INVESTOR FINANCIAL SUPPLEMENT
March 31, 2013
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
As of April 25, 2013 | ||||||||||
Address: | ||||||||||
One Hartford Plaza | A.M. Best | Fitch | Standard & Poor’s | Moody’s | ||||||
Hartford, CT 06155 | Insurance Financial Strength Ratings: | |||||||||
Hartford Fire Insurance Company | A | A+ | A | A2 | ||||||
Hartford Life Insurance Company | A- | A- | A- | A3 | ||||||
Internet address: | Hartford Life and Accident Insurance Company | A- | A- | A- | A3 | |||||
http://www.thehartford.com | Hartford Life and Annuity Insurance Company | A- | A- | BBB+ | Baa2 | |||||
Other Ratings: | ||||||||||
The Hartford Financial Services Group, Inc.: | ||||||||||
Contacts: | Senior debt | bbb+ | BBB | BBB | Baa3 | |||||
Sabra Purtill | Commercial paper | AMB-2 | F2 | A-2 | P-3 | |||||
Senior Vice President | ||||||||||
Investor Relations | ||||||||||
Phone (860) 547-8691 | ||||||||||
Sean Rourke | TRANSFER AGENT | |||||||||
Assistant Vice President | Shareholder correspondence should be mailed to: | Overnight correspondence should be mailed to: | ||||||||
Investor Relations | Computershare | Computershare | ||||||||
Phone (860) 547-5688 | P.O. Box 43006 | 250 Royall Street | ||||||||
Providence, RI 02940-3006 | Canton, MA 02021 | |||||||||
Phone (877) 272-7740 |
COMMON STOCK
Common stock and warrants of The Hartford Financial Services Group, Inc. are traded on the New York Stock Exchange under the symbols “HIG” and "HIG/WS", respectively.
This report is for information purposes only. It should be read in conjunction with documents filed by The Hartford Financial Services Group, Inc. with the U.S. Securities and Exchange Commission, including, without limitation, the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and Form 10-Q/A.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTOR FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
Basis of Presentation | i | |||||
CONSOLIDATED | Consolidated Financial Results | MUTUAL FUNDS | Income Statements | |||
Operating Results by Segment | Supplemental Data - Asset Value Rollforward - Assets Under Management - By Distribution Channel | |||||
Consolidated Statements of Operations | Supplemental Data - Asset Value Rollforward - Assets Under Management - By Asset Class | |||||
Consolidating Balance Sheets | ||||||
Capital Structure | ||||||
Statutory Capital and Surplus to GAAP Stockholders’ Equity Reconciliation | ||||||
Accumulated Other Comprehensive Income (Loss) | ||||||
Deferred Policy Acquisition Costs and Present Value of Future Profits | TALCOTT RESOLUTION | Financial Highlights | ||||
Supplemental Data | ||||||
U.S. Annuity | ||||||
Supplemental Data - Account Value Rollforward | ||||||
International Annuity | ||||||
PROPERTY & CASUALTY | Income Statements | Supplemental Data - Account Value Rollforward | ||||
Underwriting Ratios | Supplemental Data - Annuity Death and Living Benefits | |||||
P&C Commercial | ||||||
Underwriting Results | ||||||
Underwriting Ratios | ||||||
Supplemental Data | ||||||
Consumer Markets | CORPORATE | Income Statements | ||||
Underwriting Results | ||||||
Underwriting Ratios | ||||||
Supplemental Data | ||||||
P&C Other Operations | CONSOLIDATED INVESTMENTS | Investment Earnings Before-tax | ||||
Underwriting Results | Net Investment Income by Segment | |||||
Components of Net Realized Capital Gains (Losses) | ||||||
Composition of Invested Assets | ||||||
GROUP BENEFITS | Income Statements | Invested Asset Exposures | ||||
Supplemental Data | ||||||
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
BASIS OF PRESENTATION
DEFINITIONS AND PRESENTATION
All amounts are in millions, except for per share and ratio information unless otherwise stated.
The Company currently conducts business principally in six reporting segments, Property & Casualty Commercial, Consumer Markets, Property & Casualty Other Operations, Group Benefits, Mutual Funds and Talcott Resolution, as well as a Corporate category. Financial results for the former Individual Life and Retirement Plans segments are reported in the Talcott Resolution segment.
Property & Casualty ("P&C") is organized into three reporting segments; P&C Commercial, Consumer Markets and P&C Other Operations. P&C Commercial provides workers' compensation, property, automobile, liability and umbrella coverages under several different products, primarily throughout the United States (“U.S.”), within its standard commercial lines, which consists of the Company's small commercial and middle market lines of business. Additionally, a variety of customized insurance products and risk management services including workers' compensation, automobile, general liability, professional liability, fidelity, surety, livestock and specialty casualty coverages are offered through the segment's specialty lines. Consumer Markets provides standard automobile, homeowners and home-based business coverages to individuals across the U.S., including a special program designed exclusively for members of AARP. Consumer Markets also operates a member contact center for health insurance products offered through the AARP Health program. P&C Other Operations includes certain property and casualty operations, currently managed by the Company, that have discontinued writing new business and substantially all of the Company's asbestos and environmental exposures.
Group Benefits provides employers, associations, affinity groups and financial institutions with group life, accident and disability coverage, along with other products and services, including voluntary benefits and group retiree health.
Mutual Funds offers mutual funds for retail accounts such as retirement plans and 529 college savings plans and provides investment-management and administrative services such as product design, implementation and oversight.
Talcott Resolution includes U.S. Annuity, International Annuity, Institutional, Private Placement Life Insurance and the former Individual Life and Retirement Plans businesses.
The Company includes in Corporate the Company's debt financing and related interest expense, as well as other capital raising activities; banking operations; and certain purchase accounting adjustments and other charges not allocated to the segments.
The balance sheet and certain balance sheet measures incorporated herein are presented in the statutory legal entity views for Life and P&C. Life consists of the Mutual Funds, Group Benefits, Talcott Resolution, and an Other category. P&C consists of the P&C Commercial, Consumer Markets and P&C Other Operations. Corporate primarily includes the Company's debt financing and related interest expense, as well as other capital raising, banking operations and certain purchase accounting adjustment activities.
Certain operating and statistical measures have been incorporated herein to provide supplemental data that indicate current trends in the Company's business. These measures include sales, deposits, net flows, account value, insurance in-force, premium retention, renewal written price increases and policy count retention. Premium retention is defined as renewal premium written in the current period divided by total premium written in the prior period. Renewal written price increases represents the combined effect of rate changes and amount of insurance per unit of exposure since the prior year. It does not include other factors that affect average premium per unit of exposure such as changes in the mix of business by state, territory, class plan and tier of risk. Policy count retention represents the ratio of the number of policies renewed during the period divided by the number of policies from the previous policy term period.
The Company, along with others in the property and casualty insurance industry, uses underwriting ratios as measures of performance. The loss and loss adjustment expense ratio is the ratio of losses and loss adjustment expenses to earned premiums. The expense ratio is the ratio of underwriting expenses (amortization of deferred policy acquisition costs, as well as other underwriting expenses) to earned premiums. The policyholder dividend ratio is the ratio of policyholder dividends to earned premiums. The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. These ratios are relative measurements that describe the related cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses. The catastrophe ratio (a component of the loss ratio) represents the ratio of catastrophe losses to earned premiums.
The Company, along with others in the life insurance industry, uses underwriting ratios as measures of the Group Benefits segment's performance. The loss ratio is the ratio of total benefits, losses and loss adjustment expenses, excluding buyouts, to total premiums and other considerations excluding buyout premiums. The expense ratio is the ratio of insurance operating costs and other expenses to total premiums and other considerations excluding buyout premiums.
Accumulated other comprehensive income (“AOCI”) represents after tax unrealized gain (loss) on available-for-sale securities, other than temporary impairment losses recognized in AOCI, net gain (loss) on cash-flow hedging instruments, foreign currency translation adjustments and pension and other postretirement adjustments.
Mutual fund assets are an internal measure of assets under management used by the Company because a portion of revenues are based upon asset levels. Mutual funds assets are not included on the balance sheet.
Return on assets (“ROA”) is calculated using annualized earnings divided by a two-point average of assets under management.
Full surrender rates are an internal measure of contract surrenders calculated using annualized full surrenders divided by a two-point average of annuity account values. The full surrender rate represents full contract liquidation and excludes partial withdrawals.
Assets under management (“AUM”) include account values and mutual funds assets. AUM is a measure used by the Company because a significant portion of the Company's revenues are based upon asset values. These revenues increase or decrease with a rise or fall in the amount of account value whether caused by changes in capital markets or through net flows.
Yields are calculated using annualized net investment income (excluding income related to equity securities, trading) divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding equity securities, trading, and consolidated variable interest entity non-controlling interests.
NM-Not meaningful means increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa.
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES
The Company uses non-GAAP and other financial measures in this Investor Financial Supplement to assist investors in analyzing the Company's operating performance for the periods presented herein. Because the Company's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing the Company's non-GAAP and other financial measures to those of other companies.
The Company uses the non-GAAP financial measure core earnings as an important measure of the Company's operating performance. We believe that the measure 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 realized capital gains and losses, discontinued operations, loss on extinguishment of debt, gains and losses from disposal of businesses, certain restructuring charges and the impact of Unlocks to deferred policy acquisition costs (“DAC”), sales inducement assets ("SIA"), unearned revenue reserve ("URR") and death and other insurance benefit reserve balances. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses (after tax and the effects of DAC) that tend to be highly variable from period to period based on capital market conditions. We believe, 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 and net periodic settlements on the Japan fixed annuity cross-currency swap. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. Net income is the most directly comparable GAAP measure. Core earnings should not be considered as a substitute for net income and does not reflect the overall profitability of the Company's business. Therefore, we believe that it is useful for investors to evaluate both net income and core earnings when reviewing the Company's performance. A reconciliation of net income to core earnings for the periods presented herein is set forth on page 2.
Core earnings per share is calculated based on the non-GAAP financial measure core earnings. We believe that the measure core earnings per share provides investors with a valuable measure of the Company's operating performance for many of the same reasons applicable to its underlying measure, core earnings. Net income per share is the most directly comparable GAAP measure. Core earnings per share should not be considered as a substitute for net income per share and does not reflect the overall profitability of the Company's business. Therefore, we believe that it is useful for investors to evaluate both net income per share and core earnings per share when reviewing our performance.
Written premiums is a statutory accounting financial measure used by the Company as an important indicator of the operating performance of the Company's P&C Commercial and Consumer Markets operations. Because written premiums represents the amount of premium charged for policies issued, net of reinsurance, during a fiscal period, the Company believes it is useful to investors because it reflects current trends in the Company's sale of property and casualty insurance products. Earned premiums, the most directly comparable GAAP measure, represents all premiums that are recognized as revenues during a fiscal period. The difference between written premiums and earned premiums is attributable to the change in unearned premium reserves. A reconciliation of written premiums to earned premiums for P&C Commercial and Consumer Markets is set forth at pages 11 and 14, respectively.
The Company's management evaluates profitability of the P&C businesses primarily on the basis of underwriting gain (loss). Underwriting gain (loss) is a before-tax measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of the Company's pricing. Underwriting profitability over time is also 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 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. We believe that underwriting gain (loss) provides investors with a valuable measure of before-tax profitability derived from underwriting activities, which are managed separately from the Company's investing activities.
A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, earthquake, windstorm, explosion, terrorist attack and similar events. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance, and therefore their effects are not included in earnings or losses and loss adjustment expense reserves prior to occurrence. the Company believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings.
ROA, core earnings is a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of, certain of the segment's operating performance. ROA is the most directly comparable U.S. GAAP measure. We believes that the measure ROA, core earnings, provides investors with a valuable measure of the performance of certain of the Company's on-going businesses because it reveals trends in our businesses that may be obscured by the effect of realized gains (losses). ROA, core earnings, should not be considered as a substitute for ROA and does not reflect the overall profitability of our businesses. Therefore, we believe it is important for investors to evaluate both ROA, core earnings, and ROA when reviewing the Company's performance.
After-tax margin, excluding buyouts and realized gains (losses), is a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of, the Group Benefits segment's operating performance. after-tax margin is the most directly comparable U.S. GAAP measure. We believe that the measure after-tax margin, excluding buyouts and realized gains (losses), provides investors with a valuable measure of the performance of certain of the Company's on-going businesses because it reveals trends in those businesses that may be obscured by the effect of realized gains (losses). After-tax margin, excluding buyouts and realized gains (losses), should not be considered as a substitute for after-tax margin and does not reflect the overall profitability of our businesses. Therefore, we believe it is important for investors to evaluate both after-tax margin, excluding buyouts and realized gains (losses), and after-tax margin when reviewing the Company's performance. After-tax margin, excluding buyouts and realized gains (losses) is calculated by dividing core earnings excluding buyouts and realized gains (losses) by total core revenues excluding buyouts and realized gains (losses).
Book value per common share excluding AOCI is calculated based upon a non-GAAP financial measure. It is calculated by dividing (a) common stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding. The Company provides book value per common share excluding AOCI to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. We believe book value per common share, excluding AOCI, 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 common share is the most directly comparable GAAP measure. A reconciliation of book value per common share to book value per common share, excluding AOCI, for the periods presented herein is set forth at page 1.
Book value per diluted share, excluding AOCI, is calculated based upon a non-GAAP financial measure. It is calculated by dividing (a) total stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding and dilutive potential common shares. The Company provides book value per diluted share excluding AOCI to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. We believe book value per diluted share, excluding AOCI, 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 GAAP measure. A reconciliation of book value per diluted share to book value per diluted share, excluding AOCI, for the periods presented herein is set forth at page 1.
The Company provides different measures of the return on common equity (“ROE”). ROE (core earnings last twelve months to common equity, excluding AOCI), is calculated based on non-GAAP financial measures. ROE (core earnings last twelve months to common equity, excluding AOCI) is calculated by dividing (a) core earnings for the prior four fiscal quarters by (b) average common stockholders' equity, excluding AOCI. When calculating ROE, the Mandatory Convertible preferred stock (“MCP”) is included in average common stockholders' equity and MCP dividends are added back to net income (loss) available to common shareholders and core earnings (losses) available to common shareholders. The Company provides to investors return-on-equity measures based on its non-GAAP core earnings financial measures for the reasons set forth in the related discussion above. The Company excludes AOCI in the calculation of these return-on-equity measures to provide investors with a measure of how effectively the Company is investing the portion of the Company's net worth that is primarily attributable to the Company's business operations. ROE (net income last twelve months to common equity, including AOCI) is the most directly comparable GAAP measure.
CONSOLIDATED
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
HIGHLIGHTS | |||||||||||||||
Net income (loss) [1] [2] | $ | (241 | ) | $ | (46 | ) | $ | 13 | $ | (101 | ) | $ | 96 | ||
Core earnings | $ | 456 | $ | 265 | $ | 435 | $ | 277 | $ | 426 | |||||
Total revenues [3] | $ | 9,178 | $ | 7,735 | $ | 6,442 | $ | 4,574 | $ | 7,661 | |||||
Total assets | $ | 297,021 | $ | 298,513 | $ | 308,721 | $ | 303,977 | $ | 310,548 | |||||
PER SHARE AND SHARES DATA | |||||||||||||||
Basic earnings (losses) per common share | |||||||||||||||
Net income (loss) available to common shareholders | $ | (0.58 | ) | $ | (0.13 | ) | $ | 0.01 | $ | (0.26 | ) | $ | 0.20 | ||
Core earnings available to common shareholders | $ | 1.02 | $ | 0.58 | $ | 0.98 | $ | 0.61 | $ | 0.94 | |||||
Diluted earnings (losses) per common share [4] | |||||||||||||||
Net income (loss) available to common shareholders [5] | $ | (0.58 | ) | $ | (0.13 | ) | $ | 0.01 | $ | (0.26 | ) | $ | 0.18 | ||
Core earnings available to common shareholders | $ | 0.92 | $ | 0.54 | $ | 0.90 | $ | 0.57 | $ | 0.87 | |||||
Weighted average common shares outstanding (basic) | 436.3 | 436.2 | 435.8 | 438.2 | 440.7 | ||||||||||
Dilutive effect of stock compensation | 3.9 | 3.0 | 2.1 | 1.5 | 1.9 | ||||||||||
Dilutive effect of warrants | 31.7 | 28.7 | 23.8 | 25.1 | 26.4 | ||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted), before assumed conversion of preferred shares | 471.9 | 467.9 | 461.7 | 464.8 | 469.0 | ||||||||||
Dilutive effect of assumed conversion of preferred shares [5] | 21.2 | 21.0 | 21.0 | 21.0 | 20.9 | ||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted) and assumed conversion of preferred shares | 493.1 | 488.9 | 482.7 | 485.8 | 489.9 | ||||||||||
Common shares outstanding | 435.3 | 436.3 | 436.1 | 435.6 | 440.9 | ||||||||||
Book value per common share | $ | 46.78 | $ | 50.17 | $ | 51.42 | $ | 49.14 | $ | 46.99 | |||||
Per common share impact of accumulated other comprehensive income ("AOCI") | $ | 3.79 | $ | 6.51 | $ | 7.55 | $ | 5.18 | $ | 3.01 | |||||
Book value per common share (excluding AOCI) | $ | 42.99 | $ | 43.66 | $ | 43.87 | $ | 43.96 | $ | 43.98 | |||||
Book value per diluted share | $ | 42.43 | $ | 45.80 | $ | 47.34 | $ | 45.59 | $ | 43.25 | |||||
Per diluted share impact of AOCI | $ | 3.34 | $ | 5.80 | $ | 6.79 | $ | 4.68 | $ | 2.70 | |||||
Book value per diluted share (excluding AOCI) | $ | 39.09 | $ | 40.00 | $ | 40.55 | $ | 40.91 | $ | 40.55 | |||||
Common shares outstanding and dilutive potential common shares | 493.0 | 490.1 | 485.5 | 481.7 | 491.9 | ||||||||||
FINANCIAL RATIOS | |||||||||||||||
ROE (net income last 12 months to common stockholder equity including AOCI) | (1.8 | )% | (0.2 | )% | 0.6 | % | 0.8 | % | 1.5 | % | |||||
ROE (core earnings last 12 months to common stockholder equity excluding AOCI) | 7.3 | % | 7.0 | % | 7.2 | % | 6.4 | % | 5.1 | % | |||||
Debt to capitalization, including AOCI | 23.2 | % | 24.1 | % | 23.7 | % | 24.5 | % | 22.6 | % | |||||
Annualized investment yield, after tax | 3.0 | % | 2.9 | % | 2.9 | % | 3.1 | % | 3.0 | % |
[1] | Includes loss on extinguishment of debt in the first quarter of 2013 and the second quarter of 2012. For further information see Capital Structure, footnote [1] set forth at page 5. |
[2] | Includes $25 loss from disposal, after tax recognized in the first quarter of 2013 related to the sale of the Retirement Plans business; includes $388 loss from disposal, after tax recognized in the third quarter of 2012 related to the sale of the Individual Life business. |
[3] | Total revenues of The Hartford are impacted by net investment income and mark-to-market effects of equity securities, trading, supporting the international variable annuity business, which have corresponding amounts credited to policyholders within benefits, losses and loss adjustment expenses. See page 3 for the impact to total revenues along with the corresponding amounts in benefits, losses and loss adjustment expenses. |
[4] | As a result of anti-dilutive impact, in periods of a loss, weighted average common shares outstanding (basic) are used in the calculation of diluted earnings per share. |
[5] | The impact of applying the "if-converted" method to the The Hartford's mandatory convertible preferred stock was anti-dilutive to net income available to common shareholders for the three months ended September 30, 2012 and March 31, 2012 and therefore these shares were excluded from the calculation. On April 1, 2013 The Hartford's mandatory convertible preferred stock converted to 21.2 million shares of common stock. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
(A reconciliation of core earnings (losses) to net income (loss) for each of the segments is set forth on the respective segment pages contained in this supplement.)
[1] For additional information, refer to Unlock Attribution presented on page 8.
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
P&C Commercial | $ | 224 | $ | 26 | $ | 161 | $ | 162 | $ | 162 | |||||
Consumer Markets | 73 | 11 | 93 | (47 | ) | 102 | |||||||||
P&C Other Operations | 21 | 17 | 21 | (14 | ) | 20 | |||||||||
Total Property & Casualty core earnings | $ | 318 | $ | 54 | $ | 275 | $ | 101 | $ | 284 | |||||
Group Benefits core earnings | 30 | 39 | 23 | 34 | 5 | ||||||||||
Mutual Funds core earnings | 20 | 16 | 19 | 19 | 20 | ||||||||||
Talcott Resolution core earnings | 161 | 211 | 194 | 203 | 219 | ||||||||||
Corporate core losses | (73 | ) | (55 | ) | (76 | ) | (80 | ) | (102 | ) | |||||
CONSOLIDATED CORE EARNINGS | $ | 456 | $ | 265 | $ | 435 | $ | 277 | $ | 426 | |||||
Add: Unlock benefit (charge), after-tax [1] | $ | (541 | ) | $ | 42 | $ | (79 | ) | $ | (146 | ) | $ | 214 | ||
Add: Restructuring and other costs, after tax | (12 | ) | (58 | ) | (34 | ) | (31 | ) | (6 | ) | |||||
Add: Loss from discontinued operations, after tax | — | (1 | ) | (2 | ) | (1 | ) | (1 | ) | ||||||
Add: Loss on extinguishment of debt, after tax | (138 | ) | — | — | (587 | ) | — | ||||||||
Add: Net reinsurance loss on dispositions, after tax | (25 | ) | — | (388 | ) | — | — | ||||||||
Add: Net realized capital gains (losses), after tax and DAC, excluded from core earnings | 19 | (294 | ) | 81 | 387 | (537 | ) | ||||||||
Net income (loss) | $ | (241 | ) | $ | (46 | ) | $ | 13 | $ | (101 | ) | $ | 96 | ||
PER SHARE DATA | |||||||||||||||
Diluted earnings (losses) per common share: | |||||||||||||||
Core earnings available to common shareholders | $ | 0.92 | $ | 0.54 | $ | 0.90 | $ | 0.57 | $ | 0.87 | |||||
Net income (loss) available to common shareholders | $ | (0.58 | ) | $ | (0.13 | ) | $ | 0.01 | $ | (0.26 | ) | $ | 0.18 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
Earned premiums | $ | 3,252 | $ | 3,388 | $ | 3,401 | $ | 3,400 | $ | 3,442 | |||||
Fee income | 707 | 1,066 | 1,118 | 1,114 | 1,134 | ||||||||||
Net investment income (loss): | |||||||||||||||
Securities available-for-sale and other | 856 | 1,040 | 1,030 | 1,097 | 1,070 | ||||||||||
Equity securities, trading [2] | 2,700 | 2,676 | 710 | (1,687 | ) | 2,866 | |||||||||
Total net investment income (loss) | 3,556 | 3,716 | 1,740 | (590 | ) | 3,936 | |||||||||
Realized capital gains (losses): | |||||||||||||||
Total other-than-temporary impairment (“OTTI”) losses [1] | (33 | ) | (188 | ) | (59 | ) | (106 | ) | (36 | ) | |||||
OTTI losses recognized in other comprehensive income | 12 | 3 | 22 | 8 | 7 | ||||||||||
Net OTTI losses recognized in earnings | (21 | ) | (185 | ) | (37 | ) | (98 | ) | (29 | ) | |||||
Net realized capital gains on business dispositions | 1,574 | — | — | — | — | ||||||||||
Other net realized capital gains (losses) | 42 | (324 | ) | 156 | 687 | (881 | ) | ||||||||
Total net realized capital gains (losses) | 1,595 | (509 | ) | 119 | 589 | (910 | ) | ||||||||
Other revenues | 68 | 74 | 64 | 61 | 59 | ||||||||||
Total revenues | 9,178 | 7,735 | 6,442 | 4,574 | 7,661 | ||||||||||
Benefits, losses and loss adjustment expenses | 2,665 | 3,320 | 3,271 | 3,621 | 3,038 | ||||||||||
Benefits, losses and loss adjustment expenses—returns credited on international variable annuities [2] | 2,700 | 2,676 | 710 | (1,686 | ) | 2,864 | |||||||||
Amortization of DAC | 1,336 | 547 | 566 | 554 | 321 | ||||||||||
Insurance operating costs and other expenses | 1,014 | 1,252 | 1,222 | 1,261 | 1,303 | ||||||||||
Loss on extinguishment of debt | 213 | — | — | 910 | — | ||||||||||
Reinsurance loss on dispositions [3] | 1,574 | — | 533 | — | — | ||||||||||
Interest expense | 107 | 109 | 109 | 115 | 124 | ||||||||||
Restructuring and other costs [4] | 18 | 89 | 53 | 48 | 9 | ||||||||||
Total benefits and expenses | 9,627 | 7,993 | 6,464 | 4,823 | 7,659 | ||||||||||
Income (loss) from continuing operations before income taxes | (449 | ) | (258 | ) | (22 | ) | (249 | ) | 2 | ||||||
Income tax benefit | (208 | ) | (213 | ) | (37 | ) | (149 | ) | (95 | ) | |||||
Income (loss) from continuing operations, after tax | (241 | ) | (45 | ) | 15 | (100 | ) | 97 | |||||||
Loss from discontinued operations, after tax | — | (1 | ) | (2 | ) | (1 | ) | (1 | ) | ||||||
Net income (loss) | $ | (241 | ) | $ | (46 | ) | $ | 13 | $ | (101 | ) | $ | 96 | ||
Less: Unlock benefit (charge), after tax [5] | (541 | ) | 42 | (79 | ) | (146 | ) | 214 | |||||||
Less: Restructuring and other costs, after tax | (12 | ) | (58 | ) | (34 | ) | (31 | ) | (6 | ) | |||||
Less: Loss from discontinued operations, after tax | — | (1 | ) | (2 | ) | (1 | ) | (1 | ) | ||||||
Less: Loss on extinguishment of debt, after tax | (138 | ) | — | — | (587 | ) | — | ||||||||
Less: Net reinsurance loss on dispositions, after tax | (25 | ) | — | (388 | ) | — | — | ||||||||
Less: Net realized capital gains (losses), after tax and DAC, excluded from core earnings | 19 | (294 | ) | 81 | 387 | (537 | ) | ||||||||
Core earnings | $ | 456 | $ | 265 | $ | 435 | $ | 277 | $ | 426 |
[1] | Includes $177 of intent-to-sell impairment losses relating to the sales of the Retirement Plans and Individual Life businesses for the three months ended December 31, 2012. |
[2] | Includes investment income and mark-to-market effects of equity securities, trading, supporting the international variable annuity business, which are classified in net investment income with corresponding amounts credited to policyholders within benefits, losses and loss adjustment expenses. |
[3] | Includes goodwill impairment of $156 and $342 in the first quarter of 2013 and the third quarter of 2012, respectively. |
[4] | Restructuring and other costs is comprised of severance benefits and related costs, professional fees, asset impairment charges and other contract termination charges. |
[5]The Unlock recorded in the periods presented affected each income statement line item as follows:
Earned premiums | $ | (1 | ) | $ | (5 | ) | $ | (3 | ) | $ | 1 | $ | — | ||
Fee income | 2 | 7 | 14 | 7 | (2 | ) | |||||||||
Benefits, losses and loss adjustment expenses | (71 | ) | (163 | ) | 56 | 143 | (208 | ) | |||||||
Amortization of DAC | 904 | 100 | 79 | 89 | (124 | ) | |||||||||
Income tax expense (benefit) | (291 | ) | 23 | (45 | ) | (78 | ) | 116 | |||||||
Unlock benefit (charge), after tax | $ | (541 | ) | $ | 42 | $ | (79 | ) | $ | (146 | ) | $ | 214 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
AS OF MARCH 31, 2013 and DECEMBER 31, 2012
LIFE [1] | PROPERTY & CASUALTY [1] | CORPORATE [1] | CONSOLIDATED | |||||||||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Mar. 31 2013 | Dec. 31 2012 | Mar. 31 2013 | Dec. 31 2012 | Mar. 31 2013 | Dec. 31 2012 | |||||||||||||||||
Investments | ||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value | $ | 42,130 | $ | 58,889 | $ | 26,756 | $ | 26,491 | $ | 781 | $ | 542 | $ | 69,667 | $ | 85,922 | ||||||||
Fixed maturities, at fair value using the fair value option | 968 | 1,075 | 14 | 12 | — | — | 982 | 1,087 | ||||||||||||||||
Equity securities, trading, at fair value | 28,099 | 28,933 | — | — | — | — | 28,099 | 28,933 | ||||||||||||||||
Equity securities, available-for-sale, at fair value | 496 | 512 | 246 | 263 | 120 | 115 | 862 | 890 | ||||||||||||||||
Mortgage loans | 4,226 | 5,661 | 1,003 | 1,050 | — | — | 5,229 | 6,711 | ||||||||||||||||
Policy loans, at outstanding balance | 1,421 | 1,997 | — | — | — | — | 1,421 | 1,997 | ||||||||||||||||
Limited partnerships and other alternative investments | 1,441 | 1,452 | 1,617 | 1,563 | — | — | 3,058 | 3,015 | ||||||||||||||||
Other investments | 958 | 961 | 131 | 130 | 19 | 23 | 1,108 | 1,114 | ||||||||||||||||
Short-term investments | 2,129 | 2,947 | 994 | 802 | 1,289 | 832 | 4,412 | 4,581 | ||||||||||||||||
Total investments | $ | 81,868 | $ | 102,427 | $ | 30,761 | $ | 30,311 | $ | 2,209 | $ | 1,512 | $ | 114,838 | $ | 134,250 | ||||||||
Cash | 1,795 | 2,231 | 185 | 190 | 5 | — | 1,985 | 2,421 | ||||||||||||||||
Premiums receivable and agents’ balances | 299 | 344 | 3,285 | 3,198 | — | — | 3,584 | 3,542 | ||||||||||||||||
Reinsurance recoverables | 19,638 | 1,912 | 2,757 | 2,754 | — | — | 22,395 | 4,666 | ||||||||||||||||
DAC | 1,886 | 5,177 | 545 | 548 | — | — | 2,431 | 5,725 | ||||||||||||||||
Deferred income taxes | 780 | 55 | 377 | 395 | 1,510 | 1,492 | 2,667 | 1,942 | ||||||||||||||||
Goodwill | 149 | 236 | 119 | 119 | 230 | 299 | 498 | 654 | ||||||||||||||||
Property and equipment, net | 290 | 348 | 622 | 620 | 9 | 9 | 921 | 977 | ||||||||||||||||
Other assets | 1,281 | 1,600 | 1,048 | 967 | 222 | 200 | 2,551 | 2,767 | ||||||||||||||||
Separate account assets | 145,151 | 141,569 | — | — | — | — | 145,151 | 141,569 | ||||||||||||||||
Total assets | $ | 253,137 | $ | 255,899 | $ | 39,699 | $ | 39,102 | $ | 4,185 | $ | 3,512 | $ | 297,021 | $ | 298,513 | ||||||||
Future policy benefits, unpaid losses and loss adjustment expenses | 20,131 | 19,276 | 21,550 | 21,716 | — | — | $ | 41,681 | $ | 40,992 | ||||||||||||||
Other policyholder funds and benefits payable | 41,044 | 41,979 | — | — | — | — | 41,044 | 41,979 | ||||||||||||||||
Other policyholder funds and benefits payable— International variable annuities | 28,088 | 28,922 | — | — | — | — | 28,088 | 28,922 | ||||||||||||||||
Unearned premiums | 174 | 174 | 5,134 | 4,972 | (1 | ) | (1 | ) | 5,307 | 5,145 | ||||||||||||||
Debt | — | — | — | — | 6,327 | 7,126 | 6,327 | 7,126 | ||||||||||||||||
Consumer notes | 132 | 161 | — | — | — | — | 132 | 161 | ||||||||||||||||
Other liabilities | 4,267 | 6,800 | 2,208 | 1,675 | 1,896 | 1,697 | 8,371 | 10,172 | ||||||||||||||||
Separate account liabilities | 145,151 | 141,569 | — | — | — | — | 145,151 | 141,569 | ||||||||||||||||
Total liabilities | $ | 238,987 | $ | 238,881 | $ | 28,892 | $ | 28,363 | $ | 8,222 | $ | 8,822 | $ | 276,101 | $ | 276,066 | ||||||||
Common equity, excluding AOCI | 12,370 | 14,176 | 9,541 | 9,332 | (3,196 | ) | (4,460 | ) | 18,715 | 19,048 | ||||||||||||||
Preferred stock [2] | — | — | — | — | 556 | 556 | 556 | 556 | ||||||||||||||||
AOCI, after tax | 1,780 | 2,842 | 1,266 | 1,407 | (1,397 | ) | (1,406 | ) | 1,649 | 2,843 | ||||||||||||||
Total stockholders’ equity | 14,150 | 17,018 | 10,807 | 10,739 | (4,037 | ) | (5,310 | ) | 20,920 | 22,447 | ||||||||||||||
Total liabilities and equity | $ | 253,137 | $ | 255,899 | $ | 39,699 | $ | 39,102 | $ | 4,185 | $ | 3,512 | $ | 297,021 | $ | 298,513 |
[1] | For a description of Life, Property & Casualty and Corporate, refer to the Basis of Presentation on page i. |
[2] | The preferred stock converted to common equity on April 1, 2013. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
DEBT | |||||||||||||||
Short-term debt | $ | 520 | $ | 320 | $ | 320 | $ | — | $ | — | |||||
Senior notes | 4,707 | 5,706 | 5,706 | 6,025 | 4,481 | ||||||||||
Junior subordinated debentures | 1,100 | 1,100 | 1,100 | 1,100 | 1,739 | ||||||||||
Total debt [1][2] | $ | 6,327 | $ | 7,126 | $ | 7,126 | $ | 7,125 | $ | 6,220 | |||||
STOCKHOLDERS’ EQUITY | |||||||||||||||
Common stockholders' equity, excluding AOCI | $ | 18,715 | $ | 19,048 | $ | 19,131 | $ | 19,149 | $ | 19,390 | |||||
Preferred stock | 556 | 556 | 556 | 556 | 556 | ||||||||||
AOCI | 1,649 | 2,843 | 3,295 | 2,256 | 1,328 | ||||||||||
Total stockholders’ equity | $ | 20,920 | $ | 22,447 | $ | 22,982 | $ | 21,961 | $ | 21,274 | |||||
CAPITALIZATION | |||||||||||||||
Total capitalization, including AOCI, after tax | $ | 27,247 | $ | 29,573 | $ | 30,108 | $ | 29,086 | $ | 27,494 | |||||
Total capitalization, excluding AOCI, after tax | $ | 25,598 | $ | 26,730 | $ | 26,813 | $ | 26,830 | $ | 26,166 | |||||
DEBT TO CAPITALIZATION RATIOS [2] | |||||||||||||||
Total debt to capitalization, including AOCI | 23.2 | % | 24.1 | % | 23.7 | % | 24.5 | % | 22.6 | % | |||||
Total debt to capitalization, excluding AOCI | 24.7 | % | 26.7 | % | 26.6 | % | 26.6 | % | 23.8 | % | |||||
Total rating agency adjusted debt to capitalization [3] [4] | 26.6 | % | 27.4 | % | 26.3 | % | 27.3 | % | 26.5 | % |
[1] | On April 18, 2013, the Company issued $300 of 4.3% senior notes due in 2043. On March 26, 2013, the Company repurchased approximately $800 of outstanding senior debentures. On April 5, 2012, the Company issued $1.55 billion aggregate principal amount of senior notes and $600 of junior subordinated debentures. The Company used the proceeds from the 2012 debt offering to repurchase all of the outstanding 10% fixed to floating rate junior subordinated debentures due 2068 with a $1.75 billion aggregate principal amount held by Allianz SE for $2.125 billion. |
[2] | The Hartford excludes consumer notes from total debt for capital structure analysis. Consumer notes were $132, $161, $190, $254 and $310 as of March 31, 2013, December 31, 2012, September 30, 2012, June 30, 2012, and March 31, 2012, respectively. |
[3] | The leverage calculation reflects adjustments related to the Company’s defined benefit plans unfunded pension liability and the Company's rental expense on operating leases for total adjustments of $1.6 billion, $1.7 billion, $1.5 billion, $1.5 billion and $1.5 billion for the three months ended March 31, 2013, December 31, 2012, September 30, 2012, June 30, 2012, and March 31, 2012, respectively. |
[4] | Reflects 25% equity credit for the junior subordinated debentures and the discount value of the debentures issued in October 2008. Reflects 100% equity credit for the MCP stock which converted to common equity on April 1, 2013. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY CAPITAL AND SURPLUS TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
Mar. 31 2013 | [3] | Dec. 31 2012 | [4] | ||||||
Property & Casualty U.S. statutory net income [1] | $ | 466 | $ | 883 | |||||
Life U.S. statutory net income [1] [2] | $ | 2,381 | $ | 592 | |||||
Property & Casualty U.S. statutory capital and surplus [1] | $ | 7,948 | $ | 7,645 | |||||
GAAP adjustments | |||||||||
DAC | 545 | 548 | |||||||
Benefit reserves | (51 | ) | (53 | ) | |||||
GAAP unrealized losses on investments, after tax | 1,186 | 1,314 | |||||||
Goodwill | 119 | 119 | |||||||
Non-admitted assets | 806 | 914 | |||||||
Other, net | 254 | 252 | |||||||
Property & Casualty GAAP stockholders’ equity | $ | 10,807 | $ | 10,739 | |||||
Life U.S. statutory capital and surplus [1] | $ | 7,599 | $ | 6,410 | |||||
GAAP adjustments | |||||||||
Investment in subsidiaries | 2,759 | 3,045 | |||||||
DAC | 1,885 | 5,177 | |||||||
Deferred taxes | (592 | ) | (1,610 | ) | |||||
Benefit reserves | (4,541 | ) | (1,014 | ) | |||||
Unrealized losses on investments, net of impairments | 2,439 | 4,071 | |||||||
Asset valuation reserve and interest maintenance reserve | 903 | 934 | |||||||
Goodwill | 151 | 236 | |||||||
Other, net | 3,547 | (231 | ) | ||||||
Life GAAP stockholders’ equity | $ | 14,150 | $ | 17,018 |
[1] | For a description of Life and Property & Casualty, please refer to the Basis of Presentation on page i. |
[2] | Net income does not include capital gains and losses on hedging programs that may be accounted for as realized capital gains (losses) under U.S. GAAP. |
[3] | Statutory net income is for the three months ended March 31, 2013. |
[4] | Statutory net income is for the year ended December 31, 2012. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
Fixed maturities net unrealized gain | $ | 2,484 | $ | 3,402 | $ | 3,373 | $ | 2,507 | $ | 1,793 | |||||
Equities net unrealized gain (loss) | 45 | 16 | 8 | (8 | ) | (41 | ) | ||||||||
OTTI losses recognized in AOCI | (32 | ) | (47 | ) | (59 | ) | (94 | ) | (107 | ) | |||||
Net deferred gain on cash flow hedging instruments | 320 | 428 | 543 | 544 | 463 | ||||||||||
Total net unrealized gain | $ | 2,817 | $ | 3,799 | $ | 3,865 | $ | 2,949 | $ | 2,108 | |||||
Foreign currency translation adjustments | 186 | 406 | 582 | 494 | 438 | ||||||||||
Pension and other postretirement adjustment | (1,354 | ) | (1,362 | ) | (1,152 | ) | (1,187 | ) | (1,218 | ) | |||||
Total AOCI | $ | 1,649 | $ | 2,843 | $ | 3,295 | $ | 2,256 | $ | 1,328 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
DEFERRED POLICY ACQUISITION COSTS AND PRESENT VALUE OF FUTURE PROFITS (“DAC”)
THREE MONTHS ENDED MARCH 31, 2013 | ||||||||||||||||||||||||
Talcott Resolution | ||||||||||||||||||||||||
Property and Casualty | Group Benefits | Mutual Funds | U.S. Annuity | International Annuity | Institutional | Other [1] | Consolidated | |||||||||||||||||
Balance, beginning of period | $ | 548 | $ | 43 | $ | 22 | $ | 1,823 | $ | 993 | $ | 51 | $ | 2,245 | $ | 5,725 | ||||||||
Deferred costs | 307 | 10 | 9 | 6 | — | — | — | 332 | ||||||||||||||||
Amortization — DAC | (310 | ) | (8 | ) | (9 | ) | (84 | ) | (20 | ) | (1 | ) | — | (432 | ) | |||||||||
Amortization — DAC unlock charge, before tax [2] | — | — | — | (17 | ) | (887 | ) | — | — | (904 | ) | |||||||||||||
Amortization — DAC related to business dispositions [3] [4] | — | — | — | — | — | — | (2,229 | ) | (2,229 | ) | ||||||||||||||
Adjustments to unrealized gains/losses on securities available-for-sale and other | — | — | 1 | 24 | — | — | — | 25 | ||||||||||||||||
Effect of currency translation adjustment | — | — | — | — | (86 | ) | — | — | (86 | ) | ||||||||||||||
Balance, end of period | $ | 545 | $ | 45 | $ | 23 | $ | 1,752 | $ | — | $ | 50 | $ | 16 | $ | 2,431 |
[1] | Talcott Resolution Other includes DAC balances and activity related to the private placement life insurance ("PPLI"), Retirement Plans and Individual Life businesses. The Retirement Plans and Individual Life businesses were sold in January 2013. |
[2] | International Annuity's unlock charge in the first quarter of 2013 relates to elimination of future estimated gross profits on the Japan variable annuity block due to the increased costs associated with expanding the Japan variable annuity hedging program. |
[3] | Includes accelerated amortization of $352 and $2,374 in the first quarter of 2013 recognized upon the sale of the Retirement Plans and Individual Life businesses, respectively. |
[4] | Includes previously unrealized gains on securities available-for-sale of $148 and $349 recognized in the first quarter of 2013 upon the sale of the Retirement Plans and Individual Life businesses, respectively. |
UNLOCK ATTRIBUTION
THREE MONTHS ENDED MARCH 31, 2013 | |||||||||
Talcott Resolution | |||||||||
U.S. Annuity | International Annuity | Total | |||||||
Assumption changes | (33 | ) | (651 | ) | (684 | ) | |||
Market performance and other attributes [1] | 36 | 107 | 143 | ||||||
Unlock benefit (charge), after tax [2] | $ | 3 | $ | (544 | ) | $ | (541 | ) |
[1] | Other attributes include non-market components such as lapses. For the three months ended March 31, 2013, market performance was partially offset by lapses due to the implementation of the U.S. Annuity Enhanced Surrender Value initiative. |
[2] Represents unlock impacts on net income (loss), inclusive of DAC, sales inducement amortization, unearned revenue reserves and other components.
PROPERTY & CASUALTY
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
UNDERWRITING RESULTS | |||||||||||||||
Written premiums | $ | 2,523 | $ | 2,314 | $ | 2,512 | $ | 2,472 | $ | 2,549 | |||||
Change in unearned premium reserve | 98 | (165 | ) | 18 | 18 | 83 | |||||||||
Earned premiums | 2,425 | 2,479 | 2,494 | 2,454 | 2,466 | ||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 1,536 | 1,660 | 1,717 | 1,590 | 1,601 | ||||||||||
Current accident year catastrophes | 32 | 335 | 10 | 290 | 71 | ||||||||||
Prior year development | 14 | 9 | (33 | ) | 49 | (29 | ) | ||||||||
Total losses and loss adjustment expenses | 1,582 | 2,004 | 1,694 | 1,929 | 1,643 | ||||||||||
Amortization of DAC | 310 | 317 | 313 | 315 | 314 | ||||||||||
Underwriting expenses | 375 | 381 | 367 | 388 | 403 | ||||||||||
Dividends to policyholders | 4 | 6 | 5 | 5 | (2 | ) | |||||||||
Underwriting gain (loss) | 154 | (229 | ) | 115 | (183 | ) | 108 | ||||||||
Net investment income | 312 | 301 | 295 | 319 | 317 | ||||||||||
Net realized capital gains (losses) | 51 | 40 | 16 | (21 | ) | 61 | |||||||||
Other expense | (24 | ) | (33 | ) | (35 | ) | (17 | ) | (35 | ) | |||||
Restructuring and other costs | — | — | (1 | ) | (5 | ) | — | ||||||||
Income from continuing operations before income taxes | 493 | 79 | 390 | 93 | 451 | ||||||||||
Income tax expense (benefit) | 142 | (2 | ) | 106 | 8 | 126 | |||||||||
Income from continuing operations, after tax | 351 | 81 | 284 | 85 | 325 | ||||||||||
Income (loss) from discontinued operations, after tax | — | (1 | ) | (2 | ) | (1 | ) | (1 | ) | ||||||
Net income | 351 | 80 | 282 | 84 | 324 | ||||||||||
Less: Restructuring and other costs, after tax | — | — | (1 | ) | (3 | ) | — | ||||||||
Less: Loss from discontinued operations, after tax | — | (1 | ) | (2 | ) | (1 | ) | (1 | ) | ||||||
Less: Net realized capital gains (losses), after tax and DAC, excluded from core earnings | 33 | 27 | 10 | (13 | ) | 41 | |||||||||
Core earnings | $ | 318 | $ | 54 | $ | 275 | $ | 101 | $ | 284 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNDERWRITING RATIOS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
UNDERWRITING GAIN (LOSS) | $ | 154 | $ | (229 | ) | $ | 115 | $ | (183 | ) | $ | 108 | |||
UNDERWRITING RATIOS | |||||||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 63.3 | 67.0 | 68.8 | 64.8 | 64.9 | ||||||||||
Current accident year catastrophes | 1.3 | 13.5 | 0.4 | 11.8 | 2.9 | ||||||||||
Prior year development | 0.6 | 0.4 | (1.3 | ) | 2.0 | (1.2 | ) | ||||||||
Total losses and loss adjustment expenses | 65.2 | 80.8 | 67.9 | 78.6 | 66.6 | ||||||||||
Expenses | 28.2 | 28.2 | 27.3 | 28.6 | 29.1 | ||||||||||
Policyholder dividends | 0.2 | 0.2 | 0.2 | 0.2 | (0.1 | ) | |||||||||
Combined ratio | 93.6 | 109.2 | 95.4 | 107.5 | 95.6 | ||||||||||
Catastrophes | |||||||||||||||
Current year | 1.3 | 13.5 | 0.4 | 11.8 | 2.9 | ||||||||||
Prior year | 0.1 | — | (0.3 | ) | (2.0 | ) | (0.4 | ) | |||||||
Catastrophe ratio | 1.4 | 13.6 | 0.1 | 9.9 | 2.4 | ||||||||||
Combined ratio before catastrophes | 92.2 | 95.7 | 95.3 | 97.6 | 93.2 | ||||||||||
Combined ratio before catastrophes and prior year development | 91.8 | 95.4 | 96.3 | 93.6 | 93.9 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C COMMERCIAL
UNDERWRITING RESULTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
UNDERWRITING RESULTS | |||||||||||||||
Written premiums | $ | 1,645 | $ | 1,454 | $ | 1,552 | $ | 1,516 | $ | 1,687 | |||||
Change in unearned premium reserve | 116 | (114 | ) | (30 | ) | (36 | ) | 130 | |||||||
Earned premiums | 1,529 | 1,568 | 1,582 | 1,552 | 1,557 | ||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes [1] | 968 | 1,067 | 1,089 | 995 | 1,027 | ||||||||||
Current accident year catastrophes [2] | 6 | 209 | 10 | 74 | 32 | ||||||||||
Prior year development [3] [4] | 8 | 18 | 15 | 19 | 20 | ||||||||||
Total losses and loss adjustment expenses | 982 | 1,294 | 1,114 | 1,088 | 1,079 | ||||||||||
Amortization of DAC | 227 | 234 | 231 | 231 | 231 | ||||||||||
Underwriting expenses | 225 | 227 | 218 | 235 | 245 | ||||||||||
Dividends to policyholders [5] | 4 | 6 | 5 | 5 | (2 | ) | |||||||||
Underwriting gain (loss) | $ | 91 | $ | (193 | ) | $ | 14 | $ | (7 | ) | $ | 4 |
[1] | The three months ended December 31, 2012 included current accident year reserve strengthening of $28 predominantly related to workers' compensation business. The three months ended September 30, 2012 included current accident year reserve strengthening of $39 predominantly related to workers' compensation business and auto liability claims. |
[2] | Included within current accident year catastrophes in the three months ended December 31, 2012 was $207 related to Storm Sandy. |
[3] | Included within prior year development was the following (favorable) unfavorable prior year loss reserve development: |
Auto liability | $ | 15 | $ | 11 | $ | 14 | $ | 19 | $ | 12 | |||||
Professional liability | 1 | — | 22 | 9 | 9 | ||||||||||
Package business | (11 | ) | 14 | (2 | ) | (16 | ) | (16 | ) | ||||||
Workers’ compensation | 18 | 9 | 18 | 43 | 8 | ||||||||||
General liability | (19 | ) | (11 | ) | (36 | ) | (24 | ) | (16 | ) | |||||
Fidelity and surety | (5 | ) | (12 | ) | (8 | ) | 10 | 1 | |||||||
Commercial property | (4 | ) | (3 | ) | 1 | 4 | (10 | ) | |||||||
Change in workers' compensation discount, including accretion | 8 | 7 | 8 | 8 | 29 | ||||||||||
Catastrophes [4] | — | 1 | (2 | ) | (39 | ) | 3 | ||||||||
Other reserve re-estimates, net | 5 | 2 | — | 5 | — | ||||||||||
Total prior year development | $ | 8 | $ | 18 | $ | 15 | $ | 19 | $ | 20 |
[4] | The three months ended June 30, 2012 includes one time reserve releases on certain prior year catastrophes primarily related to 2001 World Trade Center workers’ compensation claims. |
[5] | The three months ended March 31, 2012 included a decrease in prior dividends of $8. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C COMMERCIAL
UNDERWRITING RATIOS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
UNDERWRITING GAIN (LOSS) | $ | 91 | $ | (193 | ) | $ | 14 | $ | (7 | ) | $ | 4 | |||
UNDERWRITING RATIOS | |||||||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes [1] | 63.3 | 68.0 | 68.8 | 64.1 | 66.0 | ||||||||||
Current accident year catastrophes [2] | 0.4 | 13.3 | 0.6 | 4.8 | 2.1 | ||||||||||
Prior year development [3] | 0.5 | 1.1 | 0.9 | 1.2 | 1.3 | ||||||||||
Total losses and loss adjustment expenses | 64.2 | 82.5 | 70.4 | 70.1 | 69.3 | ||||||||||
Expenses | 29.6 | 29.4 | 28.4 | 30.0 | 30.6 | ||||||||||
Policyholder dividends | 0.3 | 0.4 | 0.3 | 0.3 | (0.1 | ) | |||||||||
Combined ratio | 94.0 | 112.3 | 99.1 | 100.5 | 99.7 | ||||||||||
Catastrophes | |||||||||||||||
Current year [2] | 0.4 | 13.3 | 0.6 | 4.8 | 2.1 | ||||||||||
Prior year | — | 0.1 | (0.1 | ) | (2.5 | ) | 0.2 | ||||||||
Catastrophe ratio | 0.4 | 13.4 | 0.5 | 2.3 | 2.2 | ||||||||||
Combined ratio before catastrophes | 93.7 | 98.9 | 98.6 | 98.2 | 97.5 | ||||||||||
Combined ratio before catastrophes and prior year development | 93.1 | 97.8 | 97.5 | 94.5 | 96.4 |
[1] | The three months ended December 31, 2012 included current accident year reserve strengthening of 1.8 points, predominantly related to workers’ compensation business. The three months ended September 30, 2012 included current accident year reserve strengthening of 2.5 points, predominantly related to workers' compensation business and auto liability claims. |
[2] | Included in current accident year catastrophes in the three months ended December 31, 2012 was 13.2 points related to Storm Sandy. |
[3] | For a summary of (favorable) unfavorable prior year loss reserve development, refer to footnote 3 on page 11. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C COMMERCIAL
SUPPLEMENTAL DATA
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
WRITTEN PREMIUMS | |||||||||||||||
Small Commercial | $ | 842 | $ | 705 | $ | 728 | $ | 769 | $ | 815 | |||||
Middle Market | 546 | 545 | 557 | 512 | 581 | ||||||||||
Specialty | 248 | 195 | 259 | 227 | 283 | ||||||||||
Other | 9 | 9 | 8 | 8 | 8 | ||||||||||
Total | $ | 1,645 | $ | 1,454 | $ | 1,552 | $ | 1,516 | $ | 1,687 | |||||
EARNED PREMIUMS | |||||||||||||||
Small Commercial | $ | 754 | $ | 760 | $ | 755 | $ | 738 | $ | 726 | |||||
Middle Market | 530 | 559 | 565 | 562 | 577 | ||||||||||
Specialty | 236 | 243 | 253 | 244 | 245 | ||||||||||
Other | 9 | 6 | 9 | 8 | 9 | ||||||||||
Total | $ | 1,529 | $ | 1,568 | $ | 1,582 | $ | 1,552 | $ | 1,557 | |||||
SMALL COMMERCIAL | |||||||||||||||
Combined ratio | 89.9 | 111.2 | 93.6 | 94.8 | 97.3 | ||||||||||
Combined ratio before catastrophes | 88.2 | 96.5 | 93.0 | 88.7 | 93.1 | ||||||||||
Combined ratio before catastrophes and prior year development | 89.2 | 92.8 | 92.6 | 87.1 | 91.8 | ||||||||||
MIDDLE MARKET | |||||||||||||||
Combined ratio | 91.6 | 117.1 | 103.5 | 104.1 | 98.8 | ||||||||||
Combined ratio before catastrophes | 93.2 | 99.6 | 103.7 | 102.5 | 97.6 | ||||||||||
Combined ratio before catastrophes and prior year development | 95.8 | 99.0 | 100.7 | 98.4 | 99.2 | ||||||||||
SPECIALTY | |||||||||||||||
Combined ratio | 112.6 | 104.9 | 117.4 | 107.9 | 108.2 | ||||||||||
Combined ratio before catastrophes | 111.8 | 104.4 | 116.1 | 115.1 | 108.8 | ||||||||||
Combined ratio before catastrophes and prior year development | 98.9 | 111.2 | 105.0 | 106.5 | 102.9 | ||||||||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | |||||||||||||||
Renewal Written Price Increases | |||||||||||||||
Standard Commercial Lines | 9 | % | 9 | % | 8 | % | 7 | % | 7 | % | |||||
Policy Count Retention | |||||||||||||||
Small Commercial | 82 | % | 83 | % | 84 | % | 82 | % | 84 | % | |||||
Middle Market | 77 | % | 79 | % | 78 | % | 73 | % | 79 | % | |||||
New Business Premium $ | |||||||||||||||
Small Commercial | $ | 134 | $ | 109 | $ | 109 | $ | 135 | $ | 145 | |||||
Middle Market | $ | 97 | $ | 80 | $ | 86 | $ | 78 | $ | 91 | |||||
Policies in Force | |||||||||||||||
Small Commercial | 1,185,222 | 1,187,472 | 1,191,451 | 1,188,147 | 1,179,995 | ||||||||||
Middle Market | 74,645 | 75,871 | 77,372 | 78,676 | 81,159 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
UNDERWRITING RESULTS
THREE MONTHS ENDED | |||||||||||||||
UNDERWRITING RESULTS | Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | ||||||||||
Written premiums | $ | 878 | $ | 859 | $ | 960 | $ | 950 | $ | 861 | |||||
Change in unearned premium reserve | (18 | ) | (52 | ) | 48 | 46 | (48 | ) | |||||||
Earned premiums | 896 | 911 | 912 | 904 | 909 | ||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 568 | 593 | 628 | 595 | 574 | ||||||||||
Current accident year catastrophes [1] | 26 | 126 | — | 216 | 39 | ||||||||||
Prior year development [2] | 4 | (14 | ) | (49 | ) | (23 | ) | (55 | ) | ||||||
Total losses and loss adjustment expenses | 598 | 705 | 579 | 788 | 558 | ||||||||||
Amortization of DAC | 83 | 83 | 82 | 84 | 83 | ||||||||||
Underwriting expenses | 143 | 144 | 141 | 146 | 150 | ||||||||||
Underwriting gain (loss) | $ | 72 | $ | (21 | ) | $ | 110 | $ | (114 | ) | $ | 118 |
[1] | Included within current accident year catastrophes in the three months ended December 31, 2012 was $143 related to Storm Sandy. |
[2] | Included within prior year development was the following (favorable) unfavorable prior year loss reserve development: |
Auto liability | $ | — | $ | (2 | ) | $ | (38 | ) | $ | (11 | ) | $ | (30 | ) | |
Homeowners | (8 | ) | (22 | ) | (4 | ) | (1 | ) | (5 | ) | |||||
Catastrophes | 2 | — | (6 | ) | (9 | ) | (14 | ) | |||||||
Other reserve re-estimates, net | 10 | 10 | (1 | ) | (2 | ) | (6 | ) | |||||||
Total prior year development | $ | 4 | $ | (14 | ) | $ | (49 | ) | $ | (23 | ) | $ | (55 | ) |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
UNDERWRITING RATIOS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
UNDERWRITING GAIN (LOSS) | $ | 72 | $ | (21 | ) | $ | 110 | $ | (114 | ) | $ | 118 | |||
UNDERWRITING RATIOS | |||||||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 63.4 | 65.1 | 68.9 | 65.8 | 63.1 | ||||||||||
Current accident year catastrophes [1] | 2.9 | 13.8 | — | 23.9 | 4.3 | ||||||||||
Prior year development [2] | 0.4 | (1.5 | ) | (5.4 | ) | (2.5 | ) | (6.1 | ) | ||||||
Total losses and loss adjustment expenses | 66.7 | 77.4 | 63.5 | 87.2 | 61.4 | ||||||||||
Expenses | 25.2 | 24.9 | 24.5 | 25.4 | 25.6 | ||||||||||
Combined ratio | 92.0 | 102.3 | 87.9 | 112.6 | 87.0 | ||||||||||
Catastrophes | |||||||||||||||
Current year [1] | 2.9 | 13.8 | — | 23.9 | 4.3 | ||||||||||
Prior year | 0.2 | — | (0.7 | ) | (1.0 | ) | (1.5 | ) | |||||||
Catastrophe ratio | 3.1 | 13.8 | (0.7 | ) | 22.9 | 2.8 | |||||||||
Combined ratio before catastrophes | 88.8 | 88.5 | 88.6 | 89.7 | 84.3 | ||||||||||
Combined ratio before catastrophes and prior year development | 88.6 | 90.0 | 93.3 | 91.3 | 88.8 | ||||||||||
PRODUCT | |||||||||||||||
Automobile | |||||||||||||||
Combined ratio | 96.0 | 109.4 | 93.9 | 98.8 | 88.4 | ||||||||||
Combined ratio before catastrophes and prior year development | 93.3 | 100.5 | 100.1 | 96.0 | 93.8 | ||||||||||
Homeowners | |||||||||||||||
Combined ratio | 82.7 | 86.1 | 74.5 | 144.1 | 83.8 | ||||||||||
Combined ratio before catastrophes and prior year development | 77.9 | 65.7 | 78.2 | 80.2 | 77.4 |
[1] | Included in current accident year catastrophes in the three months ended December 31, 2012 was 15.7 points related to Storm Sandy. |
[2] | Refer to footnote 2 on page 14 for a summary of (favorable) unfavorable prior year loss reserve development. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
SUPPLEMENTAL DATA
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
DISTRIBUTION | |||||||||||||||
WRITTEN PREMIUMS | |||||||||||||||
AARP Direct | $ | 647 | $ | 623 | $ | 714 | $ | 710 | $ | 633 | |||||
AARP Agency | 45 | 40 | 37 | 32 | 27 | ||||||||||
Other Agency | 173 | 181 | 196 | 194 | 186 | ||||||||||
Other | 13 | 15 | 13 | 14 | 15 | ||||||||||
Total | $ | 878 | $ | 859 | $ | 960 | $ | 950 | $ | 861 | |||||
EARNED PREMIUMS | |||||||||||||||
AARP Direct | $ | 662 | $ | 674 | $ | 679 | $ | 671 | $ | 676 | |||||
AARP Agency | 35 | 32 | 27 | 23 | 19 | ||||||||||
Other Agency | 184 | 188 | 194 | 195 | 201 | ||||||||||
Other | 15 | 17 | 12 | 15 | 13 | ||||||||||
Total | $ | 896 | $ | 911 | $ | 912 | $ | 904 | $ | 909 | |||||
PRODUCT LINE | |||||||||||||||
WRITTEN PREMIUMS | |||||||||||||||
Automobile | $ | 629 | $ | 595 | $ | 650 | $ | 649 | $ | 620 | |||||
Homeowners | 249 | 264 | 310 | 301 | 241 | ||||||||||
Total | $ | 878 | $ | 859 | $ | 960 | $ | 950 | $ | 861 | |||||
EARNED PREMIUMS | |||||||||||||||
Automobile | $ | 619 | $ | 632 | $ | 632 | $ | 630 | $ | 632 | |||||
Homeowners | 277 | 279 | 280 | 274 | 277 | ||||||||||
Total | $ | 896 | $ | 911 | $ | 912 | $ | 904 | $ | 909 | |||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | |||||||||||||||
Renewal Written Price Increases | |||||||||||||||
Automobile | 5 | % | 5 | % | 4 | % | 4 | % | 4 | % | |||||
Homeowners | 6 | % | 6 | % | 6 | % | 6 | % | 6 | % | |||||
Policy Count Retention | |||||||||||||||
Automobile | 86 | % | 86 | % | 85 | % | 84 | % | 84 | % | |||||
Homeowners | 87 | % | 88 | % | 87 | % | 86 | % | 85 | % | |||||
Premium Retention | |||||||||||||||
Automobile | 88 | % | 87 | % | 87 | % | 86 | % | 84 | % | |||||
Homeowners | 92 | % | 91 | % | 91 | % | 90 | % | 89 | % | |||||
New Business Premium $ | |||||||||||||||
Automobile | $ | 87 | $ | 77 | $ | 84 | $ | 85 | $ | 86 | |||||
Homeowners | $ | 30 | $ | 30 | $ | 32 | $ | 30 | $ | 25 | |||||
Policies in Force | |||||||||||||||
Automobile | 2,018,628 | 2,015,323 | 2,029,078 | 2,044,874 | 2,065,317 | ||||||||||
Homeowners | 1,322,290 | 1,319,101 | 1,321,149 | 1,323,557 | 1,330,117 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C OTHER OPERATIONS
UNDERWRITING RESULTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
UNDERWRITING RESULTS | |||||||||||||||
Written premiums | $ | — | $ | 1 | $ | — | $ | 6 | $ | 1 | |||||
Change in unearned premium reserve | — | 1 | — | 8 | 1 | ||||||||||
Earned premiums | — | — | — | (2 | ) | — | |||||||||
Losses and loss adjustment expenses | |||||||||||||||
Prior year development [1] | 2 | 5 | 1 | 53 | 6 | ||||||||||
Total losses and loss adjustment expenses | 2 | 5 | 1 | 53 | 6 | ||||||||||
Underwriting expenses | 7 | 10 | 8 | 7 | 8 | ||||||||||
Underwriting loss | $ | (9 | ) | $ | (15 | ) | $ | (9 | ) | $ | (62 | ) | $ | (14 | ) |
[1] | Included within prior year development was the following (favorable) unfavorable prior year loss reserve development: |
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
Asbestos | $ | — | $ | — | $ | — | $ | 48 | $ | — | |||||
Environmental | 1 | 2 | — | 3 | 5 | ||||||||||
Other reserve re-estimates, net | 1 | 3 | 1 | 2 | 1 | ||||||||||
Total prior year development | $ | 2 | $ | 5 | $ | 1 | $ | 53 | $ | 6 |
GROUP BENEFITS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
Earned premiums | $ | 812 | $ | 915 | $ | 926 | $ | 950 | $ | 957 | |||||
Fee income | 14 | 16 | 15 | 16 | 15 | ||||||||||
Net investment income | 97 | 101 | 98 | 107 | 99 | ||||||||||
Net realized capital gains | 18 | 9 | 11 | — | 20 | ||||||||||
Total revenues | 941 | 1,041 | 1,050 | 1,073 | 1,091 | ||||||||||
Benefits, losses and loss adjustment expenses | 639 | 717 | 746 | 759 | 807 | ||||||||||
Amortization of DAC | 8 | 8 | 9 | 8 | 8 | ||||||||||
Insurance operating costs and other expenses | 240 | 256 | 257 | 261 | 258 | ||||||||||
Restructuring and other costs | — | — | 1 | — | — | ||||||||||
Total benefits and expenses | 887 | 981 | 1,013 | 1,028 | 1,073 | ||||||||||
Income from continuing operations before income taxes | 54 | 60 | 37 | 45 | 18 | ||||||||||
Income tax expense | 12 | 14 | 7 | 10 | — | ||||||||||
Net income | 42 | 46 | 30 | 35 | 18 | ||||||||||
Less: Net realized capital gains, after tax, excluded from core earnings | 12 | 7 | 7 | 1 | 13 | ||||||||||
Core earnings | $ | 30 | $ | 39 | $ | 23 | $ | 34 | $ | 5 | |||||
After-tax margin (excluding buyouts) | |||||||||||||||
Net income | 4.5 | % | 4.4 | % | 2.9 | % | 3.3 | % | 1.7 | % | |||||
Core earnings | 3.2 | % | 3.8 | % | 2.2 | % | 3.2 | % | 0.5 | % |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
SUPPLEMENTAL DATA
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
PREMIUMS | |||||||||||||||
Fully insured ongoing premiums | |||||||||||||||
Group disability | $ | 345 | $ | 411 | $ | 411 | $ | 423 | $ | 428 | |||||
Group life | 426 | 456 | 468 | 478 | 476 | ||||||||||
Other | 41 | 48 | 47 | 49 | 50 | ||||||||||
Total fully insured ongoing premiums | $ | 812 | $ | 915 | $ | 926 | $ | 950 | $ | 954 | |||||
Total buyouts [1] | — | — | — | — | 3 | ||||||||||
Total premiums | 812 | 915 | 926 | 950 | 957 | ||||||||||
Group disability premium equivalents [2] | 106 | 111 | 114 | 111 | 110 | ||||||||||
Total premiums and premium equivalents | $ | 918 | $ | 1,026 | $ | 1,040 | $ | 1,061 | $ | 1,067 | |||||
SALES (GROSS ANNUALIZED NEW PREMIUMS) | |||||||||||||||
Fully insured ongoing sales | |||||||||||||||
Group disability | $ | 76 | $ | 25 | $ | 25 | $ | 27 | $ | 86 | |||||
Group life | 88 | 28 | 24 | 37 | 135 | ||||||||||
Other | 5 | 3 | 6 | 2 | 7 | ||||||||||
Total fully insured ongoing sales | 169 | 56 | 55 | 66 | 228 | ||||||||||
Total buyouts [1] | — | — | — | 1 | 2 | ||||||||||
Total sales | 169 | 56 | 55 | 67 | 230 | ||||||||||
Group disability premium equivalents [2] | 15 | 8 | 7 | 3 | 31 | ||||||||||
Total sales and premium equivalents | $ | 184 | $ | 64 | $ | 62 | $ | 70 | $ | 261 | |||||
RATIOS [3] | |||||||||||||||
Loss ratio | |||||||||||||||
Group disability loss ratio | 89.9 | % | 85.8 | % | 91.5 | % | 93.1 | % | 98.2 | % | |||||
Group life loss ratio | 68.1 | % | 70.0 | % | 69.4 | % | 66.5 | % | 70.3 | % | |||||
Total loss ratio | 77.4 | % | 77.0 | % | 79.3 | % | 78.6 | % | 83.0 | % | |||||
Expense ratio | 30.0 | % | 28.4 | % | 28.4 | % | 27.8 | % | 27.5 | % | |||||
GAAP RESERVES, NET OF REINSURANCE RECOVERABLES [4] | |||||||||||||||
Group disability | $ | 5,267 | $ | 5,321 | $ | 5,346 | $ | 5,348 | $ | 5,342 | |||||
Group life | 1,116 | 1,164 | 1,151 | 1,159 | 1,174 | ||||||||||
Other | 68 | 75 | 71 | 73 | 75 | ||||||||||
Total GAAP reserves | $ | 6,451 | $ | 6,560 | $ | 6,568 | $ | 6,580 | $ | 6,591 |
[1] | Takeover of open claim liabilities and other non-recurring premium amounts. |
[2] | Administrative service only fees and claims under claim management agreements. |
[3] | Ratios calculated include fees and exclude the effects of buyout premiums. |
[4] | Reinsurance recoverables were $250, $252, $254, $244 and $239, as of March 31, 2013, December 31, 2012, September 30, 2012, June 30, 2012, and March 31, 2012, respectively. |
MUTUAL FUNDS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
Fee income | $ | 164 | $ | 152 | $ | 148 | $ | 148 | $ | 151 | |||||
Net investment loss | — | (1 | ) | (1 | ) | — | (1 | ) | |||||||
Net realized capital gains (losses) | — | — | 1 | (2 | ) | 1 | |||||||||
Total revenues | 164 | 151 | 148 | 146 | 151 | ||||||||||
Amortization of DAC | 9 | 9 | 8 | 9 | 9 | ||||||||||
Insurance operating costs and other expenses [1] | 126 | 118 | 112 | 108 | 111 | ||||||||||
Restructuring and other costs | 1 | 1 | 1 | 1 | — | ||||||||||
Total benefits and expenses | 136 | 128 | 121 | 118 | 120 | ||||||||||
Income before income taxes | 28 | 23 | 27 | 28 | 31 | ||||||||||
Income tax expense | 10 | 8 | 9 | 10 | 11 | ||||||||||
Net income | 18 | 15 | 18 | 18 | 20 | ||||||||||
Less: Restructuring and other costs, after tax | (1 | ) | (1 | ) | (1 | ) | (1 | ) | — | ||||||
Less: Net realized capital gains (losses), after tax, excluded from core earnings | (1 | ) | — | — | — | — | |||||||||
Core earnings | $ | 20 | $ | 16 | $ | 19 | $ | 19 | $ | 20 | |||||
Return on assets (bps, after tax) | |||||||||||||||
Net income | 8.0 | 6.8 | 8.3 | 8.1 | 9.0 | ||||||||||
Core earnings | 8.9 | 7.3 | 8.7 | 8.5 | 9.0 |
[1] | Includes compensation to servicing intermediaries of approximately $5 in the first quarter of 2013 related to on-going business with the Company's Retirement Plans and Individual Life businesses sold in January 2013; prior to the first quarter of 2013, compensation to servicing intermediaries was presented as a reduction to fee income. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
SUPPLEMENTAL DATA — ASSET VALUE ROLL FORWARD
ASSETS UNDER MANAGEMENT — BY DISTRIBUTION CHANNEL
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
RETAIL MUTUAL FUNDS [1] | |||||||||||||||
Beginning balance | $ | 45,013 | $ | 44,267 | $ | 42,665 | $ | 45,315 | $ | 41,785 | |||||
Sales | 3,162 | 2,433 | 2,136 | 2,031 | 2,210 | ||||||||||
Redemptions | (3,176 | ) | (2,726 | ) | (2,436 | ) | (2,856 | ) | (3,069 | ) | |||||
Net flows | (14 | ) | (293 | ) | (300 | ) | (825 | ) | (859 | ) | |||||
Change in market value/currency/change in reserve/interest credited [2] | 3,187 | 1,039 | 1,902 | (1,825 | ) | 4,389 | |||||||||
Ending balance | $ | 48,186 | $ | 45,013 | $ | 44,267 | $ | 42,665 | $ | 45,315 | |||||
DEFINED CONTRIBUTION INVESTMENT ONLY MUTUAL FUNDS [3] | |||||||||||||||
Beginning balance | $ | 16,598 | $ | 17,015 | $ | 16,678 | $ | 17,945 | $ | 16,140 | |||||
Sales | 942 | 720 | 662 | 793 | 856 | ||||||||||
Redemptions [4] | (1,426 | ) | (1,484 | ) | (1,144 | ) | (1,386 | ) | (1,157 | ) | |||||
Net flows | (484 | ) | (764 | ) | (482 | ) | (593 | ) | (301 | ) | |||||
Change in market value/currency/change in reserve/interest credited | 1,508 | 347 | 819 | (674 | ) | 2,106 | |||||||||
Ending balance | $ | 17,622 | $ | 16,598 | $ | 17,015 | $ | 16,678 | $ | 17,945 | |||||
TOTAL MUTUAL FUNDS | |||||||||||||||
Beginning balance | $ | 61,611 | $ | 61,282 | $ | 59,343 | $ | 63,260 | $ | 57,925 | |||||
Sales | 4,104 | 3,153 | 2,798 | 2,824 | 3,066 | ||||||||||
Redemptions [4] | (4,602 | ) | (4,210 | ) | (3,580 | ) | (4,242 | ) | (4,226 | ) | |||||
Net flows | (498 | ) | (1,057 | ) | (782 | ) | (1,418 | ) | (1,160 | ) | |||||
Change in market value/currency/change in reserve/interest credited | 4,695 | 1,386 | 2,721 | (2,499 | ) | 6,495 | |||||||||
Ending balance | $ | 65,808 | $ | 61,611 | $ | 61,282 | $ | 59,343 | $ | 63,260 | |||||
ANNUITY MUTUAL FUND ASSETS [5] | $ | 26,628 | $ | 26,036 | $ | 26,839 | $ | 26,888 | $ | 29,145 | |||||
TOTAL ASSETS UNDER MANAGEMENT | $ | 92,436 | $ | 87,647 | $ | 88,121 | $ | 86,231 | $ | 92,405 | |||||
AVERAGE ASSETS UNDER MANAGEMENT | $ | 90,042 | $ | 87,884 | $ | 87,176 | $ | 89,318 | $ | 88,972 |
[1] | Includes mutual funds offered within 529 college savings plans previously categorized as Other. |
[2] | Includes front end loads on A share products. |
[3] | Includes mutual funds offered within employee directed retirement plans including on-going business related to the Company's Retirement Plans and Individual Life businesses sold in January 2013. |
[4] | A planned redemption of approximately $1.4 billion occurred in April 2013. Redemptions presented herein do not include redemptions after March 31, 2013. |
[5] | Includes Company-sponsored mutual fund assets held in separate accounts supporting variable insurance and investment products. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
SUPPLEMENTAL DATA — ASSET VALUE ROLL FORWARD
ASSETS UNDER MANAGEMENT — BY ASSET CLASS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
EQUITY | |||||||||||||||
Beginning balance | $ | 35,843 | $ | 36,341 | $ | 35,694 | $ | 39,501 | $ | 35,489 | |||||
Sales | 1,559 | 1,117 | 1,047 | 1,275 | 1,416 | ||||||||||
Redemptions | (2,951 | ) | (2,562 | ) | (2,239 | ) | (2,750 | ) | (2,725 | ) | |||||
Net flows | (1,392 | ) | (1,445 | ) | (1,192 | ) | (1,475 | ) | (1,309 | ) | |||||
Change in market value/currency/change in reserve/interest credited | 4,002 | 947 | 1,839 | (2,332 | ) | 5,321 | |||||||||
Ending balance | $ | 38,453 | $ | 35,843 | $ | 36,341 | $ | 35,694 | $ | 39,501 | |||||
FIXED INCOME | |||||||||||||||
Beginning balance | $ | 14,524 | $ | 13,941 | $ | 13,281 | $ | 13,321 | $ | 13,064 | |||||
Sales | 1,755 | 1,366 | 1,109 | 884 | 954 | ||||||||||
Redemptions | (1,133 | ) | (1,042 | ) | (828 | ) | (1,056 | ) | (1,027 | ) | |||||
Net flows | 622 | 324 | 281 | (172 | ) | (73 | ) | ||||||||
Change in market value/currency/change in reserve/interest credited | 67 | 259 | 379 | 132 | 330 | ||||||||||
Ending balance | $ | 15,213 | $ | 14,524 | $ | 13,941 | $ | 13,281 | $ | 13,321 | |||||
MULTI-STRATEGY INVESTMENTS [1] | |||||||||||||||
Beginning balance | $ | 11,244 | $ | 11,000 | $ | 10,368 | $ | 10,438 | $ | 9,372 | |||||
Sales | 790 | 670 | 642 | 665 | 696 | ||||||||||
Redemptions | (518 | ) | (606 | ) | (513 | ) | (436 | ) | (474 | ) | |||||
Net flows | 272 | 64 | 129 | 229 | 222 | ||||||||||
Change in market value/currency/change in reserve/interest credited | 626 | 180 | 503 | (299 | ) | 844 | |||||||||
Ending balance | $ | 12,142 | $ | 11,244 | $ | 11,000 | $ | 10,368 | $ | 10,438 | |||||
TOTAL MUTUAL FUNDS [2] | $ | 65,808 | $ | 61,611 | $ | 61,282 | $ | 59,343 | $ | 63,260 |
[1] | Includes balanced, allocation, target date and alternatives. |
[2] | Excludes annuity mutual fund assets. |
TALCOTT RESOLUTION
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
NET INCOME (LOSS) | |||||||||||||||
U.S. Annuity [1] | $ | 63 | $ | 35 | $ | 188 | $ | (19 | ) | $ | 198 | ||||
International Annuity | (490 | ) | (176 | ) | (79 | ) | 402 | (465 | ) | ||||||
Institutional | 25 | 3 | 27 | 13 | 52 | ||||||||||
Other [2] [4] | 108 | (10 | ) | (257 | ) | 44 | 45 | ||||||||
Talcott Resolution net income (loss) | (294 | ) | (148 | ) | (121 | ) | 440 | (170 | ) | ||||||
Less: Unlock benefit (charge), after tax [3] | (541 | ) | 42 | (79 | ) | (146 | ) | 214 | |||||||
Less: Restructuring and other costs, after tax | (1 | ) | (14 | ) | (21 | ) | (9 | ) | — | ||||||
Less: Net reinsurance gain (loss) on dispositions, after tax | 44 | — | (270 | ) | — | — | |||||||||
Less: Net realized gains (losses) and other, after tax and DAC, excluded from core earnings | 43 | (387 | ) | 55 | 392 | (603 | ) | ||||||||
Talcott Resolution core earnings | $ | 161 | $ | 211 | $ | 194 | $ | 203 | $ | 219 | |||||
CORE EARNINGS (LOSSES) | |||||||||||||||
U.S. Annuity [1] | $ | 73 | $ | 96 | $ | 74 | $ | 80 | $ | 96 | |||||
International Annuity | 68 | 72 | 75 | 68 | 74 | ||||||||||
Institutional | 9 | (6 | ) | (7 | ) | 5 | 4 | ||||||||
Other [2] [4] | 11 | 49 | 52 | 50 | 45 | ||||||||||
Talcott Resolution core earnings | $ | 161 | $ | 211 | $ | 194 | $ | 203 | $ | 219 | |||||
UNLOCK IMPACT on NET INCOME (LOSS) [3] | |||||||||||||||
U.S. Annuity | $ | 3 | $ | (90 | ) | $ | (74 | ) | $ | (43 | ) | $ | 90 | ||
International Annuity | (544 | ) | 141 | 3 | (100 | ) | 125 | ||||||||
Institutional | — | — | 6 | — | — | ||||||||||
Other [2] | — | (9 | ) | (14 | ) | (3 | ) | (1 | ) | ||||||
Talcott Resolution unlock impact on net income (loss) | $ | (541 | ) | $ | 42 | $ | (79 | ) | $ | (146 | ) | $ | 214 |
[1] | Enhanced Surrender Value program costs reduced U.S. Annuity's net income and core earnings by $29 and $25, respectively, in the three months ended March 31, 2013. |
[2] | Other consists of the PPLI, Retirement Plans and Individual Life businesses, as well as residual income or tax benefits associated with the reinsurance of the policyholder and separate account liabilities of the Retirement Plans and Individual Life businesses. The Retirement Plans and Individual Life businesses were sold in January 2013. |
[3] | For additional information, refer to Unlock Attribution presented on page 8. |
[4] | Includes derivative gains of $71 and $110 for the three months ended March 31, 2013 and December 31, 2012, respectively, primarily associated with previously terminated derivatives associated with fixed rate bonds sold in connection with the Retirement Plans and Individual Life business dispositions. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
SUPPLEMENTAL DATA
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
CORE EARNINGS - RETURN ON ASSETS (bps, after tax) | |||||||||||||||
U.S. Annuity | 38.4 | 50.1 | 38.1 | 39.6 | 46.8 | ||||||||||
International Annuity | 82.8 | 84.0 | 86.4 | 77.5 | 82.4 | ||||||||||
FULL SURRENDER RATES | |||||||||||||||
U.S. variable annuity | 14.5 | % | 10.4 | % | 10.4 | % | 13.0 | % | 9.6 | % | |||||
Japan variable annuity | 9.6 | % | 3.7 | % | 3.0 | % | 3.9 | % | 2.8 | % | |||||
ACCOUNT VALUE (end of period) [1] | |||||||||||||||
U.S. variable annuity | $ | 65,500 | $ | 64,825 | $ | 66,708 | $ | 66,538 | $ | 72,235 | |||||
U.S. fixed annuity and other | 10,797 | 10,847 | 11,005 | 11,228 | 11,507 | ||||||||||
Total U.S. Annuity account value | $ | 76,297 | $ | 75,672 | $ | 77,713 | $ | 77,766 | $ | 83,742 | |||||
International variable annuity | 28,664 | 29,546 | 30,622 | 29,831 | 31,392 | ||||||||||
International fixed annuity | 3,577 | 3,908 | 4,536 | 4,461 | 4,469 | ||||||||||
Total International Annuity account value | $ | 32,241 | $ | 33,454 | $ | 35,158 | $ | 34,292 | $ | 35,861 |
[1] | Talcott Resolution total account value (including the account value information presented above) is summarized as follows: |
Other account value [2] | 102,780 | 102,429 | 105,594 | 104,567 | 106,913 | ||||||||||
Institutional | 17,586 | 17,744 | 18,204 | 18,233 | 18,622 | ||||||||||
Institutional account value inter-segment funding | $ | (1,171 | ) | $ | (1,156 | ) | $ | (1,346 | ) | $ | (1,329 | ) | $ | (1,312 | ) |
Total account value | $ | 227,733 | $ | 228,143 | $ | 235,323 | $ | 233,529 | $ | 243,826 |
[2] | Other account value includes the Retirement Plans and Individual Life businesses sold in January 2013 and PPLI. Account values associated with the Retirement Plans and Individual Life businesses no longer generate asset-based fee income following the sale of these businesses. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
U.S. ANNUITY — SUPPLEMENTAL DATA — ACCOUNT VALUE ROLL FORWARD
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
VARIABLE ANNUITIES | |||||||||||||||
Beginning balance | $ | 64,825 | $ | 66,708 | $ | 66,538 | $ | 72,235 | $ | 68,760 | |||||
Deposits | 226 | 209 | 130 | 169 | 307 | ||||||||||
Partial withdrawals | (710 | ) | (815 | ) | (711 | ) | (780 | ) | (815 | ) | |||||
Full surrenders | (2,356 | ) | (1,717 | ) | (1,737 | ) | (2,251 | ) | (1,687 | ) | |||||
Death benefits/annuitizations/other [1] | (468 | ) | (459 | ) | (388 | ) | (397 | ) | (449 | ) | |||||
Transfers | — | (1 | ) | 2 | — | 3 | |||||||||
Net flows | (3,308 | ) | (2,783 | ) | (2,704 | ) | (3,259 | ) | (2,641 | ) | |||||
Change in market value/change in reserve/interest credited and other | 3,983 | 900 | 2,874 | (2,438 | ) | 6,116 | |||||||||
Ending balance | $ | 65,500 | $ | 64,825 | $ | 66,708 | $ | 66,538 | $ | 72,235 | |||||
FIXED MARKET VALUE ADJUSTED (“MVA”) AND OTHER | |||||||||||||||
Beginning balance | $ | 10,847 | $ | 11,005 | $ | 11,228 | $ | 11,507 | $ | 11,631 | |||||
Deposits | 6 | 7 | 9 | 16 | 46 | ||||||||||
Surrenders | (103 | ) | (167 | ) | (251 | ) | (298 | ) | (204 | ) | |||||
Death benefits/annuitizations/other [1] | (74 | ) | (109 | ) | (105 | ) | (106 | ) | (102 | ) | |||||
Transfers | 1 | — | 1 | (4 | ) | 1 | |||||||||
Net flows | (170 | ) | (269 | ) | (346 | ) | (392 | ) | (259 | ) | |||||
Change in market value/change in reserve/interest credited and other | 120 | 111 | 123 | 113 | 135 | ||||||||||
Ending balance | $ | 10,797 | $ | 10,847 | $ | 11,005 | $ | 11,228 | $ | 11,507 | |||||
TOTAL U.S. ANNUITY | |||||||||||||||
Beginning balance | $ | 75,672 | $ | 77,713 | $ | 77,766 | $ | 83,742 | $ | 80,391 | |||||
Deposits | 232 | 216 | 139 | 185 | 353 | ||||||||||
Surrenders | (3,169 | ) | (2,699 | ) | (2,699 | ) | (3,329 | ) | (2,706 | ) | |||||
Death benefits/annuitizations/other [1] | (542 | ) | (568 | ) | (493 | ) | (503 | ) | (551 | ) | |||||
Transfers | 1 | (1 | ) | 3 | (4 | ) | 4 | ||||||||
Net flows | (3,478 | ) | (3,052 | ) | (3,050 | ) | (3,651 | ) | (2,900 | ) | |||||
Change in market value/change in reserve/interest credited and other | 4,103 | 1,011 | 2,997 | (2,325 | ) | 6,251 | |||||||||
Ending balance | $ | 76,297 | $ | 75,672 | $ | 77,713 | $ | 77,766 | $ | 83,742 |
[1] | Includes transfers from the accumulation phase to the annuitization phase. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
INTERNATIONAL ANNUITY — SUPPLEMENTAL DATA — ACCOUNT VALUE ROLL FORWARD
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
VARIABLE ANNUITIES | |||||||||||||||
Beginning balance | $ | 29,546 | $ | 30,622 | $ | 29,831 | $ | 31,392 | $ | 31,162 | |||||
Surrenders | (752 | ) | (395 | ) | (309 | ) | (379 | ) | (311 | ) | |||||
Death benefits/annuitizations/other [1] | (240 | ) | (225 | ) | (200 | ) | (194 | ) | (194 | ) | |||||
Net flows | (992 | ) | (620 | ) | (509 | ) | (573 | ) | (505 | ) | |||||
Change in market value/change in reserve/interest credited | 2,527 | 2,500 | 532 | (1,862 | ) | 2,681 | |||||||||
Effect of currency translation | (2,417 | ) | (2,956 | ) | 768 | 874 | (1,946 | ) | |||||||
Ending balance | $ | 28,664 | $ | 29,546 | $ | 30,622 | $ | 29,831 | $ | 31,392 | |||||
FIXED MARKET VALUE ADJUSTED ("MVA") AND OTHER | |||||||||||||||
Beginning balance | $ | 3,908 | $ | 4,536 | $ | 4,461 | $ | 4,469 | $ | 4,786 | |||||
Surrenders | (41 | ) | (47 | ) | (57 | ) | (152 | ) | (47 | ) | |||||
Death benefits/annuitizations/other [1] | (13 | ) | (180 | ) | (4 | ) | (18 | ) | 1 | ||||||
Net flows | (54 | ) | (227 | ) | (61 | ) | (170 | ) | (46 | ) | |||||
Change in market value/change in reserve/interest credited | 37 | 42 | 22 | 23 | 40 | ||||||||||
Effect of currency translation | (314 | ) | (443 | ) | 114 | 139 | (311 | ) | |||||||
Ending balance | $ | 3,577 | $ | 3,908 | $ | 4,536 | $ | 4,461 | $ | 4,469 | |||||
TOTAL INTERNATIONAL ANNUITY | |||||||||||||||
Beginning balance | $ | 33,454 | $ | 35,158 | $ | 34,292 | $ | 35,861 | $ | 35,948 | |||||
Surrenders | (793 | ) | (442 | ) | (366 | ) | (531 | ) | (358 | ) | |||||
Death benefits/annuitizations/other [1] | (253 | ) | (405 | ) | (204 | ) | (212 | ) | (193 | ) | |||||
Net flows | (1,046 | ) | (847 | ) | (570 | ) | (743 | ) | (551 | ) | |||||
Change in market value/change in reserve/interest credited | 2,564 | 2,542 | 554 | (1,839 | ) | 2,721 | |||||||||
Effect of currency translation | (2,731 | ) | (3,399 | ) | 882 | 1,013 | (2,257 | ) | |||||||
Ending balance | $ | 32,241 | $ | 33,454 | $ | 35,158 | $ | 34,292 | $ | 35,861 |
[1] | Includes transfers from the accumulation phase to the annuitization phase. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
SUPPLEMENTAL DATA—ANNUITY DEATH AND LIVING BENEFITS
AS OF: | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
U.S. Variable Annuity Business | |||||||||||||||
S&P 500 index value at end of period | 1,569 | 1,426 | 1,441 | 1,362 | 1,408 | ||||||||||
Total account value with guaranteed minimum death benefits (“GMDB”) | $ | 65,500 | $ | 64,824 | $ | 66,707 | $ | 66,538 | $ | 72,235 | |||||
GMDB gross net amount of risk ("NAR") | 5,349 | 6,610 | 7,187 | 8,998 | 7,698 | ||||||||||
% of GMDB NAR reinsured | 72 | % | 67 | % | 66 | % | 62 | % | 65 | % | |||||
GMDB retained NAR | 1,498 | 2,168 | 2,458 | 3,461 | 2,724 | ||||||||||
GMDB net GAAP liability | 293 | 310 | 308 | 337 | 322 | ||||||||||
Total account value with guaranteed minimum withdrawal benefits (“GMWB”) | $ | 34,106 | $ | 34,218 | $ | 34,836 | $ | 35,127 | $ | 38,312 | |||||
GMWB gross NAR | 361 | 650 | 761 | 1,198 | 847 | ||||||||||
% of GMWB NAR reinsured | 19 | % | 17 | % | 16 | % | 16 | % | 16 | % | |||||
GMWB retained NAR [1] | 293 | 540 | 636 | 1,009 | 711 | ||||||||||
GMWB net GAAP liability | 651 | 1,022 | 1,179 | 1,790 | 1,355 | ||||||||||
Japan Variable Annuity Business | |||||||||||||||
Yen / $ | 94.0 | 86.5 | 77.8 | 79.8 | 82.3 | ||||||||||
Yen / Euro | 120.7 | 114.5 | 100.2 | 101.0 | 110.6 | ||||||||||
Total account value with GMDB | $ | 26,934 | $ | 27,716 | $ | 28,725 | $ | 27,977 | $ | 29,396 | |||||
GMDB gross NAR | 3,091 | 5,736 | 9,107 | 9,477 | 7,580 | ||||||||||
% of GMDB NAR reinsured | 20 | % | 16 | % | 13 | % | 13 | % | 15 | % | |||||
GMDB retained NAR | 2,467 | 4,831 | 7,882 | 8,236 | 6,469 | ||||||||||
Total account value with guaranteed minimum income benefits (“GMIB”) [1] | $ | 25,129 | $ | 25,960 | $ | 26,917 | $ | 26,119 | $ | 27,350 | |||||
GMIB retained NAR [2] | 1,280 | 3,316 | 6,092 | 6,470 | 4,785 | ||||||||||
GMDB/GMIB net GAAP liability | 468 | 621 | 874 | 847 | 704 |
[1] | Total GMIB account value also includes other living benefits. |
[2] | Policies with a guaranteed living benefit (a GMWB in the U.S., or a GMIB in Japan) also have a guaranteed death benefit. The net amount at risk (“NAR”) for each benefit is shown, however these benefits are not additive. When a policy terminates due to death, any NAR related to GMWB or GMIB is released. Similarly, when a policy goes into benefit status on a GMWB or, by contract, the GMDB NAR is reduced to zero. When a policy goes into benefit status on a GMIB, its GMDB NAR is released. |
CORPORATE
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
Earned premiums | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
Fee income | 3 | 25 | 45 | 45 | 52 | ||||||||||
Net investment income | 13 | 26 | 8 | 3 | (6 | ) | |||||||||
Other revenues | — | 1 | — | — | — | ||||||||||
Net realized capital gains (losses) | (96 | ) | 84 | 9 | 17 | 15 | |||||||||
Total revenues | (80 | ) | 136 | 62 | 65 | 61 | |||||||||
Benefits, losses and loss adjustment expenses (income) | — | — | 1 | (1 | ) | — | |||||||||
Insurance operating costs and other expenses | 26 | 48 | 57 | 63 | 76 | ||||||||||
Loss on extinguishment of debt [1] | 213 | — | — | 910 | — | ||||||||||
Reinsurance loss on dispositions [2] | 69 | — | 118 | — | — | ||||||||||
Interest expense | 107 | 109 | 109 | 115 | 124 | ||||||||||
Restructuring and other costs | 16 | 67 | 17 | 28 | 9 | ||||||||||
Total benefits and expenses | 431 | 224 | 302 | 1,115 | 209 | ||||||||||
Loss before income taxes | (511 | ) | (88 | ) | (240 | ) | (1,050 | ) | (148 | ) | |||||
Income tax benefit | (153 | ) | (49 | ) | (44 | ) | (372 | ) | (52 | ) | |||||
Net loss | (358 | ) | (39 | ) | (196 | ) | (678 | ) | (96 | ) | |||||
Less: Restructuring and other costs, after tax | (10 | ) | (43 | ) | (11 | ) | (18 | ) | (6 | ) | |||||
Less: Loss on extinguishment of debt, after tax [1] | (138 | ) | — | — | (587 | ) | — | ||||||||
Less: Net reinsurance loss on dispositions, after tax [2] | (69 | ) | — | (118 | ) | — | — | ||||||||
Less: Net realized capital gains (losses), after tax and DAC, excluded from core losses | (68 | ) | 59 | 9 | 7 | 12 | |||||||||
Core losses | $ | (73 | ) | $ | (55 | ) | $ | (76 | ) | $ | (80 | ) | $ | (102 | ) |
[1] | In the first quarter of 2013 the Company repurchased approximately $800 of outstanding senior notes and debentures. In the second quarter of 2012 the Company repurchased all outstanding 10% fixed-to-floating rate junior subordinated debentures due 2068 with a $1.75 billion aggregate principal amount held by Allianz. Loss on extinguishment of debt consists of the premium associated with repurchasing the debentures at an amount greater than the face amount, the write-off of the unamortized discount and debt issuance and other costs related to the repurchase transactions. |
[2] | In the first quarter of 2013 reinsurance loss on dispositions consists of a reduction in goodwill related to the sale of the Retirement Plans business. In the third quarter of 2012, reinsurance loss on dispositions consists of a goodwill impairment charge related to the sale of the Individual Life business. |
CONSOLIDATED
INVESTMENTS
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE-TAX
CONSOLIDATED
THREE MONTHS ENDED | ||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | ||||||
Net Investment Income (Loss) | ||||||||||
Fixed maturities [1] | ||||||||||
Taxable | 555 | 710 | 712 | 729 | 738 | |||||
Tax-exempt | 116 | 117 | 118 | 119 | 120 | |||||
Total fixed maturities | 671 | 827 | 830 | 848 | 858 | |||||
Equity securities, trading | 2,700 | 2,676 | 710 | (1,687 | ) | 2,866 | ||||
Equity securities, available-for-sale | 6 | 14 | 5 | 8 | 10 | |||||
Mortgage loans | 65 | 84 | 88 | 86 | 79 | |||||
Policy loans | 20 | 29 | 30 | 30 | 30 | |||||
Limited partnerships and other alternative investments [2] | 66 | 44 | 28 | 72 | 52 | |||||
Other [3] | 57 | 71 | 75 | 81 | 69 | |||||
Subtotal | 3,585 | 3,745 | 1,766 | (562 | ) | 3,964 | ||||
Investment expense | (29 | ) | (29 | ) | (26 | ) | (28 | ) | (28 | ) |
Total net investment income | 3,556 | 3,716 | 1,740 | (590 | ) | 3,936 | ||||
Less: Equity securities, trading | 2,700 | 2,676 | 710 | (1,687 | ) | 2,866 | ||||
Total net investment income excluding trading securities | 856 | 1,040 | 1,030 | 1,097 | 1,070 | |||||
Annualized investment yield, before-tax [4] [5] | 4.3 | % | 4.3 | % | 4.2 | % | 4.5 | % | 4.3 | % |
Annualized investment yield, after tax [4] | 3.0 | % | 2.9 | % | 2.9 | % | 3.1 | % | 3.0 | % |
[1] | Includes income on short-term bonds. |
[2] | Includes income on real estate joint ventures and hedge fund investments outside of limited partnerships. |
[3] | Primarily represents income from derivatives that qualify for hedge accounting and hedge fixed maturities. |
[4] | Yields calculated using annualized net investment income (excluding income related to equity securities, trading) divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding equity securities, trading, repurchase agreement and dollar roll collateral, and consolidated variable interest entity non-controlling interests. Yield calculations for the three months ended March 31, 2013 exclude assets transfered due to the sale of the Retirement Plans and Individual Life businesses. |
[5] | Excluding the impact of the disposed businesses, the current quarter annualized investment yield, before tax, of 4.3% was higher than the first quarter 2012 annualized yield of 4.2% primarily due to higher returns on limited partnerships and other alternative investments. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET INVESTMENT INCOME BY SEGMENT
CONSOLIDATED
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
Net Investment Income (Loss) | |||||||||||||||
Commercial Markets | $ | 240 | $ | 228 | $ | 222 | $ | 239 | $ | 235 | |||||
Consumer Markets | 37 | 37 | 38 | 41 | 43 | ||||||||||
P&C Other Operations | 35 | 36 | 35 | 39 | 39 | ||||||||||
Total Property & Casualty | 312 | 301 | 295 | 319 | 317 | ||||||||||
Group Benefits | 97 | 101 | 98 | 107 | 99 | ||||||||||
Mutual Funds | — | (1 | ) | (1 | ) | — | (1 | ) | |||||||
Talcott Resolution [1]] | 3,134 | 3,289 | 1,340 | (1,019 | ) | 3,527 | |||||||||
Corporate | 13 | 26 | 8 | 3 | (6 | ) | |||||||||
Total net investment income | 3,556 | 3,716 | 1,740 | (590 | ) | 3,936 | |||||||||
Less: Equity securities, trading | 2,700 | 2,676 | 710 | (1,687 | ) | 2,866 | |||||||||
Total net investment income excluding trading securities | $ | 856 | $ | 1,040 | $ | 1,030 | $ | 1,097 | $ | 1,070 |
[1] Includes equity securities, trading.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
CONSOLIDATED
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2013 | Dec. 31 2012 | Sept. 30 2012 | Jun. 30 2012 | Mar. 31 2012 | |||||||||||
Net Realized Capital Gains (Losses) | |||||||||||||||
Gross gains on sales [1] | $ | 1,719 | $ | 167 | $ | 205 | $ | 246 | $ | 259 | |||||
Gross losses on sales | (82 | ) | (54 | ) | (131 | ) | (159 | ) | (97 | ) | |||||
Net impairment losses [2] | (21 | ) | (185 | ) | (37 | ) | (98 | ) | (29 | ) | |||||
Valuation allowances on mortgage loans | — | 13 | — | — | 1 | ||||||||||
Japan fixed annuity contract hedges, net [3] | 3 | 6 | (24 | ) | 2 | (20 | ) | ||||||||
Periodic net coupon settlements on credit derivatives/Japan [4] | (6 | ) | (11 | ) | 2 | 4 | (5 | ) | |||||||
Results of variable annuity hedge program | |||||||||||||||
U.S. GMWB derivatives, net | 47 | 68 | 381 | (115 | ) | 185 | |||||||||
U.S. macro hedge | (85 | ) | (48 | ) | (109 | ) | 6 | (189 | ) | ||||||
Total U.S. program | (38 | ) | 20 | 272 | (109 | ) | (4 | ) | |||||||
International program | (192 | ) | (857 | ) | (167 | ) | 753 | (1,219 | ) | ||||||
Total results of variable annuity hedge program | (230 | ) | (837 | ) | 105 | 644 | (1,223 | ) | |||||||
Other net gain (loss) [5] | 212 | 392 | (1 | ) | (50 | ) | 204 | ||||||||
Total net realized capital gains (losses), before tax and DAC | $ | 1,595 | $ | (509 | ) | $ | 119 | $ | 589 | $ | (910 | ) | |||
Less: Realized gain on dispositions, before tax | 1,574 | — | — | — | — | ||||||||||
Less: Realized gains (losses), included in core earnings, before tax | (5 | ) | (10 | ) | 9 | 9 | (1 | ) | |||||||
Total net realized capital gains (losses) and other, before tax and DAC, excluded from core earnings (losses) | 26 | (499 | ) | 110 | 580 | (909 | ) | ||||||||
Less: Impacts of DAC | (6 | ) | (31 | ) | (6 | ) | (25 | ) | (44 | ) | |||||
Less: Impacts of tax | 13 | (174 | ) | 35 | 218 | (328 | ) | ||||||||
Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) | $ | 19 | $ | (294 | ) | $ | 81 | $ | 387 | $ | (537 | ) |
[1] | Includes $1.5 billion of gains relating to the sales of the Retirement Plans and Individual Life businesses for the three months ended March 31, 2013. |
[2] | Includes $177 of intent-to-sell impairments relating to the sales of the Retirement Plans and Individual Life businesses as of the three months ended December 31, 2012. |
[3] | Relates to the Japan fixed annuity product (adjustment of product liability for changes in spot currency exchange rates, related derivative hedging instruments, excluding periodic net coupon settlements, and Japan FVO securities). |
[4] | Included in core earnings. |
[5] | Primarily consists of transactional foreign currency re-valuation associated with the internal reinsurance of the Japan variable annuity business, which is offset in AOCI, gains and losses on non-qualifying derivatives and Japan 3Win related foreign currency swaps. Includes $71 and $110 of derivative gains relating to the sales of the Retirement Plans and Individual Life businesses for the three months ended March 31, 2013 and December 31, 2012, respectively. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
March 31, 2013 | December 31, 2012 | September 30, 2012 | June 30, 2012 | March 31, 2012 | |||||||||||||||||||||
Amount [1] | Percent | Amount [1] [2] | Percent | Amount [1] | Percent | Amount [1] | Percent | Amount [1] | Percent | ||||||||||||||||
Total investments | $ | 114,838 | 100.0 | % | $ | 134,250 | 100.0 | % | $ | 137,168 | 100.0 | % | $ | 134,935 | 100.0 | % | $ | 133,600 | 100.0 | % | |||||
Less: Equity securities, trading | 28,099 | 24.5 | % | 28,933 | 21.6 | % | 29,980 | 21.9 | % | 29,215 | 21.7 | % | 30,722 | 23.0 | % | ||||||||||
Total investments excluding trading securities | $ | 86,739 | 75.5 | % | $ | 105,317 | 78.4 | % | $ | 107,188 | 78.1 | % | $ | 105,720 | 78.3 | % | $ | 102,878 | 77.0 | % | |||||
Asset-backed securities (“ABS”) | $ | 2,422 | 3.5 | % | $ | 2,763 | 3.2 | % | $ | 2,758 | 3.2 | % | $ | 3,002 | 3.5 | % | $ | 3,087 | 3.7 | % | |||||
Collateralized debt obligations (“CDOs”) | 2,558 | 3.7 | % | 3,040 | 3.5 | % | 3,072 | 3.5 | % | 3,037 | 3.6 | % | 3,043 | 3.7 | % | ||||||||||
Commercial mortgage-backed securities (“CMBS”) | 5,205 | 7.5 | % | 6,321 | 7.4 | % | 6,273 | 7.2 | % | 6,346 | 7.4 | % | 6,774 | 8.1 | % | ||||||||||
Corporate | 31,468 | 45.2 | % | 44,049 | 51.3 | % | 43,433 | 50.1 | % | 42,983 | 50.5 | % | 43,329 | 52.2 | % | ||||||||||
Foreign government/government agencies | 3,927 | 5.6 | % | 4,136 | 4.8 | % | 4,216 | 4.9 | % | 3,598 | 4.2 | % | 3,352 | 4.0 | % | ||||||||||
Municipal | 13,238 | 19.0 | % | 14,361 | 16.7 | % | 14,291 | 16.5 | % | 14,125 | 16.6 | % | 13,838 | 16.6 | % | ||||||||||
Residential mortgage-backed securities (“RMBS”) | 6,716 | 9.6 | % | 7,480 | 8.7 | % | 7,477 | 8.6 | % | 6,981 | 8.2 | % | 6,595 | 7.9 | % | ||||||||||
U.S. Treasuries | 4,133 | 5.9 | % | 3,772 | 4.4 | % | 5,206 | 6.0 | % | 5,155 | 6.0 | % | 3,139 | 3.8 | % | ||||||||||
Total fixed maturities, AFS [3] | $ | 69,667 | 100.0 | % | $ | 85,922 | 100.0 | % | $ | 86,726 | 100.0 | % | $ | 85,227 | 100.0 | % | $ | 83,157 | 100.0 | % | |||||
U.S. government/government agencies | $ | 10,563 | 15.2 | % | $ | 10,975 | 12.8 | % | $ | 12,458 | 14.4 | % | $ | 11,980 | 14.1 | % | $ | 9,193 | 11.1 | % | |||||
AAA | 7,265 | 10.4 | % | 9,220 | 10.7 | % | 9,128 | 10.5 | % | 9,002 | 10.6 | % | 9,712 | 11.7 | % | ||||||||||
AA | 13,877 | 19.9 | % | 16,104 | 18.7 | % | 16,305 | 18.8 | % | 16,290 | 19.1 | % | 16,463 | 19.8 | % | ||||||||||
A | 17,007 | 24.4 | % | 22,650 | 26.4 | % | 21,923 | 25.3 | % | 21,207 | 24.9 | % | 20,773 | 25.0 | % | ||||||||||
BBB | 17,079 | 24.5 | % | 22,689 | 26.4 | % | 22,665 | 26.1 | % | 22,528 | 26.3 | % | 22,664 | 27.2 | % | ||||||||||
BB & below | 3,876 | 5.6 | % | 4,284 | 5.0 | % | 4,247 | 4.9 | % | 4,220 | 5.0 | % | 4,352 | 5.2 | % | ||||||||||
Total fixed maturities, AFS [3] | $ | 69,667 | 100.0 | % | $ | 85,922 | 100.0 | % | $ | 86,726 | 100.0 | % | $ | 85,227 | 100.0 | % | $ | 83,157 | 100.0 | % |
[1] | Represents the value at which the assets are carried on the Consolidating Balance Sheets. Consolidating Balance Sheets as of March 31, 2013 and December 31, 2012 are presented on page 4. |
[2] | Total investments as of December 31, 2012 include $17.3 billion in carrying value of assets transferred by the Company in connection with the sale of the Retirement Plans and Individual Life businesses in January 2013. |
[3] | Available-for-sale ("AFS"). |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
AS OF MARCH 31, 2013
Cost or Amortized Cost | Fair Value | Percent of Total Invested Assets [1] | ||||||
Top Ten Corporate and Equity, AFS, Exposures by Sector | ||||||||
Financial services | $ | 6,221 | $ | 6,491 | 7.5 | % | ||
Utilities | 5,734 | 6,425 | 7.4 | % | ||||
Consumer non-cyclical | 3,767 | 4,236 | 4.9 | % | ||||
Basic industry | 3,068 | 3,303 | 3.8 | % | ||||
Technology and communications | 2,947 | 3,298 | 3.8 | % | ||||
Energy | 2,458 | 2,760 | 3.2 | % | ||||
Capital goods | 2,199 | 2,470 | 2.8 | % | ||||
Consumer cyclical | 1,741 | 1,930 | 2.2 | % | ||||
Transportation | 1,005 | 1,114 | 1.3 | % | ||||
Other | 234 | 303 | 0.3 | % | ||||
Total | $ | 29,374 | $ | 32,330 | 37.3 | % | ||
Top Ten Exposures by Issuer [2] | ||||||||
Government of Japan [3] | $ | 2,540 | $ | 2,578 | 3.0 | % | ||
State of California | 400 | 441 | 0.5 | % | ||||
National Grid PLC | 292 | 332 | 0.4 | % | ||||
General Electric Co. | 338 | 310 | 0.4 | % | ||||
AT&T Inc. | 250 | 305 | 0.4 | % | ||||
Commonwealth of Massachusetts | 249 | 285 | 0.3 | % | ||||
Goldman Sachs Group Inc. | 231 | 256 | 0.3 | % | ||||
HSBC Holdings PLC | 257 | 255 | 0.3 | % | ||||
State of Illinois | 235 | 246 | 0.3 | % | ||||
JP Morgan Chase & Co. | 255 | 241 | 0.3 | % | ||||
Total | $ | 5,047 | $ | 5,249 | 6.1 | % |
[1] | Excludes equity securities, trading. |
[2] | Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, exposures resulting from derivative transactions and equity securities, trading. |
[3] | These securities are included in short-term investments, fixed maturities, available-for-sale, and fixed maturities, fair value option on the Company’s Consolidating Balance Sheets. |