~~0000874766hig:SyndicatePolicyholdersMemberus-gaap:DebtSecuritiesMember2019-12-31~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-Q

____________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2020~~March 31, 2021


☐			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

____________________________________

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)


Delaware						13-3317783
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	HIG	The New York Stock Exchange
6.10% Notes due October 1, 2041	HIG 41	The New York Stock Exchange
7.875% Fixed-to-Floating Rate Junior Subordinated Debentures due 2042	HGH	The 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 share	HIG PR G	The New York Stock Exchange

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Indicate by check mark:

• 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.

Yes

☒

☐

• whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes

☒

☐

• 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 filer

☒

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).

Yes

☐

☒

As of ~~October 27, 2020,~~April 26, 2021, there were outstanding ~~358,330,435~~357,191,014 shares of Common Stock, $0.01 par value per share, of the registrant.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2020~~MARCH 31, 2021

TABLE OF CONTENTS


Item	Item	Description	Page	Item	Description	Page
		Part I			Part I
1.	1.	FINANCIAL STATEMENTS		1.	FINANCIAL STATEMENTS
					REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	6
					CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - FOR THE THREE MONTHS ENDED MARCH 31, 2021 & 2020	7
					CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - FOR THE THREE MONTHS ENDED MARCH 31, 2021 & 2020	8
					CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF MARCH 31, 2021 AND DECEMBER 31, 2020	9
					CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - FOR THE THREE MONTHS ENDED MARCH 31, 2021 & 2020	10
					CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - FOR THE THREE MONTHS ENDED MARCH 31, 2021 & 2020	11
					NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	12
					NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES	12
					NOTE 2 - EARNINGS PER SHARE	13
					NOTE 3 - SEGMENT INFORMATION	13
					NOTE 4 - FAIR VALUE MEASUREMENTS	15
					NOTE 5 - INVESTMENTS	23
					NOTE 6 - DERIVATIVES	29
					NOTE 7 - PREMIUMS RECEIVABLE AND AGENT S' BALANCES	34
					NOTE 8 - REINSURANCE	35
					NOTE 9 - RESERVE FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES	38
					NOTE 10 - RESERVE FOR FUTURE POLICY BENEFITS	42
		REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	6		NOTE 11 - INCOME TAXES	42
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019	7		NOTE 12 - COMMITMENTS AND CONTINGENCIES	42
		CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019	8		NOTE 13 - EQUITY	45
		CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019	9		NOTE 14 - A CCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX	45
		CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019	10		NOTE 15 - EMPLOYEE BENEFIT PLANS	47
		CONDENSED CONOLIDATED STATEMENTS OF CASH FLOWS - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019	11		NOTE 16 - BUSINESS DISPOSITION	47
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	12		NOTE 17 - RESTRUCTURING AND OTHER COSTS	48
2.	2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	57	2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	49
3.	3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	[a]	3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	[a]
4.	4.	CONTROLS AND PROCEDURES	122	4.	CONTROLS AND PROCEDURES	103
		PART II. OTHER INFORMATION			PART II. OTHER INFORMATION
1.	1.	LEGAL PROCEEDINGS	123	1.	LEGAL PROCEEDINGS	104
1A.	1A.	RISK FACTORS	125	1A.	RISK FACTORS	104
2.	2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	126	2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	104
6.	6.	EXHIBITS	126	6.	EXHIBITS	104
		EXHIBITS INDEX	127		EXHIBITS INDEX	105
		SIGNATURE	128		SIGNATURE	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.

~~Table of Contents~~

Forward-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 statements; or in Part I, Item 1A, Risk Factors, in ~~The Hartford’s 2019 Form 10-K Annual Report, as amended in~~ Part II, Item ~~1A in its Form 10-Q Quarterly Reports;~~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.

•Risks relating 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, 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 significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental claims;

◦the possibility of aanother 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 ~~uncertain effects~~frequency and severity of ~~emerging claim and coverage issues;~~insured losses;

•Financial Strength, Credit and Counterparty Risks:

~~Table of Contents~~

◦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:

◦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;~~securities and mortgage loans;

◦the potential for further impairments of our ~~goodwill or the potential for changes in valuation allowances against deferred tax assets;~~goodwill;

•Strategic and Operational Risks:

◦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 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.


Table of Contents

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, 2020,~~March 31, 2021, the related condensed consolidated statements of operations, comprehensive income (loss), ~~and~~ changes in stockholders' equity, and cash flows for the three-month periods ended March 31, 2021 and ~~nine-month periods ended September 30,~~ 2020, ~~and 2019, and of cash flows for the nine-month periods ended September 30, 2020 and 2019,~~ 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 information for it 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) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2019,~~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 ~~21, 2020,~~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, ~~2019,~~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 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.

/s/ DELOITTE & TOUCHE LLP

Hartford, Connecticut

~~October 29, 2020~~April 27, 2021


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Operations


		Three Months Ended September 30,				Nine Months Ended September 30, 2020					Three Months Ended March 31,
(in millions, except for per share data)	(in millions, except for per share data)	2020		2019		2020		2019		(in millions, except for per share data)	2021		2020
		(Unaudited)									(Unaudited)
Revenues	Revenues									Revenues
Earned premiums	Earned premiums	$	4,347	$	4,394	$	12,972	$	12,500	Earned premiums	$	4,343	$	4,391
Fee income	Fee income	323		330		941		970		Fee income	355		320
Net investment income	Net investment income	492		490		1,290		1,448		Net investment income	509		459
Net realized capital gains (losses)	Net realized capital gains (losses)	6		89		(116)		332		Net realized capital gains (losses)	80		(231)
Other revenues	Other revenues	3		44		108		129		Other revenues	12		17
Total revenues	Total revenues	5,171		5,347		15,195		15,379		Total revenues	5,299		4,956
Benefits, losses and expenses	Benefits, losses and expenses									Benefits, losses and expenses
Benefits, losses and loss adjustment expenses	Benefits, losses and loss adjustment expenses	2,962		2,914		8,725		8,533		Benefits, losses and loss adjustment expenses	3,350		2,916
Amortization of deferred policy acquisition costs ("DAC")	Amortization of deferred policy acquisition costs ("DAC")	421		437		1,287		1,184		Amortization of deferred policy acquisition costs ("DAC")	416		437
Insurance operating costs and other expenses	Insurance operating costs and other expenses	1,093		1,167		3,394		3,356		Insurance operating costs and other expenses	1,144		1,176
Loss on extinguishment of debt		0		90		0		90
Loss on reinsurance transaction		0		0		0		91

Interest expense	Interest expense	58		67		179		194		Interest expense	57		64
Amortization of other intangible assets	Amortization of other intangible assets	18		19		55		47		Amortization of other intangible assets	18		19
Restructuring and other costs	Restructuring and other costs	87		0		87		0		Restructuring and other costs	11		0
Total benefits, losses and expenses	Total benefits, losses and expenses	4,639		4,694		13,727		13,495		Total benefits, losses and expenses	4,996		4,612
Income before income taxes	Income before income taxes	532		653		1,468		1,884		Income before income taxes	303		344
Income tax expense	Income tax expense	73		118		268		347		Income tax expense	54		71

Net income	Net income	459		535		1,200		1,537		Net income	249		273
Preferred stock dividends	Preferred stock dividends	6		11		16		16		Preferred stock dividends	5		5
Net income available to common stockholders	Net income available to common stockholders	$	453	$	524	$	1,184	$	1,521	Net income available to common stockholders	$	244	$	268

Net income available to common stockholders per common share	Net income available to common stockholders per common share									Net income available to common stockholders per common share
Basic	Basic	$	1.26	$	1.45	$	3.30	$	4.21	Basic	$	0.68	$	0.75
Diluted	Diluted	$	1.26	$	1.43	$	3.29	$	4.17	Diluted	$	0.67	$	0.74

See Notes to Condensed Consolidated Financial Statements.


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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) 2020 2019 2020 2019
(Unaudited)
Net income $ 459 $ 535 $ 1,200 $ 1,537
Other comprehensive income (loss):
Changes in net unrealized gain on fixed maturities 376 401 747 1,744
Change in unrealized losses on fixed maturities for which an allowance for credit losses ("ACL") has been recorded 0 1
Changes in other-than-temporary impairment ("OTTI") losses recognized in other comprehensive income 0 1
Changes in net gain on cash flow hedging instruments (17) 6 22 22
Changes in foreign currency translation adjustments 6 (4) (1) 0
Changes in pension and other postretirement plan adjustments 12 9 35 26
OCI, net of tax 377 412 804 1,793
Comprehensive income $ 836 $ 947 $ 2,004 $ 3,330


	Three Months Ended March 31,
(in millions)	2021		2020
	(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 recorded	0		1

Change in net gain on cash flow hedging instruments	5		44
Change in foreign currency translation adjustments	1		(8)
Changes in pension and other postretirement plan adjustments	13		11
Other comprehensive loss, net of tax	(906)		(1,009)
Comprehensive loss	$	(657)	$	(736)

See Notes to Condensed Consolidated Financial Statements.


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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Balance Sheets


(in millions, except for share and per share data)	(in millions, except for share and per share data)	September 30, 2020		December 31, 2019		(in millions, except for share and per share data)	March 31, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Investments:	Investments:					Investments:
Fixed maturities, available-for-sale, at fair value (amortized cost of $41,073 and $40,078, and ACL of $32 and $0)		$	44,044	$	42,148
Fixed maturities, at fair value using the fair value option		0		11
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 value	Equity securities, at fair value	819		1,657		Equity securities, at fair value	1,632		1,438
Mortgage loans (net of ACL of $38 and $0)		4,461		4,215
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 investments	Limited partnerships and other alternative investments	1,868		1,758		Limited partnerships and other alternative investments	2,326		2,082
Other investments	Other investments	187		320		Other investments	207		201
Short-term investments	Short-term investments	3,399		2,921		Short-term investments	3,367		3,283
Total investments	Total investments	54,778		53,030		Total investments	55,727		56,532
Cash	Cash	173		185		Cash	176		151
Restricted cash	Restricted cash	97		77		Restricted cash	104		88
Premiums receivable and agents' balances (net of ACL of $174 and $145)		4,450		4,384
Reinsurance recoverables (net of allowance for uncollectible reinsurance of $109 and $114)		5,668		5,527
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 costs	Deferred policy acquisition costs	808		785		Deferred policy acquisition costs	827		789
Deferred income taxes, net	Deferred income taxes, net	49		299		Deferred income taxes, net	205		46
Goodwill	Goodwill	1,911		1,913		Goodwill	1,911		1,911
Property and equipment, net	Property and equipment, net	1,144		1,181		Property and equipment, net	1,092		1,122
Other intangible assets, net	Other intangible assets, net	973		1,070		Other intangible assets, net	927		950
Other assets	Other assets	2,101		2,366		Other assets	2,497		2,066
Assets held for sale	Assets held for sale	167		0		Assets held for sale	165		177
Total assets	Total assets	$	72,319	$	70,817	Total assets	$	74,201	$	74,111
Liabilities	Liabilities					Liabilities
Unpaid losses and loss adjustment expenses	Unpaid losses and loss adjustment expenses	$	37,306	$	36,517	Unpaid losses and loss adjustment expenses	$	38,540	$	37,855
Reserve for future policy benefits	Reserve for future policy benefits	650		635		Reserve for future policy benefits	641		638
Other policyholder funds and benefits payable	Other policyholder funds and benefits payable	711		755		Other policyholder funds and benefits payable	681		701
Unearned premiums	Unearned premiums	6,761		6,635		Unearned premiums	6,958		6,629
Short-term debt		0		500

Long-term debt	Long-term debt	4,351		4,348		Long-term debt	4,353		4,352
Other liabilities	Other liabilities	4,585		5,157		Other liabilities	5,178		5,222
Liabilities held for sale	Liabilities held for sale	153		0		Liabilities held for sale	148		158
Total liabilities	Total liabilities	54,517		54,547		Total liabilities	56,499		55,555
Commitments and Contingencies (Note 14)
Commitments and Contingencies (Note 12)						Commitments and Contingencies (Note 12)
Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 13,800 shares issued at September 30, 2020 and December 31, 2019, aggregate liquidation preference of $345		334		334
Common stock, $0.01 par value —1,500,000,000 shares authorized, 384,923,222 shares issued at September 30, 2020 and December 31, 2019		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 $345						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 $345	334		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, 2020						Common stock, $0.01 par value —1,500,000,000 shares authorized, 384,923,222 shares issued at March 31, 2021 and December 31, 2020	4		4
Additional paid-in capital	Additional paid-in capital	4,310		4,312		Additional paid-in capital	4,310		4,322
Retained earnings	Retained earnings	13,503		12,685		Retained earnings	14,036		13,918
Treasury stock, at cost — 26,689,649 and 25,352,977 shares		(1,205)		(1,117)
Treasury stock, at cost 27,406,740 and 26,434,682 shares						Treasury stock, at cost 27,406,740 and 26,434,682 shares	(1,246)		(1,192)
Accumulated other comprehensive income, net of tax	Accumulated other comprehensive income, net of tax	856		52		Accumulated other comprehensive income, net of tax	264		1,170
Total stockholders’ equity	Total stockholders’ equity	17,802		16,270		Total stockholders’ equity	17,702		18,556
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	72,319	$	70,817	Total liabilities and stockholders’ equity	$	74,201	$	74,111

See Notes to Condensed Consolidated Financial Statements.


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(in millions, except for share data)		2020		2019		2020		2019
(in millions, except for share and per share data)										(in millions, except for share and per share data)	2021		2020
		(Unaudited)									(Unaudited)
Preferred Stock	Preferred Stock	$	334	$	334	$	334	$	334	Preferred Stock	$	334	$	334
Common Stock	Common Stock	4		4		4		4		Common Stock	4		4
Additional Paid-in Capital	Additional Paid-in Capital									Additional Paid-in Capital
Additional Paid-in Capital, beginning of period	Additional Paid-in Capital, beginning of period	4,299		4,300		4,312		4,378		Additional Paid-in Capital, beginning of period	4,322		4,312
Issuance of shares under incentive and stock compensation plans	Issuance of shares under incentive and stock compensation plans	(5)		(17)		(89)		(91)		Issuance of shares under incentive and stock compensation plans	(69)		(79)
Stock-based compensation plans expense	Stock-based compensation plans expense	16		19		87		95		Stock-based compensation plans expense	57		53
Issuance of shares for warrant exercise		0		0		0		(80)

Additional Paid-in Capital, end of period	Additional Paid-in Capital, end of period	4,310		4,302		4,310		4,302		Additional Paid-in Capital, end of period	4,310		4,286
Retained Earnings	Retained Earnings									Retained Earnings
Retained Earnings, beginning of period	Retained Earnings, beginning of period	13,167		11,836		12,685		11,055		Retained Earnings, beginning of period	13,918		12,685
Cumulative effect of accounting changes, net of tax	Cumulative effect of accounting changes, net of tax	0		0		(18)		0		Cumulative effect of accounting changes, net of tax	0		(18)
Adjusted balance, beginning of period	Adjusted balance, beginning of period	13,167		11,836		12,667		11,055		Adjusted balance, beginning of period	13,918		12,667
Net income	Net income	459		535		1,200		1,537		Net income	249		273
Dividends declared on preferred stock	Dividends declared on preferred stock	(6)		(11)		(16)		(16)		Dividends declared on preferred stock	(5)		(5)
Dividends declared on common stock	Dividends declared on common stock	(117)		(109)		(348)		(325)		Dividends declared on common stock	(126)		(116)
Retained Earnings, end of period	Retained Earnings, end of period	13,503		12,251		13,503		12,251		Retained Earnings, end of period	14,036		12,819
Treasury Stock, at cost	Treasury Stock, at cost									Treasury Stock, at cost
Treasury Stock, at cost, beginning of period	Treasury Stock, at cost, beginning of period	(1,211)		(984)		(1,117)		(1,091)		Treasury Stock, at cost, beginning of period	(1,192)		(1,117)
Treasury stock acquired	Treasury stock acquired	0		(63)		(150)		(90)		Treasury stock acquired	(123)		(150)
Issuance of shares under incentive and stock compensation plans	Issuance of shares under incentive and stock compensation plans	7		27		98		112		Issuance of shares under incentive and stock compensation plans	94		82
Net shares acquired related to employee incentive and stock compensation plans	Net shares acquired related to employee incentive and stock compensation plans	(1)		(7)		(36)		(38)		Net shares acquired related to employee incentive and stock compensation plans	(25)		(35)
Issuance of shares for warrant exercise		0		0		0		80

Treasury Stock, at cost, end of period	Treasury Stock, at cost, end of period	(1,205)		(1,027)		(1,205)		(1,027)		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 Income (Loss), net of tax
Accumulated Other Comprehensive Income (Loss), net of tax, beginning of period		479		(198)		52		(1,579)
Accumulated Other Comprehensive Income, net of tax, beginning of period										Accumulated Other Comprehensive Income, net of tax, beginning of period	1,170		52

Total other comprehensive income		377		412		804		1,793
Total other comprehensive loss										Total other comprehensive loss	(906)		(1,009)
Accumulated Other Comprehensive Income (Loss), net of tax, end of period	Accumulated Other Comprehensive Income (Loss), net of tax, end of period	856		214		856		214		Accumulated Other Comprehensive Income (Loss), net of tax, end of period	264		(957)
Total Stockholders’ Equity	Total Stockholders’ Equity	$	17,802	$	16,078	$	17,802	$	16,078	Total Stockholders’ Equity	$	17,702	$	15,266
Preferred Shares Outstanding	Preferred Shares Outstanding									Preferred Shares Outstanding
Preferred Shares Outstanding, beginning of period	Preferred Shares Outstanding, beginning of period	13,800		13,800		13,800		13,800		Preferred Shares Outstanding, beginning of period	13,800		13,800
Issuance of preferred shares	Issuance of preferred shares	0		0		0		0		Issuance of preferred shares	0		0
Preferred Shares Outstanding, end of period	Preferred Shares Outstanding, end of period	13,800		13,800		13,800		13,800		Preferred Shares Outstanding, end of period	13,800		13,800
Common Shares Outstanding	Common Shares Outstanding									Common Shares Outstanding
Common Shares Outstanding, beginning of period (in thousands)	Common Shares Outstanding, beginning of period (in thousands)	358,099		361,605		359,570		359,151		Common Shares Outstanding, beginning of period (in thousands)	358,489		359,570
Treasury stock acquired	Treasury stock acquired	0		(1,076)		(2,661)		(1,581)		Treasury stock acquired	(2,386)		(2,661)
Issuance of shares under incentive and stock compensation plans	Issuance of shares under incentive and stock compensation plans	151		588		2,011		2,447		Issuance of shares under incentive and stock compensation plans	1,914		1,685
Return of shares under incentive and stock compensation plans to treasury stock	Return of shares under incentive and stock compensation plans to treasury stock	(16)		(134)		(686)		(755)		Return of shares under incentive and stock compensation plans to treasury stock	(500)		(660)
Issuance of shares for warrant exercise		0		0		0		1,721

Common Shares Outstanding, at end of period	Common Shares Outstanding, at end of period	358,234		360,983		358,234		360,983		Common Shares Outstanding, at end of period	357,517		357,934
Cash dividends declared per common share	Cash dividends declared per common share	$	0.325	$	0.30	$	0.975	$	0.90	Cash dividends declared per common share	$	0.350	$	0.325
Cash dividends declared per preferred share	Cash dividends declared per preferred share	$	375.00	$	750.00	$	1,125.00	$	1,125.00	Cash dividends declared per preferred share	$	375.00	$	375.00

See Notes to Condensed Consolidated Financial Statements.


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Cash Flows


		Nine Months Ended September 30,					Three Months Ended March 31,
(in millions)	(in millions)	2020		2019		(in millions)	2021		2020
Operating Activities	Operating Activities	(Unaudited)				Operating Activities	(Unaudited)
Net income	Net income	$	1,200	$	1,537	Net 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:					Adjustments to reconcile net income to net cash provided by operating activities:
Net realized capital losses (gains)	Net realized capital losses (gains)	65		(332)		Net realized capital losses (gains)	(80)		231
Amortization of deferred policy acquisition costs	Amortization of deferred policy acquisition costs	1,287		1,184		Amortization of deferred policy acquisition costs	416		437
Additions to deferred policy acquisition costs	Additions to deferred policy acquisition costs	(1,268)		(1,222)		Additions to deferred policy acquisition costs	(449)		(447)
Depreciation and amortization	Depreciation and amortization	411		333		Depreciation and amortization	174		134
Loss on extinguishment of debt		0		90

Loss on sale of business		51		0

Other operating activities, net	Other operating activities, net	129		75		Other operating activities, net	15		79
Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Decrease (increase) in reinsurance recoverables		(186)		115
Increase in reinsurance recoverables						Increase in reinsurance recoverables	(66)		(75)
Net change in accrued and deferred income taxes	Net change in accrued and deferred income taxes	437		784		Net change in accrued and deferred income taxes	70		53

Increase in insurance liabilities	Increase in insurance liabilities	1,019		630		Increase in insurance liabilities	996		235

Net change in other assets and other liabilities	Net change in other assets and other liabilities	(490)		(748)		Net change in other assets and other liabilities	(566)		(622)
Net cash provided by operating activities	Net cash provided by operating activities	2,655		2,446		Net cash provided by operating activities	759		298
Investing Activities	Investing Activities					Investing Activities
Proceeds from the sale/maturity/prepayment of:	Proceeds from the sale/maturity/prepayment of:					Proceeds from the sale/maturity/prepayment of:
Fixed maturities, available-for-sale	Fixed maturities, available-for-sale	14,734		14,335		Fixed maturities, available-for-sale	5,536		3,906
Fixed maturities, fair value option		11		7

Equity securities, at fair value	Equity securities, at fair value	1,420		1,260		Equity securities, at fair value	157		645
Mortgage loans	Mortgage loans	710		491		Mortgage loans	307		329
Partnerships	Partnerships	84		201		Partnerships	56		34

Payments for the purchase of:	Payments for the purchase of:					Payments for the purchase of:
Fixed maturities, available-for-sale	Fixed maturities, available-for-sale	(15,544)		(15,592)		Fixed maturities, available-for-sale	(5,049)		(3,578)

Equity securities, at fair value	Equity securities, at fair value	(758)		(847)		Equity securities, at fair value	(756)		(518)
Mortgage loans	Mortgage loans	(995)		(515)		Mortgage loans	(400)		(487)
Partnerships	Partnerships	(235)		(218)		Partnerships	(245)		(97)

Net proceeds from derivatives	Net proceeds from derivatives	131		60		Net proceeds from derivatives	27		161

Net additions of property and equipment	Net additions of property and equipment	(78)		(75)		Net additions of property and equipment	(23)		(23)
Net proceeds from (payments for) short-term investments	Net proceeds from (payments for) short-term investments	(475)		1,480		Net proceeds from (payments for) short-term investments	(54)		407
Other investing activities, net	Other investing activities, net	(12)		(6)		Other investing activities, net	(6)		(2)

Amount paid for business acquired, net of cash acquired		0		(1,901)
Net cash used for investing activities		(1,007)		(1,320)

Net cash provided by (used for) investing activities						Net cash provided by (used for) investing activities	(450)		777
Financing Activities	Financing Activities					Financing Activities
Deposits and other additions to investment and universal life-type contracts	Deposits and other additions to investment and universal life-type contracts	44		107		Deposits and other additions to investment and universal life-type contracts	22		15
Withdrawals and other deductions from investment and universal life-type contracts	Withdrawals and other deductions from investment and universal life-type contracts	(78)		(101)		Withdrawals and other deductions from investment and universal life-type contracts	(44)		(10)

Net decrease in securities loaned or sold under agreements to repurchase	Net decrease in securities loaned or sold under agreements to repurchase	(511)		(291)		Net decrease in securities loaned or sold under agreements to repurchase	0		(237)

Repayment of debt	Repayment of debt	(500)		(1,583)		Repayment of debt	0		(500)
Proceeds from the issuance of debt		0		1,376

Net return of shares under incentive and stock compensation plans	Net return of shares under incentive and stock compensation plans	(27)		(18)		Net return of shares under incentive and stock compensation plans	0		(32)
Treasury stock acquired	Treasury stock acquired	(150)		(90)		Treasury stock acquired	(123)		(150)
Dividends paid on preferred stock	Dividends paid on preferred stock	(16)		(16)		Dividends paid on preferred stock	(5)		(5)
Dividends paid on common stock	Dividends paid on common stock	(341)		(327)		Dividends paid on common stock	(116)		(108)
Net cash used for financing activities	Net cash used for financing activities	(1,579)		(943)		Net cash used for financing activities	(266)		(1,027)
Foreign exchange rate effect on cash	Foreign exchange rate effect on cash	(3)		(14)		Foreign exchange rate effect on cash	(3)		(9)
Net increase in cash and restricted cash, including cash classified within assets held for sale	Net increase in cash and restricted cash, including cash classified within assets held for sale	66		169		Net increase in cash and restricted cash, including cash classified within assets held for sale	40		39
Less: Net increase in cash classified within assets held for sale		58		0
Less: Net decrease in cash classified within assets held for sale						Less: Net decrease in cash classified within assets held for sale	(1)		0
Net increase in cash and restricted cash	Net increase in cash and restricted cash	8		169		Net increase in cash and restricted cash	41		39
Cash and restricted cash – beginning of period	Cash and restricted cash – beginning of period	262		121		Cash and restricted cash – beginning of period	239		262
Cash and restricted cash– end of period	Cash and restricted cash– end of period	$	270	$	290	Cash and restricted cash– end of period	$	280	$	301
Supplemental Disclosure of Cash Flow Information	Supplemental Disclosure of Cash Flow Information					Supplemental Disclosure of Cash Flow Information
Income tax received		$	161	$	420
Income tax received (paid)						Income tax received (paid)	$	32	$	(1)
Interest paid	Interest paid	$	183	$	210	Interest paid	$	58	$	74

See Notes to Condensed Consolidated Financial Statements.


Table of Contents

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in millions, except for per share data, unless otherwise stated)

(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”).

On May 23, 2019, the Company completed the acquisition of The Navigators Group, Inc. ("Navigators Group"), a global specialty underwriter, for $70 a share, or $2.137 billion in cash, including transaction expenses.

On September 30, 2020, the Company entered into a definitive agreement to sell all of the issued and outstanding equity of Navigators Holdings (Europe) N.V., a 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 further discussion of this transaction see Note 216 - Business ~~Acquisition and Disposition.~~Disposition.

The Condensed 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 ~~2019~~2020 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 ~~presentation~~statement 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 ~~2019~~2020 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 intercompany~~Intercompany 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 insurance product reserves, net of reinsurance; evaluation of goodwill for impairment; valuation of investments and derivative instruments; ~~valuation allowance on deferred tax assets;~~ and contingencies relating to corporate litigation and regulatory matters.

The novel strain of coronavirus, specifically identified as the Coronavirus Disease 2019 (“COVID-19”), continues to impact the global economy. The ultimate impact of COVID-19 and the extent to which COVID-19 continues to impact the Company’s business, results of operations and financial condition will depend on the 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.

~~Adoption of New Accounting Standards~~

~~Goodwill~~

On January 1, 2020, the Company adopted the Financial Accounting Standards Board's ("FASB") updated guidance on testing goodwill for impairment with 0 effect at adoption. The updated guidance requires impairment of goodwill if the carrying value of the reporting unit is greater than the estimated fair value, with the amount of the impairment not to exceed the carrying value of the reporting unit’s goodwill. Goodwill is reviewed for impairment at least annually and more frequently if events occur or circumstances change that would indicate that a triggering event for a potential impairment has occurred. Under the updated guidance, changes in market-based factors are more likely to result in a goodwill impairment than under the prior accounting guidance, whether a reporting unit's fair value is estimated using an income approach or a market approach. For example, changes in the weighted average cost of capital that is used to discount expected cash flows under the income approach or changes in market-based factors such as peer company price to earnings multiples or price to book multiples under a market approach can significantly affect changes to the estimated fair value of each reporting unit and such changes could result in impairments that have a material effect on our results of operations and financial condition.

~~Financial Instruments - Credit Losses~~

On January 1, 2020, the Company adopted the FASB’s updated guidance for recognition and measurement of credit losses on financial instruments. The new guidance replaces the “incurred loss” approach with an “expected loss” model for recognizing credit losses for financial instruments carried at other than fair value. Under the new model, for financial instruments carried at

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

other than fair value, such as mortgage loans, reinsurance recoverables and receivables, an allowance for credit losses ("ACL") is recognized which is an estimate of credit losses expected over the life of financial instruments. Under the prior accounting model an ACL was recognized using an incurred loss approach. The new guidance also requires that we estimate a liability for credit losses ("LCL") on off balance sheet credit exposures such as financial guarantees and mortgage loan commitments that the Company cannot unconditionally cancel.

Credit losses on fixed maturities, AFS carried at fair value continue to be measured based on the present value of expected future cash flows compared to amortized cost; however, the losses are now recognized through an ACL and no longer as an adjustment to the amortized cost. Recoveries of impairments on fixed maturities, AFS are now recognized as reversals of the ACL and no longer accreted as investment income through an adjustment to the investment yield. The ACL on fixed maturities,

AFS cannot cause the net carrying value to be below fair value and, therefore, it is possible that future increases in fair value due to decreases in market interest rates could cause the reversal of the ACL and increase net income. The new guidance also requires purchased financial assets with a more-than-insignificant amount of credit deterioration since original issuance to be recorded based on contractual amounts due and an initial allowance recorded at the date of purchase.

The Company adopted the guidance effective January 1, 2020, through a cumulative-effect adjustment that decreased retained earnings by $18, representing a net increase to the ACL and LCL, after-tax. No ACL was recognized at adoption for fixed maturities AFS; rather, these investments are evaluated for an ACL prospectively. The Company does not have any purchased financial assets with a more than insignificant amount of credit deterioration since original issuance.

~~Impact of Adoption on Condensed Consolidated Balance Sheet~~

Balance as of January 1, 2020
Opening Balance Cumulative Effect of Accounting Change Adjusted Opening Balance
Mortgage loans $ 4,215 $ 4,215
ACL on mortgage loans 0 $ (19) (19)
Mortgage loans, net of ACL 4,215 (19) 4,196
Premiums receivable and agents’ balances 4,529 4,529
ACL on premiums receivable and agents' balances (145) 23 (122)
Premiums receivable and agents' balances, net of ACL 4,384 23 4,407
Reinsurance recoverables 5,641 5,641
ACL and allowance for disputed amounts on reinsurance recoverables (114) (2) (116)
Reinsurance recoverables, net of allowance for uncollectible reinsurance 5,527 (2) 5,525
Deferred income tax asset, net 299 5 304
Other liabilities (5,157) (25) (5,182)
Retained Earnings $ 12,685 $ (18) $ 12,667

~~Summary of Adoption Impacts~~


~~Net increase to ACL and LCL~~	$	~~(23)~~
~~Net tax effects~~Table of Contents					5 Note 2 - Earnings Per Common Share
~~Net decrease to retained earnings~~			$	~~(18)~~

~~Reference Rate Reform~~

On March 12, 2020, the Company adopted the FASB’s temporary guidance which allows The Hartford to account for contract modifications made solely due to rate reform (such as replacing LIBOR with another reference rate) as continuations of existing contracts and to maintain hedge accounting when the hedging effectiveness between a financial instrument and its hedge is only affected by the change to a replacement rate. As a result, The Hartford will not recognize gains and losses during the transition period of LIBOR to an alternative reference rate that would otherwise have arisen from accounting assessments and remeasurements. The guidance expires for contract modifications made and hedge relationships entered into or evaluated after December 31, 2022. The Company is not required to measure the

~~effect of adoption on its financial position, cash flows or net income because the guidance provides relief from accounting for the effects of the change to a replacement rate.~~

~~Mortgage Loan Modification~~

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Section 4013 of the CARES Act allows financial institutions the option to suspend the requirement to disclose and account for loan modifications as troubled debt restructurings for loan modifications related to the novel strain of coronavirus, specifically identified as the Coronavirus Disease 2019 (“COVID-19”) pandemic occurring between March 1, 2020 and the earlier of 60 days after the end of the national emergency or December 31, 2020. The Company’s adoption of Section 4013 of the CARES Act had 0 impact on our results of operations, financial position or cash flows because The Hartford has not granted significant concessions to borrowers on its mortgage loans that would have been disclosed and accounted for as troubled debt restructurings.

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

2. ~~BUSINESS ACQUISITION AND DISPOSITION~~

~~Business Acquisition~~

~~Navigators Group~~

On May 23, 2019, The Hartford acquired Navigators Group, a specialty underwriter, for total consideration of $2.121 billion and recorded provisional estimates of the fair value of the assets acquired and liabilities assumed. In the second quarter of 2020, The Hartford finalized its provisional estimates and recorded additional assets of $9 and liabilities of $7 with a net reduction in

goodwill of $2. The measurement period adjustments, determined as if the accounting had been completed as of the acquisition date, had no effect on the Condensed Consolidated Statements of Operations. The following table presents the preliminary allocation of the purchase price to the assets acquired and liabilities assumed as of the acquisition date, the measurement period adjustments recorded, and the final purchase price allocation.

~~Fair Value of Assets Acquired and Liabilities Assumed at the Acquisition Date~~

Preliminary Values as of May 23, 2019 (as previously reported) Measurement Period Adjustments Adjusted Values as of May 23, 2019
Assets
Cash and invested assets $ 3,848 $ 3 $ 3,851
Premiums receivable 492 6 498
Reinsurance recoverables 1,100 (3) 1,097
Prepaid reinsurance premiums 238 0 238
Other intangible assets 580 0 580
Property and equipment 83 0 83
Other assets 99 3 102
Total Assets Acquired 6,440 9 6,449
Liabilities
Unpaid losses and loss adjustment expenses 2,823 0 2,823
Unearned premiums 1,219 0 1,219
Long-term debt 284 0 284
Deferred income taxes, net 48 (1) 47
Other liabilities 568 8 576
Total Liabilities Assumed 4,942 7 4,949
Net identifiable assets acquired 1,498 2 1,500
Goodwill [1] 623 (2) 621
Net Assets Acquired $ 2,121 $ 0 $ 2,121

~~[1] Non-deductible for income tax purposes.~~

The following table presents supplemental pro forma amounts of revenue and net income for the Company for the nine months ended September 30, 2019, as though the business was acquired on January 1, 2018. Pro forma adjustments include the revenue and earnings of Navigators Group as well as amortization of identifiable intangible assets acquired.

~~Pro Forma Results~~


	~~Nine Months Ended September 30, 2019~~
~~Total Revenue~~	$	~~16,055~~
~~Net Income~~	$	~~1,532~~

~~Business Disposition~~

~~Sale of Continental Europe Operations~~

On September 30, 2020, the Company entered into a definitive agreement to sell our Continental Europe Operations. The transaction is expected to close by the second quarter of 2021, subject to customary closing conditions, including regulatory approvals. The complete sale of the Continental Europe Operations consists of multiple arrangements designed as a single transaction. The assets and liabilities of the Continental Europe Operations have been classified as held for sale in the Company's

~~Condensed Consolidated Balance Sheets beginning with the period ended September 30, 2020.~~

~~Total consideration less costs to sell is estimated to be~~ ~~approximately $14, resulting in an estimated loss on the sale of approximately $51, before tax, which has been recorded within net realized capital gains (losses) in the third quarter of 2020 in~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

the Condensed Consolidated Statements of Operations. The Company also recorded related income tax benefits of $19, for an estimated after-tax loss of $32 on the sale, in the third quarter of 2020. The accrual for the estimated before tax loss is included as a reduction of the carrying value of assets held for sale in the Company's Condensed Consolidated Balance Sheets as of September 30, 2020. The Continental Europe Operations are reported under the Commercial Lines segment. The estimate of consideration less costs to sell of $14 includes an estimate of

consideration that is contingent on how the ultimate amounts required to settle claims on 2020 and prior accident years, as determined at the end of 2024 compare with recorded reserves as currently estimated. The contingent consideration has been estimated at its fair value of $12 and could increase or decrease depending on how ultimate losses develop. Any change in the estimated fair value of contingent consideration in a future period would increase or decrease the estimated loss on sale in that period.

~~Carrying Value of Assets and Liabilities to be Transferred in Connection With the Sale [1]~~


	~~As of September 30, 2020~~
~~Assets~~
~~Investments and cash~~	$	~~138~~




~~Reinsurance recoverables and other~~	29
~~Total assets held for sale~~	~~167~~
~~Liabilities~~
~~Unpaid losses and loss adjustment expenses~~	74
~~Unearned premiums~~	35
~~Other liabilities~~	44
~~Total liabilities held for sale~~	$	~~153~~

[1] As of September 30, 2020, the estimated fair value of the disposal group is $14 based on the estimated consideration to be received less cost to sell. Within the disposal group, as of September 30, 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, of which $2 was based on quoted prices in active markets for identical assets and $78 was based on significant observable inputs. The remaining fair value less costs to sell for the disposal group is ($66), which is measured on a nonrecurring basis using significant unobservable inputs. See Note 5—Fair Value Measurements for more information.

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) 2020 2019 2020 2019
Earnings
Net income $ 459 $ 535 $ 1,200 $ 1,537
Less: Preferred stock dividends 6 11 16 16
Net income available to common stockholders $ 453 $ 524 $ 1,184 $ 1,521
Shares
Weighted average common shares outstanding, basic 358.3 361.4 358.3 361.0
Dilutive effect of warrants [1] 0 0 0 0.7
Dilutive effect of stock-based awards under compensation plans 2.2 4.0 2.0 3.4
Weighted average common shares outstanding and dilutive potential common shares 360.5 365.4 360.3 365.1
Net income available to common stockholders per common share
Basic $ 1.26 $ 1.45 $ 3.30 $ 4.21
Diluted $ 1.26 $ 1.43 $ 3.29 $ 4.17

~~[1] On June 26, 2019, the Capital Purchase Program warrants issued in 2009 expired.~~


Computation of Basic and Diluted Earnings per Common Share
	Three Months Ended March 31,
(In millions, except for per share data)	2021		2020
Earnings

Net income	$	249	$	273
Less: Preferred stock dividends	5		5




Net income available to common stockholders	$	244	$	268


Shares
Weighted average common shares outstanding, basic	358.2		358.5

Dilutive effect of stock-based awards under compensation plans	4.0		2.6
Weighted average common shares outstanding and dilutive potential common shares	362.2		361.1
Net income available to common stockholders per common share



Basic	$	0.68	$	0.75






Diluted	$	0.67	$	0.74

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~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

4.3. SEGMENT INFORMATION

The Company currently conducts business principally in 5 reporting segments including Commercial Lines, Personal Lines,

Property & Casualty Other Operations, Group Benefits and Hartford Funds, as well as a Corporate Category.

~~category.~~

Net Income


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Commercial Lines	Commercial Lines	$	323	$	336	$	378	$	890	Commercial Lines	$	129	$	121
Personal Lines	Personal Lines	79		94		548		252		Personal Lines	135		98
Property & Casualty Other Operations	Property & Casualty Other Operations	2		18		12		52		Property & Casualty Other Operations	(13)		5
Group Benefits	Group Benefits	119		146		324		377		Group Benefits	9		104
Hartford Funds	Hartford Funds	44		40		119		108		Hartford Funds	47		36
Corporate	Corporate	(108)		(99)		(181)		(142)		Corporate	(58)		(91)
Net income	Net income	459		535		1,200		1,537		Net income	249		273
Preferred stock dividends	Preferred stock dividends	6		11		16		16		Preferred stock dividends	5		5
Net income available to common stockholders	Net income available to common stockholders	$	453	$	524	$	1,184	$	1,521	Net income available to common stockholders	$	244	$	268

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

Revenues


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Earned premiums and fee income:	Earned premiums and fee income:									Earned premiums and fee income:
Commercial Lines	Commercial Lines									Commercial Lines
Workers’ compensation	Workers’ compensation	$	776	$	825	$	2,312	$	2,480	Workers’ compensation	$	738	$	816
Liability	Liability	355		330		1,035		731		Liability	375		343
Marine	Marine	59		59		191		86		Marine	58		65
Package business	Package business	390		376		1,150		1,092		Package business	393		377
Property	Property	200		198		590		529		Property	200		205
Professional liability	Professional liability	150		137		442		304		Professional liability	155		143
Bond	Bond	68		67		206		192		Bond	69		70
Assumed reinsurance	Assumed reinsurance	68		75		206		104		Assumed reinsurance	68		66
Automobile	Automobile	193		191		562		522		Automobile	188		188
Total Commercial Lines	Total Commercial Lines	2,259		2,258		6,694		6,040		Total Commercial Lines	2,244		2,273
Personal Lines	Personal Lines									Personal Lines
Automobile	Automobile	547		564		1,552		1,690		Automobile	512		543
Homeowners	Homeowners	240		248		721		741		Homeowners	230		240
Total Personal Lines [1]	Total Personal Lines [1]	787		812		2,273		2,431		Total Personal Lines [1]	742		783

Group Benefits	Group Benefits									Group Benefits
Group disability	Group disability	697		697		2,142		2,124		Group disability	739		726
Group life	Group life	594		621		1,833		1,902		Group life	602		607
Other	Other	70		64		200		187		Other	77		58
Total Group Benefits	Total Group Benefits	1,361		1,382		4,175		4,213		Total Group Benefits	1,418		1,391
Hartford Funds	Hartford Funds									Hartford Funds
Mutual fund and Exchange-Traded Products ("ETP")	Mutual fund and Exchange-Traded Products ("ETP")	228		231		660		674		Mutual fund and Exchange-Traded Products ("ETP")	259		225
Talcott Resolution life and annuity separate accounts [2]	Talcott Resolution life and annuity separate accounts [2]	22		23		64		69		Talcott Resolution life and annuity separate accounts [2]	23		22
Total Hartford Funds	Total Hartford Funds	250		254		724		743		Total Hartford Funds	282		247
Corporate	Corporate	13		18		47		43		Corporate	12		17
Total earned premiums and fee income	Total earned premiums and fee income	4,670		4,724		13,913		13,470		Total earned premiums and fee income	4,698		4,711
Net investment income	Net investment income	492		490		1,290		1,448		Net investment income	509		459
Net realized capital gains (losses)	Net realized capital gains (losses)	6		89		(116)		332		Net realized capital gains (losses)	80		(231)
Other revenues	Other revenues	3		44		108		129		Other revenues	12		17
Total revenues	Total revenues	$	5,171	$	5,347	$	15,195	$	15,379	Total revenues	$	5,299	$	4,956

[1]For the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ AARP members accounted for earned premiums of ~~$713~~$676 and ~~$729, respectively. For the nine months ended September 30, 2020 and 2019, AARP members accounted for earned premiums of $2.1 billion and $2.2 billion,~~$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.

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

Revenue from Non-Insurance Contracts with Customers


			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
		Revenue Line Item	2020		2019		2020		2019			Revenue Line Item	2021		2020
Commercial Lines	Commercial Lines										Commercial Lines
Installment billing fees	Installment billing fees	Fee income	$	8	$	8	$	21	$	26	Installment billing fees	Fee income	$	9	$	8
Personal Lines	Personal Lines										Personal Lines
Installment billing fees	Installment billing fees	Fee income	8		9		26		28		Installment billing fees	Fee income	8		9
Insurance servicing revenues	Insurance servicing revenues	Other revenues	23		23		63		65		Insurance servicing revenues	Other revenues	19		19
Group Benefits	Group Benefits										Group Benefits
Administrative services	Administrative services	Fee income	44		45		132		135		Administrative services	Fee income	44		43
Hartford Funds	Hartford Funds										Hartford Funds
Advisor, distribution and other management fees	Advisor, distribution and other management fees	Fee income	228		232		659		677		Advisor, distribution and other management fees	Fee income	257		224
Other fees	Other fees	Fee income	22		22		65		65		Other fees	Fee income	25		23
Corporate	Corporate										Corporate
Investment management and other fees	Investment management and other fees	Fee income	13		14		38		38		Investment management and other fees	Fee income	12		13
Transition service revenues	Transition service revenues	Other revenues	0		6		2		18		Transition service revenues	Other revenues	0		2
Total non-insurance revenues with customers	Total non-insurance revenues with customers		$	346	$	359	$	1,006	$	1,052	Total non-insurance revenues with customers		$	374	$	341

5.4. 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 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 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 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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~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~


Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of September 30, 2020
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of March 31, 2021										Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of March 31, 2021
		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			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	Assets accounted for at fair value on a recurring basis									Assets accounted for at fair value on a recurring basis
Fixed maturities, AFS	Fixed maturities, AFS									Fixed maturities, AFS
Asset-backed-securities ("ABS")		$	1,490	$	0	$	1,490	$	0
Asset backed securities ("ABS")										Asset backed securities ("ABS")	$	1,435	$	0	$	1,429	$	6
Collateralized loan obligations ("CLOs")	Collateralized loan obligations ("CLOs")	2,449		0		2,308		141		Collateralized loan obligations ("CLOs")	3,049		0		2,623		426
Commercial mortgage-backed securities ("CMBS")	Commercial mortgage-backed securities ("CMBS")	4,444		0		4,352		92		Commercial mortgage-backed securities ("CMBS")	4,167		0		4,106		61
Corporate	Corporate	19,416		0		18,420		996		Corporate	19,495		0		18,551		944
Foreign government/government agencies	Foreign government/government agencies	984		0		984		0		Foreign government/government agencies	868		0		868		0
Municipal	Municipal	9,310		0		9,304		6		Municipal	9,214		0		9,214		0
Residential mortgage-backed securities ("RMBS")	Residential mortgage-backed securities ("RMBS")	4,548		0		4,097		451		Residential mortgage-backed securities ("RMBS")	4,025		0		3,544		481
U.S. Treasuries	U.S. Treasuries	1,403		381		1,022		0		U.S. Treasuries	1,354		547		807		0
Total fixed maturities	Total fixed maturities	44,044		381		41,977		1,686		Total fixed maturities	43,607		547		41,142		1,918

Equity securities, at fair value	Equity securities, at fair value	819		352		398		69		Equity securities, at fair value	1,632		1,022		540		70
Derivative assets	Derivative assets									Derivative assets
Credit derivatives	Credit derivatives	11		0		11		0		Credit derivatives	21		0		21		0

Interest rate derivatives	Interest rate derivatives	1		0		1		0		Interest rate derivatives	1		0		1		0
Total derivative assets [1]	Total derivative assets [1]	12		0		12		0		Total derivative assets [1]	22		0		22		0
Short-term investments	Short-term investments	3,399		3,176		209		14		Short-term investments	3,367		1,754		1,597		16
Total assets accounted for at fair value on a recurring basis	Total assets accounted for at fair value on a recurring basis	$	48,274	$	3,909	$	42,596	$	1,769	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	Liabilities accounted for at fair value on a recurring basis									Liabilities accounted for at fair value on a recurring basis
Derivative liabilities	Derivative liabilities									Derivative liabilities
Credit derivatives		$	1	$	0	$	1	$	0

Foreign exchange derivatives	Foreign exchange derivatives	$	6	$	0	$	6	$	0	Foreign exchange derivatives	$	(10)	$	0	$	(10)	$	0
Interest rate derivatives	Interest rate derivatives	(79)		0		(79)		0		Interest rate derivatives	(45)		0		(45)		0
Total derivative liabilities [2]	Total derivative liabilities [2]	(72)		0		(72)		0		Total derivative liabilities [2]	(55)		0		(55)		0

Total liabilities accounted for at fair value on a recurring basis	Total liabilities accounted for at fair value on a recurring basis	$	(72)	$	0	$	(72)	$	0	Total liabilities accounted for at fair value on a recurring basis	$	(55)	$	0	$	(55)	$	0

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THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~


Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 2019
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 2020										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)			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	Assets accounted for at fair value on a recurring basis									Assets accounted for at fair value on a recurring basis
Fixed maturities, AFS	Fixed maturities, AFS									Fixed maturities, AFS
ABS	ABS	$	1,476	$	0	$	1,461	$	15	ABS	$	1,564	$	0	$	1,564	$	0
CLOs	CLOs	2,183		0		2,088		95		CLOs	2,780		0		2,420		360
CMBS	CMBS	4,338		0		4,329		9		CMBS	4,484		0		4,407		77
Corporate	Corporate	17,396		0		16,664		732		Corporate	20,273		0		19,392		881
Foreign government/government agencies	Foreign government/government agencies	1,123		0		1,120		3		Foreign government/government agencies	919		0		913		6
Municipal	Municipal	9,498		0		9,498		0		Municipal	9,503		0		9,503		0
RMBS	RMBS	4,869		0		4,309		560		RMBS	4,107		0		3,726		381
U.S. Treasuries	U.S. Treasuries	1,265		330		935		0		U.S. Treasuries	1,405		529		876		0
Total fixed maturities	Total fixed maturities	42,148		330		40,404		1,414		Total fixed maturities	45,035		529		42,801		1,705
Fixed maturities, FVO		11		0		11		0

Equity securities, at fair value	Equity securities, at fair value	1,657		1,401		183		73		Equity securities, at fair value	1,438		872		496		70
Derivative assets	Derivative assets									Derivative assets
Credit derivatives	Credit derivatives	11		0		11		0		Credit derivatives	21		0		21		0

Foreign exchange derivatives										Foreign exchange derivatives	1		0		1		0
Interest rate derivatives	Interest rate derivatives	1		0		1		0		Interest rate derivatives	1		0		1		0
Total derivative assets [1]	Total derivative assets [1]	12		0		12		0		Total derivative assets [1]	23		0		23		0
Short-term investments	Short-term investments	2,921		1,028		1,878		15		Short-term investments	3,283		2,663		590		30
Total assets accounted for at fair value on a recurring basis	Total assets accounted for at fair value on a recurring basis	$	46,749	$	2,759	$	42,488	$	1,502	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	Liabilities accounted for at fair value on a recurring basis									Liabilities accounted for at fair value on a recurring basis
Derivative liabilities	Derivative liabilities									Derivative liabilities
Credit derivatives		$	(1)	$	0	$	(1)	$	0
Equity derivatives		(15)		0		—		(15)

Foreign exchange derivatives	Foreign exchange derivatives	(2)		0		(2)		0		Foreign exchange derivatives	(14)		0		(14)		0
Interest rate derivatives	Interest rate derivatives	(60)		0		(60)		0		Interest rate derivatives	(70)		0		(70)		0
Total derivative liabilities [2]	Total derivative liabilities [2]	(78)		0		(63)		(15)		Total derivative liabilities [2]	(84)		0		(84)		0
Contingent consideration [3]		(22)		0		0		(22)

Total liabilities accounted for at fair value on a recurring basis	Total liabilities accounted for at fair value on a recurring basis	$	(100)	$	0	$	(63)	$	(37)	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.

~~[3]For additional information see the Contingent Consideration section below.~~

In connection with the acquisition of Navigators Group, the Company has overseas deposits in Other Invested Assets of ~~$53~~$61 and ~~$38~~$54 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, which are measured at fair value using the net asset value as a practical expedient.

Fixed Maturities, Equity Securities, Short-term Investments, and 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

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

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, such as municipal 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.


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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, 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 derivative instruments is determined primarily using a discounted cash flow model or option model technique and incorporates counterparty credit risk. In some cases, quoted market prices for exchange-traded and over-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.

Valuation Controls

The process for determining the fair value of investments is monitored by the Valuation Committee, which is a ~~cross-functional~~cross-

functional group of senior management within the Company. The purpose of the Valuation Committee is to provide oversight of the pricing policy, procedures and controls, 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. Controls include, but are not limited to, reviewing daily and monthly price changes, stale prices, and missing prices and comparing new trade prices to third-party pricing services, weekly price changes to published bond prices of a corporate bond index, 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 to current models require approval by the Valuation Committee. In addition, the Company’s enterprise-wide Operational Risk Management function 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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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~


Valuation Inputs Used in Levels 2 and 3 Measurements for Securities and Derivatives
Level 2 Primary Observable Inputs		Level 3 Primary Unobservable Inputs
Fixed Maturity Investments
Structured securities (includes ABS, 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 and private bank loans: ~~• Independent broker quotes~~ • Credit spreads for public securities of similar quality, maturity, and sector, adjusted for non-public nature
U.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		• 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
Short-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		• Independent broker quotes
Derivatives
Credit derivatives
	• Swap yield curve • Credit default swap curves		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		Not applicable
Interest rate derivatives
	• Swap yield curve		~~• Independent broker quotes~~ ~~• Interest rate volatility~~ Not applicable

2219


T able of Contents						Note 4 - Fair Value Measurements

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

Significant Unobservable Inputs for Level 3 - Securities

Assets accounted for at fair value on a recurring basis

Fair
Value

Predominant
Valuation
Technique

Significant

Unobservable Input

Minimum

Maximum

Weighted Average [1]

Impact of
Increase in Input
on Fair Value [2]

Assets accounted for at fair value on a recurring basis

Fair
Value

Predominant
Valuation
Technique

Significant

Unobservable Input

Minimum

Maximum

Weighted Average [1]

Impact of
Increase in Input
on Fair Value [2]

As of September 30, 2020

As of March 31, 2021

CLOs [3]

Discounted cash flows

Spread

414 bps

Decrease

CLOs [3]

331

Discounted cash flows

Spread

232 bps

332 bps

312 bps

Decrease

CMBS [3]

Discounted cash flows

Spread (encompasses prepayment, default risk and loss severity)

275 bps

1,235 bps

1,188 bps

Decrease

CMBS [3]

Discounted cash flows

Spread (encompasses prepayment, default risk and loss severity)

255 bps

670 bps

555 bps

Decrease

Corporate [4]

866

Discounted cash flows

Spread

129 bps

972 bps

311 bps

Decrease

Corporate [4]

844

Discounted cash flows

Spread

91 bps

1,231 bps

330 bps

Decrease

RMBS [3]

411

Discounted cash flows

Spread [6]

30 bps

590 bps

128 bps

Decrease

RMBS [3]

450

Discounted cash flows

Spread [6]

2 bps

1,499 bps

100 bps

Decrease

Constant prepayment rate [6]

11%

Decrease [5]

Constant prepayment rate [6]

12%

Decrease [5]

Constant default rate [6]

Decrease

Constant default rate [6]

10%

Decrease

Loss severity [6]

100%

82%

Decrease

Loss severity [6]

100%

76%

Decrease

As of December 31, 2019

As of December 31, 2020

CLOs [3]

Discounted cash flows

Spread

246 bps

Decrease

CLOs [3]

340

Discounted cash flows

Spread

304 bps

305 bps

304 bps

Decrease

CMBS [3]

Discounted cash flows

Spread (encompasses prepayment, default risk and loss severity)

9 bps

1,832 bps

161 bps

Decrease

CMBS [3]

Discounted cash flows

Spread (encompasses prepayment, default risk and loss severity)

255 bps

975 bps

688 bps

Decrease

Corporate [4]

633

Discounted cash flows

Spread

93 bps

788 bps

236 bps

Decrease

Corporate [4]

749

Discounted cash flows

Spread

110 bps

692 bps

293 bps

Decrease

RMBS [3]

560

Discounted cash flows

Spread [6]

5 bps

233 bps

79 bps

Decrease

RMBS [3]

364

Discounted cash flows

Spread [6]

7 bps

937 bps

119 bps

Decrease

Constant prepayment rate [6]

11%

Decrease [5]

Constant prepayment rate [6]

10%

Decrease [5]

Constant default rate [6]

Decrease

Constant default rate [6]

Decrease

Loss severity [6]

100%

70%

Decrease

Loss severity [6]

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.

Significant Unobservable Inputs for Level 3 - Derivatives [1]
Fair
Value Predominant
Valuation
Technique Significant Unobservable Input Minimum Maximum Weighted Average [2] Impact of
Increase in Input Value [3]
As of December 31, 2019
Equity options $ (15) Option model Equity volatility 13 % 28 % 17 % Increase

~~[1]~~

As of ~~September 30,~~March 31, 2021 and December 31, 2020, the fair values of the Company's level 3 derivatives were $0 and less than $1, ~~and are excluded from the table.~~respectively.

~~[2]The weighted average is determined based on the fair value of the derivatives.~~

~~[3]~~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.

The ~~tables~~table above ~~exclude~~excludes certain 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. As of ~~September 30, 2020,~~March 31, 2021, 0 significant adjustments were made by the Company to broker prices received.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~Contingent Consideration~~

The acquisition of Lattice Strategies LLC ("Lattice") on July 29, 2016 required the Company to make payments to former owners of Lattice of up to $60 contingent upon growth in exchange-traded products ("ETP") assets under management ("AUM") over a period of four years beginning on the date of acquisition. The contingent consideration was 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 had been discounted back to the valuation date using a risk-adjusted discount rate of 10.0%. The risk-adjusted discount rate is an internally generated and significant unobservable input to fair value.

In January 2020, we made a third payment of $10 after Lattice AUM reached $3.0 billion. Given the dramatic market declines and outflow in March, 2020, the Lattice AUM declined to $2.3 billion as of March 30, 2020 and the Company reduced the remaining contingent consideration liability to 0, recognizing an $11.9 before tax reduction in expense in first quarter 2020.

~~The earn out period ended on July 29, 2020 with 0 additional consideration payable.~~

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 ~~with~~within 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 rollforward may be offset by realized and unrealized gains and losses of the associated assets and liabilities in other line items of the financial statements.

Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended September 30, 2020
Total realized/unrealized gains (losses)
Fair value as of June 30, 2020 Included in net income [1] Included in OCI [2] Purchases Settlements Sales Transfers into Level 3 [3] Transfers out of Level 3 [3] Fair value as of September 30, 2020
Assets
Fixed Maturities, AFS
ABS $ 23 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ (23) $ 0
CLOs 99 0 1 63 (3) 0 0 (19) 141
CMBS 20 0 2 66 (1) 0 5 0 92
Corporate 1,109 1 19 45 (62) 0 22 (138) 996
Municipal 0 (3) 2 0 0 0 7 0 6
RMBS 479 0 2 40 (48) 0 0 (22) 451
Total Fixed Maturities, AFS 1,730 (2) 26 214 (114) 0 34 (202) 1,686
Equity Securities, at fair value 66 0 0 3 0 0 0 0 69
Short-term investments 14 0 0 0 0 0 0 0 14
Total Assets $ 1,810 $ (2) $ 26 $ 217 $ (114) $ 0 $ 34 $ (202) $ 1,769
Liabilities
Total Liabilities $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0

2420


T able of Contents						Note 4 - Fair Value Measurements

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Nine Months Ended September 30, 2020
Total realized/unrealized gains (losses)
Fair value as of January 1, 2020 Included in net income [1] Included in OCI [2] Purchases Settlements Sales Transfers into Level 3 [3] Transfers out of Level 3 [3] Fair value as of September 30, 2020
Assets
Fixed Maturities, AFS
ABS $ 15 $ 0 $ (1) $ 43 $ 0 $ 0 $ 0 $ (57) $ 0
CLOs 95 0 (1) 82 (16) 0 0 (19) 141
CMBS 9 0 2 79 (3) 0 5 0 92
Corporate 732 (31) 0 161 (126) (27) 481 (194) 996
Foreign Govt./Govt. Agencies 3 0 0 0 0 0 0 (3) 0
Municipal 0 (3) 2 0 0 0 7 0 6
RMBS 560 0 (10) 66 (136) (7) 0 (22) 451
Total Fixed Maturities, AFS 1,414 (34) (8) 431 (281) (34) 493 (295) 1,686
Equity Securities, at fair value 73 (10) 0 6 0 0 0 0 69
Short-term investments 15 0 0 0 (1) 0 0 0 14
Total Assets $ 1,502 $ (44) $ (8) $ 437 $ (282) $ (34) $ 493 $ (295) $ 1,769
Liabilities
Contingent Consideration (22) 12 0 0 10 0 0 0 0
Derivatives, net [4]
Equity Equity (15) 36 0 0 0 (21) 0 0 0
Total Derivatives, net [4] (15) 36 0 0 0 (21) 0 0 0
Total Liabilities $ (37) $ 48 $ 0 $ 0 $ 10 $ (21) $ 0 $ 0 $ 0


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, 2021		Included in net income [1]		Included in OCI [2]		Purchases		Settlements		Sales		Transfers 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
	CLOs	360		0		0		140		(15)		0		0		(59)		426
	CMBS	77		0		0		1		(2)		0		0		(15)		61
	Corporate	881		5		(13)		73		(7)		(7)		48		(36)		944
	Foreign Govt./Govt. Agencies	6		0		0		0		0		(6)		0		0		0

	RMBS	381		0		(1)		151		(46)		(4)		0		0		481
Total Fixed Maturities, AFS		1,705		5		(14)		371		(70)		(17)		48		(110)		1,918
Equity Securities, at fair value		70		0		0		0		0		0		0		0		70
Short-term investments		30		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 September 30, 2019
Total realized/unrealized gains (losses)
Fair value as of June 30, 2019 Included in net income [1] Included in OCI [2] Purchases Settlements Sales Transfers into Level 3 [3] Transfers out of Level 3 [3] Fair value as of September 30, 2019
Assets
Fixed Maturities, AFS
ABS $ 5 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ (5) $ 0
CLOs 286 0 0 92 (8) 0 0 (74) 296
CMBS 35 0 0 10 (1) 0 0 (24) 20
Corporate 568 (3) 0 166 (7) (4) 15 (12) 723
Foreign Govt./Govt. Agencies 3 0 0 0 0 0 0 0 3
RMBS 758 0 (3) 0 (51) 0 0 (90) 614
Total Fixed Maturities, AFS 1,655 (3) (3) 268 (67) (4) 15 (205) 1,656
Equity Securities, at fair value 72 (2) 0 0 0 0 0 0 70
Total Assets $ 1,727 $ (5) $ (3) $ 268 $ (67) $ (4) $ 15 $ (205) $ 1,726
Liabilities
Contingent Consideration (21) 0 0 0 0 0 0 0 (21)
Derivatives, net [4]
Equity (3) (2) 0 0 0 0 0 0 (5)
Total Derivatives, net [4] (3) (2) 0 0 0 0 0 0 (5)
Total Liabilities $ (24) $ (2) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ (26)

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~


Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Nine Months Ended September 30, 2019
Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended March 31, 2020																					Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended March 31, 2020
					Total realized/unrealized gains (losses)																				Total realized/unrealized gains (losses)
			Fair value as of January 1, 2019		Included in net income [1]		Included in OCI [2]		Purchases		Settlements		Sales		Transfers into Level 3 [3]		Transfers out of Level 3 [3]		Fair value as of September 30, 2019				Fair value as of January 1, 2020		Included in net income [1]		Included in OCI [2]		Purchases		Settlements		Sales		Transfers into Level 3 [3]		Transfers out of Level 3 [3]		Fair value as of March 31, 2020
Assets	Assets																				Assets
Fixed Maturities, AFS	Fixed Maturities, AFS																				Fixed Maturities, AFS
		ABS	$	10	$	0	$	0	$	5	$	(1)	$	0	$	0	$	(14)	$	0		ABS	$	15	$	0	$	(1)	$	20	$	0	$	0	$	0	$	(15)	$	19
		CLOs	100		0		0		329		(18)		(6)		0		(109)		296			CLOs	95		0		(6)		0		(6)		0		0		0		83
		CMBS	12		0		1		34		(3)		0		0		(24)		20			CMBS	9		0		0		10		(1)		0		0		0		18
		Corporate	520		(4)		9		261		(13)		(68)		61		(43)		723			Corporate	732		(10)		(80)		94		(36)		(8)		47		(30)		709
		Foreign Govt./Govt. Agencies	3		0		0		0		0		0		0		0		3			Foreign Govt./Govt. Agencies	3		0		0		0		0		0		0		0		3

		RMBS	920		1		(5)		134		(163)		(35)		0		(238)		614			RMBS	560		0		(25)		5		(46)		(7)		0		0		487
Total Fixed Maturities, AFS	Total Fixed Maturities, AFS		1,565		(3)		5		763		(198)		(109)		61		(428)		1,656		Total Fixed Maturities, AFS		1,414		(10)		(112)		129		(89)		(15)		47		(45)		1,319

Equity Securities, at fair value	Equity Securities, at fair value		77		(3)		0		9		0		(13)		0		0		70		Equity Securities, at fair value		73		(7)		0		3		0		0		0		0		69
Derivatives, net [4]
Short-term investments																					Short-term investments		15		0		0		0		(1)		0		0		0		14

		Interest rate	1		(1)		0		0		0		0		0		0		0
Total Derivatives, net [4]			1		(1)		0		0		0		0		0		0		0

Total Assets	Total Assets		$	1,643	$	(7)	$	5	$	772	$	(198)	$	(122)	$	61	$	(428)	$	1,726	Total Assets		$	1,502	$	(17)	$	(112)	$	132	$	(90)	$	(15)	$	47	$	(45)	$	1,402
Liabilities	Liabilities																				Liabilities
Contingent Consideration	Contingent Consideration		(35)		(6)		0		0		20		0		0		0		(21)		Contingent Consideration		(22)		12		0		0		10		0		0		0		0
Derivatives, net [4]	Derivatives, net [4]																				Derivatives, net [4]
		Equity	3		(8)		0		0		0		0		0		0		(5)			Equity	(15)		36		0		0		(21)		0		0		0		0
Total Derivatives, net [4]	Total Derivatives, net [4]		3		(8)		0		0		0		0		0		0		(5)		Total Derivatives, net [4]		(15)		36		0		0		(21)		0		0		0		0
Total Liabilities	Total Liabilities		$	(32)	$	(14)	$	0	$	0	$	20	$	0	$	0	$	0	$	(26)	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. Transfers into Level 3 for the nine months ended September 30, 2020, were primarily related to private securities that were priced using internal matrix pricing in the prior period, but changed to broker pricing in the current period.

[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.

2621


T able of Contents						Note 4 - Fair Value Measurements

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~


Changes in Unrealized Gains (Losses) for Financial Instruments Classified as Level 3 Still Held at End of Period	Changes in Unrealized Gains (Losses) for Financial Instruments Classified as Level 3 Still Held at End of Period																		Changes in Unrealized Gains (Losses) for Financial Instruments Classified as Level 3 Still Held at End of Period
			Three Months Ended September 30,								Nine Months Ended September 30,										Three Months Ended March 31,
			2020		2019		2020		2019		2020		2019		2020		2019				2021		2020		2021		2020
			Changes in Unrealized Gain/(Loss) included in Net Income [1] [2]				Changes in Unrealized Gain/(Loss) included in OCI [3]				Changes in Unrealized Gain/(Loss) included in Net Income [1] [2]				Changes in Unrealized Gain/(Loss) included in OCI [3]						Changes in Unrealized Gain/(Loss) included in Net Income [1] [2]				Changes in Unrealized Gain/(Loss) included in OCI [3]
Assets	Assets																		Assets
Fixed Maturities, AFS	Fixed Maturities, AFS																		Fixed Maturities, AFS
																				ABS	$	0	$	0	$	0	$	(1)
		CLOs	0		0		1		0		0		0		(1)		1			CLOs	0		0		0		(6)
		CMBS	0		0		2		0		0		0		2		0
		Corporate	(1)		(2)		17		0		(21)		(3)		1		8			Corporate	5		0		(13)		(79)
		Foreign Govt./Govt. Agencies	0		0		0		0		0		0		0		1
		Municipal	(3)		0		2		0		(3)		0		2		0
		RMBS	0		0		2		(3)		0		0		(9)		(4)			RMBS	0		0		(1)		(24)
Total Fixed Maturities, AFS	Total Fixed Maturities, AFS		(4)		(2)		24		(3)		(24)		(3)		(5)		6		Total Fixed Maturities, AFS		5		0		(14)		(110)
Equity Securities, at fair value	Equity Securities, at fair value		0		(2)		0		0		(9)		(2)		0		0		Equity Securities, at fair value		0		(6)		0		0

Derivatives, net
		Equity	0		0		0		0		0		0		0		0
		Interest rate	0		0		0		0		0		(1)		0		0
Total Derivatives, net			0		0		0		0		0		(1)		0		0
Short-term investments			—		—		—		—

Total Assets	Total Assets		$	(4)	$	(4)	$	24	$	(3)	$	(33)	$	(6)	$	(5)	$	6	Total Assets		$	5	$	(6)	$	(14)	$	(110)
Liabilities	Liabilities																		Liabilities
Contingent Consideration	Contingent Consideration		0		0		0		0		12		(6)		0		0		Contingent Consideration		$	0	$	12	$	0	$	0
Derivatives, net
		Equity	0		(2)		0		0		0		(8)		0		0
Total Derivatives, net			0		(2)		0		0		0		(8)		0		0

Total Liabilities	Total Liabilities		$	0	$	(2)	$	0	$	0	$	12	$	(14)	$	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. ~~Changes in interest rate derivatives are reported in changes in net gain on cash flow hedging instruments in the Condensed Consolidated Statements of Comprehensive Income.~~

~~Fair Value Option~~

The Company has elected the fair value option for certain RMBS that contain embedded credit derivatives with underlying credit risk. These securities are included within Fixed Maturities, FVO on the Condensed Consolidated Balance Sheets and changes in the fair value of these securities are reported in net realized capital gains and losses.

As of September 30, 2020 and December 31, 2019, the fair value of assets using the fair value option was $0 and $11, respectively, with assets as of December 31, 2019 within the residential real estate sector.

~~For the three and nine months ended September 30, 2020 and 2019 there were 0 realized capital gains (losses) related to the fair value of assets using the fair value option.~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

Financial Instruments Not Carried at Fair Value


Financial Assets and Liabilities Not Carried at Fair Value	Financial Assets and Liabilities Not Carried at Fair Value											Financial Assets and Liabilities Not Carried at Fair Value
		September 30, 2020					December 31, 2019						March 31, 2021					December 31, 2020
		Fair Value Hierarchy Level	Carrying Amount [1]		Fair Value		Fair Value Hierarchy Level	Carrying Amount		Fair Value			Fair Value Hierarchy Level	Carrying Amount [1]		Fair Value		Fair Value Hierarchy Level	Carrying Amount [1]		Fair Value
Assets	Assets											Assets
Mortgage loans	Mortgage loans	Level 3	$	4,461	$	4,720	Level 3	$	4,215	$	4,350	Mortgage loans	Level 3	$	4,588	$	4,768	Level 3	$	4,493	$	4,792
Liabilities	Liabilities											Liabilities
Other policyholder funds and benefits payable	Other policyholder funds and benefits payable	Level 3	711		$	712	Level 3	$	763	$	765	Other policyholder funds and benefits payable	Level 3	$	681	$	683	Level 3	$	701	$	703
Senior notes [2]	Senior notes [2]	Level 2	$	3,261	$	4,172	Level 2	$	3,759	$	4,456	Senior notes [2]	Level 2	$	3,263	$	3,965	Level 2	$	3,262	$	4,363
Junior subordinated debentures [2]	Junior subordinated debentures [2]	Level 2	$	1,090	$	1,093	Level 2	$	1,089	$	1,153	Junior subordinated debentures [2]	Level 2	$	1,090	$	1,128	Level 2	$	1,090	$	1,107

[1]As of ~~September 30,~~March 31, 2021 and December 31, 2020, carrying amount of mortgage loans is net of ACL of ~~$38.~~$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.


Table of Contents						Note 5 - Investments

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. INVESTMENTS


Net Realized Capital Gains (Losses)	Net Realized Capital Gains (Losses)									Net Realized Capital Gains (Losses)
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(Before tax)	(Before tax)	2020		2019		2020		2019		(Before tax)	2021		2020
Gross gains on sales	Gross gains on sales	$	27	$	77	$	201	$	190	Gross gains on sales	$	31	$	78
Gross losses on sales	Gross losses on sales	(12)		(4)		(42)		(44)		Gross losses on sales	(31)		(8)
Equity securities [1]	Equity securities [1]	42		19		(269)		181		Equity securities [1]	43		(386)
Net credit losses on fixed maturities, AFS [2]		(1)				(33)
Change in ACL on mortgage loans [3]		5				(19)

Net credit losses on fixed maturities, AFS										Net credit losses on fixed maturities, AFS	4		(12)
Change in ACL on mortgage loans										Change in ACL on mortgage loans	4		(2)
Intent-to-sell impairments	Intent-to-sell impairments	0		0		(5)		0		Intent-to-sell impairments	0		(5)
Net OTTI losses recognized in earnings				(1)				(3)
Valuation allowances on mortgage loans				0				1

Other, net [4]		(55)		(2)		51		7

Other, net [2]										Other, net [2]	29		104

Net realized capital gains (losses)	Net realized capital gains (losses)	$	6	$	89	$	(116)	$	332	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 ~~September 30, 2020,~~March 31, 2021, were ~~$36 and $6~~$40 for the three ~~and nine~~ months ended ~~September 30, 2020, respectively.~~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 ~~September 30, 2019,~~March 31, 2020, were ~~$17 and $100~~$(277) for the three ~~and nine~~ months ended ~~September 30, 2019, respectively.~~March 31, 2020.

[2] ~~Due to the adoption of accounting guidance for credit losses on January 1, 2020, realized capital losses previously reported as OTTI are now presented as credit losses which are net of any recoveries.~~ For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies. In addition, see Credit Losses on Fixed Maturities, AFS within the Investment Portfolio Risks and Risk Management section of the MD&A.

~~[3]~~Represents the change in ACL recorded during the period following the adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies. In addition, see ACL on Mortgage Loans within the Investment Portfolio Risks and Risk Management section of the MD&A.

~~[4]~~ ~~Primarily includes loss of $51 from the sale of the Continental Europe Operations for~~ the three ~~and nine~~ months ended ~~September 30, 2020. Also~~March 31, 2021, primarily includes gains (losses) from transactional foreign currency revaluation of ($4)7) and ~~$6 for the three and nine months ended September 30, 2020, respectively. Additionally, for the same periods, includes~~ gains (losses) on non-qualifying derivatives of ~~$(2) and $97, respectively.~~$35. For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, includes gains (losses) from transactional foreign currency revaluation of $10 and gains (losses) on non-qualifying derivatives of ~~$(5) and $3, respectively.~~$92.

Proceeds from the sales of fixed maturities, AFS totaled ~~$4.5~~$4.2 billion and ~~$11.7~~$3.1 billion for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~respectively, and $2.6 billion and $11.5 billion for the three and nine months ended~~ ~~September 30, 2019,~~ respectively.

Accrued Interest Receivable on Fixed Maturities, AFS and Mortgage Loans

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company reported accrued interest receivable related to fixed maturities, AFS of ~~$331~~$334 and ~~$334,~~$327, respectively, and accrued interest receivable related to mortgage loans of ~~$14~~$15 and $14, respectively. These amounts are recorded in other assets on the Condensed Consolidated Balance Sheets and are not included in

the ~~amortized cost or fair~~carrying value of the fixed maturities or mortgage loans. The Company does not include the current accrued interest receivable balance when estimating the ACL. The Company has a policy to write-off accrued interest receivable balances that are more than 90 days past due. Write-offs of accrued interest receivable are recorded as a credit loss component of net realized capital gains and losses.

Interest income on fixed maturities and mortgage loans is accrued unless it is past due over 90 days or management deems the interest uncollectible.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

Recognition and Presentation of Intent-to-Sell Impairments and ACL on Fixed Maturities, AFS

The Company will record an "intent-to-sell impairment" as a reduction to the amortized cost of fixed maturities, 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 fixed 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 fixed maturity before recognizing the impairment.

When fixed maturities are in an unrealized loss position and the Company does not record an intent-to-sell impairment, the Company will record an ACL for the portion of the unrealized loss

due to a credit loss. Any remaining unrealized loss on a fixed maturity after recording an ACL is the non-credit amount and is recorded in OCI. The ACL is the excess of the amortized cost over the 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 greater than the 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 gains and losses. The ACL is written off against the amortized cost in the period in which all or a portion of the related fixed maturity ~~investment~~ is determined to be uncollectible.

Developing 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 and/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, instrument-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 ("LTVs"), 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


Table of Contents						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.

ACL on Fixed Maturities, AFS by Type
Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
(Before tax) Corporate Municipal Total Corporate Municipal Total
Balance as of beginning of period $ 32 $ 0 $ 32 $ 0 $ 0 $ 0
Credit losses on fixed maturities where credit losses were not previously recorded 0 3 3 35 3 38
Reduction due to sales (1) 0 (1) (3) 0 (3)
Net increase (decrease) in allowance on fixed maturities that had an allowance in a previous period (2) 0 (2) (3) 0 (3)
Balance as of end of period $ 29 $ 3 $ 32 $ 29 $ 3 $ 32

Cumulative Credit Impairments on Fixed Maturities, AFS
Three Months Ended September 30, Nine Months Ended September 30,
(Before tax) 2019 2019
Balance as of beginning of period $ (18) $ (19)
Additions for credit impairments recognized on [1]:
Fixed maturities not previously impaired (1) (3)
Reductions for credit impairments previously recognized on:
Fixed maturities that matured or were sold during the period 0 3
Balance as of end of period $ (19) $ (19)

~~[1]These additions are included in the net OTTI losses recognized in earnings in the Condensed Consolidated Statements of Operations.~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~Fixed Maturities, AFS~~


ACL on Fixed Maturities, AFS by Type
	Three Months Ended March 31, 2021				Three Months Ended March 31, 2020
(Before tax)	Corporate		Total			Corporate		Total
Balance as of beginning of period	$	23	$	23		$	0	$	0
Credit losses on fixed maturities where an allowance was not previously recorded	2		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	Fixed Maturities, AFS, by Type																				Fixed Maturities, AFS, by Type
		September 30, 2020										December 31, 2019											March 31, 2021												December 31, 2020
		Amortized Cost		ACL [1]		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Non-Credit OTTI [2]				Amortized Cost		ACL		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		ACL		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
ABS	ABS	$	1,449	$	0	$	41	$	0	$	1,490		$	1,461	$	18	$	(3)	$	1,476	$	0		ABS	$	1,405	$	0	$	30	$	0	$	1,435		$	1,525	$	0	$	39	$	0	$	1,564
CLOs	CLOs	2,465		0		4		(20)		2,449			2,186		5		(8)		2,183		0			CLOs	3,040		0		10		(1)		3,049			2,780		0		7		(7)		2,780
CMBS	CMBS	4,200		0		275		(31)		4,444			4,210		141		(13)		4,338		(4)			CMBS	3,979		0		206		(18)		4,167			4,219		0		286		(21)		4,484
Corporate	Corporate	17,930		(29)		1,597		(82)		19,416			16,435		986		(25)		17,396		0			Corporate	18,385		(19)		1,216		(87)		19,495			18,401		(23)		1,926		(31)		20,273
Foreign govt./govt. agencies	Foreign govt./govt. agencies	901		0		83		0		984			1,057		66		0		1,123		0			Foreign govt./govt. agencies	825		0		47		(4)		868			842		0		77		0		919
Municipal	Municipal	8,491		(3)		829		(7)		9,310			8,763		737		(2)		9,498		0			Municipal	8,471		0		762		(19)		9,214			8,564		0		940		(1)		9,503
RMBS	RMBS	4,394		0		156		(2)		4,548			4,775		97		(3)		4,869		0			RMBS	3,924		0		110		(9)		4,025			3,966		0		144		(3)		4,107
U.S. Treasuries	U.S. Treasuries	1,243		0		160		0		1,403			1,191		75		(1)		1,265		0			U.S. Treasuries	1,288		0		69		(3)		1,354			1,264		0		141		0		1,405
Total fixed maturities, AFS	Total fixed maturities, AFS	$	41,073	$	(32)	$	3,145	$	(142)	$	44,044		$	40,078	$	2,125	$	(55)	$	42,148	$	(4)		Total fixed maturities, AFS	$	41,317	$	(19)	$	2,450	$	(141)	$	43,607		$	41,561	$	(23)	$	3,560	$	(63)	$	45,035

~~[1]~~ Represents the ACL recorded following the adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies.

~~[2]~~Represents the amount of cumulative non-credit impairment losses recognized in OCI on fixed maturities that also had credit impairments. These losses are included in gross unrealized losses as of December 31, 2019.


Fixed Maturities, AFS, by Contractual Maturity Year	Fixed Maturities, AFS, by Contractual Maturity Year									Fixed Maturities, AFS, by Contractual Maturity Year
		September 30, 2020				December 31, 2019					March 31, 2021				December 31, 2020
		Amortized Cost		Fair Value		Amortized Cost		Fair Value			Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	One year or less	$	1,593	$	1,614	$	1,082	$	1,090	One year or less	$	1,394	$	1,411	$	1,411	$	1,432
Over one year through five years	Over one year through five years	6,872		7,229		7,200		7,401		Over one year through five years	7,706		8,108		7,832		8,286
Over five years through ten years	Over five years through ten years	8,166		8,769		7,395		7,803		Over five years through ten years	7,755		8,158		7,622		8,354
Over ten years	Over ten years	11,934		13,501		11,769		12,988		Over ten years	12,114		13,254		12,206		14,028
Subtotal	Subtotal	28,565		31,113		27,446		29,282		Subtotal	28,969		30,931		29,071		32,100
Mortgage-backed and asset-backed securities	Mortgage-backed and asset-backed securities	12,508		12,931		12,632		12,866		Mortgage-backed and asset-backed securities	12,348		12,676		12,490		12,935
Total fixed maturities, AFS	Total fixed maturities, AFS	$	41,073	$	44,044	$	40,078	$	42,148	Total fixed maturities, AFS	$	41,317	$	43,607	$	41,561	$	45,035

Estimated maturities may differ from contractual maturities due to 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 0 investment exposure to any credit concentration risk of a single issuer greater than 10% of the Company's stockholders' equity as of ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019~~2020 other than U.S. government securities and certain U.S. government agencies.

3024


Table of Contents						Note 5 - Investments

~~Table of Contents~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

Unrealized Losses on Fixed Maturities, AFS


Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of September 30, 2020
Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of March 31, 2021														Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of March 31, 2021
		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
ABS	ABS	$	44	$	0	$	0	$	0	$	44	$	0	ABS	$	99	$	0	$	0	$	0	$	99	$	0
CLOs	CLOs	1,193		(10)		741		(10)		1,934		(20)		CLOs	278		0		458		(1)		736		(1)
CMBS	CMBS	533		(27)		16		(4)		549		(31)		CMBS	360		(8)		127		(10)		487		(18)
Corporate	Corporate	1,609		(56)		202		(26)		1,811		(82)		Corporate	2,451		(72)		300		(15)		2,751		(87)
Foreign govt./govt. agencies	Foreign govt./govt. agencies	79		0		0		0		79		0		Foreign govt./govt. agencies	173		(4)		0		0		173		(4)
Municipal	Municipal	478		(7)		0		0		478		(7)		Municipal	796		(19)		0		0		796		(19)
RMBS	RMBS	514		(2)		29		0		543		(2)		RMBS	953		(9)		13		0		966		(9)
U.S. Treasuries	U.S. Treasuries	28		0		0		0		28		0		U.S. Treasuries	560		(3)		0		0		560		(3)
Total fixed maturities, AFS in an unrealized loss position	Total fixed maturities, AFS in an unrealized loss position	$	4,478	$	(102)	$	988	$	(40)	$	5,466	$	(142)	Total fixed maturities, AFS in an unrealized loss position	$	5,670	$	(115)	$	898	$	(26)	$	6,568	$	(141)


Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of December 31, 2019
Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of December 31, 2020														Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of December 31, 2020
		Less Than 12 Months				12 Months or More				Total					Less Than 12 Months				12 Months or More				Total
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
ABS	ABS	$	398	$	(3)	$	9	$	0	$	407	$	(3)	ABS	$	44	$	0	$	0	$	0	$	44	$	0
CLOs	CLOs	679		(2)		923		(6)		1,602		(8)		CLOs	758		(2)		715		(5)		1,473		(7)
CMBS	CMBS	538		(7)		20		(6)		558		(13)		CMBS	410		(17)		19		(4)		429		(21)
Corporate	Corporate	789		(9)		328		(16)		1,117		(25)		Corporate	466		(13)		212		(18)		678		(31)
Foreign govt./govt. agencies	Foreign govt./govt. agencies	101		0		29		0		130		0		Foreign govt./govt. agencies	24		0		0		0		24		0
Municipal	Municipal	222		(2)		0		0		222		(2)		Municipal	34		(1)		0		0		34		(1)
RMBS	RMBS	614		(3)		68		0		682		(3)		RMBS	461		(3)		21		0		482		(3)
U.S. Treasuries	U.S. Treasuries	88		0		34		(1)		122		(1)		U.S. Treasuries	39		0		0		0		39		0
Total fixed maturities, AFS in an unrealized loss position	Total fixed maturities, AFS in an unrealized loss position	$	3,429	$	(26)	$	1,411	$	(29)	$	4,840	$	(55)	Total fixed maturities, AFS in an unrealized loss position	$	2,236	$	(36)	$	967	$	(27)	$	3,203	$	(63)

As of ~~September 30, 2020,~~March 31, 2021, fixed maturities, AFS in an unrealized loss position consisted of ~~898~~978 instruments, primarily in the corporate sectors, most notably ~~energy issuers,~~technology and communications and financial services, as well as ~~issuers in the financial services sector~~municipal bonds and ~~issuers within the travel, leisure, and gaming industry, and~~ CMBS ~~and CLO securities,~~ which were depressed largely due to ~~widening of~~higher interest rates and/or wider credit spreads since the purchase date. As of ~~September 30, 2020, 96%~~March 31, 2021, 97% of these fixed maturities were depressed less than 20% of cost or amortized cost. The increase in unrealized losses during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was primarily attributable to ~~wider credit spreads,~~higher interest rates, partially offset by ~~lower interest rates.~~tighter credit spreads.

Most of the fixed maturities depressed for twelve months or more relate to ~~corporates~~the corporate and ~~CLOs. Corporate fixed maturities and CLO securities~~CMBS sectors which were primarily depressed because current market spreads are wider than at the respective purchase dates. ~~Certain other~~Additionally, certain corporate fixed maturities were also depressed because of their variable-rate coupons and long-dated ~~maturities, and current credit spreads are wider than at their purchase dates.~~maturities. The Company neither has an intention to sell nor does it expect to be required to sell the fixed maturities outlined in the preceding discussion. The decision to record credit ~~impairments~~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.


Table of Contents						Note 5 - Investments

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Mortgage Loans

ACL on Mortgage Loans

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 records an ACL on the pool of mortgage loans based on lifetime expected credit losses. The 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 data provided by an internationally recognized economics firm that generates forecasts of varying economic factors such as GDP 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

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

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 used 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 ("DSCRs") and ~~LTVs~~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.

In response to significant economic stress experienced as a result of the COVID-19 pandemic, during the first nine months of 2020, the Company increased the weight of both a moderate and severe recession in our estimate of the ACL. As of September 30, 2020, the economic scenarios improved modestly as compared to June 30, 2020, reflecting improvements in GDP growth, unemployment and other economic factors compared with the prior economic scenarios.

The ultimate impact to the Company’s financial statements could vary significantly from our estimates depending on, among other things, the 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 mitigate the economic impact of COVID-19 are effective. The impact on our commercial mortgage loan portfolio will also be impacted by borrower behavior in response to the economic stress. Borrowers with lower LTVs have 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. As property values decline, borrowers have less incentive to continue to make payments.

When a borrower is experiencing financial difficulty, including when foreclosure is probable, the Company measures an ACL on individual mortgage loans. The ACL is established for any shortfall between the amortized cost of the loan and 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. As of

~~September 30, 2020,~~ March 31, 2021, the Company did 0t have any mortgage loans for which an ACL was established on an individual basis.

There were 0 mortgage loans held-for-sale as of ~~September 30, 2020~~March 31, 2021 or December 31, ~~2019.~~2020. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, the Company ~~did 0t~~had 0 mortgage loans that have ~~any modifications that were accounted for as troubled debt restructurings.~~had extensions or restructurings other than what is allowable under the original terms of the contract.

ACL on Mortgage Loans
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
ACL as of beginning of period $ 43 $ 0 $ 0 $ 1
Cumulative effect of accounting changes [1] 19
Adjusted beginning ACL 43 0 19 1
Current period provision (release) (5) 0 19 (1)
ACL as of September 30, $ 38 $ 0 $ 38 $ 0


ACL on Mortgage Loans
	Three Months Ended March 31,
	2021		2020
ACL as of beginning of period	$	38	$	0
Cumulative effect of accounting changes [1]			19
Adjusted beginning ACL	38		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, ~~refer to~~see the Financial Instruments - Credit Losses section within Note 1 - Basis of Presentation and Significant Accounting ~~Policies.~~Policies, included in The Hartford's 2020 Form 10-K Annual Report.

During 2020, the Company increased the estimate 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 ~~September 30, 2020,~~March 31, 2021, is the result of improved economic scenarios, including improved GDP growth and unemployment, and higher property valuations ~~in certain industry sectors that have been less impacted by the COVID-19 pandemic and modestly improved economic forecasts~~ as compared to the prior quarter. ~~The increase~~We continue to monitor the impact on our mortgage loan portfolio from borrower behavior in response to the economic stress. Borrowers with lower LTVs have an incentive to continue to make payments of principal and/or interest in order to preserve the equity they have in the allowance for the nine months ended September 30, 2020, is the result of the COVID-19 pandemic and its impacts on the economic forecasts, as discussed above, as well as lower estimated property values and operating income as compared to the prior year.underlying commercial real estate properties.

The weighted-average LTV ratio of the Company’s mortgage loan portfolio was 55% as of ~~September 30, 2020,~~March 31, 2021, while the weighted-average LTV ratio at origination of these loans was ~~60%~~61%. LTV ratios compare the loan amount to the value of the underlying property collateralizing the loan with property values based on appraisals updated no less than 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 and are updated no less than annually through reviews of underlying properties.


Mortgage Loans LTV & DSCR by Origination Year as of September 30, 2020
Mortgage Loans LTV & DSCR by Origination Year as of March 31, 2021																							Mortgage Loans LTV & DSCR by Origination Year as of March 31, 2021
		2020			2019			2018			2017			2016			2015 & Prior			Total				2021			2020			2019			2018			2017			2016 & Prior			Total
Loan-to-value	Loan-to-value	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost [1]		Avg. DSCR	Loan-to-value	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost [1]		Avg. DSCR

65% - 80%	65% - 80%	$	8	2.59x	$	248	1.81x	$	248	1.96x	$	80	1.73x	$	61	1.99x	$	165	1.73x	$	810	1.85x	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%	Less than 65%	539		2.49x	672		2.70x	449		1.99x	426		1.89x	226		3.01x	1,377		3.07x	3,689		2.65x	Less than 65%	149		2.62x	637		2.71x	695		2.74x	410		2.16x	423		1.88x	1,581		2.53x	3,895		2.49x
Total mortgage loans	Total mortgage loans	$	547	2.49x	$	920	2.46x	$	697	1.98x	$	506	1.86x	$	287	2.79x	$	1,542	2.93x	$	4,499	2.50x	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 excludes ACL of $34.


Table of Contents						Note 5 - Investments

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Mortgage Loans LTV & DSCR by Origination Year as of December 31, 2020
	2020			2019			2018			2017			2016			2015 & Prior			Total
Loan-to-value	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized Cost		Avg. DSCR	Amortized 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		2.56x	676		2.85x	410		2.25x	446		1.89x	235		2.99x	1,411		3.01x	3,837		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.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~Mortgage Loans LTV & DSCR~~

~~December 31, 2019~~

~~Loan-to-value~~

~~Amortized Cost~~

~~Avg. DSCR~~

~~65% - 80%~~

~~376~~

~~1.53x~~

~~Less than 65%~~

~~3,839~~

~~2.56x~~

~~Total mortgage loans~~

~~4,215~~

~~2.46x~~


Mortgage Loans by Region	Mortgage Loans by Region									Mortgage Loans by Region
		September 30, 2020				December 31, 2019					March 31, 2021				December 31, 2020
		Amortized Cost [1]		Percent of Total		Amortized Cost		Percent of Total			Amortized Cost		Percent of Total		Amortized Cost		Percent of Total
East North Central	East North Central	$	284	6.3	%	$	270	6.4	%	East North Central	$	279	6.0	%	$	290	6.4	%

Middle Atlantic	Middle Atlantic	292		6.5	%	319		7.5	%	Middle Atlantic	290		6.3	%	291		6.4	%
Mountain	Mountain	201		4.5	%	109		2.6	%	Mountain	295		6.4	%	254		5.6	%
New England	New England	397		8.8	%	344		8.2	%	New England	396		8.6	%	397		8.8	%
Pacific	Pacific	989		22.0	%	906		21.5	%	Pacific	1,044		22.6	%	1,001		22.1	%
South Atlantic	South Atlantic	989		22.0	%	944		22.4	%	South Atlantic	1,062		23.0	%	1,038		22.9	%
West North Central	West North Central	44		1.0	%	46		1.1	%	West North Central	44		0.9	%	44		1.0	%
West South Central	West South Central	473		10.5	%	439		10.4	%	West South Central	431		9.3	%	433		9.5	%
Other [2]		830		18.4	%	838		19.9	%
Other [1]										Other [1]	781		16.9	%	783		17.3	%
Total mortgage loans	Total mortgage loans	$	4,499	100.0	%	$	4,215	100.0	%	Total mortgage loans	4,622		100.0	%	4,531		100.0	%
ACL										ACL	(34)				(38)
Total mortgage loans, net of ACL										Total mortgage loans, net of ACL	$	4,588			$	4,493

[1] ~~Amortized cost of mortgage loans excludes ACL of $38.~~

~~[2]~~Primarily represents loans collateralized by multiple properties in various regions.

Mortgage Loans by Property Type
September 30, 2020 December 31, 2019
Amortized Cost [1] Percent of Total Amortized Cost Percent of Total
Commercial
Industrial $ 1,284 28.5 % $ 1,167 27.7 %
Multifamily 1,493 33.2 % 1,313 31.2 %
Office 755 16.8 % 723 17.2 %
Retail 793 17.6 % 735 17.4 %
Single Family 134 3.0 % 137 3.2 %
Other 40 0.9 % 140 3.3 %
Total mortgage loans $ 4,499 100.0 % $ 4,215 100.0 %

~~[1] Amortized cost of mortgage loans excludes ACL of $38.~~


Mortgage Loans by Property Type
	March 31, 2021				December 31, 2020
	Amortized Cost		Percent of Total		Amortized Cost		Percent of Total
Commercial

Industrial	$	1,472	31.8	%	$	1,339	29.5	%

Multifamily	1,499		32.4	%	1,498		33.1	%
Office	712		15.4	%	774		17.1	%
Retail	807		17.5	%	788		17.4	%
Single Family	92		2.0	%	92		2.0	%
Other	40		0.9	%	40		0.9	%
Total mortgage loans	4,622		100.0	%	4,531		100.0	%
ACL	(34)				(38)
Total mortgage loans, net of ACL	$	4,588			$	4,493

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 ~~September 30, 2020~~

March 31, 2021 and December 31, ~~2019,~~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, 2020,~~March 31, 2021, under this program, the Company serviced mortgage loans with a total outstanding principal of ~~$6.7~~$7.1 billion,

of which ~~$3.6~~$3.8 billion was serviced on behalf of third parties and ~~$3.1~~$3.3 billion was retained and reported in total investments on the Company's Condensed Consolidated Balance Sheets. As of December 31, ~~2019,~~2020, the Company serviced mortgage loans with a total outstanding principal balance of ~~$6.4~~$6.9 billion, of which ~~$3.5~~$3.7 billion was serviced on behalf of third parties and ~~$2.9~~$3.2 billion was retained and reported in total investments on the Company's Condensed Consolidated Balance Sheets. Servicing rights are carried at the lower of cost or fair value and were $0 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, because servicing fees were market-level fees at origination and remain adequate to compensate the Company for servicing the loans.

~~Purchased Financial Assets with Credit Deterioration~~

Purchased financial assets with credit deterioration ("PCD") are purchased financial assets with a “more-than-insignificant” amount of credit deterioration since origination. PCD assets are assessed only at initial acquisition date and for any investments identified, the Company records an allowance at acquisition with a corresponding increase to the amortized cost basis. As of September 30, 2020, the Company held 0 PCD fixed maturities, AFS or mortgage 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.

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, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company did 0t hold any securities for which it is the primary beneficiary.

~~Non-consolidated~~


Table of Contents						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, 2020~~March 31, 2021 and December 31, ~~2019~~2020 was limited to the total carrying value of ~~$1.2~~$1.4 billion and ~~$1.1~~$1.3 billion, respectively, which are included in limited

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

partnerships and other alternative investments in the Company's Condensed Consolidated Balance Sheets. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company has outstanding commitments totaling ~~$730~~$801 and ~~$851,~~$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 Consolidated Financial Statements included in the Company’s ~~2019~~2020 Form 10-K Annual Report.

In addition, the Company makes passive investments in structured securities issued by VIEs for which the Company is not the manager. These investments are included in ABS, CLOs, CMBS, and RMBS and are reported in fixed maturities, ~~AFS, 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.

Securities Lending, Reverse Repurchase Agreements, Other Collateral Transactions and Restricted Investments

~~The Company enters into securities financing transactions as a way to earn additional income or manage liquidity, primarily through securities lending and repurchase agreements.~~

Securities Lending and Repurchase Agreements
September 30, 2020 December 31, 2019
Fair Value Fair Value
Securities Lending Transactions:
Gross amount of securities on loan $ 74 $ 606
Gross amount of associated liability for collateral received [1] $ 76 $ 621
Repurchase agreements:
Gross amount of recognized receivables for reverse repurchase agreements $ 14 $ 15

~~[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 $0 and $34 which are excluded from the Company's Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, respectively.

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 sell~~did 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. The maturity of these transactions is generally ninety days or less. Repurchase agreements include master netting provisions that provide both parties 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. Although~~securities 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 under specified conditions 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

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

be transferred to the Company under 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. ~~The receivable for reverse repurchase agreements is included~~As of March 31, 2021 and December 31, 2020, the Company reported $16 and $30, respectively, within short-term investments inon the ~~Company's~~ Condensed Consolidated Balance ~~Sheets.~~Sheets representing a receivable for the amount of cash transferred to purchase the securities.

Other Collateral Transactions

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company pledged collateral of ~~$34~~$9 and ~~$37,~~$34, respectively, of U.S. government ~~securities and municipal~~ securities or cash primarily related to certain bank loan participations committed to through a limited partnership agreement. ~~These amounts~~Amounts also include collateral related to letters of credit.

For disclosure of collateral in support of derivative transactions, refer to the Derivative Collateral Arrangements section in Note 76 - Derivatives 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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the fair value of securities on deposit was ~~$2.6~~$2.5 billion and ~~$2.3~~$2.6 billion, respectively.

In addition, as of ~~September 30, 2020,~~March 31, 2021, the Company held fixed maturities and short-term investments of ~~$639~~$673 and ~~$10,~~$4, respectively, in trust for the benefit of syndicate policyholders, held fixed maturities of ~~$63~~$171 in a Lloyd's of London ("Lloyd's") trust account to provide a portion of the required capital, and maintained other investments of ~~$53~~$61 primarily consisting of overseas deposits in various countries with Lloyd's to support underwriting activities in those countries. As of December 31, ~~2019,~~2020, the Company held fixed maturities and short-term investments of ~~$447~~$661 and ~~$189,~~$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 ~~$38~~$54 primarily consisting of overseas deposits in various countries with ~~Lloyd's.~~Lloyd's to support


Table of Contents						Note 5 - Investments

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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").

7.6. 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 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.

Strategies that Qualify for Hedge Accounting

Some of the Company's derivatives satisfy 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 ~~2019~~2020 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 debt instruments issued. ~~The hedge strategies by hedge accounting designation include:~~

~~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 variable-rate fixed maturity securities to fixed rates. The Company has also entered into interest rate swaps to convert the variable interest payments on the 3 month LIBOR + 2.125% junior subordinated debt to fixed interest payments. For further information, see the Junior Subordinated Debentures section within Note 13 - Debt of Notes

~~to the Consolidated Financial Statements, included in The Hartford's 2019 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 previously 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 group benefits liabilities.

~~Non-qualifying Strategies~~

Derivative relationships that do not qualify for hedge accounting (“non-qualifying strategies”) primarily include hedging and replication strategies that utilize credit default swaps. In addition, hedges of interest rate, foreign currency and equity risk of certain fixed maturities and equities do not qualify for hedge accounting. The non-qualifying strategies include:

~~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 should the referenced security issuers experience a credit event, as defined in the contract. The 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.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~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 September 30, 2020 and December 31, 2019, the notional amount of interest rate swaps in offsetting relationships was $7.6 billion.

~~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 may at times enter into foreign currency forwards to hedge non-U.S. dollar denominated cash.

~~Equity Index Options~~

From time to time, the Company enters into equity index options to hedge the impact of a decline in the equity markets on the investment portfolio. The Company also enters into covered call options on equity securities to generate additional return.

~~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. 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.

Derivative Balance Sheet Presentation
Net Derivatives
Asset
Derivatives
Liability Derivatives
Notional Amount Fair Value Fair Value Fair Value
Hedge Designation/ Derivative Type Sep. 30, 2020 Dec. 31, 2019 Sep. 30, 2020 Dec. 31, 2019 Sep. 30, 2020 Dec. 31, 2019 Sep. 30, 2020 Dec. 31, 2019
Cash flow hedges
Interest rate swaps $ 2,340 $ 2,040 $ 1 $ 0 $ 1 $ 1 $ 0 $ (1)
Foreign currency swaps 269 270 6 (1) 9 3 (3) (4)
Total cash flow hedges 2,609 2,310 7 (1) 10 4 (3) (5)
Non-qualifying strategies
Interest rate contracts
Interest rate swaps and futures 8,334 9,338 (79) (59) 5 3 (84) (62)
Foreign exchange contracts
Foreign currency swaps and forwards 251 464 0 (1) 0 0 0 (1)
Credit contracts
Credit derivatives that purchase credit protection 5 124 0 (3) 0 0 0 (3)
Credit derivatives that assume credit risk [1] 600 500 12 13 12 13 0 0
Credit derivatives in offsetting positions 222 29 0 0 5 5 (5) (5)
Equity contracts
Equity index swaps and options 4 941 0 (15) 0 15 0 (30)
Total non-qualifying strategies 9,416 11,396 (67) (65) 22 36 (89) (101)
Total cash flow hedges and non-qualifying strategies $ 12,025 $ 13,706 $ (60) $ (66) $ 32 $ 40 $ (92) $ (106)
Balance Sheet Location
Fixed maturities, available-for-sale $ 251 $ 244 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other investments 1,381 1,277 12 12 12 13 0 (1)
Other liabilities 10,393 12,185 (72) (78) 20 27 (92) (105)
Total derivatives $ 12,025 $ 13,706 $ (60) $ (66) $ 32 $ 40 $ (92) $ (106)

~~[1]The derivative instruments related to this strategy are held for other investment purposes.~~

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~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 offset upon an event of default, although are disallowed for offsetting under U.S. GAAP.

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, 2020
Other investments $ 32 $ 9 $ 12 $ 11 $ 1 $ 22
Other liabilities $ (92) $ (4) $ (72) $ (16) $ (81) $ (7)
As of December 31, 2019
Other investments $ 40 $ 37 $ 12 $ (9) $ 1 $ 2
Other liabilities $ (106) $ (23) $ (78) $ (5) $ (73) $ (10)

~~[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

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 variable-rate fixed maturity securities to fixed rates. The 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 14 - Debt of Notes to the Consolidated Financial Statements, included in The Hartford's 2020 Form 10-K Annual Report.

Non-Qualifying Strategies

Derivative relationships that do not qualify for hedge accounting (“non-qualifying strategies”) primarily include hedges of interest rate, foreign currency and equity risk of certain fixed maturities and equities. In addition, hedging and replication strategies that utilize credit default swaps do not qualify for hedge accounting. The non-qualifying strategies include:

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. The 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

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.

Equity Index 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 also enters into covered call options on equity securities to generate additional return.

Derivative Balance Sheet Classification


Table of Contents						Note 6 - Derivatives

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Derivative Balance Sheet Presentation
	Net Derivatives								Asset Derivatives				Liability Derivatives
	Notional Amount				Fair Value				Fair Value				Fair Value
Hedge Designation/ Derivative Type	Mar. 31, 2021		Dec. 31, 2020		Mar. 31, 2021		Dec. 31, 2020		Mar. 31, 2021		Dec. 31, 2020		Mar. 31, 2021		Dec. 31, 2020
Cash flow hedges
Interest rate swaps	$	2,340	$	2,340	$	0	$	0	$	0	$	0	$	0	$	0
Foreign currency swaps	297		286		(10)		(13)		3		3		(13)		(16)
Total cash flow hedges	2,637		2,626		(10)		(13)		3		3		(13)		(16)
Non-qualifying strategies
Interest rate contracts
Interest rate swaps and futures	7,926		8,335		(44)		(69)		4		4		(48)		(73)
Foreign exchange contracts
Foreign currency swaps and forwards	269		269		0		0		0		0		0		0
Credit contracts
Credit derivatives that purchase credit protection	6		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 positions	216		218		0		0		5		5		(5)		(5)


Total non-qualifying strategies	9,092		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 investments	9,657		9,585		22		23		24		25		(2)		(2)
Other liabilities	1,803		2,275		(55)		(84)		9		8		(64)		(92)
Total derivatives	$	11,729	$	12,129	$	(33)	$	(61)	$	33	$	33	$	(66)	$	(94)

[1]The derivative instruments related to this strategy are held for other investment purposes.

Offsetting of Derivative Assets/Liabilities


Table of Contents						Note 6 - Derivatives

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 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 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 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. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.


Gain (Loss) Recognized in OCI	Gain (Loss) Recognized in OCI							Gain (Loss) Recognized in OCI
		Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended March 31,
			2020		2019			2020		2019				2021		2020
Interest rate swaps	Interest rate swaps		$	0	$	0		$	36	$	20	Interest rate swaps		$	10	$	32
Foreign currency swaps	Foreign currency swaps		(12)		10			12		14		Foreign currency swaps		4		28
Total	Total		$	(12)	$	10		$	48	$	34	Total		$	14	$	60

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

																																							Gain (Loss) Reclassified from AOCI into Income
		Three Months Ended September 30,												Nine Months Ended September 30,													Three Months Ended March 31,
		2020						2019						2020						2019							2021						2020
		Net Realized Capital Gain/(Loss)		Net Investment Income		Interest Expense		Net Realized Capital Gain/(Loss)		Net Investment Income		Interest Expense		Net Realized Capital Gain/(Loss)		Net Investment Income		Interest Expense		Net Realized Capital Gain/(Loss)		Net Investment Income		Interest Expense			Net Realized Capital Gain/(Loss)		Net Investment Income		Interest Expense		Net Realized Capital Gain/(Loss)		Net Investment Income		Interest Expense
Interest rate swaps	Interest rate swaps	$	0	$	9	$	(2)	$	0	$	1	$	0	$	0	$	19	$	(4)	$	2	$	1	$	1	Interest rate swaps	$	0	$	10	$	(2)	$	0	$	3	$	0
Foreign currency swaps	Foreign currency swaps	1		1		0		0		1		0		1		3		0		0		2		0		Foreign currency swaps	0		1		0		0		1		0
Total	Total	$	1	$	10	$	(2)	$	0	$	2	$	0	$	1	$	22	$	(4)	$	2	$	3	$	1	Total	$	0	$	11	$	(2)	$	0	$	4	$	0

Total amounts presented on the Condensed Consolidated Statement of Operations	Total amounts presented on the Condensed Consolidated Statement of Operations	$	6	$	492	$	58	$	89	$	490	$	67	$	(116)	$	1,290	$	179	$	332	$	1,448	$	194	Total amounts presented on the Condensed Consolidated Statement of Operations	$	80	$	509	$	57	$	(231)	$	459	$	64

As of ~~September 30, 2020,~~March 31, 2021, the ~~Company had $35 of~~ before tax deferred net gains on derivative instruments recorded in AOCI that are expected to be reclassified to earnings during the next twelve ~~months.~~months are $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 which~~months. 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.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company had 0 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.

~~Non-qualifying~~


Table of Contents						Note 6 - Derivatives

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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)
Non-Qualifying Strategies Recognized within Net Realized Capital Gains (Losses)										Non-Qualifying Strategies Recognized within Net Realized Capital Gains (Losses)
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020

Foreign exchange contracts	Foreign exchange contracts									Foreign exchange contracts
Foreign currency swaps and forwards	Foreign currency swaps and forwards	$	0	$	2	$	3	$	2	Foreign currency swaps and forwards	$	0	$	3

Interest rate contracts	Interest rate contracts									Interest rate contracts
Interest rate swaps, swaptions, and futures	Interest rate swaps, swaptions, and futures	0		(5)		21		(20)		Interest rate swaps, swaptions, and futures	32		20
Credit contracts	Credit contracts									Credit contracts
Credit derivatives that purchase credit protection	Credit derivatives that purchase credit protection	(1)		(1)		3		(1)		Credit derivatives that purchase credit protection	0		6
Credit derivatives that assume credit risk	Credit derivatives that assume credit risk	(1)		0		(5)		27		Credit derivatives that assume credit risk	3		(12)
Equity contracts	Equity contracts									Equity contracts
Equity index swaps and options	Equity index swaps and options	0		(1)		75		(5)		Equity index swaps and options	0		75

Total [1]	Total [1]	$	(2)	$	(5)	$	97	$	3	Total [1]	$	35	$	92

[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 of Notes to Condensed Consolidated Financial Statements.~~

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 ~~and CMBS~~ issuers are established within sector concentration limits and may be divided into tranches that possess different credit ratings.

3832


Table of Contents						Note 6 - Derivatives

~~Table of Contents~~T

~~THE~~HE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

																									Credit Risk Assumed Derivatives by Type
							Underlying Referenced Credit Obligation(s) [1]												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]			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, 2020
As of March 31, 2021													As of March 31, 2021
Single name credit default swaps													Single name credit default swaps
Investment grade risk exposure													Investment grade risk exposure	$	100	$	2	5 years	Corporate Credit	A	$	0	$	0
Basket credit default swaps [4]													Basket credit default swaps [4]
Investment grade risk exposure													Investment grade risk exposure	500		12		5 years	Corporate Credit	BBB+	0		0
Below investment grade risk exposure													Below investment grade risk exposure	75		7		5 years	Corporate Credit	B+	0		0
Investment grade risk exposure													Investment grade risk exposure	100		1		7 years	CMBS Credit	AAA	100		(1)
Below investment grade risk exposure													Below investment grade risk exposure	8		(4)		Less than 1 year	CMBS Credit	CCC+	8		4
Total [5]													Total [5]	$	783	$	18				$	108	$	3
As of December 31, 2020													As of December 31, 2020
Single name credit default swaps	Single name credit default swaps												Single name credit default swaps
Investment grade risk exposure	Investment grade risk exposure	$	100	$	2	5 years	Corporate Credit	A-	$	0	$	0	Investment grade risk exposure	$	175	$	9	5 years	Corporate Credit	A-	$	0	$	0
Basket credit default swaps [4]	Basket credit default swaps [4]												Basket credit default swaps [4]
Investment grade risk exposure	Investment grade risk exposure	500		10		5 years	Corporate Credit	BBB+	0		0		Investment grade risk exposure	500		12		5 years	Corporate Credit	BBB+	0		0

Investment grade risk exposure	Investment grade risk exposure	100		0		8 years	CMBS Credit	AAA	100		0		Investment grade risk exposure	100		1		8 years	CMBS Credit	AAA	100		(1)
Below investment grade risk exposure	Below investment grade risk exposure	11		(4)		Less than 1 year	CMBS Credit	CCC	11		4		Below investment grade risk exposure	9		(4)		Less than 1 year	CMBS Credit	CCC+	9		4
Total [5]	Total [5]	$	711	$	8				$	111	$	4	Total [5]	$	784	$	18				$	109	$	3
As of December 31, 2019
Single name credit default swaps
Investment grade risk exposure		$	100	$	3	5 years	Corporate Credit	A-	$	0	$	0
Basket credit default swaps [4]
Investment grade risk exposure		400		10		5 years	Corporate Credit	BBB+	0		0

Investment grade risk exposure		1		0		Less than 1 year	CMBS Credit	A	1		0
Below investment grade risk exposure		14		(5)		Less than 1 year	CMBS Credit	CCC-	14		5
Total [5]		$	515	$	8				$	15	$	5

[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.

[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.

[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. ~~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,~~March 31, 2021 and December 31, 2020, the Company has 0t pledged cash ~~collateral. As of December 31, 2019, the Company pledged cash~~ collateral ~~with a fair value of less than $1~~ associated with derivative instruments. ~~The~~In general, collateral receivable ~~has been~~is recorded in other assets or other liabilities on the Company's Condensed Consolidated Balance Sheets as determined by the Company's election to offset on the balance sheet. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company ~~also~~ pledged securities collateral associated with derivative instruments with a fair value of ~~$88~~$61 and ~~$78,~~$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.

In addition, as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company has pledged initial margin of securities related to

OTC-cleared and exchange traded derivatives with a fair value of ~~$80~~ $60

and ~~$88,~~$83, respectively, which are included within fixed maturities on the Company's Condensed Consolidated Balance Sheets.

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company accepted cash collateral associated with derivative instruments of ~~$23~~$22 and ~~$16,~~$24, respectively, which was invested and recorded in the Company's Condensed Consolidated Balance Sheets in fixed maturities and short-term investments with corresponding amounts recorded in other 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, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, with a fair value of $1 as of both dates, which the Company has the right to sell or repledge. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had 0 repledged securities and 0 securities held as collateral 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.

3933

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~8. PREMIUMS RECEIVABLE AND AGENTS' BALANCES~~


Table of Contents			Note 7 - Premiums Receivable and Agents' Balances
	~~As of September 30, 2020~~




~~Premiums receivable, excluding receivables for losses within a deductible and retrospectively-rated policy premiums~~	$	~~4,027~~
~~Receivables for loss within a deductible and retrospectively-rated policy premiums, by credit quality:~~
~~AAA~~	0
AA	~~139~~
A	52
~~BBB~~	~~226~~
BB	~~103~~
~~Below BB~~	77
~~Total receivables for losses within a deductible and retrospectively-rated policy premiums~~	~~597~~

~~Total Premiums Receivable and Agents' Balances, Gross~~	~~4,624~~
~~ACL~~	~~(174)~~
~~Total Premiums Receivable and Agents' Balances, Net of ACL~~	$	~~4,450~~

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. PREMIUMS RECEIVABLE AND AGENTS' BALANCES


Premiums Receivable and Agents' Balances

	As of March 31, 2021		As 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:
AAA	0		0
AA	140		142
A	65		62
BBB	186		185
BB	115		115
Below BB	67		65
Total receivables for losses within a deductible and retrospectively-rated policy premiums	573		569

Total Premiums Receivable and Agents' Balances, Gross	4,631		4,420
ACL	(144)		(152)
Total Premiums Receivable and Agents' Balances, Net of ACL	$	4,487	$	4,268

ACL on Premiums Receivable and Agents' 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. The Company had an immaterial amount of receivables with a due date of more than one year that are past-due. Balances are considered past due when amounts that have been billed are not collected within contractually stipulated time periods.

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. In response to significant economic stress experienced as a result of the COVID-19 pandemic, during the nine months ended September 30, 2020, the Company increased the expected loss factors used to estimate the ACL based on collections experience during past moderate and severe recessions as well as experience during periods when we provided policyholders additional time to make premiums payments. During the three months ended September 30, 2020, 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 improved collection experience relative to prior assumptions in certain lines of business.

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 65 - Investments. In response to significant economic stress experienced as a result of the COVID-19 pandemic during the first nine months of 2020, the Company increased the weight of both a moderate and severe recession scenario in our estimate of the ACL for loss within a deductible and retrospectively-rated policy premiums.

During the three months ended ~~September 30, 2020,~~March 31, 2021, the ~~economic scenarios improved modestly~~ACL on premiums receivable decreased as ~~compared to June 30, 2020,~~the provision required on premiums written in the quarter was more than offset by write-offs and a reduction in the provision reflecting ~~improvements in GDP growth, unemployment and other economic factors compared with the prior economic scenarios.~~

The ultimate impact to the Company’s financial statements from the COVID-19 pandemic could vary significantly from our estimates depending on the 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 mitigate the economic impactlessening expected impacts of COVID-19 ~~are effective.~~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.

4034


Table of Contents						Note 7 - Premiums Receivable and Agents' Balances

~~Table of Contents~~T

~~THE~~HE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~


Rollforward of ACL on Premiums Receivable and Agents' Balances	Rollforward of ACL on Premiums Receivable and Agents' Balances													Rollforward of ACL on Premiums Receivable and Agents' Balances
		Three Months Ended September 30, 2020						Nine Months Ended September 30, 2020							Three Months Ended March 31, 2021						Three Months Ended March 31, 2020
		Premiums Receivable and Agents' Balances, Excluding Receivables for Loss within a Deductible and Retrospectively-Rated Policy Premiums		Receivables for Loss within a Deductible and Retrospectively-Rated Policy Premiums		Total		Premiums Receivable and Agents' Balances, Excluding Receivables for Loss within a Deductible and Retrospectively-Rated Policy Premiums		Receivables for Loss within a Deductible and Retrospectively-Rated Policy Premiums		Total			Premiums Receivable and Agents' Balances, Excluding Receivables for Loss within a Deductible and Retrospectively-Rated Policy Premiums		Receivables for Loss within a Deductible and Retrospectively-Rated Policy Premiums		Total		Premiums Receivable and Agents' Balances, Excluding Receivables for Loss within a Deductible and Retrospectively-Rated Policy Premiums		Receivables for Loss within a Deductible and Retrospectively-Rated Policy Premiums		Total
Beginning ACL	Beginning ACL	$	139	$	44	$	183	$	85	$	60	$	145	Beginning ACL	$	117	$	35	$	152	$	85	$	60	$	145
Cumulative effect of accounting change [1]	Cumulative effect of accounting change [1]	0		0		0		(2)		(21)		(23)		Cumulative effect of accounting change [1]	0						(2)		(21)		(23)
Adjusted beginning ACL	Adjusted beginning ACL	139		44		183		83		39		122		Adjusted beginning ACL	117		35		152		83		39		122
Current period provision (release)	Current period provision (release)	2		0		2		78		5		83		Current period provision (release)	4		1		5		28		2		30

Current period gross write-offs	Current period gross write-offs	(12)		0		(12)		(35)		0		(35)		Current period gross write-offs	(15)		0		(15)		(15)		0		(15)
Current period gross recoveries	Current period gross recoveries	1		0		1		4		0		4		Current period gross recoveries	2		0		2		2		0		2
Ending ACL	Ending ACL	$	130	$	44	$	174	$	130	$	44	$	174	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, ~~refer to~~see Note 1 - Basis of Presentation and Significant Accounting ~~Policies.~~

~~The Company records total credit loss expenses related~~Policies of Notes to ~~premiums receivable~~Consolidated Financial Statements included in ~~insurance operating costs and other expenses. Write-offs of premiums receivable and agents'~~

the Company's 2020 Form 10-K Annual Report.

~~balances and any related ACL are recorded in the period in which the balance is deemed uncollectible.~~

9.8. REINSURANCE

The 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

expense reserves that may be ceded under the terms of the 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 Company owes to its claimants. The Company estimates its ceded reinsurance recoverables based on the terms of any applicable facultative and treaty reinsurance, including an estimate of how incurred but not reported losses will ultimately be ceded under reinsurance agreements. Accordingly, the Company’s estimate of reinsurance recoverables is subject to similar risks and uncertainties as the estimate of the gross reserve for unpaid losses and loss adjustment expenses.

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~~THE~~HE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~


Reinsurance Recoverables by Credit Quality Indicator as of September 30, 2020
Reinsurance Recoverables by Credit Quality Indicator										Reinsurance Recoverables by Credit Quality Indicator
											As of March 31, 2021								As of December 31, 2020
		Property and Casualty		Group Benefits		Corporate		Total			Property and Casualty		Group Benefits		Corporate		Total		Property and Casualty		Group Benefits		Corporate		Total
A.M. Best Financial Strength Rating	A.M. Best Financial Strength Rating									A.M. Best Financial Strength Rating
A++	A++	$	1,301	$	0	$	0	$	1,301	A++	$	1,627	$	0	$	0	$	1,627	$	1,598	$	0	$	0	$	1,598
A+	A+	1,754		234		309		2,297		A+	1,823		240		306		2,369		1,788		230		305		2,323
A	A	571		0		0		571		A	565		0		0		565		638		0		0		638
A-	A-	31		9		0		40		A-	36		9		0		45		37		9		0		46
B++	B++	673		0		3		676		B++	658		0		3		661		666		0		3		669
Below B++	Below B++	23		1		0		24		Below B++	21		1		0		22		21		1		0		22
Total Rated by A.M. Best	Total Rated by A.M. Best	4,353		244		312		4,909		Total Rated by A.M. Best	4,730		250		309		5,289		4,748		240		308		5,296
Mandatory (Assigned) and Voluntary Risk Pools	Mandatory (Assigned) and Voluntary Risk Pools	263		0		0		263		Mandatory (Assigned) and Voluntary Risk Pools	259		0		0		259		259		0		0		259
Captives	Captives	319		0		0		319		Captives	308		0		0		308		305		0		0		305
Other not rated companies	Other not rated companies	279		7		0		286		Other not rated companies	318		7		0		325		254		5		0		259
Gross Reinsurance Recoverables	Gross Reinsurance Recoverables	5,214		251		312		5,777		Gross Reinsurance Recoverables	5,615		257		309		6,181		5,566		245		308		6,119
Allowance for uncollectible reinsurance	Allowance for uncollectible reinsurance	(106)		(1)		(2)		(109)		Allowance for uncollectible reinsurance	(95)		(1)		(2)		(98)		(105)		(1)		(2)		(108)
Net Reinsurance Recoverables	Net Reinsurance Recoverables	$	5,108	$	250	$	310	$	5,668	Net Reinsurance Recoverables	$	5,520	$	256	$	307	$	6,083	$	5,461	$	244	$	306	$	6,011

~~The Company had no reinsurance recoverables with a due date of one year or more that are past-due.~~ Balances 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 0 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.

The Company periodically evaluates the recoverability of its reinsurance recoverable assets and establishes an allowance for uncollectible reinsurance. The allowance for uncollectible reinsurance reflects management’s best estimate of reinsurance cessions that may be uncollectible in the future due to reinsurers’ unwillingness or inability to pay. The allowance for uncollectible reinsurance comprises an ACL and an allowance for disputed balances. Based on this analysis, the Company may adjust the allowance for uncollectible reinsurance or charge off reinsurer balances that are determined to be uncollectible.

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 the Company’s reinsurance recoverables, net of the 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 an 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 default. 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 quarterly basis and any significant changes are

reflected in an updated ~~at least annually.~~estimate. The probability of default factors are historical insurer and reinsurer defaults for liabilities with similar durations to the 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.

As 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 reinsurance recoverables considers the current economic environment as well as macroeconomic scenarios similar to the approach used to estimate the ACL for mortgage loans. See Note 65 - 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 capital 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. ~~In response~~The decrease in the ACL for the three months ended March 31, 2021 was primarily due to ~~significant economic stress experienced as a result of the COVID-19 pandemic, during the first nine months of 2020,~~higher than expected recovery from one reinsurer on which the Company ~~increased the weight of both a moderate and severe recession in our estimate of the~~had recognized an ACL.~~While GDP growth, unemployment and other economic factors improved modestly in the third quarter of 2020 compared with prior economic scenarios, this improvement did not have a~~

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~~THE~~HE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

~~significant impact on our expected credit losses on reinsurance recoverables. T~~he Company expects the impact of the COVID-19 pandemic to reinsurers to be somewhat mitigated by their regulated capital and liquidity positions. The ultimate impact to the Company's financial statements could vary significantly from our estimates depending on the 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 mitigate the economic impact of COVID-19 are effective. The following table presents the activity within the Company's ACL for reinsurance recoverables.

																																			Allowance for Uncollectible Reinsurance
		Three Months Ended September 30, 2020								Nine Months Ended September 30, 2020									Three Months Ended March 31, 2021								Three Months Ended March 31, 2020
		Property and Casualty		Group Benefits		Corporate		Total		Property and Casualty		Group Benefits		Corporate		Total			Property and Casualty		Group Benefits		Corporate		Total		Property and Casualty		Group Benefits		Corporate		Total
Beginning allowance for uncollectible reinsurance	Beginning allowance for uncollectible reinsurance	$	108	$	1	$	2	$	111	$	114	$	0	$	0	$	114	Beginning allowance for uncollectible reinsurance	$	105	$	1	$	2	$	108	$	114	$	0	$	0	$	114
Beginning allowance for disputed amounts	Beginning allowance for disputed amounts	57		0		0		57		66		0		0		66		Beginning allowance for disputed amounts	53		0		0		53		66		0		0		$	66
Beginning ACL	Beginning ACL	51		1		2		54		48		0		0		48		Beginning ACL	52		1		2		55		48		0		0		48
Cumulative effect of accounting change [1]	Cumulative effect of accounting change [1]	0		0		0		0		0		1		1		2		Cumulative effect of accounting change [1]	0								0		1		1		2
Adjusted beginning ACL	Adjusted beginning ACL	51		1		2		54		48		1		1		50		Adjusted beginning ACL	52		1		2		55		48		1		1		50
Current period provision (release)	Current period provision (release)	1		0		0		1		3		0		1		4		Current period provision (release)	(13)		0		0		(13)		1		0		1		2

Current period gross recoveries		0		0		0		0		1		0		0		1

Ending ACL	Ending ACL	52		1		2		55		52		1		2		55		Ending ACL	39		1		2		42		49		1		2		52
Ending allowance for disputed amounts	Ending allowance for disputed amounts	54		0		0		54		54		0		0		54		Ending allowance for disputed amounts	56		0		0		56		65		0		0		65
Ending allowance for uncollectible reinsurance	Ending allowance for uncollectible reinsurance	$	106	$	1	$	2	$	109	$	106	$	1	$	2	$	109	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 credit losses on January 1, 2020. For further information, ~~refer to~~see Note 1 - Basis of Presentation and Significant Accounting ~~Policies.~~

~~The Company records credit loss expenses related~~Policies of Notes to reinsurance recoverables in benefits losses and loss adjustment expenses. Write-offs of reinsurance recoverables and any related ACL are recorded in the period in which the balance is deemed uncollectible. Expected recoveries areConsolidated Financial Statements included in the ~~estimate of the ACL. There were 0 write-offs for the three and nine months ended September 30,~~Company's 2020 ~~respectively.~~

Form 10-K Annual Report.

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~~THE~~HE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

~~10.~~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 nine months ended September 30,				For the three months ended March 31,
		2020		2019				2021		2020
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	28,261	$	24,584		Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	29,622	$	28,261
Reinsurance and other recoverables	Reinsurance and other recoverables	5,275		4,232			Reinsurance and other recoverables	5,725		5,275
Beginning liabilities for unpaid losses and loss adjustment expenses, net	Beginning liabilities for unpaid losses and loss adjustment expenses, net	22,986		20,352			Beginning liabilities for unpaid losses and loss adjustment expenses, net	23,897		22,986
Navigators Group acquisition		0		2,001

Provision for unpaid losses and loss adjustment expenses	Provision for unpaid losses and loss adjustment expenses						Provision for unpaid losses and loss adjustment expenses
Current accident year	Current accident year	5,992		5,448			Current accident year	1,924		1,883
Prior accident year development [1]	Prior accident year development [1]	(320)		(23)			Prior accident year development [1]	229		23
Total provision for unpaid losses and loss adjustment expenses	Total provision for unpaid losses and loss adjustment expenses	5,672		5,425			Total provision for unpaid losses and loss adjustment expenses	2,153		1,906
Change in deferred gain on retroactive reinsurance included in other liabilities [1]	Change in deferred gain on retroactive reinsurance included in other liabilities [1]	(97)		0			Change in deferred gain on retroactive reinsurance included in other liabilities [1]	(6)		(29)
Payments	Payments						Payments
Current accident year	Current accident year	(1,447)		(1,549)			Current accident year	(292)		(304)
Prior accident years	Prior accident years	(3,338)		(3,403)			Prior accident years	(1,221)		(1,491)
Total payments	Total payments	(4,785)		(4,952)			Total payments	(1,513)		(1,795)
Net reserves transferred to liabilities held for sale		(43)		0
Net change in reserves transferred to liabilities held for sale							Net change in reserves transferred to liabilities held for sale	(1)		0
Foreign currency adjustment	Foreign currency adjustment	(3)		(12)			Foreign currency adjustment	(6)		(20)
Ending liabilities for unpaid losses and loss adjustment expenses, net	Ending liabilities for unpaid losses and loss adjustment expenses, net	23,730		22,814			Ending liabilities for unpaid losses and loss adjustment expenses, net	24,524		23,048
Reinsurance and other recoverables	Reinsurance and other recoverables	5,421		5,083			Reinsurance and other recoverables	5,808		5,332
Ending liabilities for unpaid losses and loss adjustment expenses, gross	Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	29,151	$	27,897		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 ~~adverse development cover ('Navigators ADC')~~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 ~~National Indemnity Company ("NICO").~~NICO. For additional information regarding the ~~Navigators ADC agreement, please~~two adverse development cover reinsurance agreements, refer to Adverse Development Covers discussion below.

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~~THE~~HE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

Unfavorable (Favorable) Prior Accident Year Development


		For the nine months ended September 30,						For the three months ended March 31,
			2020		2019				2021		2020
Workers’ compensation	Workers’ compensation		$	(72)	$	(90)	Workers’ compensation		$	(40)	$	(17)

Workers’ compensation discount accretion	Workers’ compensation discount accretion		27		25		Workers’ compensation discount accretion		9		9
General liability	General liability		112		62		General liability		307		12
Marine	Marine		1		8		Marine		6		0
Package business	Package business		(24)		(32)		Package business		(27)		1
Commercial property	Commercial property		(6)		(16)		Commercial property		(13)		(7)
Professional liability	Professional liability		(16)		32		Professional liability		(1)		1
Bond	Bond		(10)		(2)		Bond		0		0
Assumed reinsurance	Assumed reinsurance		(7)		3		Assumed reinsurance		2		0
Automobile liability - Commercial Lines	Automobile liability - Commercial Lines		27		27		Automobile liability - Commercial Lines		0		5
Automobile liability - Personal Lines	Automobile liability - Personal Lines		(53)		(28)		Automobile liability - Personal Lines		(23)		(6)
Homeowners	Homeowners		3		0		Homeowners		(3)		(2)

Catastrophes	Catastrophes		(413)		(27)		Catastrophes		(16)		(13)
Uncollectible reinsurance	Uncollectible reinsurance		(8)		0		Uncollectible reinsurance		(9)		0
Other reserve re-estimates, net	Other reserve re-estimates, net		22		15		Other reserve re-estimates, net		31		11
Prior accident year development before change in deferred gain	Prior accident year development before change in deferred gain		(417)		(23)		Prior accident year development before change in deferred gain		223		(6)
Change in deferred gain on retroactive reinsurance included in other liabilities [1]	Change in deferred gain on retroactive reinsurance included in other liabilities [1]		97		0		Change in deferred gain on retroactive reinsurance included in other liabilities [1]		6		29
Total prior accident year development	Total prior accident year development		$	(320)	$	(23)	Total prior accident year development		$	229	$	23

[1] The change in deferred gain for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~primarily~~ included ~~increased reserves for marine, professional liability, general liability, assumed reinsurance~~$6 and $29, respectively, of adverse development on Navigators 2018 and prior accident year ~~catastrophes.~~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 ~~nine~~three months ended ~~September 30,~~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 and were reduced in small commercial due to lower than expected claim severity for the 2013 to 2018 accident~~ years.

General liability reserveswere increased, ~~in part due~~primarily

related to guaranteed cost construction business for accident years ~~2014~~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, as well as increased reserves for middle market and complex liability claims for accident year 2018 largely due to higher than expected severity. Also contributing were increases in reserves on primary layer construction account business within global specialty, mainly related to accident years 2015-2017, which is included as a component of the change in deferred gain under retroactive reinsurance in the above table.

~~In addition, the Company recorded an increase in reserves for sexual molestation and abuse claims related to cases brought against religious and other institutions that were insureds of the~~

~~Company which was partly offset by reserve decreases for other mass torts and extra contractual liability claims.~~

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

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

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

~~Commercial property reserves~~were decreased for

accident year 2019 due to favorable developments on marine and middle market property claims.

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

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

~~Automobile liability reserves~~ ~~were decreased in~~ Personal Lines principally due to lower than previously expected AARP Direct automobile liability claim severity for the ~~2017 and~~ 2018 accident ~~years.~~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 and due to large losses within middle & large commercial, primarily within the 2018 and 2019 accident years.~~2017.

Catastrophes reserveswere reduced, primarily due to a reduction in estimated ~~reserves~~catastrophes for ~~2017 and 2018 California wildfires~~the 2019 accident year and a reduction in estimated ~~catastrophes~~reserves for ~~wind and hail events in the 2018 and 2019 accident years,~~2017 California wildfires, partially offset by an increase in reserves for 2019 typhoons Hagibis and Faxai in Asia. ~~The reduction~~

Other reserve re-estimates, net, primarily included

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

In December, 2019, the judge overseeing the bankruptcy of PG&E approved an $11 billion settlement of insurance subrogation claims to resolve all such claims arising from the 2017 Northern California wildfires and 2018 Camp wildfire. That settlement was contingent upon, among other things, the judgeon pool participations.

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~~THE~~HE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

~~entering an order confirming PG&E’s chapter~~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 ~~plan (“PG&E Plan”) incorporating~~and will become effective upon the settlement agreement. On June 20, 2020, the bankruptcy court judge approved the PG&E Plan and PG&E subsequently transferred the $11 billion settlement amount to a trust designed to allocate and distribute the settlement among subrogation holders,occurrence of certain conditions, including ~~certain~~confirmation of the ~~Company’s insurance subsidiaries. In~~BSA’s global resolution plan, executed releases from the ~~second~~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 2020, the Company recorded an estimated $289 subrogation benefit though the ultimate amount it collects will depend on how the Company’s ultimate paid claims subject to subrogation compare to other insurers’ ultimate paid claims subject to subrogation.

~~Re-estimates of prior accident year reserves~~2021, but this could be delayed for ~~thenine months ended September 30, 2019~~various procedural reasons.

~~Workers’ compensation reserves~~ were reduced, principally in small commercial driven by lower than previously estimated claim severity for the 2014 through 2017 accident years and, to a lesser extent, in national accounts due to lower estimated claim severity, primarily for accident years 2013 and prior.

~~General liability reserves~~ were increased, primarily due to reserve increases in small commercial for accident years 2017 and 2018 due to higher frequency of high-severity bodily injury claims, reserve increases in middle and large commercial for accident years 2015 to 2018 due to higher estimated severity, as well as increased estimated severity on the acquired Navigators book of business related to U.S. construction, premises liability, products liability and excess casualty, mostly related to accident years 2014 to 2018. In addition, an increase in reserves for mass torts was offset by a decrease in reserves for extra contractual liability claims.

~~Package business reserves~~ were decreased, primarily due to favorable emergence on property claims related to accident years 2016 through 2018 and due to favorable development of allocated loss adjustment expenses on general liability claims for 2017 and prior accident years.

~~Commercial property reserves~~ were decreased, principally due to favorable emergence of reported losses, including on the acquired Navigators Group book of business related to offshore energy in accident years 2017 to 2018 and construction engineering across accident years 2015 to 2018.

~~Professional liability reserves~~ were increased, primarily due to large loss activity, including wrongful termination and discrimination claims, in accident years 2017 and 2018 and increased estimated frequency and severity of directors’ and officers’ reserves on the Navigators Group book of business, principally for the 2014 to 2018 accident years.

~~Marine reserves~~ ~~were increased, principally related to pollution exposure from the 1980s and 1990s related to the Navigators Group book of business.~~

~~Automobile liability reserves~~ were decreased in Personal Lines due to the emergence of lower estimated severity in automobile liability for accident year 2017 and were increased in Commercial Lines due to higher estimated severity on national accounts, principally in accident years 2017 and 2018.

~~Catastrophes reserves~~ ~~were reduced, primarily as a result of lower estimated net losses from 2017 hurricanes Harvey and Irma.~~

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 ~~are~~have been 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. 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 ~~would be~~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 ~~after December 31, 2016 in excess of $650 may~~will result in ~~significant~~ charges against earnings. As of September 30, 2020, the Company has incurred $640 in cumulative adverse development on asbestos and environmental reserves that have been ceded under the A&E ADC treaty with NICO with $860 of available limit remaining under the A&E ADC.earnings which may be significant.

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

As of ~~September 30, 2020,~~March 31, 2021, the Company has recorded a reinsurance recoverable under the Navigators ADC of ~~$204,~~$215, as estimated cumulative loss development on the 2018 and prior accident year reserves of ~~$304~~$315 exceed the $100 deductible. While the reinsurance recoverable is ~~$204,~~$215, the Company has also

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~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

recorded a ~~$113~~$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 ~~$204~~$215 of the $300 available limit, there is ~~$96~~$85 of remaining limit available as of ~~September 30, 2020.~~March 31, 2021.


Table of Contents						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


		For the nine months ended September 30,					For the three months ended March 31,
		2020		2019			2021		2020
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	8,256	$	8,445	Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	8,233	$	8,256
Reinsurance recoverables [1]	Reinsurance recoverables [1]	246		239		Reinsurance recoverables [1]	237		246
Beginning liabilities for unpaid losses and loss adjustment expenses, net	Beginning liabilities for unpaid losses and loss adjustment expenses, net	8,010		8,206		Beginning liabilities for unpaid losses and loss adjustment expenses, net	7,996		8,010

Provision for unpaid losses and loss adjustment expenses	Provision for unpaid losses and loss adjustment expenses					Provision for unpaid losses and loss adjustment expenses
Current incurral year	Current incurral year	3,339		3,351		Current incurral year	1,325		1,148
Prior year's discount accretion	Prior year's discount accretion	160		169		Prior year's discount accretion	55		57
Prior incurral year development [2]	Prior incurral year development [2]	(362)		(321)		Prior incurral year development [2]	(151)		(163)
Total provision for unpaid losses and loss adjustment expenses [3]	Total provision for unpaid losses and loss adjustment expenses [3]	3,137		3,199		Total provision for unpaid losses and loss adjustment expenses [3]	1,229		1,042
Payments	Payments					Payments
Current incurral year	Current incurral year	(1,553)		(1,603)		Current incurral year	(350)		(278)
Prior incurral years	Prior incurral years	(1,681)		(1,743)		Prior incurral years	(914)		(821)
Total payments	Total payments	(3,234)		(3,346)		Total payments	(1,264)		(1,099)
Ending liabilities for unpaid losses and loss adjustment expenses, net	Ending liabilities for unpaid losses and loss adjustment expenses, net	7,913		8,059		Ending liabilities for unpaid losses and loss adjustment expenses, net	7,961		7,953
Reinsurance recoverables	Reinsurance recoverables	242		231		Reinsurance recoverables	247		249
Ending liabilities for unpaid losses and loss adjustment expenses, gross	Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	8,155	$	8,290	Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	8,208	$	8,202

[1]~~Reflects~~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. ~~See~~For further information refer to 2020 10-K, Note 1 - Basis of Presentation and Significant Accounting ~~Policies for further information.~~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 ~~$133~~$43 and ~~$130~~$44 for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, that are recorded in insurance operating costs and other expenses in the Condensed Consolidated Statements of Operations.

Re-estimates of prior incurral years reserves for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021

Group disability- Prior period reserve estimates decreased by approximately ~~$293~~$125 largely driven by group long-term disability ~~lower~~ claim incidence ~~and higher~~lower than prior assumptions together with strong recoveries on prior incurral year claims; and by group short-term disability non-COVID-19 claim incidence lower than previously expected.

Group life and accident (including group life premium waiver)- Prior period reserve estimates decreased by approximately $20 largely driven by lower-than-previously expected claim incidence in both group life premium waiver and 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 three months ended March 31, 2020

Group disability- Prior period reserve estimates decreased by approximately $100 largely driven by group long-term disability claim incidence lower than prior assumptions and ~~a refund~~strong recoveries on ~~the New York Paid Family Leave program.~~prior incurral year claims.

Group life and accident (including group life premium waiver)- Prior period reserve estimates decreased by approximately $50 largely driven by ~~lower-than-previously expected claim incidence~~lower prior year mortality than prior assumptions in group life ~~premium waiver.~~

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

~~Re-estimates of prior incurral years reserves for the nine months ended September 30, 2019~~

~~Group disability-~~ ~~Prior period reserve estimates decreased by approximately $265 largely driven by group long-term disability claim recoveries higher than prior reserve assumptions and claim incidence~~ lower than prior assumptions. Long-term disability ("LTD") reserve assumptions were also updated based partially on these more recent favorable trends. New York Paid Family Leave also experienced favorable claim emergence and refund compared to year-end estimates.

~~Group life and accident (including group life premium waiver)-~~ ~~Prior period reserve estimates decreased by approximately $45 largely driven by lower-than-previously~~previously expected claim incidence in group life premium waiver.

4741

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~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~11. RESERVE FOR FUTURE POLICY BENEFITS~~


~~Changes in Reserves~~Table of Contents			Note 10 - Reserve for Future Policy Benefits~~[1]~~
~~Liability balance, as of January 1, 2020~~	$	~~635~~
~~Incurred~~	74
~~Paid~~	~~(67)~~
~~Change in unrealized investment gains and losses~~	8
~~Liability balance, as of September 30, 2020~~	$	~~650~~
~~Reinsurance recoverable asset, as of January 1, 2020~~	$	31
~~Incurred~~	~~(2)~~
~~Paid~~	0
~~Reinsurance recoverable asset, as of September 30, 2020~~	$	29

THE HARTFORD FINANCIAL SERVICES GROUP, INC.


~~Liability balance, as of January 1, 2019~~	$	~~642~~
~~Incurred~~	63
~~Paid~~	~~(77)~~
~~Change in unrealized investment gains and losses~~	17
~~Liability balance, as of September 30, 2019~~	$	~~645~~
~~Reinsurance recoverable asset, as of January 1, 2019~~	$	27
~~Incurred~~	2
~~Paid~~	0
~~Reinsurance recoverable asset, as of September 30, 2019~~	$	29

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10. RESERVE FOR FUTURE POLICY BENEFITS


Changes in Reserves for Future Policy Benefits[1]
	For the three months ended March 31,
	2021		2020
Beginning liability balance	$	638	$	635
Incurred	37		18
Paid	(26)		(22)
Change in unrealized investment gains and losses	(8)		(2)
Ending liability balance	$	641	$	629
Beginning reinsurance recoverable asset	$	28	$	31
Incurred	18		(1)
Paid	0		0
Ending reinsurance recoverable asset	$	46	$	30

[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.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

~~12. DEBT~~

~~Senior Notes~~

~~On March 30, 2020, The Hartford repaid at maturity the $500 principal amount of its 5.5% senior notes.~~

~~Lloyd's Letter of Credit Facilities~~

~~As a result of the acquisition of Navigators Group, The Hartford has two letter of credit facility agreements: the Club Facility and the Bilateral Facility, which are used to provide a portion of the~~

capital requirements at Lloyd's. As of September 30, 2020, uncollateralized letters of credit with an aggregate face amount of $165 and £60 million were outstanding under the Club Facility and £18 million was outstanding under the Bilateral Facility. As of September 30, 2020, the Bilateral Facility has unused capacity of $2 for issuance of additional letters of credit. Among other covenants, the Club Facility and Bilateral Facility contain financial covenants regarding tangible net worth and Funds at Lloyd's ("FAL"). As of September 30, 2020, Navigators Group was in compliance with all financial covenants.

~~13.~~11. INCOME TAXES

Income Tax Expense

															Income Tax Rate Reconciliation
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Tax provision at U.S. federal statutory rate	Tax provision at U.S. federal statutory rate	$	111	$	138	$	308	$	396	Tax provision at U.S. federal statutory rate	$	63	$	72
Tax-exempt interest	Tax-exempt interest	(12)		(14)		(36)		(43)		Tax-exempt interest	(11)		(12)
Dividends received deduction ("DRD")		(4)		(3)		(5)		(5)

Executive compensation	Executive compensation	1		0		6		5		Executive compensation	5		5
Increase in deferred tax valuation allowance	Increase in deferred tax valuation allowance	6		0		19		0		Increase in deferred tax valuation allowance	1		6
Stock-based compensation		0		(3)		(1)		(7)
Sale of business		(8)		0		(8)		0
Tax credits		(4)		0		(4)		0
Carryback benefit		(11)		0		(11)		0

Other	Other	(6)		0		0		1		Other	(4)		0
Provision for income taxes	Provision for income taxes	$	73	$	118	$	268	$	347	Provision for income taxes	$	54	$	71

Other Tax Matters

~~Uncertain Tax Positions~~

Rollforward of Unrecognized Tax Benefits
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Balance, beginning of period $ 14 $ 14 $ 14 $ 14
Gross increases - tax positions in prior period 0 0 0 0
Gross decreases - tax positions in prior period 0 0 0 0
Gross increases - tax positions in current period 1 0 1 0
Balance, end of period $ 15 $ 14 $ 15 $ 14

Unrecognized tax benefits were $15 and $14 at the beginning and end of the 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.

~~Other Tax Matters~~

~~On March 27, 2020, as part~~ 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 ~~stimulus package in response to the COVID-19 pandemic, the U.S. government~~

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~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

enacted the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. The CARES Act established new tax provisions including, but not limited to: (1) five-year carryback of net operating losses ("NOLs") generatedsold in 2018 ~~2019~~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 ~~2020; (2) accelerated refund~~has a corresponding receivable included in other assets which would also be taken down upon lapse of ~~alternative minimum tax ("AMT") credit carryforwards; and (3) retroactive changes to allow accelerated depreciation for certain depreciable property.~~

~~The legislation resulted in a benefit~~the statute of $6 related to the ability to carryback non-insurance losses to recover taxes paid in prior years as described below. The changes to AMT recovery periods do not impact the Company due to the fact that the Company was already expecting to receive a refund or reduction of regular tax payable for all the remaining AMT credits in 2020.limitations.

For the period ending ~~September 30, 2020~~March 31, 2021, the Company recorded a tax benefit of $11 related to the expected carryback of losses from the Navigators Group 2019 pre-acquisition tax return to recover taxes paid in prior years at the previous statutory tax rate of 35%, of which $6 was due to the non-insurance carryback provision of the CARES Act.

For the three and nine months ended September 30, 2020, the Company recorded a tax benefit of $8 related to the excess tax over GAAP basis on the sale of the Continental Europe Operations. For discussion of this transaction, refer to Note 2 - Business Acquisition and Disposition.

~~In July of 2020, the Company received a $206 refund of AMT credits including $1 of interest, with the remaining balance of AMT credits to be utilized against 2020 federal estimated tax payments.~~

~~For the period ending September 30, 2020, the Company has utilized all US net operating loss carryforwards as a reduction of~~

~~2020 current tax liability. The~~ Company has foreign net operating losses of $11 for which a valuation allowance of ~~$11~~$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. 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~~management views ~~such tax planning strategies~~ as prudent and ~~feasible and would implement them, if necessary, to realize the deferred tax assets.~~feasible.

The federal income tax audits for the Company 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 ~~2015~~2016 tax year with the exception of NOL carryforwards utilized in open tax years. ~~Navigators Group is currently under federal audit for the 2016 year and has completed examinations through 2015.~~ Management believes that adequate provision has been made in the Company'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.

~~14.~~12. COMMITMENTS AND CONTINGENCIES

Management 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 possible losses is more probable than any other, the Company records an estimated liability at the low end of the range of losses.

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


Table of Contents						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 ~~under “Regulatory~~in Note 9 - Reserves for Unpaid Losses and ~~Legal Risks”~~Loss Adjustment Expenses of ~~the Risk Factors disclosed~~this Form 10-Q and in ~~Item 1A of Part I~~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, ~~2019, as amended in Part II Item 1A herein,~~2020, and in the following discussion under the caption “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~~In addition to the matter described below, these actions include putative 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.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

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 ~~200~~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 2734 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 Joint Panel on Multi-District Litigation (“JPMDL”) considered consolidating, for pre-trial purposes, all COVID-19 pandemic business income coverage lawsuits pending in federal court against any commercial insurer, including Hartford Writing Companies, or alternatively, against specific insurers, including Hartford Writing Companies. The Hartford Writing Companies opposed consolidation on an industry and individual basis. In October 2020, the JPMDL declined to consolidate the cases involving the Company or Hartford Writing Companies.

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.

complaints are in the process of being amended, ~~and~~ some have been dismissed voluntarily and may be ~~refiled. Accordingly, little discovery has occurred and few substantive legal rulings~~refiled, while others have been ~~made.~~dismissed through rulings in favor of the Hartford Writing Companies. Discovery is underway in certain single plaintiff cases and class actions. More than a dozen policyholders have appealed dismissals in favor of the Hartford Writing Companies. While these appeals are at 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 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. Accordingly, management cannot now reasonably estimate the possible loss or range of loss, if any. Nonetheless, given the large number of claims and potential claims, the indeterminate amounts sought, and the inherent unpredictability of litigation, it is possible that adverse outcomes, if any, in the aggregate, could have a material adverse effect on the Company’s consolidated operating results.

Run-off Asbestos and Environmental Claims

The Company continues to receive A&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.


Table of Contents						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 ~~commercial~~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.

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

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 A&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, to assess any emerging trends, fluctuations or characteristics suggested by the aggregate paid and reported activity.

While the Company believes that its current A&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 estimable now, could be material to The Hartford’s consolidated operating results and liquidity.

For its Run-off A&E, as of ~~September 30, 2020,~~March 31, 2021, the Company reported ~~$749~~$676 of net asbestos reserves and ~~$101~~$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 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 coverage limit of $1.5 billion above the Company’s existing net A&E reserves as of December 31, 2016 of approximately $1.7

billion. As of ~~September 30, 2020~~March 31, 2021, the Company has incurred ~~$640~~$860 in cumulative adverse development on A&E reserves that have been ceded under the A&E ADC treaty with NICO, leaving ~~$860~~$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 more information on the A&E ADC, refer to Note ~~11,~~12, Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements included in the Company's ~~2019~~2020 Form 10-K Annual Report.

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 immediate and ongoing full collateralization and, in certain


Table of Contents						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, 2020~~March 31, 2021 was ~~$86~~$60 for which the legal entities have posted collateral of ~~$88~~$61 in the normal course of business. Based on derivative market values as of ~~September 30, 2020,~~March 31, 2021, a downgrade of one level below the current financial strength ratings by either Moody's or S&P would not require additional assets to be posted as collateral. A downgrade of two levels below the current financial strength ratings by either Moody’s or S&P would require an additional $5$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, if required, would be primarily in the form of U.S. Treasury bills, U.S. Treasury notes and government agency securities.

~~Guarantees~~

The Hartford has guaranteed the timely payment of contractual claims under certain life, accident and health and annuity contracts issued by its former life and annuity business with most of the guaranteed contracts issued between 1990 and 1997 (the "Talcott Guarantees"). Upon the sale of the life and annuity business in May 2018, the purchaser indemnified the Company for any liability arising under the guarantees. The Talcott Guarantees cover contractual obligations only but otherwise have no limitation as to maximum potential future payments. Prior to January 1, 2020, the Company had not recorded a liability because the likelihood of any payment under the Talcott Guarantees is remote. Upon adoption of new credit loss guidance

~~Table of Contents~~

~~THE HARTFORD FINANCIAL SERVICES GROUP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)~~

on January 1, 2020, the Company estimated a LCL of $25. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements.

The LCL is calculated for the estimated amount payable under guaranteed contracts multiplied by the probability of default and the amount of loss given a default. The probability of default is assigned by credit rating of the applicable insurance company that issued the contract and is based on historical insurance industry defaults for liabilities with similar durations estimated through multiple economic cycles. Credit ratings are current and forward-looking and consider a variety of economic outcomes. Because annuities represent the majority of the contracts issued, the loss given default factors are based on a historical study of annuity policyholder recoveries from insolvent estate assets. The Company's exposure is expected to run off over a period that will include more than one economic cycle.

The Company's evaluation of the required LCL for the Talcott Guarantees considers the current economic environment as well as macroeconomic scenarios similar to the approach used to estimate the ACL for mortgage loans. See Note 6 - Investments for additional information. In response to significant economic stress experienced as a result of the COVID-19 pandemic, during

the first nine months of 2020 the Company increased the weight of both a moderate and severe recession scenario in our estimate of the LCL. As of September 30, 2020, the economic scenarios improved modestly as compared to June 30, 2020, reflecting improvements in GDP growth, unemployment and other economic factors compared with the prior economic scenarios. The ultimate impact to the Company’s financial statements could vary significantly from our estimates depending on the 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 mitigate the economic impact of COVID-19 are effective. The Company has never experienced a loss on financial guarantees of this nature and we believe the risk of loss is remote. For the three and nine months ended September 30, 2020, the Company recorded net credit loss expense (reversal) within insurance operating costs and other expenses of $(1) and $2, respectively, related to the Talcott Guarantees. The decrease for the three months ended September 30, 2020, was primarily due to a reduction in the estimated amount payable under the guaranteed contracts due to equity market recovery as well as due to the run-off of the business. The increase for the nine months ended September 30, 2020 was primarily as a result of the COVID-19 pandemic and the impacts on the economic forecasts, as discussed above.

~~15.~~13. EQUITY

Equity Repurchase Program

~~In February, 2019,~~During the three months ended March 31, 2021, the Company ~~announced a $1.0 billion~~repurchased $123 (2.4 million shares) of common stock under the share repurchase ~~authorization~~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, in April 2021, the Company announced an increase in the share repurchase authorization to $2.5 billion, which isremains effective ~~through~~until December 31, ~~2020.~~2022. During the ~~nine months ended September 30, 2020,~~period April 1, 2021 through April 26, 2021, the Company repurchased

~~2.7~~ $27 (0.4 million ~~common shares for $150. Any~~shares) under this repurchase program. The timing of ~~shares under the remaining equity repurchase authorization of $650 is~~future repurchases will be dependent on ~~market conditions and other~~several factors, including the ~~extent to which COVID-19 impacts our business, results~~market price of ~~operations,~~the Company's securities, the Company's capital position, consideration of the effect of any repurchases on the Company's financial ~~condition~~strength or credit ratings, the Company's blackout periods, and ~~liquidity.~~other considerations.

During the three months ended March 31, 2020, The Company repurchased $150 (2.7 million shares) of common stock under the previous share repurchase program that expired December 31, 2020.

~~16.~~14. CHANGES IN AND RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)


Changes in AOCI, Net of Tax for the Three Months Ended September 30, 2020
Changes in AOCI, Net of Tax for the Three Months Ended March 31, 2021														Changes in AOCI, Net of Tax for the Three Months Ended March 31, 2021
		Changes in													Changes in
		Net Unrealized Gain on Fixed Maturities		Unrealized Loss on Fixed Maturities with ACL		Net Gain on Cash Flow Hedging Instruments		Foreign Currency Translation Adjustments		Pension and Other Postretirement Plan Adjustments		AOCI, net of tax			Net Unrealized Gain on Fixed Maturities		Unrealized Loss on Fixed Maturities with ACL		Net Gain on Cash Flow Hedging Instruments		Foreign Currency Translation Adjustments		Pension and Other Postretirement Plan Adjustments		AOCI, net of tax
Beginning balance	Beginning balance	$	2,055	$	(2)	$	48	$	27	$	(1,649)	$	479	Beginning balance	$	2,834	$	(2)	$	12	$	43	$	(1,717)	$	1,170

OCI before reclassifications	OCI before reclassifications	388		0		(10)		6		0		384		OCI before reclassifications	(922)		0		12		1		0		(909)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	(12)		0		(7)		0		12		(7)		Amounts reclassified from AOCI	(3)		0		(7)		0		13		3
OCI, net of tax	OCI, net of tax	376		0		(17)		6		12		377		OCI, net of tax	(925)		0		5		1		13		(906)
Ending balance	Ending balance	$	2,431	$	(2)	$	31	$	33	$	(1,637)	$	856	Ending balance	$	1,909	$	(2)	$	17	$	44	$	(1,704)	$	264

5345


Table of Contents						Note 14 - Accumulated Other Comprehensive Income (Loss), Net of Tax

~~Table of Contents~~T

~~THE~~HE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

Changes in AOCI, Net of Tax for the Nine Months Ended September 30, 2020
Changes in
Net Unrealized Gain on Fixed Maturities Unrealized Loss on Fixed Maturities with ACL Net Gain on Cash Flow Hedging Instruments Foreign Currency Translation Adjustments Pension and Other Postretirement Plan Adjustments AOCI,
net of tax
Beginning balance $ 1,684 $ (3) $ 9 $ 34 $ (1,672) $ 52
OCI before reclassifications 842 1 37 (1) (1) 878
Amounts reclassified from AOCI (95) 0 (15) 0 36 (74)
OCI, net of tax 747 1 22 (1) 35 804
Ending balance $ 2,431 $ (2) $ 31 $ 33 $ (1,637) $ 856


Reclassifications from AOCI
	Three Months Ended March 31, 2021		Affected 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)
	4		Total before tax
	1		Income tax expense

	$	3	Net income






Net Gains on Cash Flow Hedging Instruments

Interest rate swaps	$	10	Net investment income
Interest rate swaps	(2)		Interest expense
Foreign currency swaps	1		Net investment income

	9		Total before tax
	2		Income tax expense

	$	7	Net 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 Maturities		Net Unrealized Loss on Fixed Maturities with ACL		Net Gain on Cash Flow Hedging Instruments		Foreign Currency Translation Adjustments		Pension and Other Postretirement Plan Adjustments		AOCI, 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)

Reclassifications from AOCI
Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Affected Line Item in the Condensed Consolidated Statement of Operations
Net Unrealized Gain on Fixed Maturities
Available-for-sale fixed maturities $ 15 $ 120 Net realized capital gains (losses)
15 120 Total before tax
3 25 Income tax expense
$ 12 $ 95 Net income
Net Gains on Cash Flow Hedging Instruments
Interest rate swaps $ 9 19 Net investment income
Interest rate swaps (2) (4) Interest expense
Foreign currency swaps 1 3 Net investment income
Foreign currency swaps $ 1 $ 1 Net realized capital gains (losses)
9 19 Total before tax
2 4 Income tax expense
$ 7 $ 15 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) (50) Insurance operating costs and other expenses
(15) (45) Total before tax
(3) (9) Income tax expense
$ (12) $ (36) Net income
Total amounts reclassified from AOCI $ 7 $ 74 Net income

Changes in AOCI, Net of Tax for the Three Months Ended September 30, 2019
Changes in
Net Unrealized Gain on Securities OTTI Losses in OCI Net Gain on Cash Flow Hedging Instruments Foreign Currency Translation Adjustments Pension and Other Postretirement Plan Adjustments AOCI,
net of tax
Beginning balance $ 1,367 $ (3) $ 11 $ 34 $ (1,607) $ (198)
OCI before reclassifications 458 0 8 (4) 1 463
Amounts reclassified from AOCI (57) 0 (2) 0 8 (51)
OCI, net of tax 401 0 6 (4) 9 412
Ending balance $ 1,768 $ (3) $ 17 $ 30 $ (1,598) $ 214

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Table of Contents						Note 14 - Accumulated Other Comprehensive Income (Loss), Net of Tax

~~Table of Contents~~T

~~THE~~HE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

Changes in AOCI, Net of Tax for the Nine Months Ended September 30, 2019
Changes in
Net Unrealized Gain on Securities OTTI Losses in OCI Net Gain on Cash Flow Hedging Instruments Foreign Currency Translation Adjustments Pension and Other Postretirement Plan Adjustments
AOCI,
net of tax
Beginning balance $ 24 $ (4) $ (5) $ 30 $ (1,624) $ (1,579)
OCI before reclassifications 1,857 1 27 0 1 1,886
Amounts reclassified from AOCI (113) 0 (5) 0 25 (93)
OCI, net of tax 1,744 1 22 0 26 1,793
Ending balance $ 1,768 $ (3) $ 17 $ 30 $ (1,598) $ 214

Reclassifications from AOCI
Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Affected Line Item in the Condensed Consolidated Statement of Operations
Net Unrealized Gain on Securities
Available-for-sale securities $ 72 $ 143 Net realized capital gains (losses)
72 143 Total before tax
15 30 Income tax expense
$ 57 $ 113 Net income
Net Gains on Cash Flow Hedging Instruments
Interest rate swaps $ 0 $ 2 Net realized capital gains (losses)
Interest rate swaps 1 1 Net investment income
Interest rate swaps 0 1 Interest expense
Foreign currency swaps 1 2 Net investment income
2 6 Total before tax
0 1 Income tax expense
$ 2 $ 5 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 (12) (37) Insurance operating costs and other expenses
(10) (32) Total before tax
(2) (7) Income tax expense
$ (8) $ (25) Net income
Total amounts reclassified from AOCI $ 51 $ 93 Net income


Reclassifications from AOCI
	Three Months Ended March 31, 2020		Affected 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)
	53		Total before tax
	11		Income tax expense

	$	42	Net income






Net Gains on Cash Flow Hedging Instruments

Interest rate swaps	$	3	Net investment income

Foreign currency swaps	1		Net investment income
	4		Total before tax
	1		Income tax expense

	$	3	Net 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	$	33	Net income

~~17.~~15. 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 ~~2019~~2020 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 Benefits				Other Postretirement Benefits
	Three Months Ended March 31,					Three Months Ended March 31,
	2021		2020				2021		2020
Service cost	$	1	$	1			$	0	$	0
Interest cost	24		32				1		2
Expected return on plan assets	(51)		(54)				(1)		(1)
Amortization of prior service credit	0		0				(2)		(2)
Amortization of actuarial loss	17		15				2		2

Net periodic cost (benefit)	$	(9)	$	(6)			$	0	$	1

16. BUSINESS DISPOSITION

Sale of Continental Europe Operations

On September 30, 2020, the Company entered into a definitive agreement to sell its Continental Europe Operations consisting of multiple arrangements designed as a single transaction. The Continental Europe Operations are included in the Commercial 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

~~Form 10-K.~~ resulted in an estimated loss on the sale of approximately $47, before tax, which was recorded within net realized capital gains (losses). The ~~Company, at its discretion, made~~accrual for the estimated before tax loss is included as a ~~contribution~~reduction of ~~$70~~the carrying value of assets held for sale in ~~September 2020~~the Company's Condensed Consolidated Balance Sheets as of March 31, 2021. The transaction is expected to close in the ~~U.S. qualified defined benefit pension plan.~~second or third quarter of 2021, subject to customary closing conditions, including regulatory approvals.

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Table of Contents						Note 16 - Business Disposition

~~Table of Contents~~T

~~THE~~HE HARTFORD FINANCIAL SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(continued)~~

Net Periodic Cost (Benefit)
Pension Benefits Other Postretirement Benefits
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019 2020 2019 2020 2019
Service cost $ 1 $ 1 $ 3 $ 3 $ 0 $ 0 $ 0 $ 0
Interest cost 31 40 95 119 1 2 4 6
Expected return on plan assets (53) (57) (161) (170) 0 (1) (2) (3)
Amortization of prior service credit 0 0 0 0 (2) (2) (5) (5)
Amortization of actuarial loss 15 11 45 33 2 1 5 4
Net periodic cost (benefit) $ (6) $ (5) $ (18) $ (15) $ 1 $ 0 $ 2 $ 2
Carrying Value of Assets and Liabilities to be Transferred in Connection With the Sale [1]


	As of March 31, 2021		As of December 31, 2020
Assets
Investments and cash	$	137	$	142




Reinsurance recoverables and other	28		35
Total assets held for sale	165		177
Liabilities
Unpaid losses and loss adjustment expenses	77		84
Unearned premiums	23		31
Other liabilities	48		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.

~~18.~~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. These estimated restructuring and other costs do not include all costs associated with a real estate consolidation plan as those plans are not yet sufficiently developed to provide a full estimate of those costs and related savings.

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 ~~September 30, 2020~~March 31, 2021 Condensed Consolidated Balance Sheet. Subsequent to ~~September 30, 2020,~~March 31, 2021, the Company expects to incur additional costs including ~~accelerated~~ amortization of ~~IT and~~ 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 ~~$150,~~$164, before tax, and ~~will be~~are being recognized in Corporate for segment reporting.


Restructuring and Other Costs, Before Tax	Restructuring and Other Costs, Before Tax			Restructuring and Other Costs, Before Tax

		Incurred in the Three and Nine Months Ended September 30, 2020 [1]		Total Amount Expected to be Incurred			Incurred in the Three Months Ended March 31, 2021		Cumulative Incurred Through March 31, 2021		Total Amount Expected to be Incurred
Severance benefits	Severance benefits	$	78	$	78	Severance benefits	$	0	$	73	$	73
IT costs	IT costs	0		28		IT costs	2		4		27
Professional fees and other expenses	Professional fees and other expenses	9		44		Professional fees and other expenses	9		38		64
Total restructuring and other costs, before tax	Total restructuring and other costs, before tax	$	87	$	150	Total restructuring and other costs, before tax	$	11	$	115	$	164

~~[1] Amounts incurred for the nine months ended September 30, 2020 are the cumulative incurred under the restructuring program.~~


Accrued Restructuring and Other Costs	Accrued Restructuring and Other Costs									Accrued Restructuring and Other Costs
		Nine Months Ended September 30, 2020									Three Months Ended March 31, 2021
		Severance Benefits and Related Costs		IT Costs		Professional Fees and Other		Total Restructuring and Other Costs Liability					Severance Benefits and Related Costs		IT Costs		Professional Fees and Other		Total Restructuring and Other Costs Liability
Balance, beginning of period	Balance, beginning of period	$	0	$	0	$	0	$	0			Balance, beginning of period	$	54	$	0	$	0	$	54
Incurred	Incurred	78		0		9		87				Incurred	0		2		9		11
Payments	Payments	(3)		0		(9)		(12)				Payments	(6)		(2)		(6)		(14)
Balance, end of period	Balance, end of period	$	75	$	0	$	0	$	75			Balance, end of period	$	48	$	0	$	3	$	51

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T able of Contents						Index to MD&A

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

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 4 and 5 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; Part ~~II, Item 1A, Risk Factors of this Quarterly Report on Form 10-Q; Part~~ I, Item 1A, Risk Factors in The Hartford’s ~~2019~~2020 Form 10-K Annual Report; and 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 September 30, 2020, the Company entered into a definitive agreement to sell all of the issued and outstanding equity of Navigators Holdings (Europe) N.V., a 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 216 - Business ~~Acquisition and Disposition of Notes to Condensed Consolidated Financial Statements.~~

~~On May 23, 2019, the Company completed the acquisition of Navigators Group, a specialty underwriter. For discussion of this transaction, see Note 2 - Business Acquisition and~~ Disposition of Notes to Condensed Consolidated Financial Statements.

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.

The Hartford defines increases or decreases greater than or equal to 200% as “NM” or not meaningful.

INDEX

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

Definitions of Non-GAAP and Other Measures and Ratios

Assets Under Management ("AUM")- Include mutual fund and exchange-traded products ("ETP") assets. AUM is a measure used by the Company'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 excluding accumulated other comprehensive income ("AOCI")- This is a non-GAAP per share measure that is calculated by dividing (a) common stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding and dilutive potential common shares. The Company provides this measure to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes that excluding AOCI from the numerator is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per diluted share is the most directly comparable U.S. GAAP measure.

Combined Ratio- The 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- The Hartford uses the non-GAAP measure core earnings as an important measure of the Company’s operating performance. The Hartford believes that core earnings provides investors with a valuable measure of the performance of the Company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain items. Therefore, the following items are excluded from core earnings:

•Certain realized capital gains and losses - Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses that tend to be highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income.

•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) and net income (loss) available to common stockholders are the most directly comparable U.S. GAAP measures to core earnings. Core earnings should not be considered as a substitute for net income (loss) or net income (loss) available to common stockholders and does not reflect the overall profitability of the Company’s business. Therefore, The Hartford believes that it is useful for investors to evaluate net income (loss), net income (loss) available to common stockholders, and core earnings when reviewing the Company’s performance.

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


Reconciliation of Net Income to Core Earnings	Reconciliation of Net Income to Core Earnings									Reconciliation of Net Income to Core Earnings
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Net income	Net income	$	459	$	535	$	1,200	$	1,537	Net income	$	249	$	273
Preferred stock dividends	Preferred stock dividends	6		11		16		16		Preferred stock dividends	5		5
Net income available to common stockholders	Net income available to common stockholders	453		524		1,184		1,521		Net income available to common stockholders	244		268
Adjustments to reconcile net income available to common stockholders to core earnings:	Adjustments to reconcile net income available to common stockholders to core earnings:									Adjustments to reconcile net income available to common stockholders to core earnings:
Net realized capital losses (gains) excluded from core earnings, before tax	Net realized capital losses (gains) excluded from core earnings, before tax	(6)		(88)		119		(327)		Net realized capital losses (gains) excluded from core earnings, before tax	(77)		232
Restructuring and other costs, before tax	Restructuring and other costs, before tax	87		—		87		—		Restructuring and other costs, before tax	11		—
Loss on extinguishment of debt, before tax		—		90		—		90
Loss on reinsurance transaction, before tax		—		—		—		91

Integration and transaction costs associated with acquired business, before tax	Integration and transaction costs associated with acquired business, before tax	14		29		40		70		Integration and transaction costs associated with acquired business, before tax	9		13
Change in loss reserves upon acquisition of a business, before tax		—		—		—		97

Change in deferred gain on retroactive reinsurance, before tax	Change in deferred gain on retroactive reinsurance, before tax	14		—		97		—		Change in deferred gain on retroactive reinsurance, before tax	6		29
Income tax expense		(35)		(7)		(77)		(2)
Income tax expense (benefit)										Income tax expense (benefit)	10		(57)

Core earnings	Core earnings	$	527	$	548	$	1,450	$	1,540	Core earnings	$	203	$	485

Core Earnings Margin- The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues, excluding buyouts and realized gains (losses). Net income margin, calculated by dividing net income by revenues, is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and realized gains (losses) as well as other items excluded in the calculation of core earnings. Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance. A reconciliation of net income margin to core earnings margin is set forth 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- For 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. DAC 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 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 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 favorable market performance will have a favorable impact on fee income. Conversely, either negative net flows or unfavorable market performance will reduce fee income.

Gross New Business Premium- Represents the amount of premiums charged, before ceded reinsurance, for policies issued to 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.

Loss and Loss Adjustment Expense Ratio- A 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. 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

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

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 rate-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- A measure of the cost of non-catastrophe loss 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- Utilized 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 profitability 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 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- Represents 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. ~~New~~Net new business ~~written~~ premium plus renewal ~~policy~~ written premium equals total written premium.

Policies in Force- 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.

~~Premium Retention-~~ ~~Represents renewal premium written in the current period divided by total premium written in the prior period.~~

Policy Count Retention- Represents the ratio of the number of policies renewed during the period divided by the number of policies 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 ratio of policyholder dividends to earned premium.

Prior Accident Year Loss and Loss Adjustment Expense Ratio- Represents the increase (decrease) in the estimated cost of settling catastrophe and non-catastrophe claims incurred in prior accident years as recorded in the current calendar year divided by earned premiums.

Reinstatement Premiums- Represents additional ceded premium paid for the reinstatement of the amount of reinsurance coverage that was reduced as a result of 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)- For Commercial Lines, represents the combined effect of rate changes, amount of insurance and individual risk pricing decisions per unit of exposure on ~~standard~~ 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

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

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-The Company uses this non-GAAP financial measure to evaluate, and


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believes is an important measure of, the Hartford Funds segment’s operating performance. ROA, core earnings is calculated by dividing annualized core earnings by a daily average AUM. ROA is the most directly comparable U.S. GAAP measure. The Company believes that ROA, core earnings, provides investors with a valuable measure of the performance of the Hartford Funds segment because it reveals trends in our business that may be obscured by the effect of items excluded in the calculation of core earnings. ROA, core earnings, should not be considered as a substitute for ROA and does not reflect the overall profitability of our Hartford Funds business. Therefore, the Company believes it is important for investors to evaluate both ROA, and ROA, core earnings when reviewing the Hartford Funds segment performance. A reconciliation of ROA to ROA, core earnings is set forth in the Results of Operations section within MD&A - Hartford Funds.

Underlying Combined Ratio- This non-GAAP financial measure of underwriting results represents the combined ratio before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable GAAP measure. The underlying combined ratio represents the combined ratio for the current accident year, excluding the impact of current accident year catastrophes and current accident year change in loss reserves upon acquisition of a business. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve development. The changes to loss reserves upon acquisition of a business are excluded from underlying combined ratio because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance.

A reconciliation of 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 Hartford's management evaluates profitability of the Commercial and Personal Lines segments primarily on the basis of underwriting gain or loss. Underwriting gain (loss) is a before tax non-GAAP measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of The Hartford's pricing. Underwriting profitability over time is also greatly influenced by The Hartford's underwriting discipline, as management strives to manage exposure to loss through favorable risk selection and diversification, effective management of claims, use of reinsurance and its ability to manage its expenses. The Hartford believes that the measure underwriting gain (loss) provides investors with a valuable measure of profitability, before tax, derived from underwriting activities, which are managed separately from the Company's investing activities.

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															Reconciliation of Net Income to Underwriting Gain (Loss)
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Commercial Lines	Commercial Lines									Commercial Lines
Net income	Net income	$	323	$	336	$	378	$	890	Net income	$	129	$	121
Adjustments to reconcile net income to underwriting gain (loss):	Adjustments to reconcile net income to underwriting gain (loss):									Adjustments to reconcile net income to underwriting gain (loss):
Net servicing income	Net servicing income	(1)		(2)		(2)		(3)		Net servicing income	(2)		(1)
Net investment income	Net investment income	(316)		(291)		(797)		(831)		Net investment income	(327)		(277)
Net realized capital losses (gains)	Net realized capital losses (gains)	26		(60)		105		(229)		Net realized capital losses (gains)	(44)		143
Other expense	Other expense	8		20		25		27		Other expense	4		6
Loss on reinsurance transaction		—		—		—		91

Income tax expense	Income tax expense	52		79		71		202		Income tax expense	24		28
Underwriting gain (loss)	Underwriting gain (loss)	$	92	$	82	$	(220)	$	147	Underwriting gain (loss)	$	(216)	$	20
Personal Lines	Personal Lines									Personal Lines
Net income	Net income	$	79	$	94	$	548	$	252	Net income	$	135	$	98
Adjustments to reconcile net income to underwriting gain (loss):	Adjustments to reconcile net income to underwriting gain (loss):									Adjustments to reconcile net income to underwriting gain (loss):
Net servicing income	Net servicing income	(5)		(4)		(10)		(11)		Net servicing income	(4)		(2)
Net investment income	Net investment income	(41)		(46)		(110)		(134)		Net investment income	(35)		(41)
Net realized capital losses (gains)	Net realized capital losses (gains)	(3)		(9)		12		(36)		Net realized capital losses (gains)	(7)		23
Other expense	Other expense	2		—		1		1		Other expense	—		—
Income tax expense	Income tax expense	20		23		142		60		Income tax expense	35		25
Underwriting gain	Underwriting gain	$	52	$	58	$	583	$	132	Underwriting gain	$	124	$	103
P&C Other Ops	P&C Other Ops									P&C Other Ops
Net income		$	2	$	18	$	12	$	52
Net income (loss)										Net income (loss)	$	(13)	$	5
Adjustments to reconcile net income to underwriting gain (loss):	Adjustments to reconcile net income to underwriting gain (loss):									Adjustments to reconcile net income to underwriting gain (loss):
Net investment income	Net investment income	(14)		(21)		(40)		(64)		Net investment income	(16)		(16)
Net realized capital losses (gains)	Net realized capital losses (gains)	(2)		(4)		3		(17)		Net realized capital losses (gains)	(2)		7
Income tax expense		1		4		2		11
Income tax expense (benefit)										Income tax expense (benefit)	(4)		1
Underwriting loss	Underwriting loss	$	(13)	$	(3)	$	(23)	$	(18)	Underwriting loss	$	(35)	$	(3)

Written and Earned Premiums- Written premium represents the amount of premiums charged for policies issued, net of reinsurance, during a fiscal period. 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 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 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 premium remaining in-force from year-to-year.

THE 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

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

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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June 30, 2021. The Company will receive 9.7% of the proceeds and any pre-closing dividends.

The Company derives its revenues principally from: (a) premiums earned for insurance coverage provided to insureds; (b) management fees on mutual fund and ETP 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.

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'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. ~~During the second quarter of this year,~~In 2020, the Company extended this agreement through December 31, 2032.

Similar to property and casualty, profitability of the ~~group benefits~~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 of the Company’s mutual fund and ETP businesses depend largely on the amount of assets under management and the level of fees charged based, in part, on asset share class and product type. Changes in assets under management are driven by the two main factors of net flows and the market return of the funds, which are heavily influenced by the return realized in the equity and bond markets. Net flows are comprised of new sales less redemptions by mutual fund and ETP shareholders. Financial results are highly correlated to the growth in assets under management since these products generally earn fee income on a daily basis.

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, losses 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, corporate bonds, municipal bonds, government debt, short-term debt, mortgage-backed securities, asset-backed securities and collateralized loan 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 net 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.

Impact of COVID-19 on our financial condition, results of operations and liquidity

Impact to revenues

Written and Earned premiums

~~The~~While we are beginning to emerge from the pandemic with economic stimulus measures being passed in the U.S. and other jurisdictions and progress being made to vaccinate the public from the COVID-19 virus, the COVID-19 pandemic ~~has caused~~continues to cause significant disruption to the economy of the U.S. and other countries in which we operate. Due to government restrictions that have prevented some businesses from offering goods and services to their customers and due to shelter-in-place guidelines that have reduced business activity, many of our customers, especially small businesses, have had to curtail their operations or have found they are unable to meet cash flow needs due to declining business volume, causing some to lay off workers. 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 3%4% year over year ~~decline~~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 nine months of 2020 though only a 1% decline in third quarter 2020. In addition to the expected decline in small commercial written and earned premium, other business lines in Commercial Lines have also been negatively affected due to government-quarter. Overall,

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mandated restrictions and stay-at-home guidelines reducing business activity and due to consumers having less disposable income or less willingness to spend on the products and services that our commercial lines policyholders sell. Excluding the effect of the Navigators acquisition,first quarter 2021 Commercial Lines written premium ~~declined $249,~~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 for the nine months ended September 30, 2020 and we expect written premium declines to continue for the remainder of 2020, driven by lower new business and due to endorsements or other changes to in-force policies that decrease premiums to reflect reduced exposures.

~~Within Commercial Lines,~~decline in workers’ compensation written premium ~~declined year over year~~ in first quarter 2021 was the ~~nine month period and is expected to continue to decline over the remainder~~effect of ~~2020, partly due to declining~~lower payrolls as a result of the continued economic effects of ~~COVID-19.~~COVID-19, resulting in lower average premium per policy.

~~While the impact of the COVID-19 pandemic on~~ Personal Lines written premium ~~has been less than~~declined 4% in first quarter 2021 compared to first quarter 2020, largely attributable to the effect ~~in Commercial Lines, we expect written premium declines to continue for the remainder~~ of ~~2020 in part due to~~ increased shopping behaviors and lower new business levels arising out of the competitive marketplace. In addition, The Hartford provided a 15 percent refund on policyholders’ April, May and June personal automobile insurance premiums which reduced Personal Lines written and earned premiums by $81 in the second quarter of 2020.

In Group Benefits, ~~we expect~~ fully insured ongoing premium ~~for~~increased 4% in the first quarter of 2021 compared to first quarter of 2020, ~~to decline modestly year over year~~primarily due to higher in-force employer group disability premiums and higher supplemental health product premiums, though the ~~economic downturn causing~~book of business continues to be negatively impacted by lower ~~sales of new policies, declining payrolls reducing premiums~~insured exposure on existing accounts and the potential that some employers may cancel coverage. Because of the economic stress caused by COVID-19, we also expect a higher amount of uncollectible premiums receivable. As a result, to reflect our higher expectation of credit losses, The Hartford increased its allowance for credit losses ("ACL") on premiums receivable by $55 in the nine months ended September 30, 2020.

~~Fee revenues~~

Our Hartford Funds segment revenues are based on average daily assets under management. While fee revenues have also been affected by a continued shift to lower fee generating funds, if daily average assets under management were to decrease due to a decline in markets over the balance of the year, we could experience a larger decrease in 2020 full year net income from our Hartford Funds segment relative to 2019 net income.in-force policies.

Net investment income and realized capital gains (losses)

~~Reflecting the trend year-to-date, we expect lower~~Total net investment income increased in ~~2020 than in 2019. In an effort~~the first quarter of 2021 primarily due to stimulate the economy, central banks have reduced benchmark interest rates to near zero, impacting our yields on floating rate securities and reinvestment rates. From late March to mid-May, 2020, the Company temporarily reinvested receipts of interest and proceedsgreater income from maturing fixed maturity investments in liquid, short-term investments. While the Company resumed investing in fixed maturities in May, 2020, lower interest rates since the pandemic began have generally resulted in lower investment yields on newly invested funds. Income or losses on investments in limited partnerships and other alternative investments, ~~are recognized~~a higher return on ~~a lag as results from private~~ equity fund investments and ~~other funds are generally reported~~a higher level of invested assets, partially offset by a lower yield on fixed maturity investments resulting from lower reinvestment rates and a ~~three-month delay. A~~lower yield on floating rate investments. While longer term interest rates have risen year to date in 2021, a prolonged period of ~~lower~~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 ~~and nine month periods included a total $42 and $(269) respectively, of~~months ended March 31, 2021 totaled $43 before tax, ~~unrealized mark-to-market gains (losses) on~~largely due to an increase in equity securities held and net realized gains (losses) on equity securities sold, net of realized gains on equity derivative hedges. While equity markets in the second and third quarter of 2020 largely recovered the value they lost during the first quarter, economic conditions remain uncertain and if equity markets were to experience similar declines as occurred earlier thismarket levels since year end 2020. However, we may incur ~~more~~ net realized capital losses on equity securities in future ~~periods; however, the Company reduced its investments~~periods if we experience declines in ~~public~~ equity ~~securities during March and April of 2020, with the fair value of equity securities declining from $1.7 billion as of December 31, 2019 to $819 as of September 30, 2020.~~

Net realized capital losses for the three and nine month periods also included ($4) and $52, respectively, of increases (decreases) in the allowance for credit losses, partially offset by reversals of the allowance due to improvements in market value or sales, and $0 and $5, respectively, of intent-to-sell impairments. The increase (decrease) in the allowance for credit losses in the three and nine month periods included increases of $1 and $33, respectively, on available for sale fixed maturities and increases (decreases) of ($5) and $19, respectively, on commercial mortgage loans. If it takes a prolonged period forlevels. In addition, if the economy todoes not recover ~~or if the impacts of the economic downturn are deeper than anticipated,~~as expected, we could experience ~~further~~elevated credit losses ~~and intent-to-sell impairments,~~on fixed maturity securities, particularly ~~with~~related to highly leveraged companies, ~~and issuers in the energy, commercial real estate, and travel and leisure sectors,~~ resulting in ~~further~~ net realized capital losses.

Impact to direct benefits, losses and loss adjustment expenses from COVID-19 claims

~~For the three and nine months ended September 30, 2020, we recorded~~The Company continued to incur direct COVID-19 incurred losses ~~of $72~~ and ~~$339, respectively, including $37 and $250, respectively,~~excess mortality claims in first quarter 2021, compared to a small impact in first quarter 2020.


	For the three months ended March 31,
	2021		2020
Excess mortality claims on group life	$	185	$	—
COVID-19 short-term disability claims and benefits under New York's disability and paid family leave legislation	13		16
Workers' compensation COVID-19 claims	20		—
Global specialty financial lines and other	4		—
Total direct COVID-19 and excess mortality claims	$	222	$	16

While COVID-19 property claims in P&C ~~and $35 and $89, respectively,~~were incurred in ~~Group Benefits, reflecting management’s best estimate~~the second quarter of ~~the ultimate cost of settling~~2020, there were no COVID-19 ~~claims incurred. For the nine months ended September 30, 2020, COVID-19~~P&C property losses incurred ~~losses and loss adjustment expenses~~ in P&C primarily included $141 for property claims, $52 for workers’ compensation, net of favorable frequency on other workers' compensation claims, and $57 of incurred losses largely concentrated in financial lines such as D&O and E&O and domestic wholesale. For the three months ended ~~September 30, 2020, P&C incurred COVID-19 losses and loss adjustment expenses included $17 for workers’ compensation, net of favorable frequency, and $20 in financial lines and other.~~

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. ~~Included in the $141 of COVID-19 property incurred losses and loss adjustment expenses in the nine month period were $101 of losses arising from a small number of property policies that do not require~~

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

direct physical loss or damage and from policies intended to cover specific business needs, including crisis management and performance disruption. In addition, we recorded a reserve of $40 for legal defense costs. Given the significant business disruptions that have occurred due to the COVID-19 pandemic, the Company has experienced increased property claims, resulting in increased litigation activity and legal expenses. 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. While current accident year losses for workers’ compensation in the three and nine months ended September 30, 2020 increased $65 and $140, respectively, due to COVID-19 claims, this has been partially offset by lower claim frequency of non-COVID-19 related workers’ compensation claims due to reduced business activity, resulting in a net increase in incurred losses of $17 and $52, respectively. Favorable non-COVID-19 workers’ compensation claim frequency could continue over the remainder of 2020 though possibly to a lesser extent if more business activity resumes. COVID-19 incurred losses in the three and nine month periods of $35 and $89, respectively, in

Within Group Benefits, ~~consisted of $28 and $71, respectively, of losses on~~the Company experienced excess mortality in its group life business, including those claims ~~and $7 and $18, respectively,~~where COVID-19 is specifically listed as the cause of losses on short-term disability and paid family leave claims. The Company could incur additional COVID-19 direct incurred losses over the remainder of 2020, particularly for workers’ compensation and financial lines within P&C and in group life.death.

Other impacts from COVID-19 ~~and resulting economic downturn~~

Apart from impacts on the investment portfolio, net investment income and net realized capital gains (losses), in third quarter 2020, the Company incurred a number of other insurance business impacts from the COVID-19 pandemic and the resulting economic downturn as follows:

•~~For the three and nine months ended September 30, 2020, we recognized an estimated decrease in current accident incurred losses in~~In Personal Lines automobile, ~~of $62 and $173, respectively, due to a significant reduction in~~ miles driven ~~since the pandemic began, though miles driven has~~have begun to increase ~~again.~~again as we emerge from the pandemic which we expect will increase loss costs in 2021. In addition, as the ~~second quarter~~effects of ~~2020,~~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 ~~written~~Results of Operations for discussion of pricing and ~~earned premiums were reduced~~loss cost trends in first quarter 2021.

Aided by ~~$81 due to providing automobile policyholders with premium refunds or credits~~some improvement in ~~recognition~~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 ~~miles driven.~~

•~~The Company reduced audit~~the ACL on premiums receivable, ~~by $100 in second quarter 2020 driven by the economic effects of COVID-19 reducing our insured exposures, principally in workers’ compensation. Net of~~reflecting a related reduction in estimated incurred losses and commissions attributable to the reduction in exposure, the net effect in second quarter was a $34 reduction in income before tax. In the third quarter of 2020, there was virtually no change in estimated audit premiums receivable due to COVID-19 though we continue to expect lower ~~audit premiums based on expected lower exposures. Estimated audit premiums receivable could decrease over the remainder of 2020 with the magnitude of~~

~~the impact depending on how economic conditions change in the U.S. in the fourth quarter.~~

•From April through approximately July of 2020, the Company waived late payment fees for a period of time for business and personal insurance customers and temporarily suspended the policy cancellation process for policyholders of our Commercial Lines, Personal Lines and Group Benefits segments with the period of policy cancellations for non-payment varying by state.

•~~Because of the economic stress caused by COVID-19 and partly due to the extension of billing terms, we expect a higher amount of uncollectible premiums receivable. As a result, to reflect our higher~~ expectation of credit losses, ~~The Hartford increased its ACL on~~though there remains an elevated risk of uncollectible premiums receivable by $55 in the nine months ended September 30, 2020. The allowance on premiums receivable decreased in the third quarter of 2020 as the provision required on premiums written in the quarter was more than offset by write-offs and a $9 reduction in the provision reflecting improved collection experience, largely in Group Benefits.relative to historical trends if economic conditions do not improve further.

•~~Apart~~As we emerge from the ~~increase in the premiums receivable allowance,~~pandemic, we ~~have experienced a decline in insurance operating~~expect travel costs and ~~other expenses partly due to lower acquisition-related and other operating~~certain employee benefits costs ~~associated with lower earned premium volumes and expect that trend to continue for the remainder of 2020.~~

•As a result of the effects of COVID-19 on our economy, we evaluated our goodwill and other intangible assets for impairment as of September 30, 2020 and determined that no impairments were necessary. The estimated fair values of reporting units with goodwill and of certain intangible assets are sensitive to changes in discount rates and are based on expected cash flows assuming improvement duewill increase relative to the ~~gradual reopening~~lower level of ~~the economy continuing into 2021.~~those costs we incurred when shelter-in-place orders were more broadly in effect.

For information about ~~additional~~ resources the Company has to manage capital and liquidity, ~~during the COVID-19 pandemic and financial crisis,~~ 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, ~~and resulting economic crisis,~~ 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 ~~II.~~

~~P&C combined ratios and Group Benefits margin~~

~~In 2020, we expect our combined ratio for Commercial Lines to be higher than~~I of the ~~outlook range we provided in our 2019~~Company's Annual Report on Form 10-K ~~primarily due to COVID-19 incurred losses and higher than budgeted current accident~~for the year catastrophe losses, partially offset by net favorable prior accident year development. We expect the underlying combined ratio for Commercial Lines in 2020 to be higher due to COVID-19 incurred losses. In 2020, we expect our combined ratio for Personal Lines to be lower than the outlook range we provided in our 2019 Form 10-K, primarily due to favorable prior accident year catastrophe reserve development year-to-date, including a $260 subrogation recoverable from PG&E recorded in the second quarter, partially offset by higher than expected current accident year

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

catastrophes, and expect the underlying combined ratio for Personal lines to be lower primarily due to favorable automobile claim frequency and lower non-catastrophe homeowners’ claims, partially offset by $81 before tax of premium credits issued to policyholders in the second quarter.

Our net income margin and core earnings margin for Group Benefits has been trending toward the higher end of the outlook ranges we provided in our 2019 Form 10-K and will continue to be influenced by the net effect of COVID-19 group life claims and continued favorable emergence of claim incidence on group disability over the balance of 2020.

~~Common stockholders’ equity~~

Apart from the direct loss and premium impacts of COVID-19 on net income, we could also experience a reduction in AOCI within common stockholders’ equity. The net unrealized gain position on our portfolio of fixed maturities, AFS increased by $933 fromended December 31, 2019 to September 30, 2020, due to an increase in valuations resulting from a decline in interest rates, partially offset by wider credit spreads. If credit spreads widen going forward or if interest rates increase from the level they were at as of September 30, 2020, we would recognize a decline in the fair value of fixed maturities, AFS in future periods through a reduction of AOCI within common stockholders’ equity.2020.

During the nine months ended September 30, 2020, the Company repurchased 2.7 million common shares for $150 under a $1.0 billion share repurchase authorization by the Board of Directors approved in February, 2019. Any repurchase of shares under the remaining equity repurchase authorization of $650 is dependent on market conditions and other factors including the extent to which COVID-19 impacts our business, results of operations, financial condition and liquidity.

~~For further information on the Company's reporting segments refer to Part I, Item 1, Business - Reporting Segments in The Hartford’s 2019 Form 10-K Annual Report.~~

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 ~~$500~~$540 by ~~2022.~~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 ~~spend~~incur approximately ~~$360,~~$410 over the course of the program, with ~~those costs~~$180 expensed cumulatively through March 31, 2021, and expected ~~to be approximately $156~~expenses of $75 over the last ~~six~~nine months of ~~2020, $90 in~~ 2021, ~~$64~~$77 in 2022 and ~~$50~~$78 after ~~2022. The estimated costs~~2022, with the expenses after 2022 consisting mostly of ~~approximately $360 includes an expected $60 in capitalized development costs for~~amortization of internal use software to be amortized over the useful life of the software, typically 3 years. Of the estimated costs of $360, approximately $310 would be recognized as an expense through the end of 2022, with $50 of IT asset amortization after 2022.and capitalized real estate costs. Included in the estimated costs of ~~$360,~~$410, we expect to incur restructuring costs of approximately ~~$150,~~$164, including ~~$78~~$73 of employee severance incurred in 2020, and approximately ~~$72~~$91 of other costs, including consulting expenses and the cost to retire certain IT applications. These estimated restructuring and other costs do not include all of the costs associated with a real estate consolidation plan as those plans are not yet sufficiently developed to provide a full estimate of those costs and related savings.

Restructuring costs are reported as a charge to net income but not in core earnings. All other costs of the Hartford Next program will be included in insurance operating costs and other expenses in the Condensed Consolidated Statement of Operations. Relative to 2019 full year actual expenses, the Company estimates a net increase in insurance operating costs and other expenses of approximately $81 over the last six months of 2020 and expects a net expense reduction of approximately $210 in 2021 and approximately $436 in 2022.

The following table ~~shows the expected costs of the~~presents Hartford Next program costs incurred, including restructuring costs, and ~~expected~~ expense savings ~~through~~realized in the three months ended March 31, 2021 and expected annual costs and expense savings for the full year in 2021 and 2022:

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

Hartford Next Expected Costs and Expense Savings
Estimate for Second Half of 2020 Estimate for 2021 Estimate for 2022
Employee severance $ 78 $ — $ —
IT costs to retire applications 4 10 14
Professional fees and other expenses 34 10 —
Estimated restructuring costs to be expensed and paid 116 20 14
Non-capitalized IT costs to be paid 30 50 30
Other costs to be paid 10 20 10
Amortization of capitalized IT development costs [1] — — 10
Estimated costs within core earnings 40 70 50
Total estimated Hartford Next program costs to be expensed [2] $ 156 $ 90 $ 64
Cumulative savings relative to 2019 beginning July 1, 2020 $ (75) $ (300) $ (500)
Net expense (savings) before-tax: $ 81 $ (210) $ (436)
Net expense (savings) before-tax:
To be accounted for within core earnings $ (35) $ (230) $ (450)
Restructuring costs recognized outside of core earnings 116 20 14
Net expense (savings) before tax $ 81 $ (210) $ (436)


Hartford Next Costs and Expense Savings
	Three months ended March 31, 2021		Estimate for 2021		Estimate for 2022

IT costs to retire applications	$	2	$	11	$	14
Professional fees and other expenses	9		24		11

Estimated restructuring costs	11		35		25

Non-capitalized IT costs	12		49		30
Other costs	4		17		14
Amortization of capitalized IT development costs [1]	—		1		6
Amortization of capitalized real estate [2]	—		—		2
Estimated costs within core earnings	16		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 earnings	11		35		25
Net expense (savings) before tax	$	(63)	$	(268)	$	(463)

[1]Does not include approximately $50 of IT asset amortization after 2022.

[2] ~~Includes $87~~Does not include approximately $21 of ~~restructuring costs incurred through September 30, 2020.~~real estate amortization after 2022.

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

Financial Highlights

Net Income Available to Common Stockholders

Net Income Available to Common Stockholders per Diluted Share

Book Value per Diluted Share

Decreased ~~$71~~$24 or ~~14%~~9%

Decreased ~~$0.17~~$0.07 or ~~12%~~9%

ÝÞ

~~Increased $4.62~~Decreased $2.35 or ~~11%~~5%

~~Higher current~~Greater net unfavorable prior accident year ~~catastrophes largely~~reserve development, primarily due to ~~losses from wildfires, hurricanes, tropical storms,~~increases in reserves for sexual molestation and ~~other wind and hail events.~~sexual abuse in the 2021 period.

Decrease in net income available to common stockholders.

~~Increase~~Decrease in common stockholders' equity largely due to ~~an increase~~a decrease in AOCI, primarily driven by a decrease in net unrealized capital gains on available for sale securities.

Decrease in dilutive shares, and consequently weighted average shares outstanding, principally due to a decrease in the dilutive effect of stock compensation as a result of average market price declines during the period.

~~Restructuring costs related to~~Higher mortality within group life driven by the ~~Hartford Next initiative, primarily severance costs.~~

direct and indirect impacts of COVID-19.

~~Net income~~Increase in ~~excess of stockholder dividends.~~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.

~~Lower net realized capital gains, including a loss on sale of Continental Europe Operations of $32, after tax.~~

An increase in current accident year catastrophes.

~~Decrease in dilutive shares.~~

~~$57, after tax, of COVID-19 claims across group life, disability, financial lines and workers’ compensation, net of favorable workers’ compensation frequency.~~

Share repurchase activity.

A change from ~~income~~net realized capital losses in the 2020 period to ~~loss from~~net realized capital gains in the ~~retained interest in Talcott Resolution.~~2021 period.

~~Loss on extinguishment of debt~~An increase in ~~2019 period.~~

net investment income.

~~Lower non-COVID-19 current accident year non-catastrophe property losses~~An improvement in the P&C underlying combined ratio, including a decrease in insurance operating costs and ~~lower personal automobile claim frequency.~~other expenses.

~~Greater net favorable prior accident year development.~~

~~Lower insurance operating costs and other expenses, partly driven by lower variable incentive costs and reduced travel expenses.~~

Investment Yield, After Tax

Property & Casualty Combined Ratio

Group Benefits Net Income Margin

ÞÝ

~~Decreased~~Increased 10 bps

Increased ~~0.2~~8.2 points

Decreased ~~1.6~~6.3 points

~~Lower reinvestment rates and lower yield on variable rate securities due to the decline in interest rates.~~

~~Higher current accident year catastrophes, largely due to losses from Pacific Coast wildfires, hurricanes and tropical storms.~~

~~COVID-19 incurred benefits and losses of $28 after tax.~~

~~Lower net investment income.~~

Greater ~~income from non-routine income items, including make-whole payments~~returns on ~~fixed maturities.~~limited partnerships and other alternative investments.

~~Higher current~~Greater net unfavorable prior accident year ~~loss ratio~~reserve development, primarily due to increases in ~~Commercial Lines driven by COVID-19 losses, partially offset by lower non-catastrophe property losses.~~reserves for sexual molestation and sexual abuse in the 2021 period.

~~A decrease~~Higher mortality in ~~net realized capital gains.~~

~~Lower insurance operating costs~~group life, driven by the direct and ~~other expenses, including lower variable incentive compensation and lower integration costs.~~indirect impacts of COVID-19.

Higher ~~income~~returns on ~~limited partnerships and other alternative investments~~equity fund investments.

Higher current accident year catastrophe losses.'

A change from net realized capital losses in ~~2020.~~the 2020 period to net realized capital gains in 2021 period.

A higher level of invested assets.

Lower current accident year loss ratio, ~~in Personal Lines,~~ due to lower personal automobile claim ~~frequency.~~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 .

~~Excluding COVID-19 impacts, a~~+

A lower group disability loss ratio ~~driven by lower claim incidence partially offset by less~~primarily due to more favorable prior incurral year ~~development.~~development driven by higher claim recoveries and continued improving claim incidence.

~~More favorable prior accident year development~~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.

~~Lower amortization of DAC and lower underwriting expenses, mostly driven by lower variable incentive compensation and travel costs.~~


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

CONSOLIDATED RESULTS OF OPERATIONS

The Consolidated Results of Operations should be read in conjunction with the Company's Condensed Consolidated Financial Statements and the related Notes ~~beginning on page 7~~ as well as with the segment operating results sections of MD&A.

Consolidated Results of Operations


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2020		2019		Change		2020		2019		Change			2021		2020		Change
Earned premiums	Earned premiums	$	4,347	$	4,394	(1	%)	$	12,972	$	12,500	4	%	Earned premiums	$	4,343	$	4,391	(1	%)
Fee income	Fee income	323		330		(2	%)	941		970		(3	%)	Fee income	355		320		11	%
Net investment income	Net investment income	492		490		—	%	1,290		1,448		(11	%)	Net investment income	509		459		11	%
Net realized capital gains (losses)	Net realized capital gains (losses)	6		89		(93	%)	(116)		332		(135	%)	Net realized capital gains (losses)	80		(231)		135	%
Other revenues	Other revenues	3		44		(93	%)	108		129		(16	%)	Other revenues	12		17		(29	%)
Total revenues	Total revenues	5,171		5,347		(3	%)	15,195		15,379		(1	%)	Total revenues	5,299		4,956		7	%
Benefits, losses and loss adjustment expenses	Benefits, losses and loss adjustment expenses	2,962		2,914		2	%	8,725		8,533		2	%	Benefits, losses and loss adjustment expenses	3,350		2,916		15	%
Amortization of deferred policy acquisition costs	Amortization of deferred policy acquisition costs	421		437		(4	%)	1,287		1,184		9	%	Amortization of deferred policy acquisition costs	416		437		(5	%)
Insurance operating costs and other expenses	Insurance operating costs and other expenses	1,093		1,167		(6	%)	3,394		3,356		1	%	Insurance operating costs and other expenses	1,144		1,176		(3	%)
Loss on extinguishment of debt		—		90		(100	%)	—		90		(100	%)
Loss on reinsurance transaction		—		—		—	%	—		91		(100	%)

Interest expense	Interest expense	58		67		(13	%)	179		194		(8	%)	Interest expense	57		64		(11	%)
Amortization of other intangible assets	Amortization of other intangible assets	18		19		(5	%)	55		47		17	%	Amortization of other intangible assets	18		19		(5	%)
Restructuring and other costs	Restructuring and other costs	87		—		NM		87		—		NM		Restructuring and other costs	11		—		NM
Total benefits, losses and expenses	Total benefits, losses and expenses	4,639		4,694		(1	%)	13,727		13,495		2	%	Total benefits, losses and expenses	4,996		4,612		8	%
Income, before tax	Income, before tax	532		653		(19	%)	1,468		1,884		(22	%)	Income, before tax	303		344		(12	%)
Income tax expense	Income tax expense	73		118		(38	%)	268		347		(23	%)	Income tax expense	54		71		(24	%)

Net income	Net income	459		535		(14	%)	1,200		1,537		(22	%)	Net income	249		273		(9	%)
Preferred stock dividends	Preferred stock dividends	6		11		(45	%)	16		16		—	%	Preferred stock dividends	5		5		—	%
Net income available to common stockholders	Net income available to common stockholders	$	453	$	524	(14	%)	$	1,184	$	1,521	(22	%)	Net income available to common stockholders	$	244	$	268	(9	%)

Three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019~~March 31, 2020

Net income available to common stockholders decreased by ~~$71,~~$24, primarily driven by $206 before tax of greater unfavorable P&C prior accident year development, losses in Group Benefits resulting from higher mortality in group life, including deaths specifically attributable to COVID-19, and a ~~$123~~$140 before tax increase in current accident year ~~catastrophes, $87 before tax of restructuring costs in third quarter 2020, an $83 before tax decrease in net realized gains, $72 before tax in COVID-19 claims and a change from income to~~catastrophe losses ~~from~~driven by the ~~retained Talcott Resolution investment,~~February 2021 winter storms. These declines were partially offset by a ~~$90~~$311 before tax ~~loss on debt extinguishment in third quarter 2019, lower Personal Lines auto claim frequency, lower non-~~

~~catastrophe property~~change from net realized capital losses in ~~Commercial Lines, more favorable~~the 2020 period to net realized capital gains in the 2021 period, a $50 before tax increase in net investment income 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 ~~lower insurance operating costs across all segments.For~~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 segment, see MD&A - Segment Operating Summaries. 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.

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

Revenue

Earned Premiums

[1] For the three months ended ~~September 30, 2019, there was~~March 31, 2020, the total includes $4 in ~~earned premiums recorded Corporate other revenue.~~Corporate.

Earned premiums ~~decreased~~declined by $48, or 1%, primarily due to:

•A decline in ~~P&C resulting from~~Property and Casualty reflecting a 5% decline ~~of 3%~~ in Personal Lines and a 1% decline in Commercial Lines.

•Relatively flat earned premiums in Commercial Lines as the impact of the COVID-19 pandemic, including declines in new business, lower estimated audit premiums, endorsements reducing insured exposures and declines in policy retention, werePartially offset by ~~continued written pricing increases in all lines except workers' compensation.~~

•~~A decline~~a 2% increase in Group Benefits primarily due to ~~a 4% decline in~~higher-in-force employer group ~~life.~~disability premium and higher supplemental health product premium.

Fee income ~~decreased primarily due to lower fee income in~~increased driven by Hartford Funds as a result of ~~a shift~~higher daily average assets under management due to an increase in ~~mix of assets to lower fee generating funds.~~equity market levels.

~~Other revenues~~ ~~decreased primarily due to a change from income to loss on the Talcott Resolution investment, the retained interest in the legal entity that acquired the life and annuity business sold in 2018.~~

Net Investment Income

Net investment income increased primarily due to:

•~~Higher~~Greater income onfrom limited partnerships and other alternative investments ~~due to improved performance~~primarily driven by higher valuations of ~~certain~~underlying investments within private equity ~~and credit funds. Income (loss) from limited partnerships is generally reported on a three-month delay.~~funds

•~~Higher non-routine income~~A higher return on equity fund investments resulting from the increase in ~~2020, primarily make-whole payments on fixed maturities, and a~~equity market levels

•A higher level of invested ~~assets.~~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) ~~decreased~~improved from net losses of $231 in first quarter 2020 to net gains of $80 in first quarter 2021, primarily driven by:

•~~Lower~~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 ~~on sales~~upon termination of ~~fixed maturities~~derivatives used to hedge against a decline in equity market levels.

•A ~~loss~~net reduction in ACL on fixed maturities in the 2021 period due to an increase in fair value of ~~$51, before tax,~~corporate securities, compared to an increase in the ACL on ~~sale of~~fixed maturities in the ~~Company’s Continental Europe Operations which the Company agreed to sell in September of 2020.~~2020 period.

•Partially offset by ~~greater~~lower net realized capital gains on ~~equity securities due to appreciation in valuation driven by an increase in equity market levels in third quarter 2020.~~sales of fixed maturity securities.

For further discussion of investment results, see MD&A - Investment Results, Net Realized Capital Gains and MD&A - Investment Results, Net Investment Income.

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

Benefits, losses and expenses

Losses and LAE Incurred for P&C

Benefits, losses and loss adjustment expenses increased due to:

•An increase in ~~incurred losses for~~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, ~~driven by:~~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 $23 of net unfavorable reserve development in first quarter 2020 included $29 of adverse development as the result 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.

–An increase in current accident year catastrophe losses of ~~$123, before tax.~~$140. Catastrophe losses of $214 in the ~~third~~first quarter of ~~2020 were~~2021 included $176 from February winter storms primarily in the South, with the remainder from ~~wildfires in California and Oregon, hurricane Laura on the Gulf Coast, tropical storm Isaias on the East Coast, a Midwest derecho and other~~various wind and hail events, mostly concentrated in the ~~Central Plains.~~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 ~~2019~~2020 were primarily from tornado, wind and hail events in ~~various areas of~~ the Midwest and ~~Mountain West as well as losses from hurricanes and tropical storms in the~~ Southeast. For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.

–APartially offset by a decrease in Property & Casualty current accident year ("CAY") loss and loss adjustment expenses before catastrophes primarily due to lower ~~non-COVID-19 non-catastrophe property losses~~personal automobile claim frequency, and lower claim frequency in personal automobile due to shelter-in-place guidelines reducing miles driven and favorable frequency of non-COVID-19 workers' compensation claims due to reduced business activity and lower payrolls, partially offset by direct COVID-19 incurred losses and higher current accident year loss ~~costs~~ratios in middle market workers’ compensation, U.S. wholesale, global ~~specialty international~~reinsurance and U.S. financial lines.

–More favorable Property & Casualty net prior accident year reserve development of $28, before tax. Prior accident year reserve development in third quarter 2020 was a net favorable $75 before tax and primarily included a reduction in reserves in workers’ compensation, personal auto, professional liability, and package business. Due to recognizing a deferred gain on

retroactive reinsurance, the $75 of net favorable reserve development in third quarter 2020 was net of $14 before tax of adverse development for Navigators related to 2018 and prior accident years even though that development has been economically ceded to NICO. Prior accident year development in the 2019 period primarily included a decrease in reserves for workers’ compensation, personal automobile liability and package business, partially offset by an increase in reserves for commercial automobile and general liability. For further discussion, see Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements.

~~Losses and LAE Incurred for Group Benefits~~

•~~Within Group Benefits, an increase due to COVID-19 incurred benefits and losses of $35 before tax, mostly driven by group life claims.~~

~~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 with a decrease in Commercial Lines mostly due to lower commissions and a decrease in Personal Lines commensurate with the decline in earned premiums.~~

~~Insurance operating costs and other expenses~~ ~~decreased due to lower incentive compensation, lower employee travel expenses, and a decrease in Hartford Funds due to lower variable costs.~~

~~Restructuring and other costs~~ ~~are due to the Company's Hartford Next operational transformation and cost reduction plan which includes $78 of accrued severance costs.~~

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

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 18 - Restructuring and Other Costs of Notes to Condensed Consolidated Financial Statements.

~~Income tax expense~~ ~~decreased primarily due to a decrease in income before tax. For further discussion of income taxes, see Note 13 - Income Taxes of Notes to Condensed Consolidated Financial Statements.~~

~~Nine months ended September 30, 2020 compared to the nine months ended September 30, 2019~~

~~Net income available to common stockholders~~ decreased by $337 primarily driven by a $448 before tax change from net realized capital gains in the 2019 period to net realized capital losses in the 2020 period, $339 before tax in COVID-19 claims in the 2020 period, a $203 before tax increase in current accident year catastrophes, a $158 before tax decrease in net investment income, and $87 before tax of restructuring costs in third quarter 2020, partially offset by more favorable P&C prior accident year development, the Navigators ADC premium paid of $91 before tax in the 2019 period, a $90 before tax loss on debt extinguishment in the 2019 period, lower Personal Lines auto claim frequency in the 2020 period net of premium credits given to policyholders in second quarter 2020, the effect of lower claim incidence and higher recoveries on non-COVID group disability claims and lower non-catastrophe property losses in Commercial Lines.

For a discussion of the Company's operating results by segment, see MD&A - Segment Operating Summaries. In addition, 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.

~~Revenue~~

~~Earned Premiums~~

~~[1] For the nine months ended September 30, 2020, the total includes $9 in Corporate. For the nine months ended September 30,2019, there was $5 of earned premiums recorded in Corporate other revenue.~~

~~Earned premiums~~ ~~increased primarily due to:~~

•An increase in Property and Casualty reflecting an 11% increase in Commercial Lines driven by the Navigators Group acquisition, partially offset by a 6% decline in Personal Lines. Driving part of the decrease in Personal Lines earned premiums for the nine month period was the impact of the Company offering a 15 percent credit on policyholders’ April, May and June personal automobile insurance premiums totaling $81.

•~~A 1% decrease in Group Benefits, principally driven by a decline in group life.~~

~~Fee income~~ ~~decreased due to:~~

•~~Lower fee income in Hartford Funds largely due to a shift in mix of assets to lower fee generating funds and, to a lesser extent, lower installment fee income in P&C.~~

~~Other revenues~~ ~~decreased primarily due to less transition services revenue received in the current year related to the sale of the life and annuity business in 2018.~~

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

~~Net Investment Income~~

~~Net investment income~~ ~~decreased primarily due to:~~

•Lower returns on limited partnership and other alternative investments in 2020 due primarily to lower valuations of the underlying fund investments as a result of the economic impacts of the COVID-19 pandemic. Income (loss) from limited partnerships is generally reported on a three-month delay.

•~~A lower yield on fixed maturity investments resulting from reinvesting at lower rates and a lower yield on floating rate investments.~~

•~~Partially offset by a higher level of invested assets, due in part to the acquisition of Navigators Group.~~

~~Net realized capital gains (losses)~~ ~~decreased from net gains in the 2019 period to net losses in the 2020 period, primarily driven by:~~

•~~Depreciation in the value of equity securities due to the significant decline in equity market levels in the first quarter of 2020 as well as realized losses upon sales of equity securities.~~

•A loss of $51, before tax, on sale of the Company’s Continental Europe Operations, which the Company agreed to sell in September of 2020, partially offset by gains realized upon termination of derivatives used to hedge against declines in equity market levels and, to a lesser extent, slightly higher net gains on sales of fixed maturity securities in 2020, primarily driven by trades to manage duration and credit.

~~For further discussion of investment results, see MD&A - Investment Results, Net Realized Capital Gains and MD&A - Investment Results, Net Investment Income.~~

~~Benefits, losses and expenses~~

~~Losses and LAE Incurred for P&C~~

~~Benefits, losses and loss adjustment expenses~~ ~~increased due to:~~

~~An increase in incurred losses for Property & Casualty which was driven by an increase in Commercial Lines, partially offset by a decrease in Personal Lines, and was attributable to:~~

–An increase in Property & Casualty current accident year ("CAY") loss and loss adjustment expenses before catastrophes due to the effect on incurred losses of earned premium from the Navigators Group acquisition, and COVID-19 incurred losses of $250. Also contributing were higher current accident year loss costs in international lines, more than offset by lower weather-related non-COVID-19 non-catastrophe property claims and lower claim frequency in personal automobile due to shelter-in-place guidelines reducing miles driven. COVID-19 incurred losses are net of favorable frequency of workers’ compensation claims due to reduced business activity and lower payrolls.

–An increase in current accident year catastrophe losses of $203, before tax. Catastrophe losses in the 2020 period were primarily from wildfires in California and Oregon, Tropical Storm Isaias and Hurricane Laura

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

losses in third quarter 2020, the civil unrest during the second quarter of 2020 and from tornado, wind and hail events in the South, Midwest and Central Plains. Catastrophe losses in the 2019 period were primarily from tornado, wind and hail events in the South, Midwest and Mountain West and winter storms across the country as well as from hurricanes and tropical storms in the Southeast. For additional information, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.

–More favorable Property & Casualty net prior accident year reserve development of $297, before tax. Prior accident year reserve development in the 2020 period was a favorable $320 before tax, driven by $413 of reserve reductions related to catastrophes, including decreases in estimated losses arising from wind and hail events in 2018 and 2019 and from the 2017 and 2018 California wildfires, including a $289 before tax subrogation benefit from PG&E. Apart from catastrophes, reserve development in the nine months ended September 30, 2020 primarily included a $129 before tax reserve increase for sexual molestation and abuse claims and $97 before tax of adverse development for Navigators related to 2018 and prior accident years. While the Navigators’ reserve development has been economically ceded to NICO, the Company recognized a deferred gain under retroactive reinsurance accounting. Prior accident year development in the 2019 period primarily included reserve decreases for workers’ compensation, catastrophes, and package business, partially offset by increases in general liability and professional liability, including increases in Navigators Group reserves upon acquisition of the business. For further discussion, see MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.

Losses and LAE Incurred for Group Benefits

•~~Partially offsetting the increase in Property & Casualty was a decrease in Group Benefits driven by a lower group disability~~

~~loss ratio including an increase in favorable prior incurral year development, partially offset by $89 before tax of COVID-19 incurred benefits and losses.~~

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 ~~increased~~decreased from the prior year period due primarily ~~due~~ to ~~an increase in Commercial Lines primarily due to the impact of the Navigators Group acquisition, partially offset by a decrease~~reductions in Personal Lines, middle & large commercial and small commercial, which was consistent with ~~Group Benefits down slightly from~~ the ~~prior year period.~~decline in earned premium in those lines of business.


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

Insurance operating costs and other expenses ~~increased~~decreased primarily due to:

•~~Higher information technology~~Lower staffing and other costs ~~in Group Benefits.~~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 full nine months of operating costs incurred in the 2020 period due to the Navigators Group acquisition in May of 2019, partially offset by lower integration and transaction costs in the nine months ended September 30, 2020.

•~~A $55 before tax increase~~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 ~~offsetting~~offset by higher commissions expense as a result of increased premiums in Group Benefits, increased AARP direct marketing costs in Personal Lines and higher variable costs of the ~~increase in expenses was a decrease in~~ Hartford Funds business due to ~~lower variable costs and~~higher daily average assets under management.

Interest expense declined as a ~~reduction~~result of the Company repaying at maturity the $500 principal amount of its 5.5% senior notes in ~~incentive compensation and employee travel costs.~~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 ~~$78 of accrued severance costs.~~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 1817 - Restructuring and Other Costs of Notes to Condensed Consolidated Financial Statements.

Income tax expense decreased primarily due to ~~a decrease~~an decline in income before tax.

For further discussion of income taxes, see Note 1311 - Income Taxes of Notes to Condensed Consolidated Financial Statements.

INVESTMENT RESULTS


Composition of Invested Assets
	March 31, 2021				December 31, 2020
	Amount		Percent		Amount		Percent
Fixed maturities, available-for-sale ("AFS"), at fair value	$	43,607	78.3	%	$	45,035	79.7	%

Equity securities, at fair value	1,632		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 investments	2,326		4.2	%	2,082		3.7	%
Other investments [1]	207		0.4	%	201		0.4	%
Short-term investments	3,367		6.0	%	3,283		5.8	%
Total investments	$	55,727	100.0	%	$	56,532	100.0	%

[1]Primarily consists of equity fund investments, overseas deposits, consolidated investment funds and derivative instruments which are carried at fair value.

March 31, 2021 compared to December 31, 2020

Fixed maturities, AFS decreased primarily due to a decrease in valuations due to higher interest rates, partially offset by tighter credit spreads.

7462


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

~~INVESTMENT RESULTS~~

Composition of Invested Assets
September 30, 2020 December 31, 2019
Amount Percent Amount Percent
Fixed maturities, available-for-sale ("AFS"), at fair value $ 44,044 80.4 % $ 42,148 79.5 %
Fixed maturities, at fair value using the fair value option ("FVO") — — % 11 — %
Equity securities, at fair value 819 1.5 % 1,657 3.1 %
Mortgage loans (net of ACL of $38 and $0) 4,461 8.1 % 4,215 8.0 %
Limited partnerships and other alternative investments 1,868 3.4 % 1,758 3.3 %
Other investments [1] 187 0.4 % 320 0.6 %
Short-term investments 3,399 6.2 % 2,921 5.5 %
Total investments $ 54,778 100.0 % $ 53,030 100.0 %

~~[1]Primarily consists of consolidated investment funds and derivative instruments which are carried at fair value.~~

~~September 30, 2020 compared to December 31, 2019~~

~~Fixed maturities, AFS~~ ~~increased primarily due to net additions of corporate securities and an increase in valuations as a result of a decline in interest rates, partially offset by wider credit spreads.~~

~~Equity Securities, at fair value~~ ~~decreased primarily due to sales of equity securities during March and April.~~

~~Short-term investments~~ increased due to actions taken in the first half of the year to increase liquidity, primarily by reinvesting principal and interest, as well as proceeds from sales, into short-term instruments, partially offset by the March 2020 pay down of $500 of senior notes at maturity and the return of collateral related to a decline in the Company's security lending program.


Net Investment Income	Net Investment Income																	Net Investment Income
		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
		2020				2019				2020				2019					2021				2020
(Before tax)	(Before tax)	Amount		Yield [1]		Amount		Yield [1]		Amount		Yield [1]		Amount		Yield [1]		(Before tax)	Amount		Yield [1]		Amount		Yield [1]
Fixed maturities [2]	Fixed maturities [2]	$	359	3.4	%	$	392	3.8	%	$	1,093	3.5	%	$	1,159	3.9	%	Fixed maturities [2]	$	349	3.2	%	$	377	3.6	%
Equity securities	Equity securities	9		4.5	%	12		3.4	%	27		3.4	%	31		3.0	%	Equity securities	10		2.8	%	12		3.0	%
Mortgage loans	Mortgage loans	44		3.9	%	37		4.2	%	128		3.9	%	118		4.3	%	Mortgage loans	43		3.8	%	42		3.9	%
Limited partnerships and other alternative investments	Limited partnerships and other alternative investments	83		18.3	%	65		15.3	%	70		5.2	%	181		14.7	%	Limited partnerships and other alternative investments	112		21.1	%	58		13.2	%
Other [3]	Other [3]	14				5				23				21				Other [3]	14				(12)
Investment expense	Investment expense	(17)				(21)				(51)				(62)				Investment expense	(19)				(18)
Total net investment income	Total net investment income	$	492	3.8	%	$	490	4.0	%	$	1,290	3.4	%	$	1,448	4.1	%	Total net investment income	$	509	3.8	%	$	459	3.7	%
Total net investment income excluding limited partnerships and other alternative investments	Total net investment income excluding limited partnerships and other alternative investments	$	409	3.3	%	$	425	3.6	%	$	1,220	3.3	%	$	1,267	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.

[2]Includes net investment income on short-term investments.

[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.

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

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Total net investment income increased ~~slightly for the three months ended September 30, 2020 as a result of higher~~primarily due to:

•Greater income from limited partnerships and other alternative investments primarily driven by ~~improved performance~~higher valuations of ~~certain~~underlying investments within private equity ~~and credit~~ funds ~~largely~~

•A higher return on equity fund investments within Other resulting from the increase in equity market levels

•A higher level of invested assets

•Partially offset by a lower ~~income from fixed maturities. Income from~~yield on fixed maturities ~~declined as a result of~~resulting from reinvesting at lower rates and ~~lower yields on floating rate investments, partially offset by higher income from non-routine income items, which primarily include make-whole payments, and higher asset levels.~~

Total net investment income decreased for the nine months ended September 30, 2020, primarily due to lower income from limited partnerships and other alternative investments in the second quarter of 2020, which was a result of unfavorable impact on valuations from the economic impacts of the COVID-19 pandemic. Also contributing to the decrease was a lower yield on ~~fixed maturity investments resulting from lower reinvestment rates and lower yields on~~ floating rate ~~securities, partially offset by a higher level of invested assets, due in part to the acquisition of Navigators Group.~~

investments.

Annualized net investment income yield, excluding limited partnerships and other alternative investments and non-routine items on fixed maturities, which primarily include make-whole payments ~~on fixed maturities~~and prepayment fees, was down primarily due to lower reinvestment ~~and short-term rates.~~rates, partially offset by higher equity fund investment returns.

Average reinvestment ~~rates~~rate, on fixed maturities and mortgage loans, excluding certain U.S. Treasury securities, for the ~~three and nine month periods ended September 30, 2020, were 2.1% and 2.5%~~first quarter of 2021 was 2.3%, ~~respectively,~~ which ~~were~~was below the average yield of sales and maturities of ~~3.5%~~2.9% for the same ~~periods. Average~~period. The average reinvestment ~~rates~~rate for the 2020 three ~~and nine~~ month ~~periods ended September 30, 2019, were 3.1% and 3.5%~~period was 2.9%, ~~respectively,~~ which ~~were~~was below the average yield of sales and maturities of ~~4.1% and 4.0%, respectively.~~3.3%.

WeFor the 2021 calendar year, we expect the annualized net investment income yield, ~~for the year ended December 31, 2020,~~ excluding limited partnerships and other alternative investments and non-routine items on fixed maturities, to be lower than the portfolio yield earned ~~for the year ended December 31, 2019,~~in 2020, due to a lower yield on short-term investments and lower reinvestment ~~rates, lower prepayment penalties on mortgage loans, and greater liquidity in the portfolio as a percentage of total investments.~~rates. The estimated impact on net investment income yield is subject to change due to evolving market conditions and active portfolio management.

Net Realized Capital Gains (Losses)
Three Months Ended September 30, Nine Months Ended September 30,
(Before tax) 2020 2019 2020 2019
Gross gains on sales $ 27 $ 77 $ 201 $ 190
Gross losses on sales (12) (4) (42) (44)
Equity securities [1] 42 19 (269) 181
Net credit losses on fixed maturities, AFS [2] (1) (33)
Change in ACL on mortgage loans [3] 5 (19)
Intent-to-sell impairments [4] — — (5) —
Net other-than-temporary impairment ("OTTI") losses recognized in earnings (1) (3)
Valuation allowances on mortgage loans — 1
Other, net [5] (55) (2) 51 7
Net realized capital gains (losses) $ 6 $ 89 $ (116) $ 332


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


Net Realized Capital Gains (Losses)
	Three Months Ended March 31,
(Before tax)	2021		2020
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)

[2]Due to the adoption of accounting guidance for credit losses on January 1, 2020, realized capital losses previously reported as OTTI are now presented as credit losses which are net of any recoveries. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies. In addition, seeSee Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments within the Investment Portfolio Risks and Risk Management section of the MD&A.

[3]Represents the change in ACL recorded during the period following the adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies. In addition, seeSee ACL on Mortgage Loans within the Investment Portfolio Risks and Risk Management section of the MD&A.

[4]~~See Intent-to-Sell Impairments within the Investment Portfolio Risks and Risk Management section of the MD&A.~~

~~[5]Primarily includes loss of $51 from the sale of the Continental Europe Operations for~~For the three ~~and nine~~ months ended ~~September 30, 2020. Also~~March 31, 2021 primarily includes gains (losses) from transactional foreign currency revaluation of ~~$(4)~~$(7) and ~~$6 for the three and nine months ended September 30, 2020, respectively. Additionally, for the same periods, includes~~ gains (losses) on non-qualifying derivatives of ~~$(2) and $97, respectively.~~$35. For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, includes gains (losses) from transactional foreign currency revaluation of $10 and gains (losses) on non-qualifying derivatives of ~~$(5) and $3, respectively.~~$92.

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

Three ~~and nine~~ months ended ~~September 30,~~March 31, 2021

Gross gains and losses on sales were primarily driven by issuer-specific sales of 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 market levels.

Other, net gainswere primarily due to $32 of gains on interest rate derivative trades, driven by an increase in interest rates.

Three months ended March 31, 2020

Gross gains and losses on sales were primarily driven by issuer-specific selling of corporate securities and RMBS as well as sales of U.S. treasury securities for duration ~~and/or liquidity management and issuer-specific sales of corporate securities and tax-exempt municipal bonds.~~management.

Equity securities net gains for the three month period ended September 30, 2020 were primarily driven by mark-to-market gains due to an increase in equity market levels. For the nine month period ended September 30, 2020, net losses were primarily driven by mark-to-market losses due to ~~the~~a decline in equity market levels ~~in the first quarter~~ and losses incurred on sales across multiple issuers as the Company reduced its exposure to equity ~~securities.~~securities during the quarter.

Other, net gains for the three month period ~~are~~were primarily due to ~~a loss of $51, before tax, on sale of the Company’s Continental Europe Operations which the Company agreed to sell in September of 2020, while the nine month period also includes~~ $75 of realized gains on terminated derivatives used to hedge against a decline in equity market levels and ~~$21~~$20 of gains on interest rate derivatives due to a decline in interest rates.

~~Three and nine months ended September 30, 2019~~

~~Gross gains and losses on sales~~ ~~were primarily the result of duration, liquidity and credit management within U.S. treasury securities, corporate securities, and tax-exempt municipal bonds.~~

~~Equity securities~~ ~~net gains were primarily driven by appreciation of equity securities due to higher equity market levels.~~

~~Other, net gains~~ for the three month period were primarily due to losses on interest rate derivatives of $5 due to a decline in interest rates. Gains for the nine month period were primarily due to gains on credit derivatives of $26 driven by credit spread tightening, partially offset by losses on interest rate derivatives of $20 due to 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;

•evaluation of goodwill for impairment;

•valuation of investments and derivative instruments including evaluation of ~~other-than-temporary impairments~~credit losses on ~~available-for-sale securities~~fixed maturities, AFS and ~~valuation allowances~~ACL on mortgage loans;

•~~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 ~~2019~~2020 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 ~~2019~~2020 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, 2020.~~March 31, 2021.


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

Property & Casualty Insurance Product Reserves, Net of Reinsurance

P&C Loss and Loss Adjustment Expense Reserves, Net of Reinsurance, by Segment as of ~~September 30, 2020~~March 31, 2021

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,

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

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.

Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Nine Months Ended September 30, 2020
Commercial Lines [1] Personal
Lines Property & Casualty Other Operations Total Property & Casualty [1]
Beginning liabilities for unpaid losses and loss adjustment expenses, gross $ 23,363 $ 2,201 $ 2,697 $ 28,261
Reinsurance and other recoverables [2] 4,029 68 1,178 5,275
Beginning liabilities for unpaid losses and loss adjustment expenses, net 19,334 2,133 1,519 22,986
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes 4,186 1,255 — 5,441
Current accident year ("CAY") catastrophes 355 196 — 551
Prior accident year development ("PYD") [3] 61 (396) 15 (320)
Total provision for unpaid losses and loss adjustment expenses 4,602 1,055 15 5,672
Change in deferred gain on retroactive reinsurance included in other liabilities [3] (97) — — (97)
Payments (3,271) (1,310) (204) (4,785)
Net reserves transferred to liabilities held for sale (43) — — (43)
Foreign currency adjustment (3) — — (3)
Ending liabilities for unpaid losses and loss adjustment expenses, net 20,522 1,878 1,330 23,730
Reinsurance and other recoverables 4,261 27 1,133 5,421
Ending liabilities for unpaid losses and loss adjustment expenses, gross $ 24,783 $ 1,905 $ 2,463 $ 29,151
Earned premiums and fee income $ 6,694 $ 2,273
Loss and loss expense paid ratio [4] 48.9 57.6
Loss and loss expense incurred ratio 68.9 47.0
Prior accident year development (pts) [5] 0.9 (17.6)


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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, 2021
	Commercial Lines		Personal Lines		Property & Casualty Other Operations		Total Property & Casualty
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	25,058	$	1,836	$	2,728	$	29,622
Reinsurance and other recoverables	4,271		28		1,426		5,725
Beginning liabilities for unpaid losses and loss adjustment expenses, net	20,787		1,808		1,302		23,897


Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes	1,296		414		—		1,710
Current accident year ("CAY") catastrophes	175		39		—		214
Prior accident year development ("PYD") [1]	238		(42)		33		229
Total provision for unpaid losses and loss adjustment expenses	1,709		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, net	21,453		1,777		1,294		24,524
Reinsurance and other recoverables	4,347		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 ratio	76.5		56.0
Prior accident year development (pts) [3]	10.6		(5.7)

[1]~~Commercial Lines includes Y-Risk reserve activity that was previously included~~ 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 ~~Corporate.~~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 of Notes to Condensed Consolidated Financial Statements.

[2] ~~Reflects~~The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income.

[3]“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, 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] Includes catastrophe losses from the February winter storms in Texas and other areas within Commercial Lines and Personal Lines of $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 such 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 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 Lines		Personal Lines		Property & Casualty Other Operations		Total Property & Casualty Insurance
Workers’ compensation	$	(40)	$	—	$	—	$	(40)
Workers’ compensation discount accretion	9		—		—		9
General liability	307		—		—		307
Marine	6		—		—		6
Package business	(27)		—		—		(27)
Commercial property	(13)		—		—		(13)
Professional liability	(1)		—		—		(1)

Assumed reinsurance	2		—		—		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 gain	232		(42)		33		223
Change in deferred gain on retroactive reinsurance included in other liabilities	6		—		—		6
Total prior accident year development	$	238	$	(42)	$	33	$	229


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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 Operations		Corporate		Total 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, net	19,334		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 catastrophes	1,343		463		—		3		1,809
Current accident year catastrophes	55		19		—		—		74
Prior accident year development [2]	41		(18)		—		—		23
Total provision for unpaid losses and loss adjustment expenses	1,439		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, net	19,525		2,047		1,469		7		23,048
Reinsurance and other recoverables	4,107		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 ratio	63.5		60.0
Prior accident year development (pts) [4]	1.8		(2.3)

[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 Significant Accounting Policies ~~for further information.~~of Notes to Consolidated Financial Statements included in the Company's 2020 Form 10-K Annual Report.

[3]2]Prior accident year development does not include the benefit of a portion of losses ceded under the Navigators ~~adverse development cover ("Navigators ADC")~~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 ~~Navigators ADC agreement, please~~two adverse development cover reinsurance agreements, refer to Note 109 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements.

[4]3]The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned ~~premiums.~~premiums and fee income.

[5]4]“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.

In December, 2019, the judge overseeing the bankruptcy of PG&E Corporation and Pacific Gas and Electric Company (together, “PG&E”) approved an $11 billion settlement of insurance subrogation claims to resolve all such claims arising from the 2017 Northern California wildfires and 2018 Camp wildfire. That settlement was contingent upon, among other things, the judge entering an order confirming PG&E’s chapter 11 bankruptcy plan (“PG&E Plan”) incorporating the settlement agreement. On June 20, 2020, the bankruptcy court judge approved the PG&E Plan and PG&E subsequently transferred the

$11 billion settlement amount to a trust designed to allocate and distribute the settlement among subrogation holders, including certain of the Company’s insurance subsidiaries. In the second quarter of 2020, the Company recorded an estimated $289 subrogation benefit though the ultimate amount it collects will depend on how the Company’s ultimate paid claims subject to subrogation compare to other insurers’ ultimate paid claims subject to subrogation. On July 24, 2020, the Company received an initial distribution, net of attorney costs, of $216.


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/Fire	2		1		3




Other	3		—		3
Total catastrophe losses	$	55	$	19	$	74

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

Current Accident Year Catastrophe Losses for the Nine Months Ended September 30, 2020, Net of Reinsurance
Commercial
Lines Personal
Lines Total
Wind and hail $ 160 $ 90 $ 250
Civil Unrest 107 — 107
Hurricanes and Tropical Storms 62 42 104
Wildfires 24 64 88
Other 2 — 2
Total catastrophe losses $ 355 $ 196 $ 551



Unfavorable (Favorable) Prior Accident Year Development for the Three Months Ended March 31, 2020
	Commercial Lines		Personal Lines		Property & Casualty Other Operations		Total Property & Casualty Insurance
Workers’ compensation	$	(17)	$	—	$	—	$	(17)
Workers’ compensation discount accretion	9		—		—		9
General liability	12		—		—		12
Marine	—		—		—		—
Package business	1		—		—		1
Commercial property	(7)		—		—		(7)
Professional liability	1		—		—		1
Bond	—		—		—		—
Assumed Reinsurance	—		—		—		—
Automobile liability	5		(6)		—		(1)
Homeowners	—		(2)		—		(2)
Net asbestos reserves	—		—		—		—
Net environmental reserves	—		—		—		—
Catastrophes	(5)		(8)		—		(13)
Uncollectible reinsurance	—		—		—		—
Other reserve re-estimates, net	13		(2)		—		11
Prior accident year development before change in deferred gain	12		(18)		—		(6)
Change in deferred gain on retroactive reinsurance included in other liabilities	29		—		—		29
Total prior accident year development	$	41	$	(18)	$	—	$	23

Unfavorable (Favorable) Prior Accident Year Development for the Three Months Ended September 30, 2020
Commercial Lines Personal
Lines Property & Casualty Other Operations Total Property & Casualty Insurance
Workers’ compensation $ (34) $ — $ — $ (34)
Workers’ compensation discount accretion 9 — — 9
General liability (2) — — (2)
Marine — — — —
Package business (18) — — (18)
Commercial property (4) — — (4)
Professional liability (21) — — (21)
Bond — — — —
Assumed reinsurance — — — —
Automobile liability — (32) — (32)
Homeowners — 3 — 3
Net asbestos reserves — — — —
Net environmental reserves — — — —
Catastrophes — — — —
Uncollectible reinsurance — — (6) (6)
Other reserve re-estimates, net (1) — 17 16
Prior accident year development before change in deferred gain (71) (29) 11 (89)
Change in deferred gain on retroactive reinsurance included in other liabilities 14 — — 14
Total prior accident year development $ (57) $ (29) $ 11 $ (75)

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

Unfavorable (Favorable) Prior Accident Year Development for the Nine Months Ended September 30, 2020
Commercial Lines Personal
Lines Property & Casualty Other Operations Total Property & Casualty Insurance
Workers’ compensation $ (72) $ — $ — $ (72)
Workers’ compensation discount accretion 27 — — 27
General liability 112 — — 112
Marine 1 — — 1
Package business (24) — — (24)
Commercial property (6) — — (6)
Professional liability (16) — — (16)
Bond (10) — — (10)
Assumed reinsurance (7) — — (7)
Automobile liability 27 (53) — (26)
Homeowners — 3 — 3
Net asbestos reserves — — — —
Net environmental reserves — — — —
Catastrophes (72) (341) — (413)
Uncollectible reinsurance — — (8) (8)
Other reserve re-estimates, net 4 (5) 23 22
Prior accident year development before change in deferred gain (36) (396) 15 (417)
Change in deferred gain on retroactive reinsurance included in other liabilities 97 — — 97
Total prior accident year development $ 61 $ (396) $ 15 $ (320)

~~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 Nine Months Ended September 30, 2019

Commercial
Lines
Personal
Lines
Property & Casualty Other Operations Total Property & Casualty Insurance
Beginning liabilities for unpaid losses and loss adjustment expenses, gross $ 19,455 $ 2,456 $ 2,673 $ 24,584
Reinsurance and other recoverables 3,137 108 987 4,232
Beginning liabilities for unpaid losses and loss adjustment expenses, net 16,318 2,348 1,686 20,352
Navigator's Group acquisition 2,001 2,001
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes 3,552 1,548 — 5,100
Current accident year catastrophes 234 114 — 348
Prior accident year development (7) (25) 9 (23)
Total provision for unpaid losses and loss adjustment expenses 3,779 1,637 9 5,425
Payments (2,981) (1,841) (130) (4,952)
Foreign currency adjustment (12) — — (12)
Ending liabilities for unpaid losses and loss adjustment expenses, net 19,105 2,144 1,565 22,814
Reinsurance and other recoverables 4,006 109 968 5,083
Ending liabilities for unpaid losses and loss adjustment expenses, gross $ 23,111 $ 2,253 $ 2,533 $ 27,897
Earned premiums and fee income $ 6,040 $ 2,431
Loss and loss expense paid ratio [1] 49.4 75.7
Loss and loss expense incurred ratio 62.8 68.1
Prior accident year development (pts) [2] (0.1) (1.0)

~~[1]The “loss and loss expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums.~~

~~[2]“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.~~

Current Accident Year Catastrophe Losses for the Nine Months Ended September 30, 2019, Net of Reinsurance
Commercial
Lines
Personal
Lines Total
Wind and hail $ 140 $ 87 $ 227
Winter storms 57 19 76
Tropical storms 6 4 10
Hurricanes 23 4 27
Earthquake 1 — 1
Typhoon 6 — 6
Other 1 — 1
Total catastrophe losses $ 234 $ 114 $ 348

~~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 September 30, 2019
Commercial Lines
Personal
Lines
Property & Casualty Other Operations Total Property & Casualty Insurance
Workers’ compensation $ (40) $ — $ — $ (40)
Workers’ compensation discount accretion 8 — — 8
General liability 19 — — 19
Marine (2) — — (2)
Package business (23) — — (23)
Commercial property (1) — — (1)
Professional liability (1) — — (1)
Bond (2) — — (2)
Assumed Reinsurance — — — —
Automobile liability 25 (23) — 2
Homeowners — (1) — (1)
Net asbestos reserves — — — —
Net environmental reserves — — — —
Catastrophes (5) — — (5)
Uncollectible reinsurance — — — —
Other reserve re-estimates, net 3 (4) — (1)
Total prior accident year development $ (19) $ (28) $ — $ (47)

Unfavorable (Favorable) Prior Accident Year Development for the Nine Months Ended September 30, 2019
Commercial Lines
Personal
Lines
Property & Casualty Other Operations Total Property & Casualty Insurance
Workers’ compensation $ (90) $ — $ — $ (90)
Workers’ compensation discount accretion 25 — — 25
General liability 62 — — 62
Marine 8 — — 8
Package business (32) — — (32)
Commercial property (16) — — (16)
Professional liability 32 — — 32
Bond (2) — — (2)
Assumed Reinsurance 3 — — 3
Automobile liability 27 (28) — (1)
Homeowners — — — —
Net asbestos reserves — — — —
Net environmental reserves — — — —
Catastrophes (33) 6 — (27)
Uncollectible reinsurance — — — —
Other reserve re-estimates, net 9 (3) 9 15
Total prior accident year development $ (7) $ (25) $ 9 $ (23)

For discussion of the factors contributing to unfavorable (favorable) prior accident year reserve development, please refer to Note 109 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements.

~~Current Trends Contributing to Reserve Uncertainty~~

~~As discussed in our 2019 Form 10-K, as market conditions and loss trends develop, management must assess whether those~~

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

conditions constitute a long-term trend that should result in a reserving action (i.e., increasing or decreasing property and casualty reserve). The Company has exposure to general liability claims, including from bodily injury, property damage and product liability and to workers’ compensation claims, including from injury, illness or disability to an insured’s employee while at work. Benefits paid under workers’ compensation policies may include reimbursement of medical care costs, replacement income and compensation for permanent injuries and benefits to survivors. Reserves for these exposures can be particularly difficult to estimate due to the long development pattern and uncertainty about how cases will settle.

As further explained under "Impacts of COVID-19" within The Hartford's Operations section of MD&A, through September 30, 2020, the Company incurred $250 of COVID-19 claims in P&C, including in workers' compensation, property and financial lines. Under workers’ compensation, we could experience a continuation of COVID-19 incurred losses, particularly due to laws or directives in certain states that require coverage of COVID-19 claims for health care and other essential workers based on a presumption that they contracted the virus while working. We could also incur losses on general liability policies if claimants can successfully assert that insureds were negligent from protecting employees, customers and others from exposure though we do not expect this exposure to be significant. Under commercial property policies, we have reserved for business interruption claims that pertain to policies in middle & large commercial and in global specialty which do not require direct physical loss or property damage. In other cases, particularly in small commercial, where there are policy exclusions and the general requirement that there be direct physical loss or damage to the property, we have not recorded loss reserves as there is no coverage though we have recorded a reserve for legal defense costs. In our commercial surety lines, there continues to be the potential for elevated frequency and severity due to an increase in the number of bankruptcies, especially in small businesses and impacted industries such as hospitality, entertainment and transportation. In construction surety, there is the potential for continued elevated losses from contractors who experience project shutdowns or payment delays, which negatively impact their cash flows, or result in disruptions in their supply chains, labor shortages or inflation in the cost of materials. We have also experienced an increase in COVID-19 related claims under director’s and officers’ insurance policies.

Reserve estimates for COVID-19 claims are difficult to estimate. In establishing reserves for COVID-19 incurred claims through September 30, 2020, we have provided IBNR at a higher percentage of ultimate estimated incurred losses than usual as we expect longer claim reporting patterns given the economic effects of COVID-19. For example, we expect longer delays than usual between the time a worker is treated and the date the claim is eventually submitted for workers' compensation coverage. Reserve estimates for D&O, E&O and employment practices liability are subject to significant uncertainty given that estimates must be made of the expected ultimate severity of claims that have just recently been reported

~~Group Benefit Reserves~~

The Company establishes reserves for group life and accident & health contracts, including long-term disability coverage, for both reported claims and claims related to insured events that the Company estimates have been incurred but have not yet been reported. As long-term disability reserves are long-tail claim liabilities, they are discounted because the payment pattern and the ultimate costs are reasonably fixed and determinable on an individual claim basis. The Company held $6,551 and $6,616 of LTD unpaid losses and loss adjustment expenses, net of reinsurance, as of September 30, 2020 and December 31, 2019, respectively.

~~Impact of COVID-19 on 2020 Results of Operations~~

Due to the COVID-19 pandemic, the Company is exposed to short-term disability claims and group life claims. Through September 30, 2020, the Company had incurred short-term disability claims and claims for extended benefits under New York's paid family leave and disability programs totaling $18, before tax and group life claims of $71 before tax.

~~Current Trends Contributing to Reserve Uncertainty~~

We hedge our interest rate exposure over a three year period at the time we price and sell long-term disability policies and our weighted average discount rate assumption for the 2020 incurral year is down slightly from that of the 2019 incurral year.

While we have not seen a significant change in claim recovery patterns to date, in future periods, because of COVID-19, we could experience a delay in the Social Security Administration’s processing of disability claims and a delay in physicians approving a disability claimant’s ability to return to work, resulting in lower expected claim terminations or recoveries, including Social Security offsets. Also, due to the effects on the economy, including higher unemployment, we could experience an increase in claim incidence on long-term disability claims.

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

~~Evaluation of Goodwill for Impairment~~

Goodwill balances are reviewed for impairment at least annually, or more frequently if events occur or circumstances change that would indicate that a triggering event for a potential impairment has occurred. Effective January 1, 2020, the Company adopted updated accounting guidance on recognition and measurement of goodwill impairment, as required. The updated guidance requires recognition and measurement of goodwill impairment based on the excess of the carrying value of the reporting unit over its estimated fair value, up to the amount of the reporting unit’s goodwill.

The estimated fair value of each reporting unit incorporates multiple inputs into discounted cash flow calculations including assumptions that market participants would make in valuing the reporting unit. Assumptions include levels of economic capital, future business growth, earnings projections, assets under management for Hartford Funds and the weighted average cost of capital used for purposes of discounting. Decreases in business growth, decreases in earnings projections and increases in the weighted average cost of capital will all cause a reporting unit’s fair value to decrease, increasing the possibility of impairment.

A reporting unit is defined as an operating segment or one level below an operating segment. The Company’s reporting units for which goodwill has been allocated consist of Commercial Lines, Personal Lines, Group Benefits and Hartford Funds.

~~The carrying value of goodwill was $1,911 as of September 30, 2020 and was comprised of $659 for Commercial Lines, $119 for~~

~~Personal Lines, $861 for Group Benefits and $272 for Hartford Funds.~~

Due to changes in the economy because of the COVID-19 pandemic, the weighted average cost of capital used to discount expected cash flows under the Company’s test for impairment increased in 2020 for most reporting units, which reduces estimated fair values of those reporting units.

Since the pandemic began, near-term expected net cash flows over the forecast period have reflected lower revenues arising from the economic effects of COVID-19 and, for Commercial Lines and Group Benefits, an expected continuation of COVID-19 claims.

Considering the impacts of COVID-19, the Company evaluated the impact of market factors on the fair value of the reporting units using the income approach and determined the estimated fair values do not indicate a goodwill impairment for any reporting unit. If the weighted average cost of capital used for purposes of discounting increases significantly or if the economic downturn worsens or persists for an extended period and the Company’s actual and forecasted operating results deteriorate, the Company may determine it is more likely than not that a reporting unit’s fair value is below its carrying value, including goodwill, which could result in an impairment of goodwill. The Hartford will perform its annual impairment test on October 31st for all reporting units.

~~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,
		2020		2019		Change		2020		2019		Change			2021		2020		Change
Written premiums	Written premiums	$	2,199	$	2,235	(2	%)	$	6,772	$	6,262	8	%	Written premiums	$	2,503	$	2,408	4	%
Change in unearned premium reserve	Change in unearned premium reserve	(52)		(15)		NM		99		248		(60	%)	Change in unearned premium reserve	268		143		87	%
Earned premiums	Earned premiums	2,251		2,250		—	%	6,673		6,014		11	%	Earned premiums	2,235		2,265		(1	%)
Fee income	Fee income	8		8		—	%	21		26		(19	%)	Fee income	9		8		13	%
Losses and loss adjustment expenses	Losses and loss adjustment expenses													Losses and loss adjustment expenses
Current accident year before catastrophes	Current accident year before catastrophes	1,366		1,336		2	%	4,181		3,552		18	%	Current accident year before catastrophes	1,296		1,343		(3	%)
Current accident year catastrophes [1]	Current accident year catastrophes [1]	107		74		45	%	355		234		52	%	Current accident year catastrophes [1]	175		55		NM
Prior accident year development [1]	Prior accident year development [1]	(57)		(19)		NM		61		(7)		NM		Prior accident year development [1]	238		41		NM
Total losses and loss adjustment expenses	Total losses and loss adjustment expenses	1,416		1,391		2	%	4,597		3,779		22	%	Total losses and loss adjustment expenses	1,709		1,439		19	%
Amortization of deferred policy acquisition costs	Amortization of deferred policy acquisition costs	344		356		(3	%)	1,051		940		12	%	Amortization of deferred policy acquisition costs	344		356		(3	%)
Underwriting expenses	Underwriting expenses	391		410		(5	%)	1,221		1,139		7	%	Underwriting expenses	394		443		(11	%)
Amortization of other intangible assets	Amortization of other intangible assets	8		7		14	%	22		11		100	%	Amortization of other intangible assets	7		7		—	%
Dividends to policyholders	Dividends to policyholders	8		12		(33	%)	23		24		(4	%)	Dividends to policyholders	6		8		(25	%)

Underwriting gain (loss)	Underwriting gain (loss)	92		82		12	%	(220)		147		NM		Underwriting gain (loss)	(216)		20		NM
Net servicing income	Net servicing income	1		2		(50	%)	2		3		(33	%)	Net servicing income	2		1		100	%
Net investment income [2]	Net investment income [2]	316		291		9	%	797		831		(4	%)	Net investment income [2]	327		277		18	%
Net realized capital gains (losses) [2]	Net realized capital gains (losses) [2]	(26)		60		(143	%)	(105)		229		(146	%)	Net realized capital gains (losses) [2]	44		(143)		131	%

Loss on reinsurance transaction		—		—		—	%	—		(91)		100	%

Other expenses	Other expenses	(8)		(20)		60	%	(25)		(27)		7	%	Other expenses	(4)		(6)		33	%
Income before income taxes	Income before income taxes	375		415		(10	%)	449		1,092		(59	%)	Income before income taxes	153		149		3	%
Income tax expense [3]	Income tax expense [3]	52		79		(34	%)	71		202		(65	%)	Income tax expense [3]	24		28		(14	%)

Net income	Net income	$	323	$	336	(4	%)	$	378	$	890	(58	%)	Net income	$	129	$	121	7	%

[1]For discussion of current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property and Casualty Insurance Product Reserves Development, Net of Reinsurance and Note 109 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements.

[2]For discussion of consolidated investment results, see MD&A - Investment Results. ~~The three months ended September 30, 2020, net realized capital losses included a $51 before-tax loss on sale of Continental Europe Operations.~~

[3]For discussion of income taxes, see Note 1311 - Income Taxes of Notes to Condensed Consolidated Financial Statements.

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Premium Measures

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Small commercial new business premium $ 129 $ 150 $ 404 $ 508
Middle market new business premium 131 146 355 463
Small commercial policy count retention 79 % 83 % 84 % 83 %
Middle market policy count retention [1] 77 % 83 % 78 % 82 %
Standard commercial lines renewal written price increases [1] [2] 3.7 % 3.1 % 4.0 % 2.2 %
Standard commercial lines renewal earned price increases [1] [2] 4.1 % 2.1 % 3.7 % 2.2 %
Small commercial premium retention 82 % 85 % 85 % 85 %
Middle market premium retention [1] 75 % 83 % 78 % 84 %
Small commercial policies in-force as of end of period (in thousands) 1,278 1,294
Middle market policies in-force as of end of period (in thousands) [1] 59 64


	Three Months Ended March 31,
	2021			2020
Small Commercial:
Net new business premium	$	176		$	157
Policy count retention	86		%	84		%
Renewal written price increases	2.1		%	2.3		%
Renewal earned price increases	2.2		%	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 retention	81		%	77		%
Renewal written price increases	6.0		%	7.6		%
Renewal earned price increases	7.9		%	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 increases	14.6		%	11.5		%
U.S. global specialty renewal earned price increases	19.0		%	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]~~Small commercial~~Excludes Global Re and ~~middle market lines within middle & large commercial are generally referred~~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 ~~as standard commercial lines.~~coverholders and other third parties.

Underwriting Ratios

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 Change 2020 2019 Change
Loss and loss adjustment expense ratio
Current accident year before catastrophes 60.7 59.4 1.3 62.7 59.1 3.6
Current accident year catastrophes 4.8 3.3 1.5 5.3 3.9 1.4
Prior accident year development (2.5) (0.8) (1.7) 0.9 (0.1) 1.0
Total loss and loss adjustment expense ratio 62.9 61.8 1.1 68.9 62.8 6.1
Expense ratio 32.7 34.0 (1.3) 34.1 34.3 (0.2)
Policyholder dividend ratio 0.4 0.5 (0.1) 0.3 0.4 (0.1)
Combined ratio 95.9 96.4 (0.5) 103.3 97.6 5.7
Impact of current accident year catastrophes and prior year development (2.3) (2.5) 0.2 (6.2) (3.8) (2.4)
Impact of current accident year change in loss reserves upon acquisition of a business [1] — — — — (0.5) 0.5
Underlying combined ratio 93.7 93.9 (0.2) 97.1 93.3 3.8

~~[1]~~Upon acquisition of Navigators Group and a review of Navigators Insurers reserves, the nine months ended September 30, 2019 included $68 of prior accident year reserve increases and $29 of current accident year reserve increases which were excluded for the purposes of the underlying combined ratio calculation.


	Three Months Ended March 31,
	2021	2020	Change
Loss and loss adjustment expense ratio
Current accident year before catastrophes	58.0	59.3	(1.3)
Current accident year catastrophes	7.8	2.4	5.4
Prior accident year development	10.6	1.8	8.8
Total loss and loss adjustment expense ratio	76.5	63.5	13.0
Expense ratio	32.9	35.2	(2.3)
Policyholder dividend ratio	0.3	0.4	(0.1)
Combined ratio	109.7	99.1	10.6
Impact of current accident year catastrophes and prior year development	(18.4)	(4.2)	(14.2)

Underlying combined ratio	91.2	94.9	(3.7)

~~Net Income~~

~~Three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019~~

~~Net income~~ decreased for the three month period primarily due to a change from net realized capital gains in 2019 to net realized capital losses in 2020, largely offset by higher net investment income and a higher underwriting gain. The higher underwriting gain was driven by an increase in net favorable prior accident year development and lower underwriting expenses, including amortization of DAC, largely offset by higher current accident year losses, including higher catastrophes.

~~Net income~~ decreased for the nine month period primarily due to a change from an underwriting gain in 2019 to an underwriting loss in 2020, a change from net realized capital gains in 2019 to net realized capital losses in 2020 and lower net investment income, primarily driven by losses on investments in

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~~limited partnerships and other alternative investments~~Net Income

Three months ended March 31, 2021 compared to the three months ended March 31, 2020

Net income increased in ~~the second quarter of 2020. Partially offsetting the decline~~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, ~~was $91 before tax of ADC ceded premium in the prior year period.~~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)

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Underwriting ~~gain~~loss ~~increased~~ in ~~the three month period~~2021 changed from an underwriting gain in 2020, primarily ~~due to lower underwriting expenses, including amortization of DAC,~~driven by an increase in ~~favorable~~net unfavorable prior accident year development, higher current accident year catastrophe losses and ~~lower non-catastrophe property losses, largely offset by~~$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 ~~higher~~a lower current accident year ~~catastrophes.~~loss and LAE ratio before catastrophes and COVID-19 losses. Underwriting expenses ~~were down year over year driven by~~declined due to lower ~~commissions~~staffing costs and other expense savings to Hartford Next and lower travel costs as well as a ~~reduction in travel and incentive compensation expenses.~~

~~Underwriting loss~~ decrease in the ~~2020 nine month period compared with an underwriting gain in the 2019 nine month period with the underwriting loss in 2020 primarily due to COVID-19 incurred~~allowance for credit losses in property, workers’ compensation and financial lines, higher current accident year catastrophes, a change from net favorable prior accident year development in 2019 to net unfavorable prior accident year development in 2020 and the effect of lower earned premiums excluding the effect of the Navigators acquisition. The increase in underwriting expenses, including amortization of DAC, for the nine month period was driven by including Navigators for a full nine months in 2020. Apart from the effect of the Navigators acquisition, underwriting expenses decreased as the effect of lower commissions and a reduction in travel and incentive compensation expenses was partially offset by an increase in the ACL on premiums receivable in 2021 compared to an increase in 2020 due to the economic impacts of ~~COVID-19 and the effect of a reduction in state taxes and assessments in first quarter 2019. In the nine month period of 2020, the acquisition of Navigators Group contributed to an~~

~~increase in earned premiums with a corresponding increase to losses and loss adjustment expenses, amortization of DAC and underwriting expenses.~~COVID-19.

Earned Premiums

[1] Other of $11 and ~~$12~~$11 for the three months ended ~~September 30, 2019,~~March 31, 2020, and ~~2020,~~2021, respectively, ~~and $33 for the nine months ended September 30, 2019 and 2020,~~ is included in the total.

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Earned premiums decreased ~~for the three month period and increased for the nine month period ended September 30,~~in 2021 due to written premium declines in 2020 ~~with the increase~~ in the nine month period reflecting a full nine months of premium from the acquisition of Navigators Group. Excluding Navigators, earned premiums declined in both the three and nine month periods, with the decrease in the three month period primarilysmall commercial as well as in middle ~~and~~& large commercial ~~and the decrease in the nine month period in both small commercial and middle and large commercial.~~

~~Written premiums~~ decreased in the three month period and increased in the nine month period ended September 30, 2020 with the growth in the nine month period attributable to the acquisition of Navigators Group. Excluding Navigators, written premiums declined in both the three and nine month periods due tothat were driven by the economic impacts of COVID-19, including lower new business across most lines as well as reductions in ~~estimated audit~~ premiums ~~and~~from endorsements, ~~reducing premium~~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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~~continued written pricing increases in all~~Global specialty international lines ~~except workers' compensation.~~

achieved a 28% price increase, led by D&O. In ~~standard~~small commercial, ~~lines,~~ renewal written price increases were ~~higher~~slightly lower in 2021 than 2020, ~~than 2019 for both the three and nine month periods, including double~~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, ~~automobile and specialty excess liability lines and mid-single digit~~pricing increases have moderated from 2020 levels, with high single-digit to low double-digit rate increases in most middle market lines other ~~standard commercial lines. Small commercial~~than workers’ compensation, which experienced low single-digit written pricing continued to decrease in both the three and nine month periods, with larger decreases in the third quarter. In Global Specialty, our US Wholesale book achieved an approximate 26% renewal written price increase, led by excess casualty, property and automobile. The International lines also achieved strong price increases, led by D&O.increases.

New business premium ~~decreased~~increased in ~~both the three and nine month periods in most lines~~2021 driven by ~~lower quote volume due to the economic effects of COVID-19~~growth in small commercial package business, offset by slight declines in middle and ~~a competitive pricing environment, though there was some improvement in the third quarter of 2020 compared to second quarter of 2020. Also contributing to the decrease in~~large commercial lines. Global specialty gross new business ~~in Small Commercial was the effect of new business from the 2018 Foremost renewal rights agreement of $9~~premium increased driven by wholesale and ~~$69 in the 2019 three and nine month periods, respectively.~~financial lines.

•Small commercial written premium ~~declined for both the three and nine month periods~~increased in 2021 driven ~~by a decrease in workers’ compensation, partially offset~~ by growth in package ~~business.~~business and excess and surplus lines, partially offset by a decline in workers’ compensation.

•Middle & large commercial written premium decreased ~~for both the three and nine month periods driven by lower new business and premium retention across all lines, partially offset~~ in ~~the nine month period by the acquisition of Navigators Group. Middle & large commercial premium decreases in the three and nine month periods were primarily~~2021 driven by declines in ~~general industries, driven by underwriting actions to improve the profitability of that book, as well as in~~workers’ compensation, industry verticals and national accounts, partially offset by growth in specialty and commercial excess lines.

•Global specialty written premium ~~decreased slightly for the three month period and~~ increased ~~for the nine month period with the increase~~ in ~~the nine month period~~2021 driven ~~by the acquisition of Navigators Group. Global specialty written premium decreased in the three month period due to a decline in international and bond business, partially offset~~ by growth in U.S. wholesale, global reinsurance, U.S. financial lines and professional liability. Apart from Navigators Group, written premium decreased in the nine month period due to a decline in wholesale and bond business, partially offset by growth in professional liability.international lines of business.

Current Accident Year Loss and LAE Ratio before Catastrophes

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Current accident year loss and LAE ratio before catastrophes ~~increased for both the three and nine months ended September 30, 2020,~~decreased in 2021 primarily due to ~~COVID-19 incurred losses, net of favorable non-COVID-19 workers' compensation frequency and, for the nine month period, higher current accident year~~lower loss ~~costs~~ratios in global specialty ~~international~~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 ~~partially offset~~

and was driven by ~~both the three~~U.S. wholesale, global reinsurance and ~~nine-month periods benefiting from lower non-catastrophe property losses.~~U.S. financial lines.

~~The three month period in 2020~~First quarter 2021 included COVID-19 incurred losses of $37 before tax, including $17 of losses in workers' compensation, net of favorable frequency on other workers' compensation claims, and $20 of losses in financial and other lines. The nine month period in 2020 included COVID-19 incurred losses of $250$24 before tax, including losses of ~~$141 in property, $52~~$20 in workers’ compensation ~~net of favorable frequency on other workers' compensation claims,~~ and ~~$57~~$4 in financial and other lines.

~~Included~~Catastrophes and Unfavorable (Favorable) Prior Accident Year Development

Three months ended March 31, 2021 compared to the three months ended March 31, 2020

Current accident year catastrophe lossesnet of reinsurance for the three months ended March 31, 2021 included $154 of losses from February winter storms primarily in the ~~$141 of COVID-19 property incurred~~South, with the remaining losses from wind and ~~loss adjustment expenses~~hail events, mostly concentrated in the ~~nine month period~~South and along the Pacific coast. Current accident year catastrophe losses in 2020 were ~~$101 of losses arising~~primarily from tornado, wind and hail events in the Midwest and Southeast.

Prior accident year developmentwas a ~~small number of property policies~~net unfavorable $238 in 2021 primarily due to an increase in general liability that ~~do not require direct physical loss or damage and from policies intended to cover specific business needs, including crisis management and performance disruption. In addition, we recorded~~included a reserve increase related to the settlement with Boy Scouts of ~~$40~~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 legal defense costs in the nine month period. Workers’ compensation COVID-19 incurred losses in the three and nine month periods were driven by claims in both states with presumptive coverage and in other states where the claimant must prove their COVID-19 illness was contracted at work. Financial lines COVID-19 claims in the three and nine month periods were primarily driven by exposures in D&O, E&O and employment practicesmarine, general liability and ~~the recessionary impacts on the surety book of business.~~workers' compensation pool participations, partially offset by reserve decreases for workers' compensation and catastrophes.

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~~Catastrophes and Unfavorable (Favorable) Prior Accident Year Development~~

~~Three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019~~

~~Current accident year catastrophe losses~~for the three months ended September 30, 2020 included losses from hurricane Laura, Pacific Coast wildfires, tropical storm Isaias, a Midwest derecho, and other wind and hail events mostly in the Central Plains.

Current accident year catastrophe losses for the three months ended September 30, 2019 were primarily related to wind and hail events in various areas of the Midwest and Mountain West as well as from hurricane Dorian and tropical storm Imelda.

~~Current accident year catastrophe losses~~ for the nine months ended September 30, 2020 were primarily from civil unrest, hurricane Laura, Pacific Coast wildfires, tropical storm Isaias and from tornado, wind and hail events in the South, Midwest and Central Plains.

Current accident year catastrophe losses for the nine months ended September 30, 2019 were primarily from winter storms in the northern plains, Midwest and Northeast as well as tornado, wind and hail events in various areas of the Midwest, Mountain West and South.

~~Prior accident year development~~was a net favorable $57 before tax in the 2020 three month period compared to a net favorable $19 before tax in the comparable 2019 period. Net favorable reserve development for the three month period included reserve decreases for workers' compensation, package business and professional liability. Net reserve increases were $61 before tax in the 2020 nine month period compared to a net favorable $7 before tax in the comparable 2019 period. Net unfavorable reserve development for the nine months ended September 30, 2020 included reserve increases for general liability driven primarily by increases in reserves for sexual molestation and abuse claims, and increases in commercial automobile liability reserves, partially offset by reserve decreases for workers' compensation, catastrophes and package business. Favorable development on prior year catastrophe reserves in the nine month period was due to recognizing a $29 before tax subrogation benefit from a settlement with PG&E over certain of the 2017 and 2018 California wildfires and a reduction in estimated catastrophe losses from a number of wind and hail events that occurred in 2018 and 2019. Prior accident year development in the three and nine month periods of 2020 also included $14 million and $97 million, respectively, of reserve increases related to Navigators Group on 2018 and prior accident years that was economically ceded to NICO but for which the benefit was not recognized in earnings as it has been recorded as a deferred gain on retroactive reinsurance.

Net reserve decreases for the three month period in 2019 were primarily related to lower loss reserve estimates for workers' compensation claims and package business reserves, partially offset by increases in reserves for auto liability and general liability. Net reserve decreases for the nine months ended September 30, 2019 were primarily related to lower loss reserve estimates for workers' compensation claims, catastrophes and package business reserves, largely offset by a $68 before tax increase to Navigators reserves upon acquisition of the business and increases in reserves for auto liability and general liability. The increase in Navigators reserves upon acquisition of the business principally related to higher reserve estimates for general liability, professional liability and marine.

~~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,							Three Months Ended March 31,
		2020		2019		Change		2020		2019		Change			2021		2020		Change
Written premiums	Written premiums	$	781	$	822	(5	%)	$	2,263	$	2,417	(6	%)	Written premiums	$	715	$	744	(4	%)
Change in unearned premium reserve	Change in unearned premium reserve	2		19		(89	%)	16		14		14	%	Change in unearned premium reserve	(19)		(30)		37	%
Earned premiums	Earned premiums	779		803		(3	%)	2,247		2,403		(6	%)	Earned premiums	734		774		(5	%)
Fee income	Fee income	8		9		(11	%)	26		28		(7	%)	Fee income	8		9		(11	%)
Losses and loss adjustment expenses	Losses and loss adjustment expenses													Losses and loss adjustment expenses
Current accident year before catastrophes	Current accident year before catastrophes	436		531		(18	%)	1,255		1,548		(19	%)	Current accident year before catastrophes	414		463		(11	%)
Current accident year catastrophes [1]	Current accident year catastrophes [1]	122		32		NM		196		114		72	%	Current accident year catastrophes [1]	39		19		105	%
Prior accident year development [1]	Prior accident year development [1]	(29)		(28)		(4	%)	(396)		(25)		NM		Prior accident year development [1]	(42)		(18)		(133	%)
Total losses and loss adjustment expenses	Total losses and loss adjustment expenses	529		535		(1	%)	1,055		1,637		(36	%)	Total losses and loss adjustment expenses	411		464		(11	%)
Amortization of DAC	Amortization of DAC	60		64		(6	%)	185		194		(5	%)	Amortization of DAC	58		64		(9	%)
Underwriting expenses	Underwriting expenses	146		154		(5	%)	447		464		(4	%)	Underwriting expenses	148		151		(2	%)
Amortization of other intangible assets	Amortization of other intangible assets	—		1		(100	%)	3		4		(25	%)	Amortization of other intangible assets	1		1		—	%
Underwriting gain	Underwriting gain	52		58		(10	%)	583		132		NM		Underwriting gain	124		103		20	%
Net servicing income [2]	Net servicing income [2]	5		4		25	%	10		11		(9	%)	Net servicing income [2]	4		2		100	%
Net investment income [3]	Net investment income [3]	41		46		(11	%)	110		134		(18	%)	Net investment income [3]	35		41		(15	%)
Net realized capital gains (losses) [3]	Net realized capital gains (losses) [3]	3		9		(67	%)	(12)		36		(133	%)	Net realized capital gains (losses) [3]	7		(23)		130	%
Other expenses		(2)		—		NM		(1)		(1)		—	%

Income before income taxes	Income before income taxes	99		117		(15	%)	690		312		121	%	Income before income taxes	170		123		38	%
Income tax expense [4]	Income tax expense [4]	20		23		(13	%)	142		60		137	%	Income tax expense [4]	35		25		40	%
Net income	Net income	$	79	$	94	(16	%)	$	548	$	252	117	%	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 ~~$23 for the three months ended September 30, 2020 and 2019 and $63 and $65 for the nine months ended September 30, 2020 and 2019, respectively. Includes servicing expenses of $18 and~~ $19 for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019, respectively,~~2020. Includes servicing expenses of $15 and ~~$53 and $54~~$17 for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019.~~respectively.

[3]For discussion of consolidated investment results, see MD&A - Investment Results.

[4]For discussion of income taxes, see Note 1311 - Income Taxes of Notes to Condensed Consolidated Financial Statements.

~~Written and Earned Premiums~~Underwriting Ratios

Three Months Ended September 30, Nine Months Ended September 30,
Written Premiums 2020 2019 Change 2020 2019 Change
Product Line
Automobile $ 529 $ 562 (6 %) $ 1,544 $ 1,681 (8 %)
Homeowners 252 260 (3 %) 719 736 (2 %)
Total $ 781 $ 822 (5 %) $ 2,263 $ 2,417 (6 %)
Earned Premiums
Product Line
Automobile $ 541 $ 558 (3 %) $ 1,533 $ 1,670 (8 %)
Homeowners 238 245 (3 %) 714 733 (3 %)
Total $ 779 $ 803 (3 %) $ 2,247 $ 2,403 (6 %)


	Three Months Ended March 31,
	2021	2020	Change
Loss and loss adjustment expense ratio
Current accident year before catastrophes	58.0	59.3	(1.3)
Current accident year catastrophes	7.8	2.4	5.4
Prior accident year development	10.6	1.8	8.8
Total loss and loss adjustment expense ratio	76.5	63.5	13.0
Expense ratio	32.9	35.2	(2.3)
Policyholder dividend ratio	0.3	0.4	(0.1)
Combined ratio	109.7	99.1	10.6
Impact of current accident year catastrophes and prior year development	(18.4)	(4.2)	(14.2)

Underlying combined ratio	91.2	94.9	(3.7)

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~~Premium Measures~~

Net Income

Three Months Ended September 30, Nine Months Ended September 30,
Premium Measures 2020 2019 2020 2019
Policies in-force end of period (in thousands)
Automobile 1,392 1,445
Homeowners 846 893
New business written premium
Automobile $ 55 $ 58 $ 178 $ 173
Homeowners $ 16 $ 21 $ 51 $ 57
Policy count retention [1]
Automobile 84 % 85 % 86 % 85 %
Homeowners 84 % 86 % 86 % 85 %
Renewal written price increase
Automobile 2.2 % 4.1 % 2.6 % 4.8 %
Homeowners 7.2 % 5.9 % 5.7 % 6.9 %
Renewal earned price increase
Automobile 3.1 % 5.1 % 3.7 % 5.8 %
Homeowners 5.3 % 8.0 % 5.6 % 8.8 %
Premium retention
Automobile [2] 85 % 87 % 81 % 87 %
Homeowners 91 % 90 % 91 % 90 %

Three months ended March 31, 2021 compared to the three months ended March 31, 2020

Net income increased 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)

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

[1]~~Policy count retention~~ Other of $11 and $11 for the three 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.


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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

Three months ended March 31, 2021 compared to the three ~~month period~~months ended ~~September 30,~~March 31, 2020 ~~largely~~

Current accident year loss and LAE ratio before catastrophes decreased in 2021 primarily due to ~~policy cancellations for non-payment of premium that had been temporarily suspended to provide policyholders additional time to pay their premium (until May 31, 2020~~lower loss ratios in ~~most states).~~

~~[2]Premium retention for automobile decreased~~global specialty and in ~~the nine month period ended September 30, 2020 largely due to $81 of premium credits given to automobile policyholders. Excluding~~middle market workers’ compensation, excluding the impact of COVID-19 claims. The lower loss ratios in global specialty were largely the ~~premium credits, automobile premium retention would have been 86%~~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 lines.

Catastrophes and Unfavorable (Favorable) Prior Accident Year Development

Three months ended March 31, 2021 compared to the three months ended March 31, 2020

Current accident year catastrophe lossesnet of reinsurance for the three months ended March 31, 2021 included $154 of losses from February winter storms primarily in the ~~nine month period~~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 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,
	2021		2020		Change
Written premiums	$	715	$	744	(4	%)
Change in unearned premium reserve	(19)		(30)		37	%
Earned premiums	734		774		(5	%)
Fee income	8		9		(11	%)
Losses and loss adjustment expenses
Current accident year before catastrophes	414		463		(11	%)
Current accident year catastrophes [1]	39		19		105	%
Prior accident year development [1]	(42)		(18)		(133	%)
Total losses and loss adjustment expenses	411		464		(11	%)
Amortization of DAC	58		64		(9	%)
Underwriting expenses	148		151		(2	%)
Amortization of other intangible assets	1		1		—	%
Underwriting gain	124		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 taxes	170		123		38	%
Income tax expense [4]	35		25		40	%
Net income	$	135	$	98	38	%

[2]Includes servicing revenues of $19 for the three months ended ~~September 30,~~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.

Underwriting Ratios


		Three Months Ended September 30,			Nine Months Ended September 30,				Three Months Ended March 31,
Underwriting Ratios		2020	2019	Change	2020	2019	Change
									2021	2020	Change
Loss and loss adjustment expense ratio	Loss and loss adjustment expense ratio							Loss and loss adjustment expense ratio
Current accident year before catastrophes	Current accident year before catastrophes	56.0	66.1	(10.1)	55.9	64.4	(8.5)	Current accident year before catastrophes	58.0	59.3	(1.3)
Current accident year catastrophes	Current accident year catastrophes	15.7	4.0	11.7	8.7	4.7	4.0	Current accident year catastrophes	7.8	2.4	5.4
Prior year development		(3.7)	(3.5)	(0.2)	(17.6)	(1.0)	(16.6)
Prior accident year development								Prior accident year development	10.6	1.8	8.8
Total loss and loss adjustment expense ratio	Total loss and loss adjustment expense ratio	67.9	66.6	1.3	47.0	68.1	(21.1)	Total loss and loss adjustment expense ratio	76.5	63.5	13.0
Expense ratio	Expense ratio	25.4	26.2	(0.8)	27.1	26.4	0.7	Expense ratio	32.9	35.2	(2.3)
Policyholder dividend ratio								Policyholder dividend ratio	0.3	0.4	(0.1)
Combined ratio	Combined ratio	93.3	92.8	0.5	74.1	94.5	(20.4)	Combined ratio	109.7	99.1	10.6
Impact of current accident year catastrophes and prior year development	Impact of current accident year catastrophes and prior year development	(12.0)	(0.5)	(11.5)	8.9	(3.7)	12.6	Impact of current accident year catastrophes and prior year development	(18.4)	(4.2)	(14.2)

Underlying combined ratio	Underlying combined ratio	81.4	92.3	(10.9)	83.0	90.8	(7.8)	Underlying combined ratio	91.2	94.9	(3.7)

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~~Product Combined Ratios~~

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 Change 2020 2019 Change
Automobile
Combined ratio 81.3 95.7 (14.4) 84.6 95.3 (10.7)
Underlying combined ratio 84.9 98.8 (13.9) 87.4 96.4 (9.0)
Homeowners
Combined ratio 122.9 86.5 36.4 52.1 93.0 (40.9)
Underlying combined ratio 74.0 76.6 (2.6) 73.4 78.1 (4.7)

Net Income

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Net income ~~decreased~~increased 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 ~~$15 for~~a change from an underwriting gain to an underwriting loss. For further discussion of investment results, see MD&A - Investment Results.

Underwriting Gain (Loss)

Three months ended March 31, 2021 compared to the three months ended ~~September 30,~~March 31, 2020

Underwriting loss in 2021 changed from an underwriting gain in 2020, primarily ~~due to~~driven by an increase in net unfavorable prior accident year development, higher current accident year catastrophe losses ~~lower net realized capital gains~~ and ~~lower net investment income, largely~~$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 ~~losses in automobile~~loss and LAE ratio before catastrophes and COVID-19 losses. Underwriting expenses declined due to ~~effects of the COVID-19 pandemic that has resulted in a reduction in claim frequency associated with insureds driving less due~~lower staffing costs and other expense savings to ~~shelter-in-place guidelines~~Hartford Next and lower travel costs as well as ~~lower underwriting expenses, including amortization~~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 ~~DAC.~~COVID-19.

~~Net income increased by $296~~Earned Premiums

[1] Other of $11 and $11 for the ~~nine month period,~~three 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

Written premiums increased in 2021 driven by growth in global specialty and small commercial, partially offset by a decline in middle and large commercial.


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•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.

•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

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 ~~favorable~~lower 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 lines.

Catastrophes and Unfavorable (Favorable) Prior Accident Year Development

Three months ended March 31, 2021 compared to the three months ended March 31, 2020

Current accident year catastrophe lossesnet of reinsurance for the three 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.


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PERSONAL LINES

Results of Operations

Underwriting Summary


	Three Months Ended March 31,
	2021		2020		Change
Written premiums	$	715	$	744	(4	%)
Change in unearned premium reserve	(19)		(30)		37	%
Earned premiums	734		774		(5	%)
Fee income	8		9		(11	%)
Losses and loss adjustment expenses
Current accident year before catastrophes	414		463		(11	%)
Current accident year catastrophes [1]	39		19		105	%
Prior accident year development [1]	(42)		(18)		(133	%)
Total losses and loss adjustment expenses	411		464		(11	%)
Amortization of DAC	58		64		(9	%)
Underwriting expenses	148		151		(2	%)
Amortization of other intangible assets	1		1		—	%
Underwriting gain	124		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 taxes	170		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, insee MD&A - Critical Accounting Estimates, Property & Casualty Insurance Product Reserves, Net of Reinsurance.

[2]Includes servicing revenues of $19 for the three months ended March 31, 2021 and 2020. Includes servicing expenses of $15 and $17 for the three months ended March 31, 2021 and 2020, ~~period, lower current accident year losses in automobile due~~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 ~~effects~~Condensed Consolidated Financial Statements.

Written and Earned Premiums


	Three Months Ended March 31,
Written Premiums	2021		2020		Change
Product Line
Automobile	$	508	$	534	(5	%)
Homeowners	207		210		(1	%)
Total	$	715	$	744	(4	%)
Earned Premiums
Product Line
Automobile	$	507	$	536	(5	%)
Homeowners	227		238		(5	%)
Total	$	734	$	774	(5	%)


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Premium Measures


	Three Months Ended March 31,
Premium Measures	2021			2020
Policies in-force end of period (in thousands)
Automobile	1,357			1,410
Homeowners	815			868

Net new business premium
Automobile	$	53		$	58
Homeowners	$	13		$	17
Policy count retention
Automobile	85		%	86		%
Homeowners	85		%	86		%
Renewal written price increase
Automobile	1.9		%	3.1		%
Homeowners	9.4		%	4.7		%
Renewal earned price increase
Automobile	2.2		%	4.2		%
Homeowners	7.1		%	6.1		%

Underwriting Ratios


	Three Months Ended March 31,
Underwriting Ratios	2021	2020	Change
Loss and loss adjustment expense ratio
Current accident year before catastrophes	56.4	59.8	(3.4)
Current accident year catastrophes	5.3	2.5	2.8
Prior year development	(5.7)	(2.3)	(3.4)
Total loss and loss adjustment expense ratio	56.0	59.9	(3.9)
Expense ratio	27.1	26.7	0.4
Combined ratio	83.1	86.7	(3.6)
Impact of current accident year catastrophes and prior year development	0.4	(0.2)	0.6
Underlying combined ratio	83.5	86.6	(3.1)

Product Combined Ratios


	Three Months Ended March 31,
	2021	2020	Change
Automobile
Combined ratio	83.5	89.8	(6.3)
Underlying combined ratio	86.3	90.9	(4.6)
Homeowners
Combined ratio	86.8	79.2	7.6
Underlying combined ratio	77.2	76.2	1.0


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Net Income

Three months ended March 31, 2021 compared to the ~~COVID-19 pandemic, and lower underwriting expenses, partially offset~~three months ended March 31, 2020

Net income increased $37 from first quarter 2020, largely driven by a ~~reduction in earned premium, including the effect of $81 in premium credits given to automobile policyholders in the second quarter of 2020, a~~ change tofrom net realized capital losses in ~~the~~first quarter 2020 ~~period~~to net realized gains in first quarter 2021 and ~~lower~~an increase in underwriting gain, partially offset by a decrease in net investment ~~income, primarily driven by lower income from limited partnerships and other alternative investments.~~income.

Underwriting Gain

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Underwriting gain~~decreased for the three months ended September 30, 2020, primarily~~ 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, largely offset by lower current accident year losses in automobile due to effects of the COVID-19 pandemic as well as lower underwriting expenses, including amortization of DAC.~~

Underwriting gain increased for the nine months ended September 30, 2020, primarily due to favorable prior accident year development in the 2020 period driven by a reduction in prior year catastrophe reserves, lower current accident year losses in automobile due to effects of the COVID-19 pandemic, and lower underwriting expenses, partially offset by a reduction in earned premium, including the effect of $81 in premium credits given to automobile policyholders in the second quarter of 2020.

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

losses.

Earned Premiums

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Earned premiums decreased in ~~both~~ the ~~three and nine month periods ending September 30, 2020,~~2021 period reflecting a decline in written premium over the prior twelve months in both Agency channels and in AARP Direct and, for the nine month period, the effect of $81 of premium credits given to automobile policyholders in the second quarter of 2020 in recognition of shelter-in-place guidelines that have resulted in a decline in miles driven.Direct.

Written premiums decreased in ~~both~~ the ~~three and nine month periods~~2021 period in AARP Direct and both Agency ~~channels. For automobile,~~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 ~~nine month~~same period in 2020 included a reduction for the $81 of premium credits given to policyholders in the second quarter. Written premium for both automobile and homeowners declined as the amount of non-renewed premium exceeded the new business premium.2020.

Renewal written pricing increases ~~for both the three and nine month periods~~ 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 ~~automobile~~the 2021 period in response to ~~moderating~~recent loss cost trends. For homeowners, while written pricing increases had moderated during the first half of 2020, written pricing increases were higher in third quarter 2020 due to the rate need arising from catastrophe and other property claims experience.

Policy count retention decreased in both automobile and homeowners ~~in third quarter 2020, partly due to policy cancellations for non-payment that had been temporarily suspended in second quarter 2020. Policy count retention increased for~~driven by both ~~auto~~competition and ~~homeowners in the nine month~~

~~period reflecting~~ the effect of ~~moderating~~ renewal written price increases.

~~Premium retention~~ for automobile decreased in the three month period, reflecting the decrease in policy count retention and decreased in the nine month period mostly due to the $81 of automobile premium credits given to policyholders in the second quarter of 2020. Premium retention for homeowners improved in both the three and nine month periods driven by renewal rate increases, partially offset by a decline in policy count retention for the three month period.

Policies in-force decreased in ~~2020~~the 2021 period in both automobile and homeowners driven by not generating enough new business to offset the loss of non-renewed policies.

~~Current Accident Year Loss and LAE Ratio before Catastrophes~~

~~Three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019~~

~~Current accident year Loss and LAE ratio before catastrophes~~ decreased for the three and nine months ended September 30, 2020 in both automobile and homeowners. For automobile, the loss and loss adjustment expense ratio benefited from earned pricing increases and from lower claim frequency, primarily driven by shelter-in-place guidelines due to the COVID-19 pandemic. For homeowners, in both the three and nine month periods, the primary driver was fewer non-catastrophe weather claims.

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Current Accident Year Loss and LAE Ratio before Catastrophes

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

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Current accident year catastrophe losses for first quarter 2021 included losses from February winter storms primarily in the ~~three months ended September 30, 2020 were primarily~~South, as well as losses from ~~Pacific Coast wildfires, tropical storm Isaias, hurricane Laura, a Midwest derecho, and other~~ wind and hail events ~~mostly~~ in the ~~Central Plains.~~South and Pacific Coast. Current accident year catastrophe losses for ~~the three months ended September 30, 2019~~first quarter 2020 were primarily from tornado, wind and hail events in the Midwest and ~~Mountain West and losses from hurricane Dorian and tropical storm Imelda.~~

~~Current accident year catastrophe losses~~ for the nine months ended September 30, 2020 were primarily from Pacific Coast wildfires, tropical storm Isaias, hurricane Laura and various tornado, wind and hail events in the South, Midwest, and Central Plains. Catastrophe losses for the nine months ended September 30, 2019 primarily included winter storms across the country and tornado, wind and hail events in the South, Midwest, and Mountain West.Southeast.

Prior accident year development was favorable in ~~both~~ the ~~three~~2021 period, driven mostly by a reserve reduction in automobile for the 2017 to 2019 accident years and ~~nine month periods, with the favorable development in the nine month period principally due to~~ a reduction in ~~catastrophe loss reserves. Prior~~prior accident year development for both the three and nine month periods included reserve decreases from lower estimated automobile liability claim severity for the 2017 and 2018 accident years. The reduction in catastrophe loss reserves for the nine month period wascatastrophes driven by ~~lower estimated losses for the 2017 and~~an expected subrogation recovery related to a 2018 California ~~wildfires, including a $260 subrogation benefit from PG&E, as well as a reduction in losses for various 2018 and 2019 wind and hail events.~~wildfire. Prior accident year development was favorable in ~~both~~ the ~~three and nine months ended September 30, 2019~~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 ~~accident year.~~California wildfires.

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PROPERTY & CASUALTY OTHER OPERATIONS

Results of Operations

Underwriting Summary


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2020		2019		Change		2020		2019		Change			2021		2020		Change

Losses and loss adjustment expenses	Losses and loss adjustment expenses													Losses and loss adjustment expenses
Prior accident year development [1]	Prior accident year development [1]	$	11	$	—	NM		$	15	$	9	67	%	Prior accident year development [1]	$	33	$	—	NM
Total losses and loss adjustment expenses	Total losses and loss adjustment expenses	11		—		NM		15		9		67	%	Total losses and loss adjustment expenses	33		—		NM
Underwriting expenses	Underwriting expenses	2		3		(33	%)	8		9		(11	%)	Underwriting expenses	2		3		(33	%)
Underwriting loss	Underwriting loss	(13)		(3)		NM		(23)		(18)		(28	%)	Underwriting loss	(35)		(3)		NM
Net investment income [2]	Net investment income [2]	14		21		(33	%)	40		64		(38	%)	Net investment income [2]	16		16		—	%
Net realized capital gains (losses) [2]	Net realized capital gains (losses) [2]	2		4		(50	%)	(3)		17		(118	%)	Net realized capital gains (losses) [2]	2		(7)		129	%

Income before income taxes		3		22		(86	%)	14		63		(78	%)
Income tax expense [3]		1		4		(75	%)	2		11		(82	%)
Net income		$	2	$	18	(89	%)	$	12	$	52	(77	%)
Income (loss) before income taxes														Income (loss) before income taxes	(17)		6		NM
Income tax expense (benefit) [3]														Income tax expense (benefit) [3]	(4)		1		NM
Net income (loss)														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 1311 - Income Taxes of Notes to Condensed Consolidated Financial Statements.

Net income (loss)

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Net income (loss) decreased for both the three and nine month periods, primarily due to an increase in net unfavorable prior accident year development, a decrease in net investment income and, for the nine month period, a changechanged from net ~~realized capital gains~~income in the 2020 period to a net ~~realized capital losses.~~

~~Underwriting~~ loss ~~increased for both~~in the ~~three and nine month periods, primarily~~2021 period due to ~~an increase in net unfavorable prior accident year development. Net~~ 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 ~~2020 periods included reserve increases~~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 annual reviews will occur in the fourth quarter of ~~2020.~~2021. For information on A&E reserves, see MD&A - Critical Accounting Estimates, Asbestos and Environmental Reserves included in the Company's ~~2019~~2020 Form 10-K Annual Report.

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GROUP BENEFITS

Results of Operations

																					Operating Summary
		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2020		2019		Change		2020		2019		Change			2021		2020		Change
Premiums and other considerations	Premiums and other considerations	$	1,361	$	1,382	(2	%)	$	4,175	$	4,213	(1	%)	Premiums and other considerations	$	1,418	$	1,391	2	%
Net investment income [1]	Net investment income [1]	117		121		(3	%)	324		363		(11	%)	Net investment income [1]	127		115		10	%
Net realized capital gains [1]		9		14		(36	%)	4		26		(85	%)
Net realized capital gains (losses) [1]														Net realized capital gains (losses) [1]	19		(8)		NM
Total revenues	Total revenues	1,487		1,517		(2	%)	4,503		4,602		(2	%)	Total revenues	1,564		1,498		4	%
Benefits, losses and loss adjustment expenses	Benefits, losses and loss adjustment expenses	1,005		983		2	%	3,045		3,098		(2	%)	Benefits, losses and loss adjustment expenses	1,196		1,007		19	%
Amortization of DAC	Amortization of DAC	13		14		(7	%)	39		41		(5	%)	Amortization of DAC	11		13		(15	%)
Insurance operating costs and other expenses	Insurance operating costs and other expenses	312		329		(5	%)	991		968		2	%	Insurance operating costs and other expenses	339		339		—	%
Amortization of other intangible assets	Amortization of other intangible assets	10		10		—	%	30		31		(3	%)	Amortization of other intangible assets	10		11		(9	%)
Total benefits, losses and expenses	Total benefits, losses and expenses	1,340		1,336		—	%	4,105		4,138		(1	%)	Total benefits, losses and expenses	1,556		1,370		14	%
Income before income taxes	Income before income taxes	147		181		(19	%)	398		464		(14	%)	Income before income taxes	8		128		(94	%)
Income tax expense [2]		28		35		(20	%)	74		87		(15	%)
Income tax expense (benefit) [2]														Income tax expense (benefit) [2]	(1)		24		(104	%)
Net income	Net income	$	119	$	146	(18	%)	$	324	$	377	(14	%)	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 1311 - Income Taxes of Notes to the Condensed Consolidated Financial Statements.

																					Premiums and Other Considerations
		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2020		2019		Change		2020		2019		Change			2021		2020		Change
Fully insured – ongoing premiums	Fully insured – ongoing premiums	$	1,316	$	1,337	(2	%)	$	3,988	$	4,072	(2	%)	Fully insured – ongoing premiums	$	1,372	$	1,323	4	%
Buyout premiums	Buyout premiums	1		—		NM		55		6		NM		Buyout premiums	2		25		(92	%)
Fee income	Fee income	44		45		(2	%)	132		135		(2	%)	Fee income	44		43		2	%
Total premiums and other considerations	Total premiums and other considerations	$	1,361	$	1,382	(2	%)	$	4,175	$	4,213	(1	%)	Total premiums and other considerations	$	1,418	$	1,391	2	%
Fully insured ongoing sales, excluding buyouts	Fully insured ongoing sales, excluding buyouts	$	134	$	74	81	%	$	668	$	580	15	%	Fully insured ongoing sales, excluding buyouts	$	512	$	385	33	%

																		Ratios, Excluding Buyouts
		Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended March 31,
		2020		2019		Change	2020		2019		Change		2021		2020		Change
Group disability loss ratio	Group disability loss ratio	65.3	%	64.4	%	0.9	66.4	%	69.0	%	(2.6)	Group disability loss ratio	68.4	%	71.5	%	(3.1)
Group life loss ratio	Group life loss ratio	87.5	%	80.8	%	6.7	82.6	%	80.0	%	2.6	Group life loss ratio	108.3	%	74.6	%	33.7
Total loss ratio	Total loss ratio	73.8	%	71.1	%	2.7	72.6	%	73.5	%	(0.9)	Total loss ratio	84.3	%	71.9	%	12.4
Expense ratio [1]	Expense ratio [1]	24.3	%	24.9	%	(0.6)	25.4	%	24.1	%	1.3	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,
	2021		2020		Change
Net income margin	0.6	%	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 tax	0.1	%	0.3	%	(0.2)
Income tax benefit	0.2	%	(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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Margin
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 Change 2020 2019 Change
Net income margin 8.0 % 9.6 % (1.6) 7.2 % 8.2 % (1.0)
Adjustments to reconcile net income margin to core earnings margin:
Net realized capital losses (gains) excluded from core earnings, before tax (0.6 %) (0.9 %) 0.3 (0.1 %) (0.5 %) 0.4
Integration and transaction costs associated with acquired business, before tax 0.3 % 0.6 % (0.3) 0.3 % 0.6 % (0.3)
Income tax benefit 0.2 % 0.1 % 0.1 — % — % —
Impact of excluding buyouts from denominator of core earnings margin — % — % — 0.1 % — % 0.1
Core earnings margin 7.9 % 9.4 % (1.5) 7.5 % 8.3 % (0.8)

Net Income

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Net income decreased ~~for the three~~in first quarter 2021, largely driven by $185 of excess mortality in group life, primarily caused by direct and ~~nine month periods, primarily due to~~indirect impacts of COVID-19, ~~benefits and incurred~~partially offset by a change from net realized capital losses in first quarter 2020 ~~lower net investment income, lower~~to net realized capital gains and, for the nine month period, higher insurance operating costs and other expenses, partially offset by higher recoveries and lower claim incidence on group disability claims. Also contributing to the decrease for the three month period was an increase in prior incurral year group life reserves for late reported claims and less favorable prior incurral year development for disability, largely due to a change to recovery assumptions on long-term disability claims in thirdfirst quarter 2019 that reduced losses in that period. COVID-19 incurred benefits and losses in the three and nine months ended September 30, 2020 included $28 and $71, respectively, of group life claims and $7 and $18, respectively, of incurred losses on short-term disability and New York paid family leave claims. Lower net investment income was primarily driven by lower reinvestment rates and lower income from limited partnership and other alternative investments.2021.

Insurance operating costs and other expenses ~~decreased in the three month period and increased~~

~~in the nine month period. The three month period benefited from lower incentive compensation and travel costs as well~~were flat year over year as a reduction in ~~the allowance for credit losses on premiums receivable. The increase in expenses for the nine month period included higher information technology ("IT")~~integration costs and lower staffing and other costs ~~related~~due to ~~improving~~ the ~~customer experience, partially~~Hartford Next operational transformation and cost reduction program was offset by ~~lower incentive compensation~~an increase in commissions driven, in part, by growth in premiums and ~~travel costs. Both the three month and nine month periods also benefited from lower integration costs.~~other considerations.

Fully Insured Ongoing Premiums

[1] Other of ~~$64~~$58 and ~~$70~~$77 is included in the three months ended ~~September 30, 2019,~~March 31, 2020, and ~~2020,~~2021, respectively and ~~$187~~includes other group coverages such as retiree health insurance, critical illness, accident, hospital indemnity and ~~$200 for the nine~~participant accident coverages.

Three months ended ~~September 30, 2019, and 2020 is included in the total.~~

~~Three and nine months ended September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Fully insured ongoing premiums ~~decreased for the three~~increased primarily due to higher in-force employer group disability premiums and ~~nine month periods, principally driven by a decrease~~higher supplemental health product premiums.

Fully insured ongoing sales, excluding buyouts increased in all product lines, though most significantly in group ~~life and, for the nine month period, a decrease in group~~disability.

Ratios

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disability with the declines resulting primarily from lower insured exposure on in-force policies. Premiums for voluntary business increased in both the three and nine month periods, primarily due to strong sales and persistency.

~~Fully insured ongoing sales, excluding buyouts~~ ~~increased in both the three and nine month periods with increases in both group disability and group life.~~

~~Ratios~~

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Total loss ratio increased ~~2.7~~12.4 points for the three month period ~~due to an increase in both the~~reflecting a higher group life ~~and~~loss ratio, partially offset by a lower group disability loss ratio. The group life loss ratio increased ~~6.7~~33.7 points ~~with increases~~primarily driven by higher mortality, including $185 of excess mortality claims in ~~both the current and prior incurral years. The current incurral year loss ratio increased 1.8 points~~first quarter 2021 due to ~~COVID-19 life claims~~the direct and indirect effects of 4.7 points (or $28) in the third quarter of 2020, partially offset by favorable non-COVID-19 life mortality. Prior incurral year development for group life was unfavorable to third quarter 2019, primarily due to updating reserve assumptions related to late reported death claims. The disability loss ratio increased 0.9

points in third quarter 2020 with 4.7 points of less favorable prior incurral year development, partially offset by a lower current incurral year loss ratio of 3.5 points. Prior incurral year development in third quarter 2019 included a 2.7 point benefit from favorable changes in long-term disability reserve assumptions and a 1.1 point benefit from an experience refund related to the New York Paid Family Leave product. The favorable change in long-term disability reserve assumptions in third quarter 2019 was largely driven from updating our claim recovery probabilities to more recent experience. The current incurral year disability loss ratio decreased primarily due to lower claim incidence, partially offset by 1.0 points (or $7) of COVID-19 short-term disability claims.

Total loss ratio decreased 0.9 points for the nine month period reflecting a lower group disability loss ratio, partially offset by a higher group life ratio. The group life loss ratio increased 2.6 points for the nine month period primarily due to a higher current incurral year loss ratio driven by 3.9 points (or $71) of COVID-19 life claims. Prior incurral year development for group life was more favorable due to favorable mortality emergence on the prior incurral year recognized in the three month period ended March 31, 2020, partially offset by the reserve assumption update related to late reported death claims.COVID-19. The group disability loss ratio decreased ~~2.6~~3.1 points ~~for the nine month period with a 1.1 point improvement in the current incurral year loss ratio and 1.2 points of~~primarily due to more favorable prior incurral year development. The current incurral year group disability loss ratio improved1.1 points as lower claim incidence more than offset 0.9 points ($18) of COVID-19 short-term disability and New York Paid Family Leave claims. The more

favorable prior incurral year development ~~in group disability was~~ driven by higher claim recoveries and continued improving claim ~~incidence, partially offset by~~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 ~~favorable impacts in 2019 from the long term disability reserve assumption update.~~three months ended March 2020.

Expense ratio decreased ~~0.6~~0.9 points ~~in the three month period and increased 1.3 points for the nine month period. The three month period benefited from~~due to lower ~~incentive compensation and travel costs as well as a reduction in the allowance for credit losses on premiums receivable. The expense ratio increased for the nine month period driven by higher IT~~staffing and other costs ~~related to improving~~as a result of the ~~customer experience, partially offset by lower incentive compensation~~Hartford Next operational transformation and ~~travel costs.~~cost reduction program and the effect of higher premiums.

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


HARTFORD FUNDS

Results of Operations

Operating Summary


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2020		2019		Change		2020		2019		Change			2021		2020		Change
Fee income and other revenue	Fee income and other revenue	$	250	$	254	(2	%)	$	724	$	743	(3	%)	Fee income and other revenue	$	282	$	247	14	%
Net investment income	Net investment income	1		1		—	%	3		5		(40	%)	Net investment income	1		1		—	%
Net realized capital gains		5		1		NM		2		3		(33	%)
Net realized capital gains (losses)														Net realized capital gains (losses)	2		(11)		118	%
Total revenues	Total revenues	256		256		—	%	729		751		(3	%)	Total revenues	285		237		20	%
Amortization of DAC	Amortization of DAC	4		3		33	%	11		9		22	%	Amortization of DAC	3		4		(25	%)
Operating costs and other expenses	Operating costs and other expenses	197		202		(2	%)	569		607		(6	%)	Operating costs and other expenses	224		189		19	%
Total benefits, losses and expenses	Total benefits, losses and expenses	201		205		(2	%)	580		616		(6	%)	Total benefits, losses and expenses	227		193		18	%
Income before income taxes	Income before income taxes	55		51		8	%	149		135		10	%	Income before income taxes	58		44		32	%
Income tax expense [1]	Income tax expense [1]	11		11		—	%	30		27		11	%	Income tax expense [1]	11		8		38	%
Net income	Net income	$	44	$	40	10	%	$	119	$	108	10	%	Net income	$	47	$	36	31	%
Daily average Hartford Funds AUM	Daily average Hartford Funds AUM	$	122,528	$	119,738	2	%	$	117,693	$	116,635	1	%	Daily average Hartford Funds AUM	$	143,164	$	119,632	20	%
ROA [2]	ROA [2]	14.4		13.3		8	%	13.5		12.4		9	%	ROA [2]	13.1		12.0		9	%
Adjustment to reconcile ROA to ROA, core earnings:	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 tax	Effect of net realized capital losses excluded from core earnings, before tax	(1.6)		(0.4)		NM		(0.2)		(0.3)		33	%	Effect of net realized capital losses excluded from core earnings, before tax	(0.5)		3.7		(114	%)
Effect of income tax expense [1]		0.3		—		NM		—		—		—	%
Effect of income tax expense (benefit)														Effect of income tax expense (benefit)	—		(1.0)		100	%
ROA, core earnings [2]	ROA, core earnings [2]	13.1		12.9		2	%	13.3		12.1		10	%	ROA, core earnings [2]	12.6		14.7		(14	%)

[1]For discussion of income taxes, see Note 1311 - Income Taxes of Notes to Condensed Consolidated Financial Statements.

[2]Represents annualized earnings divided by a daily average of assets under management, as measured in basis points.


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Hartford Funds Segment AUM


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2020		2019		Change		2020		2019		Change			2021		2020		Change
Mutual Fund and ETP AUM - beginning of period	Mutual Fund and ETP AUM - beginning of period	$	104,721	$	106,889	(2	%)	$	112,533	$	91,557	23	%	Mutual Fund and ETP AUM - beginning of period	$	124,627	$	112,533	11	%
Sales - mutual fund	Sales - mutual fund	5,878		5,199		13	%	21,505		17,218		25	%	Sales - mutual fund	9,198		8,121		13	%
Redemptions - mutual fund	Redemptions - mutual fund	(7,064)		(6,126)		(15	%)	(24,599)		(18,123)		(36	%)	Redemptions - mutual fund	(8,428)		(9,478)		11	%
Net flows - ETP	Net flows - ETP	(80)		127		(163	%)	(271)		874		(131	%)	Net flows - ETP	4		(67)		106	%
Net flows - mutual fund and ETP	Net flows - mutual fund and ETP	(1,266)		(800)		(58	%)	(3,365)		(31)		NM		Net flows - mutual fund and ETP	774		(1,424)		154	%
Change in market value and other	Change in market value and other	6,586		(129)		NM		873		14,434		(94	%)	Change in market value and other	4,853		(20,494)		124	%
Mutual fund and ETP AUM - end of period	Mutual fund and ETP AUM - end of period	110,041		105,960		4	%	110,041		105,960		4	%	Mutual fund and ETP AUM - end of period	130,254		90,615		44	%
Talcott Resolution life and annuity separate account AUM [1]	Talcott Resolution life and annuity separate account AUM [1]	13,669		14,021		(3	%)	13,669		14,021		(3	%)	Talcott Resolution life and annuity separate account AUM [1]	14,944		11,538		30	%
Hartford Funds AUM - end of period	Hartford Funds AUM - end of period	$	123,710	$	119,981	3	%	$	123,710	$	119,981	3	%	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.

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

Mutual Fund and ETP AUM by Asset Class


		September 30,							As of March 31,
		2020		2019		Change			2021		2020		Change
Equity	Equity	$	70,649	$	66,999	5	%	Equity	$	87,456	$	55,076	59	%
Fixed Income	Fixed Income	15,655		15,685		—	%	Fixed Income	17,705		14,558		22	%
Multi-Strategy Investments [1]	Multi-Strategy Investments [1]	21,116		20,429		3	%	Multi-Strategy Investments [1]	22,170		18,407		20	%
Exchange-traded Products	Exchange-traded Products	2,621		2,847		(8)	%	Exchange-traded Products	2,923		2,574		14	%
Mutual Fund and ETP AUM	Mutual Fund and ETP AUM	$	110,041	$	105,960	4	%	Mutual Fund and ETP AUM	$	130,254	$	90,615	44	%

[1]Includes balanced, allocation, and alternative investment products.

Net Income

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Net income increased ~~for the three month period~~primarily due to higher fee income as a result of an increase in daily average assets under management, partially offset by higher variable costs. The effect of a change to net realized capital gains ~~due to mark-to-market~~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 on(losses) consist of changes in the market

value of Company assets invested in some of the funds ~~and lower operating costs, largely offset~~which was driven by ~~a decrease~~changes in fee income. Net income increased for the nine month period due to lower operating costs, including a reduction in contingent consideration of $12 before tax associated with the acquisition of Lattice, partly offset by a decrease in fee income and a decrease in net investment income. The decrease in investment management fee revenue in the three and nine months ended September 30, 2020 was primarily the result of a continued shift to lower fee

~~generating assets. See Note 5 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements for additional information regarding contingent consideration payable.~~equity markets.

Hartford Funds AUM

~~September 30, 2020~~March 31, 2021 compared to ~~September 30, 2019~~March 31, 2020

Hartford Funds AUM increased ~~compared to the prior~~

~~year~~primarily due to an increase in market values, partially offset by the effect of net outflows ~~along with~~over the ~~continued runoff~~prior twelve months. The Company recognized net inflows of ~~AUM related~~$774 for the first quarter of 2021 compared to ~~the Talcott Resolution life and annuity separate account AUM. Net flows from mutual funds and ETP were~~net outflows of ~~$3.4~~$1.4 billion in first ~~nine months of 2020 compared to outflows of $31 in first nine months of 2019.~~quarter 2020.

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CORPORATE

Results of Operations

Operating Summary


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
		2020		2019		Change		2020		2019		Change			2021		2020		Change
Fee income	Fee income	$	13	$	14	(7	%)	$	38	$	38	—	%	Fee income	$	12	$	13	(8	%)

Other revenue (loss)	Other revenue (loss)	(21)		24		(188	%)	54		68		(21	%)	Other revenue (loss)	(8)		2		NM
Net investment income	Net investment income	3		10		(70	%)	16		51		(69	%)	Net investment income	3		9		(67	%)
Net realized capital gains (losses)	Net realized capital gains (losses)	13		1		NM		(2)		21		(110	%)	Net realized capital gains (losses)	6		(39)		115	%
Total revenues	Total revenues	8		49		(84	%)	106		178		(40	%)	Total revenues	13		(15)		187	%
Benefits, losses and loss adjustment expenses [1]	Benefits, losses and loss adjustment expenses [1]	1		5		(80	%)	13		10		30	%	Benefits, losses and loss adjustment expenses [1]	1		6		(83	%)

Insurance operating costs and other expenses	Insurance operating costs and other expenses	9		20		(55	%)	59		66		(11	%)	Insurance operating costs and other expenses	13		21		(38	%)

Loss on extinguishment of debt [2]		—		90		(100	%)	—		90		(100	%)

Interest expense [2]	Interest expense [2]	58		67		(13	%)	179		194		(8	%)	Interest expense [2]	57		64		(11	%)
Restructuring and other costs	Restructuring and other costs	87		—		NM		87		—		NM		Restructuring and other costs	11		—		NM
Total benefits, losses and expenses	Total benefits, losses and expenses	155		182		(15	%)	338		360		(6	%)	Total benefits, losses and expenses	82		91		(10	%)
Loss before income taxes	Loss before income taxes	(147)		(133)		(11	%)	(232)		(182)		(27	%)	Loss before income taxes	(69)		(106)		35	%
Income tax benefit [3]	Income tax benefit [3]	(39)		(34)		(15	%)	(51)		(40)		(28	%)	Income tax benefit [3]	(11)		(15)		27	%

Net loss	Net loss	(108)		(99)		(9	%)	(181)		(142)		(27	%)	Net loss	(58)		(91)		36	%
Preferred stock dividends	Preferred stock dividends	6		11		(45	%)	16		16		—	%	Preferred stock dividends	5		5		—	%
Net loss available to common stockholders	Net loss available to common stockholders	$	(114)	$	(110)	(4)	%	$	(197)	$	(158)	(25)	%	Net loss available to common stockholders	$	(63)	$	(96)	34	%

[1]Includes benefits expense on life and annuity business previously underwritten by the Company.

[2] For discussion of debt, see Note ~~12 - Debt of Notes to Condensed Consolidated Financial Statements and Note 13-~~14- Debt of Notes to Consolidated Financial ~~Statement~~Statements in The Hartford's ~~2019~~2020 Form 10-K Annual Report.

[3] For discussion of income taxes, see Note 1311 - Income Taxes of Notes to the Condensed Consolidated Financial Statements.

Net Loss

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Net loss ~~increased for the three month period,~~decreased primarily due to ~~restructuring costs of $87 before tax in third quarter 2020 in connection with the Company’s Hartford Next operational transformation and cost reduction plan,~~ 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 ~~to losses from~~and a larger loss on the Company's retained equity interest in the former life and annuity ~~operations included in other income, largely offset by a $90 before tax~~operations. The loss on ~~extinguishment of debt in third quarter 2019. In addition, a decrease in interest expense and increase in net realized capital gains was partly offset by lower net investment income.~~

~~Net lossincreased for~~ the nine month period primarily due to restructuring costs of $87 before tax, lower net investment income, a change from net realized capital gains to net realized capital losses and lower transition services revenue, partially offset by a $90 before tax loss on extinguishment of debt in 2019, transaction costs incurred in 2019 in connection with the acquisition of Navigators Group and lower interest expense.

~~Income (loss) before tax from the Company's~~ retained equity interest, ~~in the former life~~recognized within other revenues, was ($8) and ~~annuity operations was~~ ($~~21) and $43, respectively~~4) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and was $14 and $45, respectively, for the three and nine months ended September 30, 2019. Net income declined in~~respectively.

Interest Expense

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~~both the three and nine-month periods primarily due to a lower yield on short-term investments~~.

~~Interest Expense~~

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 compared to the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

Interest expense decreased ~~for both~~as a result of the ~~three and nine month periods primarily due to~~Company repaying at maturity the ~~repayment~~$500 principal amount of ~~our~~its 5.5% senior notes in ~~March~~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 business resiliency response to COVID-19, and specific risk tolerances for natural catastrophes and pandemic risk are described in the ERM section of the MD&A in The Hartford’s ~~2019~~2020 Form 10-K Annual Report.

Insurance Risk

Insurance risk is the risk of losses of both a catastrophic and non-catastrophic nature on the P&C and Group Benefits products the Company has 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 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

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 life 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 expectancy trends among policyholders receiving long-term benefit payments.

•Cyber Insurance- Risk of loss to property, breach of data and business interruption from various types of cyber-attacks.

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

Catastrophe risk primarily arises in the property, automobile, workers' compensation, casualty, group life, and group disability lines of business.

Impact Non-catastrophe insurance risk can arise from unexpected loss experience, underpriced business and/or

underestimation of loss reserves and 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 has 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 are set for natural catastrophes, terrorism risk and 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. The Hartford also participates in governmentally administered reinsurance facilities such as the Florida Hurricane Catastrophe Fund (“FHCF”), the Terrorism Risk Insurance Program (“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 ~~$150~~$100 per occurrence for all perils other than named storm and earthquake. Pandemic is not excluded from the catastrophe treaties, so there could be reinsurance coverage for COVID-19 if related losses exceed the retentions and fall within the terms and conditions of the contract, including that losses are sustained by the Company duringearthquake (subject to a 168 hour period. Because of the level of the retentions and the Company’s current loss estimates, the Company expects limited reinsurance recovery from COVID-19 related losses under the per-occurrence catastrophe treaties. In addition to catastrophe reinsurance, the$50 annual aggregate deductible). The Company has per risk and quota share reinsurance that would respond to certain COVID-19 related losses; however, ~~the reinsurance market has shifted to require~~ communicable ~~disease exclusions~~diseases are excluded from our per occurrence property catastrophe treaty, aggregate property treaty and workers' compensation catastrophe treaty that incepted on ~~certain treaties that have renewed subsequent to 7/1/20. The~~January 1, 2021.The Company has reinsurance in place to cover individual group life losses in excess of $1 per person. With respect to recent civil unrest, losses relating to civil unrest designated by the Property Claim Services office of Verisk as a catastrophe event will cede to our property catastrophe aggregate cover. Such losses are not expected to be covered by the property catastrophe occurrence treaties because the unrest occurred in non-contiguous areas though the Company has property per risk and property quota share reinsurance that would cover certain losses related to the civil unrest.

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

Primary Catastrophe Treaty Reinsurance Coverages as of ~~September 30, 2020~~March 31, 2021 [1]


	Portion of losses reinsured	Portion of losses retained by The Hartford
Per Occurrence Property Catastrophe Treaty from 1/1/~~2020~~2021 to 12/31/~~2020~~2021 [1] [2]
Losses of $0 to ~~$150~~$100	None	100% retained
Losses of ~~$150~~$100 to $350 for earthquakes and named hurricanes and tropical storms ~~and earthquakes~~[6]	None	100% retained
Losses of ~~$150~~$100 to $350 from one event other than earthquakes and named hurricanes and tropical storms ~~and earthquakes~~(subject to a $50 Annual Aggregate Deductible ("AAD")) [6]	70% of ~~$200~~$250 in excess of ~~$150~~$100	30% co-participation
Losses of $350 to $500 from one event (all perils)	75% of $150 in excess of $350	25% co-participation
Losses of $500 to $1.1 billion from one event [3] (all perils)	90% of $600 in excess $500	10% co-participation
Aggregate Property Catastrophe Treaty for 1/1/~~2020~~2021 to 12/31/~~2020~~2021 [4]
$0 to $700 of aggregate losses	None	100% retained
$700 to $900 of aggregate losses	100%	None
Workers' Compensation Catastrophe Treaty for 1/1/~~2020~~2021 to 12/31/~~2020~~2021
Losses of $0 to $100 from one event	None	100% retained
Losses of $100 to $450 from one event [5]	80% of $350 in excess of $100	20% co-participation

[1] ~~As of January 1, 2020 Navigators Group (Global Specialty) is included in the Corporate Property Catastrophe treaties.~~ These treaties do not cover the assumed reinsurance business which purchases its own retrocessional coverage.

[2]In addition to the Per Occurrence Property ~~Occurrence~~Catastrophe Treaty, for Florida wind events, The Hartford has purchased the mandatory FHCF reinsurance for the annual period starting at ~~6/1.~~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 ~~$67~~$55 of per event losses in excess of a ~~$27~~$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 reinsurance agreements that cover property catastrophe losses. The Per Occurrence Property Catastrophe Treaty, and Workers' Compensation Catastrophe Treaty include a provision to reinstate one limit in the event that a catastrophe loss exhausts limits on one or more layers under the treaties.

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 attacks. As such, the Company's principal reinsurance protection against large-scale terrorist attacks is the coverage currently provided through TRIPRA to the end of 2027.

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 ~~$200 million.~~$200. Under the program, in any one calendar year, the federal government will 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 80%. The Company's

estimated deductible under the program is ~~$1.5~~$1.6 billion for ~~2020.~~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 for A&E and Navigators Group Reserve Development - The Company has two adverse development cover (“ADC”) reinsurance agreements in place, both of which are accounted for as retroactive reinsurance. One agreement covers substantially all A&E reserve development for 2016 and prior accident years (the “A&E ADC”) and the other covers substantially all reserve development of Navigators Insurance Company and certain of its affiliates for 2018 and prior accident years (“Navigators ADC”). For more information on the A&E ADC and the Navigators ADC, see Note - 1, Basis of Presentation and Significant Accounting Policies of Notes to Consolidated Financial Statements, included in The Hartford's ~~2019~~2020 Form 10-K Annual Report and Note ~~-10,~~-9, Reserve for Unpaid Losses and Loss Adjustment Expenses of ~~this Form 10-Q.~~Notes to Condensed Consolidated Financial Statements.

~~Operational Risk~~

~~Operational risk is the risk of loss resulting from inadequate or failed internal processes and systems, human error, or from external events.~~

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~~Sources of Operational Risk~~Operational risk is inherent in the Company's business and functional areas. Operational risks include: compliance with laws and regulation, cybersecurity, business disruption, technology failure, inadequate execution or process management, reliance on model and data analytics, internal fraud, external fraud, third party dependency and attraction and retention of talent.

~~Impact~~ ~~Operational risk can result in financial loss, disruption~~

~~of our business, regulatory actions or damage to our reputation.~~

~~Management~~ Responsibility for day-to-day management of operational risk lies within each business unit and functional area. ERM provides an enterprise-wide view of the Company's operational risk on an aggregate basis. ERM is responsible for establishing, maintaining and communicating the framework, principles and guidelines of the Company's operational risk management program.

~~In response to COVID-19 the Company has implemented a number of mitigation strategies to address potential operational impacts, including:~~

•Activated our cross-functional Crisis Management Team (CMT) comprising of representatives from areas such as the Business Resiliency Office, IT, Corporate Health & Well-being, Employee Relations, Security, Facilities and Communications

•Enabled the vast majority of employees to work from home with no material impacts to operations; for employees in the office, various protocols have been implemented to promote employee health and safety including, but not limited to, the use of personal protective equipment, practicing social distancing and enhanced cleaning

•~~Strengthened technology infrastructure and expanded policies for accessing the Company’s network remotely~~

•~~Actively worked with sourcing partners to ensure they were implementing their business continuity plans~~

•~~Provided support to employees through our Corporate, Health & Well-being team comprised of healthcare professionals to identify and isolate employees with potential COVID-19 exposure.~~

Financial Risk

Financial risks include direct and indirect risks to the Company's financial objectives from events that impact financial market conditions 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 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 limiting aggregation of risk, portfolio re-balancing and hedging with over-the-counter and exchange-traded derivatives with

counterparties meeting the appropriate regulatory and due diligence requirements. Derivatives are utilized to achieve ~~one of four~~the following Company-approved objectives: hedging risk arising from interest rate, equity market, commodity market, credit spread

and issuer default, price or currency exchange rate risk or volatility; managing liquidity; controlling transaction costs; ~~or entering into~~and 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.

Impact Inadequate 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 ~~liquidity.~~of liquid assets among legal entities. The Company also monitors internal and external conditions, and identifies material risk changes and emerging risks that may impact 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, ~~a commercial paper program,~~ 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.

Refer to the Capital Resources & 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.

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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 products.

Impact A 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 based 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 the Company's credit risk management policy. The Company manages its credit risk by managing aggregations of risk, holding a diversified mix of issuers and counterparties across its investment, reinsurance and insurance portfolios and limiting exposure to any specific reinsurer or counterparty. Potential credit losses can be mitigated through diversification (e.g., geographic regions, asset types, industry sectors), hedging and 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. ~~Credits considered for investment~~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 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 institutions;

•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, 2020,~~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 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. 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.

The Company also has derivative counterparty exposure policies which limit the Company’s exposure to credit risk. Credit exposures are generally quantified based on the prior business day’s net fair value, including income accruals, of all derivative positions transacted with a single counterparty for each separate legal entity. The Company enters into collateral arrangements in connection with its derivatives positions and collateral is pledged to or held by, or on behalf of, the Company to the extent the exposure is greater than zero, subject to minimum transfer thresholds. For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company incurred no losses on derivative instruments due to counterparty default. For further discussion, see the Derivative Commitments section of Note 1412 - Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements.

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. 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.

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 indexes.

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For further information on credit derivatives, see Note 76 - Derivatives 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 rate risk arising from its fixed maturity investments, commercial mortgage loans ~~capital~~we invest in as well as debt securities, preferred stock and similar securities issued by the Company and discount rate assumptions associated with the Company’s claim reserves and pension and other post-retirement benefit obligations as well as from assets that support the Company's pension and 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 seek 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 cash 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, convexity and key rate duration.

The Company 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 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, 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. ~~For further information, see Note 21 - Business Dispositions and Discontinued Operations of Notes to Consolidated Financial Statements included in the Company’s 2019 Form 10-K Annual Report.~~

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 alternative 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, 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.

In addition, since our Hartford Funds segment revenues are based on average daily assets under management, a decline in equity markets could reduce assets under management and, in such case, would reduce our fee income from that segment.

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, and, at times, hedging of changes in equity indices. ~~Early in the second quarter of 2020, the Company reduced its exposure to equity securities through sales.~~ For assets supporting pension and other post-retirement benefit plans, 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 and impose concentration limits and investment quality requirements on permissible investment options.

~~Equity Sensitivity~~

~~Investment portfolio and the assets supporting pension and other post-retirement benefit plans~~

Included in the following tables are the estimated before tax change in the economic value of the Company’s invested assets and assets supporting pension and other post-retirement benefit plans with sensitivity to equity risk. The calculation of the hypothetical change in economic value below assumes a 20% upward and downward shock to the Standard & Poor's 500 Composite Price Index ("S&P 500"). For limited partnerships and other alternative investments, the movement in economic value is

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~~calculated using a beta analysis largely derived from historical experience relative to the S&P 500.~~

~~The selection of the 20% shock to the S&P 500 was made only as an illustration to the potential hypothetical impact of such an event and should not be construed as a prediction of future~~

market events. Actual results could differ materially from those illustrated below due to the nature of the estimates and assumptions used in the analysis. These calculations do not capture the impact of portfolio re-allocations.

~~Equity Sensitivity [1]~~

As of September 30, 2020 As of December 31, 2019
Shock to S&P 500 Shock to S&P 500
(Before tax) Fair Value +20% -20% Fair Value +20% -20%
Investment Portfolio $ 2,224 $ 246 $ (246) $ 3,295 $ 440 $ (407)
Assets supporting pension and other post-retirement benefit plans $ 1,433 $ 223 $ (223) $ 1,372 $ 230 $ (230)

~~[1]Table excludes the Company's investment in Hopmeadow Holdings LP which is reported in other assets on the Company's Condensed Consolidated Balance Sheets.~~

~~Hartford Funds assets under management~~

Hartford Funds earnings are significantly influenced by the U.S. and other equity markets. If equity markets were to hypothetically decline 20% and remain depressed for one year, the estimated before tax impact on reported earnings for that one year period is a decrease of $50 as of September 30, 2020. The selection of the 20% shock to the S&P 500 was made only as an illustration to the potential hypothetical impact of such an event and should not be construed as a prediction of future market events. Actual results could differ materially due to the nature of the estimates and assumptions used in the analysis.

Foreign Currency Exchange Risk

~~Sources of Currency 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 in non-U.S. dollar denominated cash, fixed maturities, equities, and derivative instruments. In addition, the Company 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 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 Company 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 foreign currency swaps 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, and 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 65 - Investments of Notes to Condensed Consolidated Financial Statements.

																											Fixed Maturities, AFS by Credit Quality
		September 30, 2020						December 31, 2019							March 31, 2021						December 31, 2020
		Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value			Amortized Cost		Fair Value		Percent of Total Fair Value		Amortized Cost		Fair Value		Percent of Total Fair Value
United States Government/Government agencies	United States Government/Government agencies	$	5,276	$	5,650	12.8	%	$	5,478	$	5,644	13.4	%	United States Government/Government agencies	$	4,631	$	4,837	11.1	%	$	4,872	$	5,214	11.6	%
AAA	AAA	6,458		6,789		15.4	%	6,412		6,617		15.7	%	AAA	6,499		6,759		15.5	%	6,482		6,848		15.2	%
AA	AA	7,620		8,152		18.5	%	7,746		8,146		19.3	%	AA	7,877		8,327		19.1	%	7,840		8,453		18.8	%
A	A	10,454		11,414		25.9	%	10,144		10,843		25.7	%	A	10,384		11,109		25.5	%	10,500		11,595		25.7	%
BBB	BBB	9,485		10,291		23.4	%	8,963		9,530		22.6	%	BBB	9,724		10,359		23.7	%	9,831		10,856		24.1	%
BB & below	BB & below	1,780		1,748		4.0	%	1,335		1,368		3.3	%	BB & below	2,202		2,216		5.1	%	2,036		2,069		4.6	%
Total fixed maturities, AFS	Total fixed maturities, AFS	$	41,073	$	44,044	100.0	%	$	40,078	$	42,148	100.0	%	Total fixed maturities, AFS	$	41,317	$	43,607	100.0	%	$	41,561	$	45,035	100.0	%

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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The fair value of fixed maturities, AFS increased as compared to December 31, 2019, primarily due to net additions of corporate securities and an increase in valuations as a result of a decline in interest rates, partially offset by wider credit spreads. Fixed Maturities, FVO, are not included in the preceding table. For

~~further discussion on FVO securities, see Note 5 - Fair Value Measurements of Notes to Condensed Consolidated Financial Statements.~~


Fixed Maturities, AFS by Type	Fixed Maturities, AFS by Type																							Fixed Maturities, AFS by Type
		September 30, 2020												December 31, 2019											March 31, 2021												December 31, 2020
		Amortized Cost		ACL [1]		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Percent of Total Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Percent of Total Fair Value			Amortized Cost		ACL		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Percent of Total Fair Value		Amortized Cost		ACL		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Percent of Total Fair Value
Asset-backed securities ("ABS")	Asset-backed securities ("ABS")																							Asset-backed securities ("ABS")
Consumer loans	Consumer loans	$	1,320	$	—	$	37	$	—	$	1,357	3.1	%	$	1,350	$	16	$	(3)	$	1,363	3.2	%	Consumer loans	$	1,257	$	—	$	27	$	—	$	1,284	2.9	%	$	1,396	$	—	$	35	$	—	$	1,431	3.2	%

Other	Other	129		—		4		—		133		0.3	%	111		2		—		113		0.3	%	Other	148		—		3		—		151		0.3	%	129		—		4		—		133		0.3	%

Collateralized loan obligations ("CLOs")	Collateralized loan obligations ("CLOs")	2,465		—		4		(20)		2,449		5.6	%	2,186		5		(8)		2,183		5.2	%	Collateralized loan obligations ("CLOs")	3,040		—		10		(1)		3,049		7.0	%	2,780		—		7		(7)		2,780		6.2	%

CMBS	CMBS																							CMBS
Agency [2]		1,804		—		121		(7)		1,918		4.3	%	1,878		43		(7)		1,914		4.5	%
Agency [1]																								Agency [1]	1,577		—		78		(4)		1,651		3.8	%	1,779		—		117		(6)		1,890		4.2	%
Bonds	Bonds	2,151		—		144		(23)		2,272		5.2	%	2,108		86		(4)		2,190		5.2	%	Bonds	2,133		—		119		(10)		2,242		5.1	%	2,160		—		159		(13)		2,306		5.1	%
Interest only	Interest only	245		—		10		(1)		254		0.6	%	224		12		(2)		234		0.6	%	Interest only	269		—		9		(4)		274		0.6	%	280		—		10		(2)		288		0.6	%
Corporate	Corporate																							Corporate
Basic industry	Basic industry	677		—		53		(4)		726		1.6	%	539		31		(1)		569		1.4	%	Basic industry	762		—		47		(4)		805		1.8	%	727		—		69		(1)		795		1.8	%
Capital goods	Capital goods	1,528		—		119		(21)		1,626		3.7	%	1,495		72		(9)		1,558		3.7	%	Capital goods	1,538		—		95		(10)		1,623		3.7	%	1,488		—		148		(11)		1,625		3.6	%
Consumer cyclical	Consumer cyclical	1,340		(6)		97		(4)		1,427		3.2	%	991		57		(1)		1,047		2.5	%	Consumer cyclical	1,415		—		67		(8)		1,474		3.4	%	1,434		(1)		108		(1)		1,540		3.4	%
Consumer non-cyclical	Consumer non-cyclical	2,861		(1)		266		(7)		3,119		7.1	%	2,372		137		(3)		2,506		5.9	%	Consumer non-cyclical	2,755		—		181		(9)		2,927		6.7	%	2,878		—		314		(4)		3,188		7.1	%
Energy	Energy	1,457		(1)		107		(22)		1,541		3.5	%	1,550		96		(3)		1,643		3.9	%	Energy	1,495		(1)		108		(4)		1,598		3.7	%	1,474		(1)		147		(4)		1,616		3.6	%
Financial services	Financial services	4,405		(21)		330		(10)		4,704		10.7	%	3,977		192		(4)		4,165		9.9	%	Financial services	4,517		(16)		257		(19)		4,739		10.9	%	4,523		(21)		398		(4)		4,896		10.9	%
Tech./comm.	Tech./comm.	2,582		—		320		(7)		2,895		6.6	%	2,360		208		—		2,568		6.1	%	Tech./comm.	2,741		(2)		233		(20)		2,952		6.8	%	2,651		—		370		(3)		3,018		6.7	%
Transportation	Transportation	683		—		73		(5)		751		1.7	%	743		44		—		787		1.9	%	Transportation	743		—		49		(3)		789		1.8	%	747		—		85		(3)		829		1.8	%
Utilities	Utilities	1,955		—		205		(2)		2,158		4.9	%	2,019		132		(4)		2,147		5.1	%	Utilities	1,941		—		152		(9)		2,084		4.8	%	1,999		—		250		—		2,249		5.0	%
Other	Other	442		—		27		—		469		1.1	%	389		17		—		406		1.0	%	Other	478		—		27		(1)		504		1.2	%	480		—		37		—		517		1.1	%
Foreign govt./govt. agencies	Foreign govt./govt. agencies	901		—		83		—		984		2.2	%	1,057		66		—		1,123		2.7	%	Foreign govt./govt. agencies	825		—		47		(4)		868		2.0	%	842		—		77		—		919		2.0	%
Municipal bonds	Municipal bonds																							Municipal bonds
Taxable	Taxable	1,088		—		98		(2)		1,184		2.7	%	815		45		(1)		859		2.0	%	Taxable	1,094		—		66		(5)		1,155		2.6	%	1,084		—		109		(1)		1,192		2.6	%
Tax-exempt	Tax-exempt	7,403		(3)		731		(5)		8,126		18.4	%	7,948		692		(1)		8,639		20.5	%	Tax-exempt	7,377		—		696		(14)		8,059		18.5	%	7,480		—		831		—		8,311		18.5	%
RMBS	RMBS																							RMBS
Agency	Agency	2,229		—		101		(1)		2,329		5.3	%	2,409		57		(1)		2,465		5.8	%	Agency	1,766		—		72		(6)		1,832		4.2	%	1,829		—		92		(2)		1,919		4.3	%
Non-agency	Non-agency	1,732		—		43		(1)		1,774		4.0	%	1,786		17		(2)		1,801		4.2	%	Non-agency	1,833		—		28		(3)		1,858		4.3	%	1,755		—		41		(1)		1,795		4.0	%
Alt-A	Alt-A	33		—		1		—		34		0.1	%	40		3		—		43		0.1	%	Alt-A	19		—		2		—		21		0.1	%	27		—		2		—		29		0.1	%
Sub-prime	Sub-prime	400		—		11		—		411		0.9	%	540		20		—		560		1.3	%	Sub-prime	306		—		8		—		314		0.7	%	355		—		9		—		364		0.8	%
U.S. Treasuries	U.S. Treasuries	1,243		—		160		—		1,403		3.2	%	1,191		75		(1)		1,265		3.0	%	U.S. Treasuries	1,288		—		69		(3)		1,354		3.1	%	1,264		—		141		—		1,405		3.1	%
Total fixed maturities, AFS	Total fixed maturities, AFS	$	41,073	$	(32)	$	3,145	$	(142)	$	44,044	100.0	%	$	40,078	$	2,125	$	(55)	$	42,148	100.0	%	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, FVO										$	—									$	11
Equity securities, at fair value										$	819									$	1,657

[1]Represents the ACL recorded following the adoption of accounting guidance for credit losses on January 1, 2020. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements.

~~[2]~~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 fixed maturities, AFS ~~increased~~decreased as compared with December 31, ~~2019,~~2020, primarily due to ~~net additions of corporate securities and an increase~~a decrease in valuations ~~as a result of a decline in~~due to higher interest rates, partially offset by ~~wider~~tighter credit spreads. ~~The~~Furthermore, the Company ~~increased~~decreased holdings in ~~consumer cyclical~~CMBS, ABS, and ~~non-~~

~~cyclical, financial services and technology/communication corporate bonds as well as in CLOs and taxable~~tax-exempt municipal bonds, while ~~simultaneously reducing~~increasing holdings in ~~tax-exempt municipal bonds and RMBS.~~

~~109~~

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

~~Energy Exposure~~

Oil prices came under significant pressure during the first half of 2020, particularly during March and April, largely due to the unprecedented reduction in demand stemming from the global pandemic as well as a decision by Saudi Arabia to raise production despite declining demand. The uncertain outlook caused credit spreads to widen for corporate and sovereign issuers that participate in the exploration, production, transportation and refining of oil and gas. Subsequently, OPEC Plus' agreement to reduce production in combination with recovering demand from economic re-openings has contributed to a recovery in oil prices, although still to historically low levels. With the stabilization of oil prices, credit spreads have recovered meaningfully. Ultimately, the impact of the price volatility in the energy sector on theCLOs.

Company’s invested assets, will be determined by the severity and duration of the decline in energy prices and the ability of the issuers to maintain liquidity, manage their indebtedness, and navigate the growing consolidation trends within the industry.

The Company's direct exposure within its investment portfolio to the energy sector totals approximately 3% of invested assets as of September 30, 2020 and is primarily comprised of investment grade corporate debt. These investments are diversified by issuer and different sub-sectors of the energy market, with the highest exposure to the midstream industry and the lowest to refining services. The following table summarizes the Company's exposure to the energy sector by security type and credit quality.

Exposure to Energy
September 30, 2020 December 31, 2019
Amortized Cost Fair Value Amortized Cost Fair Value
Corporate securities, AFS and Equity securities, at fair value
Investment grade $ 1,218 $ 1,317 $ 1,425 $ 1,516
Below investment grade 239 224 125 127
Equity securities, at fair value 6 6 45 45
Total corporate, AFS and equity securities, at fair value 1,463 1,547 1,595 1,688
Foreign govt./govt. agencies
Investment grade 225 259 232 254
Below investment grade 9 9 9 10
Total foreign govt./govt. agencies, AFS 234 268 241 264
Other 5 6 20 21
Total energy exposure $ 1,702 $ 1,821 $ 1,856 $ 1,973

The Company manages the credit risk associated with the energy sector within the investment portfolio on an on-going basis using macroeconomic analysis and issuer credit analysis. The Company considers alternate scenarios including oil prices remaining at low levels for an extended period and/or declining significantly below current levels. For additional details regarding the Company’s management of credit risks, see the Credit Risk Section of this MD&A. The Company has evaluated available-for-sale securities with exposure to energy for a potential ACL as of September 30, 2020 and concluded that for the securities in an unrealized loss position, it is more likely than not that the Company will recover the entire amortized cost basis of the securities. In addition, no

other securities in the table above have been identified as intent-to-sell, nor is the Company required to sell. For additional details regarding the Company’s impairment process, see the Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments section below.

Commercial & Residential Real Estate

The following table presents the Company’s exposure to CMBS and RMBS by current credit quality included in the preceding ~~Securities~~Fixed Maturities, AFS by Type table.

~~110~~90


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Exposure to CMBS & RMBS Bonds as of September 30, 2020
Exposure to CMBS & RMBS Bonds as of March 31, 2021																										Exposure to CMBS & RMBS Bonds as of March 31, 2021
		AAA				AA				A				BBB				BB and Below				Total					AAA				AA				A				BBB				BB and Below				Total
		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value			Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
CMBS	CMBS																									CMBS
Agency [1]	Agency [1]	$	1,800	$	1,914	$	4	$	4	$	—	$	—	$	—	$	—	$	—	$	—	$	1,804	$	1,918	Agency [1]	$	1,573	$	1,647	$	4	$	4	$	—	$	—	$	—	$	—	$	—	$	—	$	1,577	$	1,651
Bonds	Bonds	1,027		1,114		552		587		433		425		132		141		7		5		2,151		2,272		Bonds	934		994		588		620		413		427		181		187		17		14		2,133		2,242
Interest Only	Interest Only	162		169		65		68		12		12		4		4		2		1		245		254		Interest Only	165		169		89		91		7		7		6		6		2		1		269		274
Total CMBS	Total CMBS	2,989		3,197		621		659		445		437		136		145		9		6		4,200		4,444		Total CMBS	2,672		2,810		681		715		420		434		187		193		19		15		3,979		4,167
RMBS	RMBS																									RMBS
Agency	Agency	2,206		2,304		23		25		—		—		—		—		—		—		2,229		2,329		Agency	1,744		1,808		22		24		—		—		—		—		—		—		1,766		1,832
Non-Agency	Non-Agency	1,080		1,112		335		343		289		291		27		27		1		1		1,732		1,774		Non-Agency	1,008		1,027		406		411		367		368		52		52		—		—		1,833		1,858
Alt-A	Alt-A	—		—		5		4		4		4		2		2		22		24		33		34		Alt-A	2		2		—		—		—		—		1		1		16		18		19		21
Sub-Prime	Sub-Prime	3		3		31		32		129		132		109		112		128		132		400		411		Sub-Prime	14		14		45		46		95		97		56		58		96		99		306		314
Total RMBS	Total RMBS	3,289		3,419		394		404		422		427		138		141		151		157		4,394		4,548		Total RMBS	2,768		2,851		473		481		462		465		109		111		112		117		3,924		4,025
Total CMBS & RMBS	Total CMBS & RMBS	$	6,278	$	6,616	$	1,015	$	1,063	$	867	$	864	$	274	$	286	$	160	$	163	$	8,594	$	8,992	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, 2019
Exposure to CMBS & RMBS Bonds as of December 31, 2020																										Exposure to CMBS & RMBS Bonds as of December 31, 2020
		AAA				AA				A				BBB				BB and Below				Total					AAA				AA				A				BBB				BB and Below				Total
		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value			Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
CMBS	CMBS																									CMBS
Agency [1]	Agency [1]	$	1,878	$	1,914	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,878	$	1,914	Agency [1]	$	1,771	$	1,882	$	8	$	8	$	—	$	—	$	—	$	—	$	—	$	—	$	1,779	$	1,890
Bonds	Bonds	1,013		1,055		561		576		416		438		118		121		—		—		2,108		2,190		Bonds	1,009		1,101		541		582		423		430		170		179		17		14		2,160		2,306
Interest Only	Interest Only	150		158		67		70		—		—		5		5		2		1		224		234		Interest Only	177		183		90		93		8		7		4		4		1		1		280		288
Total CMBS	Total CMBS	3,041		3,127		628		646		416		438		123		126		2		1		4,210		4,338		Total CMBS	2,957		3,166		639		683		431		437		174		183		18		15		4,219		4,484
RMBS	RMBS																									RMBS
Agency	Agency	2,386		2,441		23		24		—		—		—		—		—		—		2,409		2,465		Agency	1,807		1,894		22		25		—		—		—		—		—		—		1,829		1,919
Non-Agency	Non-Agency	1,215		1,226		300		304		257		257		13		13		1		1		1,786		1,801		Non-Agency	1,034		1,063		371		380		313		315		36		36		1		1		1,755		1,795
Alt-A	Alt-A	—		—		8		8		4		4		8		9		20		22		40		43		Alt-A	—		—		3		3		2		2		2		2		20		22		27		29
Sub-Prime	Sub-Prime	9		9		56		57		167		173		164		171		144		150		540		560		Sub-Prime	1		1		25		26		114		116		102		105		113		116		355		364
Total RMBS	Total RMBS	3,610		3,676		387		393		428		434		185		193		165		173		4,775		4,869		Total RMBS	2,842		2,958		421		434		429		433		140		143		134		139		3,966		4,107
Total CMBS & RMBS	Total CMBS & RMBS	$	6,651	$	6,803	$	1,015	$	1,039	$	844	$	872	$	308	$	319	$	167	$	174	$	8,985	$	9,207	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 ~~September 30,~~March 31, 2021, mortgage loans had an amortized cost of

$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. As of December 31, 2019, mortgage loans had an amortized cost of $4.2 billion and carrying value of $4.2 billion, with no valuation allowance.~~$38 ACL. The ~~increase~~decrease in the allowance is attributable to ~~both the recognition of an ACL in connection with the adoption of accounting guidance for credit losses on January 1, 2020~~improved economic scenarios and ~~the result of the COVID-19 pandemic and its impacts on the economic forecasts, as well as lower estimated~~higher property ~~values and operating income~~valuations as compared to the prior ~~year. For further information refer to Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Condensed Consolidated Financial Statements.~~quarter.

~~111~~

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

The Company funded ~~$498~~$161 of commercial mortgage loans with a weighted average loan-to-value (“LTV”) ratio of ~~58%~~59% and a weighted average yield of ~~3.2%~~3.0% during the ~~nine~~three months ended ~~September 30, 2020.~~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-family~~multi-


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

family properties with strong LTV ratios. There were no mortgage loans held for sale as of ~~September 30, 2020~~March 31, 2021 or December 31, 2020.

~~December 31, 2019.~~

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
		September 30, 2020					December 31, 2019						March 31, 2021					December 31, 2020
		Amortized Cost		Fair Value		Weighted Average Credit Quality	Amortized Cost		Fair Value		Weighted Average Credit Quality		Amortized Cost		Fair Value		Weighted Average Credit Quality	Amortized Cost		Fair Value		Weighted Average Credit Quality
General Obligation	General Obligation	$	1,043	$	1,179	AA+	$	1,157	$	1,268	AA	General Obligation	$	1,077	$	1,194	AA+	$	1,082	$	1,232	AA+
Pre-refunded [1]	Pre-refunded [1]	880		936		AAA	936		985		AAA	Pre-refunded [1]	835		880		AAA	889		940		AAA
Revenue	Revenue											Revenue
Transportation	Transportation	1,364		1,529		A	1,509		1,675		A+	Transportation	1,538		1,705		A	1,441		1,636		A+
Health Care	Health Care	1,294		1,399		A+	1,360		1,454		A+	Health Care	1,274		1,377		A+	1,273		1,407		A+
Leasing [2]	Leasing [2]	865		936		AA-	781		842		AA-	Leasing [2]	867		923		AA-	905		985		AA-
Education	Education	802		883		AA	784		853		AA	Education	734		801		AA	732		824		AA
Water & Sewer	Water & Sewer	644		688		AA	660		700		AA	Water & Sewer	619		658		AA	644		694		AA
Sales Tax	Sales Tax	454		512		AA	456		517		AA	Sales Tax	397		457		AA	394		464		AA
Power	Power	350		396		A+	339		374		A	Power	363		401		A+	401		450		A+
Housing	Housing	109		116		AA+	114		117		AA+	Housing	101		106		AA+	102		109		AA+
Other	Other	686		736		AA-	667		713		AA-	Other	666		712		AA-	701		762		A+
Total Revenue	Total Revenue	6,568		7,195		AA-	6,670		7,245		AA-	Total Revenue	6,559		7,140		AA-	6,593		7,331		AA-
Total Municipal	Total Municipal	$	8,491	$	9,310	AA-	$	8,763	$	9,498	AA-	Total Municipal	$	8,471	$	9,214	AA-	$	8,564	$	9,503	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.

[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 both ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the largest issuer concentrations were the New York Dormitory Authority, the New York City ~~Transitional~~Municipal Water Finance Authority, and the Commonwealth of Massachusetts, ~~and the New York Dormitory Authority,~~ which each comprised less than 3% of the municipal bond portfolio and were primarily comprised of general obligation and revenue bonds. In total, municipal bonds make up 17% of the fair value of the Company's investment portfolio. While COVID-19 has had an impact on many municipal issuers, the average credit quality of the Company’s holdings is AA-, and the Company believes the issuers in which it invests have multiple levers to maintain the strength of their credit profile.

Limited Partnerships and Other Alternative Investments

The following table 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. 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. For a discussion of impacts resulting from the COVID-19 pandemic and recent economic conditions, refer to the Impact of COVID-19 on our financial condition, results of operations and liquidity section of this MD&A.

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																											Limited Partnerships and Other Alternative Investments - Net Investment Income
		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended March 31,
		2020				2019				2020				2019					2021				2020
		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield			Amount		Yield		Amount		Yield
Hedge funds	Hedge funds	$	6	15.1	%	2		8.0	%	$	4	3.9	%	$	4	8.4	%	Hedge funds	$	8	18.2	%	1		6.4	%
Real estate funds	Real estate funds	19		18.6	%	21		19.0	%	33		10.7	%	55		16.8	%	Real estate funds	1		0.9	%	16		15.3	%
Private equity funds	Private equity funds	37		16.9	%	38		19.2	%	29		4.5	%	96		16.7	%	Private equity funds	97		41.8	%	34		16.0	%
Other alternative investments [1]	Other alternative investments [1]	21		22.2	%	4		4.6	%	4		1.3	%	26		9.2	%	Other alternative investments [1]	6		5.7	%	7		7.0	%
Total	Total	$	83	18.3	%	$	65	15.3	%	$	70	5.2	%	$	181	14.7	%	Total	$	112	21.1	%	$	58	13.2	%

																			Investments in Limited Partnerships and Other Alternative Investments
		September 30, 2020				December 31, 2019					March 31, 2021				December 31, 2020
		Amount		Percent		Amount		Percent			Amount		Percent		Amount		Percent
Hedge funds	Hedge funds	$	147	7.9	%	$	94	5.3	%	Hedge funds	$	185	7.9	%	$	158	7.6	%
Real estate funds	Real estate funds	428		22.9	%	407		23.2	%	Real estate funds	704		30.3	%	563		27.0	%
Private equity and other funds	Private equity and other funds	894		47.8	%	851		48.4	%	Private equity and other funds	1,014		43.6	%	944		45.4	%
Other alternative investments [1]	Other alternative investments [1]	399		21.4	%	406		23.1	%	Other alternative investments [1]	423		18.2	%	417		20.0	%
Total	Total	$	1,868	100.0	%	$	1,758	100.0	%	Total	$	2,326	100.0	%	$	2,082	100.0	%

[1]Consists of an insurer-owned life insurance policy which is primarily invested in fixed income, private equity, and hedge ~~funds and other investments.~~funds.

Fixed Maturities, AFS — Unrealized Loss Aging

The total gross unrealized losses were ~~$142~~$141 as of ~~September 30, 2020~~March 31, 2021 and have increased ~~$87,~~$78, from December 31, ~~2019,~~2020, primarily due to ~~wider credit spreads,~~higher interest rates, partially offset by ~~lower interest rates.~~tighter credit spreads. As of ~~September 30, 2020, $116~~March 31, 2021, $136 of the gross unrealized losses were associated with fixed maturities, AFS depressed less than 20% of amortized cost. The remaining ~~$26~~$5 of gross unrealized losses were associated with fixed maturities, AFS depressed greater than 20%~~. The fixed maturities, AFS depressed more than 20% are~~, primarily ~~related~~relate to ~~one variable-rate coupon corporate issuer with a long-dated maturity date and two corporate issuers within the energy industry, which are depressed primarily due to wider~~commercial real estate securities that were purchased at tighter credit ~~spreads since the securities were purchased.~~spreads.

As part of the Company’s ongoing ~~security~~investment monitoring process, the Company has reviewed its fixed maturities, AFS ~~securities~~ in an unrealized loss position and concluded that these fixed maturities are temporarily depressed and are expected to recover in value as the ~~securities~~investments approach maturity or as market spreads tighten. For these fixed maturities in an unrealized loss position where an 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 ACL analysis, see the Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments section below.


Unrealized Loss Aging for Fixed Maturities, AFS Securities	Unrealized Loss Aging for Fixed Maturities, AFS Securities														Unrealized Loss Aging for Fixed Maturities, AFS Securities
		September 30, 2020							December 31, 2019								March 31, 2021											December 31, 2020
Consecutive Months	Consecutive Months	Items	Amortized Cost		Unrealized Loss		Fair Value			Items	Amortized Cost		Unrealized Loss		Fair Value			Consecutive Months	Items	Amortized Cost		ACL		Unrealized Loss		Fair Value			Items	Amortized Cost		ACL		Unrealized Loss		Fair Value
Three months or less	Three months or less	285	$	2,127	$	(19)	$	2,108		347	$	2,529	$	(15)	$	2,514		Three months or less	682	$	5,387	$	—	$	(98)	$	5,289		102	$	625	$	—	$	(3)	$	622
Greater than three to six months	Greater than three to six months	23	61		(2)		59			114	712		(8)		704			Greater than three to six months	40	178		—		(6)		172			46	367		—		(5)		362
Greater than six to nine months	Greater than six to nine months	348	2,262		(77)		2,185			50	190		(2)		188			Greater than six to nine months	29	214		—		(10)		204			8	6		—		(1)		5
Greater than nine to eleven months	Greater than nine to eleven months	27	130		(4)		126			15	24		(1)		23			Greater than nine to eleven months	8	6		—		(1)		5			186	1,275		(1)		(27)		1,247
Twelve months or more	Twelve months or more	215	1,028		(40)		988			345	1,440		(29)		1,411			Twelve months or more	219	924		—		(26)		898			205	994		—		(27)		967
Total	Total	898	$	5,608	$	(142)	$	5,466		871	$	4,895	$	(55)	$	4,840		Total	978	$	6,709	$	—	$	(141)	$	6,568		547	$	3,267	$	(1)	$	(63)	$	3,203

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Unrealized Loss Aging for Fixed Maturities, AFS Continuously Depressed Over 20%	Unrealized Loss Aging for Fixed Maturities, AFS Continuously Depressed Over 20%														Unrealized Loss Aging for Fixed Maturities, AFS Continuously Depressed Over 20%
		September 30, 2020							December 31, 2019								March 31, 2021							December 31, 2020
Consecutive Months	Consecutive Months	Items	Amortized Cost		Unrealized Loss		Fair Value			Items	Amortized Cost		Unrealized Loss		Fair Value			Consecutive Months	Items	Amortized Cost		Unrealized Loss		Fair Value		Items	Amortized Cost		Unrealized Loss		Fair Value
Three months or less	Three months or less	7	$	17	$	(5)	$	12		—	$	—	$	—	$	—		Three months or less	5	$	11	$	(2)	$	9	2	$	2	$	(1)	$	1
Greater than three to six months	Greater than three to six months	4	65		(16)		49			5	2		(1)		1			Greater than three to six months	2	2		(1)		1		—	—		—		—
Greater than six to nine months	Greater than six to nine months	2	5		(2)		3			—	—		—		—			Greater than six to nine months	—	—		—		—		1	46		(10)		36

Greater than nine to eleven months																		Greater than nine to eleven months	—	—		—		—		2	5		(1)		4
Twelve months or more	Twelve months or more	26	6		(3)		3			32	10		(4)		6			Twelve months or more	24	5		(2)		3		24	5		(2)		3
Total	Total	39	$	93	$	(26)	$	67		37	$	12	$	(5)	$	7		Total	31	$	18	$	(5)	$	13	29	$	58	$	(14)	$	44

Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments

Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021

The Company recorded net reversals of credit losses on fixed maturities, AFS of $1$4, including reversals of $6 and ~~$33, respectively, for the three and nine months ended September 30, 2020.~~additions of $2. The ~~losses for the three months ended September 30, 2020,~~reversals were primarily attributable to ~~one tax-exempt municipal bond impacted by COVID-19, partially offset by~~ increases in the fair value of ~~securities~~corporate issuers that had an ACL ~~recorded~~ in prior ~~periods. For the nine months ended September 30, 2020, net credit losses~~periods, primarily ~~include an increase in ACL for corporate fixed maturities, mainly one private~~related to a large regional and commercial aircraft ~~lessor and one cruise line issuer.~~lessor. Additions relate to new expected credit losses on a media/entertainment company. Unrealized losses on securities with an ACL recognized in other comprehensive income were ~~$0 and $1 for the three and nine months ended September 30, 2020.~~$0. For further information, refer to Note 65 - Investments of Notes to Condensed Consolidated Financial Statements.

~~Intent-to-sell impairments~~There were ~~$0 and $5 for the three and nine months ended September 30, 2020, respectively, with~~no intent-to-sell impairments in the ~~nine month period primarily related to one corporate issuer in the energy sector and one issuer with exposure to India.~~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.

Future intent-to-sell impairments or credit losses may develop as the result of changes in ~~intent-to-sell~~our intent to sell specific securities that are 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 ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020

~~Impairments recognized in earnings were comprised~~The Company recorded net credit losses on fixed maturities, AFS of ~~credit impairments of $1 and $3 for the three and nine months ended~~

~~September 30, 2019.~~$12. The ~~credit impairments~~losses were primarily ~~related~~attributable to ~~two~~ corporate fixed maturities, primarily one cruise line issuer and, to a lesser extent, one private bank loan. Unrealized losses on securities ~~experiencing issuer-specific financial difficulties.~~

~~Non-credit impairments~~with ACL recognized in other comprehensive income were $0$1.

Intent-to-sell impairments of $5 were primarily related to one corporate issuer in the energy sector and ~~$2 for the three and nine months ended September 30, 2019, respectively.~~one issuer with exposure to India.

ACL on Mortgage Loans

Three months ended March 31, 2021

~~For the three and nine months ended September 30, 2020, the~~The Company recorded a decrease in the ACL on mortgage loans of ~~$5 and an increase of $38, respectively.~~$4. The decrease in the allowance ~~for the three months ended September 30, 2020,~~ was the result of improved economic scenarios and higher property valuations ~~in certain industry sectors that have been less impacted by the COVID-19 pandemic and modestly improved economic forecasts~~ as compared to the prior quarter. The increase in the allowance for the nine months ended September 30, 2020, was due to the effects of the COVID-19 pandemic and its impacts on the economic forecasts, as well as lower estimated property values and operating income as compared to the prior year. The Company did not record an ACL on any individual mortgage loans.

Three months ended March 31, 2020

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.

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.

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SUMMARY OF CAPITAL RESOURCES AND LIQUIDITY

Capital available to the holding company as of ~~September 30, 2020:~~March 31, 2021:

•$~~1.6~~1.9 billion in fixed maturities, short-term investments, investment sales receivable and cash at The ~~Hartford Financial Services Group, Inc, ("~~HFSG Holding ~~Company").~~Company.

•A senior unsecured five-year revolving credit facility that provides for borrowing capacity up to $750 of unsecured credit through March 29, 2023.

•~~Borrowings available under a commercial paper program to a maximum of $750.~~ As of ~~September 30, 2020,~~March 31, 2021, there ~~was~~were no ~~commercial paper~~borrowings outstanding.

•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. As of March 31, 2021, there were no borrowings outstanding.

~~2020~~2021 expected dividends and other sources of capital:

The future 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 ~~$1.6~~$1.7 billion for ~~2020,~~2021, with ~~$870~~$900 to ~~$900~~$1.1 billion of net dividends expected in ~~2020~~2021, including ~~$714~~$230 paid to HFSG Holding Company through ~~September 30, 2020.~~March 31, 2021.

•Group Benefits - HLA has dividend capacity of ~~$534~~$295 in ~~2020~~2021 with ~~$330~~$250 to ~~$350~~$295 of dividends expected in ~~2020~~2021, including ~~$280~~$70 paid to HFSG Holding Company through ~~September 30, 2020.~~March 31, 2021.

•Hartford Funds - HFSG Holding Company expects to receive ~~$120~~$150 to ~~$130~~$180 in dividends from Hartford Funds in ~~2020~~2021, including ~~$92~~$41 received through ~~September 30, 2020.~~

•~~Cash tax receipts of approximately $530, including realization of net operating losses and AMT credits. Through September 30, 2020, HFSG Holding Company has received cash tax receipts of $489.~~

•~~In September 2020, the Company received a $30 dividend from its retained equity interest in the legal entity that acquired the life and annuity business sold in May 2018.~~March 31,2021.

Expected liquidity requirements for the next twelve months as of ~~September 30, 2020:~~March 31, 2021:

•$215 of interest on debt.

•$21 dividends on preferred stock, subject to the discretion of the Board of Directors.

•$~~470~~505 of common stockholders' dividends, subject to the discretion of the Board of Directors and before share repurchases.

Equity repurchase program:

~~Under a $1.0 billion share repurchase authorization by~~During the ~~Board of Directors in February 2019, during the nine~~three months ended ~~September 30, 2020,~~March 31, 2021, the Company repurchased ~~2.7~~2.4 million common shares for ~~$150.~~$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 ~~from~~ April 1, ~~2020 to October 27, 2020,~~2021 through April 26, 2021, the Company ~~did not repurchase any~~repurchased approximately 0.4 million common shares ~~under this authorization. Any repurchase~~for $27.

The timing of ~~shares under the remaining equity repurchase authorization of $650 is~~any future repurchases will be dependent ~~on market conditions and other~~upon several factors, including the ~~extent to which COVID-19 impacts our business, results~~market price of ~~operations,~~the Company's securities, the Company's capital position, consideration of the effect of any repurchases on the Company's financial ~~condition~~strength or credit ratings, the Company's blackout periods, and ~~liquidity.~~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. ~~have been and~~ will ~~continue to~~primarily be met by HFSG Holding ~~Company’s~~Company's fixed maturities; short-term investments and cash; and dividends, principally from its ~~subsidiaries; and tax receipts, including realization of net operating losses and refunds of prior period AMT credits available to the HFSG Holding Company.~~subsidiaries.

The Company maintains sufficient liquidity and has a variety of contingent liquidity resources to manage liquidity across a range of economic scenarios. To date, the impact of the pandemic and resulting economic downturn on net operating cash flows have been relatively modest with net operating cash flows increasing by $209 in the first nine months of 2020 compared to the first nine months of 2019, driven by the inclusion of Navigators Group for a full nine months in 2020, and a decrease in claims paid for both Group Benefits and P&C excluding Navigators, partially offset by lower P&C premiums received excluding Navigators and a decrease in refunds of AMT credits. Over the remainder of 2020, we expect moderate impacts to net operating cash flow as lower claim frequency excluding COVID-19 losses will likely continue to offset the lower premium receipts and COVID-19 losses arising from the effects of the pandemic. The amount of such impacts will ultimately depend on the length and severity of the pandemic and its effects on the economy. While those impacts could continue into 2021, weWe continue to expect to successfully manage our liquidity throughout the pandemic.

The Company has waived late payment fees for a period of time for business and personal insurance customers and temporarily suspended the policy cancellation process for policyholders of our Commercial Lines, Personal Lines and Group Benefits segments. Due to those actions and the economic effects of the pandemic, we have experienced an increase in uncollectible premiums receivable and, accordingly, increased our current expected credit loss allowance on premiums receivable by $55 before tax for the nine months ended September 30, 2020.

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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 ~~and commercial paper program~~ 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 ~~to date.~~since the start of the COVID-19 pandemic.

During the second quarter, of 2020, fixed maturities, with a value of $63 as of September 30, 2020, were deposited by Hartford Fire Insurance Company into a Lloyd’s of London ("Lloyd's") trust account to provide required capital to The Hartford’s Lloyd’s Syndicate. This replaced $26 of the capital previously contributed by HFSG Holding Company to the Lloyd’s corporate member in the second quarter of 2020 for the benefit of the syndicate and which was returned to the HFSG Holding Company in July 2020. During the fourth quarter of 2020, we will reevaluate the capital requirements of the Hartford's Lloyd's Syndicate in accordance with Lloyd's Coming into Line process. Additionally, the amount of letters of credit under the Lloyd’s Letter of Credit Facility permitted to support Lloyd's capital requirements will be reduced by the end of 2020, which will require the Company expects to ~~seek alternative means~~make a contribution of supporting its obligations at Lloyd's. As a result, an additional contribution is expected to be made in the fourth quarter of 2020 and will be funded either with cash from HFSG Holding Company or with assets pledged by Hartford Fire Insurance Company.

~~In July 2020, the Company contributed €18~~approximately €15 million to Navigators Holdings (Europe) N.V., a Belgium holding company.

~~Debt~~

~~On March 30, 2020, The Hartford repaid at maturity the $500 principal amount of its 5.5% senior notes.~~

~~Equity~~

Under a $1.0 billion share repurchase authorization by the Board of Directors in February, 2019, during the nine months ended September 30, 2020, the Company repurchased 2.7 million common shares for $150. During the period from April 1, 2020 to October 27, 2020, the Company did not repurchase any common shares under this authorization. Any repurchase of shares under the remaining equity repurchase authorization of $650 is dependent on market conditions and other factors including the extent to which COVID-19 impacts our business, results of operations, financial condition and liquidity.

~~For further information about equity repurchases, see Part II - Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.~~

Dividends

The Hartford's Board of Directors declared the following quarterly dividends since ~~July~~January 1, ~~2020:~~2021:


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Common Stock Dividends


Declared	Record	Payable	Amount per share

~~July 16, 2020~~	~~September 1, 2020~~	~~October 2, 2020~~	$
	~~0.325~~
~~October 21, 2020~~February 4, 2021	~~December~~March 1, ~~2020~~2021	~~January 5,~~April 2, 2021	$	~~0.325~~0.350

Preferred Stock Dividends


Declared	Record	Payable	Amount per share

~~July 16, 2020~~	~~November 1, 2020~~	~~November 16, 2020~~	$
	~~375.00~~
~~October 21, 2020~~February 18, 2021	~~February~~May 1, 2021	~~February 16,~~May 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 from its insurance subsidiaries, see the following "Dividends from 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 on Form 10-K for the year ended December 31, ~~2019.~~

~~Pension Plans and Other Postretirement Benefits~~

The Company does not have a 2020 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 contributed $70 in September 2020 to its U.S. qualified defined benefit pension plan.2020.

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

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

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~~

(although in certain instances more restrictive) limitations on the payment of dividends. 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.

Corporate members of Lloyd's ~~Syndicates~~syndicates may pay dividends to its parent to the extent of available profits that have been distributed from the 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 ~~European Insurance regulation (Solvency II).~~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 ~~nine~~three months of ~~2020,~~2021, HFSG Holding Company received ~~$1,086~~$341 of net dividends from its subsidiaries, including ~~$714~~$70 from HLA, $41 from Hartford Funds and $230 from its U.S. P&C subsidiaries, ~~$280 from HLA~~excluding $50 of P&C dividends that were subsequently contributed to a P&C subsidiary and ~~$92 from~~$12 of P&C dividends related to interest payments on an intercompany note owed by Hartford ~~Funds.~~Holdings, Inc. ("HHI") to Hartford Fire Insurance Company.

Over the remainder of ~~2020,~~2021, the Company anticipates receiving approximately ~~$155~~$670 to ~~$185~~$870 of net dividends from its U.S. P&C subsidiaries, ~~$50~~$180 to ~~$70~~$225 of dividends from HLA and ~~$25~~$110 to ~~$35~~$140 of dividends from Hartford Funds.

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 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 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 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 a senior unsecured five-year revolving credit facility (the "Credit Facility") that provides up to $750 of unsecured credit through March 29, 2023. As of ~~September 30, 2020,~~March 31, 2021, no borrowings were outstanding and no letters of credit were issued under the Credit Facility and the Company was in compliance with all financial covenants.

~~Commercial Paper~~

The availability of the Company's commercial paper program is dependent upon a variety of factors including the Company's ratings and market conditions. As of September 30, 2020, The Hartford's maximum borrowings available under its commercial paper program is $750 and there was no commercial paper outstanding.

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 ~~September 30, 2020~~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 ~~September 30, 2020,~~March 31, 2021 there were no advances outstanding.

For further information regarding collateralized advances with Federal Home Loan Bank of Boston, see Note 1314 - Debt of Notes to Consolidated Financial Statements included in the Company’s ~~2019~~2020 Form 10-K Annual Report.

Lloyd's Letter of Credit Facilities

~~As a result of the acquisition of Navigators Group,~~ The Hartford has ~~two letter of~~entered into a committed credit facility ~~agreements: the~~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 ~~Bilateral Facility, which are used to provide~~other tranche extending a ~~portion~~£85 million ($117 as of ~~the capital requirements at Lloyd's.~~March 31, 2021) commitment. As of ~~September 30, 2020, uncollateralized~~March 31, 2021, letters of credit with an aggregate face amount of ~~$165~~$104 and ~~£60~~£85 million, or $117, were outstanding under the Club Facility and ~~£18 million was~~no letters of credit were outstanding under the Bilateral Facility. ~~As of September 30, 2020, the Bilateral Facility has unused capacity of $2 for issuance of additional letters of credit.~~

Among other covenants, the Club Facility and Bilateral Facility contain financial covenants regarding ~~tangible~~The Hartford's consolidated net worth and financial leverage and that limit the amount of letters of credit that can support Funds atand Lloyd's,

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~~("FAL").~~ consistent with Lloyd's requirements. As of ~~September 30, 2020, Navigators Group~~March 31, 2021, The Hartford was in compliance with all financial ~~covenants.~~covenants of both facilities.

For further information regarding Revolving Credit 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 settlement of the outstanding net derivative positions transacted under each agreement. For further information, refer to Note 1412 - Commitments and Contingencies of Notes to Condensed Consolidated Financial Statements.

As of ~~September 30, 2020,~~March 31, 2021, no derivative positions would be subject to immediate termination in the event of a downgrade of one level below the current financial strength ratings. This could change as a result of changes in our hedging activities or to the extent changes in contractual terms are negotiated.

Insurance Operations

While subject to variability period to period, underwriting and investment cash flows continue to provide sufficient liquidity 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, ~~2019, as amended in Part II Item 1A herein.~~2020. For a discussion and tabular presentation of the Company’s 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 ~~2019~~2020 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 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 Group Benefits.

The Company's insurance operations hold fixed maturity securities including a significant short-term investment position (securities with maturities of one year or less at the time of purchase) to meet liquidity needs. Liquidity requirements that are unable to be funded by the 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 through the sale of invested assets. A sale of invested assets could result in significant realized capital losses.

The following tables represent the fixed maturity holdings, including the aforementioned cash and short-term investments available to meet liquidity needs, for each of the Company’s insurance operations.


Property & Casualty
	As of ~~September 30, 2020~~March 31, 2021
Fixed maturities	$	~~33,591~~33,288
Short-term investments	~~1,178~~1,155
Cash	~~151~~149
Less: Derivative collateral	7654
Total	$	~~34,844~~34,538


Group Benefits Operations
	As of ~~September 30, 2020~~March 31, 2021
Fixed maturities	$	~~10,241~~9,927
Short-term investments	~~331~~207
Cash	1812
Less: Derivative collateral	4229
Total	$	~~10,548~~10,117

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

There have been no material changes to the Company’s off-balance sheet arrangements and aggregate contractual obligations since the filing of the Company’s ~~2019~~2020 Form 10-K Annual Report.

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Capitalization


Capital Structure	Capital Structure									Capital Structure
		September 30, 2020			December 31, 2019			Change			March 31, 2021			December 31, 2020			Change
Short-term debt (includes current maturities of long-term debt)		$	—		$	500		(100	%)

Long-term debt	Long-term debt	4,351			4,348			—	%	Long-term debt	4,353			4,352			—	%
Total debt	Total debt	4,351			4,848			(10	%)	Total debt	4,353			4,352			—	%
Common stockholders' equity excluding AOCI, net of tax	Common stockholders' equity excluding AOCI, net of tax	16,612			15,884			5	%	Common stockholders' equity excluding AOCI, net of tax	17,104			17,052			—	%
Preferred stock	Preferred stock	334			334			—	%	Preferred stock	334			334			—	%
AOCI, net of tax	AOCI, net of tax	856			52			NM		AOCI, net of tax	264			1,170			(77	%)
Total stockholders’ equity	Total stockholders’ equity	17,802			16,270			9	%	Total stockholders’ equity	17,702			18,556			(5	%)
Total capitalization	Total capitalization	$	22,153		$	21,118		5	%	Total capitalization	$	22,055		$	22,908		(4	%)
Debt to stockholders’ equity	Debt to stockholders’ equity	24		%	30		%			Debt to stockholders’ equity	25		%	23		%
Debt to capitalization	Debt to capitalization	20		%	23		%			Debt to capitalization	20		%	19		%

Total capitalization ~~increased $1,035,~~decreased $853, or 5%4%, as of ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019~~2020 primarily due to an ~~increase~~decrease in ~~AOCI and net income in excess of stockholder dividends.~~AOCI.

For additional information on AOCI, net of tax, including unrealized capital gains from securities, see Note 1614 - Changes In

and Reclassifications From Accumulated Other Comprehensive Income (Loss) and Note 65 - Investments of Notes to Condensed Consolidated Financial Statements. For additional information on debt, see Note 1214 - Debt of Notes to ~~Condensed~~ Consolidated Financial ~~Statements.~~Statement in The Hartford's 2020 Form 10-K Annual Report.

Cash Flow[1]


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
Net cash provided by operating activities	Net cash provided by operating activities	$	2,655	$	2,446	Net cash provided by operating activities	$	759	$	298
Net cash used for investing activities		$	(1,007)	$	(1,320)
Net cash provided by (used for) investing activities						Net cash provided by (used for) investing activities	$	(450)	$	777
Net cash used for financing activities	Net cash used for financing activities	$	(1,579)	$	(943)	Net cash used for financing activities	$	(266)	$	(1,027)
Cash and restricted cash– end of period	Cash and restricted cash– end of period	$	270	$	290	Cash and restricted cash– end of period	$	280	$	301

[1] Cash activities in ~~2020~~2021 include cash flows related to Continental Europe Operations classified as held for sale beginning in the third quarter of 2020. See Note 216 - Business ~~Acquisition and~~ Disposition of Notes to Condensed Consolidated Financial Statements for discussion of this transaction.

Cash provided by operating activities increased in ~~2020~~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 ~~inclusion~~direct and indirect impacts of ~~Navigators Group for the full nine months~~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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payments for short-term investments, an increase in net purchases of partnerships, and a decrease in ~~claims paid for Group Benefits and P&C excluding Navigators,~~net proceeds from derivatives, partially offset by ~~lower P&C premiums received excluding Navigators and a lower refund of AMT credits.~~

~~Cash used for investing activities~~ ~~decreased primarily due to the acquisition of Navigators Group for $1.9 billion in 2019, lower net purchases of fixed maturities and~~ an increase in net proceeds from ~~equity securities, partially offset by a change from net proceeds to net payments from short-term investments, and an increase in net purchases of partnerships.~~fixed maturities.

Cash used for financing activities ~~increased~~decreased primarily due to ~~an increase~~debt repayments in the ~~net repayment from issuance~~2020 period, and ~~retirement of debt,~~ a ~~larger net~~ decrease in securities ~~loaned or sold under agreements to repurchase~~lending transactions and ~~an increase~~share repurchases, partially offset by higher cash dividends paid in ~~the repurchase of common shares.~~2021.

Operating cash flow for the ~~nine~~three months ended ~~September 30, 2020~~March 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 section in this MD&A and the Financial Risk on Statutory Capital section of the MD&A in the Company's ~~2019~~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'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.

On June 19, 2020, A.M. Best raised its financial strength rating on Hartford Life and Accident Insurance Company (“HLA”) to A+ from A. The upgrade is reflective of the support provided by The Hartford, as well as the group benefits business’ growing contribution to consolidated revenue and earnings and the overall diversification it provides.

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Insurance Financial Strength Ratings as of ~~October 27, 2020~~April 26, 2021
	A.M. Best	Standard & Poor’s	Moody’s
Hartford Fire Insurance Company	A+	A+	A1
Hartford Life and Accident Insurance Company	A+	A+	A2
Navigators Insurance Company	A+	A	Not Rated




Other Ratings:
The Hartford Financial Services Group, Inc.:
Senior debt	a-	BBB+	Baa1
~~Commercial paper~~	~~AMB-1~~	~~A-2~~	~~P-2~~

These ratings are not a recommendation to buy, sell or hold any of The ~~Hartford’s~~Hartford'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.

~~The~~Among 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 collectively~~of our U.S. insurance subsidiaries as ~~"statutory capital") necessary to support~~well as the ~~business written and is reported in accordance with accounting practices prescribed~~level 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 Subsidiary		Total			Property and Casualty Insurance Subsidiaries [1] [2]		Group Benefits Insurance Subsidiary		Total
U.S statutory capital at January 1, 2020		$	10,208	$	2,644	$	12,852
U.S statutory capital at January 1, 2021								U.S statutory capital at January 1, 2021	$	10,795	$	2,601	$	13,396
Statutory income	Statutory income	1,061		302		1,363		Statutory income	109		(40)		69
Dividends to parent		(712)		(280)		(992)
Contributions from (dividends to) parent								Contributions from (dividends to) parent	(230)		(70)		(300)

Other items	Other items	(159)		(21)		(180)		Other items	165		13		178
Net change to U.S. statutory capital	Net change to U.S. statutory capital	190		1		191		Net change to U.S. statutory capital	44		(97)		(53)
U.S statutory capital at September 30, 2020		$	10,398	$	2,645	$	13,043
U.S statutory capital at March 31, 2021								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~~Continental Europe.

Contingencies

Legal Proceedings

For a discussion regarding ~~contingencies related to~~ The Hartford’s legal proceedings, ~~please~~ see the information contained ~~under “Litigation” and "Run-off Asbestos and Environmental Claims"~~ in Note ~~14 - Commitments~~12 -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 ~~actively considering~~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 ~~been encouraging~~encouraged (and in some cases ~~requiring)~~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 ~~has~~ offered consumer financial relief including a 15 percent refund on policyholders’ April and May ~~and June~~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

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such actions could adversely affect the Company’s insurance business.

~~Federal retroactive business interruption coverage-~~ Congress continues to focus on supporting small businesses in the wake of COVID-19. Legislation has been introduced in the U.S. House of Representatives to force retroactive coverage of COVID-19 claims under future business interruption coverage provisions and would seek to nullify existing contracts. If such proposals were enacted, they could represent a material exposure for the Company. The Senate has not introduced any companion legislation to date. Potential action on such legislation is unclear at this time.

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.~~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 ~~the Families First Coronavirus Response Act~~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. ~~As Congress considers future~~We are closely monitoring further Congressional action on paid leave legislation, ~~in response to COVID-19, it is possible that lawmakers look to expand~~ the ~~scope of eligibility and use of emergency leaves. This change in the law could trigger a significant increase in claims volume and compliance requirements for Group Benefits. The~~ timing of ~~such legislation~~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 ~~various~~numerous pieces of legislation which contain ~~various~~a number of changes to the tax laws in order to aid impacted businesses and individuals, as well as provide economic stimulus. The ~~deferral of~~Company deferred the employer’s portion of the Social Security tax on wages ~~has been extended~~ 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 1311 - 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")

It 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"). If such actions were to occur, 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 would 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.

Tax Reform

At the end of 2017, ~~Congress passed and the president signed,~~ the Tax Cuts and Jobs Act of 2017 ("~~Tax Reform"~~TCJA")~~, which enacted~~ was enacted. The TCJA made significant reforms to the U.S. tax code. The major areas of interest to the Company included the reduction of the corporate tax rate from 35% to 21% and the repeal of the corporate alternative minimum tax (AMT) and the refunding of AMT credits. The U.S. Treasury and IRS continue to develop guidance implementing ~~Tax Reform,~~TCJA, and Congress may consider additional technical corrections to the law. 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 ~~Tax Reform, please~~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 year ended December 31, ~~2019 as amended in Part II Item 1A herein.~~2020.

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 ~~2019~~2020 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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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

102


Table of Contents

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, 2020.~~March 31, 2021.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting that occurred during the Company's current fiscal quarter that have materially affected, or are 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.

~~122~~103


Table of Contents

Part II - Item 1. Legal Proceedings

Item 1. LEGAL PROCEEDINGS

~~Litigation~~

For a discussion regarding The ~~Hartford is involved in claims litigation arising in~~Hartford’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, including claims alleging bad faith in the handling of insurance claims or other allegedly unfair or improper claims practices. The Hartford accounts for such activity through the establishment of unpaid loss and loss adjustment expense reserves. Subject to the uncertainties discussed under “Regulatory and Legal Risks” of 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, 2019, as amended in Part II Item 1A herein, and those related to The Hartford's A&E claims discussedinformation contained in Note ~~14 - Commitments~~12 -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 lawsuits seeking certification of a state or national class alleging improper business practices, including, for example, underpayment of claims or improper underwriting practices, as well as individual lawsuits in which punitive damages may be sought. 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 the spread of the novel coronavirus that leads to COVID-19. More than 200 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 27 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 Joint Panel on Multi-District Litigation (“JPMDL”) considered consolidating, for pre-trial purposes, all COVID-19 pandemic business income coverage lawsuits pending in federal court against any commercial insurer, including Hartford writing companies, or alternatively, against specific insurers, including Hartford writing companies. The Hartford writing companies opposed consolidation on an industry and individual basis. In October 2020, the JPMDL declined to consolidate the cases involving the Company or Hartford writing companies.

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 in predicting litigation outcomes, the COVID-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 which 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 in the earliest stages of litigation, many were stayed pending a decision on the contemplated multi-district litigation, many complaints are in the process of being amended, and some have been dismissed voluntarily and may be refiled. Accordingly, little discovery has occurred and few substantive legal rulings have been made. 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 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. Accordingly, management cannot now reasonably estimate the possible loss or range of loss, if any. Nonetheless, given the large number of claims and potential claims, the

~~123~~

~~Part II - Item 1. Legal Proceedings~~

indeterminate amounts sought, and the inherent unpredictability of litigation, it is possible that adverse outcomes, if any, in the aggregate, could have a material adverse effect on the Company’s consolidated operating results.

~~124~~

~~Part II - 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, ~~2019, as amended and updated by Item 1A of Part II of~~2020, (collectively the ~~Company's Form 10-Q for~~"Company's Risk Factors" or individually, the ~~period ended March 31, 2020,~~"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.

~~125~~

~~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

In ~~February, 2019,~~December 2020, the Company announced a ~~$1.0~~$1.5 billion share repurchase authorization by the Board of Directors which is effective from January 1, 2021 through December 31, ~~2020.~~2022. In April 2021, the Company announced an increase in the share repurchase authorization to $2.5 billion that remains effective

until December 31, 2022. During the period from

April 1, ~~2020~~2021 to ~~October 27, 2020,~~April 26, 2021, the Company ~~did not repurchase~~repurchased 0.4 million shares for $27. The timing of any ~~common shares under this authorization. Any~~ repurchase of shares under the remaining equity repurchase authorization ~~of $650~~ is dependent ~~on market conditions and other~~upon several factors, including the ~~extent to which COVID-19 impacts our business, results~~market price of ~~operations,~~the Company's securities, the Company's capital position, consideration of the effect of any repurchases on the Company's financial ~~condition~~strength or credit ratings, the Company's blackout periods, and ~~liquidity.~~other considerations.


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 Programs	Approximate 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, 2021	1,568,182	$	50.32	1,568,182	$	1,421
March 1, 2021 - March 31, 2021	818,001	$	54.25	818,001	$	1,377
Total	2,386,183	$	51.67	2,386,183

[1]This column reflects the $1.5 billion share repurchase authorization approved by the Company’s Board of Directors in December 2020. In April 2021, the Board increased this authorization to $2.5 billion. As a result of the increase, the Company had approximately $2.35 billion remaining under its share repurchase authorization as of April 26, 2021.

Item 6. EXHIBITS


See Exhibits Index on page			~~127~~105.

~~126~~104


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

FOR THE QUARTER ENDED ~~SEPTEMBER 30, 2020~~MARCH 31, 2021

FORM 10-Q

EXHIBITS INDEX

Exhibit No.

Description

Form

File No.

Exhibit No

Filing Date

Exhibit No.

Description

Form

File No.

Exhibit No

Filing Date

3.01

Restated Certificate of Incorporation of The Hartford, as filed with the Delaware Secretary of State on October 20, 2014.

8-K

001-13958

3.1

10/20/2014

3.01

Restated Certificate of Incorporation of The Hartford, as filed with the Delaware Secretary of State on October 20, 2014.

8-K

001-13958

3.01

10/20/2014

3.02

Amended and Restated By-Laws of The Hartford, amended effective July 21, 2016.

8-K

001-13958

3.1

7/21/2016

3.02

Amended and Restated By-Laws of The Hartford, amended effective December 17 , 20 20 .

8-K

001-13958

3.1

7/21/2016

10.01*

The Hartford 2020 Stock Incentive Plan Form of Non-Employee Directors Award Agreement.**

15.01

Deloitte & Touche LLP Letter of Awareness.**

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.**

31.01

Certification of Christopher J. Swift pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

31.02

Certification of Beth A. Costello pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

31.02

Certification of Beth A. Costello 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.**

32.01

Certification of Christopher J. Swift pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.02

Certification of Beth A. Costello pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.02

Certification of Beth A. Costello pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101.INS

XBRL 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.INS

XBRL 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.SCH

Inline XBRL Taxonomy Extension Schema.**

101.SCH

Inline XBRL Taxonomy Extension Schema.**

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase.**

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase.**

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase.**

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase.**

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase.**

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase.**

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase.**

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase.**

104

The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in Inline XBRL.

104

The 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.

~~127~~105


Table of Contents

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 29, 2020~~April 27, 2021

/s/ Scott R. Lewis

Scott R. Lewis

Senior Vice President and Controller

(Chief accounting officer and duly

authorized signatory)

~~128~~106


	Balance as of January 1, 2020
	Opening Balance		Cumulative Effect of Accounting Change		Adjusted Opening Balance
Mortgage loans	$	4,215			$	4,215
ACL on mortgage loans	0		$	(19)	(19)
Mortgage loans, net of ACL	4,215		(19)		4,196
Premiums receivable and agents’ balances	4,529				4,529
ACL on premiums receivable and agents' balances	(145)		23		(122)
Premiums receivable and agents' balances, net of ACL	4,384		23		4,407
Reinsurance recoverables	5,641				5,641
ACL and allowance for disputed amounts on reinsurance recoverables	(114)		(2)		(116)
Reinsurance recoverables, net of allowance for uncollectible reinsurance	5,527		(2)		5,525
Deferred income tax asset, net	299		5		304
Other liabilities	(5,157)		(25)		(5,182)
Retained Earnings	$	12,685	$	(18)	$	12,667


	Preliminary Values as of May 23, 2019 (as previously reported)		Measurement Period Adjustments		Adjusted Values as of May 23, 2019
Assets
Cash and invested assets	$	3,848	$	3	$	3,851
Premiums receivable	492		6		498
Reinsurance recoverables	1,100		(3)		1,097
Prepaid reinsurance premiums	238		0		238
Other intangible assets	580		0		580
Property and equipment	83		0		83
Other assets	99		3		102
Total Assets Acquired	6,440		9		6,449
Liabilities
Unpaid losses and loss adjustment expenses	2,823		0		2,823
Unearned premiums	1,219		0		1,219
Long-term debt	284		0		284
Deferred income taxes, net	48		(1)		47
Other liabilities	568		8		576
Total Liabilities Assumed	4,942		7		4,949
Net identifiable assets acquired	1,498		2		1,500
Goodwill [1]	623		(2)		621
Net Assets Acquired	$	2,121	$	0	$	2,121


Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended September 30, 2020
				Total realized/unrealized gains (losses)
		Fair value as of June 30, 2020		Included in net income [1]		Included in OCI [2]		Purchases		Settlements		Sales		Transfers into Level 3 [3]		Transfers out of Level 3 [3]		Fair value as of September 30, 2020
Assets
Fixed Maturities, AFS
	ABS	$	23	$	0	$	0	$	0	$	0	$	0	$	0	$	(23)	$	0
	CLOs	99		0		1		63		(3)		0		0		(19)		141
	CMBS	20		0		2		66		(1)		0		5		0		92
	Corporate	1,109		1		19		45		(62)		0		22		(138)		996

	Municipal	0		(3)		2		0		0		0		7		0		6
	RMBS	479		0		2		40		(48)		0		0		(22)		451
Total Fixed Maturities, AFS		1,730		(2)		26		214		(114)		0		34		(202)		1,686
Equity Securities, at fair value		66		0		0		3		0		0		0		0		69
Short-term investments		14		0		0		0		0		0		0		0		14
Total Assets		$	1,810	$	(2)	$	26	$	217	$	(114)	$	0	$	34	$	(202)	$	1,769
Liabilities





Total Liabilities		$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0


Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the Three Months Ended September 30, 2019
				Total realized/unrealized gains (losses)
		Fair value as of June 30, 2019		Included in net income [1]		Included in OCI [2]		Purchases		Settlements		Sales		Transfers into Level 3 [3]		Transfers out of Level 3 [3]		Fair value as of September 30, 2019
Assets
Fixed Maturities, AFS
	ABS	$	5	$	0	$	0	$	0	$	0	$	0	$	0	$	(5)	$	0
	CLOs	286		0		0		92		(8)		0		0		(74)		296
	CMBS	35		0		0		10		(1)		0		0		(24)		20
	Corporate	568		(3)		0		166		(7)		(4)		15		(12)		723
	Foreign Govt./Govt. Agencies	3		0		0		0		0		0		0		0		3

	RMBS	758		0		(3)		0		(51)		0		0		(90)		614
Total Fixed Maturities, AFS		1,655		(3)		(3)		268		(67)		(4)		15		(205)		1,656
Equity Securities, at fair value		72		(2)		0		0		0		0		0		0		70




Total Assets		$	1,727	$	(5)	$	(3)	$	268	$	(67)	$	(4)	$	15	$	(205)	$	1,726
Liabilities
Contingent Consideration		(21)		0		0		0		0		0		0		0		(21)
Derivatives, net [4]
	Equity	(3)		(2)		0		0		0		0		0		0		(5)
Total Derivatives, net [4]		(3)		(2)		0		0		0		0		0		0		(5)
Total Liabilities		$	(24)	$	(2)	$	0	$	0	$	0	$	0	$	0	$	0	$	(26)


Changes in AOCI, Net of Tax for the Three Months Ended September 30, 2019
	Changes in
	Net Unrealized Gain on Securities		OTTI Losses in OCI		Net Gain on Cash Flow Hedging Instruments		Foreign Currency Translation Adjustments		Pension and Other Postretirement Plan Adjustments		AOCI, net of tax
Beginning balance	$	1,367	$	(3)	$	11	$	34	$	(1,607)	$	(198)


OCI before reclassifications	458		0		8		(4)		1		463
Amounts reclassified from AOCI	(57)		0		(2)		0		8		(51)
OCI, net of tax	401		0		6		(4)		9		412
Ending balance	$	1,768	$	(3)	$	17	$	30	$	(1,598)	$	214


Reclassifications from AOCI
	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019		Affected Line Item in the Condensed Consolidated Statement of Operations
Net Unrealized Gain on Securities
Available-for-sale securities	$	72	$	143	Net realized capital gains (losses)
	72		143		Total before tax
	15		30		Income tax expense

	$	57	$	113	Net income






Net Gains on Cash Flow Hedging Instruments
Interest rate swaps	$	0	$	2	Net realized capital gains (losses)
Interest rate swaps	1		1		Net investment income
Interest rate swaps	0		1		Interest expense
Foreign currency swaps	1		2		Net investment income
	2		6		Total before tax
	0		1		Income tax expense

	$	2	$	5	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	(12)		(37)		Insurance operating costs and other expenses

	(10)		(32)		Total before tax
	(2)		(7)		Income tax expense
	$	(8)	$	(25)	Net income
Total amounts reclassified from AOCI	$	51	$	93	Net income


Hartford Next Expected Costs and Expense Savings
	Estimate for Second Half of 2020		Estimate for 2021		Estimate for 2022
Employee severance	$	78	$	—	$	—
IT costs to retire applications	4		10		14
Professional fees and other expenses	34		10		—


Estimated restructuring costs to be expensed and paid	116		20		14

Non-capitalized IT costs to be paid	30		50		30
Other costs to be paid	10		20		10
Amortization of capitalized IT development costs [1]	—		—		10

Estimated costs within core earnings	40		70		50
Total estimated Hartford Next program costs to be expensed [2]	$	156	$	90	$	64

Cumulative savings relative to 2019 beginning July 1, 2020	$	(75)	$	(300)	$	(500)


Net expense (savings) before-tax:	$	81	$	(210)	$	(436)

Net expense (savings) before-tax:
To be accounted for within core earnings	$	(35)	$	(230)	$	(450)
Restructuring costs recognized outside of core earnings	116		20		14
Net expense (savings) before tax	$	81	$	(210)	$	(436)


Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the Nine Months Ended September 30, 2020
	Commercial Lines [1]		Personal Lines		Property & Casualty Other Operations		Total Property & Casualty [1]
Beginning liabilities for unpaid losses and loss adjustment expenses, gross	$	23,363	$	2,201	$	2,697	$	28,261
Reinsurance and other recoverables [2]	4,029		68		1,178		5,275
Beginning liabilities for unpaid losses and loss adjustment expenses, net	19,334		2,133		1,519		22,986


Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes	4,186		1,255		—		5,441
Current accident year ("CAY") catastrophes	355		196		—		551
Prior accident year development ("PYD") [3]	61		(396)		15		(320)
Total provision for unpaid losses and loss adjustment expenses	4,602		1,055		15		5,672
Change in deferred gain on retroactive reinsurance included in other liabilities [3]	(97)		—		—		(97)
Payments	(3,271)		(1,310)		(204)		(4,785)
Net reserves transferred to liabilities held for sale	(43)		—		—		(43)
Foreign currency adjustment	(3)		—		—		(3)
Ending liabilities for unpaid losses and loss adjustment expenses, net	20,522		1,878		1,330		23,730
Reinsurance and other recoverables	4,261		27		1,133		5,421
Ending liabilities for unpaid losses and loss adjustment expenses, gross	$	24,783	$	1,905	$	2,463	$	29,151
Earned premiums and fee income	$	6,694	$	2,273
Loss and loss expense paid ratio [4]	48.9		57.6
Loss and loss expense incurred ratio	68.9		47.0
Prior accident year development (pts) [5]	0.9		(17.6)


	As of September 30, 2020						As of December 31, 2019
			Shock to S&P 500						Shock to S&P 500
(Before tax)	Fair Value		+20%		-20%		Fair Value		+20%		-20%
Investment Portfolio	$	2,224	$	246	$	(246)	$	3,295	$	440	$	(407)
Assets supporting pension and other post-retirement benefit plans	$	1,433	$	223	$	(223)	$	1,372	$	230	$	(230)


Exposure to Energy
	September 30, 2020				December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Corporate securities, AFS and Equity securities, at fair value
Investment grade	$	1,218	$	1,317	$	1,425	$	1,516
Below investment grade	239		224		125		127
Equity securities, at fair value	6		6		45		45
Total corporate, AFS and equity securities, at fair value	1,463		1,547		1,595		1,688
Foreign govt./govt. agencies
Investment grade	225		259		232		254
Below investment grade	9		9		9		10
Total foreign govt./govt. agencies, AFS	234		268		241		264
Other	5		6		20		21
Total energy exposure	$	1,702	$	1,821	$	1,856	$	1,973