enters into total return swapscovered call options on equity securities to hedge equity risk of specific common stock investments which were accounted for using fair value option in order to align the accounting treatment within net realized capital gains (losses). In addition, the Company formerly offered certain equity indexed products that remain in force, a portion of which contain embedded derivatives that require changes in value to be bifurcated from the host contract. The Company uses equity index swaps to economically hedge the equity volatility risk associated with the equity indexed products.generate additional return.
GMWB Derivatives, net
The Company formerly offered certain variable annuity products with GMWB riders. The GMWB product is a bifurcated embedded derivative (“GMWB product derivatives”) that has a notional value equal to the GRB. The Company uses reinsurance contracts to transfer a portion of its risk of loss due to GMWB. The reinsurance contracts covering GMWB (“GMWB reinsurance contracts”) are accounted for as free-standing derivatives with a notional amount equal to the GRB reinsured.
The Company utilizes derivatives (“GMWB hedging instruments”) as part of a dynamic hedging program designed to hedge a portion of the capital market risk exposures of the non-reinsured GMWB riders. The GMWB hedging instruments hedge changes in interest rates, equity market levels, and equity volatility. These derivatives include customized swaps, interest rate swaps and futures, and equity swaps, options and futures, on certain indices including the S&P 500 index, EAFE index and NASDAQ index. The Company retains the risk for differences between assumed and actual policyholder behavior and between the performance of the actively managed funds underlying the separate accounts and their respective indices.
GMWB Hedging Instruments
 Notional AmountFair Value
 Sep. 30, 2017Dec. 31, 2016Sep. 30, 2017Dec. 31, 2016
Customized swaps$5,035
$5,191
$62
$100
Equity swaps, options, and futures1,370
1,362
(41)(27)
Interest rate swaps and futures2,986
3,703
44
21
Total$9,391
$10,256
$65
$94
Macro Hedge Program
The Company utilizes equity swaps, options, forwards and futures to provide partial protection against the statutory tail scenario risk arising from GMWB and guaranteed minimum death benefit ("GMDB") liabilities on the Company's statutory surplus. These derivatives cover some of the residual risks not otherwise covered by the dynamic hedging program.
Contingent Capital Facility Put Option
The Company previously entered into a put option agreement that provided the Company the right to require a third-party trust to purchase, at any time, The Hartford’s junior subordinated notes in a maximum aggregate principal amount of $500. On February 8, 2017, The Hartford exercised the put option resulting in the issuance of $500 in junior subordinated notes with proceeds received on February 15, 2017. Under the put option agreement, The Hartford had been paying premiums on a periodic basis and had agreed to reimburse the trust for certain fees and ordinary expenses. For further information on the put option agreement, see the Contingent Capital Facility section within Note 13 - Debt of Notes to Consolidated Financial Statements, included in The Hartford's 2016 Form 10-K Annual Report.
Modified Coinsurance Reinsurance Contracts
As of September 30, 2017, and December 31, 2016, the Company had $882 and $875, respectively, of invested assets supporting other policyholder funds and benefits payable reinsured under a modified coinsurance arrangement in connection with the sale of the Individual Life business, which was structured as a reinsurance transaction. The assets are primarily held in a trust established by the Company. The Company pays or receives cash quarterly to settle the operating results of the reinsured business, including the investment results. As a result of this modified coinsurance arrangement, the Company has an embedded derivative that transfers to the reinsurer certain unrealized changes in fair value of investments subject to interest rate and credit risk. The notional amount of the embedded derivative reinsurance contracts are the invested assets which are carried at fair value and support the reinsured reserves.
Derivative Balance Sheet Classification
For reporting purposes, the Company has elected to offset within assets or liabilities, based upon the net of the fair value amounts, income accruals and related cash collateral receivables and payables of OTC derivative instruments executed in a legal entity and with the same counterparty under a master netting agreement, which provides the Company with the legal right of offset. The following fair value amounts do not include income accruals or related cash collateral receivables and payables, which are netted with derivative fair value amounts to determine balance sheet presentation. Derivative fair value reported as liabilities after taking into account the master netting agreements was $809 and $963 as of September 30, 2017, and December 31, 2016, respectively. Derivatives in the Company’s separate accounts, where the associated gains and losses accrue directly to policyholders, are not included in the table below. The Company’s derivative instruments are held for risk management purposes, unless otherwise noted in the following table. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and is presented in the table to quantify the volume of the Company’s derivative activity. Notional amounts are not necessarily reflective of credit risk. The following tables exclude investments that contain an embedded credit derivative for which the Company has elected the fair value

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THE
Note 6 - Derivatives
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Derivative Instruments (continued)


Derivative Balance Sheet Presentation
Net Derivatives
Asset
Derivatives
Liability Derivatives
Notional AmountFair ValueFair ValueFair Value
Hedge Designation/ Derivative TypeMar. 31, 2021Dec. 31, 2020Mar. 31, 2021Dec. 31, 2020Mar. 31, 2021Dec. 31, 2020Mar. 31, 2021Dec. 31, 2020
Cash flow hedges
Interest rate swaps$2,340 $2,340 $0 $0 $0 $0 $0 $0 
Foreign currency swaps297 286 (10)(13)3 3 (13)(16)
Total cash flow hedges2,637 2,626 (10)(13)3 3 (13)(16)
Non-qualifying strategies
Interest rate contracts
Interest rate swaps and futures7,926 8,335 (44)(69)4 4 (48)(73)
Foreign exchange contracts
Foreign currency swaps and forwards269 269 0 0 0 0 0 0 
Credit contracts
Credit derivatives that purchase credit protection6 6 0 0 0 0 0 0 
Credit derivatives that assume credit risk [1]675 675 21 21 21 21 0 0 
Credit derivatives in offsetting positions216 218 0 0 5 5 (5)(5)
Total non-qualifying strategies9,092 9,503 (23)(48)30 30 (53)(78)
Total cash flow hedges and non-qualifying strategies$11,729 $12,129 $(33)$(61)$33 $33 $(66)$(94)
Balance Sheet Location
Fixed maturities, available-for-sale$269 $269 $0 $0 $0 $0 $0 $0 
Other investments9,657 9,585 22 23 24 25 (2)(2)
Other liabilities1,803 2,275 (55)(84)9 8 (64)(92)
Total derivatives$11,729 $12,129 $(33)$(61)$33 $33 $(66)$(94)
option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements of Notes[1]The derivative instruments related to the Condensed Consolidated Financial Statements.this strategy are held for other investment purposes.
Derivative Balance Sheet Presentation
 Net DerivativesAsset DerivativesLiability Derivatives
 Notional AmountFair ValueFair ValueFair Value
Hedge Designation/ Derivative TypeSep. 30, 2017Dec. 31, 2016Sep. 30, 2017Dec. 31, 2016Sep. 30, 2017Dec. 31, 2016Sep. 30, 2017Dec. 31, 2016
Cash flow hedges        
Interest rate swaps$3,855
$3,440
$(1)$(79)$79
$11
$(80)$(90)
Foreign currency swaps299
239
(18)(15)6
11
(24)(26)
Total cash flow hedges4,154
3,679
(19)(94)85
22
(104)(116)
Non-qualifying strategies        
Interest rate contracts        
Interest rate swaps, swaptions, and futures11,228
11,743
(476)(890)634
264
(1,110)(1,154)
Foreign exchange contracts        
Foreign currency swaps and forwards165
1,064
(1)68
—
70
(1)(2)
Fixed payout annuity hedge804
804
(255)(263)—
—
(255)(263)
Credit contracts        
Credit derivatives that purchase credit protection144
209
(3)(4)—
—
(3)(4)
Credit derivatives that assume credit risk [1]1,105
1,309
4
10
23
15
(19)(5)
Credit derivatives in offsetting positions1,842
3,317
4
(1)25
39
(21)(40)
Equity contracts        
Equity index swaps and options167
105
2
—
2
33
—
(33)
Variable annuity hedge program        
GMWB product derivatives [2]11,797
13,114
(93)(241)—
—
(93)(241)
GMWB reinsurance contracts2,450
2,709
51
73
51
73
—
—
GMWB hedging instruments9,391
10,256
65
94
130
190
(65)(96)
Macro hedge program8,157
6,532
166
178
192
201
(26)(23)
Other        
Contingent capital facility put option—
500
—
1
—
1
—
—
Modified coinsurance reinsurance contracts882
875
57
68
57
68
—
—
Total non-qualifying strategies48,132
52,537
(479)(907)1,114
954
(1,593)(1,861)
Total cash flow hedges and non-qualifying strategies$52,286
$56,216
$(498)$(1,001)$1,199
$976
$(1,697)$(1,977)
Balance Sheet Location        
Fixed maturities, available-for-sale$156
$322
$—
$1
$—
$1
$—
$—
Other investments12,797
23,620
203
(180)281
377
(78)(557)
Other liabilities24,203
15,526
(716)(689)810
457
(1,526)(1,146)
Reinsurance recoverables3,333
3,584
108
141
108
141
—
—
Other policyholder funds and benefits payable11,797
13,164
(93)(274)—
—
(93)(274)
Total derivatives$52,286
$56,216
$(498)$(1,001)$1,199
$976
$(1,697)$(1,977)
[1]The derivative instruments related to this strategy are held for other investment purposes.
[2]These derivatives are embedded within liabilities and are not held for risk management purposes.
Offsetting of Derivative Assets/Liabilities
The following tables present the gross fair value amounts, the amounts offset, and net position of derivative instruments eligible for offset in the Company's Condensed Consolidated Balance
Sheets. Amounts offset include fair value amounts, income accruals and related cash collateral receivables and payables
associated with derivative instruments that are traded under a common master netting agreement, as described in the preceding discussion. Also included in the tables are financial collateral receivables and payables, which are contractually permitted to be

44
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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Derivative Instruments (continued)


offset upon an event of default, although are disallowed for offsetting under U.S. GAAP.
30
Offsetting Derivative Assets and Liabilities
 (i) (ii) (iii) = (i) - (ii)(iv) (v) = (iii) - (iv)
     Net Amounts Presented in the Statement of Financial Position Collateral Disallowed for Offset in the Statement of Financial Position  
 Gross Amounts of Recognized Assets (Liabilities) Gross Amounts Offset in the Statement of Financial Position Derivative Assets [1] (Liabilities) [2] Accrued Interest and Cash Collateral (Received) [3] Pledged [2] Financial Collateral (Received) Pledged [4] Net Amount
As of September 30, 2017           
Other investments$1,091
 $1,006
 $203
 $(118) $42
 $43
Other liabilities$(1,604) $(703) $(716) $(185) $(888) $(13)
As of December 31, 2016           
Other investments$834
 $670
 $(180) $344
 $103
 $61
Other liabilities$(1,703) $(884) $(689) $(130) $(763) $(56)
[1]Included in other investments in the Company's Condensed Consolidated Balance Sheets.Note 6 - Derivatives
[2]Included in other liabilities in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative payable associated with each counterparty.
[3]Included in other investments in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative receivable associated with each counterparty.
[4]Excludes collateral associated with exchange-traded derivative instruments.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Offsetting Derivative Assets and Liabilities
(i)(ii)(iii) = (i) - (ii)(iv)(v) = (iii) - (iv)
Net Amounts Presented in the Statement of Financial PositionCollateral Disallowed for Offset in the Statement of Financial Position
Gross Amounts of Recognized Assets (Liabilities)Gross Amounts Offset in the Statement of Financial PositionDerivative Assets [1] (Liabilities) [2]Accrued Interest and Cash Collateral (Received) [3] Pledged [2]Financial Collateral (Received) Pledged [4]Net Amount
As of March 31, 2021
Other investments$33 $30 $22 $(19)$1 $2 
Other liabilities$(66)$(4)$(55)$(7)$(57)$(5)
As of December 31, 2020
Other investments$33 $31 $23 $(21)$1 $1 
Other liabilities$(94)$(6)$(84)$(4)$(83)$(5)
[1]Included in other investments in the Company's Condensed Consolidated Balance Sheets.
[2]Included in other liabilities in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative payable associated with each counterparty.
[3]Included in other investments in the Company's Condensed Consolidated Balance Sheets and is limited to the net derivative receivable associated with each counterparty.
[4]Excludes collateral associated with exchange-traded derivative instruments.
Cash Flow Hedges
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a
component of OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current period earnings. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

Gain (Loss) Recognized in OCI
Three Months Ended March 31,
20212020
Interest rate swaps$10 $32 
Foreign currency swaps4 28 
Total$14 $60 
45
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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Derivative Instruments (continued)


Gain (Loss) Reclassified from AOCI into Income
Three Months Ended March 31,
20212020
Net Realized Capital Gain/(Loss)Net Investment IncomeInterest ExpenseNet Realized Capital Gain/(Loss)Net Investment IncomeInterest Expense
Interest rate swaps$0 $10 $(2)$0 $3 $0 
Foreign currency swaps0 1 0 0 1 0 
Total$0 $11 $(2)$0 $4 $0 
Total amounts presented on the Condensed Consolidated Statement of Operations$80 $509 $57 $(231)$459 $64 
Derivatives in Cash Flow Hedging Relationships
 Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
 Three Months Ended September 30, Nine months ended September 30,
 2017 2016
 2017 2016
Interest rate swaps$(1) $(26) $13
 $120
Foreign currency swaps(2) —
 (2) 1
Total$(3) $(26) $11
 $121
        
 Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
 Three Months Ended September 30, Nine Months Ended September 30, 2017 
 2017 2016 2017
 2016
Interest rate swaps      
Net realized
 capital gain/(loss)
$—
 $—
 $4
 $7
Net investment income15
 16
 47
 46
Foreign currency swaps       
Net realized
 capital gain/(loss)
4
 1
 10
 3
Total$19
 $17
 $61
 $56
During the three and nine months ended September 30, 2017, and September 30, 2016, the Company had no ineffectiveness recognized in income within net realized capital gains (losses).
As of September 30, 2017,March 31, 2021, the before-taxbefore tax deferred net gains on derivative instruments recorded in AOCI that are expected to be
reclassified to earnings during the next twelve months are $35.$35. This expectation is based on the anticipated interest payments on hedged investments in fixed maturity securities and long-term debt that will occur over the next twelve months, at whichmonths. At that time, the Company will recognize the deferred net gains (losses) as an
adjustment to net investment income and interest expense over the term of the investment cash flows. The maximum term over which the Company is hedging its exposure to the variability of future cash flows for forecasted transactions, excluding interest payments on existing variable-rate financial instruments, is less than one year.
During the three and nine months ended September 30, 2017,March 31, 2021 and September 30, 2016,2020, the Company had no0 net reclassifications from AOCI to earnings resulting from the discontinuance of cash-flow hedges due to forecasted transactions that were no longer probable of occurring.
Fair Value Hedges
31
Note 6 - Derivatives
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivatives as well as the offsetting loss or gain on the hedged items attributable to the hedged risk are recognized in current earnings. The Company includes the gain or loss on the derivative in the same line item as the offsetting loss or gain on the hedged item. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 2017, the Company did not hold any fair value hedges. For the three and nine months ended September 30, 2016, the Company recognized in income immaterial gains and (losses) for the ineffective portion of fair value hedges related to the derivative instrument and the hedged item.
Non-Qualifying Strategies
For non-qualifying strategies, including embedded derivatives that are required to be bifurcated from their host contracts and
accounted for as derivatives, the gain or loss on the derivative is recognized currently in earnings within net realized capital gains (losses).

Non-Qualifying Strategies Recognized within Net Realized Capital Gains (Losses)
Three Months Ended March 31,
20212020
Foreign exchange contracts
Foreign currency swaps and forwards$0 $3 
Interest rate contracts
Interest rate swaps, swaptions, and futures32 20 
Credit contracts
Credit derivatives that purchase credit protection0 6 
Credit derivatives that assume credit risk3 (12)
Equity contracts
Equity index swaps and options0 75 
Total [1]$35 $92 
46[1]Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option.
Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Derivative Instruments (continued)


Non-Qualifying Strategies Recognized within Net Realized Capital Gains (Losses)
 Three Months Ended September 30, Nine Months Ended September 30,
 20172016 20172016
Variable annuity hedge program     
GMWB product derivatives$58
$87
 $198
$(22)
GMWB reinsurance contracts(9)(15) (33)(2)
GMWB hedging instruments(34)(66) (112)16
Macro hedge program(65)(64) (189)(98)
Total variable annuity hedge program(50)(58) (136)(106)
Foreign exchange contracts     
Foreign currency swaps and forwards—
4
 (17)25
Fixed payout annuity hedge(3)13
 8
109
Total foreign exchange contracts(3)17
 (9)134
Other non-qualifying derivatives     
Interest rate contracts     
Interest rate swaps, swaptions, and futures(9)(2) (3)(22)
Credit contracts     
Credit derivatives that purchase credit protection10
(12) 40
(19)
Credit derivatives that assume credit risk(3)24
 (19)28
Equity contracts     
Equity index swaps and options(3)(2) (7)15
Other     
Contingent capital facility put option—
(1) (1)(4)
Modified coinsurance reinsurance contracts—
(1) (10)(48)
Total other non-qualifying derivatives(5)6
 —
(50)
Total [1]$(58)$(35) $(145)$(22)
[1]
Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements.
Credit Risk Assumed through Credit Derivatives
The Company enters into credit default swaps that assume credit risk of a single entity or referenced index in order to synthetically replicate investment transactions that are permissible under the Company's investment policies. The Company will receive periodic payments based on an agreed upon rate and notional amount and will only make a payment if there is a credit event. A credit event payment will typically be equal to the notional value of the swap contract less the value of the referenced security
issuer’s debt obligation after the occurrence of the credit event. A credit event is generally defined as a default on contractually obligated interest or principal payments or bankruptcy of the referenced entity. The credit default swaps in which the Company assumes credit risk primarily reference investment grade single corporate issuers and baskets, which include standard diversified portfolios of corporate and CMBS issuers. The diversified portfolios of corporate issuers are established within sector concentration limits and may be divided into tranches that possess different credit ratings.

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THE
Note 6 - Derivatives
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Derivative Instruments (continued)


Credit Risk Assumed Derivatives by Type
Underlying Referenced Credit
Obligation(s) [1]
Notional
Amount
[2]
Fair
Value
Weighted
Average
Years to
Maturity
Type
Average
Credit
Rating
Offsetting
Notional
Amount [3]
Offsetting
Fair
Value [3]
As of March 31, 2021
Single name credit default swaps
Investment grade risk exposure$100 $2 5 yearsCorporate CreditA$0 $0 
Basket credit default swaps [4]
Investment grade risk exposure500 12 5 yearsCorporate CreditBBB+0 0 
Below investment grade risk exposure75 7 5 yearsCorporate CreditB+0 0 
Investment grade risk exposure100 1 7 yearsCMBS CreditAAA100 (1)
Below investment grade risk exposure8 (4)Less than 1 yearCMBS CreditCCC+8 4 
Total [5]$783 $18 $108 $3 
As of December 31, 2020
Single name credit default swaps
Investment grade risk exposure$175 $9 5 yearsCorporate CreditA-$0 $0 
Basket credit default swaps [4]
Investment grade risk exposure500 12 5 yearsCorporate CreditBBB+0 0 
Investment grade risk exposure100 1 8 yearsCMBS CreditAAA100 (1)
Below investment grade risk exposure9 (4)Less than 1 yearCMBS CreditCCC+9 4 
Total [5]$784 $18 $109 $3 
[1]The average credit ratings are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P and Fitch. If no rating is available from a rating agency, then an internally developed rating is used.
Credit Derivatives by Type
    
Underlying Referenced Credit
Obligation(s) [1]
  
 
Notional
Amount
[2]
Fair
Value
Weighted
Average
Years to
Maturity
Type
Average
Credit
Rating
Offsetting
Notional
Amount [3]
Offsetting
Fair
Value [3]
As of September 30, 2017
Single name credit default swaps       
Investment grade risk exposure$240
$5
4 yearsCorporate Credit/
Foreign Gov.		A-$15
$—
Below investment grade risk exposure52
—
Less than 1 yearCorporate CreditB52
—
Basket credit default swaps [4]       
Investment grade risk exposure1,579
4
3 yearsCorporate CreditBBB+719
(3)
Below investment grade risk exposure50
4
4 yearsCorporate CreditB+50
—
Investment grade risk exposure37
(2)4 yearsCMBS CreditA+17
1
Below investment grade risk exposure68
(13)Less than 1 yearCMBS CreditCCC+68
12
Total [5]$2,026
$(2)   $921
$10
As of December 31, 2016
Single name credit default swaps       
Investment grade risk exposure$169
$—
4 yearsCorporate Credit/
Foreign Gov.		A-$50
$—
Below investment grade risk exposure77
—
1 yearCorporate CreditB+77
—
Basket credit default swaps [4]       
Investment grade risk exposure2,065
22
3 yearsCorporate CreditBBB+1,204
(10)
Below investment grade risk exposure50
3
4 yearsCorporate CreditB50
(3)
Investment grade risk exposure297
(5)4 yearsCMBS CreditAA167
1
Below investment grade risk exposure110
(26)1 yearCMBS CreditCCC111
26
Embedded credit derivatives       
Investment grade risk exposure200
201
Less than 1 yearCorporate CreditA+—
—
Total [5]$2,968
$195
   $1,659
$14
[2]Notional amount is equal to the maximum potential future loss amount. These derivatives are governed by agreements and applicable law, which include collateral posting requirements. There is no additional specific collateral related to these contracts or recourse provisions included in the contracts to offset losses.
[1]The average credit ratings are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P, Fitch and Morningstar. If no rating is available from a rating agency, then an internally developed rating is used.
[2]Notional amount is equal to the maximum potential future loss amount. These derivatives are governed by agreements, clearing house rules and applicable law, which include collateral posting requirements. There is no additional specific collateral related to these contracts or recourse provisions included in the contracts to offset losses.
[3]The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap.
[4]
Includes $1.7 billion and $2.5 billion as of September 30, 2017, and December 31, 2016, respectively, of notional amount on swaps of standard market indices of diversified portfolios of corporate and CMBS issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index.
[3]The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or losses paid related to, the original swap.
[4]Comprised of swaps of standard market indices of diversified portfolios of corporate and CMBS issuers referenced through credit default swaps. These swaps are subsequently valued based upon the observable standard market index.
[5]Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option.
[5]
Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair Value Option section in Note 5 - Fair Value Measurements.
Derivative Collateral Arrangements
The Company enters into various collateral arrangements in connection with its derivative instruments, which require both the pledging and accepting of collateral. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company has 0t pledged cash collateral associated with derivative instruments with a fair value of $38 and $623, respectively, for which theinstruments. In general, collateral receivable has been primarily included withinis recorded in other investmentsassets or other liabilities on the
Company's Condensed Consolidated Balance Sheets.Sheets as determined by the Company's election to offset on the balance sheet. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company also pledged securities collateral associated with derivative instruments with a fair value of $952$61 and $1.1 billion,$90, respectively, which have been included in fixed maturities on the Company's Condensed Consolidated Balance Sheets. The counterparties generally have the right to sell or re-pledge these securities.
AsIn addition, as of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company has pledged initial margin of securities related to OTC-cleared and exchange traded derivatives with a fair value of $60
and $83, respectively, which are included within fixed maturities on the Company's Condensed Consolidated Balance Sheets.
As of March 31, 2021 and December 31, 2020, the Company accepted cash collateral associated with derivative instruments of $416$22 and $387,$24, respectively, which was invested and recorded

48
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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Derivative Instruments (continued)


in the Company's Condensed Consolidated Balance Sheets in fixed maturities and short-term investments with corresponding amounts recorded in other liabilities.investments or other liabilities as determined by the Company's election to offset on the balance sheet. The Company also accepted securities collateral as of September 30, 2017March 31, 2021 and December 31, 2016,2020, with a fair value of $43 and $109, respectively,$1 as of both dates, which the Company has the abilityright to sell or repledge $10 and $81, respectively.repledge. Asof September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company had no0 repledged securities and did not sell any securities. In addition,0 securities held as of September 30, 2017 and December 31, 2016, non-cashcollateral have been sold. Non-cash collateral accepted was held in separate custodial accounts and was not included in the Company’s Condensed Consolidated Balance Sheets.Sheets.

33
49
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THE
Note 7 - Premiums Receivable and Agents' Balances
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Reserve for Unpaid Losses and Loss Adjustment Expenses


7. PREMIUMS RECEIVABLE AND AGENTS' BALANCES
Premiums Receivable and Agents' Balances
As of March 31, 2021As of December 31, 2020
Premiums receivable, excluding receivables for losses within a deductible and retrospectively-rated policy premiums$4,058 $3,851 
Receivables for loss within a deductible and retrospectively-rated policy premiums, by credit quality:
AAA0 0 
AA140 142 
A65 62 
BBB186 185 
BB115 115 
Below BB67 65 
Total receivables for losses within a deductible and retrospectively-rated policy premiums573 569 
Total Premiums Receivable and Agents' Balances, Gross4,631 4,420 
ACL(144)(152)
Total Premiums Receivable and Agents' Balances, Net of ACL$4,487 $4,268 
PropertyACL on Premiums Receivable and Casualty Insurance ProductsAgents' Balances
Balances are considered past due when amounts that have been billed are not collected within contractually stipulated time periods. The Company had an immaterial amount of receivables with a due date of more than one year that are past-due.
Premium receivable and agents' balances, excluding receivables for losses within a deductible and retrospectively-rated policy premiums, are primarily comprised of premiums due from policyholders, which are typically collectible within one year or less. For these balances, the ACL is estimated based on an aging of receivables and recent historical credit loss and collection experience, adjusted for current economic conditions and reasonable and supportable forecasts, when appropriate.
A portion of the Company's Commercial Lines business is written with large deductibles or under retrospectively-rated plans.
Under some commercial insurance contracts with a large deductible, the Company is obligated to pay the claimant the full amount of the claim and the Company is subsequently reimbursed by the policyholder for the deductible amount. As such, the Company is subject to credit risk until reimbursement is made. Retrospectively-rated policies are utilized primarily for workers' compensation coverage, whereby the ultimate premium is adjusted based on actual losses incurred. Although the premium adjustment feature of a retrospectively-rated policy substantially reduces insurance risk for the Company, it presents credit risk to the Company. The Company’s results of operations could be adversely affected if a significant portion of such policyholders failed to reimburse the Company for the deductible amount or the amount of additional premium owed under retrospectively-rated policies. The Company manages these credit risks through credit analysis, collateral requirements, and oversight.
The ACL for receivables for loss within a deductible and retrospectively-rated policy premiums is estimated as the amount of the receivable exposed to loss multiplied by estimated factors for probability of default and the amount of loss given a default. The probability of default is assigned based on each policyholder's credit rating, or a rating is estimated if no external rating is available. Credit ratings are reviewed and updated at least annually. The exposure amount is estimated net of collateral and other credit enhancement, considering the nature of the collateral, potential future changes in collateral values, and historical loss information for the type of collateral obtained. The probability of default factors are historical corporate defaults for receivables with similar durations estimated through multiple economic cycles. Credit ratings are forward-looking and consider a variety of economic outcomes. The loss given default factors are based on a study of historical recovery rates for general creditors through multiple economic cycles. The Company's evaluation of the required ACL for receivables for loss within a deductible and retrospectively-rated policy premiums considers the current economic environment as well as the probability-weighted macroeconomic scenarios similar to the approach used for estimating the ACL for mortgage loans. See Note 5 - Investments.
During the three months ended March 31, 2021, the ACL on premiums receivable decreased as the provision required on premiums written in the quarter was more than offset by write-offs and a reduction in the provision reflecting lessening expected impacts of COVID-19 relative to prior assumptions in certain lines of business. The three months ended March 31, 2020 reflected an increase in the ACL primarily due to increasing expected impacts of COVID-19.
Roll-forward of Liabilities for Unpaid Losses and Loss Adjustment Expenses
34
 For the nine months ended September 30,
 20172016
Beginning liabilities for unpaid losses and loss adjustment expenses, gross$21,833
$21,825
Reinsurance and other recoverables2,776
2,882
Beginning liabilities for unpaid losses and loss adjustment expenses, net19,057
18,943
Add: Maxum acquisition—
122
Provision for unpaid losses and loss adjustment expenses 
 
Current accident year5,587
5,215
Prior accident year development1
409
Total provision for unpaid losses and loss adjustment expenses5,588
5,624
Less: payments 
 
Current accident year1,770
1,901
Prior accident years3,143
3,380
Total payments4,913
5,281
Less: net reserves transferred to liabilities held for sale—
487
Ending liabilities for unpaid losses and loss adjustment expenses, net19,732
18,921
Reinsurance and other recoverables [1]2,817
2,694
Ending liabilities for unpaid losses and loss adjustment expenses, gross$22,549
$21,615
[1]
Includes reinsurance recoverables of $2,355
Note 7 - Premiums Receivable and $2,313 for the nine months endedSeptember 30, 2017 and 2016, respectively.Agents' Balances
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Rollforward of ACL on Premiums Receivable and Agents' Balances
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Premiums Receivable and Agents' Balances, Excluding Receivables for Loss within a Deductible and Retrospectively-Rated Policy PremiumsReceivables for Loss within a Deductible and Retrospectively-Rated Policy PremiumsTotalPremiums Receivable and Agents' Balances, Excluding Receivables for Loss within a Deductible and Retrospectively-Rated Policy PremiumsReceivables for Loss within a Deductible and Retrospectively-Rated Policy PremiumsTotal
Beginning ACL$117 $35 $152 $85 $60 $145 
Cumulative effect of accounting change [1]000(2)(21)(23)
Adjusted beginning ACL117 35 152 83 39 122 
Current period provision (release)4 1 5 28 2 30 
Current period gross write-offs(15)0 (15)(15)0 (15)
Current period gross recoveries2 0 2 2 0 2 
Ending ACL$108 $36 $144 $98 $41 $139 
[1]Represents the adjustment to the ACL recorded on adoption of accounting guidance for credit losses on January 1, 2020. The adjusted beginning ACL was based on the Company's historical loss information adjusted for current conditions and the forecasted economic environment at the time the guidance was adopted. For further information, see Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements included in the Company's 2020 Form 10-K Annual Report.
8. REINSURANCE
(Favorable) Unfavorable Prior Accident Year DevelopmentThe Company cedes insurance risk to reinsurers to enable the Company to manage capital and risk exposure. Such arrangements do not relieve the Company of its primary liability to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company's procedures include carefully selecting its reinsurers, structuring agreements to provide collateral funds where necessary, and regularly monitoring the financial condition and ratings of its reinsurers.
Reinsurance Recoverables
Reinsurance recoverables include balances due from reinsurance companies and are presented net of an allowance for uncollectible reinsurance. Reinsurance recoverables include an estimate of the amount of gross losses and loss adjustment
 For the nine months ended September 30,
 20172016
Workers’ compensation$(29)$(87)
Workers’ compensation discount accretion21
21
General liability10
67
Package business(22)50
Commercial property(5)2
Professional liability—
(35)
Bond10
(6)
Automobile liability - Commercial Lines20
19
Automobile liability - Personal Lines—
140
Homeowners—
(4)
Net asbestos reserves—
197
Net environmental reserves—
71
Catastrophes(12)(7)
Uncollectible reinsurance—
(30)
Other reserve re-estimates, net8
11
Total prior accident year development$1
$409
Re-estimatesexpense reserves that may be ceded under the terms of prior accident yearthe reinsurance agreements, including incurred but not reported ("IBNR") unpaid losses. The Company’s estimate of losses and loss adjustment expense reserves ceded to reinsurers is based on assumptions that are consistent with those used in establishing the gross reserves for amounts the nine months ended September 30, 2017
Workers’ compensation reserves were reduced, primarily in Small Commercial, givenCompany owes to its claimants. The Company estimates its ceded reinsurance recoverables based on the continued emergenceterms of favorable frequency for accident years 2013 to 2015. Management has placed additional weight on this favorable experience as it becomes more credible.
General liability reserves were increased for the 2013 to 2016 accident years on a classany applicable facultative and treaty reinsurance, including an estimate of business that insures service and maintenance contractors. This increase was partially offset by a decrease in recent accident year reserves for other Middle Market general liability reserves.
Package reserveswere reduced for accident years 2013 and prior largely due to reducinghow incurred but not reported losses will ultimately be ceded under reinsurance agreements. Accordingly, the Company’s estimate of allocatedreinsurance recoverables is subject to similar risks and uncertainties as the estimate of the gross reserve for unpaid losses and loss adjustment expenses incurred to settle the claims.
Bond business reserves increased for customs bonds written between 2000 and 2010 which was partly offset by a reduction in reserves for recent accident years as reported losses for commercial and contract surety have emerged favorably.
Automobile liability reserves within Commercial Lines were increased in Small Commercial and large national accounts for the 2013 to 2016 accident years, driven by higher frequency of more severe accidents, including litigated claims.expenses.

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THE
Note 8 - Reinsurance
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Reserve for Unpaid Losses and Loss Adjustment Expenses (continued)


Reinsurance Recoverables by Credit Quality Indicator
As of March 31, 2021As of December 31, 2020
Property and CasualtyGroup BenefitsCorporateTotalProperty and CasualtyGroup BenefitsCorporateTotal
A.M. Best Financial Strength Rating
A++$1,627 $0 $0 $1,627 $1,598 $0 $0 $1,598 
A+1,823 240 306 2,369 1,788 230 305 2,323 
A565 0 0 565 638 0 0 638 
A-36 9 0 45 37 9 0 46 
B++658 0 3 661 666 0 3 669 
Below B++21 1 0 22 21 1 0 22 
Total Rated by A.M. Best4,730 250 309 5,289 4,748 240 308 5,296 
Mandatory (Assigned) and Voluntary Risk Pools259 0 0 259 259 0 0 259 
Captives308 0 0 308 305 0 0 305 
Other not rated companies318 7 0 325 254 5 0 259 
Gross Reinsurance Recoverables5,615 257 309 6,181 5,566 245 308 6,119 
Allowance for uncollectible reinsurance(95)(1)(2)(98)(105)(1)(2)(108)
Net Reinsurance Recoverables$5,520 $256 $307 $6,083 $5,461 $244 $306 $6,011 
Catastrophes reservesBalances are considered past due when amounts that have been billed are not collected within contractually stipulated time periods, generally 30, 60 or 90 days. There were reduced primarily0 write-offs for the three months ended March 31, 2021.
To manage reinsurer credit risk, a reinsurance security review committee evaluates the credit standing, financial performance, management and operational quality of each potential reinsurer. In placing reinsurance, the Company considers the nature of the risk reinsured, including the expected liability payout duration, and establishes limits tiered by reinsurer credit rating.
Where its contracts permit, the Company secures future claim obligations with various forms of collateral or other credit enhancement, including irrevocable letters of credit, secured trusts, funds held accounts and group wide offsets. As part of its reinsurance recoverable review, the Company analyzes recent developments in commutation activity between reinsurers and cedants, recent trends in arbitration and litigation outcomes in disputes between cedants and reinsurers and the overall credit quality of the Company’s reinsurers.
Due to the inherent uncertainties as to collection and the length of time before reinsurance recoverables become due, it is possible that future adjustments to lower estimatesthe Company’s reinsurance recoverables, net of 2016 windthe allowance, could be required, which could have a material adverse effect on the Company’s consolidated results of operations or cash flows in a particular quarter or annual period.
The allowance for uncollectible reinsurance comprises an ACL and hail event lossesan allowance for disputed balances. The ACL is estimated as the amount of reinsurance recoverables exposed to loss multiplied by estimated factors for the probability of default and the amount of loss given a decrease in lossesdefault. The probability of default is assigned based on each reinsurer's credit rating, or a rating is estimated if no external rating is available. Credit ratings are reviewed on a 2015 wildfire.quarterly basis and any significant changes are
Re-estimates
reflected in an updated estimate. The probability of prior accident year reservesdefault factors are historical insurer and reinsurer defaults for liabilities with similar durations to thenine months endedSeptember 30, 2016 reinsured liabilities as estimated through multiple economic cycles. Credit ratings are forward-looking and consider a variety of economic outcomes. The loss given default factors are based on a study of historical recovery rates for general creditors of corporations through multiple economic cycles or, in the case of purchased annuities funding structured settlements accounted for as reinsurance, historical recovery rates for annuity contract holders.
Workers' compensation reservesconsider favorable emergence on reported lossesAs shown in the table above, a portion of the total gross reinsurance recoverable balance relates to the Company’s participation in various mandatory (assigned) and voluntary risk pools. Reinsurance recoverables due from pools are backed by the financial position of all insurance companies participating in the pools and the credit backing the reinsurance recoverable is not limited to the financial strength of each pool. The mandatory pools generally are funded through policy assessments or surcharges and if any participant in the pool defaults, remaining liabilities are apportioned among the other members.
The Company's evaluation of the required ACL for recent accident yearsreinsurance recoverables considers the current economic environment as well as a partially offsetting adverse impact relatedmacroeconomic scenarios similar to two recent Florida Supreme Court rulings that have increased the Company's exposureapproach used to workers' compensation claims in that state. The favorable emergence has been driven by lower frequencyestimate the ACL for mortgage loans. See Note 5 - Investments. Insurance companies, including reinsurers, are regulated and hold risk-based capital ("RBC") to mitigate the risk of loss due to economic factors and other risks. Non-U.S. reinsurers are either subject to a lesser extent, lower medical severity and management has placed additional weight on this favorable experience as it becomes more credible.
General liability reservesincreasedcapital regime substantively equivalent to domestic insurers or we hold collateral to support collection of reinsurance recoverables. As a result, there is limited history of losses from insurer defaults. The decrease in the ACL for accident years 2012 through 2015the three months ended March 31, 2021 was primarily due to higher severity losses incurred on a class of business that insures service and maintenance contractors and, in second quarter 2016, increased reserves in general liability for accident years 2008 and 2010 primarily due to indemnity losses and legal costs associated with a litigated claim.
Small Commercial package business reservesincreased due to higher than expected severityrecovery from one reinsurer on liability claims, principallywhich the Company had recognized an ACL.
36
Note 8 - Reinsurance
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Allowance for Uncollectible Reinsurance
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
Property and CasualtyGroup BenefitsCorporateTotalProperty and CasualtyGroup BenefitsCorporateTotal
Beginning allowance for uncollectible reinsurance$105 $1 $2 $108 $114 $0 $0 $114 
Beginning allowance for disputed amounts53 0 0 53 66 0 0 $66 
Beginning ACL52 1 2 55 48 0 0 48 
Cumulative effect of accounting change [1]00000 1 1 2 
Adjusted beginning ACL52 1 2 55 48 1 1 50 
Current period provision (release)(13)0 0 (13)1 0 1 2 
Ending ACL39 1 2 42 49 1 2 52 
Ending allowance for disputed amounts56 0 0 56 65 0 0 65 
Ending allowance for uncollectible reinsurance$95 $1 $2 $98 $114 $1 $2 $117 
[1] Represents the adjustment to the ACL recorded on adoption of accounting guidance for accident years 2013 through 2015. Severity for these accident years has developed unfavorablycredit losses on January 1, 2020. For further information, see Note 1 - Basis of Presentation and management has placed more weight on emerged experience.
Professional liability reservesdecreased for claims made years 2008 through 2013, primarily for large accounts, including on non-securities class action cases. Claim costs have emerged favorably as these years have matured and management has placed more weight on the emerged experience.
Automobile liability reservesincreasedSignificant Accounting Policies of Notes to Consolidated Financial Statements included in commercial lines, predominantly for the 2015 accident year, primarily due to increased frequency of large claims. Automobile liability reserves also increased in personal lines, primarily related to increased bodily injury frequency and severity for the 2015 accident year, including for uninsured and under-insured motorist claims, and increased bodily injury severity for the 2014 accident year. Increases in auto liability loss costs were across both the direct and agency distribution channels.
Asbestos and environmental reserves increased during the period as a result of the 2016 comprehensive annual review. For a discussion of the Company's 2016 review of asbestos and environmental reserves, see Part II, Item 7 MD&A, Critical Accounting Estimates, Property & Casualty Other Operations section in the Company’s 20162020 Form 10-K Annual Report.
Uncollectible reinsurance reservesdecreased as a result of giving greater weight to favorable collectibility experience in recent calendar periods in estimating future collections.
Group Life, Disability and Accident Products37
Roll-forward
Note 9 - Reserves for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. RESERVE FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES
Property and Casualty Insurance Products
Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses
 For the three months ended March 31,
 20212020
Beginning liabilities for unpaid losses and loss adjustment expenses, gross$29,622 $28,261 
Reinsurance and other recoverables5,725 5,275 
Beginning liabilities for unpaid losses and loss adjustment expenses, net23,897 22,986 
Provision for unpaid losses and loss adjustment expenses  
Current accident year1,924 1,883 
Prior accident year development [1]229 23 
Total provision for unpaid losses and loss adjustment expenses2,153 1,906 
Change in deferred gain on retroactive reinsurance included in other liabilities [1](6)(29)
Payments  
Current accident year(292)(304)
Prior accident years(1,221)(1,491)
Total payments(1,513)(1,795)
Net change in reserves transferred to liabilities held for sale(1)0 
Foreign currency adjustment(6)(20)
Ending liabilities for unpaid losses and loss adjustment expenses, net24,524 23,048 
Reinsurance and other recoverables5,808 5,332 
Ending liabilities for unpaid losses and loss adjustment expenses, gross$30,332 $28,380 
[1] Prior accident year development does not include the benefit of a portion of losses ceded under the Navigators and A&E ADC which, under retroactive reinsurance accounting, is deferred and is recognized over the period the ceded losses are recovered in cash from NICO. For additional information regarding the two adverse development cover reinsurance agreements, refer to Adverse Development Covers discussion below.
 For the nine months ended September 30,
 20172016 [1]
Beginning liabilities for unpaid losses and loss adjustment expenses, gross$5,772
$5,889
Reinsurance recoverables208
218
Beginning liabilities for unpaid losses and loss adjustment expenses, net5,564
5,671
Provision for unpaid losses and loss adjustment expenses



Current incurral year1,960
1,930
Prior year's discount accretion148
155
Prior incurral year development [2](162)(126)
Total provision for unpaid losses and loss adjustment expenses [3]1,946
1,959
Less: payments



Current incurral year917
932
Prior incurral years1,118
1,126
Total payments2,035
2,058
Ending liabilities for unpaid losses and loss adjustment expenses, net5,475
5,572
Reinsurance recoverables208
211
Ending liabilities for unpaid losses and loss adjustment expenses, gross$5,683
$5,783
38
[1]Certain prior year amounts have been reclassified to conform to the current year presentationNote 9 - Reserves for unpaid lossesUnpaid Losses and loss adjustment expenses.Loss Adjustment Expenses
[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 of $74, and $76 for the nine months endedSeptember 30, 2017 and 2016, respectively, that are recorded in insurance operating costs and other expenses in the Condensed Consolidated Statements of Operations.

51
Table of Contents
THETHE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Reserve
Unfavorable (Favorable) Prior Accident Year Development
For the three months ended March 31,
20212020
Workers’ compensation$(40)$(17)
Workers’ compensation discount accretion9 9 
General liability307 12 
Marine6 0 
Package business(27)1 
Commercial property(13)(7)
Professional liability(1)1 
Bond0 0 
Assumed reinsurance2 0 
Automobile liability - Commercial Lines0 5 
Automobile liability - Personal Lines(23)(6)
Homeowners(3)(2)
Catastrophes(16)(13)
Uncollectible reinsurance(9)0 
Other reserve re-estimates, net31 11 
Prior accident year development before change in deferred gain223 (6)
Change in deferred gain on retroactive reinsurance included in other liabilities [1]6 29 
Total prior accident year development$229 $23 
[1] The change in deferred gain for the three months ended March 31, 2021 and 2020 included $6 and $29, respectively, of adverse development on Navigators 2018 and prior accident year reserves, primarily driven by marine for both periods and due to commercial automobile liability in the 2021 period and prior accident year catastrophes in the 2020 period.
Re-estimates of prior accident year reserves for the three months ended March 31, 2021
Workers’ compensation reserves were decreased primarily within small commercial and national accounts for the 2014 through 2017 accident years driven by lower than previously estimated claim severity.
General liability reserves were increased including an increase for sexual molestation and sexual abuse claims above the amount of reserves previously recorded for this exposure, primarily to reflect an agreement to settle claims made against the Boy Scouts of America ("BSA") as discussed further below, partially offset by reserve decreases for other mass torts and extra contractual liability claims.
Package business reserves decreased largely due to lower estimated loss adjustment expenses for accident years 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 and large commercial and global specialty.
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 2019, and a reduction in estimated reserves for extra contractual liability claims.
Catastrophes reserves were decreased in both Commercial and Personal Lines primarily driven by 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 thethree months ended March 31, 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.
General liability reserves were increased, primarily
related to guaranteed cost construction business for accident years 2016 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.
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.
Commercial property reserves were decreased for
accident year 2019 due to favorable developments on marine and middle market property claims.
Automobile liability reserves were decreased in
Personal Lines principally due to lower than previously expected AARP Direct automobile liability claim severity for the 2018 accident year. 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.
Catastrophes reserves were reduced, primarily due to a reduction in estimated catastrophes for the 2019 accident year and a reduction in estimated reserves for 2017 California wildfires, partially offset by an increase in reserves for 2019 typhoons Hagibis and Faxai in Asia.
Other reserve re-estimates, net, primarily included
an increase in reserves on pool participations.
39
Note 9 - Reserves for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Settlement Agreement with Boy Scouts of America
On April 16, 2021, the Company announced that it has entered into a Settlement Agreement and Release with Boy Scouts of America pursuant to which The Hartford will pay $650 for sexual molestation and sexual abuse claims associated with policies mostly issued in the 1970s. The agreement, entered into after extensive negotiations, contemplates that, in exchange for The Hartford’s payment, the BSA and its local councils will fully release The Hartford from any obligation under policies it issued to the BSA and its local councils. The agreement is in connection with BSA’s Chapter 11 bankruptcy and will become effective upon the occurrence of certain conditions, including confirmation of the BSA’s global resolution plan, executed releases from the local councils, and approval from the abuse claimants and bankruptcy court. The Hartford and the BSA hope to receive court approval in the third quarter of 2021, but this could be delayed for various procedural reasons.
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 March 31, 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 March 31, 2021, the Company has recorded a reinsurance recoverable under the Navigators ADC of $215, as estimated cumulative loss development on the 2018 and prior accident year reserves of $315 exceed the $100 deductible. While the reinsurance recoverable is $215, the Company has also recorded a $124 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 $124 of cumulative ceded losses in excess of ceded premium paid, $6 was recognized as a deferred gain in first quarter 2021 and $29 was recognized as a deferred gain in first quarter 2020. As the Company has ceded $215 of the $300 available limit, there is $85 of remaining limit available as of March 31, 2021.

40
Note 9 - Reserves for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Group Life, Disability and Accident Products
Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses(continued)

For the three months ended March 31,
20212020
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, net7,996 8,010 
Provision for unpaid losses and loss adjustment expenses
Current incurral year1,325 1,148 
Prior year's discount accretion55 57 
Prior incurral year development [2](151)(163)
Total provision for unpaid losses and loss adjustment expenses [3]1,229 1,042 
Payments
Current incurral year(350)(278)
Prior incurral years(914)(821)
Total payments(1,264)(1,099)
Ending liabilities for unpaid losses and loss adjustment expenses, net7,961 7,953 
Reinsurance recoverables247 249 
Ending liabilities for unpaid losses and loss adjustment expenses, gross$8,208 $8,202 

[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 $43 and $44 for the three months ended March 31, 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 ninethree months ended September 30, 2017March 31, 2021
Group Disability-disability- Prior period reserve estimates decreased by approximately $105$125 largely driven by group long-term disability claim recoveries and deaths higherincidence lower than prior reserve assumptions. This favorability was partially reducedassumptions together with strong recoveries on prior incurral year claims; and by group short-term disability non-COVID-19 claim incidence lower expectation of future benefit offsets, particularly lower Social Security Disability Income approval ratesthan previously expected.
Group life and longer decision turnaround times in the Social Security Administration.
Group Life and Accidentaccident (including Group Life Premium Waiver)group life premium waiver)-Prior period reserve estimates decreased by approximately $55$20 largely driven by lower than previouslylower-than-previously expected claim incidence in Group Lifeboth group life premium waiver and Group Life Premium Waiver.group accidental death & dismemberment, partially offset by higher than previously estimated 2020 incurral year excess mortality claims on group term life.
Re-estimates of prior incurral years reserves for the ninethree months ended September 30, 2016March 31, 2020
Group Disability-disability-Prior period reserve estimates decreased by approximately $85$100 largely driven by group long-term disability claim recoveries higherincidence lower than prior reserve assumptions. This favorability was partially offset by lower Social Security Disability Income approvals driven by lower approval ratesassumptions and ongoing backlogs in the Social Security Administration.strong recoveries on prior incurral year claims.
Group Lifelife and Accidentaccident (including Group Life Premium Waiver)group life premium waiver)-Prior period reserve estimates decreased by approximately $30$50 largely driven by lower prior year mortality than prior assumptions in group life and lower than previously expected claim incidence on Group Life Premium Waiver.in group life premium waiver.

41
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THE
Note 10 - Reserve for Future Policy Benefits
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Reserve for Future Policy Benefits and Separate Account Liabilities

10. RESERVE FOR FUTURE POLICY BENEFITS
Changes in Reserves for Future Policy Benefits[1]
For the three months ended March 31,
20212020
Beginning liability balance$638 $635 
Incurred37 18 
Paid(26)(22)
Change in unrealized investment gains and losses(8)(2)
Ending liability balance$641 $629 
Beginning reinsurance recoverable asset$28 $31 
Incurred18 (1)
Paid0 0 
Ending reinsurance recoverable asset$46 $30 
Changes in Reserves for Future Policy Benefits
 Universal Life - Type Contracts  
  GMDB/GMWB [1]Universal Life Secondary GuaranteesTraditional Annuity and Other Contracts [2]Total Future Policy Benefits
Liability balance as of January 1, 2017$786
$2,627
$10,516
$13,929
Incurred [3]57
231
582
870
Paid(76)—
(603)(679)
Change in unrealized investment gains and losses—
—
127
127
Liability balance as of September 30, 2017$767
$2,858
$10,622
$14,247
Reinsurance recoverable asset, as of January 1, 2017$432
$2,627
$1,392
$4,451
Incurred [3]37
231
60
328
Paid(63)—
(44)(107)
Reinsurance recoverable asset, as of September 30, 2017$406
$2,858
$1,408
$4,672
[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.
 Universal Life - Type Contracts  
  GMDB/GMWB [1]Universal Life Secondary GuaranteesTraditional Annuity and Other Contracts [2]Total Future Policy Benefits
Liability balance as of January 1, 2016$863
$2,313
$10,683
$13,859
Incurred [3]50
234
575
859
Paid(92)—
(604)(696)
Change in unrealized investment gains and losses—
—
433
433
Liability balance as of September 30, 2016$821
$2,547
$11,087
$14,455
Reinsurance recoverable asset, as of January 1, 2016$523
$2,313
$1,478
$4,314
Incurred [3]40
234
(14)260
Paid(73)—
(48)(121)
Reinsurance recoverable asset, as of September 30, 2016$490
$2,547
$1,416
$4,453
[1]These liability balances include all GMDB benefits, plus the life-contingent portion of GMWB benefits in excess of the return of the GRB. GMWB benefits that make up a shortfall between the account value and the GRB are embedded derivatives held at fair value and are excluded from these balances.
[2]Represents life-contingent reserves for which the company is subject to insurance and investment risk.
[3]Includes the portion of assessments established as additions to reserves as well as changes in estimates affecting the reserves.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Reserve for Future Policy Benefits and Separate Account Liabilities (continued)


Account Value by GMDB/GMWB Type as of September 30, 2017
 Account Value (“AV”) [8]Net Amount at Risk (“NAR”) [9]Retained Net Amount at Risk (“RNAR”) [9]Weighted Average Attained Age of Annuitant
Maximum anniversary value (“MAV”) [1]    
MAV only$13,674
$2,047
$305
71
With 5% rollup [2]1,149
143
45
72
With Earnings Protection Benefit Rider (“EPB”) [3]3,482
522
80
71
With 5% rollup & EPB476
105
23
73
Total MAV18,781
2,817
453
 
Asset Protection Benefit (“APB”) [4]10,175
102
70
70
Lifetime Income Benefit (“LIB”) — Death Benefit [5]454
4
4
70
Reset [6] (5-7 years)2,445
6
5
70
Return of Premium (“ROP”) [7]/Other8,852
55
52
71
Subtotal Variable Annuity with GMDB/GMWB [10]40,707
$2,984
$584
71
Less: General Account Value with GMDB/GMWB3,665
   
Subtotal Separate Account Liabilities with GMDB37,042
   
Separate Account Liabilities without GMDB78,584
   
Total Separate Account Liabilities$115,626
   
[1]
MAV GMDB is the greatest of current AV, net premiums paid and the highest AV on any anniversary before age 80 years (adjusted for withdrawals).
[2]
Rollup GMDB is the greatest of the MAV, current AV, net premium paid and premiums (adjusted for withdrawals) accumulated at generally 5% simple interest up to the earlier of age 80 years or 100% of adjusted premiums.
[3]
EPB GMDB is the greatest of the MAV, current AV, or contract value plus a percentage of the contract’s growth. The contract’s growth is AV less premiums net of withdrawals, subject to a cap of 200% of premiums net of withdrawals.
[4]
APB GMDB is the greater of current AV or MAV, not to exceed current AV plus 25% times the greater of net premiums and MAV (each adjusted for premiums in the past 12 months).
[5]LIB GMDB is the greatest of current AV; net premiums paid; or, for certain contracts, a benefit amount generally based on market performance that ratchets over time.
[6]
Reset GMDB is the greatest of current AV, net premiums paid and the most recent five to seven year anniversary AV before age 80 years (adjusted for withdrawals).
[7]ROP GMDB is the greater of current AV or net premiums paid.
[8]AV includes the contract holder’s investment in the separate account and the general account.
[9]NAR is defined as the guaranteed minimum death benefit in excess of the current AV. RNAR represents NAR reduced for reinsurance. NAR and RNAR are highly sensitive to equity markets movements and increase when equity markets decline.
[10] Some variable annuity contracts with GMDB also have a life-contingent GMWB that may provide for benefits in excess of the return of the GRB. Such contracts included in this amount have $6.3 billion of total account value and weighted average attained age of 73 years. There is no NAR or retained NAR related to these contracts. Includes $1.7 billion of account value for contracts that had a GMDB at issue but no longer have a GMDB due to certain elections made by policyholders or their beneficiaries.
Account Balance Breakdown of Variable Separate Account Investments for Contracts with Guarantees
Asset typeAs of September 30, 2017As of December 31, 2016
Equity securities (including mutual funds)$34,267
$33,880
Cash and cash equivalents2,775
3,045
Total$37,042
$36,925
11. INCOME TAXES
As of September 30, 2017 and December 31, 2016, approximately 15% and 16%, respectively, of the equity securities (including mutual funds), in the preceding table were funds invested in fixed income securities and approximately 85% and 84%, respectively, were funds invested in equity securities.
Income Tax Expense
Income Tax Rate Reconciliation
Three Months Ended March 31,
20212020
Tax provision at U.S. federal statutory rate$63 $72 
Tax-exempt interest(11)(12)
Executive compensation5 5 
Increase in deferred tax valuation allowance1 6 
Other(4)0 
Provision for income taxes$54 $71 
For further information on guaranteed living benefits that are accounted for at fair value, such as GMWB, see Note 5 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements.
Other Tax Matters

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Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. Debt

Senior Notes
On March 15, 2017, the Company repaid its $416, 5.375% senior notes at maturity.
Junior Subordinated Debentures
On February 15, 2017, pursuant to a put option agreement with the Glen Meadow ABC Trust, the Company issued $500 junior subordinated notes with a scheduled maturity of February 12, 2047, and a final maturity of February 12, 2067. The junior subordinated notes bear interest at an annual rate of three-month LIBOR plus 2.125%, payable quarterly. The Hartford will have the right, on one or more occasions, to defer interest payments due on the junior subordinated notes under specified circumstances.
Upon receipt of the proceeds, the Company entered into a replacement capital covenant (the "RCC"). Under the terms of the RCC, if the Company redeems the notes at any time prior to February 12, 2047 (or such earlier date on which the RCC terminates by its terms) it can only do so with the proceeds from the sale of certain qualifying replacement securities. The RCC also prohibits the Company from redeeming all or any portion of the notes on or prior to February 15, 2022.
In April 2017, the Company entered into an interest rate swap agreement expiring February 15, 2027 to effectively convert the variable interest payments into fixed interest payments of approximately 4.39%.


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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Income Taxes


Income Tax Rate Reconciliation
 Three Months Ended September 30,Nine Months Ended September 30,
 2017201620172016
Tax provision at U.S. federal statutory rate$89
$185
$211
$378
Tax-exempt interest(31)(31)(91)(94)
Dividends-received deduction ("DRD")(37)(14)(75)(57)
Decrease in deferred tax valuation allowance—
—
—
(78)
Stock-based compensation(4)—
(12)—
Sale of U.K. business—
(50)5
(50)
Other5
—
(6)3
Provision for income taxes$22
$90
$32
$102
In addition to the effect of tax-exempt interest and DRD, the Company’s effective tax rate for the three and nine months ended September 30, 2017 reflects a $4 and $12, respectively, federal income tax benefit related to a deduction for stock-based compensation that vested at a fair value per share greater than the fair value on the date of grant.
Additionally, the Company's effective tax rate for the nine months ended September 30, 2016 reflects a $78 federal income tax benefit from the reduction of the deferred tax asset valuation allowance on the capital loss carryover due to taxable gains on sales of investments during the period.
The separate account DRD is estimated for the current year using information from the most recent return, adjusted for current year equity market performance and other appropriate factors, including estimated levels of corporate dividend payments and level of policy owner equity account balances. The actual current year DRD can vary from estimates based on, but not limited to, changes in eligible dividends received in the mutual funds,
amounts of distribution from these mutual funds, amounts of short-term capital gains at the mutual fund level and the Company’s taxable income before the DRD. The Company evaluates its DRD computations on a quarterly basis.
Roll-forward of Unrecognized Tax Benefits
 Three Months Ended September 30,Nine Months Ended September 30,
 2017201620172016
Balance, beginning of period$12
$12
$12
$12
Gross increases - tax positions in prior period3
—
3
—
Gross decreases - tax positions in prior period—
—
—
—
Balance, end of period$15
$12
$15
$12
The Company's unrecognizedUnrecognized tax benefits were increased by $3 for$15 and $14 at the threebeginning and nine months ended September 30, 2017 due to the filingend of the Company's 2016 federal consolidated income tax return.
periods ended March 31, 2021 and 2020, respectively. The entire amount of unrecognized tax benefits, if recognized, would affect the effective tax rate in the period of the release. The Company believes it is reasonably possible approximately $5 of its currently unrecognized tax benefits associated with dividends from segregated asset accounts of the life and annuity business sold in 2018 may be recognized by the end of 2021 as a result of a lapse in the applicable statute of
limitations. This liability is subject to a tax indemnification agreement and has a corresponding receivable included in other assets which would also be taken down upon lapse of the statute of limitations.
For the period ending March 31, 2021, the Company has foreign net operating losses of $11 for which a valuation allowance of $3 has been established. While the foreign NOLs do not expire, this assessment reflects uncertainty in the Company's ability to generate sufficient taxable income in the near term in those specific jurisdictions.
Management has assessed the need for a valuation allowance against its deferred tax assets based on tax character and jurisdiction. In making the assessment, management considered future taxable temporary difference reversals, future taxable income exclusive of reversing temporary differences and carryovers, taxable income in open carry back years and other tax planning strategies which management views as prudent and feasible.
The federal audit of the years 2012 and 2013 was completed as of March 31, 2017 with no additional adjustments. The federal audit of The Company's recently acquired subsidiary Maxumincome tax audits for the 2014Company have been completed through 2013, and the Company is not currently under federal income tax examination for any open years. The statute of limitations is closed through the 2016 tax year is expected to be completedwith the exception of NOL carryforwards utilized in the fourth quarter of 2017 with no significant adjustments.open tax years. Management believes that adequate provision has been made in the consolidated financial statementsCompany's Condensed Consolidated Financial Statements for any potential adjustments that may result from tax examinations and other tax-related matters for all open tax years.
Net deferred income taxes include the future tax benefits associated with the net operating loss carryover, foreign tax credit carryover, capital loss carryover, and alternative minimum tax credit carryover.
Future Tax Benefits
 As of 
 September 30, 2017December 31, 2016Expiration
 Carryover amountExpected tax benefit, grossCarryover amountExpected tax benefit, grossDatesAmount
Net operating loss carryover - U.S.$4,938
$1,728
$5,412
$1,894
2020$1
     2023-2036$4,937
Net operating loss carryover - foreign$3
$—
$48
$9
No expiration$3
Foreign tax credit carryover$33
$33
$56
$56
2021-2024$33
Alternative minimum tax credit carryover$742
$742
$640
$640
No expiration$742
General business credit carryover$3
$3
$99
$99
2031-2036$3
Capital loss carryover$44
$15
$—
$—
2022$44



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Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Income Taxes (continued)


Net Operating Loss Carryover12. COMMITMENTS AND CONTINGENCIES
UtilizationManagement evaluates each contingent matter separately. A loss is recorded if probable and reasonably estimable. Management establishes liabilities for these contingencies at its “best estimate,” or, if no one number within the range of these loss carryoverspossible losses is dependent uponmore probable than any other, the generation of sufficient future taxable income. MostCompany records an estimated liability at the low end of the net operating loss carryover originated from the Company's U.S. and international annuity business, including from the hedging program. Given the continued run offrange of the U.S. fixed and variable annuity business, the exposure to taxable losses from the Talcott Resolution business is significantly lessened. Given the expected earnings of its property and casualty, group benefits and mutual fund businesses, the Company expects to generate sufficient taxable income in the future to utilize its net operating loss carryover. Although the Company projects there will be sufficient future taxable income to fully recover the remainder of the loss carryover, the Company's estimate of the likely realization may change over time.
Tax Credit Carryovers
Alternative Minimum Tax Credits- These credit carryovers are available to offset regular federal income taxes from future taxable income and have no expiration date. Since the Company believes there will be sufficient regular federal taxable income in the future, and these credits have no expiration date, the Company believes it is more likely than not they will be fully utilized and thus no valuation allowance has been provided.
Foreign Tax Credits- As with the alternative minimum tax credits, these credits are available to offset regular federal income taxes from future taxable income. The use of these credits prior to expiration depends on the generation of sufficient taxable income to first utilize all U.S. net operating loss carryovers. However, the Company has identified and begun to purchase certain investments which allow for utilization of the foreign tax credits without first using the net operating loss carryover. Consequently, the Company believes it is more likely than not the foreign tax credit carryover will be fully realized. Accordingly, no valuation allowance has been provided.
Capital Loss Carryover- The Capital loss carryover is a result of the sale of Hartford Financial Products International Limited in May 2017, partially offset by year to date realized taxable capital gains.  Utilization of the capital loss carryover requires the Company to realize sufficient taxable capital gains.  The Company expects to generate sufficient taxable capital gains in the future to utilize the capital loss carryover, and thus no valuation allowance has been provided.  Although the Company projects there will be sufficient future taxable capital gains to fully recover the remainder of the capital loss carryover, the Company’s estimate of the likely realization may change over time.

losses.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Commitments and Contingencies

Litigation
The Hartford is involved in claims litigation arising in the ordinary course of business, both as a liability insurer defending or providing indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford accounts for such activity through the establishment of unpaid loss and loss adjustment expense
42
Note 12 - Commitments and Contingencies
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
reserves. Subject to the uncertainties related to sexual molestation and sexual abuse claims discussed in Note 9 - Reserves for Unpaid Losses and Loss Adjustment Expenses of this Form 10-Q and in Note 12 - Reserve for Unpaid Losses and Loss Adjustment Expense, of the Company's Annual Report on Form 10-K for the year ended December 31, 2020, and in the following discussion under the caption “Asbestos“COVID-19 Pandemic Business Income Insurance Coverage Litigation” and under the caption “Run-off Asbestos and Environmental Claims,” management expects that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition, results of operations or cash flows of The Hartford.
The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. These actions include, among others, and inIn addition to the matters in the following discussion,matter described below, these actions include putative state and federal class actions seeking certification of a state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper sales or underwriting practices in connection with various kinds of insurance policies, such as personal and commercial automobile, property, disability, life and inland marine. The Hartford also is involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims or other allegedly unfair or improper business practices. Like many other insurers, The Hartford also has been joined in actions by asbestos plaintiffs asserting, among other things, that insurers had a duty to protect the public from the dangers of asbestos and that insurers committed unfair trade practices by asserting defenses on behalf of their policyholders in the underlying asbestos cases. Management expects that the ultimate liability, if any, with respect to such lawsuits, after consideration of provisions made for estimated losses, will not be material to the consolidated financial condition of The Hartford. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, the outcome in certain matters could, from time to time, have a material adverse effect on the Company’s results of operations or cash flows in particular quarterly or annual periods.
COVID-19 Pandemic Business Income Insurance Coverage Litigation
Like many others in the property and casualty insurance industry, beginning in April 2020, various direct and indirect subsidiaries of the Company (collectively the "Hartford Writing Companies”), and in some instances the Company itself, have been served as defendants in lawsuits seeking insurance coverage under commercial insurance policies issued by the Hartford Writing Companies for alleged losses resulting from the shutdown or suspension of their businesses due to the spread of COVID-19. More than 240 such lawsuits have been filed, of which more than 50 purport to be filed on behalf of broad nationwide or statewide classes of policyholders. These lawsuits have been filed in state and federal courts in roughly 34 states. Although the allegations vary, the plaintiffs generally seek a declaration of insurance coverage, damages for breach of contract in unspecified amounts, interest, and attorney’s fees. Many of the lawsuits also allege that the insurance claims were denied in bad faith or otherwise in violation of state laws and seek extra-contractual or punitive damages.
The Company and its subsidiaries deny the allegations and intend to defend vigorously. The Hartford Writing Companies maintain that they have no coverage obligations with respect to these suits for business income allegedly lost by the plaintiffs due to the COVID-19 pandemic based on the clear terms of the applicable insurance policies. Although the policy terms vary depending, among other things, upon the size, nature, and location of the policyholder’s business, in general, the claims at issue in these lawsuits were denied because the claimant identified no direct physical damage or loss to property at the insured premises, and the governmental orders that led to the complete or partial shutdown of the business were not due to the existence of any direct physical loss or damage in the immediate vicinity of the insured premises and did not prohibit access to the insured premises, as required by the terms of the insurance policies. In addition, the vast majority of the policies at issue expressly exclude from coverage any loss caused directly or indirectly by the presence, growth, proliferation, spread or activity of a virus, subject to a narrow set of exceptions not applicable in connection with this pandemic, and contain a pollution and contamination exclusion that, among other things, expressly excludes from coverage any loss caused by material that threatens human health or welfare.
In addition to the inherent difficulty ofin predicting litigation outcomes, the Mutual Funds Litigation identified below purportsCOVID-19 pandemic business income coverage lawsuits present numerous uncertainties and contingencies that are not yet known, including how many policyholders will ultimately file claims, the number of lawsuits that will be filed, the extent to seek substantial damages for unsubstantiated conduct spanningwhich any state or nationwide classes will be certified, and the size and scope of any such classes. The legal theories advocated by plaintiffs vary significantly by case as do the state laws that govern the policy interpretation. These lawsuits are at various stages of litigation; some are in the earliest stages of litigation, many complaints are in the process of being amended, some have been dismissed voluntarily and may be refiled, while others have been dismissed through rulings in favor of the Hartford Writing Companies. Discovery is underway in certain single plaintiff cases and class actions. More than a multi-year period based on novel applicationsdozen policyholders have appealed dismissals in favor of complex legal theories. The alleged damagesthe Hartford Writing Companies. While these appeals are notat various stages of the briefing process, none have been fully briefed at this time. In addition, business income calculations depend upon a wide range of factors that are particular to the circumstances of each individual policyholder and, here, virtually none of the plaintiffs have submitted proofs of loss or otherwise quantified or factually supported in the complaint,any allegedly covered loss, and, in any event, the Company’s experience shows that demands for damages often bear little relation to a reasonable estimate of potential loss. The application of the legal standard identified by the court for assessing the potentially available damages, as described below, is inherently unpredictable, and no legal precedent has been identified that would aid in determining a reasonable estimate of potential loss. Accordingly, management cannot now reasonably estimate the possible loss or range of loss, if any.
Mutual Funds Litigation — In February 2011, a derivative action was brought on behalf Nonetheless, given the large number of six Hartford retail mutual fundsclaims and potential claims, the indeterminate amounts sought, and the inherent unpredictability of litigation, it is possible that adverse outcomes, if any, in the United States District Court for the District of New Jersey, alleging that Hartford Investment Financial Services,
LLC (“HIFSCO”), an indirect subsidiary of the Company, received excessive advisory and distribution fees in violation of its statutory fiduciary duty under Section 36(b) of the Investment Company Act of 1940. During the course of the litigation, the claims regarding distribution fees were dismissed without prejudice, the lineup of funds as plaintiffs changed several times, and the plaintiffs added asaggregate, could have a defendant Hartford Funds Management Company (“HFMC”), an indirect subsidiary of the Company that assumed the role of advisor to the funds as of January 2013. In June 2015, HFMC and HIFSCO moved for summary judgment, and plaintiffs cross-moved for partial summary judgment with respect to one fund. In March 2016, the court denied the plaintiff's motion, and granted summary judgment for HIFSCO and HFMC with respect to one fund, leaving six funds as plaintiffs: The Hartford Balanced Fund, The Hartford Capital Appreciation Fund, The Hartford Floating Rate Fund, The Hartford Growth Opportunities Fund, The Hartford Healthcare Fund, and The Hartford Inflation Plus Fund. The court further ruled that the appropriate measure of damagesmaterial adverse effect on the surviving claims would be the difference, if any, between the actual advisory fees paid through trial and the fees permitted under the applicable legal standard. A bench trial on the issue of liability was held in November 2016. In February 2017, the court granted judgment for HIFSCO and HFMC as to all claims. Plaintiffs have appealed to the United States Court of Appeals for the Third Circuit.Company’s consolidated operating results.
Run-off Asbestos and Environmental Claims–
The Company continues to receive asbestos and environmentalA&E claims. Asbestos claims relate primarily to bodily injuries asserted by people who came in contact with asbestos or products containing asbestos. Environmental claims relate primarily to pollution and related clean-up costs.
43
Note 12 - Commitments and Contingencies
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The vast majority of the Company's exposure to A&E relates to Run-off A&E, reported within the P&C Other Operations segment. In addition, since 1986, the Company has written asbestos and environmental exposures under general liability policies and pollution liability under homeowners policies, which are reported in the Commercial Lines and Personal Lines segments. 
Prior to 1986, the Company wrote several different categories of insurance contracts that may cover A&E claims. First, the Company wrote primary policies providing the first layer of coverage in an insured’s liability program. Second, the Company wrote excess and umbrella policies providing higher layers of coverage for losses that exhaust the limits of underlying coverage. Third, the Company acted as a reinsurer assuming a portion of those risks assumed by other insurers writing primary, excess, umbrella and reinsurance coverages.
Significant uncertainty limits the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid gross losses and expenses related to environmental and particularly asbestos claims. The degree of variability of gross reserve estimates for these exposures is significantly greater than for other more traditional exposures.
In the case of the reserves for asbestos exposures, factors contributing to the high degree of uncertainty include inadequate loss development patterns, plaintiffs’ expanding theories of liability, the risks inherent in major litigation, and inconsistent emerging legal doctrines. Furthermore, over time, insurers, including the Company, have experienced significant changes in the rate at which asbestos claims are brought, the claims experience of particular insureds, and the value of claims, making predictions of future exposure from past experience uncertain. Plaintiffs and insureds also have sought to use bankruptcy proceedings, including “pre-packaged” bankruptcies, to accelerate and increase loss payments by insurers. In addition, some policyholders have asserted new classes of claims for coverages to which an aggregate limit of liability may not apply. Further uncertainties include insolvencies of other carriers and unanticipated developments pertaining to the Company’s ability to recover reinsurance for A&E claims. Management believes these issues are not likely to be resolved in the near future.
In the case of the reserves for environmental exposures, factors contributing to the high degree of uncertainty include expanding theories of liability and damages, the risks inherent in major litigation, inconsistent decisions concerning the existence and scope of coverage for environmental claims, and uncertainty as to the monetary amount being sought by the claimant from the insured.
The reporting pattern for assumed reinsurance claims, including those related to A&E claims, is much longer than for direct claims. In many instances, it takes months or years to determine that the policyholder’s own obligations have been met and how the reinsurance in question may apply to such claims. The delay in reporting reinsurance claims and exposures adds to the uncertainty of estimating the related reserves.
It is also not possible to predict changes in the legal and legislative environment and their effect on the future development of A&E claims.
Given the factors described above, the Company believes the actuarial tools and other techniques it employs to estimate the ultimate cost of claims for more traditional kinds of insurance
exposure are less precise in estimating reserves for A&E exposures. For this reason, the Company principally relies on exposure-based analysis to estimate the ultimate costs of these claims, both gross and net of reinsurance, and regularly evaluates new account information in assessing its potential asbestos and environmentalA&E exposures. The Company supplements this exposure-based analysis with evaluations of the Company’s historical direct net loss and expense paid and reported experience, and net loss and expense paid and reported experience by calendar and/or report year.year, to assess any emerging trends, fluctuations or characteristics suggested by the aggregate paid and reported activity.
While the Company believes that its current asbestos and environmentalA&E reserves are appropriate, significant uncertainties limit the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid losses and related expenses. The ultimate liabilities, thus, could exceed the currently recorded reserves, and any such additional liability, while not reasonably estimable now, could be material to The Hartford’s consolidated operating results and liquidity.
Under an adverse development cover (“ADC”)For its Run-off A&E, as of March 31, 2021, the Company reported $676 of net asbestos reserves and $79 of net environmental reserves. In addition, the Company has recorded a $210 deferred gain within other liabilities for losses economically ceded to NICO but for which the benefit is not recognized in earnings until later periods. While the Company believes that its current Run-off A&E reserves are appropriate, significant uncertainties limit our ability to estimate the ultimate reserves necessary for unpaid losses and related expenses. The ultimate liabilities, thus, could exceed the currently recorded reserves, and any such additional liability, while not reasonably estimable now, could be material to The Hartford's consolidated operating results and liquidity.
The Company’s A&E ADC reinsurance agreement with National Indemnity Company (“NICO”),NICO reinsures substantially all A&E reserve development for 2016 and prior accident years, including Run-off A&E and A&E reserves included in Commercial Lines and Personal Lines. The A&E ADC has a subsidiarycoverage limit of Berkshire Hathaway Inc., the Company paid premium to reinsure adverse development of net asbestos and environmental loss and allocated loss adjustment expense reserves of a set amount$1.5 billion above the Company'sCompany’s existing net asbestos and environmentalA&E reserves as of December 31, 2016.2016 of approximately $1.7 billion. As of March 31, 2021, the Company has incurred $860 in cumulative adverse development on A&E reserves that have been ceded under the A&E ADC treaty with NICO, leaving $640 of coverage available for future adverse net reserve development, if any. Cumulative adverse development of A&E claims for accident years 2016 and prior could ultimately exceed the $1.5 billion treaty limit in which case any adverse development in excess of the treaty limit would be absorbed as a charge to earnings by the Company. In these scenarios, the effect of these charges could be material to the Company’s consolidated operating results and liquidity. For furthermore information on the reinsurance agreement, seeA&E ADC, refer to Note 8 - Reinsurance12, Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements included in The Hartford's 2016the Company's 2020 Form 10-K Annual Report.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Commitments and Contingencies (continued)

Derivative Commitments
Certain of the Company’s derivative agreements contain provisions that are tied to the financial strength ratings, as set by nationally recognized statistical agencies, of the individual legal entity that entered into the derivative agreement. If the legal entity’s financial strength were to fall below certain ratings, the counterparties to the derivative agreements could demand immediate and ongoing full collateralization and, in certain
44
Note 12 - Commitments and Contingencies
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
instances, enable the counterparties to terminate the agreements and demand immediate settlement of all outstanding derivative positions traded under each impacted bilateral agreement. The settlement amount is determined by netting the derivative positions transacted under each agreement. If the termination rights were to be exercised by the counterparties, it could impact the legal entity’s ability to conduct hedging activities by increasing the associated costs and decreasing the willingness of counterparties to transact with the legal entity. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a net liability position as of September 30, 2017March 31, 2021 was $1.3 billion. For this $1.3 billion,$60 for which the legal entities have posted collateral of $955$61 in the normal course of business. In addition, the Company has posted collateral of $31 associated with a customized GMWB derivative. Based on derivative market values as of September 30, 2017,March 31, 2021, a downgrade of one level below the current financial strength ratings by either Moody's or S&P would not require an additional $7 of assets to be posted as collateral. Based on derivative market values as of September 30, 2017, aA downgrade of two levels below the current financial strength ratings by either Moody'sMoody’s or S&P would require an additional $17$2 of assets to be posted as collateral. These collateral amounts could change as derivative market values change, as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated. The nature of the additional collateral that we would post, whenif required, iswould be primarily in the form of U.S. Treasury bills, U.S. Treasury notes and government agency securities.
On October 23, 2017, Moody’s lowered its counterparty credit

13. EQUITY
Equity Repurchase Program
During the three months ended March 31, 2021, the Company repurchased $123 (2.4 million shares) of common stock under the share repurchase program, effective January 1, 2021 until December 31, 2022, authorized by the Board of Directors in December 2020. The share repurchase program was initially authorized at $1.5 billion and, insurerin April 2021, the Company announced an increase in the share repurchase authorization to $2.5 billion, which remains effective until December 31, 2022. During the period April 1, 2021 through April 26, 2021, the Company repurchased $27 (0.4 million shares) under this repurchase program. The timing of future repurchases will be dependent on several factors, including the market price of the Company's securities, the Company's capital position, consideration of the effect of any repurchases on the Company's financial strength or credit ratings, on Hartford Lifethe Company's blackout periods, and Annuity Insurance Company and Hartford Life Insurance Company to Baa3.  Given this downgrade action, termination rating triggers inother considerations.
During the three derivative counterparty relationships were impacted.months ended March 31, 2020, The Company is inrepurchased $150 (2.7 million shares) of common stock under the process of re-negotiating the rating triggers which it expects to successfully complete.  Accordingly, the Company does not expect the current hedging programs to be adversely impacted by the announcement of the downgrade of Hartford Life and Annuity Insurance Company and Hartford Life Insurance Company.  As of September 30, 2017, the notional amount and fair value related to these three derivative counterparties is $989 and $43, respectively.  These counterparties have not exercised their right to terminate these relationships and, if they did, would have to settle all of the outstanding derivatives.  In addition, as a result of the downgrade of Hartford Life and Annuity Insurance Company, the Company is required to post an additional $7 of collateral related to a single counterparty relationship.previous share repurchase program that expired December 31, 2020.


14. CHANGES IN AND RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Changes in AOCI, Net of Tax for the Three Months Ended March 31, 2021
Changes in
Net Unrealized Gain on Fixed MaturitiesUnrealized Loss on Fixed Maturities with ACLNet Gain on Cash Flow Hedging InstrumentsForeign Currency Translation AdjustmentsPension and Other Postretirement Plan AdjustmentsAOCI,
net of tax
Beginning balance$2,834 $(2)$12 $43 $(1,717)$1,170 
OCI before reclassifications(922)0 12 1 0 (909)
Amounts reclassified from AOCI(3)0 (7)0 13 3 
     OCI, net of tax(925)0 5 1 13 (906)
Ending balance$1,909 $(2)$17 $44 $(1,704)$264 


59
45
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THE
Note 14 - Accumulated Other Comprehensive Income (Loss), Net of Tax
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. Equity

Reclassifications from AOCI
Three Months Ended March 31, 2021Affected Line Item in the Condensed Consolidated Statement of Operations
Net Unrealized Gain on Fixed Maturities
Available-for-sale fixed maturities$4 Net realized capital gains (losses)
4Total before tax
1  Income tax expense
$3Net income
Net Gains on Cash Flow Hedging Instruments
Interest rate swaps$10 Net investment income
Interest rate swaps(2)Interest expense
Foreign currency swaps1 Net investment income
9Total before tax
2  Income tax expense
$7Net income
Pension and Other Postretirement Plan Adjustments
Amortization of prior service credit$2 Insurance operating costs and other expenses
Amortization of actuarial loss(19)Insurance operating costs and other expenses
(17)Total before tax
(4) Income tax expense
$(13)Net income
Total amounts reclassified from AOCI$(3)Net income
Changes in AOCI, Net of Tax for the Three Months Ended March 31, 2020
Changes in
Net Unrealized Gain on Fixed MaturitiesNet Unrealized Loss on Fixed Maturities with ACLNet Gain on Cash Flow Hedging InstrumentsForeign Currency Translation AdjustmentsPension and Other Postretirement Plan AdjustmentsAOCI,
net of tax
Beginning balance$1,684 $(3)$9 $34 $(1,672)$52 
OCI before reclassifications(1,015)1 47 (8)(1)(976)
Amounts reclassified from AOCI(42)0 (3)0 12 (33)
     OCI, net of tax(1,057)1 44 (8)11 (1,009)
Ending balance$627 $(2)$53 $26 $(1,661)$(957)


Capital Purchase Program ("CPP") Warrants46
As of September 30, 2017 and December 31, 2016, respectively, the Company has 2.3 million and 4.0 million of CPP warrants outstanding and exercisable.
CPP warrant exercises were 0.6 million and 0.1 million for the three months ended September 30, 2017 and 2016, respectively. CPP warrant exercises were 1.7 million and 0.3 million for the nine months ended September 30, 2017 and 2016, respectively.
The declaration of common stock dividends by the Company in excess of a threshold triggers a provision in the Company's warrant agreement with The Bank of New York Mellon resulting in adjustments to the CPP warrant exercise price. Accordingly, the declaration of a common stock dividend during the three months ended September 30, 2017 resulted in an adjustment to
the CPP warrant exercise price. The CPP warrant exercise price was $9.030 as of September 30, 2017 and $9.126 as of December 31, 2016.
Equity Repurchase Program
The Company's authorization for equity repurchases is $1.3 billion for the period October 31, 2016 through December 31, 2017.
Effective October 13, 2017 the Company suspended 2017 equity repurchases. The company does not currently expect to authorize an equity repurchase plan in 2018.
During the period October 1, 2017 through October 12, 2017, the Company repurchased approximately 0.9 million common shares for $52.

Equity Repurchase Activity and Remaining Repurchase Capacity
Three months ended
Common Shares
Repurchased
Cost of Shares RepurchasedAverage Price Paid per ShareRemaining Capacity Under Share Repurchase Authorization
(In millions, except for per share data)    
March 31, 20176.7
$325
$48.47
$975
June 30, 20176.6
$325
$49.34
$650
September 30, 20176.0
$325
$54.35
$325
Total19.3
$975


 


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THE
Note 14 - Accumulated Other Comprehensive Income (Loss), Net of Tax
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. Changes In and Reclassifications From Accumulated Other Comprehensive Income

Reclassifications from AOCI
Three Months Ended March 31, 2020Affected Line Item in the Condensed Consolidated Statement of Operations
Net Unrealized Gain on Fixed Maturities
Available-for-sale fixed maturities$53 Net realized capital gains (losses)
53Total before tax
11  Income tax expense
$42Net income
Net Gains on Cash Flow Hedging Instruments
Interest rate swaps$3 Net investment income
Foreign currency swaps1 Net investment income
4Total before tax
1  Income tax expense
$3Net income
Pension and Other Postretirement Plan Adjustments
Amortization of prior service credit$2 Insurance operating costs and other expenses
Amortization of actuarial loss(17)Insurance operating costs and other expenses
(15)Total before tax
(3) Income tax expense
$(12)Net income
Total amounts reclassified from AOCI$33Net income
Changes in AOCI, Net of Tax for the Three Months Ended September 30, 2017
 Changes in
 Net Unrealized Gain on SecuritiesOTTI Losses in OCINet Gain on Cash Flow Hedging InstrumentsForeign Currency Translation AdjustmentsPension and Other Postretirement Plan AdjustmentsAOCI, net of tax
Beginning balance$1,755
$(3)$57
$13
$(1,328)$494
OCI before reclassifications119
(1)(2)14
1
131
Amounts reclassified from AOCI(34)—
(12)—
6
(40)
     OCI, net of tax85
(1)(14)14
7
91
Ending balance$1,840
$(4)$43
$27
$(1,321)$585
Changes in AOCI, Net of Tax for the Nine Months Ended September 30, 2017
 Changes in
 Net Unrealized Gain on SecuritiesOTTI Losses in OCINet Gain on Cash Flow Hedging InstrumentsForeign Currency Translation AdjustmentsPension and Other Postretirement Plan AdjustmentsAOCI, net of tax
Beginning balance$1,276
$(3)$76
$6
$(1,692)$(337)
OCI before reclassifications683
(1)7
21
(144)566
Amounts reclassified from AOCI(119)—
(40)—
515
356
     OCI, net of tax564
(1)(33)21
371
922
Ending balance$1,840
$(4)$43
$27
$(1,321)$585

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. Changes In and Reclassifications From Accumulated Other Comprehensive Income (continued)

Reclassifications from AOCI
 Three Months Ended September 30, 2017Nine Months Ended September 30, 2017Affected Line Item in the Condensed Consolidated Statement of Operations
Net Unrealized Gain on Securities   
Available-for-sale securities$52
$183
Net realized capital gains (losses)
 52
183
Income before income taxes

 18
64
Income tax expense
 $34
$119
Net income
Net Gains on Cash Flow Hedging Instruments   
Interest rate swaps$—
$4
Net realized capital gains (losses)
Interest rate swaps15
47
Net investment income
Foreign currency swaps4
10
Net realized capital gains (losses)
 19
61
Income before income taxes

 7
21
Income tax expense
 $12
$40
Net income
Pension and Other Postretirement Plan Adjustments   
Amortization of prior service credit$2
$—
Insurance operating costs and other expenses
Amortization of actuarial loss(12)(45)Insurance operating costs and other expenses
Settlement loss—
(747)Insurance operating costs and other expenses
 (10)(792)
Income before income taxes

 (4)(277)Income tax expense
 $(6)$(515)Net income
Total amounts reclassified from AOCI$40
$(356)Net income

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. Changes In and Reclassifications From Accumulated Other Comprehensive Income (continued)

Changes in AOCI, Net of Tax for the Three Months Ended September 30, 2016
 Changes in
 Net Unrealized Gain on SecuritiesOTTI Losses in OCINet Gain on Cash Flow Hedging InstrumentsForeign Currency Translation AdjustmentsPension and Other Postretirement Plan AdjustmentsAOCI, net of tax
Beginning balance$2,437
$(10)$200
$(68)$(1,659)$900
OCI before reclassifications72
4
(17)78
—
137
Amounts reclassified from AOCI(50)1
(11)—
10
(50)
     OCI, net of tax22
5
(28)78
10
87
Ending balance$2,459
$(5)$172
$10
$(1,649)$987
Changes in AOCI, Net of Tax for the Nine Months Ended September 30, 2016
 Changes in
 Net Unrealized Gain on SecuritiesOTTI Losses in OCINet Gain on Cash Flow Hedging InstrumentsForeign Currency Translation AdjustmentsPension and Other Postretirement Plan AdjustmentsAOCI, net of tax
Beginning balance$1,279
$(7)$130
$(55)$(1,676)$(329)
OCI before reclassifications1,263
(1)78
65
—
1,405
Amounts reclassified from AOCI(83)3
(36)—
27
(89)
     OCI, net of tax1,180
2
42
65
27
1,316
Ending balance$2,459
$(5)$172
$10
$(1,649)$987

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. Changes In and Reclassifications From Accumulated Other Comprehensive Income (continued)

Reclassifications of AOCI
 Three Months Ended September 30, 2016Nine Months Ended September 30, 2016Affected Line Item in the Condensed Consolidated Statement of Operations
Net Unrealized Gain on Securities   
Available-for-sale securities$77
$128
Net realized capital gains (losses)
 77
128
Income before income taxes
 27
45
Income tax expense
 $50
$83
Net income
OTTI Losses in OCI   
Other than temporary impairments$(1)$(5)Net realized capital gains (losses)
 (1)(5)
Income before income taxes

 —
(2)Income tax expense
 $(1)$(3)Net Income
Net Gains on Cash Flow Hedging Instruments   
Interest rate swaps$—
$7
Net realized capital gains (losses)
Interest rate swaps16
46
Net investment income
Foreign currency swaps1
3
Net realized capital gains (losses)
 17
56
Income before income taxes

 6
20
Income tax expense
 $11
$36
Net income
Pension and Other Postretirement Plan Adjustments   
Amortization of prior service credit$2
$5
Insurance operating costs and other expenses
Amortization of actuarial loss(17)(46)Insurance operating costs and other expenses
 (15)(41)
Income before income taxes

 (5)(14)Income tax expense
 $(10)$(27)Net income
Total amounts reclassified from AOCI$50
$89
Net income

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. Employee Benefit Plans

EMPLOYEE BENEFIT PLANS
The Company’s employee benefit plans are described in Note 1819 - Employee Benefit Plans of Notes to Consolidated Financial Statements included in The Hartford’s 20162020 Annual Report on Form 10-K. Net periodic cost (benefit) is recognized in insurance
operating costs and other expenses in the condensed consolidated statement of operations.
Net Periodic Cost (Benefit)
Pension BenefitsOther Postretirement Benefits
Three Months Ended March 31,Three Months Ended March 31,
2021202020212020
Service cost$1 $1 $0 $0 
Interest cost24 32 1 2 
Expected return on plan assets(51)(54)(1)(1)
Amortization of prior service credit0 0 (2)(2)
Amortization of actuarial loss17 15 2 2 
Net periodic cost (benefit)$(9)$(6)$0 $1 
16. BUSINESS DISPOSITION
Sale of Continental Europe Operations
On June 30, 2017, the Company transferred invested assets and cash from pension plan assets to purchase a group annuity contract that transferred approximately $1.6 billion of the Company’s outstanding pension benefit obligations related to certain U.S. retirees, terminated vested participants, and beneficiaries. As a result of this transaction, in the second quarter of 2017, the Company recognized a pre-tax settlement charge of $750 ($488 after-tax) and a reduction to shareholders' equity of $144.
In connection with this transaction, the Company made a contribution of $280 in September 2017 to the U.S. qualified pension plan in order to maintain the plan's pre-transaction funded status.
Beginning with the first quarter of 2017, the Company adopted the full yield curve approach in the estimation of the interest cost component of net periodic benefit costs for its qualified and non-qualified pension plans and the postretirement benefit plan. The full yield curve approach applies the specific spot rates along the yield curve that are used in its determination of the projected
benefit obligation at the beginning of the year. The change has been made to provide a better estimate of the interest cost component of net periodic benefit cost by better aligning projected benefit cash flows with corresponding spot rates on the yield curve rather than using a single weighted average discount rate derived from the yield curve as had been done historically.
This change does not affect the measurement of the Company's total benefit obligations as the change in the interest cost in net income is completely offset in the actuarial (gain) loss reported for the period in other comprehensive income. The change reduced the before tax interest cost component of net periodic benefit cost by $9 and $28 for the three and nine months ended September 30, 2017, respectively. The discount rate being used to measure interest cost during 2017 is 3.58%, 3.55% and 3.13% for the qualified pension plan, non-qualified pension plan and postretirement benefit plan, respectively. Under the Company's historical estimation approach, the weighted average discount rate for the interest cost component would have been 4.22%, 4.19% and 3.97% for the qualified pension plan, non-qualified pension plan and postretirement benefit plan, respectively. The Company accounted for the change in estimation approach as a change in estimate, and accordingly, is recognizing the effect prospectively beginning in 2017.
Components of Net Periodic Cost (Benefit)
 Pension BenefitsOther Postretirement Benefits
 Three Months Ended September 30,Three Months Ended September 30,
 2017201620172016
Service cost$1
$1
$—
$—
Interest cost36
60
2
2
Expected return on plan assets(55)(78)(2)(2)
Amortization of prior service credit—
—
(2)(2)
Amortization of actuarial loss11
15
1
2
Settlements—
—
—
—
Net periodic cost (benefit)$(7)$(2)$(1)$—
Components of Net Periodic Cost (Benefit)
 Pension BenefitsOther Postretirement Benefits
 Nine months ended September 30,Nine months ended September 30,
 2017201620172016
Service cost$3
$2
$6
$—
Interest cost134
178
(6)8
Expected return on plan assets(214)(231)(5)(7)
Amortization of prior service credit—
—
—
(5)
Amortization of actuarial loss41
42
4
4
Settlements750
—
—
—
Net periodic cost (benefit)$714
$(9)$(1)$—


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THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Subsequent Event


On October 23, 2017, the Company announced that Hartford Life and Accident Insurance Company (HLA), a wholly owned subsidiary of2020, the Company entered into a definitive agreement to purchase the U.S. group life and disability insurance businesssell its Continental Europe Operations consisting of Aetna, Inc. (“Aetna”) throughmultiple arrangements designed as a reinsurancesingle transaction. HLA will pay cash consideration of $1.45 billion, primarilyThe Continental Europe Operations are included in the formCommercial Lines reporting segment. Revenues and earnings are not material to the Company's consolidated results of operations for the three months ended March 31, 2021 and 2020. The pending sale
resulted in an estimated loss on the sale of approximately $47, before tax, which was recorded within net realized capital gains (losses). The accrual for the estimated before tax loss is included as a ceding commission to an Aetna subsidiary that is cedingreduction of the business to HLA. Under the reinsurance agreement, the Company will receive invested assets with a faircarrying value of approximately$3.4 billion and will assume fair value reservesassets held for sale in the Company's Condensed Consolidated Balance Sheets as of approximately$3.3 billion after taking into account estimated purchase accounting adjustments.March 31, 2021. The transaction is expected to close in the fourthsecond or third quarter of 2017,2021, subject to customary closing conditions.

conditions, including regulatory approvals.

6647
Note 16 - Business Disposition
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Carrying Value of Assets and Liabilities to be Transferred in Connection With the Sale [1]
As of March 31, 2021As of December 31, 2020
Assets
Investments and cash$137 $142 
Reinsurance recoverables and other28 35 
Total assets held for sale165 177 
Liabilities
Unpaid losses and loss adjustment expenses77 84 
Unearned premiums23 31 
Other liabilities48 43 
Total liabilities held for sale$148 $158 
[1] As of March 31, 2021 and December 31, 2020, the estimated fair value of the disposal group was $14 based on the estimated consideration to be received less cost to sell. Within the disposal group, as of March 31, 2021 and December 31, 2020, investments in fixed maturities and short-term investments, which are measured at fair value on a recurring basis, had a fair value of $80 and $84, respectively, of which $1 and $1, respectively, was based on quoted prices in active markets for identical assets and $79 and $83, respectively, was based on significant observable inputs. The remaining fair value less costs to sell for the disposal group as of March 31, 2021 and December 31, 2020 was ($66) and ($70), respectively, which is measured on a nonrecurring basis using significant unobservable inputs. See Note 4—Fair Value Measurements for more information.
17. RESTRUCTURING AND OTHER COSTS

In recognition of the need to become more cost efficient and competitive along with enhancing the experience we provide to agents and customers, on July 30, 2020 the Company announced an operational transformation and cost reduction plan it refers to as Hartford Next. Hartford Next is intended to reduce annual insurance operating costs and other expenses through reduction of the Company's headcount, investment in information technology ("IT") to further enhance our capabilities, and other activities. The activities are expected to be substantially complete by the end of 2022.

Termination benefits related to workforce reductions and professional fees are included within restructuring and other

costs in the Condensed Consolidated Statement of Operations and unpaid restructuring costs are included in other liabilities in the March 31, 2021 Condensed Consolidated Balance Sheet. Subsequent to March 31, 2021, the Company expects to incur additional costs including amortization of right of use assets and other lease exit costs, other IT costs to retire applications, professional fees and other expenses. Total restructuring and other costs are expected to be approximately $164, before tax, and are being recognized in Corporate for segment reporting.
Restructuring and Other Costs, Before Tax
Incurred in the Three Months Ended March 31, 2021Cumulative Incurred Through March 31, 2021Total Amount Expected to be Incurred
Severance benefits$0 $73 $73 
IT costs2 4 27 
Professional fees and other expenses9 38 64 
Total restructuring and other costs, before tax$11 $115 $164 
Accrued Restructuring and Other Costs
Three Months Ended March 31, 2021
Severance Benefits and Related CostsIT CostsProfessional Fees and OtherTotal Restructuring and Other Costs Liability
Balance, beginning of period$54 $0 $0 $54 
Incurred0 2 9 11 
Payments(6)(2)(6)(14)
Balance, end of period$48 $0 $3 $51 
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollar amounts in millions except for per share data, unless otherwise stated)
The Hartford provides projections and other forward-looking information in the following discussions, which contain many forward-looking statements, particularly relating to the Company’s future financial performance. These forward-looking statements are estimates based on information currently available to the Company, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the cautionary statements set forth on pages 34 and 45 of this Form 10-Q. Actual results are likely to differ, and in the past have differed, materially from those forecast by the Company, depending on the outcome of various factors, including, but not limited to, those set forth in the following discussion and indiscussion; Part I, Item 1A, Risk Factors in The Hartford’s 20162020 Form 10-K Annual Report,Report; and those identified from time to time in our other filings with the Securities and Exchange Commission. The Hartford undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.
On October 23, 2017, the Company announced that Hartford Life and Accident Insurance Company (HLA), a wholly owned subsidiary ofSeptember 30, 2020, the Company entered into a definitive agreement to purchase Aetna’s group lifesell all of the issued and disability insurance business throughoutstanding equity of Navigators Holdings (Europe) N.V., a reinsurance transaction.Belgium holding company, and its subsidiaries, Bracht, Deckers & Mackelbert N.V. (“BDM”) and Assurances Contintales Contintale Verzekeringen N.V. (“ASCO”), (collectively referred to as "Continental Europe Operations"). For discussion of this transaction, see Note 16 - Subsequent Events of Notes to Condensed Consolidated Financial Statements.
On May 10, 2017, the Company completed the sale of its U.K. property and casualty run-off subsidiaries. The operating results of the Company's U.K. property and casualty run-off subsidiaries are included in the P&C Other Operations reporting segment. For discussion of this transaction, see Note 2 - Business Disposition of Notes to Condensed Consolidated Financial Statements.
On July 29, 2016, the Company completed the acquisition of Maxum Specialty Insurance Group and Lattice Strategies LLC. Maxum's revenue and earnings since the acquisition date are included in the operating results of the Company's Commercial Lines reporting segment. Lattice's revenue and earnings since the acquisition date are included in the operating results of the Company's Mutual Funds reporting segment.
Certain reclassifications have been made to historical financial information presented in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") to conform to the current period presentation.
Fee income from installment fees reported by the Commercial Lines and Personal Lines reporting segments has been reclassified from underwriting expenses to fee income and included in total revenues. The reclassification of installment fees did not impact previously reported underwriting gain (loss), underwriting ratios, or net income (loss) either in the Commercial Lines or Personal Lines reporting segments and did not impact previously reported consolidated net income or core earnings.
Separately, the flood servicing business has been realigned from Specialty Commercial within the Commercial Lines reporting segment to the Personal Lines reporting segment. This realignment did not materially impact previously reported Commercial Lines or Personal Lines underwriting results or net income. The realignment of the flood servicing business did not impact previously reported consolidated net income or core earnings.
The Hartford defines increases or decreases greater than or equal to 200% as “NM” or not meaningful.
INDEX
INDEX
DescriptionPage
6749
7254
7659
7862
8164
9170
Personal Lines
95
74
10078
10179
10481
10683
109
Enterprise Risk Management
11084
12394
130101
Throughout the MD&A, we use certain terms and abbreviations, the more commonly used are summarized in the Acronyms section.
KEY PERFORMANCE MEASURES AND RATIOS
The Company considers the measures and ratios in the following discussion to be key performance indicators for its businesses. Management believes that these ratios and measures are useful in understanding the underlying trends in The Hartford’s businesses. However, these key performance indicators should only be used in conjunction with, and not in lieu of, the results presented in the segment discussions that follow in this MD&A. These ratios and measures may not be comparable to other performance measures used by the Company’s competitors.

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Definitions of Non-GAAP and Other Measures and Ratios
Account Value-includes policyholders’ balances for investment and insurance contracts and reserves for certain future policy benefits insurance contracts. Account value is a measure used by the Company because a significant portion of the Company’s fee income is based upon the level of account value. These revenues increase or decrease with a rise or fall in assets under management whether caused by changes in the market or through net flows.
Assets Under Management ("AUM")- include account values, Include mutual fund and ETPexchange-traded products ("ETP") assets. AUM is a measure used by the CompanyCompany's Hartford Funds segment because a significant portion of the Company’s mutual fund and ETP revenues are based upon asset values. These revenues increase or decrease with a rise or fall in AUM whether caused by changes in the market or through net flows.
Book Value per Diluted Share-Share excluding AOCI,accumulated other comprehensive income ("AOCI")- This is calculated based upon a non-GAAP financial measure. It isper share measure that is calculated by dividing (a) totalcommon 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 itthat 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.
Catastrophe Ratio- (a component of the loss and loss adjustment expense ratio) represents the ratio of catastrophe losses incurred in the current calendar year (net of reinsurance) to earned premiums and includes catastrophe losses incurred for both the current and prior accident years. 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. The catastrophe ratio includes the effect of catastrophe losses, but does not include the effect of reinstatement premiums.
Combined Ratio- theThe sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. This ratio is a relative measurement that describes the related cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses.
Core Earnings- a The Hartford uses the non-GAAP measure iscore earnings as an important measure of the Company’s operating performance. The CompanyHartford believes that core earnings provides investors with a valuable measure of the underlying 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 certain restructuring and other costs, pension settlements, loss on extinguishment of debt, reinsurance gains and losses from disposal of businesses, income tax benefit from reduction in deferred income tax valuation allowance, discontinued operations, and the impact of Unlocks to deferred policy acquisition costs ("DAC"), sales inducement assets ("SIA"), and death and other insurance benefit reserve balances.- 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 (net of tax and the effects of DAC) that tend to be highly variable from period to period based on capital market conditions. The CompanyHartford believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income.
•Restructuring and other costs - Costs incurred as part of a restructuring plan are not a recurring operating expense of the business.

•Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before maturity, these losses are not a recurring operating expense of the business.
•Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a business or to reinsure loss reserves, are not a recurring operating expense of the business.
•Integration and transaction costs in connection with an acquired business - As transaction costs are incurred upon acquisition of a business and integration costs are completed within a short period after an acquisition, they do not represent ongoing costs of the business.
•Change in loss reserves upon acquisition of a business - These changes in loss reserves are excluded from core earnings because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition.
•Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance agreements economically transfer risk to the reinsurers and including the full benefit from retroactive reinsurance in core earnings provides greater insight into the economics of the business.
•Change in valuation allowance on deferred taxes related to non-core components of pre-tax income - These changes in valuation allowances are excluded from core earnings because they relate to non-core components of pre-tax income, such as tax attributes like capital loss carryforwards.
•Results of discontinued operations - These results are excluded from core earnings for businesses sold or held for sale because such results could obscure the ability to compare period over period results for our ongoing businesses.
In addition to the above components of net income available to common stockholders that are excluded from core earnings, preferred stock dividends declared, which are excluded from net income available to common stockholders, are included in the determination of core earnings. Preferred stock dividends are a cost of financing more akin to interest expense on debt and are expected to be a recurring expense as long as the preferred stock is outstanding.
Net income (loss) isand net income (loss) available to common stockholders are the most directly comparable U.S. GAAP measure.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 CompanyThe Hartford believes that it is useful for investors to evaluate both net income (loss), net income (loss) available to common stockholders, and core earnings when reviewing the Company’s performance.
Reconciliation
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 Three Months Ended September 30, Nine Months Ended September 30,
 20172016 20172016
Net income$234
$438
 $572
$977
Less: Unlock benefit (charge), before tax23
(13) 61
18
Less: Net realized capital gains (losses) after DAC, excluded from core earnings, before tax(5)(13) 50
(110)
Less: Pension settlement, before tax—
—
 (750)—
Less: Income tax benefit (expense) [1](6)51
 222
149
Core earnings$222
$413
 $989
$920
[1] Includes income tax benefit on items not included in core earnings and other federal income tax benefits.
Reconciliation of Net Income to Core Earnings
 Three Months Ended March 31,
 20212020
Net income$249 $273 
Preferred stock dividends5 5 
Net income available to common stockholders244 268 
Adjustments to reconcile net income available to common stockholders to core earnings:
Net realized capital losses (gains) excluded from core earnings, before tax(77)232 
Restructuring and other costs, before tax11 — 
Integration and transaction costs associated with acquired business, before tax9 13 
Change in deferred gain on retroactive reinsurance, before tax6 29 
Income tax expense (benefit)10 (57)
Core earnings$203 $485 
Core Earnings Margin-a The Hartford uses the non-GAAP financial measure that the Company usescore earnings margin to evaluate, and believes it is an important measure of, the Group Benefits segment’ssegment'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

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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 in the Results of Operations section within MD&A - Group Benefits.
Current Accident Year Catastrophe Ratio- A component of the loss and loss adjustment expense ratio, represents the ratio of catastrophe losses incurred in the current accident year (net of reinsurance) to earned premiums. 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. Lloyd's of London is an insurance market-place operating worldwide ("Lloyd's"). Lloyd's does not underwrite risks. The Company accepts risks as the sole member of Lloyd's Syndicate 1221 ("Lloyd's Syndicate"). The current accident year catastrophe ratio includes the effect of catastrophe losses, but does not include the effect of reinstatement premiums.
Expense Ratio-forFor the underwriting segments of Commercial Lines and Personal Lines is the ratio of underwriting expenses less fee income, to earned premiums. Underwriting expenses include the amortization of deferred policy acquisition costs ("DAC") and insurance operating costs and expenses, including certain centralized services costs and bad debt expense. Deferred policy acquisition costsDAC include commissions, taxes, licenses and fees and other
incremental direct underwriting expenses and are amortized over the policy term.
The expense ratio for Group Benefits is expressed as the ratio of insurance operating costs and other expenses including amortization of intangibles and amortization of deferred policy acquisition costs,DAC, to premiums and other considerations, excluding buyout premiums.
The expense ratio for Commercial Lines, Personal Lines and Group Benefits does not include integration and other transaction costs associated with an acquired business.
Fee Income-Is largely driven from amounts earned as a result of contractually defined percentages of assets under management including account value of annuities and other products.in our Hartford Funds business. These fees are generally earned on a daily basis. Therefore, the growth in assets under management either through positive net flows or net sales, or favorable market performance will have a favorable impact on fee income. Conversely, either negative net flows or net sales, or unfavorable market performance will reduce fee income. Fee income also includes installment billing fees
Gross New Business Premium- Represents the amount of premiums charged, before ceded reinsurance, for policies issued to Commercial Lines and Personal Lines insureds.customers who were not insured with the Company in the previous policy term. Gross new business premium plus gross renewal written premium less ceded reinsurance equals total written premium.
Full Surrender Rates-an internal measure of contract surrenders calculated using annualized full surrenders divided by a two-point average of annuity account values. The full surrender rate represents full contract liquidation and excludes partial withdrawals.
Loss and Loss Adjustment Expense Ratio- aA measure of the cost of claims incurred in the calendar year divided by earned premium and includes losses and loss adjustment expenses incurred for both the current and prior accident years, as well as the costs of mortality and morbidity and other contractholder benefits to policyholders.years. Among other factors, the loss and loss adjustment expense ratio needed for the Company to achieve its targeted return on equity ("ROE") fluctuates from year to year based on changes in the expected investment yield over the claim settlement period, the timing of expected claim settlements and the targeted returns set by management based on the competitive environment.
The loss and loss adjustment expense ratio is affected by claim frequency and claim severity, particularly for shorter-tail property lines of business, where the emergence of claim frequency and severity is credible and likely indicative of ultimate losses. Claim frequency represents the percentage change in the average number of reported claims per unit of exposure in the
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current accident year compared to that of the previous accident year. Claim severity represents the percentage change in the estimated average cost per claim in the current accident year compared to that of the previous accident year. As one of the
factors used to determine pricing, the Company’s practice is to first make an overall assumption about claim frequency and severity for a given line of business and then, as part of the ratemakingrate-making process, adjust the assumption as appropriate for the particular state, product or coverage.
Loss and Loss Adjustment Expense Ratio before Catastrophes and Prior Accident Year Development-aA measure of the cost of non-catastrophe claimsloss and loss adjustment expenses incurred in the current accident year divided by earned premiums. Management believes that the current accident year loss and loss adjustment expense ratio before catastrophes is a performance measure that is useful to investors as it removes the impact of volatile and unpredictable catastrophe losses and prior accident year development.
Loss Ratio, excluding Buyouts-utilizedUtilized for the Group Benefits segment and is expressed as a ratio of benefits, losses and loss adjustment expenses, excluding those related to buyout premiums, to premiums and other considerations, excluding buyout premiums. Since Group Benefits occasionally buys a block of claims for a stated premium amount, the Company excludes this buyout from the loss ratio used for evaluating the underwriting resultsprofitability of the business as buyouts may distort the loss ratio. Buyout premiums represent takeover of open claim liabilities and other non-recurring premium amounts.
Mutual Fund and Exchange-Traded Product Assets-Are owned by the shareholders of those products and not by the Company and, therefore, are not reflected in the Company’s consolidated financial statements.Condensed Consolidated Financial Statements except in instances where the Company seeds new investment products and holds an investment in the fund for a period of time. Mutual fund and ETP assets are a measure used by the Company primarily because a significant portion of the Company’s Hartford Funds segment revenues are based upon asset values. These revenues increase or decrease with a rise or fall in AUM whether caused by changes in the market or through net flows.
Net New Business Written Premium-representsRepresents the amount of premiums charged, after ceded reinsurance, for policies issued to customers who were not insured with the Company in the previous policy term. NewNet new business written premium plus renewal policy written premium equals total written premium.
Policies in Force- represent Represents the number of policies with coverage in effect as of the end of the period. The number of policies in force is a growth measure used for Personal Lines and standard commercial lines (small commercial and middle market lines within middle & large commercial) within Commercial Lines and is affected by both new business growth and policy count retention.
Policy Count Retention- represents Represents the ratio of the number of policies renewed during the period divided by the number of policies available to renew. The number of policies available to renew represents the number of policies, net of any cancellations, written in the previous policy term. Policy count retention is affected by a number of factors, including the percentage of renewal policy quotes accepted and decisions by
the Company to non-renew policies because of specific policy underwriting concerns or because of a decision to reduce premium writings in certain classes of business or states. Policy count retention is also affected by advertising and rate actions taken by competitors.
Policyholder Dividend Ratio- the The ratio of policyholder dividends to earned premium.

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Prior Accident Year Loss and Loss Adjustment Expense Ratio- represents 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.
Reinstatement Premiums- represents Represents additional ceded premium paid for the reinstatement of the amount of reinsurance coverage that was reduced as a result of a reinsurance loss payment.the Company ceding losses to reinsurers.
Renewal Earned Price Increase (Decrease)-Written premiums are earned over the policy term, which is six months for certain Personal Lines automobile business and twelve months for substantially all of the remainder of the Company’s Property and Casualty business. Since the Company earns premiums over the six to twelve month term of the policies, renewal earned price increases (decreases) lag renewal written price increases (decreases) by six to twelve months.
Renewal Written Price Increase (Decrease)-forFor Commercial Lines, represents the combined effect of rate changes, amount of insurance and individual risk pricing decisions per unit of exposure on commercial lines policies that renewed. For Personal Lines, renewal written price increases represent the total change in premium per policy since the prior year on those policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Lines, other changes in exposure include, but are not limited to, the effect of changes in number of drivers, vehicles and incidents, as well as changes in customer policy elections, such as deductibles and limits. The rate component represents the change in rate filed with and approved by state regulators during the period and the amount of insurance represents the change in the value of the rating base, such as model year/vehicle symbol for automobiles, building replacement costs for property and wage inflation for workers’ compensation. A number of factors affect renewal written price increases (decreases) including expected loss costs as projected by the Company’s pricing actuaries, rate filings approved by state regulators, risk selection decisions made by the Company’s underwriters and marketplace competition. Renewal written price changes reflect the property and casualty insurance market cycle. Prices tend to increase for a particular line of business when insurance carriers have incurred significant losses in that line of business in the recent past or the industry as a whole commits less of its capital to writing exposures in that line of business. Prices tend to decrease when recent loss experience has been favorable or when competition among insurance carriers increases. Renewal written price statistics are subject to change from period to period, based on a number of factors, including changes in actuarial estimates and the effect of subsequent cancellations and non-renewals, and modifications made to better reflect ultimate pricing achieved.
Return on Assets (“ROA”), Core Earnings- aThe Company uses this non-GAAP financial measure that the Company uses to evaluate, and
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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


believes is an important measure of, certain 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 certain of the Company’s on-going businessesHartford Funds segment because it reveals trends in our businessesbusiness that may be obscured by the effect of realized gains (losses).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 businesses.Hartford Funds business. Therefore, the Company believes it is important for investors to evaluate both ROA, and ROA, core earnings and ROA when reviewing the Company’sHartford Funds segment performance. ROA, core earnings is calculated by dividing core earnings by a daily average AUM. A reconciliation of ROA to ROA, core earnings is set forth in the Results of Operations section within MD&A - MutualHartford Funds.
Underlying Combined Ratio- a This non-GAAP financial measure of underwriting results represents the combined ratio before catastrophes, and prior accident year development.development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable U.S. 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 the underlying combinedthis 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 combined ratio to underlying combined ratio is set forth in the Results of Operations section within MD&A - Commercial Lines and Personal Lines.
Underwriting Gain (Loss)-The Company'sHartford's management evaluates profitability of the P&C businessesCommercial and Personal Lines segments primarily on the basis of underwriting gain (loss).or loss. Underwriting gain (loss) is a before-taxbefore 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 Company'sThe Hartford's pricing. Underwriting profitability over time is also greatly influenced by the Company's pricing andThe Hartford's underwriting discipline, which seeksas management strives to manage exposure to loss through favorable risk selection and diversification, itseffective management of claims, its use of reinsurance and its ability to manage its expense ratio, which it accomplishes through economies of scale and its management of acquisition costs and other underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. The CompanyHartford believes that the measure underwriting gain (loss) provides investors with a valuable measure of before-tax profitability, before tax, derived from underwriting activities, which are managed separately from the Company's investing activities. A reconciliation
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Part I - Item 2. Management's Discussion and Analysis of underwriting gain (loss) to net income (loss) for Commercial Lines, Personal LinesFinancial Condition and Property & Casualty OtherResults of Operations is set forth in segment sections of MD&A.


Reconciliation of Net Income to Underwriting Gain (Loss)
 Three Months Ended March 31,
20212020
Commercial Lines
Net income$129 $121 
Adjustments to reconcile net income to underwriting gain (loss):
Net servicing income(2)(1)
Net investment income(327)(277)
Net realized capital losses (gains)(44)143 
Other expense4 6 
Income tax expense24 28 
Underwriting gain (loss)$(216)$20 
Personal Lines
Net income$135 $98 
Adjustments to reconcile net income to underwriting gain (loss):
Net servicing income(4)(2)
Net investment income(35)(41)
Net realized capital losses (gains)(7)23 
Other expense— — 
Income tax expense35 25 
Underwriting gain$124 $103 
P&C Other Ops
Net income (loss)$(13)$5 
Adjustments to reconcile net income to underwriting gain (loss):
Net investment income(16)(16)
Net realized capital losses (gains)(2)7 
Income tax expense (benefit)(4)1 
Underwriting loss$(35)$(3)
Written and Earned Premiums-Written premium is a statutory accounting financial measure which represents the amount of premiums charged for policies issued, net of reinsurance, during a fiscal period. Earned premium is a U.S. GAAP and statutory measure. Premiums are considered earned and are included in the financial results on a pro rata basis over the policy period. Management believes that written premium is a performance measure that is useful to investors as it reflects current trends in the Company’s sale of property and casualty insurance products. Written and earned premium are recorded net of ceded reinsurance premium.
Traditional life and disability insurance type products, such as those sold by Group Benefits, collect premiums from policyholders in exchange for financial protection for the policyholder from a specified insurable loss, such as death or disability. These premiums together with net investment income earned from the overall investment strategy are used to pay the contractual obligations under these insurance contracts. Two major factors, new sales and persistency, impact premium growth. Sales can increase or

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decrease in a given year based on a number of factors, including but not limited to, customer demand for the Company’s product offerings, pricing competition, distribution channels and the Company’s reputation and ratings. Persistency refers to the percentage of policiespremium remaining in-force from year-to-year.

71THE HARTFORD’S OPERATIONS
The Hartford conducts business principally in five reporting segments including Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits and Hartford Funds, as well as a Corporate category. The Company includes in the Corporate category reserves for run-off structured settlement and terminal funding agreement liabilities, restructuring costs, capital raising activities (including equity financing, debt financing and related interest expense), transaction expenses incurred in connection with an acquisition, purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments. Corporate also includes investment management fees and expenses related to managing third party business, including management of the invested assets of Talcott Resolution Life, Inc. and its subsidiaries ("Talcott Resolution"). Talcott Resolution is the holding company of the life and annuity business that was 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. The sale of Talcott Resolution to a new group of investors is expected to close by
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THE HARTFORD’S OPERATIONS
Overview
June 30, 2021. The Hartford conducts business principally in six reporting segments including Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits, Mutual FundsCompany will receive 9.7% of the proceeds and Talcott Resolution, as well as a Corporate category. The Hartford includes in its Corporate category the Company’s capital raising activities (including debt financing and related interest expense, purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments).any pre-closing dividends.
The Company derives its revenues principally from: (a) premiums earned for insurance coverage provided to insureds; (b) fee income, including asset management fees on separate account, mutual fund and ETP assets, mortality and expense fees, as well as cost of insurance charges;assets; (c) net investment income; (d) fees earned for services provided to third parties; and (e) net realized capital gains and losses. Premiums charged for insurance coverage are earned principally on a pro rata basis over the terms of the related policies in-force. Asset management fees and mortality and expense fees are primarily generated from separate account assets and assets under management. Cost of insurance charges are assessed on the net amount at risk for investment-oriented life insurance products.
The profitability of the Company's property and casualty insurance businesses over time is greatly influenced by the Company’s underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance, the size of its in force block, actual mortality and morbidity experience, and its ability to manage its expense ratio which it accomplishes through economies of scale and its management of acquisition costs and other underwriting expenses. Pricing adequacy depends on a number of factors, including the ability to obtain regulatory approval for rate changes, proper evaluation of underwriting risks, the ability to project future loss cost frequency and severity based on historical loss experience adjusted for known trends, the Company’s response to rate actions taken by competitors, its expense levels and expectations about regulatory and legal developments. The Company seeks to price its insurance policies such that insurance premiums and future net investment income earned on premiums received will cover underwriting expenses and the ultimate cost of paying claims reported on the policies and provide for a profit margin. For many of its insurance products, the Company is required to obtain approval for its premium rates from state insurance departments and the Lloyd's Syndicate 1221's ("Lloyd's Syndicate") ability to write business is subject to Lloyd's approval for its premium capacity each year. Most of Personal Lines written premium is associated with our exclusive licensing agreement with AARP. This agreement provides an important competitive advantage given the size of the 50 plus population and the strength of the AARP brand. In 2020, the Company extended this agreement through December 31, 2032.
Similar to property and casualty, profitability of the Group Benefits business depends, in large part, on the ability to evaluate and price risks appropriately and make reliable estimates of mortality, morbidity, disability and longevity. To manage the pricing risk, Group Benefits generally offers term insurance policies, allowing for the adjustment of rates or policy terms in order to minimize the adverse effect of market trends, loss costs, declining interest rates and other factors. However, as policies are typically sold with rate guarantees of up to three years, pricing for the Company’s products could prove to be inadequate if loss and expense trends emerge adversely during the rate guarantee period or if investment returns are lower than expected at the time the products were sold. For some of its products, the Company is required to obtain approval for its premium rates from state insurance departments. New and renewal business for group benefits business, particularly for long-term disability, are priced using an assumption about expected investment yields over time. While the Company employs asset-liability duration matching strategies to mitigate risk and may use interest-rate sensitive derivatives to hedge its exposure in the Group Benefits investment portfolio, cash flow patterns related to the payment of benefits and claims are uncertain and actual investment yields could differ significantly
from expected investment yields, affecting profitability of the business. In addition to appropriately evaluating and pricing risks, the profitability of the Group Benefits business depends on other factors, including the Company’s response to pricing decisions and other actions taken by competitors, its ability to offer voluntary products and self-service capabilities, the persistency of its sold business and its ability to manage its expenses which it seeks to achieve through economies of scale and operating efficiencies.
The financial results inof the Company’s mutual fund ETP and variable annuityETP businesses depend largely on the amount of the contractholder or shareholder account value or assets under management on which it earns fees and the level of fees charged.charged based, in part, on asset share class and product type. Changes in account value or assets under management are driven by the two main factors:factors of net flows and the market return of the funds, which isare heavily influenced by the return realized in the equity and fixed incomebond markets. Net flows are comprised of deposits less withdrawals and surrenders, redemptions, death benefits, policy charges and annuitizations of investment type contracts, such as variable annuity contracts. In the mutual fund and ETP business, net flows are known as net sales. Net sales are comprised of new sales less redemptions by mutual fund and ETP shareholders. The Company uses the average daily value of the S&P 500 Index as an indicator for evaluating market returns of the underlying account portfolios for the variable annuity business. Financial results of variable products are highly correlated to the growth in account values or assets under management since these products generally earn fee income on a daily basis. Equity and fixed income market movements could also result in benefits for or charges against DAC.
The profitability of fixed annuities and other “spread-based” products depends largely on the Company’s ability to earn target spreads between earned investment rates on its general account assets and interest credited to policyholders.
The investment return, or yield, on invested assets is an important element of the Company’s earnings since insurance products are priced with the assumption that premiums received can be invested for a period of time before benefits, losslosses and loss adjustment expenses are paid. Due to the need to maintain sufficient liquidity to satisfy claim obligations, the majority of the Company’s invested assets have been held in available-for-sale securities, including, among other asset classes, equities, corporate bonds, municipal bonds, government debt, short-term debt, mortgage-backed securities, and asset-backed securities and collateralized debtloan obligations.
The primary investment objective for the Company is to maximize economic value, consistent with acceptable risk parameters, including the management of credit risk and interest rate sensitivity of invested assets, while generating sufficient after-taxnet of tax income to meet policyholder and corporate obligations. Investment strategies are developed based on a variety of factors including business needs, regulatory requirements and tax considerations.
For further informationImpact of COVID-19 on our financial condition, results of operations and liquidity
Impact to revenues
Written and Earned premiums
While we are beginning to emerge from the Company's reporting segments referpandemic with economic stimulus measures being passed in the U.S. and other jurisdictions and progress being made to Part I, Item 1, Business - Reporting Segmentsvaccinate the public from the COVID-19 virus, the COVID-19 pandemic continues to cause significant disruption to the economy of the U.S. and other countries in The Hartford’s 2016 Form 10-K Annual Report.which we operate. As one of the largest providers of small business insurance in the U.S., we were negatively affected by economic effects of the pandemic on small businesses beginning in March of 2020. In 2021, economic conditions have improved and in the first quarter of 2021, we experienced a 4% year over year increase in our small commercial written premium. Our middle and large commercial business was also negatively affected by COVID-19 and written premium in that line has been slower to rebound with written premium in middle & large commercial down 3% year over year in the first quarter. Overall,

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first quarter 2021 Commercial Lines written premium increased $95, or 4%, as growth in small commercial package business and excess and surplus lines as well as growth in U.S. wholesale, global reinsurance, U.S. financial lines and international lines of business was partially offset by a decline in workers' compensation. Contributing to a year over year decline in workers’ compensation written premium in first quarter 2021 was the effect of lower payrolls as a result of the continued economic effects of COVID-19, resulting in lower average premium per policy.
Personal Lines written premium declined 4% in first quarter 2021 compared to first quarter 2020, largely attributable to the effect of increased shopping behaviors and lower new business levels arising out of the competitive marketplace.
In Group Benefits, fully insured ongoing premium increased 4% in the first quarter of 2021 compared to first quarter of 2020, primarily due to higher in-force employer group disability premiums and higher supplemental health product premiums, though the book of business continues to be negatively impacted by lower insured exposure on in-force policies.
Net investment income and realized capital gains (losses)
Total net investment income increased in the first quarter of 2021 primarily due to greater income from limited partnerships and other alternative investments, a higher return on equity fund investments and a higher level of invested assets, partially offset by a lower yield on fixed maturity investments resulting from lower reinvestment rates and a lower yield on floating rate investments. While longer term interest rates have risen year to date in 2021, a prolonged period of low interest rates could depress the Company's net investment income such that to earn the same level of return on equity we may have to charge higher premiums for the insurance products we sell unless loss costs similarly lessen.
Net realized capital gains (losses) on equity securities for the three months ended March 31, 2021 totaled $43 before tax, largely due to an increase in equity market levels since year end 2020. However, we may incur net realized capital losses on equity securities in future periods if we experience declines in equity market levels. In addition, if the economy does not recover as expected, we could experience elevated credit losses on fixed maturity securities, particularly related to highly leveraged companies, resulting in net realized capital losses.
Impact to direct benefits, losses and loss adjustment expenses from COVID-19 claims
The Company continued to incur direct COVID-19 incurred losses and excess mortality claims in first quarter 2021, compared to a small impact in first quarter 2020.
For the three months ended March 31,
20212020
Excess mortality claims on group life$185 $— 
COVID-19 short-term disability claims and benefits under New York's disability and paid family leave legislation13 16 
Workers' compensation COVID-19 claims20 — 
Global specialty financial lines and other4 — 
Total direct COVID-19 and excess mortality claims$222 $16 
While COVID-19 property claims in P&C were incurred in the second quarter of 2020, there were no COVID-19 P&C property losses incurred in the three months ended March 31, 2021 or 2020. Nearly all of our property insurance policies require direct physical loss or damage to property and contain standard exclusions that we believe preclude coverage for COVID-19 related claims, and the vast majority of such policies contain exclusions for virus-related losses. Within Property & Casualty, we incur COVID-19 workers’ compensation losses when it is determined that workers were exposed to COVID-19 out of and in the course of their employment and in other cases where states have passed laws providing for the presumption of coverage for certain industry classes, including health care and other essential workers.
Within Group Benefits, the Company experienced excess mortality in its group life business, including those claims where COVID-19 is specifically listed as the cause of death.
Other impacts from COVID-19
In Personal Lines automobile, miles driven have begun to increase again as we emerge from the pandemic which we expect will increase loss costs in 2021. In addition, as the effects of favorable claim frequency from lower miles driven during the pandemic are factored into rates, we expect lower earned pricing increases resulting in a higher expected automobile loss ratio in 2021 than in 2020. Refer to Personal Lines Results of Operations for discussion of pricing and loss cost trends in first quarter 2021.
Aided by some improvement in the economy and the effect of the government’s economic stimulus payments to our customers, in first quarter 2021, we recorded a $8 decrease in the ACL on premiums receivable, reflecting a lower expectation of credit losses, though there remains an elevated risk of uncollectible premiums receivable relative to historical trends if economic conditions do not improve further.
As we emerge from the pandemic, we expect travel costs and certain employee benefits costs will increase relative to the lower level of those costs we incurred when shelter-in-place orders were more broadly in effect.
For information about resources the Company has to manage capital and liquidity, refer to the Capital Resources & Liquidity section of MD&A.
For additional information about the potential economic impacts to the Company of the COVID-19 pandemic, see the risk factor "The pandemic caused by the spread of COVID-19 has disrupted
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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


our operations and may have a material adverse impact on our business results, financial condition, results of operations and/or liquidity" in Item 1A of Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
Operational Transformation and Cost Reduction Plan
In recognition of the need to become more cost efficient and competitive along with enhancing the experience we provide to agents and customers, on July 30, 2020, the Company announced an operational transformation and cost reduction plan it refers to as Hartford Next. Through reduction of its headcount, IT investments to further enhance our capabilities, and other activities, relative to 2019, the Company expects to achieve a reduction in annual insurance operating costs and other expenses of approximately $540 by 2022 and $625 by 2023. The Hartford Next program will contribute to our goal of reducing the 2022 P&C expense ratio by about 2.0 to 2.5 points, reducing the 2022 Group Benefits expense ratio by about 1.5 to 2.0 points and
reducing our 2022 claim expense ratio by approximately 0.5 point.
To achieve those expected savings, we expect to incur approximately $410 over the course of the program, with $180 expensed cumulatively through March 31, 2021, and expected expenses of $75 over the last nine months of 2021, $77 in 2022 and $78 after 2022, with the expenses after 2022 consisting mostly of amortization of internal use software and capitalized real estate costs. Included in the estimated costs of $410, we expect to incur restructuring costs of approximately $164, including $73 of employee severance incurred in 2020, and approximately $91 of other costs, including consulting expenses and the cost to retire certain IT applications. Restructuring costs are reported as a charge to net income but not in core earnings.
The following table presents Hartford Next program costs incurred, including restructuring costs, and expense savings realized in the three months ended March 31, 2021 and expected annual costs and expense savings for the full year in 2021 and 2022:
Hartford Next Costs and Expense Savings
Three months ended March 31, 2021Estimate for 2021Estimate for 2022
IT costs to retire applications$2 $11 $14 
Professional fees and other expenses9 24 11 
Estimated restructuring costs11 35 25 
Non-capitalized IT costs12 49 30 
Other costs4 17 14 
Amortization of capitalized IT development costs [1]— 1 6 
Amortization of capitalized real estate [2]— — 2 
Estimated costs within core earnings16 67 52 
Total Hartford Next program costs$27 $102 $77 
Cumulative savings for the period relative to 2019$(90)$(370)$(540)
Net expense (savings) before tax:$(63)$(268)$(463)
Net expense (savings) before tax:
To be accounted for within core earnings$(74)$(303)$(488)
Restructuring costs recognized outside of core earnings11 35 25 
Net expense (savings) before tax$(63)$(268)$(463)
[1]Does not include approximately $50 of IT asset amortization after 2022.
[2]Does not include approximately $21 of real estate amortization after 2022.
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Financial Highlights
Net Income Available to Common StockholdersNet Income Available to Common Stockholders per Diluted ShareBook Value per Diluted Share
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ÞDecreased $24 or 9%ÞDecreased $0.07 or 9%ÞDecreased $2.35 or 5%
-Greater net unfavorable prior accident year reserve development, primarily due to increases in reserves for sexual molestation and sexual abuse in the 2021 period.-Decrease in net income available to common stockholders.-Decrease in common stockholders' equity largely due to a decrease in AOCI, primarily driven by a decrease in net unrealized capital gains on available for sale securities.
-Higher mortality within group life driven by the direct and indirect impacts of COVID-19.-Increase in dilutive shares under stock-based compensation largely due to an increase in the quarterly average stock price.-Increase in dilutive shares outstanding from stock-based compensation awards.
-An increase in current accident year catastrophes.+Share repurchase activity.
+A change from net realized capital losses in the 2020 period to net realized capital gains in the 2021 period.
+An increase in net investment income.
+An improvement in the P&C underlying combined ratio, including a decrease in insurance operating costs and other expenses.
Net IncomeNet Income per Diluted ShareBook Value per Diluted Share
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Net incomedecreased to $234, or $0.65 per basic share and $0.64 per diluted share, from third quarter 2016 net income of $438, or $1.14 per basic share and $1.12 per diluted share, primarily due to catastrophe losses from hurricanes Harvey and Irma in the third quarter 2017, partially offset by the accretive effect of share repurchases over the past year.
Common share repurchases during third quarter 2017 totaled $325, or 6 million shares and $258 of dividends were paid to shareholders.
Book value per diluted shareincreased to $47.33 from $44.35 as of December 31, 2016 as a result of a 4% decrease in common shares outstanding and dilutive potential common shares and a 2% increase in stockholders' equity resulting primarily from net income and an increase in accumulated other comprehensive income (AOCI) over the nine month period, partially offset by common dividends and share repurchases. AOCI increased due to higher net unrealized capital gains and a reduction in unamortized actuarial losses on benefit plans due to a pension settlement in second quarter 2017.
Net Investment Income   Annualized Investment Yield After-tax
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Net investment income of $729 decreased 6% compared with third quarter 2016 primarily due to lower income from limited partnerships and other alternative investments as well as lower asset levels as a result of the continued run off of Talcott Resolution.
Investment Yield, After TaxProperty & Casualty Combined RatioGroup Benefits Net Income Margin
Net realized capital losses improved by $14 from the third quarter 2016 primarily due to losses related to the sale of the Company's U.K. property and casualty run-off subsidiaries in the prior year, lower impairments and lower losses on the variable annuity hedge program, partially offset by lower net gains on sales.hig-20210331_g5.jpghig-20210331_g6.jpghig-20210331_g7.jpg

ÝIncreased 10 bpsÝIncreased 8.2 pointsÞDecreased 6.3 points
+Greater returns on limited partnerships and other alternative investments.+Greater net unfavorable prior accident year reserve development, primarily due to increases in reserves for sexual molestation and sexual abuse in the 2021 period.-Higher mortality in group life, driven by the direct and indirect impacts of COVID-19.
+Higher returns on equity fund investments.+Higher current accident year catastrophe losses.'+A change from net realized capital losses in the 2020 period to net realized capital gains in 2021 period.
+A higher level of invested assets.-Lower current accident year loss ratio, due to lower personal automobile claim frequency, and lower current accident year loss ratios in middle market workers’ compensation, U.S. wholesale, global reinsurance and U.S. financial lines.
-Lower reinvestment rates and lower yield on floating rate investments.+An increase in net investment income .
+A lower group disability loss ratio primarily due to more favorable prior incurral year development driven by higher claim recoveries and continued improving claim incidence.
-A lower expense ratio, driven by lower staffing and other costs as well as a decrease in the ACL on uncollectible premiums receivable in 2021 compared to an increase in 2020.

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Annualized investment yield
CONSOLIDATED RESULTS OF OPERATIONS
The Consolidated Results of 3.0%, after-tax, Operations should be read in conjunction with the Company's Condensed Consolidated Financial Statements and the related Notes as well as with the segment operating results sections of MD&A.
Consolidated Results of Operations
Three Months Ended March 31,
20212020Change
Earned premiums$4,343 $4,391 (1 %)
Fee income355 320 11 %
Net investment income509 459 11 %
Net realized capital gains (losses)80 (231)135 %
Other revenues12 17 (29 %)
Total revenues5,299 4,956 7 %
Benefits, losses and loss adjustment expenses3,350 2,916 15 %
Amortization of deferred policy acquisition costs416 437 (5 %)
Insurance operating costs and other expenses1,144 1,176 (3 %)
Interest expense57 64 (11 %)
Amortization of other intangible assets18 19 (5 %)
Restructuring and other costs11 — NM
Total benefits, losses and expenses4,996 4,612 8 %
Income, before tax303 344 (12 %)
Income tax expense54 71 (24 %)
Net income249 273 (9 %)
Preferred stock dividends5 5 — %
Net income available to common stockholders$244 $268 (9 %)

Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Net income available to common stockholders decreased by $24, primarily driven by $206 before tax of greater unfavorable P&C prior accident year development, losses in Group Benefits resulting from 3.1%, after-tax, compared with third quarter 2016, primarily duehigher mortality in group life, including deaths specifically attributable to reinvesting at lower rates.
Net unrealized gains, after-tax,COVID-19, and a $140 before tax increase in current accident year catastrophe losses driven by the February 2021 winter storms. These declines were partially offset by a $311 before tax change from net realized capital losses in the 2020 period to net realized capital gains in the 2021 period, a $50 before tax increase in net investment portfolioincome driven by higher returns on limited partnerships and other alternative investments, and an improvement in the P&C underlying combined ratio, including a decrease in insurance operating costs and other expenses. The increase in net unfavorable P&C prior accident year reserve development was principally driven by increased reserves for sexual molestation and sexual abuse claims in the first quarter 2021, primarily related to an agreement to settle claims made against the Boy Scouts of America.
For a discussion of the Company's operating results by $85 in third quarter 2017 primarily duesegment, see MD&A - Segment Operating Summaries. For further
discussion of impacts resulting from the COVID-19 pandemic, refer to the effectImpact of tighter credit spreads.COVID-19 on our financial condition, results of operations and liquidity section of this MD&A.
59
Written PremiumsCombined Ratio
Index to MD&A
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Written premiums decreased 2% compared with third quarter 2016 for Property & Casualty reflecting a decrease in Personal Lines, partially offset by an increase in Commercial Lines.
Combined ratio forProperty & Casualty increased 10.6 points to 107.1 compared with a combined ratio of 96.5 in third quarter 2016, largely due to catastrophe losses from hurricanes Harvey and Irma.
Catastrophe losses of $352, before tax, increased from catastrophe losses of $80, before tax, in third quarter 2016, largely due to losses of $175, before tax, from hurricane Harvey and losses of $157, before tax, from hurricane Irma.
Prior accident year developmentwas a net favorable $1, before tax, in third quarter 2017, primarily due to a decrease in reserves for Small Commercial package business offset by a reserve increase for customs bond claims. Reserve development was a net unfavorable $25, before tax, in third quarter 2016, largely due to an increase in commercial auto liability reserves.
Net Income Margin - Group Benefits Net Income - Talcott Resolution
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Net income marginfor Group Benefits increased to 7.7% from 6.7% in third quarter 2016, primarily due to lower incurred loss costs in both group disability and group life.

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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



Revenue
NetEarned Premiums
hig-20210331_g8.jpg
[1] For the three months ended March 31, 2020, the total includes $4 in Corporate.
Earned premiums declined by $48, or 1%, primarily due to:
•A decline in Property and Casualty reflecting a 5% decline in Personal Lines and a 1% decline in Commercial Lines.
•Partially offset by a 2% increase in Group Benefits primarily due to higher-in-force employer group disability premium and higher supplemental health product premium.
Fee income for Talcott Resolutionwas $80 compared with $78 in third quarter 2016, increased driven by Hartford Funds as a changeresult of higher daily average assets under management due to an increase in equity market levels.

Net Investment Income
hig-20210331_g9.jpg
Net investment income increased primarily due to:
•Greater income from limited partnerships and other alternative investments primarily driven by higher valuations of underlying investments within private equity funds
•A higher return on equity fund investments resulting from the increase in equity market levels
•A higher level of invested assets
•Partially offset by a lower yield on fixed maturity investments resulting from reinvesting at lower rates and a lower yield on floating rate investments.
Net realized capital gains (losses) improved from net losses of $231 in first quarter 2020 to net unlock benefitgains of $80 in first quarter 2021, primarily driven by:
•Gains on equity securities in the first quarter of 2021 driven by appreciation in value compared to losses on equity securities in the first quarter of 2020 driven by depreciation in value and realized losses upon sales, partially offset by net realized gains upon termination of derivatives used to hedge against a decline in equity market levels.
•A net reduction in ACL on fixed maturities in the 2021 period due to an increase in fair value of corporate securities, compared to an unlock chargeincrease in the prior year period andACL on fixed maturities in the effect of lower operating expenses was largely2020 period.
•Partially offset by lower net realized capital gains on sales of fixed maturity securities.
For further discussion of investment incomeresults, see MD&A - Investment Results, Net Realized Capital Gains and fee income due to the continued run off of the business.MD&A - Investment Results, Net Investment Income.

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CONSOLIDATED RESULTS OF OPERATIONS
Benefits, losses and expenses
Losses and LAE Incurred for P&C
hig-20210331_g10.jpg
Benefits, losses and loss adjustment expenses increased due to:
•An increase in Group Benefits of $189 driven by higher mortality in group life, primarily caused by $185 of direct and indirect claims from COVID-19 in first quarter 2021, partially offset by the impact of a lower group disability loss ratio that was principally due to more favorable prior incurral year development driven by higher claim recoveries and continued improving claim incidence.
•An increase in Property & Casualty, which was attributable to:
–An increase in Property & Casualty net unfavorable prior accident year reserve development $206. Prior accident year reserve development in 2021 was an unfavorable $229 before tax and primarily included reserve increases for sexual molestation and sexual abuse claims, primarily to reflect an agreement to settle claims made against the Boy Scouts of America. Also included were reserve decreases for workers’ compensation, package business, personal automobile liability, catastrophes and commercial property, partially offset by $6 of adverse development as the result of recognizing a deferred gain on retroactive reinsurance. Prior accident year reserve development in 2020 was an unfavorable $23 before tax and primarily included reserve increases for marine, general liability and workers' compensation pool participants, partially offset by reserve decreases for workers' compensation, and catastrophes. The Consolidated Results$23 of Operations should be readnet unfavorable reserve development in conjunction withfirst quarter 2020 included $29 of adverse development as the Company'sresult of recognizing a deferred gain on retroactive reinsurance. For further discussion, see Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements and the related Notes beginning on page F-1 as well as with the segment operating results sections of MD&A.
Statements.
 Three Months Ended September 30, Nine Months Ended September 30,
 20172016Change 20172016Change
Earned premiums$3,474
$3,484
—% $10,437
$10,332
1%
Fee income460
452
2% 1,381
1,338
3%
Net investment income729
772
(6%) 2,172
2,203
(1%)
Net realized capital gains (losses)(3)(17)82% 52
(119)144%
Other revenues24
24
—% 66
67
(1%)
Total revenues4,684
4,715
(1%) 14,108
13,821
2%
Benefits, losses and loss adjustment expenses2,994
2,780
8% 8,518
8,563
(1%)
Amortization of deferred policy acquisition costs357
403
(11%) 1,088
1,145
(5%)
Insurance operating costs and other expenses995
918
8% 3,652
2,777
32%
Interest expense82
86
(5%) 246
257
(4%)
Total benefits, losses and expenses4,428
4,187
6% 13,504
12,742
6%
Income before income taxes256
528
(52%) 604
1,079
(44%)
Income tax expense22
90
(76%) 32
102
(69%)
Net income$234
$438
(47%) $572
$977
(41%)
Three months ended September 30, 2017 compared to the three months ended September 30, 2016
Net incomedecreased by $204 primarily due to an–An increase in current accident year catastrophe losses of $177 after-tax, primarily due to hurricanes Harvey and Irma, and, to a lesser extent, a decrease in net investment income. Apart from those impacts, net income was relatively flat as a change to a net unlock benefit compared to an unlock charge$140. Catastrophe losses of $214 in the prior year period and more favorable prior accident year development in P&C was offset by higher variable incentive compensation costs.
Earned premiumsdecreased by $10, before tax, reflecting a 6% decline in Personal Lines, largely offset by growthfirst quarter of 3% in Commercial Lines, including the effect of the Maxum acquisition, and 1% in Group Benefits. For a discussion of the Company's operating results by segment, see MD&A - Results of Operations by Segment.
Fee incomeincreased by 2% reflecting a 14% increase in Mutual Funds, partially offset by a 6% decline in Talcott Resolution. For a discussion of the Company's operating results by segment, see MD&A - Results of Operations by segment.
Net investment incomedecreased by 6%2021 included $176 from February winter storms primarily due to lower asset levels as a result of the continued run off of Talcott Resolution as well as lower income from limited partnerships and other alternative investments. For further discussion of investment results, see MD&A - Investment Results, Net Investment Income (Loss).
Net realized capital losses improved by $14 from third quarter 2016 largely due to to losses related to the sale of the Company's U.K. property and casualty run-off subsidiaries in the prior year, lower impairments and lower losses onSouth, with the variable annuity hedge program, partially offset by lower net gains on sales. For further discussion of investment results, see MD&A - Investment Results, Net Realized Capital Gains (Losses).
Benefits, losses and loss adjustment expenses increased in Property & Casualty driven by an increase in catastrophe losses and decreased in Group Benefits due to lower losses on group disability and life business. The net increase in incurred losses for Property & Casualty was driven by:
Current accident year losses and loss adjustment expenses before catastrophes in Property & Casualty decreased $16, before tax, primarily resultingremainder from the effect of lower Personal Lines earned premium and lower Personal Lines auto liability loss costs, largely offset by the effect of earned premium growth in Small Commercial and higher workers' compensation loss costs.
Current accident year catastrophe losses of $352, before tax, for the three months endedSeptember 30, 2017, compared to $80, before tax, for the prior year period. Catastrophe losses in 2017 were primarily from hurricanes Harvey and Irma which accounted for $332, before tax, of catastrophe losses in the quarter. Catastrophe losses in 2016 were primarily due to multiplevarious wind and hail events, across various U.S. geographic regions.mostly concentrated in the South and along the Pacific Coast. The $176 of losses from the February winter storms is net of a $46 reinsurance recoverable under the Company's per occurrence catastrophe treaty that covers 70% of up to $250 in losses in excess of $100 on catastrophe events occurring within a 7-day period other than from earthquakes and named hurricanes and tropical storms, subject to a $50 annual aggregate deductible. Catastrophe losses in 2020 were primarily from tornado, wind and hail events in the Midwest and Southeast. For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.
–Partially offset by a decrease in Property & Casualty current accident year ("CAY") loss and loss adjustment expenses before catastrophes primarily due to lower personal automobile claim frequency, and lower current accident year loss ratios in middle market workers’ compensation, U.S. wholesale, global reinsurance and U.S. financial lines.

Losses and LAE Incurred for Group Benefits
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For further discussion of impacts resulting from the COVID-19 pandemic, refer to the Impact of COVID-19 on our financial condition, results of operations and liquidity section of this MD&A.
Amortization of deferred policy acquisition costs decreased from the prior year period due primarily to reductions in Personal Lines, middle & large commercial and small commercial, which was consistent with the decline in earned premium in those lines of business.

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Net prior accident year reserve development in Property & Casualty was favorable $1, before tax, for the three months endedSeptember 30, 2017, compared to unfavorable reserve development of $25, before tax, for the prior year period. Prior accident year development in 2017 included a decrease in reserves for Small Commercial package business offset by a reserve increase for customs bond claims. Prior accident year development in 2016 was largely due to an increase in commercial auto liability. For additional information, see MD&A - Critical Accounting Estimates, Reserve Roll Forwards and Development.
Amortization of deferred policy acquisition costsdecreased year over year due to the run off of the Talcott Resolution business, the effect of a favorable unlock in the 2017 period compared to an unfavorable unlock in the 2016 period and lower amortization in Personal Lines, partially offset by higher amortization in Commercial Lines.
Insurance operating costs and other expenses increased decreased primarily due to:
•Lower staffing and other costs driven by the Company’s Hartford Next operational and transformation cost reduction plan. In addition, employee travel costs were also lower as a result of the impact of the COVID-19 pandemic.
•A decrease in the ACL on uncollectible premiums receivable in Property & Casualty and Group Benefits in 2021 compared to an increase in 2020 due to the economic impacts of COVID-19.
•Partially offset by higher variable incentive compensation costs, higher ITcommissions expense as a result of increased premiums in Group Benefits, increased AARP direct marketing costs in CommercialPersonal Lines and higher variable expensescosts of the Hartford Funds business due to higher daily average assets under management.
Interest expense declined as a result of the Company repaying at maturity the $500 principal amount of its 5.5% senior notes in Mutual Funds.the first quarter of 2020.
Restructuring and other costs are due to the Company's Hartford Next operational transformation and cost reduction plan which includes professional fees and IT costs to retire applications.
For further discussion of impacts resulting from the Hartford Next initiative, see MD&A - The Hartford's Operations, Operational Transformation and Cost Reduction Plan and Note 17 - Restructuring and Other Costs of Notes to Condensed Consolidated Financial Statements.
Income tax expensedecreased primarily due to a $272 decreasean decline in pre-tax income partially offset by the effect of a federal income tax benefit of $65 for the three months ended September 30, 2016 related to the sale of the Company's U.K. property and casualty run-off subsidiaries.
Differences between the Company's effective income tax rate and the U.S. statutory rate of 35% are due primarily to tax-exempt interest earned on invested assets, the dividends received deduction and changes in the valuation allowance recorded on capital loss carryovers.before tax. For further discussion of income taxes, see Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
Nine months ended September 30, 2017 compared to the nine months ended September 30, 2016
Net income decreased by $405 primarily due toa pension settlement charge of $488, after-tax, in the nine months ended September 30, 2017 and a $196 after-tax increase in catastrophe losses partially offset by the effect of adverse prior accident year development of $266 after-tax, in the first nine months of 2016. Apart from those impacts, net income was slightly higher largely due to a higher unlock benefit and lower group disability and life loss costs offset by lower net investment income and higher variable incentive compensation.
Earned premiumsincreased by $35, before tax, reflecting growth of 4% in Commercial Lines, including the effect of the Maxum acquisition, and 3% in Group Benefits, partially offset by a 5% decrease in Personal Lines. For a discussion of the Company's operating results by segment, see MD&A - Results of Operations by segment.
Fee incomeincreased reflecting a 15% increase in Mutual Funds, partially offset by a 6% decline in Talcott Resolution. For a discussion of the Company's operating results by segment, see MD&A - Results of Operations by segment.
Net investment incomedecreased 1%, primarily due to
lower asset levels and lower reinvestment rates, largely offset by higher income from limited partnerships and other alternative investments. For further discussion of investment results, see MD&A - Investment Results, Net Investment Income (Loss).
Net realized capital gainsof $52 in the nine months ended September 30, 2017 compared to net realized capital losses of $119 in the first nine months of 2016, were primarily due to losses in 2016 related to the sale of the Company's U.K. property and casualty run-off subsidiaries and derivatives, higher net gains on sales of securities and lower impairment losses, partially offset by higher variable annuity hedge program losses in 2017. For further discussion of investment results, see MD&A - Investment Results, Net Realized Capital Gains (Losses).
Benefits, losses and loss adjustment expenses decreased in Property & Casualty and were relatively flat in Group Benefits as the effect on losses of growth in Group Benefits earned premium was offset by the effect of lower loss ratios for group disability and group life. The net decrease in incurred losses for Property & Casualty was driven by:
Losses and loss adjustment expenses before catastrophes in Property & Casualty increased $70, before tax, primarily resulting from the effect of Commercial Lines earned premium growth in Small Commercial and higher loss costs in workers' compensation, commercial auto and non-catastrophe property, partially offset by the effect of lower Personal Lines earned premium.
Current accident year catastrophe losses of $657, before tax, for the nine months ended September 30,2017, compared to $355, before tax, for the prior year period. Catastrophe losses in 2017 were primarily due to hurricanes Harvey and Irma in the third quarter and multiple wind and hail events across various U.S. geographic regions, primarily in the Midwest, Colorado, Texas and the Southeast. Catastrophe losses in 2016 were primarily due to multiple wind and hail and winter storm events across various U.S. geographic regions, concentrated in Texas and the central and southern plains and, to a lesser extent, winter storms. For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.
Unfavorable prior accident year reserve development in Property & Casualty of $1, before tax, for the nine months ended September 30,2017, compared to unfavorable reserve development of $409, before tax, for the prior year period. Prior accident year development in 2017 included a decrease in reserves for Small Commercial package business offset by a reserve increase for commercial auto liability. Prior accident year development in 2016 was largely due to a $268 increase in asbestos and environmental reserves and a $140 increase in Personal Lines auto liability reserves. For additional information, see MD&A - Critical Accounting Estimates, Reserve Roll Forwards and Development.
Amortization of deferred policy acquisition costsdecreased primarily due to lower amortization on lower earned premium for Personal Lines, the effect of the run off of Talcott Resolution, and a larger unlock benefit in 2017, partially offset by higher amortization on higher earned premium for Commercial Lines.

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Insurance operating costs and other expenses increased primarily due to a $750 pre-tax pension settlement charge in second quarter 2017. Apart from the pension settlement charge, insurance operating costs and other expenses increased by 5%, primarily driven by higher variable incentive plan compensation, increased IT costs in Commercial Lines, higher variable expenses in Mutual Funds and $20, before tax, of state guaranty fund assessments in Group Benefits, partially offset by lower direct marketing costs in Personal Lines. Effective with awards granted in March, 2017, long-term incentive compensation awards to retirement-eligible employees now fully vest when they are granted, which resulted in an accelerated recognition of compensation expense in the first nine months of 2017 of $21 pre-tax. For additional information on the pension settlement charge in second quarter 2017, see Note 15 - Employee Benefit Plans of Notes to Condensed Consolidated Financial Statements.
Income tax expensedecreased for the nine months ended September 30, 2017, primarily due to a $475 decrease in
income before income taxes, partially offset by the effect of federal income tax benefits of $78 for the nine months ended September 30, 2016 arising from a reduction of the deferred tax asset valuation allowance on capital loss carryovers and the effect of a federal income tax benefit of $65 for the nine months ended September 30, 2016 related to the sale of the Company's U.K. property and casualty run-off subsidiaries.
Differences between the Company's effective income tax rate and the U.S. statutory rate of 35% are due primarily to tax-exempt interest earned on invested assets, the dividends received deduction and changes in the valuation allowance recorded on capital loss carryovers. For further discussion of income taxes, see Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements.

INVESTMENT RESULTS
Composition of Invested Assets
March 31, 2021December 31, 2020
AmountPercentAmountPercent
Fixed maturities, available-for-sale ("AFS"), at fair value$43,607 78.3 %$45,035 79.7 %
Equity securities, at fair value1,632 2.9 %1,438 2.5 %
Mortgage loans (net of ACL of $34 and $38)4,588 8.2 %4,493 7.9 %
Limited partnerships and other alternative investments2,326 4.2 %2,082 3.7 %
Other investments [1]207 0.4 %201 0.4 %
Short-term investments3,367 6.0 %3,283 5.8 %
Total investments$55,727 100.0 %$56,532 100.0 %
 September 30, 2017 December 31, 2016
 AmountPercent AmountPercent
Fixed maturities, available-for-sale ("AFS"), at fair value$57,669
79.0% $56,003
79.3%
Fixed maturities, at fair value using the fair value option ("FVO")82
0.1% 293
0.4%
Equity securities, AFS, at fair value1,112
1.5% 1,097
1.6%
Mortgage loans6,058
8.3% 5,697
8.1%
Policy loans, at outstanding balance1,418
2.0% 1,444
1.9%
Limited partnerships and other alternative investments2,533
3.5% 2,456
3.5%
Other investments [1]365
0.5% 403
0.6%
Short-term investments3,756
5.1% 3,244
4.6%
Total investments$72,993
100.0% $70,637
100.0%
[1]Primarily consists of equity fund investments, overseas deposits, consolidated investment funds and derivative instruments which are carried at fair value.
[1]Primarily relates to derivative instruments.
September 30, 2017March 31, 2021 compared to December 31, 20162020
Total investmentsincreasedFixed maturities, AFS decreased primarily due to an increasea decrease in fixed maturities, AFS, short-term investments and mortgage loans.
Fixed maturities, AFS increased primarilyvaluations due to an increase in valuations as a result ofhigher interest rates, partially offset by tighter credit spreads and lower long-term interest rates as well as the purchases of Collateralized Loan Obligations ("CLOs") and tax-exempt municipal bonds.spreads.
Short-term investments increased largely due to an increase in short-term investments held as part of the Company's securities lending agreements. For more information on the securities lending agreements, see Note 6 - Investments.
62
Mortgage Loans increased largely due to originations of multifamily commercial whole loans.



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Net Investment Income
 Three Months Ended March 31,
 20212020
(Before tax)AmountYield [1]AmountYield [1]
Fixed maturities [2]$349 3.2 %$377 3.6 %
Equity securities10 2.8 %12 3.0 %
Mortgage loans43 3.8 %42 3.9 %
Limited partnerships and other alternative investments112 21.1 %58 13.2 %
Other [3]14 (12)
Investment expense(19)(18)
Total net investment income$509 3.8 %$459 3.7 %
Total net investment income excluding limited partnerships and other alternative investments$397 3.1 %$401 3.3 %
[1]Yields calculated using 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.
Net Investment Income
 Three Months Ended September 30, Nine Months Ended September 30,
 20172016 20172016
(Before tax)AmountYield [1]AmountYield [1] AmountYield [1]AmountYield [1]
Fixed maturities [2]$579
4.2%$589
4.2% $1,734
4.2%$1,788
4.2%
Equity securities6
2.2%5
2.7% 19
2.2%22
3.3%
Mortgage loans62
4.2%62
4.4% 185
4.2%182
4.3%
Policy loans20
5.5%20
5.3% 59
5.4%62
5.7%
Limited partnerships and other alternative investments71
11.7%93
15.2% 189
10.7%141
7.3%
Other [3]23
 29
  78
 90
 
Investment expense(32) (26)  (92) (82) 
Total net investment income$729
4.3%$772
4.5% $2,172
4.3%$2,203
4.2%
Total net investment income excluding limited partnerships and other alternative investments$658
4.0%$679
4.1% $1,983
4.0%$2,062
4.1%
[2]Includes net investment income on short-term investments.
[1]Yields calculated using 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 amortized cost.
[2]Includes net investment income on short-term investments.
[3]Primarily includes income from derivatives that qualify for hedge accounting and hedge fixed maturities.
[3]Primarily 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.
Three and nine months ended September 30, 2017,March 31, 2021 compared to the three and nine months ended September 30, 2016March 31, 2020
Total net investment income decreased for the three month period increased primarily due to lowerto:
•Greater income from limited partnerships and other alternative investments as well as lower asset levels as a resultprimarily driven by higher valuations of the continued run off of Talcott Resolution. Income from limited partnership and other alternativeunderlying investments was below the prior year due to lower returns onwithin private equity funds
•A higher return on equity fund investments partiallywithin Other resulting from the increase in equity market levels
•A higher level of invested assets
•Partially offset by stronger returnsa lower yield on real estatefixed maturities resulting from reinvesting at lower rates and a lower yield on floating rate investments. Total net investment income decreased for the nine month period primarily due to lower asset levels, partially offset by higher income from limited partnerships and other alternative investments. For the nine month period, income from limited partnerships and other alternative investments increased due to strong returns on real estate investments as well as losses on hedge funds during 2016.
Annualized net investment income yield,excluding limited partnerships and other alternative investments was 4.0% for the nine month period in 2017, down slightly from 4.1% for the nine month period in 2016. Excludingand non-routine
items on fixed maturities, which primarily include make-whole payments and prepayment fees, was down primarily due to lower reinvestment rates, partially offset by higher equity fund investment returns.
Average reinvestment rate,on fixed maturities and income received from previously impaired securities, the annualized investment income yield was 4.0% for the nine month periods for both years.
Average reinvestment rate for the nine month period in 2017,mortgage loans, excluding certain U.S. Treasury securities, and cash equivalent securities,for the first quarter of 2021 was approximately 3.5%2.3%, which was below the average yield of sales and maturities of 3.9%2.9% for the same period. For the nine month period in 2017, theThe average reinvestment rate of 3.5% increased slightly from 3.4% for the nine2020 three month period in 2016, due to higher interest rates.was 2.9%, which was below the average yield of sales and maturities of 3.3%.
WeFor the 2021 calendar year, we expect the annualized net investment income yield, for the 2017 calendar year, excluding limited partnerships and other alternative investments and non-routine items on fixed maturities, to be slightly belowlower than the portfolio yield earned in 2016. This assumes the Company earns less income in 2017 from make-whole payments2020, due to a lower yield on fixed maturitiesshort-term investments and recoveries on previously impaired securities than it did in 2016 and thatlower reinvestment rates continue to be below the average yield of sales and maturities.rates. The estimated impact on net investment income yield is subject to change as the composition of thedue to evolving market conditions and active portfolio changes through portfolio management and trading activities and changes in market conditions.management.

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Net Realized Capital Gains (Losses)
Three Months Ended March 31,
(Before tax)20212020
Gross gains on sales$31 $78 
Gross losses on sales(31)(8)
Equity securities [1]43 (386)
Net credit losses on fixed maturities, AFS [2]4 (12)
Change in ACL on mortgage loans [3]4 (2)
Intent-to-sell impairments [2]— (5)
Other, net [4]29 104 
Net realized capital gains (losses)$80 $(231)
[1] The net unrealized gains (losses) on equity securities included in net realized capital gains (losses) related to equity securities still held as of March 31, 2021, were $40 for the three months ended March 31, 2021. The net unrealized gains (losses) on equity securities included in net realized capital gains (losses) related to equity securities still held as of March 31, 2020, were $(277) for the three months ended March 31, 2020.
Net Realized Capital Gains (Losses)
 Three Months Ended September 30,Nine Months Ended September 30,
(Before tax)2017201620172016
Gross gains on sales$80
$114
$332
$328
Gross losses on sales(26)(24)(132)(157)
Net other-than-temporary impairment ("OTTI") losses recognized in earnings [1](2)(14)(17)(44)
Valuation allowances on mortgage loans—
—
2
—
Results of variable annuity hedge program







GMWB derivatives, net15
6
53
(8)
Macro hedge program(65)(64)(189)(98)
Total results of variable annuity hedge program(50)(58)(136)(106)
Transactional foreign currency revaluation2
(13)2
(144)
Non-qualifying foreign currency derivatives(3)17
(9)138
Other, net [2](4)(39)10
(134)
Net realized capital gains (losses)$(3)$(17)$52
$(119)
[2]See Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments within the Investment Portfolio Risks and Risk Management section of the MD&A.
[1]
See Other-Than-Temporary Impairments within the Investment Portfolio Risks and Risk Management section of the MD&A.
[3]See ACL on Mortgage Loans within the Investment Portfolio Risks and Risk Management section of the MD&A.
[4]For the three months ended March 31, 2021 primarily includes gains (losses) from transactional foreign currency revaluation of $(7) and gains (losses) on non-qualifying derivatives of $35. For the three months ended March 31, 2020, includes gains (losses) from transactional foreign currency revaluation of $10 and gains (losses) on non-qualifying derivatives of $92.
[2]Primarily consists of changes in value of non-qualifying derivatives, including credit derivatives, interest rate derivatives used to manage duration, and embedded derivatives associated with modified coinsurance reinsurance contracts.
Three and nine months ended September 30, 2017March 31, 2021
Gross gains and losses on saleswere primarily the resultdriven by issuer-specific sales of duration, liquidity and credit management within corporate securities, a reduction of exposure in the foreign government sector, and sales of U.S. treasury securities for duration management.
Equity securities net gains were primarily driven by appreciation in value due to higher equity securities, and municipal bonds.market levels.
Variable annuity hedge program lossesfor the three and nine months included losses on the macro hedge program which Other, net gainswere primarily due to losses$32 of $42 and $109, respectively,gains on interest rate derivative trades, driven by an improvementincrease in domestic equity marketsinterest rates.
Three months ended March 31, 2020
Gross gains and $15 and $51, respectively,losses on sales were primarily driven by time decayissuer-specific selling of options. Also includedcorporate securities and RMBS as well as sales of U.S. treasury securities for duration management.
Equity securities net losses were losses of $8 and $37primarily driven by mark-to-market losses due to a decline in equity market volatility. Forlevels and losses incurred on sales across multiple issuers as the three and nine month periods these losses were partially offset by net gains onCompany reduced its exposure to equity securities during the combined GMWB derivatives, net, which include the GMWB product, reinsurance, and hedging derivatives, primarily driven by gains of $8 and $19, respectively, driven by a decline in equity market volatility, $7 and $18, respectively, driven by time decay of options, and $4 and $15, respectively, due to policyholder behavior.quarter.
Other, net gains and losses for the three month period were primarily due to losses$75 of $9realized gains on terminated derivatives used to hedge against a decline in equity market levels and $20 of gains on interest rate derivatives due to an increase in interest rates, partially offset by gains of $5 related to credit derivatives driven by credit spread tightening. For the nine month period gains were primarily related to $19 of credit derivatives due to credit spread tightening, partially offset by losses of $10 associated with modified coinsurance reinsurance contracts driven by a decline in interest rates. Modified coinsurance reinsurance contracts are accounted for as embedded derivatives and transfer to the reinsurer the investment experience related to the assets supporting the reinsured policies.
Three and nine months ended September 30, 2016
Gross gains and losses on saleswere primarily due to the sale of U.S. treasury securities, corporate securities, including tender offers, municipal bonds, and equity securities. The sales were primarily a result of duration, liquidity and credit management.
Variable annuity hedge program gain and lossesfor the three and nine month periods included losses on the macro hedge program of $25 and $58, respectively, driven by an increase in equity markets and losses of $19 and $40, respectively, driven by time decay on options. Additional losses of $9 for the three month period were driven by a decline in equity volatility. For the three month period, gain on the combined GMWB derivatives, net, was primarily due to gains of $16 due to favorable policyholder behavior and gains of$11 driven by outperformance of the underlying actively managed funds as compared to their respective indices, partially offset by losses of $(11) primarily resulting from assumption updates and losses of $6 due to an increase in interest rates. For the nine month period the net loss related to the combined GMWB hedging program was primarily due to losses of $(19) driven by an increase in U.S equity markets, partially offset by non-market gains of $14. The non-market gains include favorable policyholder behavior and outperformance of the underlying actively managed funds compared to their respective indices, partially offset by assumption and fund regression updates.
Other, netloss for the three and nine month periods were primarily due to losses of $59 associated with the Company's U.K. property and casualty run-off subsidiaries that were sold in May 2017. The three month period also included gains of $10 on credit derivatives driven by credit spreads tightening. The nine month period also included losses of $48 associated with modified coinsurance reinsurance contracts driven by a decline in interest rates, losses of $28 on equity derivatives which were hedging

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against a decline in the equity market on the investment portfolio and losses of $16 on interest rate derivatives driven by a decline in interest rates.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ, and in the past have differed, from those estimates.
The Company has identified the following estimates as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability:
•property and casualty insurance product reserves, net of reinsurance;
•group benefit long-term disability (LTD)("LTD") reserves, net of reinsurance;
estimated gross profits used in the valuation and amortization of assets and liabilities associated with variable annuity and other universal life-type contracts;
living benefits required to be fair valued (in other policyholder funds and benefits payable);
•evaluation of goodwill for impairment;
•valuation of investments and derivative instruments including evaluation of other-than-temporary impairmentscredit losses on available-for-sale securitiesfixed maturities, AFS and valuation allowancesACL on mortgage loans; and
valuation allowance on deferred tax assets; and
•contingencies relating to corporate litigation and regulatory matters.
Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or volatility in the worldwide debt or equity markets could have a material impact on the Condensed Consolidated Financial Statements. In developing these estimates, management makes subjective and complex judgments that are inherently uncertain and subject to material change as facts and circumstances develop. Although variability is inherent in these estimates, management believes the amounts provided are appropriate based upon the facts available upon compilation of the financial statements.
The Company’s critical accounting estimates are discussed in Part II, Item 7 MD&A in the Company’s 20162020 Form 10-K Annual Report. In addition, Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements included in the Company's 20162020 Form 10-K Annual
Report should be read in conjunction with this section to assist with obtaining an understanding of the underlying accounting policies related to these estimates. The following discussion updates certain of the Company’s critical accounting estimates as of September 30, 2017.March 31, 2021.
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Property & Casualty Insurance Product Reserves, Net of Reinsurance
P&C Loss and Loss Adjustment Expense ("LAE") Reserves, of $19,732, Net of Reinsurance, by Segment as of September 30, 2017March 31, 2021
hig0930201_chart-11852.jpghig-20210331_g12.jpg
Based on the results of the quarterly reserve review process, the Company determines the appropriate reserve adjustments, if any, to record. Recorded reserve estimates are adjusted after consideration of numerous factors, including but not limited to, the magnitude of the difference between the actuarial indication and the recorded reserves, improvement or deterioration of actuarial indications in the period, the maturity of the accident year, trends observed over the recent past and the level of volatility within a particular line of business. In general, adjustments are made more quickly to more mature accident years and less volatile lines of business. Such adjustments of reserves are referred to as “prior accident year development”. Increases in previous estimates of ultimate loss costs are referred to as either an increase in prior accident year reserves or as unfavorable reserve development. Decreases in previous estimates of ultimate loss costs are referred to as either a decrease in prior accident year reserves or as favorable reserve development. Reserve development can influence the comparability of year over year underwriting results and is set forth in the paragraphs and tables that follow.

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Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Three Months Ended March 31, 2021
Commercial LinesPersonal
Lines		Property & Casualty Other OperationsTotal Property & Casualty
Beginning liabilities for unpaid losses and loss adjustment expenses, gross$25,058 $1,836 $2,728 $29,622 
Reinsurance and other recoverables4,271 28 1,426 5,725 
Beginning liabilities for unpaid losses and loss adjustment expenses, net20,787 1,808 1,302 23,897 
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes1,296 414 — 1,710 
Current accident year ("CAY") catastrophes175 39 — 214 
Prior accident year development ("PYD") [1]238 (42)33 229 
Total provision for unpaid losses and loss adjustment expenses1,709 411 33 2,153 
Change in deferred gain on retroactive reinsurance included in other liabilities [1](6)— — (6)
Payments(1,030)(442)(41)(1,513)
Net change in reserves transferred to liabilities held for sale(1)— — (1)
Foreign currency adjustment(6)— — (6)
Ending liabilities for unpaid losses and loss adjustment expenses, net21,453 1,777 1,294 24,524 
Reinsurance and other recoverables4,347 34 1,427 5,808 
Ending liabilities for unpaid losses and loss adjustment expenses, gross$25,800 $1,811 $2,721 $30,332 
Earned premiums and fee income$2,244 $742 
Loss and loss expense paid ratio [2]45.9 59.6 
Loss and loss expense incurred ratio76.5 56.0 
Prior accident year development (pts) [3]10.6 (5.7)
Roll-forward[1] Prior accident year development does not include the benefit of Propertya portion of losses ceded under the Navigators and Casualty Insurance Product LiabilitiesA&E ADC which, under retroactive reinsurance accounting, is deferred and is recognized over the period the ceded losses are recovered in cash from National Indemnity Company ("NICO"). For additional information regarding the two adverse development cover reinsurance agreements, refer to Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses forof Notes to Condensed Consolidated Financial Statements.
[2] The “loss and loss expense paid ratio” represents the Nine Months EndedSeptember 30, 2017
ratio of paid losses and loss adjustment expenses to earned premiums and fee income.
 
Commercial
Lines
Personal
Lines
Property & Casualty Other OperationsTotal Property & Casualty Insurance
Beginning liabilities for unpaid losses and loss adjustment expenses, gross$17,238
$2,094
$2,501
$21,833
Reinsurance and other recoverables2,325
25
426
2,776
Beginning liabilities for unpaid losses and loss adjustment expenses, net14,913
2,069
2,075
19,057
Provision for unpaid losses and loss adjustment expenses    
Current accident year before catastrophes2,971
1,959
—
4,930
Current accident year ("CAY") catastrophes ("CATS")404
253
—
657
Prior accident year development ("PYD")12
(12)1
1
Total provision for unpaid losses and loss adjustment expenses3,387
2,200
1
5,588
Less: payments2,602
2,118
193
4,913
Ending liabilities for unpaid losses and loss adjustment expenses, net15,698
2,151
1,883
19,732
Reinsurance and other recoverables2,404
24
389
2,817
Ending liabilities for unpaid losses and loss adjustment expenses, gross$18,102
$2,175
$2,272
$22,549
Earned premiums$5,159
$2,818
  
Loss and loss expense paid ratio [1]50.4
75.2
  
Loss and loss expense incurred ratio66.0
79.0
  
Prior accident year development (pts) [2]0.2
(0.4)  
[1]The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.
[2][3]“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
Catastrophe Losses of $657 for the Nine Months Ended September 30, 2017prior accident year development to earned premiums.
hig0930201_chart-12794.jpg
Current Accident Year Catastrophe Losses for the Three Months Ended March 31, 2021, Net of Reinsurance
Commercial
Lines		Personal
Lines		Total
Wind and hail$21 $17 $38 
Winter storms [1]154 22 176 
Total catastrophe losses$175 $39 $214 
[1] These amounts represent an aggregation of multiple catastrophes.
[2] Includes catastrophe losses from the February winter storms in Texas and other areas within Commercial Lines of $1 and Personal Lines of $3.
[3] Includes$194 and $28, respectively, gross of reinsurance, and $154 and $22, respectively, net of reinsurance under the Company's per occurrence property catastrophe treaty covering events other than earthquakes and named hurricanes and tropical storms. The reinsurance covers 70% of up to $250 of losses in excess of $100 from Hurricane Harvey and Hurricane Irmasuch events occurring within a seven day time period, subject to a $50 annual aggregate deductible. For further information on the treaty, refer to Enterprise Risk Management — Insurance Risk section of $175 and $157, respectively.



this MD&A.
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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



Unfavorable (Favorable) Prior Accident Year Development for the Three Months Ended March 31, 2021
 Commercial LinesPersonal
Lines		Property & Casualty Other OperationsTotal Property & Casualty Insurance
Workers’ compensation$(40)$— $— $(40)
Workers’ compensation discount accretion9 — — 9 
General liability307 — — 307 
Marine6 — — 6 
Package business(27)— — (27)
Commercial property(13)— — (13)
Professional liability(1)— — (1)
Assumed reinsurance2 — — 2 
Automobile liability— (23)— (23)
Homeowners— (3)— (3)
Catastrophes(4)(12)— (16)
Uncollectible reinsurance(5)— (4)(9)
Other reserve re-estimates, net(2)(4)37 31 
Prior accident year development before change in deferred gain232 (42)33 223 
Change in deferred gain on retroactive reinsurance included in other liabilities6 — — 6 
Total prior accident year development$238 $(42)$33 $229 
(Favorable) Unfavorable Prior Accident Year Development for the Three Months Ended September 30, 2017
 Commercial Lines
Personal
Lines
Property & Casualty Other OperationsTotal Property & Casualty Insurance
Workers’ compensation$(9)$—
$—
$(9)
Workers’ compensation discount accretion5
—
—
5
Package business(22)—
—
(22)
Commercial property1
—
—
1
Bond20
—
—
20
Catastrophes1
—
—
1
Other reserve re-estimates, net1
2
—
3
Total prior accident year development$(3)$2
$—
$(1)
(Favorable) Unfavorable Prior Accident Year Development for the Nine Months Ended September 30, 2017
 Commercial Lines
Personal
Lines
Property & Casualty Other OperationsTotal Property & Casualty Insurance
Workers’ compensation$(29)$—
$—
$(29)
Workers’ compensation discount accretion21
—
—
21
General liability10
—
—
10
Package business(22)—
—
(22)
Commercial property(5)—
—
(5)
Bond10
—
—
10
Automobile liability20
—
—
20
Catastrophes(1)(11)—
(12)
Other reserve re-estimates, net8
(1)1
8
Total prior accident year development$12
$(12)$1
$1
Workers’ compensation reserves were reduced, primarily in Small Commercial, given the continued emergence of favorable frequency for accident years 2013 to 2015. Management has placed additional weight on this favorable experience as it becomes more credible.67
General liability reserves were increased for the 2013 to 2016 accident years on a class of business that insures service and maintenance contractors. This increase was partially offset by a decrease in recent accident year reserves for other Middle Market general liability reserves.
Package reserveswere reduced for accident years 2013 and prior largely due to reducing the Company’s estimate of allocated loss adjustment expenses incurred to settle the claims.
Bond business reserves increased for customs bonds written between 2000 and 2010 which was partly offset by a reduction in reserves for recent accident years as reported losses for commercial and contract surety have emerged favorably.
Automobile liability reserves within Commercial Lines were increased in Small Commercial and large national accounts for the 2013 to 2016 accident years, driven by higher frequency of more severe accidents, including litigated claims.
Catastrophes reserveswere reduced primarily due to lower estimates of 2016 wind and hail event losses and a decrease in losses on a 2015 wildfire.

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Index to MD&A
Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Three Months Ended March 31, 2020
 Commercial
Lines
Personal
Lines
Property & Casualty Other OperationsCorporateTotal Property & Casualty Insurance
Beginning liabilities for unpaid losses and loss adjustment expenses, gross$23,363 $2,201 $2,697 $— $28,261 
Reinsurance and other recoverables [1]4,029 68 1,178 — 5,275 
Beginning liabilities for unpaid losses and loss adjustment expenses, net19,334 2,133 1,519 — 22,986 
Transfer of Y-Risk from Commercial Lines to Corporate(5)— — 5 — 
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes1,343 463 — 3 1,809 
Current accident year catastrophes55 19 — — 74 
Prior accident year development [2]41 (18)— — 23 
Total provision for unpaid losses and loss adjustment expenses1,439 464 — 3 1,906 
Change in deferred gain on retroactive reinsurance included in other liabilities [2](29)— — — (29)
Payments(1,194)(550)(50)(1)(1,795)
Foreign currency adjustment(20)— — — (20)
Ending liabilities for unpaid losses and loss adjustment expenses, net19,525 2,047 1,469 7 23,048 
Reinsurance and other recoverables4,107 68 1,157 — 5,332 
Ending liabilities for unpaid losses and loss adjustment expenses, gross$23,632 $2,115 $2,626 $7 $28,380 
Earned premiums and fee income$2,273 $783 
Loss and loss expense paid ratio [3]52.5 70.2 
Loss and loss expense incurred ratio63.5 60.0 
Prior accident year development (pts) [4]1.8 (2.3)
Roll-forward[1] Includes a cumulative effect adjustment of $1 and $(1) for Commercial Lines and Property & Casualty Other Operations respectively, representing an adjustment to the ACL recorded on adoption of accounting guidance for credit losses on January 1, 2020. See Note 1 - Basis of Presentation and Casualty Insurance Product LiabilitiesSignificant Accounting Policies of Notes to Consolidated Financial Statements included in the Company's 2020 Form 10-K Annual Report.
[2]Prior accident year development does not include the benefit of a portion of losses ceded under the Navigators and A&E ADC which, under retroactive reinsurance accounting, is deferred and is recognized over the period the ceded losses are recovered in cash from NICO. For additional information regarding the two adverse development cover reinsurance agreements, refer to Note 9 - Reserve for Unpaid Losses and LAE forLoss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements.
[3] The “loss and loss expense paid ratio” represents the Nine Months EndedSeptember 30, 2016ratio of paid losses and loss adjustment expenses to earned premiums and fee income.
[4]“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
Current Accident Year Catastrophe Losses for the Three Months Ended March 31, 2020, Net of Reinsurance
Commercial
Lines
Personal
Lines		Total
Wind and hail$50 $18 $68 
Explosion/Fire2 1 3 
Other3 — 3 
Total catastrophe losses$55 $19 $74 
68
 
Commercial
Lines
Personal
Lines
Property & Casualty Other OperationsTotal Property & Casualty Insurance
Beginning liabilities for unpaid losses and loss adjustment expenses, gross$16,559
$1,845
$3,421
$21,825
Reinsurance and other recoverables2,293
19
570
2,882
Beginning liabilities for unpaid losses and loss adjustment expenses, net14,266
1,826
2,851
18,943
Add: Maxum acquisition122
—
—
122
Provision for unpaid losses and loss adjustment expenses    
Current accident year before catastrophes2,820
2,040
—
4,860
Current accident year catastrophes167
188
—
355
Prior accident year development8
131
270
409
Total provision for unpaid losses and loss adjustment expenses2,995
2,359
270
5,624
Less: payments2,582
2,228
471
5,281
Less: net reserves transferred to liabilities held for sale—
—
487
487
Ending liabilities for unpaid losses and loss adjustment expenses, net14,801
1,957
2,163
18,921
Reinsurance and other recoverables2,299
18
377
2,694
Ending liabilities for unpaid losses and loss adjustment expenses, gross$17,100
$1,975
$2,540
$21,615
Earned premiums$4,950
$2,931
  
Loss and loss expense paid ratio [1]52.2
76.0
  
Loss and loss expense incurred ratio60.5
80.5
  
Prior accident year development (pts) [2]0.2
4.5
  
[1]The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses
Index to earned premiums.MD&A
[2]“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
Catastrophe Losses of $355 for the Nine Months Ended September 30, 2016
hig0930201_chart-14655.jpg
[1]These amounts represent an aggregation of multiple catastrophes.
[2]This amount is related to Personal Lines.

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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



Unfavorable (Favorable) Prior Accident Year Development for the Three Months Ended March 31, 2020
 Commercial Lines
Personal
Lines
Property & Casualty Other OperationsTotal Property & Casualty Insurance
Workers’ compensation$(17)$— $— $(17)
Workers’ compensation discount accretion9 — — 9 
General liability12 — — 12 
Marine— — — — 
Package business1 — — 1 
Commercial property(7)— — (7)
Professional liability1 — — 1 
Bond— — — — 
Assumed Reinsurance— — — — 
Automobile liability5 (6)— (1)
Homeowners— (2)— (2)
Net asbestos reserves— — — — 
Net environmental reserves— — — — 
Catastrophes(5)(8)— (13)
Uncollectible reinsurance— — — — 
Other reserve re-estimates, net13 (2)— 11 
Prior accident year development before change in deferred gain12 (18)— (6)
Change in deferred gain on retroactive reinsurance included in other liabilities29 — — 29 
Total prior accident year development$41 $(18)$— $23 
(Favorable) Unfavorable Prior Accident Year Development for the Three Months Ended September 30, 2016
 Commercial Lines
Personal
Lines
Property & Casualty Other OperationsTotal Property & Casualty Insurance
Workers’ compensation$(4)$—
$—
$(4)
Workers’ compensation discount accretion7
—
—
7
General liability1
—
—
1
Package business(2)—
—
(2)
Commercial property5
—
—
5
Professional liability(2)—
—
(2)
Automobile liability18
—
—
18
Homeowners—
1
—
1
Catastrophes(3)1
—
(2)
Other reserve re-estimates, net2
1
—
3
Total prior accident year development$22
$3
$—
$25
(Favorable) Unfavorable Prior Accident Year Development for the Nine Months Ended September 30, 2016
 Commercial Lines
Personal
Lines
Property & Casualty Other OperationsTotal Property & Casualty Insurance
Workers’ compensation$(87)$—
$—
$(87)
Workers’ compensation discount accretion21
—
—
21
General liability67
—
—
67
Package business50
—
—
50
Commercial property2
—
—
2
Professional liability(35)—
—
(35)
Bond(6)—
—
(6)
Automobile liability19
140
—
159
Homeowners—
(4)—
(4)
Net asbestos reserves—
—
197
197
Net environmental reserves—
—
71
71
Catastrophes(4)(3)—
(7)
Uncollectible reinsurance(30)—
—
(30)
Other reserve re-estimates, net11
(2)2
11
Total prior accident year development$8
$131
$270
$409
Workers' compensation reservesconsider favorable emergence on reported losses for recent accident years as well as a partially offsetting adverse impact relatedFor discussion of the factors contributing to two recent Florida Supreme Court rulings that have increased the Company's exposure to workers' compensation claims in that state. The favorable emergence has been driven by lower frequency and, to a lesser extent, lower medical severity and management has placed additional weight on this favorable experience as it becomes more credible.
General liability reservesincreased for accident years 2012 through 2015 primarily due to higher severity losses incurred on a class of business that insures service and maintenance contractors and, in second quarter 2016, increased reserves in general liability for accident years 2008 and 2010 primarily due to indemnity losses and legal costs associated with a litigated claim.
Small Commercial package business reservesincreased due to higher than expected severity on liability claims, principally for accident years 2013 through 2015. Severity for these accident years has developed unfavorably and management has placed more weight on emerged experience.
Professional liability reservesdecreased for claims made years 2008 through 2013, primarily for large accounts, including on non-securities class action cases. Claim costs have emerged favorably as these years have matured and management has placed more weight on the emerged experience.
Automobile liability reservesincreased in commercial lines, predominantly for the 2015unfavorable (favorable) prior accident year primarily duereserve development, please refer to increased frequencyNote 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses of large claims. Automobile liability reserves also increased in personal lines, primarily relatedNotes to increased bodily injury frequency and severity for the 2015Condensed Consolidated Financial Statements.


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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



accident year, including for uninsured and under-insured motorist claims, and increased bodily injury severity for the 2014 accident year. Increases in auto liability loss costs were across both the direct and agency distribution channels.
Asbestos and environmental reserves increased during the period as a result of the 2016 comprehensive annual review. For a discussion of the Company's 2016 review of asbestos and environmental reserves, see Part II, Item 7 MD&A, Critical Accounting Estimates, Property & Casualty Other Operations section in the Company’s 2016 Form 10-K Annual Report.
Uncollectible reinsurance reservesdecreased as a result of giving greater weight to favorable collectibility experience in recent calendar periods in estimating future collections.
P&C Other Operations Total Reserves, Net of Reinsurancehig0930201_chart-10083.jpg
Asbestos and Environmental Reserves
Reserves for asbestos and environmental are primarily within P&C Other Operations with less significant amounts of asbestos and environmental reserves included within Commercial Lines and Personal Lines reporting segments (collectively "Ongoing Operations"). The following tables include all asbestos and environmental reserves, including reserves in P&C Other Operations and Ongoing Operations.
Asbestos and Environmental Net Reserves
 AsbestosEnvironmental
September 30, 2017  
Property and Casualty Other Operations$1,179
$188
Commercial Lines and Personal Lines74
56
Ending liability — net$1,253
$244
December 31, 2016  
Property and Casualty Other Operations$1,282
$234
Commercial Lines and Personal Lines81
58
Ending liability — net$1,363
$292
Property & Casualty Reserves Asbestos and Environmental ("A&E") Summary as of September 30, 2017
  AsbestosEnvironmentalTotal A&E
Gross   
 Direct$1,450
$262
$1,712
 Assumed Reinsurance143
—
143
 Total1,593
262
1,855
Ceded(340)(18)(358)
Net$1,253
$244
$1,497


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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Roll-Forward of Asbestos and Environmental Losses and LAE for the Nine Months Ended September 30, 2017 and September 30, 2016
 AsbestosEnvironmental
2017  
Beginning liability—net$1,363
$292
Reclassification of allowance for uncollectible reinsurance [1]1
—
Less: losses and loss adjustment expenses paid111
48
Ending liability – net$1,253
$244
2016  
Beginning liability—net$1,803
$318
Losses and loss adjustment expenses incurred197
71
Less: losses and loss adjustment expenses paid [2]389
35
Less: net reserves transferred to liabilities held for sale205
41
Ending liability – net$1,406
$313
[1] Related to the reclassification of an allowance for uncollectible reinsurance from the "All Other" category of P&C Other Operations reserves.
[2] Included $262 related to the settlement in 2016 of PPG Industries ("PPG") asbestos liabilities, net of reinsurance billed to third-party reinsurers.
The Company classifies its asbestos and environmental reserves into two categories: Direct and Assumed Reinsurance.
Direct Insurance- includes primary and excess coverage. Of the two categories of claims, direct policies tend to have the greatest factual development from which to estimate the Company’s exposures.
Assumed Reinsurance- includes both “treaty” reinsurance (covering broad categories of claims or blocks of business) and “facultative” reinsurance (covering specific risks or individual policies of primary or excess insurance companies). Assumed Reinsurance exposures are less predictable than direct insurance exposures because the Company does not generally receive notice of a reinsurance claim until the underlying direct insurance claim is mature. This causes a delay in the receipt of information at the reinsurer level and adds to the uncertainty of estimating related reserves.
Net Survival Ratio
Net survival ratio is the quotient of the net carried reserves divided by average annual payments net of reinsurance and is an indication of the number of years that net carried reserves would last (i.e. survive) if future annual net payments were consistent with the calculated historical average.
The net survival ratios shown below are calculated for the one and three year periods ended September 30, 2017 and are calculated excluding the effect of net reserves for asbestos and environmental related to the second quarter 2017 sale of the Company's U.K. Property & Casualty run-off subsidiaries. See
section that follows entitled Adverse Development Cover which could materially affect the survival ratio of net reserves given that adverse development of asbestos and environmental reserves, if any, subsequent to December 31, 2016 will be ceded to NICO up to the reinsurance limit. For asbestos, the table also presents the net survival ratios excluding the effect of the PPG Industries ("PPG") settlement in the second quarter of 2016.
Net Survival Ratios
 AsbestosEnvironmental
One year net survival ratio6.93.5
Three year net survival ratio4.84.2
One year net survival ratio - excluding PPG settlement8.1 
Three year net survival ratio - excluding PPG settlement7.5 
Asbestos and Environmental Paid and Incurred Losses and LAE Development for the Nine Months Ended September 30, 2017
 AsbestosEnvironmental
 Paid
Losses &  LAE		Incurred
Losses &  LAE		Paid
Losses &  LAE		Incurred
Losses &  LAE
Gross    
Direct$105
$—
$51
$—
Assumed Reinsurance34
—
7
—
Total139
—
58
—
Ceded(28)—
(10)—
Net$111
$—
$48
$—
Annual Reserve Reviews
Review of Asbestos Reserves
In 2017, the Company expects to perform its regular comprehensive annual review of asbestos reserves in the fourth quarter.
As part of its evaluation in the second quarter of 2016, the Company reviewed all of its open direct domestic insurance accounts exposed to asbestos liability, as well as assumed reinsurance accounts. Based on this evaluation, the Company increased its net asbestos reserves for prior year development by $197 in second quarter 2016.
Review of Environmental Reserves
In 2017, the Company expects to perform its regular comprehensive annual review of environmental reserves in the fourth quarter.
As part of its evaluation in the second quarter of 2016, the Company reviewed all of its open direct domestic insurance accounts exposed to environmental liability, as well as assumed reinsurance accounts and its London Market exposures for both direct and assumed reinsurance. Based on this evaluation, the

87



Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Company increased its net environmental reserves for prior year development by $71 in second quarter 2016.
2016 Reserve Reviews
For a discussion of the Company's 2016 comprehensive annual review of asbestos and environmental reserves, see Part II, Item 7 MD&A, Critical Accounting Estimates, Property & Casualty Other Operations section in the Company’s 2016 Form 10-K Annual Report.
Adverse Development Cover
Effective December 31, 2016, the Company entered into an asbestos and environmental adverse development cover (“ADC”) reinsurance agreement with National Indemnity Company (“NICO”), a subsidiary of Berkshire Hathaway Inc., to reduce uncertainty about potential adverse development. Under the ADC, the Company paid a reinsurance premium of $650 for NICO to assume adverse net loss and allocated loss adjustment expense reserve development up to $1.5 billion above the Company’s existing net asbestos and environmental (“A&E”) reserves as of December 31, 2016 of approximately $1.7 billion.  The $650 reinsurance premium was placed in 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 ADC covers substantially all the Company’s A&E reserve development up to the reinsurance limit. The ADC excludes risk of adverse development on net asbestos and environmental reserves that were part of the Company’s U.K. Property and Casualty run-off subsidiaries that were sold in May 2017, which have been accounted for as liabilities held for sale in the consolidated balance sheets as of December 31, 2016.
The ADC has been accounted for as retroactive reinsurance and the Company reported the $650 cost as a loss on reinsurance transaction in the fourth quarter of 2016. Under retroactive reinsurance accounting, net adverse asbestos and environmental reserve development after December 31, 2016, if any, will result in an offsetting reinsurance recoverable up to the $1.5 billion limit. Cumulative ceded losses up to the $650 reinsurance premium paid would be recognized as a dollar-for-dollar offset to direct losses incurred. Cumulative ceded losses exceeding the $650 reinsurance premium paid would result in a deferred gain.  The deferred gain would be 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 after December 31, 2016 in excess of $650 may result in significant charges against earnings.
Uncertainties Regarding Adequacy of Asbestos and Environmental Reserves
A number of factors affect the variability of estimates for asbestos and environmental reserves before considering the effect of the reinsurance agreement with NICO, including assumptions with respect to the frequency of claims, the average severity of those claims settled with payment, the dismissal rate of claims with no payment, resolution of coverage disputes with
our policyholders and the expense to indemnity ratio. The uncertainty with respect to the underlying reserve assumptions for asbestos and environmental adds a greater degree of variability to these reserve estimates than reserve estimates for more traditional exposures.
As of September 30, 2017 , the Company reported $1.3 billion of net asbestos reserves and $244 million of net environmental reserves. The Company believes that its current asbestos and environmental reserves are appropriate. However, analyses of future developments could cause The Hartford to change its estimates of its asbestos and environmental reserves. As discussed above the effect of these changes could be material to the Company's liquidity and, if cumulative adverse development subsequent to December 31, 2016 exceeded $650, the effect of the changes could be material to the Company's consolidated operating results. The process of estimating asbestos and environmental reserves remains subject to a wide variety of uncertainties, which are detailed in the Company's 2016 Form 10-K Annual Report.
Consistent with the Company's long-standing reserve practices, the Company will continue to review and monitor its reserves in Property & Casualty Other Operations regularly, including its annual reviews of asbestos liabilities, reinsurance recoverables and the allowance for uncollectible reinsurance, and environmental liabilities, and where future developments indicate, make appropriate adjustments to the reserves. For a discussion of the Company's reserving practices, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance in the Company's 2016 Form 10-K Annual Report.
Estimated Gross Profits
Estimated gross profits (“EGPs”) are used in the valuation and amortization of assets, including DAC and SIA. Portions of EGPs are also used in the valuation of reserves for death and other insurance benefit features on variable annuity and other universal life type contracts.
Talcott Resolution Significant EGP - based Balances
 As of September 30, 2017As of December 31, 2016
DAC$986
$1,066
SIA$51
$53
Death and Other Insurance Benefit Reserves, net of reinsurance [1]$361
$354
[1] For additional information on death and other insurance benefit reserves, see Note 9 - Reserve for Future Policy Benefits and Separate Account Liabilities of Notes to Condensed Consolidated Financial Statements.

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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Talcott Resolution Benefit (Charge) to Income, Net of Tax, as a Result of Unlock
 Three Months Ended September 30, Nine Months Ended September 30,
 20172016 20172016
DAC$18
$(29) $40
$(17)
SIA1
4
 2
5
Death and Other Insurance Benefit Reserves4
12
 19
30
Total (before tax)23
(13) 61
18
Income tax effect8
(4) 21
7
Total (after-tax)$15
$(9) $40
$11
The Unlock benefit for the three and nine month 2017 periods was primarily due to separate account returns being above our aggregated estimated returns during the period largely due to an increase in equity markets.
The Unlock charge for the three months ended September 30, 2016 was primarily due to the reduction of the fixed annuity DAC balance to zero due to the impact of the sustained low interest rates on estimated gross profits, partially offset by an off-cycle assumption change that reduced future expected lapse rates given recent experience and an unlock benefit on variable annuity DAC due to separate account returns being above our aggregated estimated returns during the period largely due to an increase in equity markets.
The Unlock benefit for the nine months ended September 30, 2016 was primarily due to separate account returns being above our aggregated estimated returns during the period largely due to an increase in equity markets partially offset by the reduction of the fixed annuity DAC balance to zero.
Use of Estimated Gross Profits in Amortization and Reserving
For most annuity contracts, the Company estimates gross profits over 20 years as EGPs emerging subsequent to that time frame are immaterial. Products sold in a particular year are aggregated into cohorts. Future gross profits for each cohort are projected over the estimated lives of the underlying contracts, based on future account value projections for variable annuity products. The projection of future account values requires the use of certain assumptions including: separate account returns; separate account fund mix; fees assessed against the contract holder’s account balance; surrender and lapse rates; interest margin; mortality; and the extent and duration of hedging activities and hedging costs. Changes in these assumptions and changes to other policyholder behavior assumptions such as resets, partial surrenders, reaction to price increases, and asset allocations cause EGPs to fluctuate, which impacts earnings.
The Company determines EGPs from a single deterministic reversion to mean (“RTM”) separate account return projection which is an estimation technique commonly used by insurance entities to project future separate account returns. Through this estimation technique, the Company’s DAC model is adjusted to reflect actual account values at the end of each quarter. Through
consideration of recent market returns, the Company will unlock, or adjust, projected returns over a future period so that the account value returns to the long-term expected rate of return, providing that those projected returns do not exceed certain caps.
Market Unlocks
In addition to updating assumptions in the fourth quarter of each year, an Unlock revises EGPs, on a quarterly basis, to reflect the Company’s current best estimate assumptions and market updates of policyholder account value. The Unlock for future separate account returns is determined each quarter. Under RTM, the expected long-term weighted average rate of return is 8.3%. The annual return assumed over the next five years of approximately 0.1% was calculated based on the return needed over that period to produce an 8.3% return since March of 2009, the date the Company adopted the RTM estimation technique to project future separate account returns. Based on the expected trend of policy lapses and annuitizations, the Company expects approximately 55% of its block of variable annuities to run off in the next 5 years.
Aggregate Recoverability
After each quarterly Unlock, the Company also tests the aggregate recoverability of DAC by comparing the DAC balance to the present value of future EGPs. The margin between the DAC balance and the present value of future EGPs for variable annuities was 42% as of September 30, 2017. If the margin between the DAC asset and the present value of future EGPs is exhausted, then further reductions in EGPs would cause portions of DAC to be unrecoverable and the DAC asset would be written down to equal future EGPs.
Valuation Allowance on Deferred Tax Assets
Deferred tax assets represent the tax benefit of future deductible temporary differences and tax carryforwards. Deferred tax assets are measured using the enacted tax rates expected to be in effect when such benefits are realized if there is no change in tax law. Under U.S. GAAP, we test the value of deferred tax assets for impairment on a quarterly basis at the entity level within each tax jurisdiction, consistent with our filed tax returns. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The determination of the valuation allowance for our deferred tax assets requires management to make certain judgments and assumptions. In evaluating the ability to recover deferred tax assets, we have considered all available evidence as of September 30, 2017, including past operating results, forecasted earnings, future taxable income, and prudent and feasible tax planning strategies. In the event we determine it is not more likely than not that we will be able to realize all or part of our deferred tax assets in the future, an increase to the valuation allowance would be charged to earnings in the period such determination is made. Likewise, if it is later determined that it is more likely than not that those deferred tax assets would be realized, the previously provided valuation allowance would be reversed. Our judgments and assumptions are subject to change given the inherent uncertainty in predicting future performance and specific industry and investment market conditions.

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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

As of September 30, 2017 and December 31, 2016, the Company had no valuation allowance. In assessing the need for a valuation allowance, management considered future taxable temporary difference reversals, future taxable income exclusive of reversing temporary differences and carryovers, taxable income in open carry back years and other tax planning strategies. From time to time, tax planning strategies could include holding a portion of debt securities with market value losses until recovery, altering the level of tax exempt securities held, making investments which have specific tax characteristics, and business considerations such as asset-liability matching. Management views such tax planning strategies as prudent and feasible, and would implement them, if necessary, to realize the deferred tax assets.


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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

SEGMENT OPERATING SUMMARIES
COMMERCIAL LINES
Results of Operations
Underwriting Summary
Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,
20172016Change 20172016Change20212020Change
Written premiums$1,702
$1,673
2% $5,229
$5,068
3%Written premiums$2,503 $2,408 4 %
Change in unearned premium reserve(21)(4)NM
 98
118
(17%)Change in unearned premium reserve268 143 87 %
Earned premiums1,723
1,677
3% 5,131
4,950
4%Earned premiums2,235 2,265 (1 %)
Fee income9
10
(10%) 28
29
(3%)Fee income9 8 13 %
Losses and loss adjustment expenses


   Losses and loss adjustment expenses
Current accident year before catastrophes1,009
969
4% 2,971
2,820
5%Current accident year before catastrophes1,296 1,343 (3 %)
Current accident year catastrophes270
43
NM
 404
167
142%
Prior accident year development(3)22
(114%) 12
8
50%
Current accident year catastrophes [1]Current accident year catastrophes [1]175 55 NM
Prior accident year development [1]Prior accident year development [1]238 41 NM
Total losses and loss adjustment expenses1,276
1,034
23% 3,387
2,995
13%Total losses and loss adjustment expenses1,709 1,439 19 %
Amortization of deferred policy acquisition costs253
243
4% 754
727
4%Amortization of deferred policy acquisition costs344 356 (3 %)
Underwriting expenses348
303
15% 995
915
9%Underwriting expenses394 443 (11 %)
Amortization of other intangible assetsAmortization of other intangible assets7 7 — %
Dividends to policyholders4
4
—% 11
12
(8%)Dividends to policyholders6 8 (25 %)
Underwriting gain (loss)(149)103
NM
 12
330
(96%)Underwriting gain (loss)(216)20 NM
Net servicing income1
2
(50%) 2
2
—%Net servicing income2 1 100 %
Net investment income [1]241
239
1% 724
674
7%
Net realized capital gains [1]13
39
(67%) 56
31
81%
Other income (expenses)(1)(3)67% —
(2)100%
Net investment income [2]Net investment income [2]327 277 18 %
Net realized capital gains (losses) [2]Net realized capital gains (losses) [2]44 (143)131 %
Other expensesOther expenses(4)(6)33 %
Income before income taxes105
380
(72%) 794
1,035
(23%) Income before income taxes153 149 3 %
Income tax expense [2]15
112
(87%) 215
305
(30%)
Income tax expense [3] Income tax expense [3]24 28 (14 %)
Net income$90
$268
(66%) $579
$730
(21%)Net income$129 $121 7 %
[1]
[1]For discussion of consolidated investment results, see MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).
[2]
For discussion of income taxes, see Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
Premium Measures [1]
 Three Months Ended September 30, Nine Months Ended September 30,
 20172016 20172016
New business premium$274
$270
 $864
$832
Standard commercial lines policy count retention83%85% 84%84%
Standard commercial lines renewal written price increase3.5%2.0% 3.4%2.1%
Standard commercial lines renewal earned price increase3.1%2.2% 2.7%2.4%
Standard commercial lines policies in-force as of end of period (in thousands)   1,341
1,345
[1]Standard commercial lines consists of Small Commercial and Middle Market. Standard Commercial premium measures exclude Middle Market programs and livestock lines of business.

91



Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Underwriting Ratios
 Three Months Ended September 30, Nine Months Ended September 30,

20172016Change 20172016Change
Loss and loss adjustment expense ratio       
Current accident year before catastrophes58.6
57.8
0.8
 57.9
57.0
0.9
Current accident year catastrophes15.7
2.6
13.1
 7.9
3.4
4.5
Prior accident year development(0.2)1.3
(1.5) 0.2
0.2
—
Total loss and loss adjustment expense ratio74.1
61.7
12.4
 66.0
60.5
5.5
Expense ratio34.4
32.0
2.4
 33.5
32.6
0.9
Policyholder dividend ratio0.2
0.2
—
 0.2
0.2
—
Combined ratio108.6
93.9
14.7
 99.8
93.3
6.5
Current accident year catastrophes and prior year development15.5
3.9
11.6
 8.1
3.6
4.5
Underlying combined ratio93.2
90.0
3.2
 91.7
89.8
1.9
Net Income
hig0930201_chart-11287.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Net income decreased for the three month period, primarily due to the effect of hurricanes Harvey and Irma in the third quarter of 2017 and, to a lesser extent, a decrease in net realized capital gains and an increase in underwriting expenses.
Net income decreased for the nine month period due to a lower underwriting gain primarily driven by higher catastrophe losses and an increase in underwriting expenses, partially offset by increases in net investment income and net realized capital gains.
Underwriting Gain (Loss)
hig0930201_chart-12222.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Underwriting gain (loss)decreased for the three month period, primarily due to higher catastrophe losses due to hurricanes Harvey and Irma. Also, contributing to the decrease were higher underwriting expenses, driven by higher variable incentive compensation and technology costs, and higher current accident year loss costs in workers’ compensation, partially offset by a change to net favorable prior year development.
Underwriting gaindecreased for the nine month period due to higher catastrophe losses and higher underwriting expenses due to an increase in variable incentive compensation. Also, contributing to the decrease were higher current accident year loss costs for workers’ compensation and non-catastrophe property, partially offset by the effect of earned premium growth.

92



Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Earned Premiums
hig0930201_chart-13264.jpg
[1] Other of $10 and $11 for the three months ended September 30, 2016, and 2017, and $32 and $35 for the nine months ended September 30, 2016, and 2017, respectively, is included in the total.
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Earned premiums increased for the three and nine month periods reflecting written premium growth over the preceding twelve months.
Written premiumsincreased for the three month period due to growth in Small Commercial, partially offset by declines in Middle Market and Specialty Commercial. Written premiums increased for the nine month period primarily due to growth in Small Commercial.
Small Commercial written premium growth for both the three and nine month periods was primarily due to higher renewal premium driven by renewal written price increases and growth from the acquisition of Maxum, partially offset by lower new business premium, excluding Maxum, and the effect of lower policy retention.
Middle Market written premiums declined for the three month period due to lower renewal and other premium,
partially offset by higher new business premium. For the nine month period, Middle Market written premiums were up modestly as higher new business was largely offset by lower renewal and other premium.
Specialty Commercial written premium declined for the three month period, primarily due to a decline in National Accounts. For the nine month period, Specialty Commercial written premiums were essentially flat as declines in National Accounts were offset by an increase in Bond.
For the three month period, renewal written price increases averaged 3.5% in standard commercial, which included 4.7% for Small Commercial and 1.3% for Middle Market.
Loss and LAE Ratio before Catastrophes and Prior Accident Year Development
hig0930201_chart-15366.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Loss and LAE ratio before catastrophes and prior accident year development,increased see MD&A - Critical Accounting Estimates, Property and Casualty Insurance Product Reserves Development, Net of Reinsurance and Note 9 - Reserve for the three month period, primarily dueUnpaid Losses and Loss Adjustment Expenses of Notes to a higher loss and loss adjustment expense ratio in workers' compensation and general liability, partially offset by a lower loss and loss adjustment expense ratio in commercial automobile.Condensed Consolidated Financial Statements.
Loss and LAE ratio before catastrophes and prior accident year developmentincreased for the nine month period, primarily due to a higher loss and loss adjustment expense ratio in workers' compensation, commercial automobile and general liability, as well as higher commercial property losses in Middle Market.
[2]For discussion of consolidated investment results, see MD&A - Investment Results.

93



Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Catastrophes and (Favorable) Unfavorable Prior Accident Year Development
hig0930201_chart-16431.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Current accident year catastrophe losses for the three month 2017 period were primarily from hurricanes Harvey and Irma. Catastrophe losses for the three month 2016 period were primarily due to multiple wind and hail events concentrated in the Midwest and the central plains.
Current accident year catastrophe losses for the nine month 2017 period were primarily from hurricanes Harvey and Irma, but also included wind and hail events in the Midwest, Texas and Colorado. Catastrophe losses for the nine month 2016 period were primarily due to wind and hail events and winter storms across various U.S. geographic regions.
Prior accident year development was favorable for the three month 2017 period compared to unfavorable prior accident year development for the three month 2016 period. Net reserve decreases for the three month 2017 period were primarily related to reductions in package business and workers' compensation reserves, partially offset by an increase in bond reserves. Net reserve increases for the three month 2016 period were primarily related to increases in commercial auto liability.
Prior accident year development was unfavorable for the nine month 2017 period compared to unfavorable prior accident year development for the nine month 2016 period. Net reserve increases for the nine month 2017 period were primarily related to commercial automobile liability, general liability and bond, largely offset by a decrease in reserves for package business. Net reserve increases for the nine month 2016 period were primarily related to reserve increases for general liability, package business and commercial auto, largely offset by reserve
decreases in workers' compensation, professional liability and uncollectible reinsurance.


94



Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

PERSONAL LINES
Results of Operations
Underwriting Summary
 Three Months Ended September 30, Nine Months Ended September 30,
Underwriting Summary20172016Change 20172016Change
Written premiums$924
$1,000
(8%) $2,738
$2,945
(7%)
Change in unearned premium reserve3
20
(85%) (47)14
NM
Earned premiums921
980
(6%) 2,785
2,931
(5%)
Fee income11
10
10% 33
29
14%
Losses and loss adjustment expenses


   
Current accident year before catastrophes663
719
(8%) 1,959
2,040
(4%)
Current accident year catastrophes82
37
122% 253
188
35%
Prior accident year development2
3
(33%) (12)131
(109%)
Total losses and loss adjustment expenses747
759
(2%) 2,200
2,359
(7%)
Amortization of DAC76
86
(12%) 236
264
(11%)
Underwriting expenses146
147
(1%) 425
461
(8%)
Underwriting loss(37)(2)NM
 (43)(124)65%
Net servicing income [1]4
6
(33%) 11
15
(27%)
Net investment income [2]36
35
3% 107
99
8%
Net realized capital gains [2]2
5
(60%) 9
4
125%
Other income3
2
50% 1
2
(50%)
Income (loss) before income taxes8
46
(83%) 85
(4)NM
Income tax expense (benefit) [3]—
13
(100%) 20
(10)NM
Net income$8
$33
(76%) $65
$6
NM
[1]
Includes servicing revenues of $24 for the three months endedSeptember 30, 2017 and 2016, and $66 and $67 for the nine months endedSeptember 30, 2017and2016, respectively.
[2]For discussion of consolidated investment results, see MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).
[3]
For discussion of income taxes, see Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
Written and Earned Premiums
 Three Months Ended September 30, Nine Months Ended September 30,
Written Premiums20172016Change 20172016Change
Product Line       
Automobile$636
$691
(8%) $1,919
$2,067
(7%)
Homeowners288
309
(7%) 819
878
(7%)
Total$924
$1,000
(8%) $2,738
$2,945
(7%)
Earned Premiums  
   

Product Line  
   

Automobile$644
$686
(6%) $1,950
$2,044
(5%)
Homeowners277
294
(6%) 835
887
(6%)
Total$921
$980
(6%) $2,785
$2,931
(5%)

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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Premium Measures
 Three Months Ended September 30, Nine Months Ended September 30,
Premium Measures20172016 20172016
Policies in-force end of period (in thousands)     
Automobile   1,768
2,016
Homeowners   1,071
1,208
New business written premium     
Automobile$37
$70
 $117
$263
Homeowners$11
$18
 $35
$62
Policy count retention     
Automobile80%84% 81%84%
Homeowners83%84% 82%84%
Renewal written price increase     
Automobile12.0%8.0% 10.9%7.0%
Homeowners8.6%8.3% 8.9%7.9%
Renewal earned price increase     
Automobile10.1%6.4% 9.1%6.0%
Homeowners8.7%7.8% 8.4%7.5%
Underwriting Ratios
 Three Months Ended September 30, Nine Months Ended September 30,
Underwriting Ratios20172016Change 20172016Change
Loss and loss adjustment expense ratio       
Current accident year before catastrophes72.0
73.4
(1.4) 70.3
69.6
0.7
Current accident year catastrophes8.9
3.8
5.1
 9.1
6.4
2.7
Prior year development0.2
0.3
(0.1) (0.4)4.5
(4.9)
Total loss and loss adjustment expense ratio81.1
77.4
3.7
 79.0
80.5
(1.5)
Expense ratio22.9
22.8
0.1
 22.5
23.7
(1.2)
Combined ratio104.0
100.2
3.8
 101.5
104.2
(2.7)
Current accident year catastrophes and prior year development9.1
4.1
5.0
 8.7
10.9
(2.2)
Underlying combined ratio94.9
96.1
(1.2) 92.9
93.3
(0.4)

Product Combined Ratios
 Three Months Ended September 30, Nine Months Ended September 30,
 20172016Change 20172016Change
Automobile  

   

Combined ratio106.3
104.8
1.5
 101.5
109.5
(8.0)
Underlying combined ratio101.6
103.1
(1.5) 99.1
100.7
(1.6)
Homeowners  

   

Combined ratio97.9
89.2
8.7
 101.6
92.1
9.5
Underlying combined ratio78.9
79.6
(0.7) 78.4
76.3
2.1

96



Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Net Income
hig0930201_chart-12396.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Net incomefor the three month period decreased from 2016 to 2017, primarily resulting from higher catastrophe losses due to hurricanes Harvey and Irma.
Net incomefor the nine month period increased from 2016 to 2017, primarily due to a lower underwriting loss, driven by improved auto underwriting results.
Underwriting Loss
hig0930201_chart-13856.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Underwriting lossincreased for the three month period, primarily due to the higher current accident year catastrophes in 2017. A decrease in underwriting expenses and DAC
amortization was offset by the effect of lower earned premium as the Company took actions to improve profitability.
Underwriting lossdecreased for the nine month period primarily due to the effect of unfavorable reserve development in the first half of 2016 and a decrease in underwriting expenses, partially offset by higher catastrophes, a higher current accident year loss and loss adjustment expense ratio before catastrophes, and the effect of a decline in earned premium. The decrease in underwriting expenses was primarily due to a decrease in direct marketing expenses that was partially offset by higher variable incentive compensation and the decrease in DAC amortization was driven primarily by lower Agency commissions.
Earned Premiums
hig0930201_chart-15122.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Earned premiums decreased for the three and nine month periods, reflecting a decline in written premium over the prior six to twelve months, particularly in Other Agency business.
Written premiums decreased for the three and nine month periods in AARP Direct and both Agency channels primarily due to a decline in new business and lower policy count retention in both automobile and homeowners.
For the three and nine month periods, renewal written pricing increased in both automobile and home, as the Company increased rates to improve profitability.
Policy count retention decreased for the three and nine month periods in both automobile and homeowners, driven in part by renewal written pricing increases.


97



Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Policies in-forcedecreased for the nine month period in both automobile and homeowners, driven by lower new business and lower policy count retention.
Loss and LAE Ratio before Catastrophes and Prior Accident Year Development
hig0930201_chart-16517.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Loss and LAE ratio before catastrophes and prior accident year development decreased for the three month period, primarily as a result of lower automobile liability and auto physical damage frequency, lower non-catastrophe weather-related homeowners losses and the effect of earned pricing increases.
Loss and LAE ratio before catastrophes and prior accident year development increased for the nine month period, primarily as a result of higher non-catastrophe weather-related homeowners losses, partially offset by the effect of increases in earned pricing. Taking into account management’s current view of loss cost changes for the first nine months of 2016, automobile liability frequency has decreased while automobile liability severity has increased modestly.
Catastrophes and (Favorable) Unfavorable Prior Accident Year Developmenthig0930201_chart-17724.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Current accident year catastrophe lossesfor the three month 2017 period were primarily due to hurricanes Harvey and Irma. Catastrophe losses for the three month 2016 period were primarily due to multiple wind and hail events across various U.S. geographic regions.
Current accident year catastrophe lossesfor the nine month 2017 period were primarily due to hurricanes Harvey and Irma as well as multiple wind and hail events across various U.S. geographic regions, concentrated in Texas, Colorado, the Midwest and the Southeast. Catastrophe losses for the nine month 2016 period were primarily due to multiple wind and hail events across various U.S. geographic regions, concentrated in the Midwest and central plains.
Prior accident year development was slightly unfavorable for the three month periods in both 2016 and 2017. Net reserves increased for the three month 2017 period primarily due to increases in reserves for prior accident year non-catastrophe homeowners.
Prior accident year development was favorable for the nine month 2017 period compared to unfavorable prior accident year development for the nine month 2016 period. Net

98



Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

reserves decreased for the nine month 2017 period primarily due to decreases in reserves for prior accident year catastrophes. Net reserves increased for the nine month 2016 period primarily related to increased bodily injury frequency and severity for the 2015 accident year and increased bodily injury severity for the 2014 accident year. Increases in auto liability loss costs were across both the direct and agency distribution channels.

99



Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

PROPERTY & CASUALTY OTHER OPERATIONS
Results of Operations
Underwriting Summary
 Three Months Ended September 30, Nine Months Ended September 30,
Underwriting Summary20172016Change 20172016Change
Losses and loss adjustment expenses  

   

       Prior accident year development$—
$—
—% $1
$270
(100%)
Total losses and loss adjustment expenses—
—
—% 1
270
(100%)
Underwriting expenses3
7
(57%) 11
20
(45%)
Underwriting loss(3)(7)57% (12)(290)96%
Net investment income [1]26
31
(16%) 84
96
(13%)
Net realized capital gains (losses) [1]1
(47)102% 10
(44)123%
Other income2
2
—% 4
4
—%
Income (loss) before income taxes26
(21)NM
 86
(234)137%
Income tax expense (benefit) [2]8
(52)115% 24
(128)119%
Net income (loss)$18
$31
(42%) $62
$(106)158%
[1]For discussion of consolidated investment results, see MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).
[2] 3]For discussion of income taxes, see Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
Net Income (Loss)70
hig0930201_chart-10364.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Net income for the three month period decreased from 2016, primarily due to lower net investment income and lower net realized capital gains after tax. In the 2016 three month period, the Company recognized a gain of $6, after-tax related to
the sale of its U.K. property and casualty run-off subsidiaries consisting of a $59 pre-tax loss and a $65 tax benefit.
Net income (loss) for the nine month period, improved from a loss in 2016 to net income in 2017, primarily due to the effect of unfavorable asbestos and environmental reserve development in 2016.
Underwriting lossdecreased for the three and nine month periods, primarily due to a $268 increase in asbestos and environmental reserves in 2016.
Asbestos and environmental comprehensive annual reserve reviews were performed in the second quarter of 2016. Based on this evaluation, the Company increased its net asbestos and environmental reserves for prior year development by $197 and $71, respectively, in 2016.
In 2017, the Company will complete its annual asbestos and environmental reserve review in the fourth quarter. The Company has an adverse development cover in place that reinsures asbestos and environmental reserve development after December 31, 2016, subject to a limit of $1.5 billion. For a discussion of the adverse development cover and the Company's second quarter 2016 comprehensive annual review of asbestos and environmental reserves, see Part II, Item 7 MD&A, Critical Accounting Estimates, Property & Casualty Other Operations section in the Company’s 2016 Form 10-K Annual Report.

100



Index to MD&A
Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



Premium Measures
Three Months Ended March 31,
20212020
Small Commercial:
Net new business premium$176 $157 
Policy count retention86 %84 %
Renewal written price increases2.1 %2.3 %
Renewal earned price increases2.2 %2.1 %
Policies in-force as of end of period (in thousands)1,304 1,291 
Middle Market [1]:
Net new business premium$122 $125 
Policy count retention81 %77 %
Renewal written price increases6.0 %7.6 %
Renewal earned price increases7.9 %4.6 %
Policies in-force as of end of period (in thousands)58 62 
Global Specialty:
Global specialty gross new business premium [2]$216 $197 
U.S. global specialty renewal written price increases14.6 %11.5 %
U.S. global specialty renewal earned price increases19.0 %8.0 %
International global specialty renewal written price increases [3]27.7 %22.0 %
International global specialty renewal earned price increases [3]56.6 %23.7 %
[1]Middle market disclosures exclude loss sensitive and programs businesses.
[2]Excludes Global Re and Continental Europe Operations and is before ceded reinsurance.
[3]Excludes offshore energy policies, political violence and terrorism policies, and any business under which the managing agent of our Lloyd's Syndicate delegates underwriting authority to coverholders and other third parties.
Underwriting Ratios
Three Months Ended March 31,
20212020Change
Loss and loss adjustment expense ratio
Current accident year before catastrophes58.0 59.3 (1.3)
Current accident year catastrophes7.8 2.4 5.4 
Prior accident year development10.6 1.8 8.8 
Total loss and loss adjustment expense ratio76.5 63.5 13.0 
Expense ratio32.9 35.2 (2.3)
Policyholder dividend ratio0.3 0.4 (0.1)
Combined ratio109.7 99.1 10.6 
Impact of current accident year catastrophes and prior year development(18.4)(4.2)(14.2)
Underlying combined ratio91.2 94.9 (3.7)
71
GROUP BENEFITS
Results of Operations
Operating Summary
 Three Months Ended September 30, Nine Months Ended September 30,

20172016Change 20172016Change
Premiums and other considerations$822
$812
1 % $2,481
$2,415
3 %
Net investment income [1]95
95
— % 278
271
3 %
Net realized capital gains [1]9
19
(53)% 30
37
(19)%
Total revenues926
926
— % 2,789
2,723
2 %
Benefits, losses and loss adjustment expenses614
642
(4)% 1,893
1,894
— %
Amortization of DAC8
8
— % 24
23
4 %
Insurance operating costs and other expenses204
190
7 % 617
580
6 %
Total benefits, losses and expenses826
840
(2)% 2,534
2,497
1 %
Income before income taxes100
86
16 % 255
226
13 %
Income tax expense [2]29
24
21 % 70
59
19 %
Net income$71
$62
15 % $185
$167
11 %
[1]For discussion
Table of consolidated investment results, see MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).Contents
[2]
For discussion of income taxes, see Note 11 - Income Taxes of NotesIndex to the Consolidated Financial Statements.MD&A
Premiums and Other Considerations
 Three Months Ended September 30, Nine Months Ended September 30,

20172016Change 20172016Change
Fully insured – ongoing premiums$803
$792
1 % $2,410
$2,354
2 %
Buyout premiums—
—
— % 14
6
133 %
Fee income19
20
(5)% 57
55
4 %
Total premiums and other considerations$822
$812
1 % $2,481
$2,415
3 %
Fully insured ongoing sales, excluding buyouts$68
$61
11 % $346
$407
(15)%
Ratios, Excluding Buyouts
 Three Months Ended September 30, Nine Months Ended September 30,

20172016Change 20172016Change
Group disability loss ratio73.0%79.4%6.4 78.3%80.5%2.2
Group life loss ratio77.7%80.0%2.3 75.0%77.4%2.4
Total loss ratio74.7%79.1%4.4 76.2%78.4%2.2
Expense ratio25.8%24.4%(1.4) 26.0%25.0%(1.0)
Margin
 Three Months Ended September 30, Nine Months Ended September 30,
 20172016Change 20172016Change
Net income margin7.7%6.7%1.0
 6.7%6.1%0.6
Effect of net capital realized gains (losses), net of tax on after-tax margin0.5%1.1%(0.6) 0.6%0.7%(0.1)
Core earnings margin7.2%5.6%1.6
 6.1%5.4%0.7

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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



Net Income
hig0930201_chart-10764.jpghig-20210331_g13.jpg
Three and nine months endedSeptember 30, 2017 March 31, 2021 compared to the three and nine months endedSeptember 30, 2016 March 31, 2020
Net incomeincreased in 2021 primarily due to a change from net realized capital losses in 2020 to net realized capital gains in 2021, as well as higher net investment income, largely offset by a change from an underwriting gain to an underwriting loss. For further discussion of investment results, see MD&A - Investment Results.
Underwriting Gain (Loss)
hig-20210331_g14.jpg
Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Underwriting loss in 2021 changed from an underwriting gain in 2020, primarily driven by an increase in net unfavorable prior accident year development, higher current accident year catastrophe losses and $24 before-tax of COVID-19 incurred losses in workers’ compensation and financial and other lines in
first quarter 2021, partially offset by lower underwriting expenses and a lower current accident year loss and LAE ratio before catastrophes and COVID-19 losses. Underwriting expenses declined due to lower staffing costs and other expense savings to Hartford Next and lower travel costs as well as a decrease in the allowance for credit losses on premiums receivable in 2021 compared to an increase in 2020 due to the economic impacts of COVID-19.
Earned Premiums
hig-20210331_g15.jpg
[1] Other of $11 and $11 for the three month period,months ended March 31, 2020, and 2021, respectively, is included in the total.
Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Earned premiums decreased in 2021 due to written premium declines in 2020 in small commercial as well as in middle & large commercial that were driven by the economic impacts of COVID-19, including lower new business across most lines as well as reductions in premiums from endorsements, principally in workers’ compensation due to a declining exposure base from lower payrolls.
Written premiums increased in 2021 driven by growth in global specialty and small commercial, partially offset by a decline in middle and large commercial.
The Company recognized renewal written pricing increases in all lines except workers’ compensation. In global specialty, our U.S. wholesale book achieved an approximate 22% renewal written price increase, led by excess casualty, property and automobile.
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Global specialty international lines achieved a 28% price increase, led by D&O. In small commercial, renewal written price increases were slightly lower in 2021 than 2020, with mid-single digit to high single-digit rate increases in most lines, partially offset by slight written pricing decreases in workers’ compensation. In middle market, pricing increases have moderated from 2020 levels, with high single-digit to low double-digit rate increases in most middle market lines other than workers’ compensation, which experienced low single-digit written pricing increases.

New business premium increased in 2021 driven by growth in small commercial package business, offset by slight declines in middle and large commercial lines. Global specialty gross new business premium increased driven by wholesale and financial lines.
•Small commercial written premium increased in 2021 driven by growth in package business and excess and surplus lines, partially offset by a decline in workers’ compensation.
•Middle & large commercial written premium decreased in 2021 driven by declines in workers’ compensation, industry verticals and national accounts, partially offset by growth in specialty and commercial excess lines.
•Global specialty written premium increased in 2021 driven by growth in U.S. wholesale, global reinsurance, U.S. financial lines and international lines of business.
Current Accident Year Loss and LAE Ratio before Catastrophes
hig-20210331_g16.jpg
Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Current accident year loss and LAE ratio before catastrophes decreased in 2021 primarily due to higher premiumlower loss ratios in global specialty and in middle market workers’ compensation, excluding the impact of COVID-19 claims. The lower loss ratios in global specialty were largely the result of rate and underwriting actions to improve profitability in those lines
and was driven by U.S. wholesale, global reinsurance and U.S. financial lines.
First quarter 2021 included COVID-19 incurred losses of $24 before tax, including losses of $20 in workers’ compensation and $4 in financial and other considerationslines.
Catastrophes and lower benefits, losses and loss adjustment expenses, partially offset by higher insurance operating costs and other expenses and lower net realized capital gains. For the nine month period, net income increased due to higher premium and other considerations and net investment income, partially offset by higher insurance operating costs, state guaranty fund assessments relatedUnfavorable (Favorable) Prior Accident Year Development
hig-20210331_g17.jpg
Three months ended March 31, 2021 compared to the liquidationthree months ended March 31, 2020
Current accident year catastrophe lossesnet of a life and health insurance company, and lower net realized capital gains.
Insurance operating costs and other expensesreinsurance for the three month period increased 7%,months ended March 31, 2021 included $154 of losses from February winter storms primarily in the South, with the remaining losses from wind and hail events, mostly concentrated in the South and along the Pacific coast. Current accident year catastrophe losses in 2020 were primarily from tornado, wind and hail events in the Midwest and Southeast.
Prior accident year developmentwas a net unfavorable $238 in 2021 primarily due to an increase in variable incentive compensation. general liability that included a reserve increase related to the settlement with Boy Scouts of America on sexual molestation and sexual abuse claims, partially offset by reserve decreases in workers’ compensation, package business and commercial property. Net unfavorable reserve development in 2020 primarily included reserve increases for marine, general liability and workers' compensation pool participations, partially offset by reserve decreases for workers' compensation and catastrophes.
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PERSONAL LINES
Results of Operations
Underwriting Summary
Three Months Ended March 31,
20212020Change
Written premiums$715 $744 (4 %)
Change in unearned premium reserve(19)(30)37 %
Earned premiums734 774 (5 %)
Fee income8 9 (11 %)
Losses and loss adjustment expenses
Current accident year before catastrophes414 463 (11 %)
Current accident year catastrophes [1]39 19 105 %
Prior accident year development [1](42)(18)(133 %)
Total losses and loss adjustment expenses411 464 (11 %)
Amortization of DAC58 64 (9 %)
Underwriting expenses148 151 (2 %)
Amortization of other intangible assets1 1 — %
Underwriting gain124 103 20 %
Net servicing income [2]4 2 100 %
Net investment income [3]35 41 (15 %)
Net realized capital gains (losses) [3]7 (23)130 %
Income before income taxes170 123 38 %
 Income tax expense [4]35 25 40 %
Net income$135 $98 38 %
[1]For discussion of current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.
[2]Includes servicing revenues of $19 for the nine monththree months ended March 31, 2021 and 2020. Includes servicing expenses of $15 and $17 for the three months ended March 31, 2021 and 2020, respectively.
[3]For discussion of consolidated investment results, see MD&A - Investment Results.
[4]For discussion of income taxes, see Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
Written and Earned Premiums
Three Months Ended March 31,
Written Premiums20212020Change
Product Line
Automobile$508 $534 (5 %)
Homeowners207 210 (1 %)
Total$715 $744 (4 %)
Earned Premiums
Product Line
Automobile$507 $536 (5 %)
Homeowners227 238 (5 %)
Total$734 $774 (5 %)
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Premium Measures
Three Months Ended March 31,
Premium Measures20212020
Policies in-force end of period (in thousands)
Automobile1,357 1,410 
Homeowners815 868 
Net new business premium
Automobile$53 $58 
Homeowners$13 $17 
Policy count retention
Automobile85 %86 %
Homeowners85 %86 %
Renewal written price increase
Automobile1.9 %3.1 %
Homeowners9.4 %4.7 %
Renewal earned price increase
Automobile2.2 %4.2 %
Homeowners7.1 %6.1 %

Underwriting Ratios
Three Months Ended March 31,
Underwriting Ratios20212020Change
Loss and loss adjustment expense ratio
Current accident year before catastrophes56.4 59.8 (3.4)
Current accident year catastrophes5.3 2.5 2.8 
Prior year development(5.7)(2.3)(3.4)
Total loss and loss adjustment expense ratio56.0 59.9 (3.9)
Expense ratio27.1 26.7 0.4 
Combined ratio83.1 86.7 (3.6)
Impact of current accident year catastrophes and prior year development0.4 (0.2)0.6 
Underlying combined ratio83.5 86.6 (3.1)
Product Combined Ratios
Three Months Ended March 31,
20212020Change
Automobile
Combined ratio83.5 89.8 (6.3)
Underlying combined ratio86.3 90.9 (4.6)
Homeowners
Combined ratio86.8 79.2 7.6 
Underlying combined ratio77.2 76.2 1.0 
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Net Income
hig-20210331_g18.jpg
Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Net income increased $37 from first quarter 2020, largely driven by a change from net realized capital losses in first quarter 2020 to net realized gains in first quarter 2021 and an increase in underwriting gain, partially offset by a decrease in net investment income.
Underwriting Gain
hig-20210331_g19.jpg
Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Underwriting gain in 2021 increased due to lower personal automobile claim frequency from fewer miles driven and higher net favorable prior accident year development, partially offset by higher current accident year catastrophe losses.
Earned Premiums
hig-20210331_g20.jpg
Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Earned premiums decreased in the 2021 period insurancereflecting a decline in written premium over the prior twelve months in both Agency channels and in AARP Direct.
Written premiums decreased in the 2021 period in AARP Direct and both Agency channels due to non-renewed premium exceeding new business. Contributing to the decline in written premium were endorsements reducing premiums for fewer miles driven, decreases in surcharges for moving violations and lower new vehicle sales. Both new business and policy count retention declined in first quarter 2021 compared to the same period in 2020.
Renewal written pricing increases were lower in automobile compared to the first quarter of 2020 though have stabilized since fourth quarter 2020. Renewal written pricing increases for homeowners were higher in the 2021 period in response to recent loss cost trends.
Policy count retention decreased in both automobile and homeowners driven by both competition and the effect of renewal written price increases.
Policies in-force decreased in the 2021 period in both automobile and homeowners driven by not generating enough new business to offset the loss of non-renewed policies.
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Current Accident Year Loss and LAE Ratio before Catastrophes
hig-20210331_g21.jpg
Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Current accident year Loss and LAE ratio before catastrophes decreased in automobile and increased in homeowners. The decrease in automobile was principally due to lower claim frequency as a result of fewer miles driven. The increase in homeowners was due to an increase in both weather and non-weather non-catastrophe losses.
Current Accident Year Catastrophes and Unfavorable (Favorable) Prior Accident Year Development
hig-20210331_g22.jpg

Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Current accident year catastrophe losses for first quarter 2021 included losses from February winter storms primarily in the South, as well as losses from wind and hail events in the South and Pacific Coast. Current accident year catastrophe losses for first quarter 2020 were primarily from tornado, wind and hail events in the Midwest and Southeast.
Prior accident year development was favorable in the 2021 period, driven mostly by a reserve reduction in automobile for the 2017 to 2019 accident years and a reduction in prior accident year catastrophes driven by an expected subrogation recovery related to a 2018 California wildfire. Prior accident year development was favorable in the 2020 period primarily due to a decrease in automobile liability reserves for the 2018 accident year and a decrease in catastrophe reserves, principally for the 2017 California wildfires.
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PROPERTY & CASUALTY OTHER OPERATIONS
Results of Operations
Underwriting Summary
 Three Months Ended March 31,
20212020Change
Losses and loss adjustment expenses
       Prior accident year development [1]$33 $— NM
Total losses and loss adjustment expenses33 — NM
Underwriting expenses2 3 (33 %)
Underwriting loss(35)(3)NM
Net investment income [2]16 16 — %
Net realized capital gains (losses) [2]2 (7)129 %
Income (loss) before income taxes(17)6 NM
Income tax expense (benefit) [3](4)1 NM
Net income (loss)$(13)$5 NM
[1]For discussion of prior accident year development, see MD&A - Critical Accounting Estimates, Property and Casualty Insurance Product Reserves, Net of Reinsurance.
[2]For discussion of consolidated investment results, see MD&A - Investment Results.
[3]For discussion of income taxes, see Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
Net income (loss)
hig-20210331_g23.jpg
Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Net income (loss) changed from net income in the 2020 period to a net loss in the 2021 period due to unfavorable prior accident year reserve development in first quarter 2021, partially offset by a change from net realized capital losses in first quarter 2020 to net realized capital gains in first quarter 2021.
Underwriting (loss) increased in the 2021 period due to unfavorable prior accident year development in first quarter 2021 driven by an increase in reserves for sexual molestation and sexual abuse claims, primarily on assumed reinsurance, partially offset by a reduction in the allowance for uncollectible reinsurance.
Asbestos and environmental reserve comprehensive annualreviews will occur in the fourth quarter of 2021. For information on A&E reserves, see MD&A - Critical Accounting Estimates, Asbestos and Environmental Reserves included in the Company's 2020 Form 10-K Annual Report.
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GROUP BENEFITS
Results of Operations
Operating Summary
Three Months Ended March 31,
20212020Change
Premiums and other considerations$1,418 $1,391 2 %
Net investment income [1]127 115 10 %
Net realized capital gains (losses) [1]19 (8)NM
Total revenues1,564 1,498 4 %
Benefits, losses and loss adjustment expenses1,196 1,007 19 %
Amortization of DAC11 13 (15 %)
Insurance operating costs and other expenses339 339 — %
Amortization of other intangible assets10 11 (9 %)
Total benefits, losses and expenses1,556 1,370 14 %
Income before income taxes8 128 (94 %)
Income tax expense (benefit) [2](1)24 (104 %)
Net income$9 $104 (91 %)
[1]For discussion of consolidated investment results, see MD&A - Investment Results.
[2]For discussion of income taxes, see Note 11 - Income Taxes of Notes to the Condensed Consolidated Financial Statements.
Premiums and Other Considerations
Three Months Ended March 31,
20212020Change
Fully insured – ongoing premiums$1,372 $1,323 4 %
Buyout premiums2 25 (92 %)
Fee income44 43 2 %
Total premiums and other considerations$1,418 $1,391 2 %
Fully insured ongoing sales, excluding buyouts$512 $385 33 %

Ratios, Excluding Buyouts
Three Months Ended March 31,
20212020Change
Group disability loss ratio68.4 %71.5 %(3.1)
Group life loss ratio108.3 %74.6 %33.7
Total loss ratio84.3 %71.9 %12.4
Expense ratio [1]25.3 %26.2 %(0.9)
[1] 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.
Margin
Three Months Ended March 31,
20212020Change
Net income margin0.6 %6.9 %(6.3)
Adjustments to reconcile net income margin to core earnings margin:
Net realized capital losses (gains) excluded from core earnings, before tax(1.1 %)0.6 %(1.7)
Integration and transaction costs associated with acquired business, before tax0.1 %0.3 %(0.2)
Income tax benefit0.2 %(0.1 %)0.3 
Impact of excluding buyouts from denominator of core earnings margin— %0.1 %(0.1)
Core earnings margin(0.2 %)7.8 %(8.0)
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Net Income
hig-20210331_g24.jpg
Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Net income decreased in first quarter 2021, largely driven by $185 of excess mortality in group life, primarily caused by direct and indirect impacts of COVID-19, partially offset by a change from net realized capital losses in first quarter 2020 to net realized capital gains in first quarter 2021.
Insurance operating costs and other expenses increased 6%, primarilywere flat year over year as a reduction in integration costs and lower staffing and other costs due to state guaranty fund assessments of $20 before tax related to the liquidation of a lifeHartford Next operational transformation and health insurance company andcost reduction program was offset by an increase in variable incentive compensation.commissions driven, in part, by growth in premiums and other considerations.
Fully Insured Ongoing Premiums
hig0930201_chart-12060.jpghig-20210331_g25.jpg
[1] Other of $51$58 and $53$77 is included in the three months ended September 30, 2016,March 31, 2020, and 2017,2021, respectively and $153includes other group coverages such as retiree health insurance, critical illness, accident, hospital indemnity and $159 for the nineparticipant accident coverages.
Three months ended September 30, 2016, and 2017, respectively is included in the total.
Three and nine months endedSeptember 30, 2017March 31, 2021 compared to the three and nine months endedSeptember 30, 2016 March 31, 2020
Fully insured ongoing premiums increased 1% and 2%, respectively, for the three and nine month periodsprimarily due to sales in excess of cancellations, strong group life andhigher in-force employer group disability persistencypremiums and modest disability pricing increases.higher supplemental health product premiums.
Fully insured ongoing sales, excluding buyouts, for the three month period increased 11% due to higher large new case sales in the third quarter of 2017. For the nine month period, fully insured ongoing sales decreased 15%, due to fewer large case salesall product lines, though most significantly in2017. group disability.
Ratios
hig0930201_chart-13319.jpghig-20210331_g26.jpg

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Three and nine months ended September 30, 2017March 31, 2021 compared to the three and nine months ended September 30, 2016March 31, 2020
Total lossratio for the three and nine month periods decreased 4.4 points and 2.2 points, respectively, reflecting lower group life and group disability loss ratios. The group life loss ratio for the three and nine month periods decreased 2.3 points and 2.4 points, respectively, due to favorable mortality. The group disability loss ratio for the three and nine month periods decreased 6.4 points and 2.2 points, respectively, due to favorable claim recoveries including higher than expected deaths. In addition, results reflect continued improvements in incidence trends and modest pricing increases for group disability.
Expense ratio increased 1.412.4 points for the three month period reflecting a higher group life loss ratio, partially offset by a lower group disability loss ratio. The group life loss ratio increased 33.7 points primarily driven by higher mortality, including $185 of excess mortality claims in first quarter 2021 due to an increase in variable incentive compensation. For the nine month period the expensedirect and indirect effects of COVID-19. The group disability loss ratio increased 1.0decreased 3.1 points primarily due to state guaranty fund assessmentsmore
favorable prior incurral year development driven by higher claim recoveries and continued improving claim incidence. The three months period ending March 2021 included $13 of losses on short-term disability and New York Paid Family Leave claims related to COVID-19 as compared to $16 for the liquidationthree months ended March 2020.
Expense ratio decreased 0.9 points due to lower staffing and other costs as a result of a lifethe Hartford Next operational transformation and health insurance companycost reduction program and an increase in variable incentive compensation.
the effect of higher premiums.

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MUTUALHARTFORD FUNDS
Results of Operations
Operating Summary

Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended March 31,

20172016Change 20172016Change20212020Change
Fee income and other revenue$203
$178
14 % $595
$517
15 %Fee income and other revenue$282 $247 14 %
Net investment income1
—
NM
 2
1
100 %Net investment income1 1 — %
Net realized capital gains (losses)Net realized capital gains (losses)2 (11)118 %
Total revenues204
178
15 % 597
518
15 %Total revenues285 237 20 %
Amortization of DAC5
6
(17)% 16
17
(6)%Amortization of DAC3 4 (25 %)
Operating costs and other expenses159
141
13 % 468
407
15 %Operating costs and other expenses224 189 19 %
Total benefits, losses and expenses164
147
12 % 484
424
14 %Total benefits, losses and expenses227 193 18 %
Income before income taxes40
31
29 % 113
94
20 % Income before income taxes58 44 32 %
Income tax expense14
10
40 % 40
33
21 %
Income tax expense [1]Income tax expense [1]11 8 38 %
Net income$26
$21
24 % $73
$61
20 %Net income$47 $36 31 %
     
Daily Average Total Mutual Funds segment AUM$109,640
$93,753
17 % $105,491
$90,760
16 %
Return on Assets ("ROA") [1]     
Net income9.5
8.5
12 % 9.3
8.9
4 %
Core Earnings9.5
8.5
12 % 9.3
8.9
4 %
Daily average Hartford Funds AUMDaily average Hartford Funds AUM$143,164 $119,632 20 %
ROA [2]ROA [2]13.1 12.0 9 %
Adjustment to reconcile ROA to ROA, core earnings:Adjustment to reconcile ROA to ROA, core earnings:
Effect of net realized capital losses excluded from core earnings, before taxEffect of net realized capital losses excluded from core earnings, before tax(0.5)3.7 (114 %)
Effect of income tax expense (benefit)Effect of income tax expense (benefit)— (1.0)100 %
ROA, core earnings [2]ROA, core earnings [2]12.6 14.7 (14 %)
[1]For discussion of income taxes, see Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements.
[1] 2]Represents annualized earnings divided by a daily average of assets under management, as measured in basis points.
Mutual Funds Segment AUM
81
 Three Months Ended September 30, Nine Months Ended September 30,
 20172016Change 20172016Change
Mutual Fund AUM - beginning of period$91,256
$74,941
22 % $81,298
$74,413
9 %
Sales5,364
4,896
10 % 18,830
13,682
38 %
Redemptions(4,597)(4,702)2 % (15,416)(14,093)(9)%
Net flows767
194
NM
 3,414
(411)NM
Change in market value and other3,165
2,769
14 % 10,476
3,902
168 %
Mutual Fund AUM - end of period$95,188
$77,904
22 % $95,188
$77,904
22 %
Exchange Traded Products AUM409
210
NM
 409
210
NM
Mutual Funds segment AUM before Talcott Resolution95,597
78,114
22 % 95,597
78,114
NM
Talcott Resolution AUM [1]16,127
16,387
(2)% 16,127
16,387
(2)%
Total Mutual Funds segment AUM$111,724
$94,501
18 % $111,724
$94,501
18 %
[1] Talcott Resolution AUM consist of Company-sponsored mutual fund assets held in separate accounts supporting variable insurance and investment products.
Mutual Fund AUM by Asset Class
 September 30,
2017		September 30, 2016Change
Equity$61,163
$48,476
26%
Fixed Income14,454
12,864
12%
Multi-Strategy Investments [1]19,571
16,564
18%
Mutual Fund AUM$95,188
$77,904
22%
[1] Includes balanced, allocation, and alternative investment products.

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Hartford Funds Segment AUM

Three Months Ended March 31,
20212020Change
Mutual Fund and ETP AUM - beginning of period$124,627 $112,533 11 %
Sales - mutual fund9,198 8,121 13 %
Redemptions - mutual fund(8,428)(9,478)11 %
Net flows - ETP4 (67)106 %
Net flows - mutual fund and ETP774 (1,424)154 %
Change in market value and other4,853 (20,494)124 %
Mutual fund and ETP AUM - end of period130,254 90,615 44 %
Talcott Resolution life and annuity separate account AUM [1]14,944 11,538 30 %
Hartford Funds AUM - end of period$145,198 $102,153 42 %
[1]Represents AUM of the life and annuity business sold in May 2018 that is still managed by the Company's Hartford Funds segment.
Mutual Fund and ETP AUM by Asset Class
As of March 31,
20212020Change
Equity$87,456 $55,076 59 %
Fixed Income17,705 14,558 22 %
Multi-Strategy Investments [1]22,170 18,407 20 %
Exchange-traded Products2,923 2,574 14 %
Mutual Fund and ETP AUM$130,254 $90,615 44 %
[1]Includes balanced, allocation, and alternative investment products.
Net Income
hig0930201_chart-11345.jpghig-20210331_g27.jpg
Three and nine months ended September 30, 2017March 31, 2021 compared to the three and nine months ended September 30, 2016March 31, 2020
Net income for the three and nine month periods increased primarily due to higher investmentfee income as a result of an increase in daily average assets under management, fees resulting from higher AUM levels and the addition of Schroders' funds, partially offset by higher variable costs including sub-advisory and distribution and services expenses.costs. The effect of a change to net realized capital gains in first quarter 2021 from net realized capital losses in first quarter 2020 was offset by the effect of a $12 reduction in contingent consideration payable associated with the acquisition of Lattice that was recognized in first quarter 2020. Realized gains (losses) consist of changes in the market
September 30, 2017
value of Company assets invested in some of the funds which was driven by changes in equity markets.
Hartford Funds AUM
hig-20210331_g28.jpg
March 31, 2021 compared to September 30, 2016March 31, 2020
Total MutualHartford Funds segment AUMincreased primarily resulting from positive net flows, the addition of Schroders' funds and market appreciation. Thedue to an increase in Mutual Fund business AUM wasmarket values, partially offset by the continued run offeffect of Talcott Resolution AUM.net outflows over the prior twelve months. The Company recognized net inflows of $774 for the first quarter of 2021 compared to net outflows of $1.4 billion in first quarter 2020.

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TALCOTT RESOLUTION
Results of Operations
Operating Summary
 Three Months Ended September 30,Nine Months Ended September 30,

20172016Change20172016Change
Earned premiums$27
$35
(23%)$97
$91
7%
Fee income and other218
233
(6%)666
705
(6%)
Net investment income [1]325
366
(11%)963
1,039
(7%)
Realized capital losses:  

   
Total other-than-temporary impairment (“OTTI”) losses(1)(10)90%(10)(19)47%
Other net realized capital losses(30)(22)(36%)(44)(122)64%
Net realized capital losses [1](31)(32)3%(54)(141)62%
Total revenues539
602
(10%)1,672
1,694
(1%)
Benefits, losses and loss adjustment expenses357
345
3%1,037
1,045
(1%)
Amortization of DAC15
60
(75%)58
114
(49%)
Insurance operating costs and other expenses105
105
—%307
325
(6%)
Total benefits, losses and expenses477
510
(6%)1,402
1,484
(6%)
Income before income taxes62
92
(33%)270
210
29%
Income tax expense (benefit)(18)14
NM
17
11
55%
Net income$80
$78
3%$253
$199
27%
Assets Under Management (end of period)  
   
Variable annuity account value$40,707
$41,696
(2%)  
Fixed market value adjusted and payout annuities7,335
7,792
(6%)  
Institutional annuity account value13,836
15,550
(11%)  
Other account value [2]87,547
86,869
1%  
Total account value$149,425
$151,907
(2%)  
Variable Annuity Account Value  
   
Account value, beginning of period$40,668
$41,738
(3%)$40,698
$44,245
(8%)
Net outflows(1,169)(1,417)18%(4,062)(4,379)7%
Change in market value and other1,208
1,375
(12%)4,071
1,830
122 %
Account value, end of period$40,707
$41,696
(2%)$40,707
$41,696
(2%)
[1]For discussion of consolidated investment results, see MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).CORPORATE
[2]
Other account value included $31.4 billion, $15.1 billion, and $41.1 billion as of September 30, 2017 for the Retirement Plans, Individual Life and Private Placement Life Insurance businesses, respectively. Other account value included $31.5 billion, $14.6 billion, and $40.7 billion at September 30, 2016 for the Retirement Plans, Individual Life and Private Placement Life Insurance businesses, respectively. Account values associated with the Retirement Plans and Individual Life businesses no longer generate asset-based fee income due to the sales of these businesses through reinsurance transactions.

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Operating Summary

Three Months Ended March 31,
20212020Change
Fee income$12 $13 (8 %)
Other revenue (loss)(8)2 NM
Net investment income3 9 (67 %)
Net realized capital gains (losses)6 (39)115 %
Total revenues13 (15)187 %
Benefits, losses and loss adjustment expenses [1]1 6 (83 %)
Insurance operating costs and other expenses13 21 (38 %)
Interest expense [2]57 64 (11 %)
Restructuring and other costs11 — NM
Total benefits, losses and expenses82 91 (10 %)
Loss before income taxes(69)(106)35 %
Income tax benefit [3](11)(15)27 %
Net loss(58)(91)36 %
Preferred stock dividends5 5 — %
Net loss available to common stockholders$(63)$(96)34 %
Net Income
hig0930201_chart-10764.jpg
Three[1]Includes benefits expense on life and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Net income for the three month period was up slightly. A change to a net unlock benefit compared to an unlock charge in the prior year period was largely offset by lower net investment income and fee income, the effect of the continued run off of the business.
Net income for the nine month period increased primarily due to lower net realized capital losses in 2017. Net realized capital losses were down due to higher net gains on sales of investments in 2017, a decrease in losses on the modified coinsurance reinsurance contract related to the individual life business reinsured with Prudential, partially offset by an increase in losses on the variable annuity hedge program. Apart from the lower net realized capital losses, earnings were relatively flat as an increase in the unlock benefit and lower interest credited were largely offset by lower net investment income and lower fee income due to the continued run off of the variable annuity block.
For the nine month period in 2017, net investment income decreased due to the run off of the annuity business assets under management and lower limited partnership investment income.
previously underwritten by the Company.
Total Account Value
hig0930201_chart-11731.jpg
September 30, 2017 compared to September 30, 2016
Account valuedecreased by approximately $2.5 billion to $149 billion due to outflows from institutional annuity due to the transfer[2] For discussion of $1.6 billion of Hartford pension assets to a third party provider (seedebt, see Note 15 Employee Benefit Plans14- Debt of Notes to Condensed Consolidated Financial Statements) and net outflowsStatements in variable annuity account value, partially offset by market appreciation.The Hartford's 2020 Form 10-K Annual Report.
Variable annuity net outflows were approximately $1.2 billion and $4.1 billion respectively, for the three and nine months period in 2017, due to the continued run off of the business.
Variable Annuity Annualized Full Surrender Rate
hig0930201_chart-12783.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Variable annuity annualized full surrender rate for the three month period decreased to 5.8%. For the nine month period the variable annuity annualized full surrender rate decreased to 7.0%. In general, as the block of variable annuity

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contracts ages, the remaining in-force contracts are less likely to surrender. However, full surrender rates can fluctuate from period to period.
Contract Counts (in thousands)
hig0930201_chart-13868.jpg
September 30, 2017 compared to September 30, 2016
Contract counts decreased 9% for annuities, due to the continued run off of the block.
Income Taxes
The effective tax rates in 2017 and 2016 differ from the U.S. federal statutory rate of 35% primarily due to permanent differences related to separate account DRD.[3] For discussion of income taxes, see Note 11 - Income Taxes of Notes to the Condensed Consolidated Financial Statements.

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CORPORATE
Results of Operations
Operating Summary
 Three Months Ended September 30, Nine Months Ended September 30,
Operating Summary20172016Change 20172016Change
Fee income [1]$—
$1
(100%) $2
$3
(33%)
Net investment income [2]5
6
(17%) 14
23
(39%)
Net realized capital gains (losses) [2]3
(1)NM
 1
(6)117%
Total revenues8
6
33% 17
20
(15%)
Insurance operating costs and other expenses [1]11
6
83% 20
11
82%
Pension settlement—
—
—% 750
—
NM
Interest expense82
86
(5%) 246
257
(4%)
Total benefits, losses and expenses93
92
1% 1,016
268
NM
Loss before income taxes(85)(86)1% (999)(248)NM
Income tax benefit [3](26)(31)16% (354)(168)(111%)
Net loss$(59)$(55)(7%) $(645)$(80)NM
[1]Fee income includes the income associated with the sales of non-proprietary insurance products in the Company’s broker-dealer subsidiaries that has an offsetting commission expense included in insurance operating costs and other expenses.
[2]For discussion of consolidated investment results, see MD&A - Investment Results, Net Investment Income (Loss) and Net Realized Capital Gains (Losses).
[3]
For discussion of income taxes, see Note 11 - Income Taxes of Notes to the Consolidated Financial Statements.
Net Loss
hig0930201_chart-10270.jpghig-20210331_g29.jpg
Three and nine months ended September 30, 2017March 31, 2021 compared to the three and nine months ended September 30, 2016March 31, 2020
Net lossdecreased primarily due to a change from net realized capital losses in the first quarter 2020 to net realized
capital gains in the first quarter 2021, a decrease in insurance operating costs and other expenses and a decrease in interest expense, partially offset by restructuring costs in the first quarter of 2021, a decrease in net investment income and a larger loss on the Company's retained equity interest in the former life and annuity operations. The loss on the retained equity interest, recognized within other revenues, was ($8) and ($4) for the three months increased from net loss in the prior year period primarily due to an increase in Insurance
operating costsended March 31, 2021 and other expenses. For the nine months , net loss increased primarily due to an after tax pension settlement charge of $488 that occurred in the second quarter.2020 respectively.
Interest Expense
hig0930201_chart-11856.jpg
Three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016
Interest expense decreased primarily due to a decrease in outstanding debt due to debt maturities and the paydown of senior notes. Since September 30, 2016, $691 of senior notes have either matured or been paid down.hig-20210331_g30.jpg
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Three months ended March 31, 2021 compared to the three months ended March 31, 2020
Interest expense decreased as a result of the Company repaying at maturity the $500 principal amount of its 5.5% senior notes in the first quarter of 2020.
ENTERPRISE RISK MANAGEMENT
The Company’s Board of Directors has ultimate responsibility for risk oversight, as described more fully in our Proxy Statement, while management is tasked with the day-to-day management of the Company’s risks.
The Company manages and monitors risk through risk policies, controls and limits. At the senior management level, an Enterprise Risk and Capital Committee (“ERCC”) oversees the risk profile and risk management practices of the Company.
The Company's enterprise risk management ("ERM") function supports the ERCC and functional committees, and is tasked with, among other things:
•risk identification and assessment;
•the development of risk appetites, tolerances, and limits;
•risk monitoring; and
•internal and external risk reporting.
The Company categorizes its main risks as insurance risk, operational risk and financial risk. Insurance risk and financial risk are described in more detail below. Operational risk, including cybersecurity and specificbusiness resiliency response to COVID-19, and specific risk tolerances for natural catastrophes terrorism risk and pandemic risk are described in the ERM section of the MD&A in The Hartford’s 20162020 Form 10-K Annual Report.
Insurance Risk
TheInsurance risk is the risk of losses of both a catastrophic and non-catastrophic nature on the P&C and Group Benefits products the Company categorizes itshas sold. Catastrophe insurance risk is the exposure arising from both natural (e.g., weather, earthquakes, wildfires, pandemics) and man-made catastrophes (e.g., terrorism, cyber-attacks) that create a concentration or aggregation of loss across the Company's insurance or asset portfolios.
Sources of Insurance Risk Non-catastrophe insurance risks across property-exist within each of the Company's segments except Hartford Funds and include:
•Property- Risk of loss to personal or commercial property from automobile related accidents, weather, explosions, smoke, shaking, fire, theft, vandalism, inadequate installation, faulty equipment, collisions and falling objects, and/or machinery mechanical breakdown resulting in physical damage and other covered perils.
•Liability- Risk of loss from automobile related accidents, uninsured and underinsured drivers, lawsuits from accidents, defective products, breach of warranty, negligent acts by
casualty,professional practitioners, environmental claims, latent exposures, fraud, coercion, forgery, failure to fulfill obligations per contract surety, liability from errors and omissions, losses from political and credit coverages, losses from derivative lawsuits, and other securities actions and covered perils.
•Mortality- Risk of loss from unexpected trends in insured deaths impacting timing of payouts from group benefitslife insurance, personal or commercial automobile related accidents, and death of employees or executives during the course of employment, while on disability, or while collecting workers compensation benefits.
•Morbidity- Risk of loss to an insured from illness incurred during the course of employment or illness from other covered perils.
•Disability- Risk of loss incurred from personal or commercial automobile related losses, accidents arising outside of the workplace, injuries or accidents incurred during the course of employment, or from equipment, with each loss resulting in short term or long-term disability payments.
•Longevity- Risk of loss from increased life products. Non-catastrophe insurance risk arisesexpectancy trends among policyholders receiving long-term benefit payments.
•Cyber Insurance- Risk of loss to property, breach of data and business interruption from a numbervarious types of exposures including property, liability, mortality, morbidity, disability and longevity. cyber-attacks.
Catastrophe risk primarily arises in the property, automobile, workers' compensation, casualty, group life, and group disability property,lines of business.
Impact Non-catastrophe insurance risk can arise from unexpected loss experience, underpriced business and/or underestimation of loss reserves and workers' compensation product lines.can have significant effects on the Company’s earnings. Catastrophe insurance risk can arise from various unpredictable events and can have significant effects on the Company's earnings and may result in losses that could constrain its liquidity.
Management The Company's policies and procedures for managing these risks include disciplined underwriting protocols, exposure controls, sophisticated risk-based pricing, risk modeling, risk transfer, and capital management strategies. The Company establisheshas established underwriting guidelines for both individual risks, including individual policy limits, and risks in the aggregate, including aggregate exposure limits by geographic zone and peril. The Company uses both internal and third-party models to estimate the potential loss resulting from various catastrophe events and the potential financial impact those events would have on the Company's financial position and results of operations across its businesses.
In addition, certain insurance products offered by The Hartford provide coverage for losses incurred due to cyber events and the
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Company has assessed and modeled how those products would respond to different events in order to manage its aggregate exposure to losses incurred under the insurance policies we sell. The Company models numerous deterministic scenarios including losses caused by malware, data breach, distributed denial of service attacks, intrusions of cloud environments and attacks of power grids.
Among specific risk tolerances set by the Company, risk limits to control potential lossare set for natural catastrophes, terrorism risk and actively monitors the risk exposures as a percent of statutory surplus. The Company also uses reinsurance to transfer insurance risk to well-established and financially secure reinsurers.pandemic risk.
Reinsurance as a Risk Management Strategy
The Company uses reinsurance to transfer certain risks to reinsurance companies based on specific geographic or risk concentrations. A variety of traditional reinsurance products are used as part of the Company's risk management strategy, including excess of loss occurrence-based products that reinsure property and workers' compensation exposures, and individual risk (including facultative reinsurance) or quota share arrangements, that reinsure losses from specific classes or lines of business. The Company has no significant finite risk contracts in place and the statutory surplus benefit from all such prior year contracts is immaterial. Facultative reinsurance is used by the Company to manage policy-specific risk exposures based on established underwriting guidelines. The Hartford also participates in governmentally administered reinsurance facilities such as the Florida Hurricane Catastrophe Fund (“FHCF”), the Terrorism Risk Insurance Program established under “TRIPRA”(“TRIPRA”) and other reinsurance programs relating to particular risks or specific lines of business.
Reinsurance for Catastrophes-The Company utilizes various reinsurance programs to mitigate catastrophe losses including excess of loss occurrence-based treaties covering property and workers’ compensation, and an aggregate property catastrophe treaty as well as individual risk agreements (including facultative reinsurance) that reinsure losses from specific classes or lines of business. The aggregate property catastrophe treaty covers the aggregate of catastrophe events designated by the Property Claim Services office of Verisk and, for international business, net losses arising from two or more risks involved in the same loss occurrence totaling at least $500 thousand, in excess of a $700 retention. The occurrence-based property catastrophe treaties respond in excess of $100 per occurrence for all perils other than named storm and earthquake (subject to a $50 annual aggregate deductible). The Company has severalper risk and quota share reinsurance that would respond to certain COVID-19 related losses; however, communicable diseases are excluded from our per occurrence property catastrophe reinsurance programs, including reinsurance treaties that covertreaty, aggregate property treaty and workers' compensation catastrophe treaty that incepted on January 1, 2021.The Company has reinsurance in place to cover individual group life losses aggregating from single catastrophe events.in excess of $1 per person.
Primary Catastrophe Treaty Reinsurance Coverages as of September 30, 2017March 31, 2021 [1]
CoverageEffective for the period% of layer(s) reinsurancePer occurrence limit Retention
Property losses arising from a single catastrophe event [1] [2]1/1/2017 to 1/1/201888%$800
 $350
Property catastrophe losses from a Personal Lines Florida hurricane6/1/2017 to 6/1/201890%$102
[3]$32
Workers compensation losses arising from a single catastrophe event [4]1/1/2017 to 12/31/201780%$350
 $100
[1]Certain aspectsPortion of our principal catastrophe treaty have terms that extend beyond the traditional one year term. While overall treaty is placed at 88%, each layer's placement varies slightly.losses reinsuredPortion of losses retained by The Hartford
Per Occurrence Property Catastrophe Treaty from 1/1/2021 to 12/31/2021 [1] [2]
[2]Losses of $0 to $100$50None100% retained
Losses of the property occurrence treaty can alternatively be used as part$100 to $350 for earthquakes and named hurricanes and tropical storms [6]None100% retained
Losses of the$100 to $350 from one event other than earthquakes and named hurricanes and tropical storms (subject to a $50 Annual Aggregate Deductible ("AAD")) [6]70% of $250 in excess of $10030% co-participation
Losses of $350 to $500 from one event (all perils)75% of $150 in excess of $35025% co-participation
Losses of $500 to $1.1 billion from one event [3] (all perils)90% of $600 in excess $50010% co-participation
Aggregate Property Aggregate treaty referenced below.Catastrophe Treaty for 1/1/2021 to 12/31/2021 [4]
[3]$0 to $700 of aggregate lossesThe per occurrence limitNone100% retained
$700 to $900 of aggregate losses100%None
Workers' Compensation Catastrophe Treaty for Florida Hurricane Catastrophe Fund (FHCF), which is required coverage for homeowners business in Florida,  is estimated1/1/2021 to be $102 for the current treaty year, which is calculated on the best of available information from FHCF as of September 2017. 12/31/2021
[4]Losses of $0 to $100 from one eventIn additionNone100% retained
Losses of $100 to the limit shown, the workers compensation reinsurance includes a non-catastrophe, industrial accident layer, providing coverage for $450 from one event [5]80% of a $30 per event limit$350 in excess of a $20 retention.$10020% co-participation
[1] These treaties do not cover the assumed reinsurance business which purchases its own retrocessional coverage.
[2]In addition to the Per Occurrence Property Catastrophe Treaty, for Florida wind events, The Hartford has purchased the mandatory FHCF reinsurance for the annual period starting at June 1,2020. Retention and coverage varies by writing company. The writing company with the largest coverage under FHCF is Hartford Insurance Company of the Midwest, with coverage estimated at approximately $55 of per event losses in excess of a $24 retention (estimates are based on best available information at this time and are periodically updated as information is made available by Florida).
[3]Portions of this layer of coverage extend beyond a traditional one year term.
[4]The aggregate treaty is not limited to a single event; rather, it is designed to provide reinsurance protection for the aggregate of all catastrophe events (up to $350 per event), either designated by the Property Claim Services office of Verisk or, for international business, net losses arising from two or more risks involved in the same loss occurrence totaling at least $500 thousand. All catastrophe losses apply toward satisfying the $700 attachment point under the aggregate treaty.
[5]In addition to the limits shown, the workers' compensation reinsurance includes a non-catastrophe, industrial accident layer, providing coverage for 80% of $30 in per event losses in excess of a $20 retention.
[6]Named hurricanes and tropical storms are defined as any storm or storm system declared to be a hurricane or tropical storm by the US National Hurricane Center, US Weather Prediction Center, or their successor organizations (being divisions of the US National Weather Service).
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In addition to the property catastrophe reinsurance coverage described in the above table, the Company has other catastrophe and working layer treaties and facultative reinsurance agreements that cover property catastrophe losses on an aggregate excess of losslosses. The Per Occurrence Property Catastrophe Treaty, and on a per risk basis. The principal property catastrophe reinsurance program and certain other reinsurance programsWorkers' Compensation Catastrophe Treaty include a provision to reinstate limitsone limit in the event that a catastrophe loss exhausts limits on one or more layers under the treaties. In addition, covering the period from January 1, 2017 to December 31, 2017, the Company has a Property Aggregate treaty in place which provides one limit of
$200 of aggregate qualifying property catastrophe losses in excess of a net retention of $850.
Reinsurance for Terrorism- For the risk of terrorism, private sector catastrophe reinsurance capacity is generally limited and largely unavailable for terrorism losses caused by nuclear, biological, chemical or radiological ("NBCR") attacks. As such, the Company's principal reinsurance protection against large-scale terrorist attacks is the coverage currently provided through the Terrorism Risk Insurance Program ("TRIPRA")TRIPRA to the end of 2020.2027.

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TRIPRA provides a backstop for insurance-related losses resulting from any “act of terrorism”, which is certified by the Secretary of the Treasury, in consultation with the Secretary of Homeland Security and the Attorney General, for losses that exceed a threshold of industry losses of $100 in 2015, with the threshold increasing to $200 by 2020.$200. Under the program, in any one calendar year, the federal government wouldwill pay a percentage of losses incurred from a certified act of terrorism after an insurer's losses exceed 20% of the Company's eligible direct commercial earned premiums of the prior calendar year up to a combined annual aggregate limit for the federal government and all insurers of $100 billion. The percentage of losses paid by the federal government is 83% in 2017, decreasing by 1 point
annually to 80% in the year 2020.. The Company's estimated deductible under the program is $1.2$1.6 billion for 2017.2021. If an act of terrorism or acts of terrorism result in covered losses exceeding the $100 billion annual industry aggregate limit, Congress would be responsible for determining how additional losses in excess of $100 billion will be paid.
Reinsurance Recoverables
Propertyfor A&E and casualty insurance product reinsurance recoverables represent loss and loss adjustment expense recoverables from a number of entities, including reinsurers and pools.
Property & Casualty Reinsurance Recoverables
 As of September 30, 2017As of December 31, 2016
Paid loss and loss adjustment expenses$91
$89
Unpaid loss and loss adjustment expenses2,431
2,449
Gross reinsurance recoverables [1]$2,522
$2,538
Less: Allowance for uncollectible reinsurance(167)(165)
Net reinsurance recoverables$2,355
$2,373
[1]
Excludes reinsurance recoverables classified as held-for-sale as of December 31, 2016 and subsequently transferred to the buyer in connection with the sale of the Company's U.K. property and casualty run-off subsidiaries in May, 2017. For discussion of the sale transaction, see Note 2 - Business Disposition of Notes to Condensed Consolidated Financial Statements.
Navigators Group benefits and life insurance product reinsurance recoverables represent future policy benefits and unpaid loss and loss adjustment expenses and other
policyholder funds and benefits payable that are recoverable from a number of reinsurers.
Group Benefits and Life Insurance Reinsurance Recoverables
Reinsurance RecoverablesAs of September 30, 2017As of December 31, 2016
Future policy benefits and unpaid loss and loss adjustment expenses and other policyholder funds and benefits payable$20,968
$20,938
Gross reinsurance recoverables$20,968
$20,938
Less: Allowance for uncollectible reinsurance [1]—
—
Net reinsurance recoverables$20,968
$20,938
[1] No allowance for uncollectible reinsurance is required as of September 30, 2017 and December 31, 2016.
As of September 30, 2017, theReserve Development - The Company has two adverse development cover (“ADC”) reinsurance recoverables from MassMutualagreements in place, both of which are accounted for as retroactive reinsurance. One agreement covers substantially all A&E reserve development for 2016 and Prudentialprior accident years (the “A&E ADC”) and the other covers substantially all reserve development of $8.4 billionNavigators Insurance Company and $11.4 billion, respectively. Ascertain of December 31, 2016,its affiliates for 2018 and prior accident years (“Navigators ADC”). For more information on the Company had reinsurance recoverables from MassMutualA&E ADC and Prudentialthe Navigators ADC, see Note - 1, Basis of $8.6 billionPresentation and $11.1 billion, respectively. The Company's obligationsSignificant Accounting Policies of Notes to its direct policyholders that have been reinsured to MassMutual and Prudential are secured by invested assets held in trust. Net of invested assets held in trust, as of September 30, 2017, the Company has no reinsurance-related concentrations of credit risk greater than 10% of the Company’s Condensed Consolidated Stockholders’ Equity.
For further explanation of the Company's insurance risk management strategy, see MD&A Enterprise Risk Management Insurance Risk ManagementFinancial Statements, included in The Hartford's 20162020 Form 10-K Annual Report.Report and Note -9, Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements.

Financial Risk
Financial risks include direct and indirect risks to the Company's financial objectives coming from events that impact financial market conditions or prices.and the value of financial assets. Some events may cause correlated movement in multiple risk factors. The primary sources of financial risks are the Company's general account assets and the liabilities and the guarantees which the company has written over various liability products, particularly its fixed and variable annuity guarantees. invested assets.
Consistent with its risk appetite, the Company establishes financial risk limits to control potential loss on a U.S. GAAP, statutory, and economic basis. Exposures are actively monitored and managed, with risks mitigated where appropriate. The Company uses various risk management strategies, including reinsurancelimiting aggregation of risk, portfolio re-balancing and hedging with over-the-counter and exchange tradedexchange-traded derivatives with
counterparties meeting the appropriate regulatory and due diligence requirements. Derivatives are utilized to achieve one of fourthe following Company-approved objectives: hedging risk arising from interest rate, equity market, commodity

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market, credit spread and issuer default, price or currency exchange rate risk or volatility; managing liquidity; controlling transaction costs; or entering intoand engaging in income generation covered call transactions and synthetic replication transactions. Derivative activities are monitored and evaluated by the Company’s compliance and risk management teams and reviewed by senior management.
The Company identifies different categories of financial risk, including liquidity, credit, interest rate, equity and foreign currency exchange.
Liquidity Risk
Liquidity risk is the risk to current or prospective earnings or capital arising from the Company's inability or perceived inability to meet its contractual funding obligations as they come due.
Sources of Liquidity Risk Sources of liquidity risk include funding risk, company-specific liquidity risk and market liquidity risk resulting from differences in the amount and timing of sources and uses of cash as well as company-specific and general market conditions. Stressed market conditions may impact the ability to sell assets or otherwise transact business and may result in a significant loss in value.
ImpactInadequate capital resources and liquidity could negatively affect the Company’s overall financial strength and its ability to generate cash flows from its businesses, borrow funds at competitive rates, and raise new capital to meet operating and growth needs.
Management The Company has defined ongoing monitoring and reporting requirements to assess liquidity across the enterprise under both current and stressed market conditions. The Company measures and manages liquidity risk exposures and funding needs within prescribed limits across legal entities, taking into account legal, regulatory and operational limitations to the transferability of liquidity.liquid assets among legal entities. The Company also monitors internal and external conditions, and identifies material risk changes and emerging risks that may impact liquidity.operating cash flows or liquid assets. The liquidity requirements of the Holding Company have been and will continue to be met by the Holding Company's fixed maturities, short-term investments and cash, and dividends from its subsidiaries, principally its insurance operations, as well as the issuance of common stock, debt or other capital securities and borrowings from its credit facilities as needed. The Company maintains multiple sources of contingent liquidity including a revolving credit facility, an intercompany liquidity agreement that allows for short-term advances of funds among the HFSG Holding Company and certain affiliates, and access to collateralized advances from the Federal Home Loan Bank of Boston ("FHLBB") for certain affiliates. The Company's CFO has primary responsibility for liquidity risk.
For further discussion on liquidity seeRefer to the section on Capital Resources and Liquidity.& Liquidity section of MD&A for the discussion of what the Company is doing to manage liquidity during the COVID-19 pandemic.
Credit Risk and Counterparty Risk
Credit risk is the risk to earnings or capital due to uncertainty of an obligor’s or counterparty’s ability or willingness to meet its
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obligations in accordance with contractually agreed upon terms. Credit risk is comprised of three major factors: the risk of change in credit quality, or credit migration risk; the risk of default; and the risk of a change in value due to changes in credit spreads.
Sources of Credit Risk The majority of the Company’s credit risk is concentrated in its investment holdings and use of derivatives, but it is also present in the Company’s ceded reinsurance activities and various insurance portfolios,products.
ImpactA decline in creditworthiness is typically reflected as an increase in an investment’s credit spread and an associated decline in the investment's fair value, potentially resulting in recording an ACL and an increased probability of a realized loss upon sale. In certain instances, counterparties may default on their obligations and the Company may realize a loss on default. Premiums receivable, including premiums for retrospectively rated plans, reinsurance recoverable and deductible losses recoverable are also subject to credit risk associatedbased on the counterparty’s unwillingness or inability to pay.
For a discussion of impacts resulting from the COVID-19 pandemic, refer to the Impact of COVID-19 on our financial condition, results of operations and liquidity section of this MD&A.
Management The objective of the Company’s enterprise credit risk management strategy is to identify, quantify and manage credit risk in aggregate and to limit potential losses in accordance with reinsurance recoverables and premiums receivable.
the Company's credit risk management policy. The Company primarily manages its credit risk by managing aggregations of risk, holding a diversified mix of investment grade issuers and counterparties across its investment, reinsurance and insurance portfolios.portfolios and limiting exposure to any specific reinsurer or counterparty. Potential credit losses are also limited within portfolios by diversifying acrosscan be mitigated through diversification (e.g., geographic regions, asset types, industry sectors), hedging and sectors.the use of collateral to reduce net credit exposure.
The Company manages credit risk through the use of various surveillance, analyses and governance processes. The investment, derivatives and reinsurance areas have formal policies and procedures for counterparty approvals and authorizations, which establish criteria defining minimum levels of creditworthiness and financial stability for eligible counterparties. Potential investments are subject to underwriting reviews and private securities are subject to management approval. Mitigation strategies vary across the three sources of credit risk, but may include:
•Investing in a portfolio of high-quality and diverse securities;
•Selling investments subject to credit risk;
•Hedging through use of single name or basket credit default swaps;
•Clearing derivative transactions through central clearing houses that require daily variation margin;
•Entering into derivative and reinsurance contracts only with strong creditworthy institutionsinstitutions;
•Requiring collateral; and
•Non-renewing policies/contracts or reinsurance treaties.
The Company has developed credit exposure thresholds which are based upon counterparty ratings. Aggregate counterparty credit quality and exposure are monitored on a daily basis
utilizing an enterprise-wide credit exposure information system that contains data on issuers, ratings, exposures, and credit limits. Exposures are tracked on a current and potential basis and aggregated by ultimate parent of the counterparty across investments, reinsurance receivables, insurance products with credit risk, and derivatives.
As of September 30, 2017,March 31, 2021, the Company had no investment exposure to any credit concentration risk of a single issuer or counterparty greater than 10% of the Company’s stockholders'
equity, other than the U.S. government and certain U.S. government securities.agencies. For further discussion of concentration of credit risk in the investment portfolio, see the Concentration of Credit Risk section in Note 65 - Investments of Notes to Condensed Consolidated Financial Statements.
Credit Risk of Derivatives
The Company uses various derivative counterparties in executing its derivative transactions. The use of counterparties creates credit risk that the counterparty may not perform in accordance with the terms of the derivative transaction.
Downgrades to the credit ratings of the Company’s insurance operating companies may have adverse implications for its use of derivatives including those used to hedge benefit guarantees of variable annuities.derivatives. In some cases, downgrades may give derivative counterparties for over-the-counter ("OTC") derivatives and clearing brokers for OTC-cleared derivatives the right to cancel and settle outstanding derivative trades or require additional collateral to be posted. In addition, downgrades may result in counterparties and clearing brokers becoming unwilling to engage in or clear additional derivatives or may require additional collateralization before entering into any new trades. This would restrict the supply of derivative instruments commonly used to hedge variable annuity guarantees, particularly long-dated equity derivatives and interest rate swaps.
The Company also has derivative counterparty exposure policies which limit the Company’s exposure to credit risk.
For Credit exposures are generally quantified based on the company’sprior business day’s net fair value, including income accruals, of all derivative programs, the maximum uncollateralized threshold for a derivative counterparty for a single legal entity is $10. The Company currently transacts OTC derivatives in two legal entities that have a threshold greater than zero. The maximum combined threshold forpositions transacted with a single counterparty across allfor each separate legal entities that useentity. The Company enters into collateral arrangements in connection with its derivatives positions and have a thresholdcollateral is pledged to or held by, or on behalf of, the Company to the extent the exposure is greater than zero, is $10. In addition,subject to minimum transfer thresholds. For the three months ended March 31, 2021, the Company may have exposure to multiple counterparties in a single corporate familyincurred no losses on derivative instruments due to a common credit support provider. As of September 30, 2017, the maximum combined threshold for all counterparties under a single credit support provider across all legal entities that use derivatives and have a threshold greater than zero was $10. Based on the contractual terms of the collateral agreements, these thresholds may be immediately reduced due to a downgrade in either party’s credit rating.counterparty default. For further discussion, see the Derivative Commitments section of Note 12 - Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements.
For the nine months ended September 30, 2017, the Company incurred no losses on derivative instruments due to counterparty default.
Use of Credit Derivatives
The Company may also use credit default swaps to manage credit exposure or to assume credit risk to enhance yield.
Credit Risk Reduced Through Credit Derivatives
The Company uses credit derivatives to purchase credit protection with respect to a single entity or referenced index, or asset pool.index. The Company purchases credit protection through credit default swaps to economically hedge and manage credit risk of certain fixed maturity investments across multiple sectors of the investment portfolio.

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Credit Risk Assumed Through Credit Derivatives
The Company also enters into credit default swaps that assume credit risk as part of replication transactions. Replication transactions are used as an economical means to synthetically
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replicate the characteristics and performance of assets that are permissible investments under the Company’s investment policies. These swaps primarily reference investment grade single corporate issuers and baskets, which include customized diversified portfolios of corporate issuers, which are established within sector concentration limits and may be divided into tranches which possess different credit ratings.indexes.
For further information on credit derivatives, see Note 76 - Derivative InstrumentsDerivatives of Notes to Condensed Consolidated Financial Statements.
Credit Risk of Business Operations
The Company is subject to credit risk related to the company's commercial business that is written with large deductible policies or retrospectively-rated plans. The Company’s results of operations could be adversely affected if a significant portion of such contract holders failed to reimburse the Company for the deductible amount or the retrospectively rated policyholders failed to pay additional premiums owed. While the Company attempts to manage the risks discussed above through underwriting, credit analysis, collateral requirements, provision for bad debt, and other oversight mechanisms, the Company’s efforts may not be successful.
Interest Rate Risk
Interest rate risk is the risk of financial loss due to adverse changes in the value of assets and liabilities arising from movements in interest rates. Interest rate risk encompasses exposures with respect to changes in the level of interest rates, the shape of the term structure of rates and the volatility of interest rates. Interest rate risk does not include exposure to changes in credit spreads.
Sources of Interest Rate Risk The Company has exposure to interest ratesrate risk arising from its fixed maturity investments, commercial mortgage loans we invest in as well as debt securities, interest sensitive liabilities such as fixed rate annuitiespreferred stock and structured settlementssimilar securities issued by the Company and discount rate assumptions associated with the Company’s claim reserves and pension and other post retirementpost-retirement benefit obligations. In addition, certain product liabilities, including those containing GMWB or GMDB, exposeobligations as well as from assets that support the Company to interest rate risk but also have significant equity risk. These liabilities are discussed as part of the Variable Product Guarantee RisksCompany's pension and Risk Management section. Management also evaluates performance of certain Talcott Resolution products based on net investment spread which is, in part, influenced by changes in interest rates.other post-retirement benefit plans.
Impact Changes in interest rates from current levels can have both favorable and unfavorable effects for the Company.
For a discussion of impacts resulting from the COVID-19 pandemic, refer to the Impact of COVID-19 on our financial condition, results of operations and liquidity section of this MD&A.
Management The Company manages its exposure to interest rate risk by constructing investment portfolios that maintain asset allocation limitsseek to protect the firm from the economic impact associated with changes in interest rates by setting portfolio duration targets that are aligned with the duration of the liabilities that they support. The Company analyzes interest rate risk using various models including parametric models and asset/liabilitycash flow simulation under various market scenarios of the liabilities and their supporting investment portfolios. Key metrics that the Company uses to quantify its exposure to interest rate risk inherent in its invested assets and the associated liabilities include duration, matching targets which may include the use of derivatives.convexity and key rate duration.
The Company also utilizes a variety of derivative instruments to mitigate interest rate risk associated with its investment portfolio or to hedge liabilities. Interest rate caps, floors, swaps, swaptions, and futures may be used to manage portfolio duration.
Equity Risk
Equity risk is defined as the risk of financial loss due to changes in the value of global equities or equity indices.
Sources of Equity Risk The Company has
exposure to equity risk from invested assets, under management, embedded derivatives within the Company’s variable annuities and assets that support the Company’s pension and other post-retirement benefit plans, and fee income derived from Hartford Funds assets under management. In addition, the Company has equity exposure through its 9.7% ownership interest in the limited partnership, Hopmeadow Holdings LP, that owns the life and annuity business sold in 2018.
Impact The investment portfolio is exposed to losses from market declines affecting equity securities and derivatives, which could negatively impact the Company's reported earnings. In addition, investments in limited partnerships and other post retirementalternative investments generally have a level of correlation to domestic equity market levels and can expose the Company to losses in earnings if valuations decline; however, earnings impacts are recognized on a lag as results from private equity investments and other funds are generally reported on a three-month delay. For assets supporting pension and other post-retirement benefit plans.plans, the Company may be required to make additional plan contributions if equity investments in the plan portfolios decline in value. Hartford Funds earnings are also significantly influenced by the U.S. and other equity markets. Generally, declines in equity markets will reduce the value of average daily assets under management and the amount of fee income generated from those assets. Increases in equity markets will generally have the inverse impact.
For a discussion of impacts resulting from the COVID-19 pandemic, refer to the Impact of COVID-19 on our financial condition, results of operations and liquidity section of this MD&A.
Management The Company uses various approaches in managing its equity exposure, including limits on the proportion of assets invested in equities, diversification of the equity portfolio, reinsurance of product liabilities and, at times, hedging of changes in equity indices. Equity Risk on the Company’s variable annuity products is mitigated through various hedging programs which are primarily focused on mitigating the economic exposure while considering the potential impacts on statutory and GAAP accounting results. (See the Variable Annuity Hedging Program Section).
Talcott Resolution includes certain guaranteed benefits, primarily associated with variable annuity products, which increase the Company's potential benefit exposure in the periods that equity markets decline and the Company has a dynamic and macro hedging program in place to hedge the exposure.
For the assets that support itssupporting pension plans and other post retirementpost-retirement benefit plans, the Company may be required to make additional plan contributions if equity investments in the plan portfolio decline in value. The asset allocation mix is reviewed on a periodic basis. In order to minimize risk, the pension plans maintain a listing of permissible and prohibited investments. In addition, the pension plans have certaininvestments and impose concentration limits and investment quality requirements imposed on permissible investment options.
Managing Equity Risk on the Company's Variable Annuity Products-Most of the Company’s variable annuities include GMDB and certain contracts with GMDB also include GMWB features. Declines in the equity markets will increase the Company’s liability for these benefits. Many contracts with a GMDB include a maximum anniversary value ("MAV"), which in rising markets resets the guarantee on the anniversary to be 'at the money'. As the MAV increases, it can increase the NAR for subsequent declines in account value. Generally, a GMWB contract is ‘in the money’ if the contractholder’s guaranteed remaining balance ("GRB") becomes greater than the account value.
The NAR is generally defined as the guaranteed minimum benefit amount in excess of the contractholder’s current account value. Variable annuity account values with guarantee features were $40.7 billion as of September 30, 2017 and December 31, 2016.
The following tables summarize the account values of the Company’s variable annuities with guarantee features and the NAR split between various guarantee features (retained net amount at risk does not take into consideration the effects of the variable annuity hedge programs in place as of each balance sheet date).
Total Variable Annuity Guarantees as of September 30, 2017
($ in billions)Account
Value		Gross Net Amount at RiskRetained Net Amount at Risk% of Contracts In the Money[2]% In the Money [2] [3]
U.S. Variable Annuity [1]     
GMDB [4]$40.7
$3.0
$0.6
14%28%
GMWB$17.9
$0.2
$0.1
5%19%

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Total Variable Annuity Guarantees as of December 31, 2016
($ in billions)
Account
Value
Gross Net Amount at RiskRetained Net Amount at Risk% of Contracts In the Money [2]% In the Money [2] [3]
U.S. Variable Annuity [1]     
GMDB [4]$40.7
$3.3
$0.7
28%14%
GMWB$18.3
$0.2
$0.1
7%13%
[1]Contracts with a guaranteed living benefit also have a guaranteed death benefit. The NAR for each benefit is shown; however these benefits are not additive. When a contract terminates due to death, any NAR related to GMWB is released. Similarly, when a contract goes into benefit status on a GMWB, the GMDB NAR is reduced to zero.
[2]Excludes contracts that are fully reinsured.
[3]For all contracts that are “in the money”, this represents the percentage by which the average contract was in the money.
[4]
Includes contracts that had a GMDB at issue but no longer have a GMDB due to certain elections made by policyholders or their beneficiaries. Such contracts had $1.7 billion of account value as of September 30, 2017 and $1.5 billion as of December 31, 2016.
Many policyholders with a GMDB also have a GMWB. Policyholders that have a product that offers both guarantees can only receive the GMDB or GMWB. The GMDB NAR disclosed in the preceding tables is a point in time measurement and assumes that all participants utilize the GMDB on that measurement date.
The Company expects to incur GMDB payments in the future only if the policyholder has an “in the money” GMDB at their death. For contracts with a GMWB rider, the company expects to incur GMWB payments in the future only if the account value is reduced over time to a specified level through a combination of market performance and periodic withdrawals, at which point the contractholder will receive an annuity equal to the GRB which is generally equal to premiums less withdrawals. For the Company’s “lifetime” GMWB products, this annuity can exceed the GRB. As the account value fluctuates with equity market returns on a daily basis and the “lifetime” GMWB payments may exceed the GRB,
the ultimate amount to be paid by the Company, if any, is uncertain and could be significantly more or less than the Company’s current carried liability. For additional information on the Company’s GMWB liability, see Note 5 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements. For additional information on the Company's GMDB liability, see Note 9 - Reserve for Future Policy Benefits and Separate Account Liabilities of Notes to Condensed Consolidated Financial Statements.
Variable Annuity Market Risk Exposures
The following table summarizes the broad Variable Annuity Guarantees offered by the Company and the market risks to which the guarantee is most exposed from a U.S. GAAP accounting perspective:
Variable Annuity Guarantees [1]U.S. GAAP Treatment [1]Primary Market Risk Exposures [1]
GMDB and life-contingent component of the GMWBAccumulation of the portion of fees required to cover expected claims, less accumulation of actual claims paidEquity Market Levels
GMWB (excluding life-contingent portions)Fair Value
Equity Market Levels / Implied
Volatility / Interest Rates
[1]Each of these guarantees and the related U.S. GAAP accounting volatility will also be influenced by actual and estimated policyholder behavior.
Variable Annuity Hedging Program
The Company’s variable annuity hedging program is primarily focused, through the use of reinsurance and capital market derivative instruments, on reducing the economic exposure to market risks associated with guaranteed benefits that are embedded in our variable annuity contracts. The variable annuity hedging program also considers the potential impacts on statutory capital.
Reinsurance
The Company uses reinsurance for a portion of contracts with GMWB riders issued prior to the second quarter of 2006. The Company also uses reinsurance for a majority of the GMDB with NAR.
GMWB Hedge Program
Under the dynamic hedging program, the Company enters into derivative contracts to hedge market risk exposures associated with the GMWB liabilities that are not reinsured. These derivative contracts include customized swaps, interest rate swaps and futures, and equity swaps, options, and futures, on certain indices including the S&P 500 index, EAFE index, and NASDAQ index.
Additionally, the Company holds customized derivative contracts to provide protection from certain capital market risks for the remaining term of specified blocks of non-reinsured GMWB riders. These customized derivative contracts are based on policyholder behavior assumptions specified at the inception of the derivative contracts. The Company retains the risk for differences between assumed and actual policyholder behavior and between the performance of the actively managed funds underlying the separate accounts and their respective indices.
While the Company actively manages this dynamic hedging program, increased U.S. GAAP earnings volatility may result from factors including, but not limited to: policyholder behavior, capital markets, divergence between the performance of the underlying funds and the hedging indices, changes in hedging positions and the relative emphasis placed on various risk management objectives.
Macro Hedge Program
The Company’s macro hedging program uses derivative instruments, such as options and futures on equities and interest rates, to provide protection against the statutory tail scenario risk arising from GMWB and GMDB liabilities on the Company’s

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statutory surplus. These macro hedges cover some of the residual risks not otherwise covered by the dynamic hedging program. Management assesses this residual risk under various scenarios in designing and executing the macro hedge program. The macro hedge program will result in additional U.S. GAAP earnings volatility as changes in the value of the macro hedge derivatives, which are designed to reduce statutory reserve and capital volatility, may not be closely aligned to changes in GAAP liabilities.
Variable Annuity Hedging Program Sensitivities
The underlying guaranteed withdrawal benefit liabilities (excluding the life contingent portion of GMWB contracts) and hedge assets within the GMWB hedge and Macro hedge programs are carried at fair value.
The following table presents our estimates of the potential instantaneous impacts from sudden market stresses related to
equity market prices, interest rates, and implied market volatilities. The following sensitivities represent: (1) the net estimated difference between the change in the fair value of GMWB liabilities and the underlying hedge instruments and (2) the estimated change in fair value of the hedge instruments for the macro program, before the impacts of amortization of DAC and taxes. As noted in the preceding discussion, certain hedge assets are used to hedge liabilities that are not carried at fair value and will not have a liability offset in the U.S. GAAP sensitivity analysis. All sensitivities are measured as of September 30, 2017 and are related to the fair value of liabilities and hedge instruments in place at that date for the Company’s variable annuity hedge programs. The impacts presented in the table that follows are estimated individually and measured without consideration of any correlation among market risk factors.
GAAP Sensitivity Analysis (before tax and DAC) as of September 30, 2017 [1]
 GMWBMacro
Equity Market Return-20 %-10 %10 %-20 %-10 %10 %
Potential Net Fair Value Impact$1
$3
$(6)$387
$149
$(105)
Interest Rates-50bps
-25bps
+25bps
-50bps
-25bps
+25bps
Potential Net Fair Value Impact$—
$—
$(1)$2
$1
$(1)
Implied Volatilities10 %2 %-10 %10 %2 %-10 %
Potential Net Fair Value Impact$(62)$(12)$55
$130
$25
$(105)
[1]
These sensitivities are based on the following key market levels as of September 30, 2017: 1) S&P of 2,519; 2) 10yr US swap rate of 2.33%; and 3) S&P 10yr volatility of 23.71%.
The preceding sensitivity analysis is an estimate and should not be used to predict the future financial performance of the Company's variable annuity hedge programs. The actual net changes in the fair value liability and the hedging assets illustrated in the preceding table may vary materially depending on a variety of factors which include but are not limited to:
The sensitivity analysis is only valid as of the measurement date and assumes instantaneous changes in the capital market factors and no ability to rebalance hedge positions prior to the market changes;
Changes to the underlying hedging program, policyholder behavior, and variation in underlying fund performance relative to the hedged index, which could materially impact the liability; and
The impact of elapsed time on liabilities or hedge assets, any non-parallel shifts in capital market factors, or correlated moves across the sensitivities.
During the three months ended September 30, 2017, the Company added hedge positions in the macro hedge program to reduce open equity risk exposure, which increased the sensitivity that changes in equity market returns would have on GAAP net income.

Foreign Currency Exchange Risk
Foreign currency exchange risk is the risk of financial loss due to changes in the relative value between currencies.
Sources of Currency Risk The Company has foreign currency exchange risk primarily in non-U.S. dollar denominated cash, fixed maturity investments, foreign denominated cashmaturities, equities, and a yen denominated fixed payout annuity.derivative instruments. In addition, the Company’s Talcott Resolution segment formerly issuedCompany has non-U.S. subsidiaries, some with functional currencies other than U.S. dollar, and which transact business in multiple currencies resulting in assets and liabilities denominated funding agreement liability contracts.in foreign currencies.
Impact Changes in relative values between currencies can create variability in cash flows and realized or unrealized gains and losses on changes in the fair value of assets and liabilities.
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Management The openCompany manages its foreign currency exchange risk primarily through asset-liability matching and through the use of derivative instruments. However, legal entity capital is invested in local currencies in order to satisfy regulatory requirements and to support local insurance operations. The foreign currency exposure of non-U.S. dollar denominated investments will most commonly be reduced through the sale of the assets or through hedges using currency futures/forwards/swaps. In order to manage the currency risk related to any non-U.S. dollar denominated liability contracts, the Company enters into foreign currency swaps or holds non-U.S. dollar denominated investments.and forwards.
Investment Portfolio Risk
The following table presents the Company’s fixed maturities, AFS,
by credit quality. The credit ratings referenced throughout this section are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P, Fitch and Morningstar.Fitch. If no rating is available from a rating agency, then an internally developed rating is used. Accrued interest receivable related to fixed maturities are recorded in other assets on the Condensed Consolidated Balance Sheets and are not included in the amortized cost or fair value of the fixed maturities. For further information refer to Note 5 - Investments of Notes to Condensed Consolidated Financial Statements.

Fixed Maturities, AFS by Credit Quality
 March 31, 2021December 31, 2020
 Amortized CostFair ValuePercent of Total Fair ValueAmortized CostFair ValuePercent of Total Fair Value
United States Government/Government agencies$4,631 $4,837 11.1 %$4,872 $5,214 11.6 %
AAA6,499 6,759 15.5 %6,482 6,848 15.2 %
AA7,877 8,327 19.1 %7,840 8,453 18.8 %
A10,384 11,109 25.5 %10,500 11,595 25.7 %
BBB9,724 10,359 23.7 %9,831 10,856 24.1 %
BB & below2,202 2,216 5.1 %2,036 2,069 4.6 %
Total fixed maturities, AFS$41,317 $43,607 100.0 %$41,561 $45,035 100.0 %
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The fair value of fixed maturities, AFS decreased as compared to December 31, 2020, primarily due to a decrease in valuations due to higher interest rates, partially offset by tighter credit spreads.
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Fixed Maturities, AFS by Type
 March 31, 2021December 31, 2020
 Amortized CostACLGross Unrealized GainsGross Unrealized LossesFair ValuePercent of Total Fair ValueAmortized CostACLGross Unrealized GainsGross Unrealized LossesFair ValuePercent of Total Fair Value
Asset-backed securities ("ABS")
Consumer loans$1,257 $— $27 $— $1,284 2.9 %$1,396 $— $35 $— $1,431 3.2 %
Other148 — 3 — 151 0.3 %129 — 4 — 133 0.3 %
Collateralized loan obligations ("CLOs")3,040 — 10 (1)3,049 7.0 %2,780 — 7 (7)2,780 6.2 %
CMBS
Agency [1]1,577 — 78 (4)1,651 3.8 %1,779 — 117 (6)1,890 4.2 %
Bonds2,133 — 119 (10)2,242 5.1 %2,160 — 159 (13)2,306 5.1 %
Interest only269 — 9 (4)274 0.6 %280 — 10 (2)288 0.6 %
Corporate
Basic industry762 — 47 (4)805 1.8 %727 — 69 (1)795 1.8 %
Capital goods1,538 — 95 (10)1,623 3.7 %1,488 — 148 (11)1,625 3.6 %
Consumer cyclical1,415 — 67 (8)1,474 3.4 %1,434 (1)108 (1)1,540 3.4 %
Consumer non-cyclical2,755 — 181 (9)2,927 6.7 %2,878 — 314 (4)3,188 7.1 %
Energy1,495 (1)108 (4)1,598 3.7 %1,474 (1)147 (4)1,616 3.6 %
Financial services4,517 (16)257 (19)4,739 10.9 %4,523 (21)398 (4)4,896 10.9 %
Tech./comm.2,741 (2)233 (20)2,952 6.8 %2,651 — 370 (3)3,018 6.7 %
Transportation743 — 49 (3)789 1.8 %747 — 85 (3)829 1.8 %
Utilities1,941 — 152 (9)2,084 4.8 %1,999 — 250 — 2,249 5.0 %
Other478 — 27 (1)504 1.2 %480 — 37 — 517 1.1 %
Foreign govt./govt. agencies825 — 47 (4)868 2.0 %842 — 77 — 919 2.0 %
Municipal bonds
Taxable1,094 — 66 (5)1,155 2.6 %1,084 — 109 (1)1,192 2.6 %
Tax-exempt7,377 — 696 (14)8,059 18.5 %7,480 — 831 — 8,311 18.5 %
RMBS
Agency1,766 — 72 (6)1,832 4.2 %1,829 — 92 (2)1,919 4.3 %
Non-agency1,833 — 28 (3)1,858 4.3 %1,755 — 41 (1)1,795 4.0 %
Alt-A19 — 2 — 21 0.1 %27 — 2 — 29 0.1 %
Sub-prime306 — 8 — 314 0.7 %355 — 9 — 364 0.8 %
U.S. Treasuries1,288 — 69 (3)1,354 3.1 %1,264 — 141 — 1,405 3.1 %
Total fixed maturities, AFS$41,317 $(19)$2,450 $(141)$43,607 100.0 %$41,561 $(23)$3,560 $(63)$45,035 100.0 %
Fixed Maturities by Credit Quality
 September 30, 2017December 31, 2016
 Amortized CostFair ValuePercent of Total Fair ValueAmortized CostFair ValuePercent of Total Fair Value
United States Government/Government agencies$7,462
$7,724
13.4%$7,474
$7,626
13.6%
AAA6,926
7,225
12.5%6,733
6,969
12.5%
AA9,292
9,757
16.9%8,764
9,182
16.4%
A14,549
15,727
27.3%14,169
14,996
26.8%
BBB13,366
14,210
24.6%13,399
13,901
24.8%
BB & below2,883
3,026
5.3%3,266
3,329
5.9%
Total fixed maturities, AFS$54,478
$57,669
100%$53,805
$56,003
100%
[1]Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
The fair value of securities increased,fixed maturities, AFS decreased as compared towith December 31, 2016,2020, primarily due to purchases of highly rated CLOsa decrease in valuations due to higher interest rates, partially offset by tighter credit spreads. Furthermore, the Company decreased holdings in CMBS, ABS, and tax-exempt municipal bonds, as well as higher valuations as a result of tighterwhile increasing holdings in CLOs.
Commercial & Residential Real Estate
The following table presents the Company’s exposure to CMBS and RMBS by current credit spreads and a decrease in
long-term interest rates. Fixed maturities, FVO, are notquality included in the preceding Fixed Maturities, AFS by Type table. For further discussion on FVO securities, see Note 5 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements.

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Exposure to CMBS & RMBS Bonds as of March 31, 2021
 AAAAAABBBBB and BelowTotal
Amortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair Value
CMBS
   Agency [1]$1,573 $1,647 $4 $4 $— $— $— $— $— $— $1,577 $1,651 
   Bonds934 994 588 620 413 427 181 187 17 14 2,133 2,242 
   Interest Only165 169 89 91 7 7 6 6 2 1 269 274 
Total CMBS2,672 2,810 681 715 420 434 187 193 19 15 3,979 4,167 
RMBS
   Agency1,744 1,808 22 24 — — — — — — 1,766 1,832 
   Non-Agency1,008 1,027 406 411 367 368 52 52 — — 1,833 1,858 
   Alt-A2 2 — — — — 1 1 16 18 19 21 
   Sub-Prime14 14 45 46 95 97 56 58 96 99 306 314 
Total RMBS2,768 2,851 473 481 462 465 109 111 112 117 3,924 4,025 
Total CMBS & RMBS$5,440 $5,661 $1,154 $1,196 $882 $899 $296 $304 $131 $132 $7,903 $8,192 

Exposure to CMBS & RMBS Bonds as of December 31, 2020
 AAAAAABBBBB and BelowTotal
Amortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair Value
CMBS
   Agency [1]$1,771 $1,882 $8 $8 $— $— $— $— $— $— $1,779 $1,890 
   Bonds1,009 1,101 541 582 423 430 170 179 17 14 2,160 2,306 
   Interest Only177 183 90 93 8 7 4 4 1 1 280 288 
Total CMBS2,957 3,166 639 683 431 437 174 183 18 15 4,219 4,484 
RMBS
   Agency1,807 1,894 22 25 — — — — — — 1,829 1,919 
   Non-Agency1,034 1,063 371 380 313 315 36 36 1 1 1,755 1,795 
   Alt-A— — 3 3 2 2 2 2 20 22 27 29 
   Sub-Prime1 1 25 26 114 116 102 105 113 116 355 364 
Total RMBS2,842 2,958 421 434 429 433 140 143 134 139 3,966 4,107 
Total CMBS & RMBS$5,799 $6,124 $1,060 $1,117 $860 $870 $314 $326 $152 $154 $8,185 $8,591 
[1]Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
The Company also has exposure to commercial mortgage loans. These loans are collateralized by real estate properties that are diversified both geographically throughout the United States and by property type. These commercial loans are originated by the Company as high quality whole loans, and the Company may sell participation interests in one or more loans to third parties. A loan participation interest represents a pro-rata share in interest and principal payments generated by the participated loan, and the relationship between the Company as loan originator, lead participant and servicer and the third party as a participant are governed by a participation agreement.
As of March 31, 2021, mortgage loans had an amortized cost of
Securities by Type
 September 30, 2017December 31, 2016
 Cost or Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValuePercent of Total Fair ValueCost or Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValuePercent of Total Fair Value
Asset-backed securities ("ABS")          
Consumer loans$1,896
$13
$(14)$1,895
3.3%$2,057
$10
$(30)$2,037
3.6%
Small business78
3
(1)80
0.1%86
3
(1)88
0.2%
Other326
4
 -330
0.6%253
4
—
257
0.5%
Collateralized debt obligations ("CDOs")          
CLOs2,355
5
(2)2,358
4.1%1,597
7
(4)1,600
2.9%
Other9
28
—
37
0.1%256
60
—
316
0.6%
CMBS          
Agency [1]1,733
31
(16)1,748
3.0%1,439
24
(20)1,443
2.6%
Bonds2,648
72
(17)2,703
4.7%2,681
62
(33)2,710
4.7%
Interest only (“IOs”)653
20
(4)669
1.2%787
11
(15)783
1.4%
Corporate          
Basic industry1,095
88
 -
1,183
2.0%1,071
61
(9)1,123
2.0%
Capital goods1,844
130
(6)1,968
3.4%1,522
110
(15)1,617
2.9%
Consumer cyclical1,407
90
(3)1,494
2.6%1,517
78
(10)1,585
2.8%
Consumer non-cyclical3,314
245
(12)3,547
6.2%3,792
206
(45)3,953
7.1%
Energy2,134
183
(7)2,310
4.0%2,098
142
(17)2,223
4.0%
Financial services5,062
345
(11)5,396
9.4%4,806
262
(32)5,036
9.0%
Tech./comm.3,242
365
(5)3,602
6.2%3,385
265
(20)3,630
6.5%
Transportation895
58
(1)952
1.6%896
46
(7)935
1.7%
Utilities4,578
381
(35)4,924
8.5%5,024
326
(65)5,285
9.3%
Other354
16
 -
370
0.6%269
14
(4)279
0.5%
Foreign govt./govt. agencies1,300
71
(6)1,365
2.4%1,164
33
(26)1,171
2.1%
Municipal bonds          
Taxable1,579
151
(9)1,721
3.0%1,497
116
(20)1,593
2.8%
Tax-exempt10,006
718
(10)10,714
18.6%9,328
616
(51)9,893
17.7%
RMBS          
Agency1,842
41
(5)1,878
3.2%2,493
39
(28)2,504
4.5%
Non-agency258
6
 -
264
0.5%178
3
(1)180
0.3%
Alt-A107
6
 -
113
0.2%117
2
—
119
0.2%
Sub-prime1,876
74
 -
1,950
3.4%1,950
22
(8)1,964
3.5%
U.S. Treasuries3,887
224
(13)4,098
7.1%3,542
182
(45)3,679
6.6%
Fixed maturities, AFS54,478
3,368
(177)57,669
100%53,805
2,704
(506)56,003
100%
Equity securities          
Financial services157
27
 -
184
16.5%203
15
(1)217
19.8%
Other853
103
(28)928
83.5%817
81
(18)880
80.2%
Equity securities, AFS1,010
130
(28)1,112
100%1,020
96
(19)1,097
100%
Total AFS securities$55,488
$3,498
$(205)$58,781
 $54,825
$2,800
$(525)$57,100
 
Fixed maturities, FVO   $82
    $293
 
$4.6 billion and carrying value of $4.6 billion, with an ACL of $34. As of December 31, 2020, mortgage loans had an amortized cost of $4.5 billion and carrying value of $4.5 billion, with an ACL of $38 ACL. The decrease in the allowance is attributable to improved economic scenarios and higher property valuations as compared to the prior quarter.
The Company funded $161 of commercial mortgage loans with a weighted average loan-to-value (“LTV”) ratio of 59% and a weighted average yield of 3.0% during the three months ended March 31, 2021. The Company continues to originate commercial mortgage loans in high growth markets across the country focusing primarily on institutional-quality industrial and multi-
91
[1]Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



The fair value of AFS securities increased as compared to December 31, 2016 due to higher valuations as a result of tighter credit spreads and a decrease in long-term interest rates. The Company also reduced its allocation to agency RMBS and reinvested proceeds into CLOs and tax-exempt municipal bonds.
Financial Services
The Company’s investment in the financial services sector is predominantly through investment grade banking and insurance
institutions. The following table presents the Company’s fixed maturities and equity, AFS securities in the financial services sector that are included in the preceding Securities by Type table.
Financial Services by Credit Quality
 September 30, 2017 December 31, 2016
 Amortized CostFair ValueNet Unrealized Gain/(Loss) Amortized CostFair ValueNet Unrealized Gain/(Loss)
AAA$33
$35
$2
 $13
$15
$2
AA409
429
20
 583
602
19
A2,548
2,733
185
 2,219
2,354
135
BBB1,996
2,120
124
 1,856
1,934
78
BB & below233
263
30
 338
348
10
Total [1]$5,219
$5,580
$361
 $5,009
$5,253
$244
[1]
Includes equity, AFS securities with an amortized cost and fair value of $157 and $184, respectively as of September 30, 2017 and an amortized cost and fair value of $203 and $217, respectively, as of December 31, 2016 included in the Securities by Type table above.
Commercial Real Estate
The following table presents the Company’s exposure to CMBS bonds by current credit quality and vintage year included in the preceding Securities by Type table. Credit protection represents the current weighted average percentage of the outstanding
capital structure subordinated to the Company’s investment holding that is available to absorb losses before the security incurs the first dollar loss of principal and excludes any equity interest or property value in excess of outstanding debt.
Exposure to CMBS Bonds as of September 30, 2017
 AAAAAABBBBB and BelowTotal
Vintage Year [1]Amortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair Value
2008 & Prior$108
$118
$48
$53
$—
$—
$—
$—
$21
$21
$177
$192
2009—
—
11
11
—
—
—
—
—
—
11
11
201018
19
—
—
—
—
—
—
—
—
18
19
201155
58
—
—
15
15
—
—
—
—
70
73
201239
40
6
6
13
13
19
18
—
—
77
77
201316
16
95
98
98
102
4
4
—
—
213
220
2014301
311
59
61
73
73
9
9
8
8
450
462
2015213
215
200
200
203
209
85
88
11
11
712
723
2016143
142
227
225
121
126
63
66
—
—
554
559
2017101
101
243
243
—
—
22
23
—
—
366
367
Total$994
$1,020
$889
$897
$523
$538
$202
$208
$40
$40
$2,648
$2,703
Credit  protection31.1%21.5%14.0%10.5%30.7%22.9%

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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Exposure to CMBS Bonds as of December 31, 2016
 AAAAAABBBBB and BelowTotal
Vintage Year [1]Amortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair Value
2008 & Prior$278
$294
$137
$143
$102
$102
$14
$14
$22
$22
$553
$575
200911
11
—
—
—
—
—
—
—
—
11
11
201018
19
8
8
—
—
—
—
—
—
26
27
201155
59
—
—
13
13
2
2
—
—
70
74
201240
41
6
6
30
30
20
18
—
—
96
95
201316
17
95
99
110
113
4
4
—
—
225
233
2014301
309
64
65
72
70
1
1
—
—
438
445
2015210
210
200
198
207
206
87
87
—
—
704
701
2016132
130
249
242
113
113
64
64
—
—
558
549
Total$1,061
$1,090
$759
$761
$647
$647
$192
$190
$22
$22
$2,681
$2,710
Credit 
protection		33.3%22.4%18.0%16.2%32.5%25.3%
[1]The vintage year represents the year the pool of loans was originated.
The Company also has exposure to commercial mortgage loans as presented in the following table. These loans are collateralized by a variety of commercialfamily properties and are diversified both geographically throughout the United States and by property type. These loans are primarily in the form of whole loans, where the Company is the sole lender, but may include participations.
Loan participations are loans where the Company has purchased or retained a portion of an outstanding loan or package of loans and participates on a pro-rata basis in collecting interest and principal pursuant to the terms of the participation agreement. In general, A-Note participations have senior payment priority.
Commercial Mortgage Loans
 September 30, 2017 December 31, 2016
 Amortized Cost [1] Valuation Allowance Carrying Value Amortized Cost [1] Valuation Allowance Carrying Value
Whole loans$5,950
 $(1) $5,949
 $5,580
 $(19) $5,561
A-Note participations109
 —
 109
 136
 —
 136
Total$6,059
 $(1) $6,058
 $5,716
 $(19) $5,697
[1] Amortized cost represents carrying value prior to valuation allowances, if any.
The Company funded $827 of commercial whole loans with a weighted average loan-to-value (“LTV”) ratio of 66% and a weighted average yield of 3.9% during the nine months ended September 30, 2017. The Company continues to originate commercial whole loans within primary markets, such as office, industrial and multi-family, focusing on loans with strong LTV ratios and high quality property collateral.ratios. There were no mortgage loans held for sale as of September 30, 2017March 31, 2021 or December 31, 2016.
2020.

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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Municipal Bonds
The following table presents the Company's exposure to
municipal bonds by type and weighted average credit quality included in the preceding Securities by Type table.
Available For Sale Investments in Municipal Bonds
 March 31, 2021December 31, 2020
 Amortized CostFair ValueWeighted Average Credit QualityAmortized CostFair ValueWeighted Average Credit Quality
General Obligation$1,077 $1,194 AA+$1,082 $1,232 AA+
Pre-refunded [1]835 880 AAA889 940 AAA
Revenue
Transportation1,538 1,705  A1,441 1,636 A+
Health Care1,274 1,377  A+1,273 1,407 A+
Leasing [2]867 923 AA-905 985 AA-
Education734 801 AA732 824 AA
Water & Sewer619 658  AA644 694 AA
Sales Tax397 457  AA394 464 AA
Power363 401  A+401 450 A+
Housing101 106  AA+102 109 AA+
Other666 712  AA-701 762 A+
Total Revenue6,559 7,140 AA-6,593 7,331 AA-
Total Municipal$8,471 $9,214 AA-$8,564 $9,503 AA-
Available For Sale Investments in Municipal Bonds
 September 30, 2017 December 31, 2016
 Amortized Cost Fair Value Weighted Average Credit Quality Amortized Cost Fair Value Weighted Average Credit Quality
General Obligation$1,789
 $1,931
 AA $1,809
 $1,907
 AA
Pre-Refunded [1]1,623
 1,727
 AAA 1,590
 1,693
 AAA
Revenue

 

 
 

 

 
Transportation1,658
 1,826
 A+ 1,591
 1,724
 A+
Health Care1,327
 1,408
 AA- 1,216
 1,285
 AA-
Water & Sewer1,078
 1,145
 AA 1,019
 1,066
 AA
Education1,071
 1,124
 AA+ 988
 1,023
 AA
Leasing [2]907
 981
 AA- 681
 734
 AA-
Sales Tax590
 650
 AA 574
 627
 AA
Power531
 575
 A+ 571
 605
 A+
Housing83
 89
 A 136
 140
 A
Other928
 979
 AA- 650
 682
 AA-
Total Revenue8,173
 8,777
 AA- 7,426
 7,886
 AA-
Total Municipal$11,585
 $12,435
 AA $10,825
 $11,486
 AA
[1]Pre-refunded bonds are bonds for which an irrevocable trust containing sufficient U.S. treasury, agency, or other securities has been established to fund the remaining payments of principal and interest.
[1]Pre-Refunded bonds are bonds for which an irrevocable trust containing sufficient U.S. treasury, agency, or other securities has been established to fund the remaining payments of principal and interest.
[2]Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases facilities back to a municipality. The notes are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual appropriation by the municipality or the municipality may be obligated to appropriate general tax revenues to make lease payments.
[2]Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases facilities back to a municipality. The notes are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual appropriation by the municipality or the municipality may be obligated to appropriate general tax revenues to make lease payments.
As of September 30, 2017,both March 31, 2021 and December 31, 2020, the largest issuer concentrations were the New York Dormitory Authority, the State of California, and the New York City TransitionalMunicipal Water Finance Authority, and the Commonwealth of Massachusetts, which each comprised less than 3% of the municipal bond portfolio and were primarily comprised of general obligation and revenue bonds. AsIn total, municipal bonds make up 17% of December 31, 2016, the largest issuer concentrations werefair value of the stateCompany's investment portfolio. While COVID-19 has had an impact on many municipal issuers, the average credit quality of California, the Commonwealth of Massachusetts,Company’s holdings is AA-, and the New York Dormitory Authority,Company believes the issuers in which each comprised less than 3%it invests have multiple levers to maintain the strength of the municipal bond portfolio and were primarily comprised of general obligation and revenue bonds.their credit profile.
Limited Partnerships and Other Alternative Investments
The following tables presenttable presents the Company’s investments in limited partnerships and other alternative investments which include hedge funds, real estate funds, and private equity funds. Real estate funds consist of investments primarily in real estate
joint ventures and, to a lesser extent, equity funds, including some funds with public market exposure, and real estate joint ventures.funds. Private equity funds primarily consist of investments in funds whose assets typically consist of a diversified pool of investments in small to mid-sized non-public businesses with high growth potential and strong owner sponsorship, as well as limited exposure to public markets.

Income or losses on investments in limited partnerships and alternative investments are recognized on a lag as results from private equity investments and other funds are generally reported on a three-month delay.
92
Limited Partnerships and Other Alternative Investments - Net Investment Income
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 AmountYield AmountYield AmountYield AmountYield
Hedge funds$1
1.9 % $4
7.1 % $5
4.4% $(10)(3.6)%
Real estate funds29
18.6 % 1
0.7 % 40
8.8% 11
2.5 %
Private equity funds41
13.1 % 90
28.8 % 136
14.8% 148
16.3 %
Other alternative investments—
(0.7)% (2)(1.6)% 8
2.7% (8)(2.7)%
Total$71
11.7 % $93
15.2 % $189
10.7% $141
7.3 %



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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



Limited Partnerships and Other Alternative Investments - Net Investment Income
Three Months Ended March 31,
 20212020
 AmountYieldAmountYield
Hedge funds$8 18.2 %1 6.4 %
Real estate funds1 0.9 %16 15.3 %
Private equity funds97 41.8 %34 16.0 %
Other alternative investments [1]6 5.7 %7 7.0 %
Total$112 21.1 %$58 13.2 %

Investments in Limited Partnerships and Other Alternative Investments
September 30, 2017 December 31, 2016 March 31, 2021December 31, 2020
AmountPercent AmountPercent AmountPercentAmountPercent
Hedge funds$148
5.9% $155
6.3%Hedge funds$185 7.9 %$158 7.6 %
Real estate funds652
25.7% 629
25.6%Real estate funds704 30.3 %563 27.0 %
Private equity and other funds1,345
53.1% 1,291
52.6%Private equity and other funds1,014 43.6 %944 45.4 %
Other alternative investments [1]388
15.3% 381
15.5%Other alternative investments [1]423 18.2 %417 20.0 %
Total$2,533
100% $2,456
100%Total$2,326 100.0 %$2,082 100.0 %
[1]Consists of an insurer-owned life insurance policy which is primarily invested in hedge fundsfixed income, private equity, and other investments. This amount was previously included in hedge funds.
Available-for-sale SecuritiesFixed Maturities, AFS — Unrealized Loss Aging
The total gross unrealized losses were $205$141 as of September 30, 2017March 31, 2021 and have decreased $320, or 61%,increased $78, from December 31, 2016,2020, primarily due to higher interest rates, partially offset by tighter credit spreads and a decrease in long-term interest rates.spreads. As of September 30, 2017, $183March 31, 2021, $136 of the gross unrealized losses were associated with securitiesfixed maturities, AFS depressed less than 20% of cost or amortized cost. The remaining $22$5 of gross unrealized losses were associated with securitiesfixed maturities, AFS depressed greater than 20%. The securities depressed more than 20% are, primarily equity securities depressed due to issuer specific deterioration, as well as securities with exposurerelate to commercial real estate which are depressed primarily due to higher rates since the securities that were purchased.purchased at tighter credit spreads.
As part of the Company’s ongoing securityinvestment monitoring process, the Company has reviewed its fixed maturities, AFS securities in an unrealized loss position and concluded that these securitiesfixed maturities are temporarily depressed and are expected to recover in value as the securitiesinvestments approach maturity or as market spreads tighten. For these securitiesfixed maturities in an unrealized loss position where a credit impairmentan ACL has not been recorded, the Company’s best estimate of expected future cash flows are sufficient to recover the amortized cost basis of the security.investment. Furthermore, the Company neither has an intention to sell nor does it expect to be required to sell these securities.Investments. For further information regarding the Company’s impairmentACL analysis, see Other-Than-Temporarythe Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments in the Investment Portfolio Risks and Risk Management section of this MD&A.below.
Unrealized Loss Aging for AFS Securities
Unrealized Loss Aging for Fixed Maturities, AFS SecuritiesUnrealized Loss Aging for Fixed Maturities, AFS Securities
September 30, 2017 December 31, 2016 March 31, 2021December 31, 2020
Consecutive MonthsItems Cost or Amortized Cost Fair Value Unrealized Loss Items Cost or Amortized Cost Fair Value Unrealized LossConsecutive MonthsItemsAmortized CostACLUnrealized LossFair ValueItemsAmortized CostACLUnrealized LossFair Value
Three months or less901
 $5,000
 $4,970
 $(30) 2,119
 $11,299
 $11,037
 $(262)Three months or less682 $5,387 $— $(98)$5,289 102 $625 $— $(3)$622 
Greater than three to six months315
 1,151
 1,135
 (16) 1,109
 2,039
 1,934
 (105)Greater than three to six months40 178 — (6)172 46 367 — (5)362 
Greater than six to nine months213
 529
 518
 (11) 151
 484
 456
 (28)Greater than six to nine months29 214 — (10)204 8 6 — (1)5 
Greater than nine to eleven months399
 2,015
 1,971
 (44) 151
 452
 441
 (11)Greater than nine to eleven months8 6 — (1)5 186 1,275 (1)(27)1,247 
Twelve months or more663
 2,444
 2,340
 (104) 657
 2,565
 2,446
 (119)Twelve months or more219 924 — (26)898 205 994 — (27)967 
Total2,491
 $11,139
 $10,934
 $(205) 4,187
 $16,839
 $16,314
 $(525)Total978 $6,709 $— $(141)$6,568 547 $3,267 $(1)$(63)$3,203 
93
Unrealized Loss Aging for AFS Securities Continuously Depressed Over 20%
 September 30, 2017 December 31, 2016
Consecutive MonthsItems Cost or Amortized Cost Fair Value  Unrealized Loss Items Cost or Amortized Cost Fair Value Unrealized Loss
Three months or less78
 $29
 $22
 $(7) 83
 $24
 $18
 $(6)
Greater than three to six months32
 17
 10
 (7) 38
 13
 9
 (4)
Greater than six to nine months20
 2
 1
 (1) 21
 14
 10
 (4)
Greater than nine to eleven months13
 —
 —
 —
 11
 1
 —
 (1)
Twelve months or more55
 16
 9
 (7) 56
 19
 11
 (8)
Total198
 $64
 $42
 $(22) 209
 $71
 $48
 $(23)

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Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations



Unrealized Loss Aging for Fixed Maturities, AFS Continuously Depressed Over 20%
 March 31, 2021December 31, 2020
Consecutive MonthsItemsAmortized CostUnrealized LossFair ValueItemsAmortized Cost Unrealized LossFair Value
Three months or less5 $11 $(2)$9 2 $2 $(1)$1 
Greater than three to six months2 2 (1)1 — — — — 
Greater than six to nine months— — — — 1 46 (10)36 
Greater than nine to eleven months— — — — 2 5 (1)4 
Twelve months or more24 5 (2)3 24 5 (2)3 
Total31 $18 $(5)$13 29 $58 $(14)$44 
Other-than-temporary Impairments Recognized in Earnings by Security Type
 Three Months Ended September 30,Nine Months Ended September 30,

2017201620172016
CMBS$—
$—
$2
$1
Corporate1
13
13
38
Equity1
1
2
5
Total$2
$14
$17
$44
Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments
Three and nine months ended September 30, 2017March 31, 2021
ForThe Company recorded net reversals of credit losses on fixed maturities, AFS of $4, including reversals of $6 and additions of $2. The reversals were primarily attributable to increases in the three and nine months ended September 30, 2017, impairments recognizedfair value of corporate issuers that had an ACL in earnings included credit impairments of $1 and $15, respectively. These impairments wereprior periods, primarily related to a private issuer experiencing financial difficulty that is currently undergoinglarge regional and commercial aircraft lessor. Additions relate to new expected credit losses on a sale and is not expectedmedia/entertainment company. Unrealized losses on securities with an ACL recognized in other comprehensive income were $0. For further information, refer to generate enough cash flow forNote 5 - Investments of Notes to Condensed Consolidated Financial Statements.
There were no intent-to-sell impairments in the Company to recover the investment. three months ended March 31, 2021.
The Company incorporates its best estimate of future performance using internal assumptions and judgments that are informed by economic and industry specific trends, as well as our expectations with respect to security specific developments.
Non-creditFuture intent-to-sell impairments recognized in other comprehensive income were $3 and $7, respectively, for the three and nine months ended September 30, 2017.
Future impairmentsor credit losses may develop as the result of changes in intent-to-sellour intent to sell specific securities or if actual results underperform current modeling assumptions, which may be the result of, butthat are not limited to, macroeconomic factors and security-specific performance below current expectations.
Three and nine months ended September 30, 2016
For the three and nine months ended September 30, 2016, impairments recognized in earnings were comprised of credit impairments of $13 and $36, respectively, and intent-to-sell impairments of $0 and $3, respectively, both of which were primarily concentrated in corporate securities. Also, impairments recognized in earnings included impairments on equity securities of $1 and $5, respectively, that were in an unrealized loss position or if modeling assumptions, such as macroeconomic factors or security specific developments, change unfavorably from our current modeling assumptions, resulting in lower cash flow expectations. For a discussion of impacts resulting from the COVID-19 pandemic, refer to the Impact of COVID-19 on our financial condition, results of operations and liquidity section of this MD&A.
Three months ended March 31, 2020
The Company recorded net credit losses on fixed maturities, AFS of $12. The losses were primarily attributable to corporate fixed maturities, primarily one cruise line issuer and, to a lesser extent, one private bank loan. Unrealized losses on securities with ACL recognized in other comprehensive income were $1.
Intent-to-sell impairments of $5 were primarily related to one corporate issuer in the energy sector and one issuer with exposure to India.
ACL on Mortgage Loans
Three months ended March 31, 2021
The Company reviews mortgage loans on a quarterly basis to estimate the ACL with changes in the ACL recorded in net realized capital gains and losses. Apart from an ACL recorded on individual mortgage loans where the borrower is experiencing financial difficulties, the Company no longer believedrecords an ACL on the securities would recoverpool of mortgage loans based on lifetime expected credit losses. For further information, refer to Note 5 - Investments of Notes to Condensed Consolidated Financial Statements.
The Company recorded a decrease in the foreseeable future.
ACL on mortgage loans of $4. The decrease in the allowance was the result of improved economic scenarios and higher property valuations as compared to the prior quarter. The Company did not record an ACL on any individual mortgage loans.

Three months ended March 31, 2020
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The Company recorded an increase in the ACL on mortgage loans of $2. The increase was primarily due to volatility surrounding the COVID-19 pandemic and, to a lesser extent, newly originated mortgage loans. The Company did not record an ACL on any individual mortgage loans.



Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

CAPITAL RESOURCES AND LIQUIDITY
The following section discusses the overall financial strength of The Hartford and its insurance operations including their ability to generate cash flows from each of their business segments, borrow funds at competitive rates and raise new capital to meet operating and growth needs over the next twelve months.
SUMMARY OF CAPITAL RESOURCES AND LIQUIDITY
Capital available at the holding company as of September 30, 2017:
$1.3 billion in fixed maturities, short-term investments and cash at HFSG Holding Company
Borrowings available under a commercial paper program to a maximum of $1 billion. As of September 30, 2017 there was no commercial paper outstanding
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A senior unsecured five-year revolving credit facility that provides for borrowing capacity up to $1 billion of unsecured credit through October 31, 2019. No borrowings were outstanding as of September 30, 2017
Expected liquidity requirements for the next twelve months as of September 30, 2017:
$320 maturing debt payment due in March of 2018
$500 junior subordinated debt expected to be called in June of 2018
$315 of interest on debt
$353 of common stockholders dividends, subject to the discretion of the Board of Directors
$1.45 billion of cash consideration to be paid for the purchase of Aetna's group life and disability insurance business by the Company's indirect wholly-owned subsidiary, Hartford Life and Accident Insurance Company ("HLA") in November of 2017
$200 capital contribution to HLA by the HFSG holding company in 4Q 2017
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Equity repurchase program:
Authorization for equity repurchases of up to $1.3 billion for the period October 31, 2016 through December 31, 2017.
Effective October 13, 2017, the Company suspended 2017 equity repurchases. The company does not currently expect to authorize an equity repurchase plan in 2018.
During the nine months endedSeptember 30, 2017, the Company repurchased 19.3 million common shares for $975. During the period October 1, 2017 through October 12, 2017 the Company repurchased approximately 0.9 million common shares for $52 under this authorization.
2017 dividend capacity:
The Company has 2017 dividend capacity of $1.5 billion for property and casualty subsidiaries, $207 for Hartford Life and Accident Insurance Company ("HLA") , and $1 billion for Hartford Life Insurance Company ("HLIC").
During the first nine months of 2017, HFSG holding company received approximately $625 in net dividends from its P&C insurance subsidiaries, $188 in dividends from HLA, and $600 in dividends from HLIC.
In connection with the purchase of Aetna's group life and disability insurance business, the property and casualty subsidiaries have received approval to pay an extraordinary dividend to the HFSG holding company of $1.4 billion, of which $800 will be funded by approved extraordinary dividends from HLIC.
Including the extraordinary dividends and other ordinary dividends anticipated in the fourth quarter, total dividends anticipated for 2017 include approximately $2.3 billion from property and casualty subsidiaries, $188 from HLA, $1.4 billion from HLIC and $76 from Mutual Funds. However, since $800 of the HLIC dividends funded a portion of the property and casualty dividends, the net dividends anticipated to the HFSG holding company for the 2017 full year is approximately $3.1 billion.
Liquidity Requirements and Sources of Capital
The Hartford Financial Services Group, Inc. (Holding Company)
The liquidity requirements of the holding company of The Hartford Financial Services Group, Inc. (“HFSG Holding Company”) have been and will continue to be met by HFSG Holding Company’s fixed maturities, short-term investments and cash, and dividends from its subsidiaries, principally from its insurance operations, as well as the issuance of common stock, debt or other capital securities and borrowings from its credit

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facilities,
SUMMARY OF CAPITAL RESOURCES AND LIQUIDITY
Capital available to the holding company as needed.of March 31, 2021:
As of September 30, 2017, HFSG Holding Company held•$1.9 billion in fixed maturities, short-term investments, investment sales receivable and cash of $1.3 billion. Expected liquidity requirements of theat The HFSG Holding CompanyCompany.
•A senior unsecured five-year revolving credit facility that provides for the next twelve months include paymentsborrowing capacity up to $750 of 6.3% senior notesunsecured credit through March 29, 2023. As of $320 at maturity in March 2018, redemption of $500 junior subordinated notes in June 2018, interest payments on debt of approximately $315, common stockholder dividends, subject to the discretion of the Board of Directors, of approximately $353 and a capital contribution of $1.65 billion to HLA in the fourth quarter of 2017 of which $1.45 billion will be used to purchase Aetna's group life and disability insurance business. For further details see Note 16- Subsequent Events of Notes to Condensed Consolidated Financial Statements.31, 2021, there were no borrowings outstanding.
The Hartford has an•An intercompany liquidity agreement that allows for short-term advances of funds among the HFSG Holding Company and certain affiliates of up to $2$2.0 billion for liquidity and other general corporate purposes. As of March 31, 2021, there were no borrowings outstanding.
2021 expected dividends and other sources of capital:
The Connecticut Insurance Department ("CTDOI") granted approvalfuture payment of dividends from our subsidiaries is dependent on several factors including the extent to which COVID-19 impacts our business, results of operations, financial condition and liquidity.
•P&C - The Company's U.S. property and casualty insurance subsidiaries have dividend capacity of $1.7 billion for certain affiliated insurance companies that are parties2021, with $900 to $1.1 billion of net dividends expected in 2021, including $230 paid to HFSG Holding Company through March 31, 2021.
•Group Benefits - HLA has dividend capacity of $295 in 2021 with $250 to $295 of dividends expected in 2021, including $70 paid to HFSG Holding Company through March 31, 2021.
•Hartford Funds - HFSG Holding Company expects to receive $150 to $180 in dividends from Hartford Funds in 2021, including $41 received through March 31,2021.
Expected liquidity requirements for the next twelve months as of March 31, 2021:
•$215 of interest on debt.
•$21 dividends on preferred stock, subject to the agreementdiscretion of the Board of Directors.
•$505 of common stockholders' dividends, subject to treat receivablesthe discretion of the Board of Directors and before share repurchases.
Equity repurchase program:
During the three months ended March 31, 2021, the Company repurchased 2.4 million common shares for $123 under the share repurchase program authorized in December 2020, which is
effective through December 31, 2022. The share repurchase program was initially authorized at $1.5 billion and, in April 2021, the Company announced an increase in the share repurchase authorization to $2.5 billion, which remains effective until December 31, 2022. The Company expects to utilize $1.5 billion of this share repurchase authorization during 2021, subject to market conditions. During the period April 1, 2021 through April 26, 2021, the Company repurchased approximately 0.4 million common shares for $27.
The timing of any future repurchases will be dependent upon several factors, including the market price of the Company's securities, the Company's capital position, consideration of the effect of any repurchases on the Company's financial strength or credit ratings, the Company's blackout periods, and other considerations.
Liquidity Requirements and Sources of Capital
The Hartford Financial Services Group, Inc. ("HFSG Holding Company")
The liquidity requirements of the holding company of The Hartford Financial Services Group, Inc. will primarily be met by HFSG Holding Company's fixed maturities; short-term investments and cash; and dividends, principally from its subsidiaries.
The Company maintains sufficient liquidity and has a parent, includingvariety of contingent liquidity resources to manage liquidity across a range of economic scenarios. We continue to expect to successfully manage our liquidity throughout the pandemic.
The HFSG Holding Company expects to continue to receive dividends from its operating subsidiaries in the future and manages the capital and surplus in each of its operating subsidiaries to be sufficient under significant economic stress scenarios. Dividends from subsidiaries and other sources of funds at the holding company may be used to repurchase shares under the authorized share repurchase program at the discretion of management.
Under significant economic stress scenarios that could arise due to the COVID-19 pandemic, the Company has the ability to meet short-term cash requirements, if needed, by borrowing under its revolving credit facility or by having its insurance subsidiaries take collateralized advances under a facility with the Federal Home Loan Bank of Boston (“FHLBB”). The Company could also choose to have its insurance subsidiaries sell certain highly liquid, high quality fixed maturities or the Company could issue debt in the public markets under its shelf registration. No borrowings or advances have occurred since the start of the COVID-19 pandemic.
During the second quarter, the Company expects to make a contribution of approximately €15 million to Navigators Holdings (Europe) N.V., a Belgium holding company.
Dividends
The Hartford's Board of Directors declared the following quarterly dividends since January 1, 2021:
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Common Stock Dividends
DeclaredRecordPayableAmount per share
February 4, 2021March 1, 2021April 2, 2021$0.350 
Preferred Stock Dividends
DeclaredRecordPayableAmount per share
February 18, 2021May 1, 2021May 17, 2021$375.00 
There are no current restrictions on the HFSG Holding Company's ability to pay dividends to its stockholders.
For a discussion of restrictions on dividends to the HFSG Holding Company as admitted assets for statutory accounting purposes. Asfrom its insurance subsidiaries, see the following "Dividends from Subsidiaries" discussion. For a discussion of September 30, 2017, there were no amounts outstanding frompotential restrictions on the HFSG Holding Company.Company's ability to pay dividends, see the risk factor "Our ability to declare and pay dividends is subject to limitations" in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Debt
On March 15, 2017,Dividends from Subsidiaries
Dividends to HFSG Holding Company from its insurance subsidiaries are restricted by insurance regulation. Upon the acquisition of Navigators Group, the Company’s principal insurance subsidiaries are domiciled in the United States, the United Kingdom, and Belgium.
The payment of dividends by Connecticut-domiciled insurers is limited under the insurance holding company laws of Connecticut. These laws require notice to and approval by the state insurance commissioner for the declaration or payment of any dividend, which, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of the insurer’s statutory policyholder surplus as of December 31 of the preceding year or (ii) net income (or net gain from operations, if such company is a life insurance company) for the twelve-month period ending on the thirty-first day of December last preceding, in each case determined under statutory insurance accounting principles. In addition, if any dividend of a Connecticut-domiciled insurer exceeds the insurer’s earned surplus, it requires the prior approval of the Connecticut Insurance Commissioner.
Property casualty insurers domiciled in New York, including Navigators Insurance Company ("NIC") and Navigators Specialty Insurance Company ("NSIC"), generally may not, without notice to and approval by the state insurance commissioner, pay dividends out of earned surplus in any twelve‑month period that exceeds the lesser of (i) 10% of the insurer’s statutory policyholders’ surplus as of the most recent financial statement on file, or (ii) 100% of its adjusted net investment income, as defined, for the same twelve month period. As part of the New York state insurance commissioner's approval of the Navigators Group acquisition, and as is common practice, any dividend from NIC and NSIC before May 2021 will require prior approval from the state insurance commissioner.
The insurance holding company laws of the other jurisdictions in which The Hartford’s insurance subsidiaries are incorporated (or deemed commercially domiciled) generally contain similar
(although in certain instances more restrictive) limitations on the payment of dividends. In addition to statutory limitations on paying dividends, the Company repaidalso takes other items into consideration when determining dividends from subsidiaries. These considerations include, but are not limited to, expected earnings and capitalization of the subsidiaries, regulatory capital requirements and liquidity requirements of the individual operating company.
Corporate members of Lloyd's syndicates may pay dividends to its $416, 5.375% senior notes at maturity.
On February 15, 2017, pursuantparent to the put option agreement withextent of available profits that have been distributed from the Glen Meadow ABC Trust,syndicate in excess of the Funds at Lloyd's ("FAL") capital requirement. The FAL is determined based on the syndicate’s solvency capital requirement ("SCR") under the E.U.'s Solvency II capital adequacy model, the current regulatory framework governing UK domiciled insurers, plus a Lloyd’s specific economic capital assessment.
Insurers domiciled in the United Kingdom may pay dividends to their parent out of their statutory profits subject to restrictions imposed under U.K. Company law and Solvency II. Belgium domiciled insurers may only pay dividends if, at the end of their previous fiscal year, the total amount of their assets, as reduced by its provisions and debts, are in excess of certain minimum capital thresholds calculated under Belgian law.
Through the first three months of 2021, HFSG Holding Company received $341 of net dividends from its subsidiaries, including $70 from HLA, $41 from Hartford Funds and $230 from its U.S. P&C subsidiaries, excluding $50 of P&C dividends that were subsequently contributed to a P&C subsidiary and $12 of P&C dividends related to interest payments on an intercompany note owed by Hartford Holdings, Inc. ("HHI") to Hartford Fire Insurance Company.
Over the remainder of 2021, the Company issued $500 junior subordinated notes with a scheduled maturityanticipates receiving approximately $670 to $870 of February 12, 2047,net dividends from its U.S. P&C subsidiaries, $180 to $225 of dividends from HLA and a final maturity$110 to $140 of February 12, 2067. The junior subordinated notes bear interest at an annual ratedividends from Hartford Funds.
Other Sources of three-month LIBOR plus 2.125%, payable quarterly. Capital for the HFSG Holding Company
The Hartford will haveendeavors to maintain a capital structure that provides financial and operational flexibility to its insurance subsidiaries, ratings that support its competitive position in the right, on onefinancial services marketplace (see the "Ratings" section below for further discussion), and stockholder returns. As a result, the Company may from time to time raise capital from the issuance of debt, common equity, preferred stock, equity-related debt or more occasions, to defer interest payments due on the junior subordinated notes under specified circumstances.
other capital securities and is continuously evaluating strategic opportunities. The issuance of debt, common equity, equity-related debt or other capital securities could result in the $500 junior subordinated notesdilution of stockholder interests or reduced net income due to additional interest expense.
Shelf Registrations
The Hartford filed an automatic shelf registration statement with the Securities and Exchange Commission ("the SEC") on May 17, 2019 that permits it to offer and sell debt and equity securities during the three-year life of the registration statement.
For further information regarding Shelf Registrations, see Note 14 - Debt of Notes to Consolidated Financial Statement in The Hartford's 2020 Form 10-K Annual Report.
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Revolving Credit Facilities
The Company has increased debta senior unsecured five-year revolving credit facility (the "Credit Facility") that provides up to capital ratios though$750 of unsecured credit through March 29, 2023. As of March 31, 2021, no borrowings were outstanding and no letters of credit were issued under the Credit Facility and the Company anticipates callingwas in June 2018 its outstanding $500 of 8.125% junior subordinated debentures that are due 2068 and are first callable at that time. Accordingly, the Company expects debt to capital ratios to be reduced in June, 2018.
Upon receipt of the proceeds, the Company entered into a replacement capital covenant (the "RCC"). Under the terms of the RCC, if the Company redeems the notes at any time prior to February 12, 2047 (or such earlier date on which the RCC terminates by its terms) it can only do socompliance with the proceeds from the sale of certain qualifying replacement securities. The RCC also prohibits the Company from redeeming all or any portion of the notes on or prior to February 15, 2022.financial covenants.
In April, 2017, the Company entered into an interest rate swap agreement expiring February 15, 2027 to effectively convert the variable interest payments into fixed interest payments of approximately 4.39%.
Intercompany Liquidity AgreementsOther Sources of Capital for the HFSG Holding Company
On January 5, 2017,The Hartford Fire Insuranceendeavors to maintain a capital structure that provides financial and operational flexibility to its insurance subsidiaries, ratings that support its competitive position in the financial services marketplace (see the "Ratings" section below for further discussion), and stockholder returns. As a result, the Company a subsidiarymay from time to time raise capital from the issuance of debt, common equity, preferred stock, equity-related debt or other capital securities and is continuously evaluating strategic opportunities. The issuance of debt, common equity, equity-related debt or other capital securities could result in the dilution of stockholder interests or reduced net income due to additional interest expense.
Shelf Registrations
The Hartford filed an automatic shelf registration statement with the Securities and Exchange Commission ("the SEC") on May 17, 2019 that permits it to offer and sell debt and equity securities during the three-year life of the Company, issued a Revolving Note (the "Note")
in the principal amount of $230 to Hartford Accident and Indemnity Company, an indirect wholly-owned subsidiary of the Company, under the intercompany liquidity agreement. The note was issued to fund the liquidity needs associated with the $650 ceded premium paid in January 2017 for the adverse development cover with NICO. The Note was repaid on March 29, 2017. The company has $2.0 billion available under the intercompany liquidity agreement as of September 30, 2017.
Equity
During the nine months ended September 30, 2017, the Company repurchased 19.3 million common shares for $975. During the period October 1, 2017 through October 12, 2017, the Company repurchased approximately 0.9 million common shares for $52 under this authorization. Effective October 13, 2017 the Company suspended 2017 equity repurchases. The Company does not currently expect to authorize an equity repurchase plan in 2018.registration statement.
For further information about equity repurchases,regarding Shelf Registrations, see Part II. Other Information, Item 2.
Dividends
Note 14 - Debt of Notes to Consolidated Financial Statement in The Hartford's Board of Directors declared the following quarterly dividends:
DeclaredRecordPayableAmount
October 23, 2017December 1, 2017January 2, 2018$0.25
July 20, 2017September 1, 2017October 2, 2017$0.23
May 18, 2017June 1, 2017July 3, 2017$0.23
February 23, 2017March 6, 2017April 3, 2017$0.23
There are no current restrictions on the HFSG Holding Company's ability to pay dividends to its shareholders.
For a discussion of restrictions on dividends to the HFSG Holding Company from its insurance subsidiaries, see the following "Dividends from Insurance Subsidiaries" discussion. For a discussion of potential restrictions on the HFSG Holding Company's ability to pay dividends, see the risk factor "Our ability to declare and pay dividends is subject to limitations" in Item 1A of Part I of the Company’s Annual Report on2020 Form 10-K for the year ended December 31, 2016.
Pension Plans and Other Postretirement Benefits
On June 30, 2017, the Company purchased a group annuity contract to transfer approximately $1.6 billion of the Company’s outstanding pension benefit obligations related to certain U.S. retirees, terminated vested participants, and beneficiaries. As a result of this transaction, in the second quarter of 2017, the Company recognized a pre-tax settlement charge of $750 ($488 after-tax) and a reduction to shareholders' equity of $144.
In connection with this transaction, the Company made a contribution of $280 in September 2017 to the U.S. qualified pension plan in order to maintain the plan’s pre-transaction funded status.Annual Report.

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Dividends from Insurance SubsidiariesRevolving Credit Facilities
DividendsThe Company has a senior unsecured five-year revolving credit facility (the "Credit Facility") that provides up to the HFSG Holding Company from its insurance subsidiaries are restricted by insurance regulation. The payment$750 of dividends by Connecticut-domiciled insurers is limitedunsecured credit through March 29, 2023. As of March 31, 2021, no borrowings were outstanding and no letters of credit were issued under the insurance holding company laws of Connecticut. These laws require notice toCredit Facility and approval by the state insurance commissioner for the declaration or payment of any dividend, which, together with other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of the insurer’s policyholder surplus as of December 31 of the preceding year or (ii) net income (or net gain from operations, if such company is a life insurance company) for the twelve-month period ending on the thirty-first day of December last preceding, in each case determined under statutory insurance accounting principles. In addition, if any dividend of a Connecticut-domiciled insurer exceeds the insurer’s earned surplus, it requires the prior approval of the Connecticut Insurance Commissioner. The insurance holding company laws of the other jurisdictions in which The Hartford’s insurance subsidiaries are incorporated (or deemed commercially domiciled) generally contain similar (although in certain instances more restrictive) limitations on the payment of dividends. Dividends paid to HFSG Holding Company by its life insurance subsidiaries are further dependent on cash requirements of Hartford Life, Inc. ("HLI"), Hartford Holdings, Inc. ("HHI") and other factors. In addition to statutory limitations on paying dividends, the Company also takes other items into consideration when determining dividends from subsidiaries. These considerations include, but are not limited to expected earnings and capitalization of the subsidiaries, regulatory capital requirements and liquidity requirements of the individual operating company.
For 2017, the amount of dividends that may be paid by the company's subsidiaries up to the HFSG holding company without approval of extraordinary dividends included $1.5 billion for property and casualty insurance subsidiaries, $207 for Hartford Life and Accident Insurance Company ("HLA") and $1 billion for Hartford Life Insurance Company ("HLIC").
During the first nine months of 2017, HFSG holding company received approximately $625was in net dividends from its P&C insurance subsidiaries, $188 in dividends from HLA and $600 in dividends from HLIC. While the HFSG holding company received approximately $787 in dividends from its P&C insurance subsidiaries in the first nine months of 2017, that amount included $100 which was subsequently contributed to a run-off P&C subsidiary and approximately $63 related to principal and interest payments on an intercompany note owed by Hartford Holdings, Inc. ("HHI") to Hartford Fire Insurance Company, resulting in a net dividend of $625.
In connectioncompliance with the purchase of Aetna’s group life and disability insurance business, the P&C insurance subsidiaries have received approval to pay an extraordinary dividend to the HFSG holding company of $1.4 billion, of which $800 will be funded by approved extraordinary dividends from HLIC. The extraordinary dividends from HLIC are being funded, in part, by $550 of extraordinary dividends that have been approved from HLIC’s indirect wholly-owned subsidiary, Hartford Life and Annuity Insurance Company. The $800 of extraordinary dividends from HLIC will be used to pay down principal on the intercompany note owed by HHI to Hartford Fire Insurance Company. Theall financial covenants.
extraordinary dividends will be paid prior to the closing of the transaction.
In addition to the extraordinary dividends approved in connection with the purchase of Aetna’s group life and disability insurance business, the Company anticipates that the HFSG holding company will take out an additional $225 dividend from its P&C insurance subsidiaries in the fourth quarter of 2017.
During the first nine months of 2017, Mutual Funds paid $54 in dividends to HFSG Holding Company with another $22 of dividends expected to be paid before year end.
Given the additional 2017 dividends from the property and casualty subsidiaries and HLIC to fund the purchase of Aetna’s group life and disability business, the Company expects subsidiary dividends to the HFSG holding company in 2018 to be significantly below the level of subsidiary dividends paid in recent years.
Taking into consideration subsidiary dividends received through September 30, 2017, extraordinary dividends approved in connection with the purchase of Aetna's group life and disability insurance business, and other dividends anticipated in the fourth quarter, total dividends anticipated for 2017 include approximately $2.3 billion from P&C insurance subsidiaries, $188 from HLA, $1.4 billion from HLIC and $76 from Mutual Funds. However, since $800 of the HLIC dividends were paid up to Hartford Fire Insurance Company to fund a portion of dividends from the P&C insurance subsidiaries, the net dividends anticipated to the HFSG holding company for the 2017 full year is approximately $3.1 billion. In connection with the purchase of Aetna's group life and disability insurance business, the HFSG holding company will contribute $1.65 billion to HLA in order to fund the purchase price and provide additional capital support.
Other Sources of Capital for the HFSG Holding Company
The Hartford endeavors to maintain a capital structure that provides financial and operational flexibility to its insurance subsidiaries, ratings that support its competitive position in the financial services marketplace (see the "Ratings" section below for further discussion), and shareholderstockholder returns. As a result, the Company may from time to time raise capital from the issuance of debt, common equity, preferred stock, equity-related debt or other capital securities and is continuously evaluating strategic opportunities. The issuance of debt, common equity, equity-related debt or other capital securities could result in the dilution of shareholderstockholder interests or reduced net income due to additional interest expense.
Shelf Registrations
The Hartford filed an automatic shelf registration statement with the Securities and Exchange Commission ("the SEC") on July 29, 2016May 17, 2019 that permits it to offer and sell debt and equity securities during the three-year life of the registration statement.
Commercial Paper and Revolving Credit Facility
Commercial Paper
For further information regarding Shelf Registrations, see Note 14 - Debt of Notes to Consolidated Financial Statement in The Hartford’s maximum borrowings available under its commercial paper program are $1 billion. The Company is dependent upon market conditions to access short-term financing through the issuance of commercial paper to investors.Hartford's 2020 Form 10-K Annual Report.

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As of September 30, 2017, there was no commercial paper outstanding.
Revolving Credit Facilities
The Company has a senior unsecured five-year revolving credit facility (the “Credit Facility”"Credit Facility") that provides for borrowing capacity up to $1 billion$750 of unsecured credit through October 31, 2019 available in U.S. dollars, Euro, Sterling, Canadian dollars and Japanese Yen.March 29, 2023. As of September 30, 2017,March 31, 2021, no borrowings were outstanding and no letters of credit were issued under the Credit Facility. As of September 30, 2017,Facility and the Company was in compliance with all financial covenants.
Intercompany Liquidity Agreements
The Company has $2.0 billion available under an intercompany liquidity agreement that allows for short-term advances of funds among the HFSG Holding Company and certain affiliates of up to $2.0 billion for liquidity and other general corporate purposes. The Connecticut Department of Insurance ("CTDOI") granted approval for certain affiliated insurance companies that are parties to the agreement to treat receivables from a parent, including the HFSG Holding Company, as admitted assets for statutory accounting purposes.
As of March 31, 2021 there were no amounts outstanding at the HFSG Holding Company.
Collateralized Advances with Federal Home Loan Bank of Boston
The Company’s subsidiaries, Hartford Fire Insurance Company (“Hartford Fire”) and Hartford Life and Accident Insurance Company (“HLA”), are members of the Federal Home Loan Bank of Boston (“FHLBB”). Membership allows these subsidiaries access to collateralized advances, which may be short- or long-term with fixed or variable rates. Advances may be used to support general corporate purposes, which would be presented as short- or long-term debt, or to earn incremental investment income, which would be presented in other liabilities consistent with other collateralized financing transactions. As of March 31, 2021 there were no advances outstanding.
For further information regarding collateralized advances with Federal Home Loan Bank of Boston, see Note 14 - Debt of Notes to Consolidated Financial Statements included in the Company’s 2020 Form 10-K Annual Report.
Lloyd's Letter of Credit Facilities
The Hartford has entered into a committed credit facility agreement with a syndicate of lenders (the "Club Facility") as well as a non-committed $25 credit facility with a lender (the "Bilateral Facility"). The Club Facility has two tranches with one tranche extending a $104 commitment and the other tranche extending a £85 million ($117 as of March 31, 2021) commitment. As of March 31, 2021, letters of credit with an aggregate face amount of $104 and £85 million, or $117, were outstanding under the Club Facility and no letters of credit were outstanding under the Bilateral Facility.
Among other covenants, within the Club Facility and Bilateral Facility contain financial covenants regarding The Hartford's consolidated net worth and financial leverage and that limit the amount of letters of credit that can support Funds and Lloyd's, consistent with Lloyd's requirements. As of March 31, 2021, The Hartford was in compliance with all financial covenants of both facilities.
For further information regarding Revolving Credit Facility.Facilities, see Note 14 - Debt of Notes to Consolidated Financial Statements included in the Company’s 2020 Form 10-K Annual Report.
Pension Plans and Other Postretirement Benefits
The Company does not have a 2021 required minimum funding contribution for the U.S. qualified defined benefit pension plan and the funding requirements for all pension plans are expected to be immaterial. The Company has not determined whether, and to what extent, contributions may be made to the U.S. qualified defined benefit pension plan in 2021. The Company will monitor the funded status of the U.S. qualified defined benefit pension plan during 2021 to make this determination.
Derivative Commitments
Certain of the Company’s derivative agreements contain provisions that are tied to the financial strength ratings, as set by nationally recognized statistical rating agencies, of the individual legal entity that entered into the derivative agreement. If the legal entity’s financial strength were to fall below certain ratings, the counterparties to the derivative agreements could demand either immediate and ongoing full collateralization or immediate termination and in certain instances enable the counterparties to terminate the agreements and demand immediate settlement of allthe outstanding derivative positions traded under each impacted bilateral agreement. The settlement amount is determined by netting thenet derivative positions transacted under each agreement. If the termination rights wereFor further information, refer to be exercised by the counterparties, it could impact the legal entity’s abilityNote 12 - Commitments and Contingencies of Notes to conduct hedging activities by increasing the associated costs and decreasing the willingness of counterparties to transact with the legal entity. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a net liability position as of September 30, 2017 was $1.3 billion. For this $1.3 billion, the legal entities have posted collateral of $955 in the normal course of business. In addition, the Company has posted collateral of $31 associated with a customized GMWB derivative. Based on derivative market values as of September 30, 2017, a downgrade of one level below the current financial strength ratings by either Moody's or S&P would require an additional $7 of assets to be posted as collateral. Based on derivative market values as of September 30, 2017, a downgrade of two levels below the current financial strength ratings by either Moody's or S&P would require an additional $17 of assets to be posted as collateral. These collateral amounts could change as derivative market values change, as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated. The nature of the collateral that we post, if required, would be primarily in the form of U.S. Treasury bills, U.S. Treasury notes and government agency securities.Condensed Consolidated Financial Statements.
As of September 30, 2017, the aggregate notional amount and fair value ofMarch 31, 2021, no derivative relationships that couldpositions would be subject to immediate termination in the event of a downgrade of one level below the current financial strength ratings was $1.2 billion and $25, respectively. These amountsratings. This could change as derivative market values change as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated.
On October 23, 2017, Moody’s lowered its counterparty credit and insurer financial strength ratings on Hartford Life and Annuity Insurance Company and Hartford Life Insurance Company to Baa3. Given this downgrade action, termination rating triggers in three derivative counterparty relationships
were impacted. The Company is in the process of re-negotiating the rating triggers which it expects to successfully complete.  Accordingly, the Company does not expect the current hedging programs to be adversely impacted by the announcement of the downgrade of Hartford Life and Annuity Insurance Company and Hartford Life Insurance Company.  As of September 30, 2017, the notional amount and fair value related to these three derivative counterparties is $989 and $43, respectively. These counterparties have not exercised their right to terminate these relationships and, if they did, would have to settle all of the outstanding derivatives.  In addition, as a result of the downgrade of Hartford Life and Annuity Insurance Company, the Company is required to post an additional $7 of collateral related to a single counterparty relationship.
Insurance Operations
While subject to variability period to period, claim frequencyunderwriting and severity patterns and the level of policy surrendersinvestment cash flows continue to be within historical norms and, therefore, the Company’s insurance operations’ currentprovide sufficient liquidity position is considered to be sufficient to meet anticipated demands over the next twelve months. For information about the impact of COVID-19 on the Company's cash flows see the Risk Factors disclosed in Item 1A of Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2020. For a discussion and tabular presentation of the Company’s current contractual obligations by period, refer to Off-Balance Sheet Arrangements and Aggregate Contractual Obligations within the Capital Resources and Liquidity section of the MD&A included in The Hartford’s 20162020 Form 10-K Annual Report.
The principal sources of operating funds are premiums, fees earned from assets under management and investment income, while investing cash flows primarily originate from maturities and sales of invested assets. The primary uses of funds are to pay claims, claim adjustment expenses, commissions and other underwriting expenses,and insurance operating costs, to pay taxes, to purchase new investments and to make dividend payments to the HFSG Holding Company.
The Company’s insurance operations consist of property and casualty insurance products (collectively referred to as “Property & Casualty Operations”) and lifeGroup Benefits. The Company's insurance and legacy annuity products (collectively referred to as “Life Operations”).
Property & Casualty Operations
Property & Casualty Operations includes the followingoperations hold fixed maturity securities andincluding a significant short-term investmentsinvestment position (securities with maturities of one year or less at the time of purchase) to meet liquidity needs.
Property & Casualty
 As of September 30, 2017
Fixed maturities$25,867
Short-term investments1,310
Cash74
Less: Derivative collateral95
Total$27,156
Liquidity requirements that are unable to be funded by Property & Casualty Operation’sthe Company's insurance operations' short-term investments would be satisfied with current operating funds, including premiums or investing cash flows, which includes
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proceeds received or through the sale of invested assets. A sale of invested assets could result in significant realized capital gains (losses).losses.
Life Operations
Life Operations’ total general account contractholder obligations are supported by $40 billion of cash and total general account invested assets, which includesThe following tables represent the following fixed maturity

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securities holdings, including the aforementioned cash and short-term investments available to meet liquidity needs.
Life Operations
 As of September 30, 2017
Fixed maturities$31,090
Short-term investments1,895
Cash258
Less: Derivative collateral1,272
Total$31,971
Capital resources available to fund liquidity upon contractholder surrender or termination are a functionneeds, for each of the legal entity in which the liquidity requirement resides. Generally, obligations of Group Benefits will be funded by Hartford Life and Accident Insurance Company. Obligations of Talcott Resolution will generally be funded by Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company.
Company’s insurance operations.
HLIC, an indirect wholly-owned subsidiary, is a member of the Federal Home Loan Bank of Boston (“FHLBB”). Membership allows HLIC access to collateralized advances, which may be used to support various spread-based businesses and enhance liquidity management. FHLBB membership requires the company to own member stock and advances require the purchase of activity stock. The amount of advances that can be taken is dependent on the asset types pledged to secure the advances. The CTDOI will permit HLIC to pledge up to $1.1 billion in qualifying assets to secure FHLBB advances for 2017. The pledge limit is recalculated annually based on statutory admitted assets and capital and surplus. HLIC would need to seek the prior approval of the CTDOI in order to exceed these limits. As of September 30, 2017, HLIC had no advances outstanding under the FHLBB facility.
Contractholder Obligations
 As of September 30, 2017
Total Life contractholder obligations$165,716
Less: Separate account assets [1]115,626
General account contractholder obligations$50,090
Composition of General Account Contractholder Obligations 
Contracts without a surrender provision and/or fixed payout dates [2]$24,555
U.S. Fixed MVA annuities [3]4,798
Other [4]20,737
General account contractholder obligations$50,090
[1]Property & Casualty
In the event customers elect to surrender separate account assets, Life Operations will use the proceeds from the saleAs of the assets to fund the surrender, and Life Operations’ liquidity position will not be impacted. In some instances Life Operations will receive a percentage of the surrender amount as compensation for early surrender (surrender charge), increasing Life Operations’ liquidity position. In addition, a surrender of variable annuity separate account or general account assets (see the following) will decrease Life Operations’ obligation for payments on guaranteed living and death benefits.March 31, 2021
Fixed maturities$33,288 
Short-term investments1,155 
Cash149 
Less: Derivative collateral54 
Total$34,538

[2]Group Benefits Operations
Relates to contracts such as payout annuities, institutional notes, term life, group benefit contracts, or death and living benefit reserves, which cannot be surrendered for cash.As of March 31, 2021
Fixed maturities$9,927 
[3]Short-term investmentsRelates to annuities that are recorded in the general account under U.S. GAAP as the contractholders are subject to the Company's credit risk, although these annuities are held in a statutory separate account. In the statutory separate account, Life Operations is required to maintain invested assets with a fair value greater than or equal to the MVA surrender value of the Fixed MVA contract. In the event assets decline in value at a greater rate than the MVA surrender value of the Fixed MVA contract, Life Operations is required to contribute additional capital to the statutory separate account. Life Operations will fund these required contributions with operating cash flows or short-term investments. In the event that operating cash flows or short-term investments are not sufficient to fund required contributions, the Company may have to sell other invested assets at a loss, potentially resulting in a decrease in statutory surplus. As the fair value of invested assets in the statutory separate account are at least equal to the MVA surrender value of the Fixed MVA contract, surrender of Fixed MVA annuities will have an insignificant impact on the liquidity requirements of Life Operations.
207 
[4]CashSurrenders of, or policy loans taken from, as applicable, these general account liabilities, which include the general account option for Life Operations' individual variable annuities and the variable life contracts of the former Individual Life business, the general account option for annuities of the former Retirement Plans business and universal life contracts sold by the former Individual Life business, may be funded through operating cash flows of Life Operations, available short-term investments, or Life Operations may be required to sell fixed maturity investments to fund the surrender payment. Sales of fixed maturity investments could result in the recognition of realized losses and insufficient proceeds to fully fund the surrender amount. In this circumstance, Life Operations may need to take other actions, including enforcing certain contract provisions which could restrict surrenders and/or slow or defer payouts. The Company has ceded reinsurance in connection with the sales of its Retirement Plans and Individual Life businesses to MassMutual and Prudential, respectively. These reinsurance transactions do not extinguish the Company's primary liability on the insurance policies issued under these businesses.12 
Less: Derivative collateral29 
Total$10,117
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
There have been no material changes to the Company’s off-
balanceoff-balance sheet arrangements and aggregate contractual obligations since the filing of the Company’s 20162020 Form 10-K Annual Report.

Capitalization
Capital Structure
March 31, 2021December 31, 2020Change
Long-term debt4,353 4,352 — %
Total debt4,353 4,352 — %
Common stockholders' equity excluding AOCI, net of tax17,104 17,052 — %
Preferred stock334 334 — %
AOCI, net of tax264 1,170 (77 %)
Total stockholders’ equity17,702 18,556 (5 %)
Total capitalization$22,055 $22,908 (4 %)
Debt to stockholders’ equity25 %23 %
Debt to capitalization20 %19 %
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Total capitalization decreased $853, or 4%, as of March 31, 2021 compared to December 31, 2020 primarily due to an decrease in AOCI.
For additional information on AOCI, net of tax, including unrealized capital gains from securities, see Note 14 - Changes In
and Reclassifications From Accumulated Other Comprehensive Income (Loss) and Note 5 - Investments of Notes to Condensed Consolidated Financial Statements. For additional information on debt, see Note 14 - Debt of Notes to Consolidated Financial Statement in The Hartford's 2020 Form 10-K Annual Report.
Cash Flow[1]
Three Months Ended March 31,
20212020
Net cash provided by operating activities$759 $298 
Net cash provided by (used for) investing activities$(450)$777 
Net cash used for financing activities$(266)$(1,027)
Cash and restricted cash– end of period$280 $301 
[1] Cash activities in 2021 include cash flows related to Continental Europe Operations classified as held for sale beginning in the third quarter of 2020. See Note 16 - Business Disposition of Notes to Condensed Consolidated Financial Statements for discussion of this transaction.
Cash provided by operating activities increased in 2021 as compared to the prior year period primarily driven by a decline in P&C losses and expenses paid, and lower operating expenses paid including lower payroll and employee related expenditures. Positive cash flow impacts were partially offset by an increase in Group Benefits claims paid due, in large part, to the
impact of excess mortality in group life primarily caused by the direct and indirect impacts of COVID-19.
Cash provided by (used for) investing activities decreased from net inflows in 2020 to net outflows in 2021 as a result of a decrease from net proceeds to net payments for equity securities, a change from net proceeds to net
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Capitalization
Capital Structure
 September 30, 2017December 31, 2016Change
Short-term debt (includes current maturities of long-term debt)$320
$416
(23)%
Long-term debt4,818
4,636
4 %
Total debt [1]5,138
5,052
2 %
Stockholders’ equity excluding accumulated other comprehensive income (loss), net of tax (“AOCI”)16,648
17,240
(3)%
AOCI, net of tax585
(337)NM
Total stockholders’ equity$17,233
$16,903
2 %
Total capitalization including AOCI$22,371
$21,955
2 %
Debt to stockholders’ equity30%30% 
Debt to capitalization23%23% 
[1]
Total debt of the Company excludes $9 and $20 of consumer notes as of September 30, 2017 and December 31, 2016, respectively.
Total capitalization increased $416, or 2%, as of September 30, 2017 compared to December 31, 2016 primarily due to net income and increases in AOCI, partially offset by share repurchases and stockholder dividends.
For additional information on AOCI, net of tax, and unrealized capital gains from securities, see Note 14 - Changes In and
Reclassifications From Accumulated Other Comprehensive Income, and Note 6 - Investments of Notes to Condensed Consolidated Financial Statements.
Cash Flow
 Nine Months Ended September 30,
 20172016
Net cash provided by operating activities$1,524
$1,405
Net cash provided (used) by investing activities$(1,485)$945
Net cash used for financing activities$(658)$(1,967)
Cash – end of period$333
$810
Cash provided by operating activities increasedpayments for short-term investments, an increase in 2017 as compared to the prior year period primarily due tonet purchases of partnerships, and a decrease in net losses paid and a decrease in income taxes paid, partially offset by a $650 premium payment to reinsure adverse development on asbestos and environmental reserves.
Cash used by investing activities in 2017 primarily relates to net payments for the purchase of available-for-sale securities of $568 and net payments for derivatives of $98. Cash provided by investing activities in 2016 primarily relates to net proceeds from available-for-sale securities of $1.0 billion and net proceeds from partnerships of $358,derivatives, partially offset by net payments for short-term investments of $388 and cash paid for acquisitions of $175, net of cash acquired of $13.
Cash used for financing activities in 2017 consists primarily of net payments for deposits, transfers and withdrawals for investments and universal life products of $915 and the repurchase of common shares outstanding, offset by an increase in cashnet proceeds from securities loaned or sold under agreements to repurchase securities and issuance of debt. fixed maturities.
Cash used for financing activities decreased primarily due to debt repayments in 2016 consists primarily of acquisitions of treasury stock of $1,050, net payments for deposits, transfersthe 2020 period, and withdrawals for investmentsa decrease in securities lending transactions and universal life products of $622, andshare repurchases, partially offset by higher cash dividends paid on common stock of $253.
in 2021.
Operating cash flowsflow for the ninethree months ended September 30, 2017March 31, 2021 have been adequate to meet liquidity requirements.
Equity Markets
For a discussion of the potential impact of the equity markets on capital and liquidity, see the Financial Risk Liquidity Risksection in this MD&A and the Financial Risk on Statutory Capital sectionssection of the MD&A in this MD&A.the Company's 2020 Form 10-K Annual Report.
Ratings
Ratings are an important factor in establishing a competitive position in the insurance marketplace and impact the Company’sCompany's ability to access financing and its cost of borrowing. There can be no assurance that the Company’s ratings will continue for any given period of time, or that they will not be changed. In the event the Company’s ratings are downgraded, the Company’s competitive position, ability to access financing, and its cost of borrowing, may be adversely impacted.
The following ratings actions were announced in connection with the definitive agreement to acquire Aetna's group life and disability insurance business:
On October 23, 2017, Moody's Investor Service affirmed the A2 insurance financial strength (IFS) rating of Hartford Life and

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Accident Insurance Company ("HLA") and downgraded the IFS rating of Hartford Life Insurance Company ("HLIC") and Hartford Life and Annuity Insurance Company ("HLAI") to Baa3 from Baa2. The ratings outlook on these companies remains stable. The debt ratings of The Hartford Financial Services Group and the IFS rating of Hartford Fire Insurance Company are not affected.
On October 23, 2017, Standard & Poor’s Global Ratings affirmed its "A" long-term issuer credit rating on HLA. All other ratings were not affected.
On October 23, 2017, A.M. Best commented that the credit ratings of The Hartford Financial Services Group and its subsidiaries remain unchanged following The Hartford’s announcement that it had entered a definitive agreement to acquire Aetna’s group life and disability insurance business.
Insurance Financial Strength Ratings as of April 26, 2021
A.M. BestStandard & Poor’sMoody’s
Hartford Fire Insurance CompanyA+A+A1
Hartford Life and Accident Insurance CompanyA+A+A2
Navigators Insurance CompanyA+ANot Rated
Insurance Financial Strength Ratings as of October 24, 2017
A.M. BestStandard & Poor’sMoody’s
Hartford Fire Insurance CompanyOther Ratings:A+A+A1
Hartford Life and Accident Insurance CompanyAAA2
Hartford Life Insurance CompanyA-BBB+Baa3
Hartford Life and Annuity Insurance CompanyA-BBB+Baa3
Other Ratings:
The Hartford Financial Services Group, Inc.:
Senior debta-BBB+Baa2Baa1
Commercial paperAMB-1A-2P-2
These ratings are not a recommendation to buy, sell or hold any of The Hartford’sHartford's securities and they may be revised or revoked at any time at the sole discretion of the rating organization. Each agency's rating should be evaluated independently of any other agency's rating. The system and number of rating categories can vary across rating agencies.
TheAmong other factors, rating agencies consider many factors in determining the final rating of an insurance company. One consideration is the relative level of statutory capital and surplus (referred to collectivelyof our U.S. insurance subsidiaries as "statutory capital") necessary to supportwell as the business written and is reported in accordance with accounting practices prescribedlevel of a measure of GAAP capital held by the applicable state insurance department.Company in determining the Company's financial strength and credit ratings. Rating agencies may implement changes to their capital formulas that have the effect of increasing the amount of capital we must hold in order to maintain our current ratings. See Risk Factors disclosed in Item 1A of Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
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Statutory Capital
U.S. Statutory Capital Rollforward for the Company's Insurance Subsidiaries
Property and Casualty Insurance Subsidiaries [1] [2]Group Benefits Insurance SubsidiaryTotal
U.S statutory capital at January 1, 2021$10,795 $2,601 $13,396 
Statutory income109 (40)69 
Contributions from (dividends to) parent(230)(70)(300)
Other items165 13 178 
Net change to U.S. statutory capital44 (97)(53)
U.S statutory capital at March 31, 2021$10,839 $2,504 $13,343 
[1]The statutory capital for property and casualty insurance subsidiaries in this table does not include the value of an intercompany note owed by Hartford Holdings, Inc. ("HHI") to Hartford Fire Insurance Company.
[2]Excludes insurance operations in the U.K. and Continental Europe.

Statutory Capital Roll Forward for the Company's Insurance Subsidiaries
 Property and Casualty Insurance SubsidiariesLife Insurance SubsidiariesTotal
U.S. statutory capital at January 1, 2017$8,261
$6,022
$14,283
Variable annuity surplus impacts—
18
18
Statutory earnings (excluding VA for Life)743
317
1,060
Dividends to parent(625)(788)(1,413)
Other items(138)156
18
Net change to U.S. statutory capital(20)(297)(317)
U.S. statutory capital at September 30, 2017$8,241
$5,725
$13,966
Contingencies
Legal Proceedings –
For a discussion regarding contingencies related to The Hartford’s legal proceedings, please see the information contained under “Litigation” in Note 12 - Commitments-Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements and Part II, Item 1 Legal Proceedings, which are incorporated herein by reference.Statements.
Legislative and Regulatory Developments
COVID-19 Global Pandemic
State and federal retroactive business interruption coverage and other insurance regulatory relief initiatives-
State and federal lawmakers are continuing to consider legislation and regulation in response to COVID-19. There have been proposals to impose retroactive coverage of COVID-19 claims under existing business interruption coverage provisions. If such proposals were enacted, they could represent a material exposure for the Company. Further, some states have adopted, or are considering incorporating, a presumption that if certain workers become infected with COVID-19, such infection would constitute an occupational disease triggering workers’ compensation coverage. In addition, state insurance regulators, including California, New Jersey and New York, have encouraged (and in some cases required) insurers to offer immediate relief to policyholders including refunding and offering discounts for drivers, incorporating flexible payment solutions for families, individuals, and businesses, providing additional time to make payments, waiving insurance premium late fees, pausing cancellation of coverage for personal and commercial policies due to non-payment and policy expiration, and suspending personal automobile exclusions for restaurant employees who are transitioning to meal delivery services using their personal automobile policy as coverage. The Hartford offered consumer financial relief including a 15 percent refund on policyholders’ April and May 2020 personal automobile insurance premiums, waived late payments fees for a period of time for business and personal insurance customers and temporarily suspended policy cancellations for policyholders of our Commercial Lines, Personal Lines and Group Benefits segments. As the COVID-19 global pandemic continues, regulators may require us to or we may elect to provide additional consumer and/or business financial relief.
The duration and scope of such regulatory/Company actions are uncertain, and the impacts of such actions could adversely affect the Company’s insurance business.

Federal pandemic risk insurance- Congress is considering possible action for future pandemic risk insurance coverage through a risk sharing mechanism between insurers and the federal government. Timing for any Congressional action with respect to these efforts is uncertain at this time. If such a program were to be enacted, it could represent a significant obligation for the company in terms of deductible and co-share obligations.
American Rescue Plan Act of 2021- On March 11, 2021, President Biden signed the $1.9 trillion American Rescue Plan. The comprehensive bill includes provisions on taxes, healthcare, extends unemployment benefits, direct payments, state and local funding and other issues. The American Rescue Plan also directed billions of dollars towards the Paycheck Protection Program ("PPP") and Targeted Economic Injury Disaster Loan Advance payments to support small businesses across the nation. Additionally, the new law directed $28.6 billion for the Restaurant Revitalization Fund for industry-focused grants. On March 30, 2021, President Biden signed the PPP Extension Act of 2021 which sets a new application deadline of May 31, allowing the Small Business Administration (SBA) to continue processing applications for up to 30 days past the May 31 deadline.

Federal emergency leave legislation- On March 18, 2020, the Families First Coronavirus Response Act ("FFCRA") was signed into law by the President, and was effective from April 1, 2020 to December 31, 2020. This legislation included a number of funding provisions and worker protections including mandated emergency paid sick leave and paid family and medical leave programs. For private employers with fewer than 500 employees, and most public employers, new programs were put in place to guarantee individuals 10 days of paid sick leave, and up to 10 weeks of paid family and medical leave to deal directly with COVID-19. Eligible employers have access to a tax credit to reimburse for costs related to the emergency leave programs. On December 27, 2020, the Consolidated Appropriations Act of 2021 was signed into law and included a bipartisan COVID-19 relief bill. Although the mandatory paid leave provisions from the FFCRA expired on December 31, 2020, the new law extended FFCRA tax credits through March 31, 2021, for covered employers that voluntarily continue to offer paid leave under the
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FFCRA framework. As part of the American Rescue Plan, Congress has once again extended certain FFCRA refundable tax credits between April 1 and September 30, 2021, for covered employers who voluntarily offer emergency paid leave for reasons described under FFCRA. The American Rescue Plan also expands the allowable leaves for purposes of qualifying for the tax credit. The Hartford is providing support for the administration of the family and medical leave component of these voluntary company FFCRA-type leaves for our Group Benefits customers. Congress also approved a $2 trillion Coronavirus Aid, Relief and Economic Security ("CARES") Act. The bill, signed into law on March 27, 2020, focused on providing financial support for small businesses, individuals, emergency workers, airlines and other industries of national security. The CARES Act included several technical corrections to the emergency leave programs and created advance refunding credits, which allow the U.S. Treasury to develop regulations or guidance to permit advancement of the tax credit for both the emergency paid sick leave and paid family and medical leave. We are closely monitoring further Congressional action on paid leave legislation, the timing of which is unclear at this time.

Federal tax legislation- In response to the COVID-19 Global Pandemic, Congress, various states and other global jurisdictions have passed numerous pieces of legislation which contain a number of changes to the tax laws in order to aid impacted businesses and individuals, as well as provide economic stimulus. The Company deferred the employer’s portion of the Social Security tax on wages from March 27, 2020 to year-end 2020. Such deferred amounts would be due and payable over a two-year period, 50% by December 31, 2021 and 50% by December 31, 2022. Refer to Note 11 - Income Taxes of Notes to Condensed Consolidated Financial Statements for information about the impact of these new tax laws on the Company. The U.S. Treasury and IRS continue to develop guidance implementing these new tax law provisions, and Congress may consider additional technical corrections to these laws. Tax proposals and regulatory initiatives which have been or are being considered by Congress and/or the U.S. Treasury Department could have a material effect on the Company and its insurance businesses. The nature and timing of any Congressional or regulatory action with respect to any such efforts is unclear.
American Jobs Plan
On March 31, 2021, President Biden unveiled a key initiative of his Administration, the American Jobs Plan, a broad $2.2 trillion, 8-year infrastructure plan. The President’s plan outlines funding for several traditional infrastructure verticals such as roads, bridges, and highways, but also seeks to prioritize and incentivize clean energy and pursue policy options that promote equity and connect disadvantaged communities. This plan will largely be viewed as an opening bid as Congress starts the formal process of developing infrastructure spending legislation. To offset some of the plan’s costs, the Biden Administration proposed a series of tax changes including raising the corporate tax rate to 28%, eliminating subsidies and foreign tax credits for fossil fuel companies, championing a new 21% global minimum tax for multinational corporations, enacting a minimum tax on large corporations book income, and other tax changes to prevent U.S. corporations from inverting or claiming tax havens as their residence. The Biden Administration is set to release a second
proposal in the coming weeks to address “social infrastructure,” which could include expanding health insurance, climate change initiatives, education, and paid family and medical leave. The prospects for these proposals remain unclear, even when considering procedural devices that could be used to move the legislation through Congress. While changes to corporate taxation, including a higher corporate income tax rate, would adversely affect the Company, the impact of other provisions on the Company’s operations and ability to attract new business and retain existing customers is unclear.
Patient Protection and Affordable Care Act of 2010 (the "Affordable Care Act")
The outcome of efforts underway inIt is unclear whether the Administration, Congress or the courts will seek to reverse, amend or alter the ongoing operation of the Affordable Care Act ("ACA") and in Congress. If such actions were to repeal and replace the ACAoccur, they may have an impact on various aspects of our business, including our insurance businesses. It is unclear what an amended ACA would entail, and to what extent there may be a transition period for the phase out of the ACA. The impact to The Hartford as an employer willwould be consistent with other large employers. The Hartford’s core business does not involve the issuance of health insurance, and we have not observed any material impacts on the Company’s workers’ compensation business or group benefits business from the enactment of the ACA. We will continue to monitor the impact of the ACA and any reforms on consumer, broker and medical provider behavior for leading indicators of changes in medical costs or loss payments primarily on the Company's workers' compensation and disability liabilities.
United States DepartmentTax Reform
At the end of Labor Fiduciary Rule
On April 6, 2016,2017, the Tax Cuts and Jobs Act of 2017 ("TCJA") was enacted. The TCJA made significant reforms to the U.S. Departmenttax code. The major areas of Labor (“DOL”) issued a final regulation expandinginterest to the rangeCompany included the reduction of activities consideredthe corporate tax rate from 35% to be fiduciary investment advice under the Employee Retirement Income Security Act of 1974 (“ERISA”)21% and the Internal Revenue Code.repeal of the corporate alternative minimum tax (AMT) and the refunding of AMT credits. The DOL also extendedU.S. Treasury and IRS continue to develop guidance implementing TCJA, and Congress may consider additional technical corrections to the applicability datelaw. In addition, President Biden has proposed to increase the corporate tax rate to 28% and revisit other aspects of TCJA. Tax proposals and regulatory initiatives which have been or are being considered by Congress and/or the U.S. Treasury Department could have a material effect on the Company and its insurance businesses. The nature and timing of any Congressional or regulatory action with respect to any such efforts is unclear. For additional information on risks to the Company related to TCJA, see the risk factor entitled "Changes in federal or state tax laws could adversely affect our business, financial condition, results of operations and liquidity" under "Risk Factors" in Part I of the Company's Annual Report on Form 10-K for the final
year ended December 31, 2020.

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rule from April 10, 2017 to June 9, 2017. Implementation is being phased in, with the regulation scheduled to be in full effect by January 1, 2018. As part of a stated intent to continue to study the rule, the DOL published a Request for Information on July 6, 2017. It sought comment generally on a delay of the January 1, 2018 applicability date, as well as a number of other questions on compliance and the implementation of provisions currently scheduled to go into effect on January 1, 2018.
The impact of the new regulation on our mutual fund business is difficult to assess because the regulation is new and is still being studied. While we continue to analyze the regulation, we believe the regulation may impact the compensation paid to the financial intermediaries who sell our mutual funds to their retirement clients and could negatively impact our mutual funds business.
In 2016, several plaintiffs, including insurers and industry groups such as the U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association (SIFMA), filed a lawsuit against the DOL challenging the constitutionality of the fiduciary rule, and the DOL's rulemaking authority. In most cases, the district courts have entered a summary judgment in favor of the DOL. Certain cases were appealed to the Fifth Circuit and on July 5, 2017, the DOL filed a brief in support of upholding the rule. We continue to monitor potential effects of case law and the regulatory landscape on our mutual funds business.
IMPACT OF NEW ACCOUNTING STANDARDS
For a discussion of accounting standards, see Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements included in The Hartford’s 20162020 Form 10-K Annual Report and Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements in this Form 10-Q.Report.

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Part I - Item 3. Quantitative and Qualitative Disclosure About Market Risk

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information contained in the Financial Risk Management section of Management’s2. Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference.


ACRONYMS
A&E Asbestos and Environmental
HIMCO Hartford Investment Management Company
ABS Asset Backed Securities
IBNR Incurred But Not Reported
ACL Allowance for Credit Losses
IT Information Technology
ADC Adverse Development Cover
LCL Liability for Credit Losses
AFS Available-For-Sale
LIBOR London Inter-Bank Offered Rate
ALAE Allocated Loss Adjustment Expenses
LTD Long-Term Disability
AMT Alternative Minimum Tax
LTV Loan-to-Value
AOCI Accumulated Other Comprehensive Income
MD&A Management's Discussion and Analysis
AUM Assets Under Management
NAIC National Association of Insurance Commissioners
CAY Current Accident Year
NIC Navigators Insurance Company
CLO Collateralized Loan Obligation
NICO National Indemnity Company, a subsidiary of Berkshire Hathaway Inc. (“Berkshire”)
CMBS Commercial Mortgage-Backed Securities
NM Not Meaningful
DAC Deferred Policy Acquisition Costs
NOLs Net Operating Loss Carryforwards or Carrybacks
DSCR Debt Service Coverage Ratio
NSIC Navigators Specialty Insurance Company
ERCC Enterprise Risk and Capital Committee
OCI Other Comprehensive Income
ETF Exchange-Traded Funds
OTC Over-the-Counter
ETP Exchange-Traded Products
P&C Property and Casualty
FAL Funds at Lloyd's
PYD Prior Year Development
FASB Financial Accounting Standards Board
RBC Risk-Based Capital
FHLBB Federal Home Loan Bank of Boston
RMBS Residential Mortgage-Backed Securities
GAAP Generally Accepted Accounting Principles
ROA Return on Assets
GBGroup Benefits
ROE Return on Equity
HFSGHartford Financial Services Group, Inc.
SCR Solvency Capital Requirement
HHIHartford Holdings, Inc.
ULAEUnallocated Loss Adjustment Expenses
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Part I - Item 4. Controls and Procedures



Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s principal executive officer and its principal financial officer, based on their evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) have concluded that the Company’s disclosure controls and procedures are effective for the purposes set forth in the definition thereof in Exchange Act Rule 13a-15(e) as of September 30, 2017.March 31, 2021.
Changes in Internal Control Over Financial Reporting
There waswere no changechanges in the Company's internal control over financial reporting that occurred during the Company's current fiscal quarter that hashave materially affected, or isare reasonably likely to materially affect, the Company's internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most employees of the Company and of our vendors have had to work from home during the COVID-19 pandemic though we will continue to assess the impact on the design and operating effectiveness of our internal controls.

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Part II - Item 1. Legal Proceedings




Item 1. LEGAL PROCEEDINGS
Litigation
For a discussion regarding The Hartford is involved in claims litigation arising inHartford’s legal proceedings, see the ordinary course of business, both as a liability insurer defending or providing indemnity for third-party claims brought against insureds and as an insurer defending coverage claims brought against it. The Hartford accounts for such activity through the establishment of unpaid loss and loss adjustment expense reserves. Subject to the uncertainties related to The Hartford's asbestos and environmental claims discussedinformation contained in Note 12 - Commitments-Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements, management expects that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, will not be material to the consolidated financial condition, results of operations or cash flows of The Hartford.Statements.
The Hartford is also involved in other kinds of legal actions, some of which assert claims for substantial amounts. These actions include, among others, and in addition to the matters in the following description, putative state and federal class actions seeking certification of a state or national class. Such putative class actions have alleged, for example, underpayment of claims or improper underwriting practices in connection with various kinds of insurance policies, such as personal and commercial automobile, property, disability, life and inland marine. The Hartford also is involved in individual actions in which punitive damages are sought, such as claims alleging bad faith in the handling of insurance claims or other allegedly unfair or improper business practices. Like many other insurers, The Hartford also has been joined in actions by asbestos plaintiffs asserting, among other things, that insurers had a duty to protect the public from the dangers of asbestos and that insurers committed unfair trade practices by asserting defenses on behalf of their policyholders in the underlying asbestos cases. Management expects that the ultimate liability, if any, with respect to such lawsuits, after consideration of provisions made for estimated losses, will not be material to the consolidated financial condition of The Hartford. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation, the outcome in certain matters could, from time to time, have a material adverse effect on the Company’s results of operations or cash flows in particular quarterly or annual periods.
In addition to the inherent difficulty of predicting litigation outcomes, the Mutual Funds Litigation identified below purports to seek substantial damages for unsubstantiated conduct spanning a multi-year period based on novel applications of complex legal theories. The alleged damages are not quantified or factually supported in the complaint, and, in any event, the Company’s experience shows that demands for damages often bear little relation to a reasonable estimate of potential loss. The application of the legal standard identified by the court for assessing the potentially available damages, as described below, is inherently unpredictable, and no legal precedent has been identified that would aid in determining a reasonable estimate of
potential loss. Accordingly, management cannot reasonably estimate the possible loss or range of loss, if any.
Mutual Funds Litigation — In February 2011, a derivative action was brought on behalf of six Hartford retail mutual funds in the United States District Court for the District of New Jersey, alleging that Hartford Investment Financial Services, LLC (“HIFSCO”), an indirect subsidiary of the Company, received excessive advisory and distribution fees in violation of its statutory fiduciary duty under Section 36(b) of the Investment Company Act of 1940. During the course of the litigation, the claims regarding distribution fees were dismissed without prejudice, the lineup of funds as plaintiffs changed several times, and the plaintiffs added as a defendant Hartford Funds Management Company (“HFMC”), an indirect subsidiary of the Company that assumed the role of advisor to the funds as of January 2013.  In June 2015, HFMC and HIFSCO moved for summary judgment, and plaintiffs cross-moved for partial summary judgment with respect to one fund. In March 2016, the court denied the plaintiff's motion, and granted summary judgment for HIFSCO and HFMC with respect to one fund, leaving six funds as plaintiffs: The Hartford Balanced Fund, The Hartford Capital Appreciation Fund, The Hartford Floating Rate Fund, The Hartford Growth Opportunities Fund, The Hartford Healthcare Fund, and The Hartford Inflation Plus Fund. The court further ruled that the appropriate measure of damages on the surviving claims would be the difference, if any, between the actual advisory fees paid through trial and the fees permitted under the applicable legal standard. A bench trial on the issue of liability was held in November 2016. In February 2017, the court granted judgment for HIFSCO and HFMC as to all claims.  Plaintiffs have appealed to the United States Court of Appeals for the Third Circuit.


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Part I - Item 1A. Risk Factors

Item 1A.    RISK FACTORS
Investing in The Hartford involves risk. In deciding whether to invest in The Hartford, you should carefully consider the risk factors disclosed in Item 1A of Part I of the Company's Annual Report on Form 10-K for the year ended December 31, 2016,2020, (collectively the "Company's Risk Factors" or individually, the "Company's Risk Factor"), which is incorporated herein by reference, any of which could have a significant or material
adverse effect on the business, financial condition, operating results or liquidity of The Hartford. This information should be considered carefully together with the other information contained in this report and the other reports and materials filed by The Hartford with the SEC.


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Part II - Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities by the Issuer
The Company’s
In December 2020, the Company announced a $1.5 billion share repurchase authorization permits purchasesby the Board of common stock, as well as warrants or other derivative securities. Repurchases may be madeDirectors which is effective from January 1, 2021 through December 31, 2022. In April 2021, the Company announced an increase in the open market, through derivative, accelerated share repurchase and other privately negotiated transactions, and through plans designedauthorization to comply with Rule 10b5-1(c) under$2.5 billion that remains effective
until December 31, 2022. During the Securities Exchange Act of 1934, as amended.period from April 1, 2021 to April 26, 2021, the Company repurchased 0.4 million shares for $27. The timing of any future repurchases will berepurchase of shares under the remaining equity repurchase authorization is dependent upon several factors, including the market price of the Company’sCompany's securities, the Company’sCompany's capital position,
consideration of the effect of any repurchases on the Company’sCompany's financial strength or credit ratings, the Company's blackout periods, and other corporate considerations. The
Repurchases of Common Stock by the Issuer for the Three Months Ended March 31, 2021
Period
Total Number
of Shares
Purchased
Average Price
Paid Per
Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value
of Shares that May Yet Be
Purchased Under
the Plans or Programs [1]
   (in millions)
January 1, 2021 - January 31, 2021— $— — $1,500 
February 1, 2021 - February 28, 20211,568,182 $50.32 1,568,182 $1,421 
March 1, 2021 - March 31, 2021818,001 $54.25 818,001 $1,377 
Total2,386,183 $51.67 2,386,183 
[1]This column reflects the $1.5 billion share repurchase program may be modified, extended or terminatedauthorization approved by the Company’s Board of Directors at any time.
Effective October 13, 2017in December 2020. In April 2021, the Board increased this authorization to $2.5 billion. As a result of the increase, the Company suspended 2017 equity repurchases. The company does not currently expect to authorize an equityhad approximately $2.35 billion remaining under its share repurchase plan in 2018.authorization as of April 26, 2021.
The Company's authorization for equity repurchases is $1.3 billion for the period commencing October 31, 2016 through December 31, 2017.

Repurchases of Common Stock by the Issuer for the Three Months Ended September 30, 2017
Period
Total Number
of Shares
Purchased
Average Price
Paid Per
Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value
of Shares that May Yet Be
Purchased Under
the Plans or Programs
    (in millions)
July 1, 2017 - July 31, 20172,012,300
$53.40
2,012,300
$543
August 1, 2017 - August 31, 20172,292,018
$55.58
2,292,018
$415
September 1, 2017 - September 30, 20171,677,971
$53.80
1,677,971
$325
Total5,982,289
$54.35
5,982,289
 
.


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Part II - Item 6. Exhibits

Item 6. EXHIBITS
See Exhibits Index on page

104


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
FOR THE QUARTER ENDED MARCH 31, 2021
FORM 10-Q
EXHIBITS INDEX
Exhibit No.DescriptionFormFile No.Exhibit NoFiling Date
3.018-K001-139583.0110/20/2014
3.028-K001-139583.17/21/2016
10.01*
15.01
31.01
31.02
32.01
32.02
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema.**
101.CALInline XBRL Taxonomy Extension Calculation Linkbase.**
101.DEFInline XBRL Taxonomy Extension Definition Linkbase.**
101.LABInline XBRL Taxonomy Extension Label Linkbase.**
101.PREInline XBRL Taxonomy Extension Presentation Linkbase.**
104The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL.
*Management contract, compensatory plan or arrangement.
**Filed with the Securities and Exchange Commission as an exhibit to this report.
105
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
The Hartford Financial Services Group, Inc.
(Registrant)
Date:October 26, 2017April 27, 2021
/s/ Scott R. Lewis

Scott R. Lewis
Scott R. Lewis
Senior Vice President and Controller
(Chief accounting officer and duly
authorized signatory)


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
FOR THE QUARTER ENDED SEPTEMBER 30, 2017
FORM 10-Q
EXHIBITS INDEX
106
Exhibit No.DescriptionFormFile No.Exhibit NoFiling Date
3.01
Restated Certificate of Incorporation of The Hartford, as filed with the Delaware Secretary of State on October 20, 2014.
8-K  001-139583.0110/20/2014
3.02
Amended and Restated By-Laws of The Hartford, amended effective July 21, 2016.
8-K  001-139583.017/21/2016
15.01
Deloitte & Touche LLP Letter of Awareness.**
    
31.01
Certification of Christopher J. Swift pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
    
31.02
Certification of Beth A. Bombara pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
    
32.01
Certification of Christopher J. Swift pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
    
32.02
Certification of Beth A. Bombara pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
    
101.INSXBRL Instance Document.**    
101.SCHXBRL Taxonomy Extension Schema.**    
101.CALXBRL Taxonomy Extension Calculation Linkbase.**    
101.DEFXBRL Taxonomy Extension Definition Linkbase.**    
101.LABXBRL Taxonomy Extension Label Linkbase.**    
101.PREXBRL Taxonomy Extension Presentation Linkbase.**    
**Filed with the Securities and Exchange Commission as an exhibit to this report.    

138