INVESTOR FINANCIAL SUPPLEMENT
March 31, 2014
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
As of April 23, 2014 | ||||||||||
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- | BBB+ | BBB+ | Baa2 | ||||||
Internet address: | Hartford Life and Accident Insurance Company | A | A | A | A3 | |||||
http://www.thehartford.com | Hartford Life and Annuity Insurance Company | A- | BBB+ | 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 30170 | 211 Quality Circle, Suite 210 | ||||||||
College Station, TX 77842-3170 | College Station, TX 77845 | |||||||||
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.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTOR FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
CONSOLIDATED | Consolidated Financial Results | 1 |
Operating Results by Segment | 2 | |
Consolidated Statements of Operations | 3 | |
Consolidating Balance Sheets | 4 | |
Capital Structure | 5 | |
Statutory Capital and Surplus to GAAP Stockholders’ Equity Reconciliation | 6 | |
Accumulated Other Comprehensive Income (Loss) | 7 | |
Deferred Policy Acquisition Costs and Present Value of Future Profits | 8 | |
PROPERTY & CASUALTY | Property & Casualty Combined Income Statements | 9 |
Property & Casualty Combined Underwriting Ratios | 10 | |
P&C Commercial Underwriting Results | 11 | |
P&C Commercial Underwriting Ratios | 12 | |
P&C Commercial Supplemental Data | 13 | |
Consumer Markets Underwriting Results | 14 | |
Consumer Markets Underwriting Ratios | 15 | |
Consumer Markets Supplemental Data | 16 | |
P&C Other Operations Underwriting Results | 17 | |
GROUP BENEFITS | Income Statements | 18 |
Supplemental Data | 19 | |
MUTUAL FUNDS | Income Statements | 20 |
Asset Value Rollforward - Assets Under Management By Distribution Channel | 21 | |
Asset Value Rollforward - Assets Under Management By Asset Class | 22 | |
TALCOTT RESOLUTION | Financial Highlights | 23 |
Supplemental Data | 24 | |
U.S. Annuity Account Value Rollforward | 25 | |
Japan Annuity Account Value Rollforward | 26 | |
Annuity Death and Living Benefits | 27 | |
Variable Annuity Guaranteed Benefits | 28 | |
CORPORATE | Income Statements | 29 |
INVESTMENTS | Investment Earnings Before Tax - Consolidated | 30 |
Investment Earnings Before Tax - Property & Casualty Combined | 31 | |
Net Investment Income by Segment | 32 | |
Components of Net Realized Capital Gains (Losses) | 33 | |
Composition of Invested Assets | 34 | |
Invested Asset Exposures | 35 | |
APPENDIX | Basis of Presentation and Definitions | 36 |
Discussion of Non-GAAP and Other Financial Measures | 36 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
HIGHLIGHTS | |||||||||||||||
Net income (loss) | $ | 495 | $ | 314 | $ | 293 | $ | (190 | ) | $ | (241 | ) | |||
Core earnings | $ | 564 | $ | 456 | $ | 505 | $ | 324 | $ | 457 | |||||
Total revenues | $ | 4,461 | $ | 6,073 | $ | 5,623 | $ | 5,444 | $ | 9,024 | |||||
Total assets | $ | 272,923 | $ | 277,884 | $ | 283,947 | $ | 294,833 | $ | 297,021 | |||||
PER SHARE AND SHARES DATA | |||||||||||||||
Basic earnings (losses) per common share | |||||||||||||||
Net income (loss) available to common shareholders | $ | 1.10 | $ | 0.70 | $ | 0.65 | $ | (0.42 | ) | $ | (0.58 | ) | |||
Core earnings available to common shareholders | $ | 1.25 | $ | 1.01 | $ | 1.12 | $ | 0.72 | $ | 1.02 | |||||
Diluted earnings (losses) per common share [1] | |||||||||||||||
Net income (loss) available to common shareholders | $ | 1.03 | $ | 0.65 | $ | 0.60 | $ | (0.42 | ) | $ | (0.58 | ) | |||
Core earnings available to common shareholders | $ | 1.18 | $ | 0.94 | $ | 1.03 | $ | 0.66 | $ | 0.93 | |||||
Weighted average common shares outstanding (basic) | 449.8 | 451.1 | 452.1 | 451.4 | 436.3 | ||||||||||
Dilutive effect of stock compensation | 6.2 | 5.1 | 4.6 | 4.2 | 3.9 | ||||||||||
Dilutive effect of warrants | 22.6 | 29.9 | 33.9 | 33.4 | 31.7 | ||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted), before assumed conversion of preferred shares | 478.6 | 486.1 | 490.6 | 489.0 | 471.9 | ||||||||||
Dilutive effect of assumed conversion of preferred shares [2] | — | — | — | — | 21.2 | ||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted) and assumed conversion of preferred shares | 478.6 | 486.1 | 490.6 | 489.0 | 493.1 | ||||||||||
Common shares outstanding | 452.5 | 453.3 | 448.5 | 453.9 | 435.3 | ||||||||||
Book value per common share | $ | 43.70 | $ | 41.71 | $ | 42.20 | $ | 41.89 | $ | 46.78 | |||||
Per common share impact of accumulated other comprehensive income [3] | $ | 1.46 | $ | (0.17 | ) | $ | (0.04 | ) | $ | 0.16 | $ | 3.79 | |||
Book value per common share (excluding AOCI) | $ | 42.24 | $ | 41.88 | $ | 42.24 | $ | 41.73 | $ | 42.99 | |||||
Book value per diluted share | $ | 41.56 | $ | 39.14 | $ | 38.87 | $ | 38.59 | $ | 42.43 | |||||
Per diluted share impact of AOCI | $ | 1.39 | $ | (0.16 | ) | $ | (0.04 | ) | $ | 0.15 | $ | 3.34 | |||
Book value per diluted share (excluding AOCI) | $ | 40.17 | $ | 39.30 | $ | 38.91 | $ | 38.44 | $ | 39.09 | |||||
Common shares outstanding and dilutive potential common shares | 475.8 | 483.0 | 486.9 | 492.7 | 493.0 | ||||||||||
FINANCIAL RATIOS | |||||||||||||||
ROE (net income (loss) last 12 months to stockholders' equity including AOCI) | 4.5 | % | 0.9 | % | (0.9 | )% | (2.3 | )% | (1.8 | )% | |||||
ROE (core earnings last 12 months to stockholders' equity excluding AOCI) | 9.6 | % | 9.0 | % | 8.0 | % | 7.6 | % | 7.2 | % | |||||
Debt to capitalization, including AOCI | 24.3 | % | 25.7 | % | 25.0 | % | 25.8 | % | 23.2 | % | |||||
Annualized investment yield, after-tax | 3.1 | % | 3.0 | % | 2.9 | % | 3.1 | % | 3.0 | % |
[1] | 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. |
[2] | The preferred shares converted to 21.2 million common shares in April 2013. |
[3] | 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.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Core earnings (losses): | |||||||||||||||
P&C Commercial | $ | 264 | $ | 229 | $ | 176 | $ | 198 | $ | 224 | |||||
Consumer Markets | 101 | 49 | 68 | 15 | 73 | ||||||||||
P&C Other Operations | 21 | 22 | 19 | (73 | ) | 21 | |||||||||
Property & Casualty Combined | $ | 386 | $ | 300 | $ | 263 | $ | 140 | $ | 318 | |||||
Group Benefits | 45 | 55 | 36 | 37 | 30 | ||||||||||
Mutual Funds | 21 | 20 | 18 | 20 | 20 | ||||||||||
Sub-total | 452 | 375 | 317 | 197 | 368 | ||||||||||
Talcott Resolution | 175 | 173 | 204 | 196 | 162 | ||||||||||
Corporate | (63 | ) | (92 | ) | (16 | ) | (69 | ) | (73 | ) | |||||
CONSOLIDATED CORE EARNINGS | $ | 564 | $ | 456 | $ | 505 | $ | 324 | $ | 457 | |||||
Add: Unlock benefit (charge), after-tax [1] | $ | 14 | $ | 47 | $ | (67 | ) | $ | 36 | $ | (541 | ) | |||
Add: Restructuring and other costs, after-tax | (13 | ) | (10 | ) | (10 | ) | (12 | ) | (12 | ) | |||||
Add: Income (loss) from discontinued operations, after-tax | — | (2 | ) | (5 | ) | (126 | ) | (1 | ) | ||||||
Add: Loss on extinguishment of debt, after-tax | — | — | — | — | (138 | ) | |||||||||
Add: Net reinsurance gain (loss) on dispositions, after-tax | — | — | — | 1 | (25 | ) | |||||||||
Add: Net realized capital gains (losses), after-tax and DAC, excluded from core earnings | (70 | ) | (177 | ) | (130 | ) | (413 | ) | 19 | ||||||
Net income (loss) | $ | 495 | $ | 314 | $ | 293 | $ | (190 | ) | $ | (241 | ) | |||
PER SHARE DATA | |||||||||||||||
Diluted earnings (losses) per common share: | |||||||||||||||
Core earnings available to common shareholders | $ | 1.18 | $ | 0.94 | $ | 1.03 | $ | 0.66 | $ | 0.93 | |||||
Net income (loss) available to common shareholders | $ | 1.03 | $ | 0.65 | $ | 0.60 | $ | (0.42 | ) | $ | (0.58 | ) |
[1]The Unlock benefit (charge) recorded in the periods presented affected each income statement line item as follows:
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Earned premiums | $ | — | $ | (2 | ) | $ | — | $ | (1 | ) | $ | (1 | ) | ||
Fee income | — | 1 | 12 | 1 | 2 | ||||||||||
Benefits, losses and loss adjustment expenses | (10 | ) | (71 | ) | (54 | ) | (72 | ) | (71 | ) | |||||
Amortization of DAC | (12 | ) | (5 | ) | 170 | 17 | 904 | ||||||||
Income tax expense (benefit) | 8 | 28 | (37 | ) | 19 | (291 | ) | ||||||||
Unlock benefit (charge), after-tax [a.] | $ | 14 | $ | 47 | $ | (67 | ) | $ | 36 | $ | (541 | ) |
[a.] The Unlock charge for the three months ended March 31, 2013 relates primarily to costs associated with expanding the
Japan variable annuity hedging program in the Talcott Resolution - International Annuity segment resulting in the
elimination of estimated future gross profits on the Japan annuity block.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Earned premiums | $ | 3,301 | $ | 3,344 | $ | 3,337 | $ | 3,293 | $ | 3,252 | |||||
Fee income [1] | 621 | 685 | 690 | 678 | 680 | ||||||||||
Net investment income (loss): | |||||||||||||||
Securities available-for-sale and other | 836 | 827 | 812 | 867 | 856 | ||||||||||
Equity securities, trading [2] | (236 | ) | 1,432 | 878 | 1,189 | 2,562 | |||||||||
Total net investment income | 600 | 2,259 | 1,690 | 2,056 | 3,418 | ||||||||||
Realized capital gains (losses): | |||||||||||||||
Total other-than-temporary impairment (“OTTI”) losses | (23 | ) | (15 | ) | (28 | ) | (17 | ) | (33 | ) | |||||
OTTI losses recognized in other comprehensive income | 1 | 1 | 2 | 5 | 12 | ||||||||||
Net OTTI losses recognized in earnings | (22 | ) | (14 | ) | (26 | ) | (12 | ) | (21 | ) | |||||
Net realized capital gains on business dispositions [3] | — | — | — | 1 | 1,574 | ||||||||||
Other net realized capital gains (losses) | (64 | ) | (275 | ) | (136 | ) | (637 | ) | 53 | ||||||
Total net realized capital gains (losses) | (86 | ) | (289 | ) | (162 | ) | (648 | ) | 1,606 | ||||||
Other revenues | 25 | 74 | 68 | 65 | 68 | ||||||||||
Total revenues [1] | 4,461 | 6,073 | 5,623 | 5,444 | 9,024 | ||||||||||
Benefits, losses and loss adjustment expenses | 2,604 | 2,659 | 2,739 | 2,886 | 2,664 | ||||||||||
Benefits, losses and loss adjustment expenses—returns credited on international variable annuities [2] | (236 | ) | 1,432 | 878 | 1,188 | 2,562 | |||||||||
Amortization of DAC | 396 | 380 | 594 | 391 | 1,336 | ||||||||||
Insurance operating costs and other expenses [1] | 947 | 1,129 | 975 | 1,099 | 1,005 | ||||||||||
Loss on extinguishment of debt | — | — | — | — | 213 | ||||||||||
Reinsurance loss on dispositions [3] | — | — | — | — | 1,574 | ||||||||||
Interest expense | 95 | 96 | 94 | 100 | 107 | ||||||||||
Total benefits and expenses [1] | 3,806 | 5,696 | 5,280 | 5,664 | 9,461 | ||||||||||
Income (loss) from continuing operations before income taxes | 655 | 377 | 343 | (220 | ) | (437 | ) | ||||||||
Income tax expense (benefit) | 160 | 61 | 45 | (156 | ) | (197 | ) | ||||||||
Income (loss) from continuing operations, after-tax | 495 | 316 | 298 | (64 | ) | (240 | ) | ||||||||
Loss from discontinued operations, after-tax [4] | — | (2 | ) | (5 | ) | (126 | ) | (1 | ) | ||||||
Net income (loss) | $ | 495 | $ | 314 | $ | 293 | $ | (190 | ) | $ | (241 | ) |
[1] | Reflects change in presentation of Mutual Funds revenues and expenses for all periods presented as described in footnote [1] on page 20. |
[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] | All amounts pertain to the sales of the Retirement Plans and Individual Life businesses. |
[4] | For further information related to the discontinued operations of the U.K. variable annuity business, refer to Talcott Resolution Financial Highlights on page 23. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
LIFE [1] | PROPERTY & CASUALTY [1] | CORPORATE [1] | CONSOLIDATED | |||||||||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Mar. 31 2014 | Dec. 31 2013 | Mar. 31 2014 | Dec. 31 2013 | Mar. 31 2014 | Dec. 31 2013 | |||||||||||||||||
Investments | ||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value | $ | 37,006 | $ | 36,608 | $ | 25,336 | $ | 24,684 | $ | 997 | $ | 1,065 | $ | 63,339 | $ | 62,357 | ||||||||
Fixed maturities, at fair value using the fair value option | 952 | 824 | 57 | 20 | — | — | 1,009 | 844 | ||||||||||||||||
Equity securities, trading, at fair value | 17,418 | 19,745 | — | — | — | — | 17,418 | 19,745 | ||||||||||||||||
Equity securities, available-for-sale, at fair value | 405 | 450 | 245 | 292 | 129 | 126 | 779 | 868 | ||||||||||||||||
Mortgage loans | 4,155 | 4,172 | 1,552 | 1,426 | — | — | 5,707 | 5,598 | ||||||||||||||||
Policy loans, at outstanding balance | 1,429 | 1,420 | — | — | — | — | 1,429 | 1,420 | ||||||||||||||||
Limited partnerships and other alternative investments | 1,449 | 1,447 | 1,572 | 1,593 | — | — | 3,021 | 3,040 | ||||||||||||||||
Other investments | 226 | 383 | 99 | 121 | 15 | 17 | 340 | 521 | ||||||||||||||||
Short-term investments | 2,612 | 2,211 | 1,008 | 984 | 422 | 813 | 4,042 | 4,008 | ||||||||||||||||
Total investments | $ | 65,652 | $ | 67,260 | $ | 29,869 | $ | 29,120 | $ | 1,563 | $ | 2,021 | $ | 97,084 | $ | 98,401 | ||||||||
Cash | 1,106 | 1,237 | 176 | 189 | 3 | 2 | 1,285 | 1,428 | ||||||||||||||||
Premiums receivable and agents’ balances | 275 | 279 | 3,191 | 3,186 | — | — | 3,466 | 3,465 | ||||||||||||||||
Reinsurance recoverables | 20,407 | 20,595 | 2,732 | 2,735 | — | — | 23,139 | 23,330 | ||||||||||||||||
DAC | 1,528 | 1,612 | 564 | 549 | — | — | 2,092 | 2,161 | ||||||||||||||||
Deferred income taxes | 1,315 | 1,642 | 532 | 818 | 1,364 | 1,380 | 3,211 | 3,840 | ||||||||||||||||
Goodwill | 149 | 149 | 119 | 119 | 230 | 230 | 498 | 498 | ||||||||||||||||
Property and equipment, net | 234 | 247 | 627 | 621 | 9 | 9 | 870 | 877 | ||||||||||||||||
Other assets | 1,542 | 1,703 | 1,027 | 1,090 | 217 | 205 | 2,786 | 2,998 | ||||||||||||||||
Separate account assets [2] | 138,492 | 140,886 | — | — | — | — | 138,492 | 140,886 | ||||||||||||||||
Total assets | $ | 230,700 | $ | 235,610 | $ | 38,837 | $ | 38,427 | $ | 3,386 | $ | 3,847 | $ | 272,923 | $ | 277,884 | ||||||||
Future policy benefits, unpaid losses and loss adjustment expenses | 19,809 | 19,669 | 21,652 | 21,704 | — | — | $ | 41,461 | $ | 41,373 | ||||||||||||||
Other policyholder funds and benefits payable | 38,430 | 39,029 | — | — | — | — | 38,430 | 39,029 | ||||||||||||||||
Other policyholder funds and benefits payable— International variable annuities | 17,406 | 19,734 | — | — | — | — | 17,406 | 19,734 | ||||||||||||||||
Unearned premiums | 163 | 177 | 5,164 | 5,049 | (1 | ) | (1 | ) | 5,326 | 5,225 | ||||||||||||||
Debt | 386 | 238 | — | — | 5,964 | 6,306 | 6,350 | 6,544 | ||||||||||||||||
Other liabilities | 2,523 | 3,006 | 1,410 | 1,550 | 1,751 | 1,632 | 5,684 | 6,188 | ||||||||||||||||
Separate account liabilities | 138,492 | 140,886 | — | — | — | — | 138,492 | 140,886 | ||||||||||||||||
Total liabilities | $ | 217,209 | $ | 222,739 | $ | 28,226 | $ | 28,303 | $ | 7,714 | $ | 7,937 | $ | 253,149 | $ | 258,979 | ||||||||
Common equity, excluding AOCI | 12,244 | 12,053 | 9,910 | 9,721 | (3,039 | ) | (2,790 | ) | 19,115 | 18,984 | ||||||||||||||
AOCI, after-tax | 1,247 | 818 | 701 | 403 | (1,289 | ) | (1,300 | ) | 659 | (79 | ) | |||||||||||||
Total stockholders’ equity | 13,491 | 12,871 | 10,611 | 10,124 | (4,328 | ) | (4,090 | ) | 19,774 | 18,905 | ||||||||||||||
Total liabilities and equity | $ | 230,700 | $ | 235,610 | $ | 38,837 | $ | 38,427 | $ | 3,386 | $ | 3,847 | $ | 272,923 | $ | 277,884 |
[1] | For a description of Life, Property & Casualty and Corporate, refer to the Appendix - Basis of Presentation and Definitions. |
[2] | Excludes Mutual Funds assets under management ("AUM") owned by the shareholders of those funds and not by the Company. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
DEBT | |||||||||||||||
Short-term debt | $ | 532 | $ | 438 | $ | 200 | $ | 520 | $ | 520 | |||||
Senior notes | 4,718 | 5,006 | 5,006 | 5,005 | 4,707 | ||||||||||
Junior subordinated debentures | 1,100 | 1,100 | 1,100 | 1,100 | 1,100 | ||||||||||
Total debt | $ | 6,350 | $ | 6,544 | $ | 6,306 | $ | 6,625 | $ | 6,327 | |||||
STOCKHOLDERS’ EQUITY | |||||||||||||||
Common stockholders' equity, excluding AOCI | $ | 19,115 | $ | 18,984 | $ | 18,945 | $ | 18,939 | $ | 18,715 | |||||
Preferred stock | — | — | — | — | 556 | ||||||||||
AOCI | 659 | (79 | ) | (17 | ) | 74 | 1,649 | ||||||||
Total stockholders’ equity | $ | 19,774 | $ | 18,905 | $ | 18,928 | $ | 19,013 | $ | 20,920 | |||||
CAPITALIZATION | |||||||||||||||
Total capitalization, including AOCI, after tax | $ | 26,124 | $ | 25,449 | $ | 25,234 | $ | 25,638 | $ | 27,247 | |||||
Total capitalization, excluding AOCI, after tax | $ | 25,465 | $ | 25,528 | $ | 25,251 | $ | 25,564 | $ | 25,598 | |||||
DEBT TO CAPITALIZATION RATIOS | |||||||||||||||
Total debt to capitalization, including AOCI | 24.3 | % | 25.7 | % | 25.0 | % | 25.8 | % | 23.2 | % | |||||
Total debt to capitalization, excluding AOCI | 24.9 | % | 25.6 | % | 25.0 | % | 25.9 | % | 24.7 | % | |||||
Total rating agency adjusted debt to capitalization [1] [2] | 26.9 | % | 28.4 | % | 28.5 | % | 29.3 | % | 26.6 | % |
[1] | 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 $1.3 billion, $1.4 billion, $1.6 billion, $1.6 billion, and $1.6 billion for the three months ended March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013, and March 31 2013, respectively. |
[2] | Reflects 25% equity credit for the junior subordinated debentures. Reflects 100% equity credit for preferred 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 2014 | [3] | Dec. 31 2013 | [3] | ||||||
U.S. statutory net income | |||||||||
Property & Casualty [1] | $ | 504 | $ | 1,217 | |||||
Life [1] [2] | $ | (122 | ) | $ | 2,144 | ||||
U.S. statutory capital and surplus - Property & Casualty | $ | 8,294 | $ | 8,022 | |||||
U.S. GAAP adjustments: | |||||||||
DAC | 564 | 549 | |||||||
Benefit reserves | (48 | ) | (48 | ) | |||||
Unrealized gains on investments, after tax | 621 | 313 | |||||||
Goodwill | 119 | 119 | |||||||
Non-admitted assets | 884 | 973 | |||||||
Other, net | 177 | 196 | |||||||
U.S. GAAP stockholders’ equity - Property & Casualty | $ | 10,611 | $ | 10,124 | |||||
U.S. statutory capital and surplus - Life | $ | 7,016 | $ | 6,639 | |||||
U.S. GAAP adjustments: | |||||||||
DAC | 1,528 | 1,612 | |||||||
Deferred taxes | 204 | 573 | |||||||
Benefit reserves | (576 | ) | (20 | ) | |||||
Unrealized gains on investments, after tax | 1,645 | 937 | |||||||
Asset valuation reserve and interest maintenance reserve | 837 | 787 | |||||||
Goodwill | 149 | 149 | |||||||
Other, net | 373 | 136 | |||||||
Investment in foreign and non-insurance subsidiaries | 2,315 | 2,058 | |||||||
U.S. GAAP stockholders’ equity - Life | $ | 13,491 | $ | 12,871 |
[1] | For a description of Property & Casualty and Life, refer to the Appendix - Basis of Presentation and Definitions on page 36. |
[2] | Statutory net income does not include capital gains and losses on the mark to market effects of 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, 2014 and the year ended December 31, 2013. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Fixed maturities net unrealized gain | $ | 1,663 | $ | 975 | $ | 976 | $ | 1,141 | $ | 2,484 | |||||
Equities net unrealized gain | 23 | 12 | 12 | 21 | 45 | ||||||||||
OTTI losses recognized in AOCI | (10 | ) | (12 | ) | (20 | ) | (23 | ) | (32 | ) | |||||
Net deferred gain on cash flow hedging instruments | 121 | 108 | 167 | 188 | 320 | ||||||||||
Total net unrealized gain | $ | 1,797 | $ | 1,083 | $ | 1,135 | $ | 1,327 | $ | 2,817 | |||||
Foreign currency translation adjustments | 108 | 91 | 184 | 92 | 186 | ||||||||||
Pension and other postretirement adjustment | (1,246 | ) | (1,253 | ) | (1,336 | ) | (1,345 | ) | (1,354 | ) | |||||
Total AOCI | $ | 659 | $ | (79 | ) | $ | (17 | ) | $ | 74 | $ | 1,649 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
DEFERRED POLICY ACQUISITION COSTS AND PRESENT VALUE OF FUTURE PROFITS (“DAC”)
THREE MONTHS ENDED MAR. 31 2014 | ||||||||||||||||||
Talcott Resolution | ||||||||||||||||||
Property and Casualty | Group Benefits | Mutual Funds | U.S. Annuity | Institutional | Consolidated | |||||||||||||
Balance, beginning of period | $ | 549 | $ | 41 | $ | 19 | $ | 1,505 | $ | 47 | $ | 2,161 | ||||||
Deferred costs | 326 | 10 | 5 | 8 | 1 | 350 | ||||||||||||
Amortization — DAC | (311 | ) | (9 | ) | (9 | ) | (78 | ) | (1 | ) | (408 | ) | ||||||
Amortization — DAC unlock benefit, before tax | — | — | — | 12 | — | 12 | ||||||||||||
Adjustments to unrealized gains/losses on securities available-for-sale and other | — | 1 | — | (23 | ) | (1 | ) | (23 | ) | |||||||||
Balance, end of period | $ | 564 | $ | 43 | $ | 15 | $ | 1,424 | $ | 46 | $ | 2,092 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY COMBINED
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
UNDERWRITING RESULTS | |||||||||||||||
Written premiums | $ | 2,597 | $ | 2,349 | $ | 2,556 | $ | 2,501 | $ | 2,523 | |||||
Change in unearned premium reserve | 128 | (149 | ) | 68 | 48 | 98 | |||||||||
Earned premiums | 2,469 | 2,498 | 2,488 | 2,453 | 2,425 | ||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 1,524 | 1,615 | 1,607 | 1,551 | 1,536 | ||||||||||
Current accident year catastrophes | 86 | 28 | 66 | 186 | 32 | ||||||||||
Prior year development | (40 | ) | 15 | 17 | 146 | 14 | |||||||||
Total losses and loss adjustment expenses | 1,570 | 1,658 | 1,690 | 1,883 | 1,582 | ||||||||||
Amortization of DAC | 311 | 310 | 308 | 309 | 310 | ||||||||||
Underwriting expenses [1] | 331 | 398 | 391 | 389 | 375 | ||||||||||
Dividends to policyholders | 4 | 4 | 4 | 4 | 4 | ||||||||||
Underwriting gain (loss) | 253 | 128 | 95 | (132 | ) | 154 | |||||||||
Net investment income | 326 | 324 | 296 | 338 | 312 | ||||||||||
Net realized capital gains (losses) | (37 | ) | 72 | 2 | (7 | ) | 51 | ||||||||
Other expense | (36 | ) | (45 | ) | (32 | ) | (34 | ) | (24 | ) | |||||
Income from continuing operations before income taxes | 506 | 479 | 361 | 165 | 493 | ||||||||||
Income tax expense | 143 | 133 | 98 | 27 | 142 | ||||||||||
Income from continuing operations, after tax | 363 | 346 | 263 | 138 | 351 | ||||||||||
Income (loss) from discontinued operations, after tax | — | — | 1 | (2 | ) | — | |||||||||
Net income | 363 | 346 | 264 | 136 | 351 | ||||||||||
Less: Restructuring and other costs, after tax | — | — | (1 | ) | — | — | |||||||||
Less: Income (loss) from discontinued operations, after tax | — | — | 1 | (2 | ) | — | |||||||||
Less: Net realized capital gains (losses), after tax and DAC, excluded from core earnings | (23 | ) | 46 | 1 | (2 | ) | 33 | ||||||||
Core earnings | $ | 386 | $ | 300 | $ | 263 | $ | 140 | $ | 318 |
[1] The three months ended March 31, 2014 includes a $49 before tax reduction for New York (NY) State Workers' Compensation Board assessments.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY COMBINED
UNDERWRITING RATIOS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
UNDERWRITING GAIN (LOSS) | $ | 253 | $ | 128 | $ | 95 | $ | (132 | ) | $ | 154 | ||||
UNDERWRITING RATIOS | |||||||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 61.7 | 64.7 | 64.6 | 63.2 | 63.3 | ||||||||||
Current accident year catastrophes | 3.5 | 1.1 | 2.7 | 7.6 | 1.3 | ||||||||||
Prior year development | (1.6 | ) | 0.6 | 0.7 | 6.0 | 0.6 | |||||||||
Total losses and loss adjustment expenses | 63.6 | 66.4 | 67.9 | 76.8 | 65.2 | ||||||||||
Expenses [1] | 26.0 | 28.3 | 28.1 | 28.5 | 28.2 | ||||||||||
Policyholder dividends | 0.2 | 0.2 | 0.2 | 0.2 | 0.2 | ||||||||||
Combined ratio | 89.8 | 94.9 | 96.2 | 105.4 | 93.6 | ||||||||||
Current accident year catastrophes and prior year development | 1.9 | 1.7 | 3.4 | 13.6 | 1.9 | ||||||||||
Combined ratio before catastrophes and prior year development | 87.9 | 93.2 | 92.8 | 91.8 | 91.8 |
[1] Includes 2.0 point favorable impact related to a reduction in NY State Workers' Compensation Board assessments in the three months ended March 31, 2014.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C COMMERCIAL
UNDERWRITING RESULTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
UNDERWRITING RESULTS | |||||||||||||||
Written premiums | $ | 1,669 | $ | 1,463 | $ | 1,567 | $ | 1,533 | $ | 1,645 | |||||
Change in unearned premium reserve | 128 | (103 | ) | 4 | (12 | ) | 116 | ||||||||
Earned premiums | 1,541 | 1,566 | 1,563 | 1,545 | 1,529 | ||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 934 | 972 | 991 | 966 | 968 | ||||||||||
Current accident year catastrophes | 60 | 7 | 48 | 44 | 6 | ||||||||||
Prior year development [2] | (7 | ) | 12 | 26 | 37 | 8 | |||||||||
Total losses and loss adjustment expenses | 987 | 991 | 1,065 | 1,047 | 982 | ||||||||||
Amortization of DAC | 226 | 226 | 226 | 226 | 227 | ||||||||||
Underwriting expenses [1] | 188 | 247 | 238 | 243 | 225 | ||||||||||
Dividends to policyholders | 4 | 4 | 4 | 4 | 4 | ||||||||||
Underwriting gain | $ | 136 | $ | 98 | $ | 30 | $ | 25 | $ | 91 |
[1] | The three months ended March 31, 2014 includes a $49 before tax reduction for NY State Workers' Compensation Board assessments. Small Commercial, Middle Market and Specialty |
Commercial represent $25, $14 and $10, respectively, of the reduction.
[2] | Prior year development includes the following (favorable) unfavorable prior year loss reserve development: |
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Auto liability | $ | 5 | $ | — | $ | 86 | $ | 40 | $ | 15 | |||||
Professional liability | (8 | ) | — | — | (30 | ) | 1 | ||||||||
Package business | (3 | ) | 16 | — | (3 | ) | (11 | ) | |||||||
General liability | — | (1 | ) | (45 | ) | (10 | ) | (19 | ) | ||||||
Fidelity and surety | — | (3 | ) | — | — | (5 | ) | ||||||||
Commercial property | (3 | ) | — | (1 | ) | (2 | ) | (4 | ) | ||||||
Uncollectible reinsurance | — | — | — | (25 | ) | — | |||||||||
Workers’ compensation | — | (11 | ) | (10 | ) | 1 | 18 | ||||||||
Workers’ compensation - NY 25a Fund for Reopened Cases | — | — | — | 80 | — | ||||||||||
Change in workers' compensation discount, including accretion | 8 | 7 | 8 | 7 | 8 | ||||||||||
Catastrophes | (12 | ) | (3 | ) | (12 | ) | (9 | ) | — | ||||||
Other reserve re-estimates, net | 6 | 7 | — | (12 | ) | 5 | |||||||||
Total prior year development | $ | (7 | ) | $ | 12 | $ | 26 | $ | 37 | $ | 8 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C COMMERCIAL
UNDERWRITING RATIOS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
UNDERWRITING GAIN | $ | 136 | $ | 98 | $ | 30 | $ | 25 | $ | 91 | |||||
UNDERWRITING RATIOS | |||||||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 60.6 | 62.1 | 63.4 | 62.5 | 63.3 | ||||||||||
Current accident year catastrophes | 3.9 | 0.4 | 3.1 | 2.8 | 0.4 | ||||||||||
Prior year development [1] | (0.5 | ) | 0.8 | 1.7 | 2.4 | 0.5 | |||||||||
Total losses and loss adjustment expenses | 64.0 | 63.3 | 68.1 | 67.8 | 64.2 | ||||||||||
Expenses [2] | 26.9 | 30.2 | 29.7 | 30.4 | 29.6 | ||||||||||
Policyholder dividends | 0.3 | 0.3 | 0.3 | 0.3 | 0.3 | ||||||||||
Combined ratio | 91.2 | 93.7 | 98.1 | 98.4 | 94.0 | ||||||||||
Current accident year catastrophes and prior year development | 3.4 | 1.2 | 4.8 | 5.2 | 0.9 | ||||||||||
Combined ratio before catastrophes and prior year development | 87.7 | 92.5 | 93.3 | 93.1 | 93.1 | ||||||||||
COMBINED RATIOS BY LINE OF BUSINESS [3] | |||||||||||||||
SMALL COMMERCIAL | |||||||||||||||
Combined ratio | 85.7 | 85.8 | 92.4 | 94.5 | 89.9 | ||||||||||
Combined ratio before catastrophes | 83.3 | 85.4 | 89.9 | 91.8 | 88.2 | ||||||||||
Combined ratio before catastrophes and prior year development | 83.7 | 85.9 | 87.1 | 87.6 | 89.2 | ||||||||||
MIDDLE MARKET | |||||||||||||||
Combined ratio | 96.1 | 97.1 | 102.7 | 101.7 | 91.6 | ||||||||||
Combined ratio before catastrophes | 90.6 | 96.9 | 99.7 | 99.3 | 93.2 | ||||||||||
Combined ratio before catastrophes and prior year development | 90.1 | 94.8 | 95.9 | 95.2 | 95.8 | ||||||||||
SPECIALTY COMMERCIAL | |||||||||||||||
Combined ratio | 97.3 | 102.4 | 111.0 | 113.8 | 112.6 | ||||||||||
Combined ratio before catastrophes | 97.2 | 102.5 | 110.9 | 113.4 | 111.8 | ||||||||||
Combined ratio before catastrophes and prior year development | 94.7 | 100.6 | 103.0 | 105.7 | 98.9 |
[1]For a summary of prior year loss reserve development, refer to footnote [2] on page 11.
[2]The expense ratio includes 3.2 point favorable impact related to a reduction in NY State Workers' Compensation Board assessments in the three months ended March 31, 2014.
[3] | Small Commercial, Middle Market and Specialty Commercial include a benefit of 3.3 points, 2.5 points and 4.4 points, respectively, for the NY State Workers' Compensation Board assessments reduction. For additional information, refer to footnote [1] on page 11. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C COMMERCIAL
SUPPLEMENTAL DATA
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
WRITTEN PREMIUMS | |||||||||||||||
Small Commercial | $ | 865 | $ | 715 | $ | 740 | $ | 787 | $ | 842 | |||||
Middle Market | 566 | 555 | 570 | 518 | 546 | ||||||||||
Specialty Commercial | 229 | 186 | 248 | 219 | 248 | ||||||||||
National Accounts | 113 | 62 | 90 | 72 | 91 | ||||||||||
Financial Products | 55 | 63 | 61 | 60 | 53 | ||||||||||
Programs | 58 | 60 | 93 | 85 | 101 | ||||||||||
Other Specialty | 3 | 1 | 4 | 2 | 3 | ||||||||||
Other | 9 | 7 | 9 | 9 | 9 | ||||||||||
Total | $ | 1,669 | $ | 1,463 | $ | 1,567 | $ | 1,533 | $ | 1,645 | |||||
EARNED PREMIUMS | |||||||||||||||
Small Commercial | $ | 769 | $ | 777 | $ | 769 | $ | 763 | $ | 754 | |||||
Middle Market | 541 | 549 | 545 | 540 | 530 | ||||||||||
Specialty Commercial | 223 | 234 | 240 | 233 | 236 | ||||||||||
National Accounts | 80 | 79 | 83 | 70 | 68 | ||||||||||
Financial Products | 59 | 62 | 61 | 64 | 63 | ||||||||||
Programs | 81 | 89 | 92 | 97 | 102 | ||||||||||
Other Specialty | 3 | 4 | 4 | 2 | 3 | ||||||||||
Other | 8 | 6 | 9 | 9 | 9 | ||||||||||
Total | $ | 1,541 | $ | 1,566 | $ | 1,563 | $ | 1,545 | $ | 1,529 | |||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | |||||||||||||||
Renewal Written Price Increases | |||||||||||||||
Standard Commercial Lines | 7 | % | 8 | % | 7 | % | 7 | % | 8 | % | |||||
Policy Count Retention | |||||||||||||||
Small Commercial | 83 | % | 82 | % | 81 | % | 80 | % | 82 | % | |||||
Middle Market | 81 | % | 79 | % | 80 | % | 79 | % | 77 | % | |||||
New Business Premium | |||||||||||||||
Small Commercial | $ | 131 | $ | 111 | $ | 115 | $ | 125 | $ | 134 | |||||
Middle Market | $ | 111 | $ | 102 | $ | 107 | $ | 116 | $ | 97 | |||||
Policies in Force (in thousands) | |||||||||||||||
Small Commercial | 1,179 | 1,177 | 1,181 | 1,181 | 1,185 | ||||||||||
Middle Market | 73 | 73 | 74 | 74 | 75 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
UNDERWRITING RESULTS
THREE MONTHS ENDED | |||||||||||||||
UNDERWRITING RESULTS | Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | ||||||||||
Written premiums | $ | 927 | $ | 886 | $ | 988 | $ | 967 | $ | 878 | |||||
Change in unearned premium reserve | (1 | ) | (45 | ) | 63 | 59 | (18 | ) | |||||||
Earned premiums | 928 | 931 | 925 | 908 | 896 | ||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 590 | 643 | 616 | 585 | 568 | ||||||||||
Current accident year catastrophes | 26 | 21 | 18 | 142 | 26 | ||||||||||
Prior year development [1] | (34 | ) | — | (11 | ) | (32 | ) | 4 | |||||||
Total losses and loss adjustment expenses | 582 | 664 | 623 | 695 | 598 | ||||||||||
Amortization of DAC | 85 | 84 | 82 | 83 | 83 | ||||||||||
Underwriting expenses | 136 | 144 | 145 | 139 | 143 | ||||||||||
Underwriting gain (loss) | $ | 125 | $ | 39 | $ | 75 | $ | (9 | ) | $ | 72 |
[1] | Prior year development includes the following (favorable) unfavorable prior year loss reserve development: |
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Auto liability | $ | — | $ | 1 | $ | — | $ | 2 | $ | — | |||||
Homeowners | (13 | ) | 3 | 1 | (2 | ) | (8 | ) | |||||||
Catastrophes | (21 | ) | (2 | ) | (8 | ) | (31 | ) | 2 | ||||||
Other reserve re-estimates, net | — | (2 | ) | (4 | ) | (1 | ) | 10 | |||||||
Total prior year development | $ | (34 | ) | $ | — | $ | (11 | ) | $ | (32 | ) | $ | 4 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
UNDERWRITING RATIOS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
UNDERWRITING GAIN (LOSS) | $ | 125 | $ | 39 | $ | 75 | $ | (9 | ) | $ | 72 | ||||
UNDERWRITING RATIOS | |||||||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes [1] | 63.6 | 69.1 | 66.6 | 64.4 | 63.4 | ||||||||||
Current accident year catastrophes | 2.8 | 2.3 | 1.9 | 15.6 | 2.9 | ||||||||||
Prior year development [1] | (3.7 | ) | — | (1.2 | ) | (3.5 | ) | 0.4 | |||||||
Total losses and loss adjustment expenses | 62.7 | 71.3 | 67.4 | 76.5 | 66.7 | ||||||||||
Expenses | 23.8 | 24.5 | 24.5 | 24.4 | 25.2 | ||||||||||
Combined ratio | 86.5 | 95.8 | 91.9 | 101.0 | 92.0 | ||||||||||
Current accident year catastrophes and prior year development | (0.9 | ) | 2.3 | 0.7 | 12.1 | 3.3 | |||||||||
Combined ratio before catastrophes and prior year development | 87.4 | 93.6 | 91.1 | 88.9 | 88.6 | ||||||||||
PRODUCT | |||||||||||||||
Automobile | |||||||||||||||
Combined ratio | 91.4 | 102.4 | 96.3 | 94.6 | 96.0 | ||||||||||
Combined ratio before catastrophes and prior year development | 91.6 | 102.7 | 96.8 | 93.8 | 93.3 | ||||||||||
Homeowners | |||||||||||||||
Combined ratio | 75.3 | 78.3 | 81.2 | 115.0 | 82.7 | ||||||||||
Combined ratio before catastrophes and prior year development | 77.4 | 70.6 | 77.6 | 77.9 | 77.9 |
[1] | For a summary of (favorable) unfavorable prior year loss reserve development refer to footnote [1] on page 14. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSUMER MARKETS
SUPPLEMENTAL DATA
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
DISTRIBUTION | |||||||||||||||
WRITTEN PREMIUMS | |||||||||||||||
AARP Direct | $ | 669 | $ | 632 | $ | 725 | $ | 718 | $ | 647 | |||||
AARP Agency | 71 | 66 | 62 | 52 | 45 | ||||||||||
Other Agency | 173 | 175 | 187 | 182 | 173 | ||||||||||
Other | 14 | 13 | 14 | 15 | 13 | ||||||||||
Total | $ | 927 | $ | 886 | $ | 988 | $ | 967 | $ | 878 | |||||
EARNED PREMIUMS | |||||||||||||||
AARP Direct | $ | 678 | $ | 684 | $ | 682 | $ | 673 | $ | 662 | |||||
AARP Agency | 58 | 54 | 47 | 41 | 35 | ||||||||||
Other Agency | 179 | 181 | 182 | 181 | 184 | ||||||||||
Other | 13 | 12 | 14 | 13 | 15 | ||||||||||
Total | $ | 928 | $ | 931 | $ | 925 | $ | 908 | $ | 896 | |||||
PRODUCT LINE | |||||||||||||||
WRITTEN PREMIUMS | |||||||||||||||
Automobile | $ | 660 | $ | 608 | $ | 668 | $ | 657 | $ | 629 | |||||
Homeowners | 267 | 278 | 320 | 310 | 249 | ||||||||||
Total | $ | 927 | $ | 886 | $ | 988 | $ | 967 | $ | 878 | |||||
EARNED PREMIUMS | |||||||||||||||
Automobile | $ | 636 | $ | 640 | $ | 637 | $ | 626 | $ | 619 | |||||
Homeowners | 292 | 291 | 288 | 282 | 277 | ||||||||||
Total | $ | 928 | $ | 931 | $ | 925 | $ | 908 | $ | 896 | |||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | |||||||||||||||
Renewal Written Price Increases | |||||||||||||||
Automobile | 5 | % | 5 | % | 5 | % | 5 | % | 5 | % | |||||
Homeowners | 8 | % | 8 | % | 8 | % | 7 | % | 6 | % | |||||
Policy Count Retention | |||||||||||||||
Automobile | 87 | % | 86 | % | 86 | % | 86 | % | 86 | % | |||||
Homeowners | 87 | % | 86 | % | 86 | % | 87 | % | 87 | % | |||||
Premium Retention | |||||||||||||||
Automobile | 89 | % | 87 | % | 88 | % | 88 | % | 88 | % | |||||
Homeowners | 93 | % | 92 | % | 92 | % | 92 | % | 92 | % | |||||
New Business Premium | |||||||||||||||
Automobile | $ | 104 | $ | 94 | $ | 100 | $ | 93 | $ | 87 | |||||
Homeowners | $ | 32 | $ | 32 | $ | 35 | $ | 34 | $ | 30 | |||||
Policies in Force (in thousands) | |||||||||||||||
Automobile | 2,033 | 2,019 | 2,021 | 2,020 | 2,019 | ||||||||||
Homeowners | 1,324 | 1,319 | 1,321 | 1,322 | 1,322 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C OTHER OPERATIONS
UNDERWRITING RESULTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
UNDERWRITING RESULTS | |||||||||||||||
Written premiums | $ | 1 | $ | — | $ | 1 | $ | 1 | $ | — | |||||
Change in unearned premium reserve | 1 | (1 | ) | 1 | 1 | — | |||||||||
Earned premiums | — | 1 | — | — | — | ||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Prior year development [1] | 1 | 3 | 2 | 141 | 2 | ||||||||||
Total losses and loss adjustment expenses | 1 | 3 | 2 | 141 | 2 | ||||||||||
Underwriting expenses | 7 | 7 | 8 | 7 | 7 | ||||||||||
Underwriting loss | $ | (8 | ) | $ | (9 | ) | $ | (10 | ) | $ | (148 | ) | $ | (9 | ) |
[1] Prior year development includes the following (favorable) unfavorable prior year loss reserve development:
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Asbestos | $ | — | $ | — | $ | — | $ | 130 | $ | — | |||||
Environmental | — | — | 1 | 10 | 1 | ||||||||||
Other reserve re-estimates, net | 1 | 3 | 1 | 1 | 1 | ||||||||||
Total prior year development | $ | 1 | $ | 3 | $ | 2 | $ | 141 | $ | 2 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Earned premiums | $ | 784 | $ | 821 | $ | 817 | $ | 823 | $ | 812 | |||||
Fee income | 15 | 14 | 14 | 15 | 14 | ||||||||||
Net investment income | 96 | 97 | 96 | 100 | 97 | ||||||||||
Net realized capital gains (losses) | 8 | 3 | (8 | ) | 37 | 18 | |||||||||
Total revenues | 903 | 935 | 919 | 975 | 941 | ||||||||||
Benefits, losses and loss adjustment expenses | 597 | 607 | 637 | 635 | 639 | ||||||||||
Amortization of DAC | 9 | 9 | 8 | 8 | 8 | ||||||||||
Insurance operating costs and other expenses | 228 | 239 | 237 | 248 | 240 | ||||||||||
Total benefits and expenses | 834 | 855 | 882 | 891 | 887 | ||||||||||
Income before income taxes | 69 | 80 | 37 | 84 | 54 | ||||||||||
Income tax expense | 18 | 22 | 6 | 23 | 12 | ||||||||||
Net income | 51 | 58 | 31 | 61 | 42 | ||||||||||
Less: Net realized capital gains (losses), after tax, excluded from core earnings | 6 | 3 | (5 | ) | 24 | 12 | |||||||||
Core earnings | $ | 45 | $ | 55 | $ | 36 | $ | 37 | $ | 30 | |||||
After-tax margin (excluding buyouts) | |||||||||||||||
Net income | 5.7 | % | 6.2 | % | 3.4 | % | 6.3 | % | 4.5 | % | |||||
Core earnings | 5.1 | % | 5.9 | % | 3.9 | % | 3.9 | % | 3.2 | % |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
SUPPLEMENTAL DATA
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
PREMIUMS | |||||||||||||||
Fully insured ongoing premiums | |||||||||||||||
Group disability | $ | 346 | $ | 352 | $ | 343 | $ | 355 | $ | 345 | |||||
Group life [1] | 388 | 428 | 435 | 427 | 426 | ||||||||||
Other | 42 | 41 | 39 | 40 | 41 | ||||||||||
Total fully insured ongoing premiums | $ | 776 | $ | 821 | $ | 817 | $ | 822 | $ | 812 | |||||
Total buyouts [2] | 8 | — | — | 1 | — | ||||||||||
Total premiums | 784 | 821 | 817 | 823 | 812 | ||||||||||
Group disability premium equivalents [3] | 103 | 102 | 104 | 100 | 106 | ||||||||||
Total premiums and premium equivalents | $ | 887 | $ | 923 | $ | 921 | $ | 923 | $ | 918 | |||||
SALES (GROSS ANNUALIZED NEW PREMIUMS) | |||||||||||||||
Fully insured ongoing sales | |||||||||||||||
Group disability | $ | 88 | $ | 29 | $ | 32 | $ | 46 | $ | 76 | |||||
Group life | 79 | 26 | 28 | 55 | 88 | ||||||||||
Other | 13 | 3 | 3 | 2 | 5 | ||||||||||
Total fully insured ongoing sales | 180 | 58 | 63 | 103 | 169 | ||||||||||
Total buyouts [2] | 8 | — | — | 1 | — | ||||||||||
Total sales | 188 | 58 | 63 | 104 | 169 | ||||||||||
Group disability premium equivalents [3] | 25 | 23 | 5 | 18 | 15 | ||||||||||
Total sales and premium equivalents | $ | 213 | $ | 81 | $ | 68 | $ | 122 | $ | 184 | |||||
RATIOS [4] | |||||||||||||||
Loss ratio | |||||||||||||||
Group disability loss ratio | 82.4 | % | 75.7 | % | 87.9 | % | 82.7 | % | 89.9 | % | |||||
Group life loss ratio | 67.9 | % | 70.8 | % | 68.2 | % | 70.8 | % | 68.1 | % | |||||
Total loss ratio | 74.5 | % | 72.7 | % | 76.7 | % | 75.7 | % | 77.4 | % | |||||
Expense ratio | 30.0 | % | 29.7 | % | 29.5 | % | 30.6 | % | 30.0 | % |
[1] | Association - Financial Institution business represents $44, $65, $68, $71 and $72 for the three months ended March 31, 2014, December 31, 2013, September 30, 2013, |
June 30, 2013 and March 31, 2013, respectively.
[2] | Takeover of open claim liabilities and other non-recurring premium amounts. |
[3] | Administrative service only fees and premium equivalent of claims under claim management. |
[4] | Ratios calculated include fee income and exclude the effects of buyout premiums. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Investment management fees [1] | $ | 146 | $ | 146 | $ | 139 | $ | 137 | $ | 133 | |||||
Shareholder servicing fees | 19 | 19 | 19 | 20 | 20 | ||||||||||
Other revenue | 9 | 10 | 10 | 8 | 7 | ||||||||||
Total revenues [1] | 174 | 175 | 168 | 165 | 160 | ||||||||||
Sub-advisory | 51 | 51 | 48 | 48 | 48 | ||||||||||
Employee compensation and benefits | 25 | 26 | 24 | 24 | 25 | ||||||||||
Distribution and service [1] | 43 | 43 | 43 | 41 | 41 | ||||||||||
General, administrative and other | 22 | 25 | 24 | 21 | 18 | ||||||||||
Total expenses [1] | 141 | 145 | 139 | 134 | 132 | ||||||||||
Income before income taxes | 33 | 30 | 29 | 31 | 28 | ||||||||||
Income tax expense | 12 | 11 | 10 | 11 | 10 | ||||||||||
Net income | 21 | 19 | 19 | 20 | 18 | ||||||||||
Less: Restructuring and other costs, after-tax | — | — | 1 | (1 | ) | (1 | ) | ||||||||
Less: Net realized capital gains (losses), after-tax, excluded from core earnings | — | (1 | ) | — | 1 | (1 | ) | ||||||||
Core earnings | $ | 21 | $ | 20 | $ | 18 | $ | 20 | $ | 20 | |||||
Return on assets (bps, after-tax) [2] | |||||||||||||||
Net income | 8.6 | 8.0 | 8.4 | 8.8 | 8.0 | ||||||||||
Core earnings | 8.6 | 8.5 | 8.0 | 8.8 | 8.9 |
[1] | Certain investment management fees previously reported as gross revenues are being reported as a net amount in distribution and service expenses for all periods presented. In |
addition, sub-advisory fees previously netted against revenues are being reported as distribution and service expenses for all periods presented.
[2] | Represents annualized earnings divided by average assets under management. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
ASSET VALUE ROLL FORWARD
ASSETS UNDER MANAGEMENT BY DISTRIBUTION CHANNEL
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
RETAIL MUTUAL FUNDS [1] | |||||||||||||||
Beginning balance | $ | 53,040 | $ | 49,938 | $ | 47,617 | $ | 48,186 | $ | 45,013 | |||||
Sales | 2,627 | 2,488 | 2,864 | 2,789 | 3,162 | ||||||||||
Redemptions | (2,688 | ) | (2,569 | ) | (2,901 | ) | (4,075 | ) | (3,176 | ) | |||||
Net flows | (61 | ) | (81 | ) | (37 | ) | (1,286 | ) | (14 | ) | |||||
Change in market value and other [2] | 2,009 | 3,183 | 2,358 | 717 | 3,187 | ||||||||||
Ending balance | $ | 54,988 | $ | 53,040 | $ | 49,938 | $ | 47,617 | $ | 48,186 | |||||
RETIREMENT MUTUAL FUNDS [3] | |||||||||||||||
Beginning balance | $ | 17,878 | $ | 16,821 | $ | 15,991 | $ | 17,622 | $ | 16,598 | |||||
Sales | 1,065 | 1,067 | 923 | 937 | 942 | ||||||||||
Redemptions | (986 | ) | (1,428 | ) | (1,531 | ) | (2,590 | ) | (1,426 | ) | |||||
Net flows | 79 | (361 | ) | (608 | ) | (1,653 | ) | (484 | ) | ||||||
Change in market value and other | 401 | 1,418 | 1,438 | 22 | 1,508 | ||||||||||
Ending balance | $ | 18,358 | $ | 17,878 | $ | 16,821 | $ | 15,991 | $ | 17,622 | |||||
TOTAL MUTUAL FUNDS | |||||||||||||||
Beginning balance | $ | 70,918 | $ | 66,759 | $ | 63,608 | $ | 65,808 | $ | 61,611 | |||||
Sales | 3,692 | 3,555 | 3,787 | 3,726 | 4,104 | ||||||||||
Redemptions | (3,674 | ) | (3,997 | ) | (4,432 | ) | (6,665 | ) | (4,602 | ) | |||||
Net flows | 18 | (442 | ) | (645 | ) | (2,939 | ) | (498 | ) | ||||||
Change in market value and other | 2,410 | 4,601 | 3,796 | 739 | 4,695 | ||||||||||
Ending balance | $ | 73,346 | $ | 70,918 | $ | 66,759 | $ | 63,608 | $ | 65,808 | |||||
AVERAGE MUTUAL FUNDS ASSETS UNDER MANAGEMENT | $ | 72,132 | $ | 68,839 | $ | 65,183 | $ | 64,708 | $ | 63,710 | |||||
ANNUITY MUTUAL FUND ASSETS [4] | $ | 24,957 | $ | 25,817 | $ | 25,638 | $ | 25,901 | $ | 26,628 | |||||
TOTAL ASSETS UNDER MANAGEMENT | $ | 98,303 | $ | 96,735 | $ | 92,397 | $ | 89,509 | $ | 92,436 | |||||
AVERAGE ASSETS UNDER MANAGEMENT | $ | 97,519 | $ | 94,566 | $ | 90,953 | $ | 90,973 | $ | 90,042 |
[2] Includes front end loads on A share products.
[3] Consists of mutual funds offered within employee directed retirement plans.
[4] Consists of Company-sponsored mutual fund assets held in separate accounts supporting variable insurance and investment products.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
ASSET VALUE ROLL FORWARD
ASSETS UNDER MANAGEMENT BY ASSET CLASS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
EQUITY | |||||||||||||||
Beginning balance | $ | 42,426 | $ | 39,057 | $ | 36,186 | $ | 38,453 | $ | 35,843 | |||||
Sales | 1,906 | 1,678 | 1,591 | 1,446 | 1,559 | ||||||||||
Redemptions | (1,819 | ) | (2,043 | ) | (2,054 | ) | (4,821 | ) | (2,951 | ) | |||||
Net flows | 87 | (365 | ) | (463 | ) | (3,375 | ) | (1,392 | ) | ||||||
Change in market value and other | 1,976 | 3,734 | 3,334 | 1,108 | 4,002 | ||||||||||
Ending balance | $ | 44,489 | $ | 42,426 | $ | 39,057 | $ | 36,186 | $ | 38,453 | |||||
FIXED INCOME | |||||||||||||||
Beginning balance | $ | 14,632 | $ | 14,595 | $ | 14,944 | $ | 15,213 | $ | 14,524 | |||||
Sales | 1,134 | 1,255 | 1,507 | 1,432 | 1,755 | ||||||||||
Redemptions | (1,257 | ) | (1,322 | ) | (1,802 | ) | (1,323 | ) | (1,133 | ) | |||||
Net flows | (123 | ) | (67 | ) | (295 | ) | 109 | 622 | |||||||
Change in market value and other | 152 | 104 | (54 | ) | (378 | ) | 67 | ||||||||
Ending balance | $ | 14,661 | $ | 14,632 | $ | 14,595 | $ | 14,944 | $ | 15,213 | |||||
MULTI-STRATEGY INVESTMENTS [1] | |||||||||||||||
Beginning balance | $ | 13,860 | $ | 13,107 | $ | 12,478 | $ | 12,142 | $ | 11,244 | |||||
Sales | 652 | 622 | 689 | 848 | 790 | ||||||||||
Redemptions | (598 | ) | (632 | ) | (576 | ) | (521 | ) | (518 | ) | |||||
Net flows | 54 | (10 | ) | 113 | 327 | 272 | |||||||||
Change in market value and other | 282 | 763 | 516 | 9 | 626 | ||||||||||
Ending balance | $ | 14,196 | $ | 13,860 | $ | 13,107 | $ | 12,478 | $ | 12,142 | |||||
TOTAL MUTUAL FUNDS [2] | $ | 73,346 | $ | 70,918 | $ | 66,759 | $ | 63,608 | $ | 65,808 |
[1] Includes balanced, allocation, target date and alternatives.
[2] Excludes annuity mutual fund assets.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
NET INCOME (LOSS) | |||||||||||||||
U.S. Annuity | $ | 108 | $ | 41 | $ | 69 | $ | 23 | $ | 63 | |||||
International Annuity [1] | 22 | (78 | ) | (80 | ) | (407 | ) | (490 | ) | ||||||
Institutional and other [2] [3] | 15 | 22 | 18 | 52 | 133 | ||||||||||
Talcott Resolution net income (loss) | 145 | (15 | ) | 7 | (332 | ) | (294 | ) | |||||||
Less: Unlock benefit (charge), after tax | 14 | 47 | (67 | ) | 36 | (541 | ) | ||||||||
Less: Restructuring and other costs, after tax | — | — | (1 | ) | 1 | (1 | ) | ||||||||
Less: Income (loss) from discontinued operations, after tax [1] | — | (2 | ) | (6 | ) | (124 | ) | (1 | ) | ||||||
Less: Net reinsurance gain (loss) on dispositions, after tax | — | — | — | 1 | 44 | ||||||||||
Less: Net realized gains (losses) and other, after tax and DAC, excluded from core earnings | (44 | ) | (233 | ) | (123 | ) | (442 | ) | 43 | ||||||
Talcott Resolution core earnings | $ | 175 | $ | 173 | $ | 204 | $ | 196 | $ | 162 | |||||
CORE EARNINGS (LOSSES) | |||||||||||||||
U.S. Annuity | $ | 89 | $ | 81 | $ | 89 | $ | 79 | $ | 73 | |||||
International Annuity | 64 | 72 | 91 | 96 | 69 | ||||||||||
Institutional and other [2] | 22 | 20 | 24 | 21 | 20 | ||||||||||
Talcott Resolution core earnings | $ | 175 | $ | 173 | $ | 204 | $ | 196 | $ | 162 |
[1] | The three months ended June 30, 2013 includes a loss on disposition of $102 and loss from discontinued operations of $22 for the period related to the U.K. variable annuity business. |
[2] | Other consists of PPLI and 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] | Includes derivative gains of $71 for the three months ended March 31, 2013 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 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
CORE EARNINGS - RETURN ON ASSETS (bps, after tax) [1] | |||||||||||||||
U.S. Annuity | 50.3 | 45.0 | 49.0 | 42.3 | 38.4 | ||||||||||
Japan Annuity | 118.6 | 118.0 | 135.4 | 133.1 | 88.4 | ||||||||||
FULL SURRENDER RATES [2] | |||||||||||||||
U.S. variable annuity | 12.3 | % | 14.5 | % | 20.3 | % | 17.5 | % | 14.5 | % | |||||
Japan variable annuity | 38.1 | % | 41.5 | % | 30.8 | % | 34.8 | % | 9.6 | % | |||||
CONTRACT COUNTS (in thousands) | |||||||||||||||
U.S. variable annuity | 747 | 774 | 802 | 839 | 873 | ||||||||||
U.S. fixed annuity and other | 163 | 170 | 176 | 180 | 184 | ||||||||||
Japan variable annuity | 270 | 305 | 341 | 368 | 400 | ||||||||||
Japan fixed annuity | 21 | 23 | 24 | 25 | 26 | ||||||||||
ACCOUNT VALUE (end of period) | |||||||||||||||
U.S. variable annuity | $ | 59,547 | $ | 61,812 | $ | 61,512 | $ | 62,579 | $ | 65,500 | |||||
U.S. fixed annuity and other | 9,917 | 10,142 | 10,455 | 10,670 | 10,797 | ||||||||||
Total U.S. Annuity account value | $ | 69,464 | $ | 71,954 | $ | 71,967 | $ | 73,249 | $ | 76,297 | |||||
Japan variable annuity | 17,800 | 20,130 | 22,846 | 23,921 | 26,934 | ||||||||||
Japan fixed annuity and other | 3,129 | 3,061 | 3,384 | 3,368 | 3,553 | ||||||||||
Total Japan Annuity account value | $ | 20,929 | $ | 23,191 | $ | 26,230 | $ | 27,289 | $ | 30,487 |
[1] | Represents annualized earnings divided by a two-point average of assets under management. |
[2] | Represents annualized surrenders (full contract liquidation excluding partial withdrawals) divided by a two-point average of annuity account values. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
U.S. ANNUITY
ACCOUNT VALUE ROLLFORWARD
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
VARIABLE ANNUITIES | |||||||||||||||
Beginning balance | $ | 61,812 | $ | 61,512 | $ | 62,579 | $ | 65,500 | $ | 64,824 | |||||
Deposits | 66 | 60 | 77 | 180 | 226 | ||||||||||
Partial withdrawals | (634 | ) | (748 | ) | (647 | ) | (630 | ) | (710 | ) | |||||
Full surrenders | (1,860 | ) | (2,235 | ) | (3,153 | ) | (2,805 | ) | (2,356 | ) | |||||
Death benefits/annuitizations/other [1] | (521 | ) | (470 | ) | (445 | ) | (472 | ) | (468 | ) | |||||
Transfers | (1 | ) | — | (2 | ) | (1 | ) | 1 | |||||||
Net flows | (2,950 | ) | (3,393 | ) | (4,170 | ) | (3,728 | ) | (3,307 | ) | |||||
Change in market value/change in reserve/interest credited and other | 685 | 3,693 | 3,103 | 807 | 3,983 | ||||||||||
Ending balance | $ | 59,547 | $ | 61,812 | $ | 61,512 | $ | 62,579 | $ | 65,500 | |||||
FIXED MARKET VALUE ADJUSTED (“MVA”) AND OTHER | �� | ||||||||||||||
Beginning balance | $ | 10,142 | $ | 10,455 | $ | 10,670 | $ | 10,797 | $ | 10,848 | |||||
Deposits | — | — | — | 2 | 6 | ||||||||||
Surrenders | (331 | ) | (381 | ) | (264 | ) | (161 | ) | (103 | ) | |||||
Death benefits/annuitizations/other [1] | 7 | (58 | ) | (64 | ) | (72 | ) | (74 | ) | ||||||
Transfers | 1 | (2 | ) | (2 | ) | (3 | ) | — | |||||||
Net flows | (323 | ) | (441 | ) | (330 | ) | (234 | ) | (171 | ) | |||||
Change in market value/change in reserve/interest credited and other | 98 | 128 | 115 | 107 | 120 | ||||||||||
Ending balance | $ | 9,917 | $ | 10,142 | $ | 10,455 | $ | 10,670 | $ | 10,797 | |||||
TOTAL U.S. ANNUITY | |||||||||||||||
Beginning balance | $ | 71,954 | $ | 71,967 | $ | 73,249 | $ | 76,297 | $ | 75,672 | |||||
Deposits | 66 | 60 | 77 | 182 | 232 | ||||||||||
Surrenders | (2,825 | ) | (3,364 | ) | (4,064 | ) | (3,596 | ) | (3,169 | ) | |||||
Death benefits/annuitizations/other [1] | (514 | ) | (528 | ) | (509 | ) | (544 | ) | (542 | ) | |||||
Transfers | — | (2 | ) | (4 | ) | (4 | ) | 1 | |||||||
Net flows | (3,273 | ) | (3,834 | ) | (4,500 | ) | (3,962 | ) | (3,478 | ) | |||||
Change in market value/change in reserve/interest credited and other | 783 | 3,821 | 3,218 | 914 | 4,103 | ||||||||||
Ending balance | $ | 69,464 | $ | 71,954 | $ | 71,967 | $ | 73,249 | $ | 76,297 |
[1] | Includes transfers from the accumulation phase to the annuitization phase. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
JAPAN ANNUITY
ACCOUNT VALUE ROLL FORWARD
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
VARIABLE ANNUITIES | |||||||||||||||
Beginning balance | $ | 20,130 | $ | 22,846 | $ | 23,921 | $ | 26,934 | $ | 27,716 | |||||
Surrenders | (1,848 | ) | (2,273 | ) | (1,842 | ) | (2,257 | ) | (694 | ) | |||||
Annuitizations [1] | (130 | ) | (92 | ) | (42 | ) | (30 | ) | (31 | ) | |||||
Annuity lump sum [2] | (264 | ) | (139 | ) | (57 | ) | (42 | ) | (34 | ) | |||||
Death benefits/other | (155 | ) | (161 | ) | (159 | ) | (134 | ) | (155 | ) | |||||
Net flows | (2,397 | ) | (2,665 | ) | (2,100 | ) | (2,463 | ) | (914 | ) | |||||
Change in market value/change in reserve/interest credited | (349 | ) | 1,421 | 736 | 916 | 2,402 | |||||||||
Effect of currency translation | 416 | (1,472 | ) | 289 | (1,466 | ) | (2,270 | ) | |||||||
Ending balance | $ | 17,800 | $ | 20,130 | $ | 22,846 | $ | 23,921 | $ | 26,934 | |||||
FIXED MARKET VALUE ADJUSTED ("MVA") AND OTHER | |||||||||||||||
Beginning balance | $ | 3,061 | $ | 3,384 | $ | 3,368 | $ | 3,553 | $ | 3,908 | |||||
Surrenders | (22 | ) | (28 | ) | (28 | ) | (26 | ) | (41 | ) | |||||
Annuitizations | 130 | 92 | 42 | 30 | 31 | ||||||||||
Payouts | (101 | ) | (179 | ) | (49 | ) | (34 | ) | (29 | ) | |||||
Death benefits/other | (16 | ) | (13 | ) | (8 | ) | (14 | ) | (15 | ) | |||||
Net flows | (9 | ) | (128 | ) | (43 | ) | (44 | ) | (54 | ) | |||||
Change in market value/change in reserve/interest credited | 14 | 25 | 18 | 28 | 37 | ||||||||||
Effect of currency translation | 63 | (220 | ) | 41 | (169 | ) | (338 | ) | |||||||
Ending balance | $ | 3,129 | $ | 3,061 | $ | 3,384 | $ | 3,368 | $ | 3,553 | |||||
TOTAL JAPAN ANNUITY | |||||||||||||||
Beginning balance | $ | 23,191 | $ | 26,230 | $ | 27,289 | $ | 30,487 | $ | 31,624 | |||||
Surrenders | (1,870 | ) | (2,301 | ) | (1,870 | ) | (2,283 | ) | (735 | ) | |||||
Annuity lump sum/payouts | (365 | ) | (318 | ) | (106 | ) | (76 | ) | (63 | ) | |||||
Death benefits/other | (171 | ) | (174 | ) | (167 | ) | (148 | ) | (170 | ) | |||||
Net flows | (2,406 | ) | (2,793 | ) | (2,143 | ) | (2,507 | ) | (968 | ) | |||||
Change in market value/change in reserve/interest credited | (335 | ) | 1,446 | 754 | 944 | 2,439 | |||||||||
Effect of currency translation | 479 | (1,692 | ) | 330 | (1,635 | ) | (2,608 | ) | |||||||
Ending balance | $ | 20,929 | $ | 23,191 | $ | 26,230 | $ | 27,289 | $ | 30,487 |
[1] Variable annuitizations reflect policyholders electing, generally at annuity commencement date, to receive their account value with interest over a series of periodic payments.
[2] Annuity lump sum reflects policyholders electing at annuity commencement date to receive their full account value immediately.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
ANNUITY DEATH AND LIVING BENEFITS
AS OF: | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
U.S. Variable Annuity Business | |||||||||||||||
S&P 500 index value at end of period | 1,872 | 1,848 | 1,682 | 1,606 | 1,569 | ||||||||||
Total account value with guaranteed minimum death benefits (“GMDB”) | $ | 59,547 | $ | 61,812 | $ | 61,512 | $ | 62,579 | $ | 65,500 | |||||
GMDB gross net amount of risk ("NAR") | 4,192 | 4,325 | 4,657 | 5,195 | 5,349 | ||||||||||
% of GMDB NAR reinsured | 77 | % | 76 | % | 75 | % | 72 | % | 72 | % | |||||
GMDB retained NAR [2] | 971 | 1,026 | 1,183 | 1,457 | 1,498 | ||||||||||
GMDB net GAAP liability | 322 | 316 | 301 | 298 | 293 | ||||||||||
Total account value with guaranteed minimum withdrawal benefits (“GMWB”) | $ | 29,036 | $ | 30,262 | $ | 30,907 | $ | 32,035 | $ | 34,106 | |||||
GMWB gross NAR | 163 | 167 | 228 | 344 | 361 | ||||||||||
% of GMWB NAR reinsured | 21 | % | 20 | % | 18 | % | 18 | % | 19 | % | |||||
GMWB retained NAR [2] | 129 | 134 | 187 | 282 | 293 | ||||||||||
GMWB net GAAP (asset) liability | (15 | ) | (3 | ) | 158 | 513 | 651 | ||||||||
Japan Variable Annuity Business | |||||||||||||||
Yen / $ | 103.0 | 105.1 | 98.1 | 99.3 | 94.0 | ||||||||||
Yen / Euro | 141.9 | 144.8 | 132.8 | 129.1 | 120.7 | ||||||||||
Total account value with GMDB | $ | 17,800 | $ | 20,130 | $ | 22,846 | $ | 23,921 | $ | 26,934 | |||||
GMDB gross NAR | 955 | 779 | 1,624 | 2,218 | 3,091 | ||||||||||
% of GMDB NAR reinsured | 30 | % | 29 | % | 23 | % | 21 | % | 20 | % | |||||
GMDB retained NAR | 668 | 552 | 1,250 | 1,760 | 2,467 | ||||||||||
Total account value with guaranteed minimum income benefits (“GMIB”) [1] | $ | 16,309 | $ | 18,483 | $ | 21,102 | $ | 22,174 | $ | 25,129 | |||||
GMIB retained NAR [2] | 164 | 128 | 509 | 851 | 1,280 | ||||||||||
GMDB/GMIB net GAAP liability | 259 | 249 | 336 | 383 | 468 |
[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. 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 GMIB, its GMDB NAR is released. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
VARIABLE ANNUITY GUARANTEED BENEFITS
($ in billions)
As of March 31, 2014 | |||||||||||||
Account Value | Gross Net Amount at Risk | Retained Net Amount at Risk | % of Contracts In the Money[2] | % In the Money[2][3] | |||||||||
U. S. variable annuity [1] | |||||||||||||
GMDB | $ | 59.5 | $ | 4.2 | $ | 1.0 | 17 | % | 23 | % | |||
GMWB | 29.0 | 0.2 | 0.1 | 6 | % | 12 | % | ||||||
Japan variable annuity [1] | |||||||||||||
GMDB | 17.8 | 1.0 | 0.7 | 36 | % | 10 | % | ||||||
GMIB | 16.3 | 0.2 | 0.2 | 26 | % | 4 | % |
As of December 31, 2013 | |||||||||||||
Account Value | Gross Net Amount at Risk | Retained Net Amount at Risk | % of Contracts In the Money[2] | % In the Money[2][3] | |||||||||
U. S. variable annuity [1] | |||||||||||||
GMDB | $ | 61.8 | $ | 4.3 | $ | 1.0 | 16 | % | 26 | % | |||
GMWB | 30.3 | 0.2 | 0.1 | 5 | % | 12 | % | ||||||
Japan variable annuity [1] | |||||||||||||
GMDB | 20.1 | 0.8 | 0.6 | 31 | % | 8 | % | ||||||
GMIB | 18.5 | 0.1 | 0.1 | 20 | % | 3 | % |
[1] | 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 GMIB, its GMDB NAR is released.
[2] | Excludes contracts that are fully reinsured. |
[3] | For all contracts that are “in the money”, this represents the percentage by which the average contract was in the money. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Fee income | $ | 3 | $ | 4 | $ | 2 | $ | 2 | $ | 3 | |||||
Net investment income | 2 | 8 | 6 | — | 13 | ||||||||||
Other revenues | — | 1 | — | — | — | ||||||||||
Net realized capital gains (losses) | (9 | ) | 2 | (5 | ) | 10 | (96 | ) | |||||||
Total revenues | (4 | ) | 15 | 3 | 12 | (80 | ) | ||||||||
Insurance operating costs and other expenses [1] | 12 | 34 | (60 | ) | 14 | 26 | |||||||||
Loss on extinguishment of debt [2] | — | — | — | — | 213 | ||||||||||
Reinsurance loss on dispositions [3] | — | — | — | — | 69 | ||||||||||
Interest expense | 95 | 96 | 94 | 100 | 107 | ||||||||||
Restructuring and other costs | 20 | 15 | 14 | 19 | 16 | ||||||||||
Total expenses | 127 | 145 | 48 | 133 | 431 | ||||||||||
Loss before income taxes | (131 | ) | (130 | ) | (45 | ) | (121 | ) | (511 | ) | |||||
Income tax benefit | (46 | ) | (36 | ) | (17 | ) | (46 | ) | (153 | ) | |||||
Net loss | (85 | ) | (94 | ) | (28 | ) | (75 | ) | (358 | ) | |||||
Less: Restructuring and other costs, after tax | (13 | ) | (10 | ) | (9 | ) | (12 | ) | (10 | ) | |||||
Less: Loss on extinguishment of debt, after tax [2] | — | — | — | — | (138 | ) | |||||||||
Less: Net reinsurance loss on dispositions, after tax [3] | — | — | — | — | (69 | ) | |||||||||
Less: Net realized capital gains (losses), after tax and DAC, excluded from core losses | (9 | ) | 8 | (3 | ) | 6 | (68 | ) | |||||||
Core losses | $ | (63 | ) | $ | (92 | ) | $ | (16 | ) | $ | (69 | ) | $ | (73 | ) |
[1] | In the three months ended September 30, 2013 insurance operating costs and other expenses include a benefit of $57, before tax, for an insurance recovery from the Company's insurers |
for past legal expenses associated with closed litigation and a benefit of $19, before tax, from the resolution of items under the Company's spin-off agreement with its former parent company.
[2] | In the three months ended March 31, 2013 the Company repurchased approximately $800 of outstanding senior notes and debentures. 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.
[3]In the three months ended March 31, 2013 reinsurance loss on dispositions consists of a reduction in goodwill related to the sale of the Retirement Plans business.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE TAX
CONSOLIDATED
THREE MONTHS ENDED | ||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | ||||||
Net Investment Income (Loss) | ||||||||||
Fixed maturities [1] | ||||||||||
Taxable | 511 | 514 | 540 | 548 | 554 | |||||
Tax-exempt | 117 | 118 | 117 | 116 | 116 | |||||
Total fixed maturities | 628 | 632 | 657 | 664 | 670 | |||||
Equity securities, trading | (236 | ) | 1,432 | 878 | 1,189 | 2,562 | ||||
Equity securities, available-for-sale | 7 | 9 | 7 | 8 | 6 | |||||
Mortgage loans | 66 | 70 | 65 | 62 | 65 | |||||
Policy loans | 20 | 21 | 20 | 22 | 20 | |||||
Limited partnerships and other alternative investments [2] | 97 | 80 | 46 | 95 | 66 | |||||
Other [3] | 47 | 50 | 47 | 45 | 58 | |||||
Subtotal | 629 | 2,294 | 1,720 | 2,085 | 3,447 | |||||
Investment expense | (29 | ) | (35 | ) | (30 | ) | (29 | ) | (29 | ) |
Total net investment income | 600 | 2,259 | 1,690 | 2,056 | 3,418 | |||||
Less: Equity securities, trading | (236 | ) | 1,432 | 878 | 1,189 | 2,562 | ||||
Total net investment income, excluding equity securities, trading | 836 | 827 | 812 | 867 | 856 | |||||
Annualized investment yield, before tax [4] | 4.4 | % | 4.3 | % | 4.2 | % | 4.4 | % | 4.3 | % |
Annualized investment yield, after-tax [4] | 3.1 | % | 3.0 | % | 2.9 | % | 3.1 | % | 3.0 | % |
[1] | Includes income on short-term bonds. |
[2] | Alternative investments include 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 are used to hedge fixed maturities. |
[4] | Represents 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, consolidated variable interest entity non-controlling interests, and derivatives book value. 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. Yield calculations for each of the three month periods in 2013 exclude income and assets associated with the disposal of the Hartford Life International Limited business which was sold in December 2013.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE TAX
PROPERTY & CASUALTY COMBINED
THREE MONTHS ENDED | ||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | ||||||
Net Investment Income (Loss) | ||||||||||
Fixed maturities [1] | ||||||||||
Taxable | 166 | 165 | 168 | 175 | 172 | |||||
Tax-exempt | 92 | 92 | 92 | 91 | 92 | |||||
Total fixed maturities | 258 | 257 | 260 | 266 | 264 | |||||
Equity securities, available-for-sale | 3 | 4 | 3 | 4 | 2 | |||||
Mortgage loans | 16 | 16 | 13 | 11 | 12 | |||||
Limited partnerships and other alternative investments [2] | 48 | 46 | 20 | 50 | 39 | |||||
Other [3] | 10 | 12 | 9 | 16 | 3 | |||||
Subtotal | 335 | 335 | 305 | 347 | 320 | |||||
Investment expense | (9 | ) | (11 | ) | (9 | ) | (9 | ) | (8 | ) |
Total net investment income | 326 | 324 | 296 | 338 | 312 | |||||
Annualized investment yield, before tax [4] | 4.5 | % | 4.5 | % | 4.2 | % | 4.8 | % | 4.5 | % |
Annualized investment yield, after-tax [4] | 3.4 | % | 3.5 | % | 3.1 | % | 3.6 | % | 3.5 | % |
[1] | Includes income on short-term bonds. |
[2] | Alternative investments include income on real estate joint ventures and hedge fund investments outside of limited partnerships. |
[3] | Primarily represents income from derivatives that hedge fixed maturities and qualify for hedge accounting. |
[4] | Represents annualized net investment income divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding repurchase |
agreement and dollar roll collateral, consolidated variable interest entity non-controlling interests, and derivatives book value.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET INVESTMENT INCOME BY SEGMENT
CONSOLIDATED
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Net Investment Income (Loss) | |||||||||||||||
Commercial Markets | $ | 256 | $ | 252 | $ | 230 | $ | 262 | $ | 240 | |||||
Consumer Markets | 35 | 36 | 33 | 39 | 37 | ||||||||||
P&C Other Operations | 35 | 36 | 33 | 37 | 35 | ||||||||||
Total Property & Casualty | 326 | 324 | 296 | 338 | 312 | ||||||||||
Group Benefits | 96 | 97 | 96 | 100 | 97 | ||||||||||
Talcott Resolution | 412 | 398 | 414 | 429 | 434 | ||||||||||
Corporate | 2 | 8 | 6 | — | 13 | ||||||||||
Total net investment income, excluding equity securities, trading | $ | 836 | $ | 827 | $ | 812 | $ | 867 | $ | 856 | |||||
Equity securities, trading | (236 | ) | 1,432 | 878 | 1,189 | 2,562 | |||||||||
Total net investment income | $ | 600 | $ | 2,259 | $ | 1,690 | $ | 2,056 | $ | 3,418 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
CONSOLIDATED
THREE MONTHS ENDED | |||||||||||||||
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||
Net Realized Capital Gains (Losses) | |||||||||||||||
Gross gains on sales [1] | $ | 197 | $ | 353 | $ | 106 | $ | 211 | $ | 1,717 | |||||
Gross losses on sales | (148 | ) | (353 | ) | (139 | ) | (118 | ) | (82 | ) | |||||
Net impairment losses | (22 | ) | (14 | ) | (26 | ) | (12 | ) | (21 | ) | |||||
Valuation allowances on mortgage loans | — | (1 | ) | — | — | — | |||||||||
Japan fixed annuity contract hedges, net [2] | (9 | ) | 10 | (8 | ) | 1 | 3 | ||||||||
Periodic net coupon settlements on credit derivatives/Japan [3] | 3 | (4 | ) | 3 | — | (6 | ) | ||||||||
Results of variable annuity hedge program | |||||||||||||||
U.S. GMWB derivatives, net | 15 | 43 | 203 | (31 | ) | 47 | |||||||||
U.S. macro hedge | (10 | ) | (52 | ) | (50 | ) | (47 | ) | (85 | ) | |||||
Total U.S. program | 5 | (9 | ) | 153 | (78 | ) | (38 | ) | |||||||
International program | (32 | ) | (387 | ) | (286 | ) | (742 | ) | (171 | ) | |||||
Total results of variable annuity hedge program | (27 | ) | (396 | ) | (133 | ) | (820 | ) | (209 | ) | |||||
Other net gain (loss) [4] | (80 | ) | 116 | 35 | 90 | 204 | |||||||||
Total net realized capital gains (losses) | $ | (86 | ) | $ | (289 | ) | $ | (162 | ) | $ | (648 | ) | $ | 1,606 | |
Less: Realized gain on dispositions, before tax | — | — | — | 1 | 1,574 | ||||||||||
Less: Realized gains (losses), included in core earnings, before tax | 4 | (3 | ) | 4 | 2 | (5 | ) | ||||||||
Total net realized capital gains (losses) and other, before tax and DAC, excluded from core earnings (losses) | (90 | ) | (286 | ) | (166 | ) | (651 | ) | 37 | ||||||
Less: Impacts of DAC | 16 | (10 | ) | 28 | (6 | ) | (6 | ) | |||||||
Less: Impacts of tax | (36 | ) | (99 | ) | (64 | ) | (232 | ) | 24 | ||||||
Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) | $ | (70 | ) | $ | (177 | ) | $ | (130 | ) | $ | (413 | ) | $ | 19 |
[1] | Includes $1.5 billion of gains for the three months ended March 31, 2013 relating to the sales of the Retirement Plans and Individual Life businesses. |
[2] | 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).
[3] | Included in core earnings. |
[4] | Primarily consists of changes in value of non-qualifying derivatives, Japan 3Win related foreign currency swaps, and transactional foreign currency re-valuation associated with the internal reinsurance of the Japan variable annuity business, which is offset in AOCI. Includes $71 of derivative gains relating to the sales of the Retirement Plans and Individual |
Life businesses for the three months ended March 31, 2013.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
Mar. 31 2014 | Dec. 31 2013 | Sept. 30 2013 | Jun. 30 2013 | Mar. 31 2013 | |||||||||||||||||||||
Amount [1] | Percent | Amount [1] | Percent | Amount [1] | Percent | Amount [1] | Percent | Amount [1] | Percent | ||||||||||||||||
Total investments | $ | 97,084 | 100.0 | % | $ | 98,401 | 100.0 | % | $ | 103,064 | 100.0 | % | $ | 105,520 | 100.0 | % | $ | 114,838 | 100.0 | % | |||||
Less: Equity securities, trading | 17,418 | 17.9 | % | 19,745 | 20.1 | % | 22,343 | 21.7 | % | 23,362 | 22.1 | % | 28,099 | 24.5 | % | ||||||||||
Total investments excluding trading securities | $ | 79,666 | 82.1 | % | $ | 78,656 | 79.9 | % | $ | 80,721 | 78.3 | % | $ | 82,158 | 77.9 | % | $ | 86,739 | 75.5 | % | |||||
Asset-backed securities | $ | 2,252 | 3.6 | % | $ | 2,365 | 3.8 | % | $ | 2,362 | 3.7 | % | $ | 2,453 | 3.8 | % | $ | 2,422 | 3.5 | % | |||||
Collateralized debt obligations | 2,394 | 3.8 | % | 2,387 | 3.8 | % | 2,550 | 4.0 | % | 2,623 | 4.0 | % | 2,558 | 3.7 | % | ||||||||||
Commercial mortgage-backed securities | 4,568 | 7.2 | % | 4,446 | 7.1 | % | 4,489 | 7.0 | % | 4,733 | 7.3 | % | 5,205 | 7.5 | % | ||||||||||
Corporate | 29,040 | 45.8 | % | 28,490 | 45.7 | % | 28,770 | 45.0 | % | 29,666 | 45.7 | % | 31,468 | 45.2 | % | ||||||||||
Foreign government/government agencies | 4,050 | 6.4 | % | 4,104 | 6.6 | % | 3,968 | 6.2 | % | 3,825 | 5.9 | % | 3,927 | 5.6 | % | ||||||||||
Municipal | 12,682 | 20.0 | % | 12,173 | 19.5 | % | 12,543 | 19.6 | % | 12,569 | 19.4 | % | 13,238 | 19.0 | % | ||||||||||
Residential mortgage-backed securities | 4,556 | 7.2 | % | 4,647 | 7.5 | % | 5,086 | 7.9 | % | 5,167 | 8.0 | % | 6,716 | 9.6 | % | ||||||||||
U.S. Treasuries | 3,797 | 6.0 | % | 3,745 | 6.0 | % | 4,255 | 6.6 | % | 3,845 | 5.9 | % | 4,133 | 5.9 | % | ||||||||||
Total fixed maturities, available-for-sale | $ | 63,339 | 100.0 | % | $ | 62,357 | 100.0 | % | $ | 64,023 | 100.0 | % | $ | 64,881 | 100.0 | % | $ | 69,667 | 100.0 | % | |||||
U.S. government/government agencies | $ | 8,194 | 12.9 | % | $ | 8,208 | 13.2 | % | $ | 8,923 | 13.9 | % | $ | 8,588 | 13.2 | % | $ | 10,563 | 15.2 | % | |||||
AAA | 6,410 | 10.1 | % | 6,376 | 10.2 | % | 6,377 | 10.0 | % | 6,638 | 10.2 | % | 7,265 | 10.4 | % | ||||||||||
AA | 12,930 | 20.4 | % | 12,273 | 19.7 | % | 12,923 | 20.2 | % | 13,273 | 20.5 | % | 13,877 | 19.9 | % | ||||||||||
A | 16,084 | 25.4 | % | 15,498 | 24.9 | % | 15,412 | 24.1 | % | 15,514 | 23.9 | % | 17,007 | 24.4 | % | ||||||||||
BBB | 16,006 | 25.3 | % | 16,087 | 25.7 | % | 16,187 | 25.2 | % | 16,570 | 25.6 | % | 17,079 | 24.5 | % | ||||||||||
BB & below | 3,715 | 5.9 | % | 3,915 | 6.3 | % | 4,201 | 6.6 | % | 4,298 | 6.6 | % | 3,876 | 5.6 | % | ||||||||||
Total fixed maturities, available-for-sale | $ | 63,339 | 100.0 | % | $ | 62,357 | 100.0 | % | $ | 64,023 | 100.0 | % | $ | 64,881 | 100.0 | % | $ | 69,667 | 100.0 | % |
[1] | Amount represents the value at which the assets are presented on the Consolidating Balance Sheets. Consolidating Balance Sheets are presented on page 4. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
AS OF MARCH 31, 2014
Cost or Amortized Cost | Fair Value | Percent of Total Invested Assets [1] | ||||||
Top Ten Corporate and Equity, Available-for-sale, Exposures by Sector | ||||||||
Utilities | $ | 5,720 | $ | 6,186 | 7.7 | % | ||
Financial Services | 5,485 | 5,720 | 7.2 | % | ||||
Consumer non-cyclical | 3,594 | 3,915 | 4.9 | % | ||||
Technology and communications | 3,075 | 3,339 | 4.2 | % | ||||
Basic Industry | 2,493 | 2,626 | 3.3 | % | ||||
Energy | 2,312 | 2,523 | 3.2 | % | ||||
Capital goods | 2,086 | 2,269 | 2.8 | % | ||||
Consumer cyclical | 1,880 | 2,020 | 2.5 | % | ||||
Transportation | 939 | 1,008 | 1.3 | % | ||||
Other | 198 | 214 | 0.3 | % | ||||
Total | $ | 27,782 | $ | 29,820 | 37.4 | % | ||
Top Ten Exposures by Issuer [2] | ||||||||
Government of Japan [3] | $ | 2,902 | $ | 2,843 | 3.6 | % | ||
Goldman Sachs Group Inc. | 316 | 335 | 0.4 | % | ||||
State of Illinois | 310 | 321 | 0.4 | % | ||||
State of California | 263 | 288 | 0.4 | % | ||||
JP Morgan Chase & Co. | 301 | 286 | 0.4 | % | ||||
HSBC Holdings PLC | 266 | 270 | 0.3 | % | ||||
National Grid PLC | 241 | 270 | 0.3 | % | ||||
Commonwealth of Massachusetts | 240 | 264 | 0.3 | % | ||||
Bank of America Corp. | 247 | 250 | 0.3 | % | ||||
Verizon Communication Inc. | 200 | 230 | 0.3 | % | ||||
Total | $ | 5,286 | $ | 5,357 | 6.7 | % |
[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, AFS, and fixed maturities, fair value option on the Company’s Consolidating Balance Sheets. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
APPENDIX
BASIS OF PRESENTATION AND DEFINITIONS
All amounts are in millions, except for per share and ratio information unless otherwise stated. Amounts presented throughout this document have been rounded for presentation purposes.
The Hartford Financial Services Group, Inc. (the "Company", "we", or "our") currently conducts business principally in 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.
The consolidating balance sheets and certain balance sheet measures incorporated herein are presented as follows: Life consists of Talcott Resolution, Mutual Funds, Group Benefits, and an Other category. Property & Casualty ("P&C") consists of P&C Commercial, Consumer Markets and P&C Other Operations. Corporate consists of the Corporate category.
Property & Casualty is organized into three reporting segments; P&C Commercial, Consumer Markets and P&C Other Operations ("Property & Casualty Combined"). 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. 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 is comprised of runoff business from the Company's U.S. annuity, international (entirely Japan) annuity, and institutional and private-placement life insurance businesses, as well as the Retirement Plans and Individual Life businesses sold in January 2013 and the U.K. variable annuity business sold in December 2013.
Corporate includes the Company's debt financing and related interest expense, as well as other capital raising activities, certain purchase accounting adjustments and other charges not allocated to the segments.
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 represent the combined effect of rate changes and amount of insurance per unit of exposure since the prior year. 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.
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 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 core earnings to net income (loss) 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.
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.
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 herein on pages 12 and 15, 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.
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 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).
ROA, core earnings is a non-GAAP financial measure that the Company uses to evaluate the Mutual Funds and Talcott Resolution segments' operating performance. ROA is the most directly comparable U.S. GAAP measure. We believe that ROA, core earnings, provides investors with a valuable measure of the performance of these 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.