INVESTOR FINANCIAL SUPPLEMENT
September 30, 2019
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
As of November 1, 2019 | ||||||||
Address: | ||||||||
One Hartford Plaza | A.M. Best | Standard & Poor’s | Moody’s | |||||
Hartford, CT 06155 | Insurance Financial Strength Ratings: | |||||||
Hartford Fire Insurance Company | A+ | A+ | A1 | |||||
Hartford Life and Accident Insurance Company | A | A+ | A2 | |||||
Maxum Casualty Insurance Company | A+ | Not Rated "NR" | NR | |||||
Maxum Indemnity Company | A+ | NR | NR | |||||
Navigators Insurance Company | A+ | A | NR | |||||
Navigators Specialty Insurance Company | A+ | A | NR | |||||
Navigators International Insurance Company Ltd. | A | A | NR | |||||
Assurances Continentales – Continentale Verzekeringen NV | NR | A- | NR | |||||
- Hartford Fire Insurance Company ratings are on stable outlook at A.M. Best, Moody’s, and Standard and Poor’s | ||||||||
- Hartford Life and Accident Insurance Company ratings are on stable outlook at A.M. Best, Moody’s, and Standard and Poor’s | ||||||||
Internet address: | - Maxum Casualty Insurance Company and Maxum Indemnity Company ratings are on stable outlook at A.M. Best | |||||||
http://www.thehartford.com | - Navigators Insurance Company and Navigators Specialty Insurance Company, are on positive outlook at A.M. Best and on stable outlook at Standard and Poor's | |||||||
- Navigators International Insurance Co. Ltd. is on stable outlook at A.M. Best and Standard and Poor's | ||||||||
- Assurances Continentales - Continentale Verzekeringen, a Belgium domiciled insurance subsidiary, is on stable outlook at Standard and Poor's | ||||||||
Other Ratings: | ||||||||
The Hartford Financial Services Group, Inc.: | ||||||||
Senior debt | a- | BBB+ | Baa1 | |||||
Contact: | Commercial paper | AMB-1 | A-2 | P-2 | ||||
Susan Spivak Bernstein | Preferred stock | bbb | BBB- | Baa3 | ||||
Senior Vice President | Junior subordinated debentures | bbb | BBB- | Baa2 | ||||
Investor Relations | ||||||||
Phone (860) 547-6233 | ||||||||
- Hartford Financial Services Group, Inc. senior debt and junior subordinated debentures are on stable outlook at A.M. Best, Standard and Poor’s, and Moody's. | ||||||||
TRANSFER AGENT | ||||||||
Stockholder correspondence should be mailed to: | Overnight correspondence should be mailed to: | |||||||
Computershare | Computershare | |||||||
P.O. Box 505000 | 462 South 4th Street, Suite 1600 | |||||||
Louisville, KY 40233 | Louisville, KY 40202 | |||||||
Common stock and preferred stock of The Hartford Financial Services Group, Inc. are traded on the New York Stock Exchange under the symbols “HIG” and "HIG PS G", 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 |
Consolidated Statements of Operations | 2 | |
Operating Results by Segment | 3 | |
Consolidating Balance Sheets | 4 | |
Capital Structure | 5 | |
Statutory Capital to GAAP Stockholders’ Equity Reconciliation | 6 | |
Accumulated Other Comprehensive Income (Loss) | 7 | |
PROPERTY & CASUALTY | Property & Casualty Income Statements | 8 |
Property & Casualty Underwriting Ratios and Results | 9 | |
Commercial Lines Income Statements | 10 | |
Commercial Lines Underwriting Ratios | 12 | |
Commercial Lines Supplemental Data | 13 | |
Personal Lines Income Statements | 14 | |
Personal Lines Underwriting Ratios | 16 | |
Personal Lines Supplemental Data | 17 | |
P&C Other Operations Income Statements | 19 | |
GROUP BENEFITS | Income Statements | 20 |
Supplemental Data | 21 | |
HARTFORD FUNDS | Income Statements | 22 |
Asset Value Rollforward - Assets Under Management By Asset Class | 23 | |
CORPORATE | Income Statements | 24 |
INVESTMENTS | Investment Earnings Before Tax - Consolidated | 25 |
Investment Earnings Before Tax - Property & Casualty | 26 | |
Investment Earnings Before Tax - Group Benefits | 27 | |
Net Investment Income | 28 | |
Components of Net Realized Capital Gains (Losses) | 29 | |
Composition of Invested Assets | 30 | |
Invested Asset Exposures | 31 | |
APPENDIX | Basis of Presentation and Definitions | 32 |
Discussion of Non-GAAP and Other Financial Measures | 33 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
HIGHLIGHTS | ||||||||||||||||||||||||||||
Income from continuing operations, net of tax, available to common stockholders [1] | $ | 524 | $ | 372 | $ | 625 | $ | 190 | $ | 427 | $ | 434 | $ | 428 | $ | 1,521 | $ | 1,289 | ||||||||||
Net income | $ | 535 | $ | 372 | $ | 630 | $ | 196 | $ | 432 | $ | 582 | $ | 597 | $ | 1,537 | $ | 1,611 | ||||||||||
Net income available to common stockholders | $ | 524 | $ | 372 | $ | 625 | $ | 190 | $ | 432 | $ | 582 | $ | 597 | $ | 1,521 | $ | 1,611 | ||||||||||
Core earnings * | $ | 548 | $ | 485 | $ | 507 | $ | 284 | $ | 418 | $ | 412 | $ | 461 | $ | 1,540 | $ | 1,291 | ||||||||||
Total revenues | $ | 5,347 | $ | 5,092 | $ | 4,940 | $ | 4,633 | $ | 4,842 | $ | 4,789 | $ | 4,691 | $ | 15,379 | $ | 14,322 | ||||||||||
Total assets | $70,256 | $69,472 | $63,324 | $62,307 | $61,437 | $60,775 | $216,666 | |||||||||||||||||||||
PER SHARE AND SHARES DATA | ||||||||||||||||||||||||||||
Basic earnings per common share | ||||||||||||||||||||||||||||
Income from continuing operations, net of tax, available to common stockholders [1] | $ | 1.45 | $ | 1.03 | $ | 1.74 | $ | 0.53 | $ | 1.19 | $ | 1.21 | $ | 1.20 | $ | 4.21 | $ | 3.60 | ||||||||||
Net income available to common stockholders | $ | 1.45 | $ | 1.03 | $ | 1.74 | $ | 0.53 | $ | 1.20 | $ | 1.62 | $ | 1.67 | $ | 4.21 | $ | 4.50 | ||||||||||
Core earnings* | $ | 1.52 | $ | 1.34 | $ | 1.41 | $ | 0.79 | $ | 1.17 | $ | 1.15 | $ | 1.29 | $ | 4.27 | $ | 3.61 | ||||||||||
Diluted earnings per common share | ||||||||||||||||||||||||||||
Income from continuing operations, net of tax, available to common stockholders [1] | $ | 1.43 | $ | 1.02 | $ | 1.71 | $ | 0.52 | $ | 1.17 | $ | 1.19 | $ | 1.18 | $ | 4.17 | $ | 3.54 | ||||||||||
Net income available to common stockholders | $ | 1.43 | $ | 1.02 | $ | 1.71 | $ | 0.52 | $ | 1.19 | $ | 1.60 | $ | 1.64 | $ | 4.17 | $ | 4.42 | ||||||||||
Core earnings* | $ | 1.50 | $ | 1.33 | $ | 1.39 | $ | 0.78 | $ | 1.15 | $ | 1.13 | $ | 1.27 | $ | 4.22 | $ | 3.55 | ||||||||||
Weighted average common shares outstanding (basic) | 361.4 | 361.4 | 360.0 | 359.1 | 358.6 | 358.3 | 357.5 | 361.0 | 358.1 | |||||||||||||||||||
Dilutive effect of stock compensation | 4.0 | 3.2 | 3.3 | 3.2 | 3.6 | 4.0 | 4.4 | 3.4 | 4.0 | |||||||||||||||||||
Dilutive effect of warrants [2] | — | 0.5 | 1.4 | 1.7 | 1.9 | 1.9 | 2.0 | 0.7 | 2.0 | |||||||||||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted) | 365.4 | 365.1 | 364.7 | 364.0 | 364.1 | 364.2 | 363.9 | 365.1 | 364.1 | |||||||||||||||||||
Common shares outstanding | 361.0 | 361.6 | 360.9 | 359.2 | 358.7 | 358.4 | 358.1 | |||||||||||||||||||||
Book value per common share | $ | 43.61 | $ | 41.37 | $ | 38.81 | $ | 35.54 | $ | 35.49 | $ | 35.01 | $ | 36.70 | ||||||||||||||
Per common share impact of accumulated other comprehensive income [3] | $ | 0.59 | $ | (0.54 | ) | $ | (2.45 | ) | $ | (4.40 | ) | $ | (4.23 | ) | $ | (3.77 | ) | $ | (0.67 | ) | ||||||||
Book value per common share (excluding AOCI)* | $ | 43.02 | $ | 41.91 | $ | 41.26 | $ | 39.94 | $ | 39.72 | $ | 38.78 | $ | 37.37 | ||||||||||||||
Book value per diluted share | $ | 43.13 | $ | 41.00 | $ | 38.36 | $ | 35.06 | $ | 34.95 | $ | 34.44 | $ | 36.06 | ||||||||||||||
Per diluted share impact of AOCI | $ | 0.58 | $ | (0.55 | ) | $ | (2.43 | ) | $ | (4.34 | ) | $ | (4.17 | ) | $ | (3.71 | ) | $ | (0.65 | ) | ||||||||
Book value per diluted share (excluding AOCI)* | $ | 42.55 | $ | 41.55 | $ | 40.79 | $ | 39.40 | $ | 39.12 | $ | 38.15 | $ | 36.71 | ||||||||||||||
Common shares outstanding and dilutive potential common shares | 365.0 | 364.8 | 365.1 | 364.1 | 364.2 | 364.3 | 364.5 | |||||||||||||||||||||
RETURN ON COMMON STOCKHOLDER'S EQUITY ("ROE") [4] | ||||||||||||||||||||||||||||
Net income (loss) available to common stockholders' ROE ("Net income (loss) ROE") | 12.0 | % | 11.8 | % | 13.5 | % | 13.7 | % | (14.0 | %) | (15.4 | %) | (19.3 | )% | ||||||||||||||
Core earnings ROE* | 12.3 | % | 11.7 | % | 11.5 | % | 11.6 | % | 10.3 | % | 8.4 | % | 7.8 | % |
[1] | Income from continuing operations, net of tax, available to common stockholders includes the impact of preferred stock dividends. |
[2] | On June 26, 2019, the Capital Purchase Program warrants issued in 2009 expired. |
[3] | Accumulated other comprehensive income ("AOCI") represents net of 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. |
[4] | For reconciliation of Net income (loss) ROE to Core earnings ROE, see Appendix, page 33. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Earned premiums | $ | 4,394 | $ | 4,166 | $ | 3,940 | $ | 3,997 | $ | 3,987 | $ | 3,958 | $ | 3,927 | $ | 12,500 | $ | 11,872 | ||||||||||
Fee income | 330 | 326 | 314 | 319 | 344 | 327 | 323 | 970 | 994 | |||||||||||||||||||
Net investment income | 490 | 488 | 470 | 457 | 444 | 428 | 451 | 1,448 | 1,323 | |||||||||||||||||||
Realized capital gains (losses): | ||||||||||||||||||||||||||||
Total other-than-temporary impairment (“OTTI”) losses | (1 | ) | — | (4 | ) | (1 | ) | (4 | ) | — | (2 | ) | (5 | ) | (6 | ) | ||||||||||||
OTTI losses recognized in other comprehensive income | — | — | 2 | 1 | 3 | — | 2 | 2 | 5 | |||||||||||||||||||
Net OTTI losses recognized in earnings | (1 | ) | — | (2 | ) | — | (1 | ) | — | — | (3 | ) | (1 | ) | ||||||||||||||
Other net realized capital gains (losses) | 90 | 80 | 165 | (172 | ) | 39 | 52 | (30 | ) | 335 | 61 | |||||||||||||||||
Total net realized capital gains (losses) | 89 | 80 | 163 | (172 | ) | 38 | 52 | (30 | ) | 332 | 60 | |||||||||||||||||
Other revenues | 44 | 32 | 53 | 32 | 29 | 24 | 20 | 129 | 73 | |||||||||||||||||||
Total revenues | 5,347 | 5,092 | 4,940 | 4,633 | 4,842 | 4,789 | 4,691 | 15,379 | 14,322 | |||||||||||||||||||
Benefits, losses and loss adjustment expenses | 2,914 | 2,934 | 2,685 | 2,946 | 2,786 | 2,738 | 2,695 | 8,533 | 8,219 | |||||||||||||||||||
Amortization of deferred acquisition costs ("DAC") | 437 | 392 | 355 | 350 | 348 | 344 | 342 | 1,184 | 1,034 | |||||||||||||||||||
Insurance operating costs and other expenses | 1,167 | 1,141 | 1,048 | 1,086 | 1,091 | 1,067 | 1,037 | 3,356 | 3,195 | |||||||||||||||||||
Loss on extinguishment of debt [1] | 90 | — | — | — | — | 6 | — | 90 | 6 | |||||||||||||||||||
Loss on reinsurance transaction | — | 91 | — | — | — | — | — | 91 | — | |||||||||||||||||||
Interest expense | 67 | 63 | 64 | 70 | 69 | 79 | 80 | 194 | 228 | |||||||||||||||||||
Amortization of other intangible assets | 19 | 15 | 13 | 14 | 18 | 18 | 18 | 47 | 54 | |||||||||||||||||||
Total benefits, losses and expenses | 4,694 | 4,636 | 4,165 | 4,466 | 4,312 | 4,252 | 4,172 | 13,495 | 12,736 | |||||||||||||||||||
Income from continuing operations, before tax | 653 | 456 | 775 | 167 | 530 | 537 | 519 | 1,884 | 1,586 | |||||||||||||||||||
Income tax expense (benefit) | 118 | 84 | 145 | (29 | ) | 103 | 103 | 91 | 347 | 297 | ||||||||||||||||||
Income from continuing operations, net of tax | 535 | 372 | 630 | 196 | 427 | 434 | 428 | 1,537 | 1,289 | |||||||||||||||||||
Income from discontinued operations, net of tax | — | — | — | — | 5 | 148 | 169 | — | 322 | |||||||||||||||||||
Net income | 535 | 372 | 630 | 196 | 432 | 582 | 597 | 1,537 | 1,611 | |||||||||||||||||||
Preferred stock dividends [2] | 11 | — | 5 | 6 | — | — | — | 16 | — | |||||||||||||||||||
Net income available to common stockholders | 524 | 372 | 625 | 190 | 432 | 582 | 597 | 1,521 | 1,611 | |||||||||||||||||||
Adjustments to reconcile net income available to common stockholders to core earnings: | ||||||||||||||||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | (88 | ) | (79 | ) | (160 | ) | 175 | (37 | ) | (50 | ) | 30 | (327 | ) | (57 | ) | ||||||||||||
Loss on extinguishment of debt, before tax | 90 | — | — | — | — | 6 | — | 90 | 6 | |||||||||||||||||||
Loss on reinsurance transaction, before tax | — | 91 | — | — | — | — | — | 91 | — | |||||||||||||||||||
Integration and transaction costs associated with acquired business, before tax [3] | 29 | 31 | 10 | 12 | 12 | 11 | 12 | 70 | 35 | |||||||||||||||||||
Change in loss reserves upon acquisition of a business, before tax [4] | — | 97 | — | — | — | — | — | 97 | — | |||||||||||||||||||
Income tax expense (benefit) [5] | (7 | ) | (27 | ) | 32 | (93 | ) | 16 | 11 | (9 | ) | (2 | ) | 18 | ||||||||||||||
Income from discontinued operations, net of tax | — | — | — | — | (5 | ) | (148 | ) | (169 | ) | — | (322 | ) | |||||||||||||||
Core earnings | $ | 548 | $ | 485 | $ | 507 | $ | 284 | $ | 418 | $ | 412 | $ | 461 | $ | 1,540 | $ | 1,291 |
[1] | For the September 30, 2019 periods, amount relates to the redemptions of $265 of 5.75% senior notes that had been assumed in the Navigators Group acquisition and $800 of 5.125% senior notes of The Hartford Financial Services Group, Inc. |
[2] | No preferred stock dividends were declared in second quarter 2019. Preferred stock dividends of $5 and $6 were declared on July 18, 2019 and September 12, 2019, respectively, and were recognized in third quarter 2019. |
[3] | The three and nine month periods ended September 30, 2019 included Navigators Group acquisition transaction expenses of $1 and $16, respectively, Navigators integration costs of $19 and $26, respectively and integration costs related to the 2017 acquisition of Aetna's group benefits business of $9 and $28, respectively. Periods prior to the second quarter of 2019 represent integration costs related to the 2017 acquisition of Aetna's group benefits business. |
[4] | Included in net income for the three months ended June 30, 2019 and nine months ended September 30, 2019 was $68 of prior accident year reserve increases and $29 of current accident year reserve increases upon acquisition of Navigators Group and a review of Navigators Insurers reserves. |
[5] | Generally represents federal income tax expense (benefit) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Net income (loss): | ||||||||||||||||||||||||||||
Commercial Lines | $ | 336 | $ | 191 | $ | 363 | $ | 253 | $ | 289 | $ | 372 | $ | 298 | $ | 890 | $ | 959 | ||||||||||
Personal Lines | 94 | 62 | 96 | (178 | ) | 51 | 6 | 89 | 252 | 146 | ||||||||||||||||||
P&C Other Operations | 18 | 11 | 23 | (16 | ) | 9 | 5 | 17 | 52 | 31 | ||||||||||||||||||
Property & Casualty ("P&C") | 448 | 264 | 482 | 59 | 349 | 383 | 404 | 1,194 | 1,136 | |||||||||||||||||||
Group Benefits | 146 | 113 | 118 | 113 | 77 | 96 | 54 | 377 | 227 | |||||||||||||||||||
Hartford Funds | 40 | 38 | 30 | 36 | 41 | 37 | 34 | 108 | 112 | |||||||||||||||||||
Sub-total | 634 | 415 | 630 | 208 | 467 | 516 | 492 | 1,679 | 1,475 | |||||||||||||||||||
Corporate [1] | (99 | ) | (43 | ) | — | (12 | ) | (35 | ) | 66 | 105 | (142 | ) | 136 | ||||||||||||||
Net income | 535 | 372 | 630 | 196 | 432 | 582 | 597 | 1,537 | 1,611 | |||||||||||||||||||
Preferred stock dividends | 11 | — | 5 | 6 | — | — | — | 16 | — | |||||||||||||||||||
Net income available to common stockholders | $ | 524 | $ | 372 | $ | 625 | $ | 190 | $ | 432 | $ | 582 | $ | 597 | $ | 1,521 | $ | 1,611 | ||||||||||
Core earnings (losses): | ||||||||||||||||||||||||||||
Commercial Lines | $ | 303 | $ | 304 | $ | 274 | $ | 337 | $ | 265 | $ | 341 | $ | 302 | $ | 881 | $ | 908 | ||||||||||
Personal Lines | 87 | 55 | 82 | (166 | ) | 47 | 2 | 89 | 224 | 138 | ||||||||||||||||||
P&C Other Operations | 15 | 8 | 16 | (15 | ) | 8 | 3 | 17 | 39 | 28 | ||||||||||||||||||
P&C | 405 | 367 | 372 | 156 | 320 | 346 | 408 | 1,144 | 1,074 | |||||||||||||||||||
Group Benefits | 141 | 115 | 122 | 136 | 102 | 104 | 85 | 378 | 291 | |||||||||||||||||||
Hartford Funds | 39 | 38 | 28 | 38 | 41 | 38 | 34 | 105 | 113 | |||||||||||||||||||
Sub-total | 585 | 520 | 522 | 330 | 463 | 488 | 527 | 1,627 | 1,478 | |||||||||||||||||||
Corporate | (37 | ) | (35 | ) | (15 | ) | (46 | ) | (45 | ) | (76 | ) | (66 | ) | (87 | ) | (187 | ) | ||||||||||
Core earnings | $ | 548 | $ | 485 | $ | 507 | $ | 284 | $ | 418 | $ | 412 | $ | 461 | $ | 1,540 | $ | 1,291 |
[1] | For the first three quarters of 2018, includes income (loss) from discontinued operations from the life and annuity business sold in May 2018. For the three months ended September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018, includes $14, $3, $28, and $6, respectively, of before tax income from the Company's retained 9.7% equity interest in the limited partnership that acquired the life and annuity business sold in May 2018. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
PROPERTY & CASUALTY | GROUP BENEFITS | HARTFORD FUNDS | CORPORATE | CONSOLIDATED | ||||||||||||||||||||||||||||||
Sept 30 2019 | Dec 31 2018 | Sept 30 2019 | Dec 31 2018 | Sept 30 2019 | Dec 31 2018 | Sept 30 2019 | Dec 31 2018 | Sept 30 2019 | Dec 31 2018 | |||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value | $ | 31,270 | $ | 24,763 | $ | 10,495 | $ | 9,876 | $ | 36 | $ | 28 | $ | 588 | $ | 985 | $ | 42,389 | $ | 35,652 | ||||||||||||||
Fixed maturities, at fair value using the fair value option | 35 | 16 | 4 | 6 | — | — | — | — | 39 | 22 | ||||||||||||||||||||||||
Equity securities, at fair value | 1,094 | 920 | 76 | 64 | 44 | 51 | 200 | 179 | 1,414 | 1,214 | ||||||||||||||||||||||||
Mortgage loans | 2,636 | 2,603 | 1,100 | 1,101 | — | — | — | — | 3,736 | 3,704 | ||||||||||||||||||||||||
Limited partnerships and other alternative investments | 1,477 | 1,458 | 293 | 265 | — | — | — | — | 1,770 | 1,723 | ||||||||||||||||||||||||
Other investments | 135 | 78 | 8 | 10 | 12 | — | 147 | 104 | 302 | 192 | ||||||||||||||||||||||||
Short-term investments | 1,453 | 1,081 | 328 | 398 | 204 | 197 | 942 | 2,607 | 2,927 | 4,283 | ||||||||||||||||||||||||
Total investments [1] | 38,100 | 30,919 | 12,304 | 11,720 | 296 | 276 | 1,877 | 3,875 | 52,577 | 46,790 | ||||||||||||||||||||||||
Cash | 162 | 88 | 37 | 12 | 6 | 7 | 2 | 5 | 207 | 112 | ||||||||||||||||||||||||
Restricted cash | 79 | 3 | 4 | 6 | — | — | — | — | 83 | 9 | ||||||||||||||||||||||||
Premiums receivable and agents’ balances | 4,104 | 3,565 | 476 | 430 | — | — | — | — | 4,580 | 3,995 | ||||||||||||||||||||||||
Reinsurance recoverables [2] | 4,766 | 3,774 | 244 | 251 | — | — | 323 | 332 | 5,333 | 4,357 | ||||||||||||||||||||||||
DAC | 714 | 612 | 51 | 52 | 7 | 6 | — | — | 772 | 670 | ||||||||||||||||||||||||
Deferred income taxes | (219 | ) | 180 | (190 | ) | (26 | ) | 7 | 7 | 778 | 1,087 | 376 | 1,248 | |||||||||||||||||||||
Goodwill | 780 | 157 | 723 | 723 | 181 | 180 | 229 | 230 | 1,913 | 1,290 | ||||||||||||||||||||||||
Property and equipment, net | 1,018 | 826 | 90 | 101 | 14 | — | 72 | 79 | 1,194 | 1,006 | ||||||||||||||||||||||||
Other intangible assets | 587 | 87 | 529 | 559 | 10 | 11 | — | — | 1,126 | 657 | ||||||||||||||||||||||||
Other assets | 1,169 | 1,013 | 284 | 286 | 88 | 96 | 554 | 778 | 2,095 | 2,173 | ||||||||||||||||||||||||
Total assets | $ | 51,260 | $ | 41,224 | $ | 14,552 | $ | 14,114 | $ | 609 | $ | 583 | $ | 3,835 | $ | 6,386 | $ | 70,256 | $ | 62,307 | ||||||||||||||
Unpaid losses and loss adjustment expenses | $ | 27,897 | $ | 24,584 | $ | 8,291 | $ | 8,445 | $ | — | $ | — | $ | — | $ | — | $ | 36,188 | $ | 33,029 | ||||||||||||||
Reserves for future policy benefits [2] | — | — | 414 | 427 | — | — | 231 | 215 | 645 | 642 | ||||||||||||||||||||||||
Other policyholder funds and benefits payable [2] | — | — | 464 | 455 | — | — | 300 | 312 | 764 | 767 | ||||||||||||||||||||||||
Unearned premiums | 6,775 | 5,239 | 45 | 43 | — | — | — | — | 6,820 | 5,282 | ||||||||||||||||||||||||
Debt | — | — | — | — | — | — | 4,846 | 4,678 | 4,846 | 4,678 | ||||||||||||||||||||||||
Other liabilities | 2,244 | 1,930 | 386 | 516 | 207 | 203 | 2,078 | 2,159 | 4,915 | 4,808 | ||||||||||||||||||||||||
Total liabilities | 36,916 | 31,753 | 9,600 | 9,886 | 207 | 203 | 7,455 | 7,364 | 54,178 | 49,206 | ||||||||||||||||||||||||
Common stockholders' equity, excluding AOCI | 13,089 | 9,389 | 4,460 | 4,303 | 402 | 380 | (2,421 | ) | 274 | 15,530 | 14,346 | |||||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | 334 | 334 | 334 | 334 | ||||||||||||||||||||||||
AOCI, net of tax | 1,255 | 82 | 492 | (75 | ) | — | — | (1,533 | ) | (1,586 | ) | 214 | (1,579 | ) | ||||||||||||||||||||
Total stockholders' equity | 14,344 | 9,471 | 4,952 | 4,228 | 402 | 380 | (3,620 | ) | (978 | ) | 16,078 | 13,101 | ||||||||||||||||||||||
Total liabilities and equity | $ | 51,260 | $ | 41,224 | $ | 14,552 | $ | 14,114 | $ | 609 | $ | 583 | $ | 3,835 | $ | 6,386 | $ | 70,256 | $ | 62,307 |
[1] | Corporate includes fixed maturities, cash, and short-term investments of $1.3 billion and $3.4 billion as of September 30, 2019 and December 31, 2018, respectively, held by the holding company of The Hartford Financial Services Group, Inc. Corporate also includes investments held by Hartford Life and Accident Insurance Company (HLA) that support reserves for run-off structured settlement and terminal funding agreement liabilities. |
[2] | Corporate includes reserves and reinsurance recoverables for run-off structured settlement and terminal funding agreement liabilities. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | |||||||||||||||
DEBT | |||||||||||||||||||||
Short-term debt | $ | 500 | $ | 500 | $ | 499 | $ | 413 | $ | 413 | $ | 413 | $ | 413 | |||||||
Senior notes | 3,257 | 2,961 | 2,678 | 3,176 | 3,174 | 3,173 | 3,172 | ||||||||||||||
Junior subordinated debentures | 1,089 | 1,089 | 1,089 | 1,089 | 1,089 | 1,089 | 1,583 | ||||||||||||||
Total debt | $ | 4,846 | $ | 4,550 | $ | 4,266 | $ | 4,678 | $ | 4,676 | $ | 4,675 | $ | 5,168 | |||||||
STOCKHOLDERS’ EQUITY | |||||||||||||||||||||
Common stockholders' equity, excluding AOCI | $ | 15,530 | $ | 15,156 | $ | 14,891 | $ | 14,346 | $ | 14,248 | $ | 13,899 | $ | 13,382 | |||||||
Preferred stock | 334 | 334 | 334 | 334 | — | — | — | ||||||||||||||
AOCI | 214 | (198 | ) | (885 | ) | (1,579 | ) | (1,519 | ) | (1,353 | ) | (239 | ) | ||||||||
Total stockholders’ equity | $ | 16,078 | $ | 15,292 | $ | 14,340 | $ | 13,101 | $ | 12,729 | $ | 12,546 | $ | 13,143 | |||||||
CAPITALIZATION | |||||||||||||||||||||
Total capitalization, including AOCI, net of tax | $ | 20,924 | $ | 19,842 | $ | 18,606 | $ | 17,779 | $ | 17,405 | $ | 17,221 | $ | 18,311 | |||||||
Total capitalization, excluding AOCI, net of tax | $ | 20,710 | $ | 20,040 | $ | 19,491 | $ | 19,358 | $ | 18,924 | $ | 18,574 | $ | 18,550 | |||||||
DEBT TO CAPITALIZATION RATIOS | |||||||||||||||||||||
Total debt to capitalization, including AOCI | 23.2 | % | 22.9 | % | 22.9 | % | 26.3 | % | 26.9 | % | 27.1 | % | 28.2 | % | |||||||
Total debt to capitalization, excluding AOCI | 23.4 | % | 22.7 | % | 21.9 | % | 24.2 | % | 24.7 | % | 25.2 | % | 27.9 | % | |||||||
Total debt and preferred stock to capitalization, including AOCI | 24.8 | % | 24.6 | % | 24.7 | % | 28.2 | % | 26.9 | % | 27.1 | % | 28.2 | % | |||||||
Total debt and preferred stock to capitalization, excluding AOCI | 25.0 | % | 24.4 | % | 23.6 | % | 25.9 | % | 24.7 | % | 25.2 | % | 27.9 | % | |||||||
Total rating agency adjusted debt to capitalization [1] [2] | 26.6 | % | 26.6 | % | 25.7 | % | 29.2 | % | 29.4 | % | 29.7 | % | 29.9 | % | |||||||
FIXED CHARGE COVERAGE RATIOS | |||||||||||||||||||||
Total earnings to total fixed charges [3] | 9.7:1 | 10.1:1 | 11.9:1 | 6.4:1 | 7.6:1 | 7.4:1 | 7.1:1 |
[1] | The leverage calculation reflects adjustments related to the Company’s defined benefit plans' unfunded pension liability, the Company's rental expense on operating leases and uncollateralized letters of credit for Lloyd's of London for a total adjustment of $1.1 billion and $1.0 billion as of September 30, 2019 and 2018, respectively. |
[2] | Reflects 25% equity credit for the Company's outstanding junior subordinated debentures and 50% equity credit for the Company’s outstanding preferred stock. |
[3] | Calculated as year to date total earnings divided by year to date total fixed charges. Total earnings represent income from continuing operations before income taxes and total fixed charges (excluding the impact of preferred stock dividends), less undistributed earnings from limited partnerships and other alternative investments. Total fixed charges include interest expense, preferred stock dividends, interest factor attributable to rent expense, capitalized interest and amortization of debt issuance costs. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY CAPITAL TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
SEPTEMBER 30, 2019
P&C | GROUP BENEFITS | |||||
U.S. statutory net income [1][5] | $ | 1,129 | $ | 359 | ||
U.S. statutory capital [2][5] | $ | 9,756 | $ | 2,566 | ||
U.S. GAAP adjustments: | ||||||
DAC | 784 | 51 | ||||
Non-admitted deferred tax assets [3] | 158 | 172 | ||||
Deferred taxes [4] | (933 | ) | (509 | ) | ||
Goodwill | 119 | 723 | ||||
Other intangible assets | 79 | 529 | ||||
Non-admitted assets other than deferred taxes | 678 | 135 | ||||
Asset valuation and interest maintenance reserve | — | 231 | ||||
Benefit reserves | (56 | ) | (37 | ) | ||
Unrealized gains on investments | 1,553 | 679 | ||||
Other, net | 1,015 | 412 | ||||
U.S. GAAP stockholders’ equity of U.S. insurance entities [5] | 13,153 | 4,952 | ||||
U.S. GAAP stockholders’ equity of international subsidiaries as well as goodwill and other intangible assets related to the acquisition of Navigators Group | 1,191 | — | ||||
Total U.S. GAAP stockholders’ equity | $ | 14,344 | $ | 4,952 |
[1] | Statutory net income is for the nine months ended September 30, 2019. |
[2] | For reporting purposes, statutory capital and surplus is referred to collectively as "statutory capital". |
[3] | Represents the limitations on the recognition of deferred tax assets under U.S. statutory accounting principles ("U.S. STAT"). |
[4] | Represents the tax timing differences between U.S. GAAP and U.S. STAT. |
[5] | Excludes insurance operations in the U.K. and continental Europe. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
AS OF | |||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | |||||||||||||||
Fixed maturities net unrealized gain | $ | 1,768 | $ | 1,367 | $ | 703 | $ | 24 | $ | 40 | $ | 211 | $ | 1,349 | |||||||
OTTI losses recognized in AOCI | (3 | ) | (3 | ) | (3 | ) | (4 | ) | (4 | ) | (3 | ) | (5 | ) | |||||||
Net gains (losses) on cash flow hedging instruments | 17 | 11 | — | (5 | ) | (17 | ) | (12 | ) | (24 | ) | ||||||||||
Total net unrealized gain | $ | 1,782 | $ | 1,375 | $ | 700 | $ | 15 | $ | 19 | $ | 196 | $ | 1,320 | |||||||
Foreign currency translation adjustments | 30 | 34 | 31 | 30 | 34 | 33 | 32 | ||||||||||||||
Pension and other postretirement plan adjustments | (1,598 | ) | (1,607 | ) | (1,616 | ) | (1,624 | ) | (1,572 | ) | (1,582 | ) | (1,591 | ) | |||||||
Total AOCI | $ | 214 | $ | (198 | ) | $ | (885 | ) | $ | (1,579 | ) | $ | (1,519 | ) | $ | (1,353 | ) | $ | (239 | ) |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Written premiums | $ | 3,057 | $ | 2,902 | $ | 2,720 | $ | 2,554 | $ | 2,605 | $ | 2,591 | $ | 2,658 | $ | 8,679 | $ | 7,854 | ||||||||||
Change in unearned premium reserve | 4 | 114 | 144 | (87 | ) | (29 | ) | (10 | ) | 88 | 262 | 49 | ||||||||||||||||
Earned premiums | 3,053 | 2,788 | 2,576 | 2,641 | 2,634 | 2,601 | 2,570 | 8,417 | 7,805 | |||||||||||||||||||
Fee income | 17 | 19 | 18 | 18 | 19 | 18 | 19 | 54 | 56 | |||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Current accident year before catastrophes [1] | 1,867 | 1,696 | 1,537 | 1,595 | 1,620 | 1,534 | 1,537 | 5,100 | 4,691 | |||||||||||||||||||
Current accident year catastrophes | 106 | 138 | 104 | 361 | 169 | 188 | 103 | 348 | 460 | |||||||||||||||||||
Prior accident year development [1] | (47 | ) | 35 | (11 | ) | (28 | ) | (60 | ) | (47 | ) | (32 | ) | (23 | ) | (139 | ) | |||||||||||
Total losses and loss adjustment expenses | 1,926 | 1,869 | 1,630 | 1,928 | 1,729 | 1,675 | 1,608 | 5,425 | 5,012 | |||||||||||||||||||
Amortization of DAC | 420 | 375 | 339 | 334 | 332 | 329 | 328 | 1,134 | 989 | |||||||||||||||||||
Underwriting expenses | 567 | 550 | 495 | 516 | 511 | 495 | 470 | 1,612 | 1,476 | |||||||||||||||||||
Amortization of other intangible assets | 8 | 4 | 3 | 2 | 3 | 2 | 1 | 15 | 6 | |||||||||||||||||||
Dividends to policyholders | 12 | 6 | 6 | 5 | 8 | 6 | 4 | 24 | 18 | |||||||||||||||||||
Underwriting gain (loss)* [2] | 137 | 3 | 121 | (126 | ) | 70 | 112 | 178 | 261 | 360 | ||||||||||||||||||
Net investment income | 358 | 348 | 323 | 308 | 311 | 301 | 322 | 1,029 | 934 | |||||||||||||||||||
Net realized capital gains (losses) | 73 | 66 | 143 | (132 | ) | 37 | 50 | (9 | ) | 282 | 78 | |||||||||||||||||
Loss on reinsurance transaction | — | (91 | ) | — | — | — | — | — | (91 | ) | — | |||||||||||||||||
Net servicing and other income (expense) | (14 | ) | (2 | ) | 2 | (1 | ) | 7 | 3 | 5 | (14 | ) | 15 | |||||||||||||||
Income before income taxes | 554 | 324 | 589 | 49 | 425 | 466 | 496 | 1,467 | 1,387 | |||||||||||||||||||
Income tax expense (benefit) | 106 | 60 | 107 | (10 | ) | 76 | 83 | 92 | 273 | 251 | ||||||||||||||||||
Net income | 448 | 264 | 482 | 59 | 349 | 383 | 404 | 1,194 | 1,136 | |||||||||||||||||||
Adjustments to reconcile net income to core earnings: | ||||||||||||||||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | (72 | ) | (65 | ) | (140 | ) | 134 | (36 | ) | (49 | ) | 8 | (277 | ) | (77 | ) | ||||||||||||
Loss on reinsurance transaction, before tax | — | 91 | — | — | — | — | — | 91 | — | |||||||||||||||||||
Integration costs, before tax | 19 | 6 | 1 | — | — | — | — | 26 | — | |||||||||||||||||||
Change in loss reserves upon acquisition of a business, before tax [1] | — | 97 | — | — | — | — | — | 97 | — | |||||||||||||||||||
Income tax expense (benefit) [3] | 10 | (26 | ) | 29 | (37 | ) | 7 | 12 | (4 | ) | 13 | 15 | ||||||||||||||||
Core earnings | $ | 405 | $ | 367 | $ | 372 | $ | 156 | $ | 320 | $ | 346 | $ | 408 | $ | 1,144 | $ | 1,074 | ||||||||||
ROE | ||||||||||||||||||||||||||||
Net income available to common stockholders [4] | 12.0 | % | 11.6 | % | 15.2 | % | 15.1 | % | 15.5 | % | 12.7 | % | 11.9 | % | ||||||||||||||
Adjustments to reconcile net income available to common stockholders to core earnings: | ||||||||||||||||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | (1.6 | %) | (1.2 | %) | (1.2 | %) | 0.8 | % | (1.7 | %) | (1.4 | %) | (1.4 | )% | ||||||||||||||
Loss on reinsurance transaction, before tax | 1.0 | % | 1.0 | % | — | % | — | % | — | % | — | % | ||||||||||||||||
Integration and transaction costs associated with an acquired business, before tax | 0.3 | % | 0.1 | % | — | % | — | % | — | % | — | % | — | % | ||||||||||||||
Changes in loss reserves upon acquisition of a business, before tax [1] | 1.1 | % | 1.1 | % | — | % | — | % | — | % | — | % | ||||||||||||||||
Income tax expense (benefit) [3] | (0.3 | %) | (0.3 | %) | 0.1 | % | (0.3 | %) | 1.2 | % | 1.2 | % | 1.2 | % | ||||||||||||||
Impact of AOCI, excluded from core earnings ROE | 0.8 | % | 0.6 | % | 0.7 | % | 0.7 | % | 0.5 | % | 0.5 | % | 0.6 | % | ||||||||||||||
Core earnings [4] | 13.3 | % | 12.9 | % | 14.8 | % | 16.3 | % | 15.5 | % | 13.0 | % | 12.3 | % |
[1] | See [4] on page 2 for impact of Navigators Group acquisition. |
[2] | Excluding the non-core change in loss reserves upon acquisition of Navigators Group of $97, the underwriting gain for the nine months ended September 30, 2019 was $358. |
[3] | Generally represents federal income tax expense (benefit) related to before tax items not included in core earnings. |
[4] | Net income available to common stockholders ROE and Core earnings ROE assume a portion of debt and interest expense and preferred stock and preferred stock dividends accounted for within Corporate are allocated to Property & Casualty. For further information, see Appendix, page 33. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNDERWRITING RATIOS AND RESULTS
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | |||||||||||
UNDERWRITING GAIN (LOSS) | 137 | 3 | 121 | (126 | ) | 70 | 112 | 178 | 261 | 360 | |||||||||
UNDERWRITING RATIOS | |||||||||||||||||||
Losses and loss adjustment expenses | |||||||||||||||||||
Current accident year before catastrophes [1] | 61.2 | 60.8 | 59.7 | 60.4 | 61.5 | 59.0 | 59.8 | 60.6 | 60.1 | ||||||||||
Current accident year catastrophes | 3.5 | 4.9 | 4.0 | 13.7 | 6.4 | 7.2 | 4.0 | 4.1 | 5.9 | ||||||||||
Prior accident year development [2][4] | (1.5 | ) | 1.3 | (0.4 | ) | (1.1 | ) | (2.3 | ) | (1.8 | ) | (1.2 | ) | (0.3 | ) | (1.8 | ) | ||
Total losses and loss adjustment expenses | 63.1 | 67.0 | 63.3 | 73.0 | 65.6 | 64.4 | 62.6 | 64.5 | 64.2 | ||||||||||
Expenses [3] | 32.0 | 32.6 | 31.8 | 31.6 | 31.4 | 31.1 | 30.4 | 32.2 | 30.9 | ||||||||||
Policyholder dividends | 0.4 | 0.2 | 0.2 | 0.2 | 0.3 | 0.2 | 0.2 | 0.3 | 0.2 | ||||||||||
Combined ratio | 95.5 | 99.9 | 95.3 | 104.8 | 97.3 | 95.7 | 93.1 | 96.9 | 95.4 | ||||||||||
Adjustments to reconcile combined ratio to underlying combined ratio: | |||||||||||||||||||
Current accident year catastrophes and prior accident year development [2] | (2.0 | ) | (6.2 | ) | (3.6 | ) | (12.6 | ) | (4.1 | ) | (5.4 | ) | (2.8 | ) | (3.8 | ) | (4.1 | ) | |
Current accident year change in loss reserves upon acquisition of a business | — | (1.1 | ) | — | — | — | — | — | (0.4 | ) | — | ||||||||
Underlying combined ratio * | 93.6 | 92.6 | 91.7 | 92.2 | 93.2 | 90.3 | 90.3 | 92.7 | 91.3 |
[1] | The three months ended June 30, 2019 and nine months ended September 30, 2019 include an increase in loss reserves of $29 upon acquisition of Navigators Group (see [4] on page 2). |
[2] | The three months ended June 30, 2019 and nine months ended September 30, 2019 include an increase in loss reserves of $68 upon acquisition of Navigators Group (see [4] on page 2). |
[3] | Integration and transaction costs related to the acquisition of Navigators Group are not included in the expense ratio. |
[4] | The following table summarizes unfavorable (favorable) prior accident year development. |
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Auto liability - Commercial Lines | $ | 25 | $ | 2 | $ | — | $ | — | $ | (5 | ) | $ | (5 | ) | $ | (5 | ) | $ | 27 | $ | (15 | ) | ||||||
Auto liability - Personal Lines | (23 | ) | — | (5 | ) | (8 | ) | (10 | ) | — | — | (28 | ) | (10 | ) | |||||||||||||
Homeowners | (1 | ) | — | 1 | (5 | ) | (7 | ) | (1 | ) | (12 | ) | — | (20 | ) | |||||||||||||
Marine | (2 | ) | 10 | — | — | — | — | 8 | — | |||||||||||||||||||
Professional liability | (1 | ) | 33 | — | — | (20 | ) | 6 | 2 | 32 | (12 | ) | ||||||||||||||||
Package business | (23 | ) | (14 | ) | 5 | (10 | ) | (9 | ) | (15 | ) | 8 | (32 | ) | (16 | ) | ||||||||||||
General liability | 19 | 37 | 6 | 20 | 4 | 20 | 8 | 62 | 32 | |||||||||||||||||||
Bond | (2 | ) | — | — | 2 | — | — | — | (2 | ) | — | |||||||||||||||||
Assumed Reinsurance | — | 3 | — | — | — | — | — | 3 | — | |||||||||||||||||||
Commercial property | (1 | ) | (13 | ) | (2 | ) | (2 | ) | 2 | 1 | (13 | ) | (16 | ) | (10 | ) | ||||||||||||
Workers’ compensation | (40 | ) | (30 | ) | (20 | ) | (67 | ) | (24 | ) | (48 | ) | (25 | ) | (90 | ) | (97 | ) | ||||||||||
Workers' compensation discount accretion | 8 | 9 | 8 | 10 | 10 | 10 | 10 | 25 | 30 | |||||||||||||||||||
Catastrophes | (5 | ) | (14 | ) | (8 | ) | (2 | ) | (13 | ) | (31 | ) | (3 | ) | (27 | ) | (47 | ) | ||||||||||
Uncollectible reinsurance | — | — | — | — | 11 | 11 | — | — | 22 | |||||||||||||||||||
Other reserve re-estimates | (1 | ) | 12 | 4 | 34 | 1 | 5 | (2 | ) | 15 | 4 | |||||||||||||||||
Total prior accident year development [1] | $ | (47 | ) | $ | 35 | $ | (11 | ) | $ | (28 | ) | $ | (60 | ) | $ | (47 | ) | $ | (32 | ) | $ | (23 | ) | $ | (139 | ) |
[1] | The prior accident year reserve increase of $68 related to the Navigators Group acquisition for the three months ended June 30, 2019 and nine months ended September 30, 2019 (see [4] on page 2) represented increases of $34 for general liability, $25 for professional liability, $10 for marine, $3 for assumed reinsurance and $2 for commercial auto liability, partially offset by a reserve decrease of $6 for commercial property. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Written premiums | $ | 2,235 | $ | 2,078 | $ | 1,949 | $ | 1,800 | $ | 1,751 | $ | 1,734 | $ | 1,851 | $ | 6,262 | $ | 5,336 | ||||||||||
Change in unearned premium reserve | (15 | ) | 91 | 172 | (6 | ) | (34 | ) | (11 | ) | 140 | 248 | 95 | |||||||||||||||
Earned premiums | 2,250 | 1,987 | 1,777 | 1,806 | 1,785 | 1,745 | 1,711 | 6,014 | 5,241 | |||||||||||||||||||
Fee income | 8 | 9 | 9 | 8 | 9 | 8 | 9 | 26 | 26 | |||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Current accident year before catastrophes [1] | 1,336 | 1,179 | 1,037 | 1,034 | 1,055 | 977 | 971 | 3,552 | 3,003 | |||||||||||||||||||
Current accident year catastrophes | 74 | 90 | 70 | 37 | 95 | 74 | 69 | 234 | 238 | |||||||||||||||||||
Prior accident year development [1] [2] | (19 | ) | 22 | (10 | ) | (55 | ) | (53 | ) | (73 | ) | (19 | ) | (7 | ) | (145 | ) | |||||||||||
Total losses and loss adjustment expenses | 1,391 | 1,291 | 1,097 | 1,016 | 1,097 | 978 | 1,021 | 3,779 | 3,096 | |||||||||||||||||||
Amortization of DAC | 356 | 310 | 274 | 268 | 264 | 259 | 257 | 940 | 780 | |||||||||||||||||||
Underwriting expenses | 410 | 392 | 337 | 356 | 353 | 336 | 324 | 1,139 | 1,013 | |||||||||||||||||||
Amortization of other intangible assets | 7 | 2 | 2 | 1 | 2 | 1 | — | 11 | 3 | |||||||||||||||||||
Dividends to policyholders | 12 | 6 | 6 | 5 | 8 | 6 | 4 | 24 | 18 | |||||||||||||||||||
Underwriting gain (loss) [3] | 82 | (5 | ) | 70 | 168 | 70 | 173 | 114 | 147 | 357 | ||||||||||||||||||
Net servicing income (loss) | 2 | 2 | (1 | ) | 2 | (1 | ) | 1 | — | 3 | — | |||||||||||||||||
Net investment income | 291 | 281 | 259 | 247 | 250 | 242 | 258 | 831 | 750 | |||||||||||||||||||
Net realized capital gains (losses) | 60 | 54 | 115 | (106 | ) | 29 | 42 | (8 | ) | 229 | 63 | |||||||||||||||||
Loss on reinsurance transaction | — | (91 | ) | — | — | — | — | — | (91 | ) | — | |||||||||||||||||
Other income (expense) | (20 | ) | (6 | ) | (1 | ) | (3 | ) | 2 | (3 | ) | 2 | (27 | ) | 1 | |||||||||||||
Income before income taxes | 415 | 235 | 442 | 308 | 350 | 455 | 366 | 1,092 | 1,171 | |||||||||||||||||||
Income tax expense | 79 | 44 | 79 | 55 | 61 | 83 | 68 | 202 | 212 | |||||||||||||||||||
Net income | 336 | 191 | 363 | 253 | 289 | 372 | 298 | 890 | 959 | |||||||||||||||||||
Adjustments to reconcile net income to core earnings: | ||||||||||||||||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | (59 | ) | (54 | ) | (113 | ) | 108 | (28 | ) | (40 | ) | 6 | (226 | ) | (62 | ) | ||||||||||||
Integration costs, before tax [4] | 19 | 6 | 1 | — | — | — | 26 | — | ||||||||||||||||||||
Change in loss reserves upon acquisition of a business, before tax [1] | — | 97 | — | — | — | — | 97 | — | ||||||||||||||||||||
Loss on reinsurance transaction, before tax | — | 91 | — | — | — | — | 91 | — | ||||||||||||||||||||
Income tax expense (benefit) [5] | 7 | (27 | ) | 23 | (24 | ) | 4 | 9 | (2 | ) | 3 | 11 | ||||||||||||||||
Core earnings | $ | 303 | $ | 304 | $ | 274 | $ | 337 | $ | 265 | $ | 341 | $ | 302 | $ | 881 | $ | 908 |
[1] | See [4] on page 2 for impact related to Navigators Group acquisition. |
[2] | For further information, see Commercial Lines Income Statements (continued), page 11. |
[3] | Excluding the non-core change in loss reserves upon acquisition of Navigators Group of $97, underwriting gain for the nine months ended September 30, 2019 was $244. |
[4] | The three and nine month periods ended September 30, 2019 included Navigators Group integration costs. |
[5] | Generally represents federal income tax expense (benefit) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS (CONTINUED)
Prior accident year development included the following unfavorable (favorable) reserve development:
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Auto liability | $ | 25 | $ | 2 | $ | — | $ | — | $ | (5 | ) | $ | (5 | ) | $ | (5 | ) | $ | 27 | $ | (15 | ) | ||||||
Professional liability | (1 | ) | 33 | — | — | (20 | ) | 6 | 2 | 32 | (12 | ) | ||||||||||||||||
Package business | (23 | ) | (14 | ) | 5 | (10 | ) | (9 | ) | (15 | ) | 8 | (32 | ) | (16 | ) | ||||||||||||
General liability | 19 | 37 | 6 | 20 | 4 | 20 | 8 | 62 | 32 | |||||||||||||||||||
Marine | (2 | ) | 10 | — | — | — | — | 8 | — | |||||||||||||||||||
Bond | (2 | ) | — | — | 2 | — | — | — | (2 | ) | — | |||||||||||||||||
Assumed Reinsurance | — | 3 | — | — | — | — | 3 | — | ||||||||||||||||||||
Commercial property | (1 | ) | (13 | ) | (2 | ) | (2 | ) | 2 | 1 | (13 | ) | (16 | ) | (10 | ) | ||||||||||||
Workers’ compensation | (40 | ) | (30 | ) | (20 | ) | (67 | ) | (24 | ) | (48 | ) | (25 | ) | (90 | ) | (97 | ) | ||||||||||
Workers' compensation discount accretion | 8 | 9 | 8 | 10 | 10 | 10 | 10 | 25 | 30 | |||||||||||||||||||
Catastrophes | (5 | ) | (16 | ) | (12 | ) | (4 | ) | (11 | ) | (44 | ) | (8 | ) | (33 | ) | (63 | ) | ||||||||||
Uncollectible reinsurance | — | — | — | — | — | — | — | — | — | |||||||||||||||||||
Other reserve re-estimates | 3 | 1 | 5 | (4 | ) | — | 2 | 4 | 9 | 6 | ||||||||||||||||||
Total prior accident year development | $ | (19 | ) | $ | 22 | $ | (10 | ) | $ | (55 | ) | $ | (53 | ) | $ | (73 | ) | $ | (19 | ) | $ | (7 | ) | $ | (145 | ) | ||
Change in loss reserves upon acquisition of Navigators [1] | — | 68 | — | — | — | — | — | 68 | — | |||||||||||||||||||
Prior accident year development excluding increase in Navigators reserves | $ | (19 | ) | $ | (46 | ) | $ | (10 | ) | $ | (55 | ) | $ | (53 | ) | $ | (73 | ) | $ | (19 | ) | $ | (75 | ) | $ | (145 | ) |
[1] | The prior accident year reserve increase of $68 related to the Navigators Group acquisition for the three months ended June 30, 2019 (see [4] on page 2) represented increases of $34 for general liability, $25 for professional liability, $10 for marine, $3 for assumed reinsurance and $2 for commercial auto liability, partially offset by a reserve decrease of $6 for commercial property. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
UNDERWRITING RATIOS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
UNDERWRITING GAIN | $ | 82 | $ | (5 | ) | $ | 70 | $ | 168 | $ | 70 | $ | 173 | $ | 114 | $ | 147 | $ | 357 | |||||||||
UNDERWRITING RATIOS | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Current accident year before catastrophes | 59.4 | 59.3 | 58.4 | 57.3 | 59.1 | 56.0 | 56.8 | 59.1 | 57.3 | |||||||||||||||||||
Current accident year catastrophes | 3.3 | 4.5 | 3.9 | 2.0 | 5.3 | 4.2 | 4.0 | 3.9 | 4.5 | |||||||||||||||||||
Prior accident year development | (0.8 | ) | 1.1 | (0.6 | ) | (3.0 | ) | (3.0 | ) | (4.2 | ) | (1.1 | ) | (0.1 | ) | (2.8 | ) | |||||||||||
Total losses and loss adjustment expenses | 61.8 | 65.0 | 61.7 | 56.3 | 61.5 | 56.0 | 59.7 | 62.8 | 59.1 | |||||||||||||||||||
Expenses [1] | 34.0 | 35.0 | 34.0 | 34.2 | 34.2 | 33.7 | 33.4 | 34.3 | 33.8 | |||||||||||||||||||
Policyholder dividends | 0.5 | 0.3 | 0.3 | 0.3 | 0.4 | 0.3 | 0.2 | 0.4 | 0.3 | |||||||||||||||||||
Combined ratio | 96.4 | 100.3 | 96.1 | 90.7 | 96.1 | 90.1 | 93.3 | 97.6 | 93.2 | |||||||||||||||||||
Adjustments to reconcile combined ratio to underlying combined ratio: | ||||||||||||||||||||||||||||
Current accident year catastrophes and prior accident year development | (2.5 | ) | (5.6 | ) | (3.3 | ) | 1.0 | (2.3 | ) | — | 2.9 | (3.8 | ) | (1.7 | ) | |||||||||||||
Current accident year change in loss reserves upon acquisition of a business | — | (1.5 | ) | — | — | — | — | — | (0.5 | ) | — | |||||||||||||||||
Underlying combined ratio | 93.9 | 93.2 | 92.7 | 91.7 | 93.7 | 90.0 | 90.4 | 93.3 | 91.4 | |||||||||||||||||||
COMBINED RATIOS BY LINE OF BUSINESS | ||||||||||||||||||||||||||||
SMALL COMMERCIAL | ||||||||||||||||||||||||||||
Combined ratio | 86.6 | 89.2 | 92.4 | 83.4 | 88.3 | 85.6 | 88.9 | 89.4 | 87.6 | |||||||||||||||||||
Current accident year catastrophes | 1.9 | 5.6 | 3.4 | 2.1 | 2.7 | 5.5 | 3.5 | 3.6 | 3.9 | |||||||||||||||||||
Prior accident year development | (3.2 | ) | (4.3 | ) | 0.1 | (4.7 | ) | (2.8 | ) | (5.1 | ) | (2.0 | ) | (2.5 | ) | (3.3 | ) | |||||||||||
Underlying combined ratio | 87.9 | 87.8 | 88.9 | 86.0 | 88.4 | 85.2 | 87.5 | 88.2 | 87.0 | |||||||||||||||||||
MIDDLE & LARGE COMMERCIAL | ||||||||||||||||||||||||||||
Combined ratio | 107.3 | 105.8 | 103.0 | 99.0 | 111.7 | 97.8 | 100.7 | 105.4 | 103.5 | |||||||||||||||||||
Current accident year catastrophes | 5.4 | 4.1 | 5.0 | 0.9 | 10.0 | 3.3 | 5.9 | 4.9 | 6.4 | |||||||||||||||||||
Prior accident year development | 2.4 | 0.7 | (0.2 | ) | (1.8 | ) | 0.4 | (2.6 | ) | (0.2 | ) | 1.0 | (0.8 | ) | ||||||||||||||
Underlying combined ratio | 99.6 | 100.9 | 98.1 | 99.9 | 101.2 | 97.1 | 95.0 | 99.6 | 97.9 | |||||||||||||||||||
GLOBAL SPECIALTY | ||||||||||||||||||||||||||||
Combined ratio | 97.9 | 120.4 | 85.7 | 95.4 | 69.6 | 92.1 | 86.1 | 103.1 | 82.6 | |||||||||||||||||||
Current accident year catastrophes | 2.9 | 2.3 | 2.3 | 6.7 | 0.4 | 0.2 | — | 2.6 | 0.2 | |||||||||||||||||||
Prior accident year development | (1.1 | ) | 18.2 | (5.9 | ) | 0.4 | (20.6 | ) | 3.8 | — | 4.2 | (5.6 | ) | |||||||||||||||
Current accident year change in loss reserves upon acquisition of a business | — | 9.1 | — | — | — | — | — | 2.9 | — | |||||||||||||||||||
Underlying combined ratio | 96.2 | 90.7 | 89.4 | 88.4 | 89.8 | 88.1 | 86.1 | 93.4 | 88.0 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
SUPPLEMENTAL DATA
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
WRITTEN PREMIUMS | ||||||||||||||||||||||||||||
Small Commercial | $ | 897 | $ | 960 | $ | 1,010 | $ | 889 | $ | 898 | $ | 906 | $ | 978 | $ | 2,867 | $ | 2,782 | ||||||||||
Middle & Large Commercial | 768 | 757 | 757 | 742 | 686 | 657 | 716 | 2,282 | 2,059 | |||||||||||||||||||
Middle Market [1] | 675 | 673 | 641 | 653 | 605 | 569 | 600 | 1,989 | 1,774 | |||||||||||||||||||
National Accounts and Other | 93 | 84 | 116 | 89 | 81 | 88 | 116 | 293 | 285 | |||||||||||||||||||
Global Specialty | 559 | 353 | 171 | 156 | 155 | 161 | 145 | 1,083 | 461 | |||||||||||||||||||
U.S. [2] | 376 | 274 | 171 | 156 | 155 | 161 | 145 | 821 | 461 | |||||||||||||||||||
International [3] | 115 | 43 | — | — | — | — | — | 158 | — | |||||||||||||||||||
Global Re [4] | 68 | 36 | — | — | — | — | — | 104 | — | |||||||||||||||||||
Other | 11 | 8 | 11 | 13 | 12 | 10 | 12 | 30 | 34 | |||||||||||||||||||
Total | $ | 2,235 | $ | 2,078 | $ | 1,949 | $ | 1,800 | $ | 1,751 | $ | 1,734 | $ | 1,851 | $ | 6,262 | $ | 5,336 | ||||||||||
EARNED PREMIUMS | ||||||||||||||||||||||||||||
Small Commercial | $ | 936 | $ | 933 | $ | 910 | $ | 930 | $ | 920 | $ | 907 | $ | 894 | $ | 2,779 | $ | 2,721 | ||||||||||
Middle & Large Commercial | 765 | 729 | 703 | 710 | 702 | 675 | 659 | 2,197 | 2,036 | |||||||||||||||||||
Middle Market [1] | 674 | 637 | 608 | 610 | 598 | 580 | 564 | 1,919 | 1,742 | |||||||||||||||||||
National Accounts and Other | 91 | 92 | 95 | 100 | 104 | 95 | 95 | 278 | 294 | |||||||||||||||||||
Global Specialty | 538 | 314 | 153 | 156 | 151 | 152 | 146 | 1,005 | 449 | |||||||||||||||||||
U.S. [2] | 362 | 241 | 153 | 156 | 151 | 152 | 146 | 756 | 449 | |||||||||||||||||||
International [3] | 101 | 44 | — | — | — | — | — | 145 | — | |||||||||||||||||||
Global Re [4] | 75 | 29 | — | — | — | — | — | 104 | — | |||||||||||||||||||
Other | 11 | 11 | 11 | 10 | 12 | 11 | 12 | 33 | 35 | |||||||||||||||||||
Total | $ | 2,250 | $ | 1,987 | $ | 1,777 | $ | 1,806 | $ | 1,785 | $ | 1,745 | $ | 1,711 | $ | 6,014 | $ | 5,241 | ||||||||||
U.S. STANDARD COMMERCIAL LINES STATISTICAL PREMIUM INFORMATION [5] | ||||||||||||||||||||||||||||
New Business Premium | ||||||||||||||||||||||||||||
Small Commercial | $ | 150 | $ | 183 | $ | 175 | $ | 157 | $ | 145 | $ | 142 | $ | 156 | $ | 508 | $ | 443 | ||||||||||
Middle Market | $ | 146 | $ | 177 | $ | 140 | $ | 136 | $ | 131 | $ | 135 | $ | 138 | $ | 463 | $ | 404 | ||||||||||
Renewal Price Increases [6] | ||||||||||||||||||||||||||||
Standard Commercial Lines - Written | 2.8 | % | 2.4 | % | 1.7 | % | 1.7 | % | 1.9 | % | 3.1 | % | 2.8 | % | 2.3 | % | 2.6 | % | ||||||||||
Standard Commercial Lines - Earned | 2.2 | % | 2.1 | % | 2.4 | % | 2.6 | % | 3.0 | % | 3.3 | % | 3.3 | % | 2.2 | % | 3.2 | % | ||||||||||
Policy Count Retention [6] | ||||||||||||||||||||||||||||
Small Commercial | 83 | % | 83 | % | 84 | % | 83 | % | 83 | % | 82 | % | 82 | % | 83 | % | 82 | % | ||||||||||
Middle Market | 83 | % | 81 | % | 81 | % | 79 | % | 78 | % | 77 | % | 78 | % | 82 | % | 78 | % | ||||||||||
Policies in Force (in thousands) [6] | ||||||||||||||||||||||||||||
Small Commercial | 1,294 | 1,291 | 1,280 | 1,271 | 1,264 | 1,259 | 1,258 | |||||||||||||||||||||
Middle Market | 64 | 64 | 64 | 64 | 64 | 65 | 65 |
[1] | The three months ended September 30, 2019 and June 30, 2019, included $32 and $12 of written premium, respectively, and $25 and $9 of earned premium, respectively, related to the business from Navigators Group |
[2] | The three months ended September 30, 2019 and June 30, 2019, included $208 and $99 of written premium, respectively, and $198 and $80 of earned premium, respectively, related to the business from Navigators Group. |
[3] | International represents Navigators Group business written in either Lloyd's market or other international markets, which includes U.S.-based exposures. |
[4] | Global Re includes accident and health and other assumed premiums previously written by Navigators Re. |
[5] | Small commercial and middle market lines within middle & large commercial are generally referred to as standard commercial lines. |
[6] | Excludes certain risk classes of higher hazard general liability in middle market. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Written premiums | $ | 822 | $ | 824 | $ | 771 | $ | 758 | $ | 854 | $ | 857 | $ | 807 | $ | 2,417 | $ | 2,518 | ||||||||||
Change in unearned premium reserve | 19 | 23 | (28 | ) | (77 | ) | 5 | 1 | (52 | ) | 14 | (46 | ) | |||||||||||||||
Earned premiums | 803 | 801 | 799 | 835 | 849 | 856 | 859 | 2,403 | 2,564 | |||||||||||||||||||
Fee income | 9 | 10 | 9 | 10 | 10 | 10 | 10 | 28 | 30 | |||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Current accident year before catastrophes | 531 | 517 | 500 | 561 | 565 | 557 | 566 | 1,548 | 1,688 | |||||||||||||||||||
Current accident year catastrophes | 32 | 48 | 34 | 324 | 74 | 114 | 34 | 114 | 222 | |||||||||||||||||||
Prior accident year development [1] | (28 | ) | 4 | (1 | ) | (11 | ) | (18 | ) | 10 | (13 | ) | (25 | ) | (21 | ) | ||||||||||||
Total losses and loss adjustment expenses | 535 | 569 | 533 | 874 | 621 | 681 | 587 | 1,637 | 1,889 | |||||||||||||||||||
Amortization of DAC | 64 | 65 | 65 | 66 | 68 | 70 | 71 | 194 | 209 | |||||||||||||||||||
Underwriting expenses | 154 | 155 | 155 | 157 | 155 | 156 | 143 | 464 | 454 | |||||||||||||||||||
Amortization of other intangible assets | 1 | 2 | 1 | 1 | 1 | 1 | 1 | 4 | 3 | |||||||||||||||||||
Underwriting gain (loss) | 58 | 20 | 54 | (253 | ) | 14 | (42 | ) | 67 | 132 | 39 | |||||||||||||||||
Net servicing income | 4 | 4 | 3 | 3 | 5 | 4 | 4 | 11 | 13 | |||||||||||||||||||
Net investment income | 46 | 46 | 42 | 39 | 39 | 37 | 40 | 134 | 116 | |||||||||||||||||||
Net realized capital gains (losses) | 9 | 8 | 19 | (17 | ) | 5 | 5 | — | 36 | 10 | ||||||||||||||||||
Other income (expense) | — | (2 | ) | 1 | (2 | ) | 1 | 1 | (1 | ) | (1 | ) | 1 | |||||||||||||||
Income (loss) before income taxes | 117 | 76 | 119 | (230 | ) | 64 | 5 | 110 | 312 | 179 | ||||||||||||||||||
Income tax expense (benefit) | 23 | 14 | 23 | (52 | ) | 13 | (1 | ) | 21 | 60 | 33 | |||||||||||||||||
Net income (loss) | 94 | 62 | 96 | (178 | ) | 51 | 6 | 89 | 252 | 146 | ||||||||||||||||||
Adjustments to reconcile net income (loss) to core earnings (losses): | ||||||||||||||||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | (9 | ) | (8 | ) | (18 | ) | 17 | (5 | ) | (6 | ) | 1 | (35 | ) | (10 | ) | ||||||||||||
Income tax expense (benefit) [2] | 2 | 1 | 4 | (5 | ) | 1 | 2 | (1 | ) | 7 | 2 | |||||||||||||||||
Core earnings (losses) | $ | 87 | $ | 55 | $ | 82 | $ | (166 | ) | $ | 47 | $ | 2 | $ | 89 | $ | 224 | $ | 138 |
[1] | For further information, see Personal Lines Income Statements (continued), page 15. |
[2] | Generally represents federal income tax expense (benefit) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS (CONTINUED)
Prior accident year development included the following unfavorable (favorable) reserve development:
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Auto liability | $ | (23 | ) | $ | — | $ | (5 | ) | $ | (8 | ) | $ | (10 | ) | $ | — | $ | — | $ | (28 | ) | $ | (10 | ) | ||||
Homeowners | (1 | ) | — | 1 | (5 | ) | (7 | ) | (1 | ) | (12 | ) | — | (20 | ) | |||||||||||||
Catastrophes | — | 2 | 4 | 2 | (2 | ) | 13 | 5 | 6 | 16 | ||||||||||||||||||
Other reserve re-estimates, net | (4 | ) | 2 | (1 | ) | — | 1 | (2 | ) | (6 | ) | (3 | ) | (7 | ) | |||||||||||||
Total prior accident year development | $ | (28 | ) | $ | 4 | $ | (1 | ) | $ | (11 | ) | $ | (18 | ) | $ | 10 | $ | (13 | ) | $ | (25 | ) | $ | (21 | ) |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
UNDERWRITING RATIOS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
UNDERWRITING GAIN (LOSS) | $ | 58 | $ | 20 | $ | 54 | $ | (253 | ) | $ | 14 | $ | (42 | ) | $ | 67 | $ | 132 | $ | 39 | ||||||||
UNDERWRITING RATIOS | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Current accident year before catastrophes | 66.1 | 64.5 | 62.6 | 67.2 | 66.5 | 65.1 | 65.9 | 64.4 | 65.8 | |||||||||||||||||||
Current accident year catastrophes | 4.0 | 6.0 | 4.3 | 38.8 | 8.7 | 13.3 | 4.0 | 4.7 | 8.7 | |||||||||||||||||||
Prior accident year development | (3.5 | ) | 0.5 | (0.1 | ) | (1.3 | ) | (2.1 | ) | 1.2 | (1.5 | ) | (1.0 | ) | (0.8 | ) | ||||||||||||
Total losses and loss adjustment expenses | 66.6 | 71.0 | 66.7 | 104.7 | 73.1 | 79.6 | 68.3 | 68.1 | 73.7 | |||||||||||||||||||
Expenses | 26.2 | 26.5 | 26.5 | 25.6 | 25.2 | 25.4 | 23.9 | 26.4 | 24.8 | |||||||||||||||||||
Combined ratio | 92.8 | 97.5 | 93.2 | 130.3 | 98.4 | 104.9 | 92.2 | 94.5 | 98.5 | |||||||||||||||||||
Adjustment to reconcile combined ratio to underlying combined ratio: | ||||||||||||||||||||||||||||
Current accident year catastrophes and prior accident year development | (0.5 | ) | (6.5 | ) | (4.2 | ) | (37.5 | ) | (6.6 | ) | (14.5 | ) | (2.5 | ) | (3.7 | ) | (7.9 | ) | ||||||||||
Underlying combined ratio | 92.3 | 91.0 | 89.1 | 92.8 | 91.8 | 90.4 | 89.8 | 90.8 | 90.6 | |||||||||||||||||||
PRODUCT | ||||||||||||||||||||||||||||
Automobile | ||||||||||||||||||||||||||||
Combined ratio | 95.7 | 97.2 | 93.1 | 102.9 | 98.9 | 99.7 | 93.1 | 95.3 | 97.2 | |||||||||||||||||||
Current accident year catastrophes | 1.2 | 0.9 | 0.6 | 0.9 | 2.0 | 3.4 | 0.5 | 0.9 | 2.0 | |||||||||||||||||||
Prior accident year development | (4.2 | ) | (0.5 | ) | (1.1 | ) | (1.5 | ) | (1.7 | ) | (0.2 | ) | (1.6 | ) | (1.9 | ) | (1.2 | ) | ||||||||||
Underlying combined ratio | 98.8 | 96.7 | 93.6 | 103.6 | 98.5 | 96.5 | 94.2 | 96.4 | 96.4 | |||||||||||||||||||
Homeowners | ||||||||||||||||||||||||||||
Combined ratio | 86.5 | 99.3 | 93.1 | 194.3 | 96.9 | 117.8 | 89.8 | 93.0 | 101.5 | |||||||||||||||||||
Current accident year catastrophes | 10.6 | 17.6 | 12.7 | 126.5 | 23.6 | 36.4 | 12.0 | 13.6 | 24.0 | |||||||||||||||||||
Prior accident year development | (0.7 | ) | 2.6 | 2.1 | (0.9 | ) | (3.0 | ) | 5.0 | (1.1 | ) | 1.3 | 0.3 | |||||||||||||||
Underlying combined ratio | 76.6 | 79.2 | 78.4 | 68.7 | 76.3 | 76.4 | 78.9 | 78.1 | 77.2 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
DISTRIBUTION | ||||||||||||||||||||||||||||
WRITTEN PREMIUMS | ||||||||||||||||||||||||||||
AARP Direct | $ | 690 | $ | 692 | $ | 643 | $ | 615 | $ | 706 | $ | 704 | $ | 654 | $ | 2,025 | $ | 2,064 | ||||||||||
AARP Agency | 59 | 60 | 62 | 63 | 64 | 67 | 67 | 181 | 198 | |||||||||||||||||||
Other Agency | 64 | 63 | 58 | 71 | 73 | 77 | 77 | 185 | 227 | |||||||||||||||||||
Other | 9 | 9 | 8 | 9 | 11 | 9 | 9 | 26 | 29 | |||||||||||||||||||
Total | $ | 822 | $ | 824 | $ | 771 | $ | 758 | $ | 854 | $ | 857 | $ | 807 | $ | 2,417 | $ | 2,518 | ||||||||||
EARNED PREMIUMS | ||||||||||||||||||||||||||||
AARP Direct | $ | 667 | $ | 663 | $ | 657 | $ | 681 | $ | 687 | $ | 684 | $ | 681 | $ | 1,987 | $ | 2,052 | ||||||||||
AARP Agency | 62 | 63 | 65 | 68 | 71 | 74 | 77 | 190 | 222 | |||||||||||||||||||
Other Agency | 64 | 66 | 68 | 75 | 83 | 86 | 92 | 198 | 261 | |||||||||||||||||||
Other | 10 | 9 | 9 | 11 | 8 | 12 | 9 | 28 | 29 | |||||||||||||||||||
Total | $ | 803 | $ | 801 | $ | 799 | $ | 835 | $ | 849 | $ | 856 | $ | 859 | $ | 2,403 | $ | 2,564 | ||||||||||
PRODUCT LINE | ||||||||||||||||||||||||||||
WRITTEN PREMIUMS | ||||||||||||||||||||||||||||
Automobile | $ | 562 | $ | 564 | $ | 555 | $ | 523 | $ | 583 | $ | 586 | $ | 581 | $ | 1,681 | $ | 1,750 | ||||||||||
Homeowners | 260 | 260 | 216 | 235 | 271 | 271 | 226 | 736 | 768 | |||||||||||||||||||
Total | $ | 822 | $ | 824 | $ | 771 | $ | 758 | $ | 854 | $ | 857 | $ | 807 | $ | 2,417 | $ | 2,518 | ||||||||||
EARNED PREMIUMS | ||||||||||||||||||||||||||||
Automobile | $ | 558 | $ | 557 | $ | 555 | $ | 582 | $ | 591 | $ | 596 | $ | 600 | $ | 1,670 | $ | 1,787 | ||||||||||
Homeowners | 245 | 244 | 244 | 253 | 258 | 260 | 259 | 733 | 777 | |||||||||||||||||||
Total | $ | 803 | $ | 801 | $ | 799 | $ | 835 | $ | 849 | $ | 856 | $ | 859 | $ | 2,403 | $ | 2,564 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA (CONTINUED)
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | ||||||||||||||||||||||||||||
New Business Premium | ||||||||||||||||||||||||||||
Automobile | $ | 58 | $ | 59 | $ | 56 | $ | 43 | $ | 47 | $ | 42 | $ | 37 | $ | 173 | $ | 126 | ||||||||||
Homeowners | $ | 21 | $ | 20 | $ | 16 | $ | 14 | $ | 12 | $ | 11 | $ | 9 | $ | 57 | $ | 32 | ||||||||||
Renewal Written Price Increases | ||||||||||||||||||||||||||||
Automobile | 4.1 | % | 4.8 | % | 5.5 | % | 5.1 | % | 6.0 | % | 8.1 | % | 9.5 | % | 4.8 | % | 7.9 | % | ||||||||||
Homeowners | 5.9 | % | 7.0 | % | 7.9 | % | 9.1 | % | 9.9 | % | 10.4 | % | 9.4 | % | 6.9 | % | 9.9 | % | ||||||||||
Renewal Earned Price Increases | ||||||||||||||||||||||||||||
Automobile | 5.1 | % | 5.6 | % | 6.5 | % | 7.8 | % | 9.2 | % | 10.4 | % | 10.7 | % | 5.8 | % | 10.1 | % | ||||||||||
Homeowners | 8.0 | % | 8.9 | % | 9.6 | % | 9.7 | % | 9.6 | % | 9.2 | % | 8.9 | % | 8.8 | % | 9.2 | % | ||||||||||
Policy Count Retention | ||||||||||||||||||||||||||||
Automobile | 85 | % | 85 | % | 85 | % | 83 | % | 83 | % | 82 | % | 80 | % | 85 | % | 82 | % | ||||||||||
Homeowners | 86 | % | 85 | % | 84 | % | 84 | % | 83 | % | 84 | % | 82 | % | 85 | % | 83 | % | ||||||||||
Premium Retention | ||||||||||||||||||||||||||||
Automobile | 87 | % | 87 | % | 87 | % | 84 | % | 85 | % | 86 | % | 85 | % | 87 | % | 85 | % | ||||||||||
Homeowners | 90 | % | 90 | % | 89 | % | 90 | % | 90 | % | 91 | % | 89 | % | 90 | % | 90 | % | ||||||||||
Policies in Force (in thousands) | ||||||||||||||||||||||||||||
Automobile | 1,445 | 1,465 | 1,485 | 1,510 | 1,547 | 1,589 | 1,641 | |||||||||||||||||||||
Homeowners | 893 | 903 | 913 | 927 | 948 | 978 | 1,008 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C OTHER OPERATIONS
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Prior accident year development | $ | — | $ | 9 | $ | — | $ | 38 | $ | 11 | $ | 16 | $ | — | $ | 9 | $ | 27 | ||||||||||
Total losses and loss adjustment expenses | — | 9 | — | 38 | 11 | 16 | — | 9 | 27 | |||||||||||||||||||
Underwriting expenses | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 9 | 9 | |||||||||||||||||||
Underwriting loss | (3 | ) | (12 | ) | (3 | ) | (41 | ) | (14 | ) | (19 | ) | (3 | ) | (18 | ) | (36 | ) | ||||||||||
Net investment income | 21 | 21 | 22 | 22 | 22 | 22 | 24 | 64 | 68 | |||||||||||||||||||
Net realized capital gains (losses) | 4 | 4 | 9 | (9 | ) | 3 | 3 | (1 | ) | 17 | 5 | |||||||||||||||||
Other expense | — | — | — | (1 | ) | — | — | — | — | — | ||||||||||||||||||
Income (loss) before income taxes | 22 | 13 | 28 | (29 | ) | 11 | 6 | 20 | 63 | 37 | ||||||||||||||||||
Income tax expense (benefit) | 4 | 2 | 5 | (13 | ) | 2 | 1 | 3 | 11 | 6 | ||||||||||||||||||
Net income (loss) | 18 | 11 | 23 | (16 | ) | 9 | 5 | 17 | 52 | 31 | ||||||||||||||||||
Adjustments to reconcile net income to core earnings (losses): | ||||||||||||||||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | (4 | ) | (3 | ) | (9 | ) | 9 | (3 | ) | (3 | ) | 1 | (16 | ) | (5 | ) | ||||||||||||
Income tax expense (benefit) [1] | 1 | — | 2 | (8 | ) | 2 | 1 | (1 | ) | 3 | 2 | |||||||||||||||||
Core earnings (losses) | $ | 15 | $ | 8 | $ | 16 | $ | (15 | ) | $ | 8 | $ | 3 | $ | 17 | $ | 39 | $ | 28 |
[1] | Generally represents federal income tax expense (benefit) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Earned premiums | $ | 1,337 | $ | 1,377 | $ | 1,364 | $ | 1,356 | $ | 1,353 | $ | 1,357 | $ | 1,357 | $ | 4,078 | $ | 4,067 | ||||||||||
Fee income | 45 | 45 | 45 | 44 | 43 | 44 | 44 | 135 | 131 | |||||||||||||||||||
Net investment income | 121 | 121 | 121 | 121 | 117 | 115 | 121 | 363 | 353 | |||||||||||||||||||
Net realized capital gains (losses) | 14 | 7 | 5 | (21 | ) | (3 | ) | 2 | (25 | ) | 26 | (26 | ) | |||||||||||||||
Total revenues | 1,517 | 1,550 | 1,535 | 1,500 | 1,510 | 1,518 | 1,497 | 4,602 | 4,525 | |||||||||||||||||||
Benefits, losses and loss adjustment expenses | 983 | 1,062 | 1,053 | 1,016 | 1,054 | 1,059 | 1,085 | 3,098 | 3,198 | |||||||||||||||||||
Amortization of DAC | 14 | 14 | 13 | 12 | 12 | 11 | 10 | 41 | 33 | |||||||||||||||||||
Insurance operating costs and other expenses | 329 | 324 | 315 | 325 | 319 | 317 | 321 | 968 | 957 | |||||||||||||||||||
Amortization of other intangible assets | 10 | 11 | 10 | 12 | 15 | 16 | 17 | 31 | 48 | |||||||||||||||||||
Total benefits, losses and expenses | 1,336 | 1,411 | 1,391 | 1,365 | 1,400 | 1,403 | 1,433 | 4,138 | 4,236 | |||||||||||||||||||
Income before income taxes | 181 | 139 | 144 | 135 | 110 | 115 | 64 | 464 | 289 | |||||||||||||||||||
Income tax expense | 35 | 26 | 26 | 22 | 33 | 19 | 10 | 87 | 62 | |||||||||||||||||||
Net income | 146 | 113 | 118 | 113 | 77 | 96 | 54 | 377 | 227 | |||||||||||||||||||
Adjustments to reconcile net income to core earnings: | ||||||||||||||||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | (15 | ) | (6 | ) | (5 | ) | 22 | 3 | — | 26 | (26 | ) | 29 | |||||||||||||||
Integration and transaction costs associated with acquired business, before tax | 9 | 10 | 9 | 12 | 12 | 11 | 12 | 28 | 35 | |||||||||||||||||||
Income tax expense (benefit) [1] | 1 | (2 | ) | — | (11 | ) | 10 | (3 | ) | (7 | ) | (1 | ) | — | ||||||||||||||
Core earnings | $ | 141 | $ | 115 | $ | 122 | $ | 136 | $ | 102 | $ | 104 | $ | 85 | $ | 378 | $ | 291 | ||||||||||
Margin | ||||||||||||||||||||||||||||
Net income margin | 9.6 | % | 7.3 | % | 7.7 | % | 7.5 | % | 5.1 | % | 6.3 | % | 3.6 | % | 8.2 | % | 5.0 | % | ||||||||||
Core earnings margin* | 9.4 | % | 7.5 | % | 8.0 | % | 8.9 | % | 6.7 | % | 6.9 | % | 5.6 | % | 8.3 | % | 6.4 | % | ||||||||||
ROE | ||||||||||||||||||||||||||||
Net income available to common stockholders [2] | 12.9 | % | 11.2 | % | 11.1 | % | 9.3 | % | 12.0 | % | 11.9 | % | 10.9 | % | ||||||||||||||
Adjustments to reconcile net income available to common stockholders to core earnings: | ||||||||||||||||||||||||||||
Net realized capital losses, excluded from core earnings, before tax | (0.1 | %) | 0.4 | % | 0.6 | % | 1.7 | % | 1.0 | % | 0.6 | % | 0.1 | % | ||||||||||||||
Integration and transaction costs associated with acquired business, before tax | 1.2 | % | 1.3 | % | 1.4 | % | 1.5 | % | 2.1 | % | 1.6 | % | 1.2 | % | ||||||||||||||
Income tax benefit [1] | (0.4 | %) | (0.1 | %) | (0.1 | %) | (0.4 | %) | (2.2 | %) | (2.6 | %) | (2.3 | )% | ||||||||||||||
Impact of AOCI, excluded from core earnings ROE | 0.7 | % | 0.5 | % | 0.3 | % | 0.2 | % | 0.2 | % | 0.4 | % | 0.4 | % | ||||||||||||||
Core earnings [2] | 14.3 | % | 13.3 | % | 13.3 | % | 12.3 | % | 13.1 | % | 11.9 | % | 10.3 | % |
[1] | Generally represents federal income tax expense (benefit) related to before tax items not included in core earnings, though for the three and nine months ended September 30, 2018, also included $14 of income tax expense that was primarily driven by the effect of the lower corporate income tax rate on deferred taxes due to the filing of the Company's 2017 federal income tax return and completion of the Aetna group benefits acquisition. |
[2] | Net income ROE and core earnings ROE assume a portion of debt and interest expense and preferred stock and preferred stock dividends accounted for within Corporate are allocated to Group Benefits. For further information, see Appendix, page 33. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
SUPPLEMENTAL DATA
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
PREMIUMS | ||||||||||||||||||||||||||||
Fully insured ongoing premiums | ||||||||||||||||||||||||||||
Group disability | $ | 652 | $ | 679 | $ | 659 | $ | 651 | $ | 641 | $ | 642 | $ | 633 | $ | 1,990 | $ | 1,916 | ||||||||||
Group life | 621 | 633 | 641 | 643 | 652 | 651 | 664 | 1,895 | 1,967 | |||||||||||||||||||
Other [1] | 64 | 61 | 62 | 62 | 60 | 59 | 60 | 187 | 179 | |||||||||||||||||||
Total fully insured ongoing premiums | 1,337 | 1,373 | 1,362 | 1,356 | 1,353 | 1,352 | 1,357 | 4,072 | 4,062 | |||||||||||||||||||
Total buyouts [2] | — | 4 | 2 | — | — | 5 | — | 6 | 5 | |||||||||||||||||||
Total premiums | $ | 1,337 | $ | 1,377 | $ | 1,364 | $ | 1,356 | $ | 1,353 | $ | 1,357 | $ | 1,357 | $ | 4,078 | $ | 4,067 | ||||||||||
SALES (GROSS ANNUALIZED NEW PREMIUMS) | ||||||||||||||||||||||||||||
Fully insured ongoing sales | ||||||||||||||||||||||||||||
Group disability | $ | 29 | $ | 48 | $ | 219 | $ | 37 | $ | 48 | $ | 47 | $ | 260 | $ | 296 | $ | 355 | ||||||||||
Group life | 30 | 43 | 143 | 21 | 47 | 34 | 160 | 216 | 241 | |||||||||||||||||||
Other [1] | 15 | 8 | 45 | 3 | 9 | 4 | 34 | 68 | 47 | |||||||||||||||||||
Total fully insured ongoing sales | 74 | 99 | 407 | 61 | 104 | 85 | 454 | 580 | 643 | |||||||||||||||||||
Total buyouts [2] | — | 4 | 2 | — | — | 5 | — | 6 | 5 | |||||||||||||||||||
Total sales | $ | 74 | $ | 103 | $ | 409 | $ | 61 | $ | 104 | $ | 90 | $ | 454 | $ | 586 | $ | 648 | ||||||||||
RATIOS, EXCLUDING BUYOUTS | ||||||||||||||||||||||||||||
Group disability loss ratio | 64.4 | % | 72.9 | % | 69.6 | % | 67.5 | % | 75.9 | % | 74.3 | % | 74.9 | % | 69.0 | % | 75.0 | % | ||||||||||
Group life loss ratio | 80.8 | % | 77.8 | % | 81.3 | % | 78.8 | % | 76.6 | % | 77.4 | % | 80.9 | % | 80.0 | % | 78.3 | % | ||||||||||
Total loss ratio | 71.1 | % | 74.6 | % | 74.7 | % | 72.6 | % | 75.5 | % | 75.5 | % | 77.4 | % | 73.5 | % | 76.2 | % | ||||||||||
Expense ratio [3] | 24.9 | % | 23.9 | % | 23.4 | % | 24.1 | % | 23.9 | % | 23.9 | % | 24.0 | % | 24.1 | % | 23.9 | % |
[1] | Includes other group coverages such as retiree health insurance, critical illness, accident, hospital indemnity and participant accident coverages. |
[2] | Takeover of open claim liabilities and other non-recurring premium amounts. |
[3] | Integration and transaction costs related to the acquisition of Aetna's U.S. group life and disability business are not included in the expense ratio. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
HARTFORD FUNDS
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Investment management fees | $ | 183 | $ | 180 | $ | 171 | $ | 174 | $ | 188 | $ | 182 | $ | 181 | $ | 534 | $ | 551 | ||||||||||
Shareholder servicing fees | 22 | 21 | 21 | 21 | 23 | 22 | 21 | 64 | 66 | |||||||||||||||||||
Other revenue | 50 | 52 | 48 | 53 | 57 | 58 | 57 | 150 | 172 | |||||||||||||||||||
Net realized capital gains (losses) | 1 | — | 2 | (3 | ) | — | (1 | ) | — | 3 | (1 | ) | ||||||||||||||||
Total revenues | 256 | 253 | 242 | 245 | 268 | 261 | 259 | 751 | 788 | |||||||||||||||||||
Sub-advisory expense | 67 | 65 | 62 | 64 | 69 | 66 | 66 | 194 | 201 | |||||||||||||||||||
Employee compensation and benefits | 26 | 28 | 32 | 29 | 28 | 27 | 29 | 86 | 84 | |||||||||||||||||||
Distribution and service | 84 | 84 | 81 | 82 | 91 | 91 | 91 | 249 | 273 | |||||||||||||||||||
General, administrative and other | 28 | 29 | 30 | 25 | 28 | 31 | 30 | 87 | 89 | |||||||||||||||||||
Total expenses | 205 | 206 | 205 | 200 | 216 | 215 | 216 | 616 | 647 | |||||||||||||||||||
Income before income taxes | 51 | 47 | 37 | 45 | 52 | 46 | 43 | 135 | 141 | |||||||||||||||||||
Income tax expense | 11 | 9 | 7 | 9 | 11 | 9 | 9 | 27 | 29 | |||||||||||||||||||
Net income | $ | 40 | $ | 38 | $ | 30 | $ | 36 | $ | 41 | $ | 37 | $ | 34 | $ | 108 | $ | 112 | ||||||||||
Adjustments to reconcile net income to core earnings: | ||||||||||||||||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | (1 | ) | — | (2 | ) | 3 | — | 1 | — | (3 | ) | 1 | ||||||||||||||||
Income tax benefit | — | — | — | (1 | ) | — | — | — | — | — | ||||||||||||||||||
Core earnings | $ | 39 | $ | 38 | $ | 28 | $ | 38 | $ | 41 | $ | 38 | $ | 34 | $ | 105 | $ | 113 | ||||||||||
Daily average Hartford Funds AUM | $119,738 | $117,875 | $112,210 | $112,097 | $119,897 | $117,070 | $117,301 | $ | 116,635 | $ | 118,098 | |||||||||||||||||
Return on assets (bps, net of tax) [1] | ||||||||||||||||||||||||||||
Net income | 13.3 | 12.9 | 10.9 | 12.6 | 13.6 | 12.6 | 11.9 | 12.4 | 12.7 | |||||||||||||||||||
Core earnings* | 12.9 | 12.9 | 10.3 | 13.4 | 13.6 | 12.8 | 11.9 | 12.1 | 12.8 | |||||||||||||||||||
ROE | ||||||||||||||||||||||||||||
Net income available to common stockholders [2] | 48.0 | % | 49.7 | % | 51.3 | % | 54.2 | % | 51.8 | % | 47.9 | % | 44.3 | % | ||||||||||||||
Adjustments to reconcile net income available to common stockholders to core earnings: | ||||||||||||||||||||||||||||
Net realized capital losses excluded from core earnings, before tax | — | % | 0.4 | % | 0.7 | % | 1.5 | % | 0.4 | % | 0.4 | % | — | % | ||||||||||||||
Income tax expense (benefit) | (0.3 | %) | (0.4 | %) | (0.4 | %) | (0.4 | %) | 1.5 | % | 1.5 | % | 1.6 | % | ||||||||||||||
Impact of AOCI, excluded from core earnings ROE | (0.6 | %) | (0.6 | %) | (0.4 | %) | (0.5 | %) | (0.4 | %) | (0.3 | %) | (0.2 | )% | ||||||||||||||
Core earnings [2] | 47.1 | % | 49.1 | % | 51.2 | % | 54.8 | % | 53.3 | % | 49.5 | % | 45.7 | % |
[1] | Represents annualized earnings divided by daily average assets under management, as measured in basis points ("bps") which represents one hundredth of one percent. |
[2] | Net income ROE and core earnings ROE assume a portion of debt and interest expense and preferred stock and preferred stock dividends accounted for within Corporate are allocated to Hartford Funds. For further information, see Appendix, page 33. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
HARTFORD FUNDS
ASSET VALUE ROLLFORWARD
ASSETS UNDER MANAGEMENT BY ASSET CLASS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Equity Funds | ||||||||||||||||||||||||||||
Beginning balance | $ | 68,474 | $ | 66,158 | $ | 56,986 | $ | 69,463 | $ | 66,285 | $ | 64,702 | $ | 63,740 | $ | 56,986 | $ | 63,740 | ||||||||||
Sales | 3,003 | 3,761 | 4,358 | 3,749 | 3,672 | 3,452 | 4,175 | 11,122 | 11,299 | |||||||||||||||||||
Redemptions | (3,867 | ) | (4,153 | ) | (3,893 | ) | (5,376 | ) | (3,449 | ) | (3,116 | ) | (3,749 | ) | (11,913 | ) | (10,314 | ) | ||||||||||
Net flows | (864 | ) | (392 | ) | 465 | (1,627 | ) | 223 | 336 | 426 | (791 | ) | 985 | |||||||||||||||
Change in market value and other | (611 | ) | 2,708 | 8,707 | (10,850 | ) | 2,955 | 1,247 | 536 | 10,804 | 4,738 | |||||||||||||||||
Ending balance | $ | 66,999 | $ | 68,474 | $ | 66,158 | $ | 56,986 | $ | 69,463 | $ | 66,285 | $ | 64,702 | $ | 66,999 | $ | 69,463 | ||||||||||
Fixed Income Funds | ||||||||||||||||||||||||||||
Beginning balance | $ | 15,569 | $ | 15,070 | $ | 14,467 | $ | 14,831 | $ | 14,556 | $ | 14,378 | $ | 14,401 | $ | 14,467 | $ | 14,401 | ||||||||||
Sales | 1,420 | 1,274 | 1,314 | 1,222 | 946 | 1,119 | 1,002 | 4,008 | 3,067 | |||||||||||||||||||
Redemptions | (1,491 | ) | (1,121 | ) | (1,138 | ) | (1,541 | ) | (772 | ) | (960 | ) | (1,030 | ) | (3,750 | ) | (2,762 | ) | ||||||||||
Net flows | (71 | ) | 153 | 176 | (319 | ) | 174 | 159 | (28 | ) | 258 | 305 | ||||||||||||||||
Change in market value and other | 187 | 346 | 427 | (45 | ) | 101 | 19 | 5 | 960 | 125 | ||||||||||||||||||
Ending balance | $ | 15,685 | $ | 15,569 | $ | 15,070 | $ | 14,467 | $ | 14,831 | $ | 14,556 | $ | 14,378 | $ | 15,685 | $ | 14,831 | ||||||||||
Multi-Strategy Investments Funds [1] | ||||||||||||||||||||||||||||
Beginning balance | $ | 20,095 | $ | 19,540 | $ | 18,233 | $ | 20,062 | $ | 19,894 | $ | 20,137 | $ | 20,469 | $ | 18,233 | $ | 20,469 | ||||||||||
Sales | 776 | 672 | 640 | 622 | 558 | 681 | 1,000 | 2,088 | 2,239 | |||||||||||||||||||
Redemptions | (768 | ) | (823 | ) | (869 | ) | (1,079 | ) | (971 | ) | (931 | ) | (914 | ) | (2,460 | ) | (2,816 | ) | ||||||||||
Net flows | 8 | (151 | ) | (229 | ) | (457 | ) | (413 | ) | (250 | ) | 86 | (372 | ) | (577 | ) | ||||||||||||
Change in market value and other | 326 | 706 | 1,536 | (1,372 | ) | 581 | 7 | (418 | ) | 2,568 | 170 | |||||||||||||||||
Ending balance | $ | 20,429 | $ | 20,095 | $ | 19,540 | $ | 18,233 | $ | 20,062 | $ | 19,894 | $ | 20,137 | $ | 20,429 | $ | 20,062 | ||||||||||
Exchange-traded Products ("ETP") AUM | ||||||||||||||||||||||||||||
Beginning balance | $ | 2,751 | $ | 2,457 | $ | 1,871 | $ | 1,177 | $ | 930 | $ | 666 | $ | 480 | $ | 1,871 | $ | 480 | ||||||||||
Net flows | 127 | 285 | 462 | 721 | 261 | 228 | 194 | 874 | 683 | |||||||||||||||||||
Change in market value and other | (31 | ) | 9 | 124 | (27 | ) | (14 | ) | 36 | (8 | ) | 102 | 14 | |||||||||||||||
Ending balance | $ | 2,847 | $ | 2,751 | $ | 2,457 | $ | 1,871 | $ | 1,177 | $ | 930 | $ | 666 | $ | 2,847 | $ | 1,177 | ||||||||||
Mutual Fund and ETP AUM | ||||||||||||||||||||||||||||
Beginning balance | $ | 106,889 | $ | 103,225 | $ | 91,557 | $ | 105,533 | $ | 101,665 | $ | 99,883 | $ | 99,090 | $ | 91,557 | $ | 99,090 | ||||||||||
Sales - mutual fund | 5,199 | 5,707 | 6,312 | 5,593 | 5,176 | 5,252 | 6,177 | 17,218 | 16,605 | |||||||||||||||||||
Redemptions - mutual fund | (6,126 | ) | (6,097 | ) | (5,900 | ) | (7,996 | ) | (5,192 | ) | (5,007 | ) | (5,693 | ) | (18,123 | ) | (15,892 | ) | ||||||||||
Net flows - ETP | 127 | 285 | 462 | 721 | 261 | 228 | 194 | 874 | 683 | |||||||||||||||||||
Net flows - mutual fund and ETP | (800 | ) | (105 | ) | 874 | (1,682 | ) | 245 | 473 | 678 | (31 | ) | 1,396 | |||||||||||||||
Change in market value and other | (129 | ) | 3,769 | 10,794 | (12,294 | ) | 3,623 | 1,309 | 115 | 14,434 | 5,047 | |||||||||||||||||
Ending balance | 105,960 | 106,889 | 103,225 | 91,557 | 105,533 | 101,665 | 99,883 | 105,960 | 105,533 | |||||||||||||||||||
Talcott Resolution life and annuity separate account AUM [2] | 14,021 | 14,412 | 14,364 | 13,283 | 15,543 | 15,376 | 15,614 | 14,021 | 15,543 | |||||||||||||||||||
Hartford Funds AUM | $ | 119,981 | $ | 121,301 | $ | 117,589 | $ | 104,840 | $ | 121,076 | $ | 117,041 | $ | 115,497 | $ | 119,981 | $ | 121,076 |
[1] | Includes balanced, allocation, and alternative investment products. |
[2] | Represents AUM of the the life and annuity business sold in May 2018 that is still managed by the Company's Hartford Funds segment. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Fee income [1] | $ | 14 | $ | 11 | $ | 13 | $ | 11 | $ | 15 | $ | 4 | $ | 2 | $ | 38 | $ | 21 | ||||||||||
Other revenue [2] | 24 | 10 | 34 | 13 | 6 | 2 | — | 68 | 8 | |||||||||||||||||||
Net investment income | 10 | 17 | 24 | 26 | 15 | 11 | 7 | 51 | 33 | |||||||||||||||||||
Net realized capital gains (losses) | 1 | 7 | 13 | (16 | ) | 4 | 1 | 4 | 21 | 9 | ||||||||||||||||||
Total revenues | 49 | 45 | 84 | 34 | 40 | 18 | 13 | 178 | 71 | |||||||||||||||||||
Benefits, losses and loss adjustment expenses [3] | 5 | 3 | 2 | 2 | 3 | 4 | 2 | 10 | 9 | |||||||||||||||||||
Insurance operating costs and other expenses | 20 | 33 | 13 | 24 | 25 | 19 | 15 | 66 | 59 | |||||||||||||||||||
Loss on extinguishment of debt [4] | 90 | — | — | — | — | 6 | — | 90 | 6 | |||||||||||||||||||
Interest expense | 67 | 63 | 64 | 70 | 69 | 79 | 80 | 194 | 228 | |||||||||||||||||||
Total expenses | 182 | 99 | 79 | 96 | 97 | 108 | 97 | 360 | 302 | |||||||||||||||||||
Income (loss) from continuing operations before income taxes | (133 | ) | (54 | ) | 5 | (62 | ) | (57 | ) | (90 | ) | (84 | ) | (182 | ) | (231 | ) | |||||||||||
Income tax expense (benefit) | (34 | ) | (11 | ) | 5 | (50 | ) | (17 | ) | (8 | ) | (20 | ) | (40 | ) | (45 | ) | |||||||||||
Loss from continuing operations, net of tax | (99 | ) | (43 | ) | — | (12 | ) | (40 | ) | (82 | ) | (64 | ) | (142 | ) | (186 | ) | |||||||||||
Income from discontinued operations, net of tax [5] | — | — | — | — | 5 | 148 | 169 | — | 322 | |||||||||||||||||||
Net income (loss) | (99 | ) | (43 | ) | — | (12 | ) | (35 | ) | 66 | 105 | (142 | ) | 136 | ||||||||||||||
Preferred stock dividends | 11 | — | 5 | 6 | — | — | — | 16 | — | |||||||||||||||||||
Net income (loss) available to common stockholders | (110 | ) | (43 | ) | (5 | ) | (18 | ) | (35 | ) | 66 | 105 | (158 | ) | 136 | |||||||||||||
Adjustments to reconcile net income available to common stockholders to core earnings: | ||||||||||||||||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | — | (8 | ) | (13 | ) | 16 | (4 | ) | (2 | ) | (4 | ) | (21 | ) | (10 | ) | ||||||||||||
Loss on extinguishment of debt, before tax | 90 | — | — | — | — | 6 | — | 90 | 6 | |||||||||||||||||||
Transaction costs, before tax [7] | 1 | 15 | — | — | — | — | — | 16 | — | |||||||||||||||||||
Income tax expense (benefit) [6] | (18 | ) | 1 | 3 | (44 | ) | (1 | ) | 2 | 2 | (14 | ) | 3 | |||||||||||||||
Income from discontinued operations, net of tax [5] | — | — | — | — | (5 | ) | (148 | ) | (169 | ) | — | (322 | ) | |||||||||||||||
Core losses | $ | (37 | ) | $ | (35 | ) | $ | (15 | ) | $ | (46 | ) | $ | (45 | ) | $ | (76 | ) | $ | (66 | ) | $ | (87 | ) | $ | (187 | ) |
[1] | Beginning in June 2018, includes fee income from managing invested assets of the life and annuity business sold in May 2018. |
[2] | For the three and nine months ended September 30, 2019, includes $14 and $45, respectively, of income before tax from the Company's retained 9.7% equity interest in the limited partnership that acquired the life and annuity business sold in May 2018. |
[3] | Relates to run-off structured settlement and terminal funding agreement liabilities. |
[4] | For the September 30, 2019 periods, amount relates to the redemptions of $265 of 5.75% senior notes that had been assumed in the Navigators Group acquisition and $800 of 5.125% senior notes of The Hartford Financial Services Group, Inc. |
[5] | The three months ended June 30, 2018 and March 31, 2018, included a reduction in loss on sale of $151 and $62, respectively, related to the life and annuity business sold in May 2018. |
[6] | Generally represents federal income tax expense (benefit) related to before tax items not included in core earnings. |
[7] | Related to transaction costs incurred in connection with the acquisition of Navigators Group that are included in insurance operating costs and other expenses. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
CONSOLIDATED
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||||||
Fixed maturities [1] | ||||||||||||||||||||||||||||
Taxable | $ | 306 | $ | 296 | $ | 284 | $ | 282 | $ | 269 | $ | 252 | $ | 238 | $ | 886 | $ | 759 | ||||||||||
Tax-exempt | 86 | 90 | 97 | 100 | 101 | 106 | 111 | 273 | 318 | |||||||||||||||||||
Total fixed maturities | 392 | 386 | 381 | 382 | 370 | 358 | 349 | 1,159 | 1,077 | |||||||||||||||||||
Equity securities | 12 | 12 | 7 | 14 | 6 | 6 | 6 | 31 | 18 | |||||||||||||||||||
Mortgage loans | 37 | 41 | 40 | 39 | 35 | 34 | 33 | 118 | 102 | |||||||||||||||||||
Limited partnerships and other alternative investments [2] | 65 | 60 | 56 | 48 | 45 | 39 | 73 | 181 | 157 | |||||||||||||||||||
Other [3] | 5 | 7 | 9 | (7 | ) | 10 | 9 | 8 | 21 | 27 | ||||||||||||||||||
Subtotal | 511 | 506 | 493 | 476 | 466 | 446 | 469 | 1,510 | 1,381 | |||||||||||||||||||
Investment expense | (21 | ) | (18 | ) | (23 | ) | (19 | ) | (22 | ) | (18 | ) | (18 | ) | (62 | ) | (58 | ) | ||||||||||
Total net investment income | $ | 490 | $ | 488 | $ | 470 | $ | 457 | $ | 444 | $ | 428 | $ | 451 | $ | 1,448 | $ | 1,323 | ||||||||||
Annualized investment yield, before tax [4] | 4.0 | % | 4.2 | % | 4.1 | % | 4.0 | % | 4.0 | % | 3.9 | % | 4.2 | % | 4.1 | % | 4.0 | % | ||||||||||
Annualized limited partnerships and other alternative investment yield, before tax [4] | 15.3 | % | 13.9 | % | 13.4 | % | 11.6 | % | 10.6 | % | 9.5 | % | 18.6 | % | 14.7 | % | 13.3 | % | ||||||||||
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4]* | 3.6 | % | 3.8 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.7 | % | ||||||||||
Annualized investment yield, net of tax [4] | 3.3 | % | 3.4 | % | 3.4 | % | 3.3 | % | 3.3 | % | 3.3 | % | 3.5 | % | 3.4 | % | 3.4 | % | ||||||||||
Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4]* | 3.0 | % | 3.1 | % | 3.1 | % | 3.1 | % | 3.1 | % | 3.1 | % | 3.0 | % | 3.1 | % | 3.1 | % | ||||||||||
Average reinvestment rate [5] | 3.1 | % | 3.5 | % | 4.1 | % | 4.3 | % | 4.0 | % | 4.0 | % | 3.8 | % | 3.5 | % | 4.0 | % | ||||||||||
Average sales/maturities yield [6] | 4.1 | % | 4.0 | % | 4.1 | % | 4.0 | % | 3.8 | % | 3.7 | % | 3.3 | % | 4.0 | % | 3.6 | % | ||||||||||
Portfolio duration (in years) [7] | 4.9 | 4.9 | 4.8 | 4.7 | 4.9 | 4.9 | 5.1 | 4.9 | 4.9 |
[1] | Includes income on short-term bonds. |
[2] | Other alternative investments include an insurer-owned life insurance policy which is invested in hedge funds and other investments. |
[3] | Includes income from derivatives that qualify for hedge accounting and are used to hedge fixed maturities. |
[4] | Represents annualized net investment income divided by the monthly average invested assets at amortized cost as applicable, excluding repurchase agreement and securities lending collateral, if any, and derivatives book value. |
[5] | Represents the annualized yield on fixed maturities and mortgage loans that were purchased during the respective period. Excludes U.S. Treasury securities, cash equivalent securities, and repurchase agreement and securities lending collateral, if any. |
[6] | Represents the annualized yield on fixed maturities and mortgage loans that were sold, matured, or redeemed, including calls and pay-downs, during the respective period. Excludes U.S. Treasury securities, cash equivalent securities, and repurchase agreement and securities lending collateral, if any. |
[7] | Excludes certain short-term securities. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
PROPERTY & CASUALTY
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||||||
Fixed maturities [1] | ||||||||||||||||||||||||||||
Taxable | $ | 218 | $ | 201 | $ | 182 | $ | 184 | $ | 178 | $ | 168 | $ | 163 | $ | 601 | $ | 509 | ||||||||||
Tax-exempt | 65 | 68 | 73 | 76 | 77 | 79 | 82 | 206 | 238 | |||||||||||||||||||
Total fixed maturities | 283 | 269 | 255 | 260 | 255 | 247 | 245 | 807 | 747 | |||||||||||||||||||
Equity securities | 9 | 8 | 5 | 5 | 5 | 5 | 4 | 22 | 14 | |||||||||||||||||||
Mortgage loans | 26 | 28 | 27 | 28 | 24 | 23 | 24 | 81 | 71 | |||||||||||||||||||
Limited partnerships and other alternative investments [2] | 52 | 50 | 46 | 37 | 35 | 33 | 58 | 148 | 126 | |||||||||||||||||||
Other [3] | 3 | 7 | 7 | (8 | ) | 8 | 6 | 4 | 17 | 18 | ||||||||||||||||||
Subtotal | 373 | 362 | 340 | 322 | 327 | 314 | 335 | 1,075 | 976 | |||||||||||||||||||
Investment expense | (15 | ) | (14 | ) | (17 | ) | (14 | ) | (16 | ) | (13 | ) | (13 | ) | (46 | ) | (42 | ) | ||||||||||
Total net investment income | $ | 358 | $ | 348 | $ | 323 | $ | 308 | $ | 311 | $ | 301 | $ | 322 | $ | 1,029 | $ | 934 | ||||||||||
Annualized investment yield, before tax [4] | 4.0 | % | 4.2 | % | 4.2 | % | 4.0 | % | 4.1 | % | 4.0 | % | 4.3 | % | 4.2 | % | 4.1 | % | ||||||||||
Annualized limited partnerships and other alternative investment yield, before tax [4] | 14.6 | % | 13.9 | % | 13.0 | % | 10.7 | % | 9.8 | % | 9.3 | % | 17.0 | % | 14.3 | % | 12.4 | % | ||||||||||
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4]* | 3.6 | % | 3.8 | % | 3.8 | % | 3.7 | % | 3.8 | % | 3.8 | % | 3.7 | % | 3.7 | % | 3.7 | % | ||||||||||
Annualized investment yield, net of tax [4] | 3.3 | % | 3.5 | % | 3.6 | % | 3.3 | % | 3.4 | % | 3.4 | % | 3.5 | % | 3.5 | % | 3.4 | % | ||||||||||
Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4]* | 3.0 | % | 3.2 | % | 3.2 | % | 3.0 | % | 3.2 | % | 3.2 | % | 3.1 | % | 3.1 | % | 3.1 | % | ||||||||||
Average reinvestment rate [5] | 3.1 | % | 3.5 | % | 4.1 | % | 4.4 | % | 3.9 | % | 4.0 | % | 3.7 | % | 3.5 | % | 3.9 | % | ||||||||||
Average sales/maturities yield [6] | 4.1 | % | 3.9 | % | 4.1 | % | 4.1 | % | 3.8 | % | 3.9 | % | 3.7 | % | 4.0 | % | 3.8 | % | ||||||||||
Portfolio duration (in years) [7] | 4.8 | 4.8 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.8 | 4.9 |
Footnotes [1] through [7] are explained on page 25.
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
GROUP BENEFITS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||||||
Fixed maturities [1] | ||||||||||||||||||||||||||||
Taxable | $ | 81 | $ | 81 | $ | 81 | $ | 80 | $ | 77 | $ | 75 | $ | 70 | $ | 243 | $ | 222 | ||||||||||
Tax-exempt | 20 | 20 | 22 | 22 | 23 | 25 | 27 | 62 | 75 | |||||||||||||||||||
Total fixed maturities | 101 | 101 | 103 | 102 | 100 | 100 | 97 | 305 | 297 | |||||||||||||||||||
Equity securities | 1 | 1 | — | 1 | — | — | 1 | 2 | 1 | |||||||||||||||||||
Mortgage loans | 11 | 13 | 13 | 11 | 11 | 11 | 9 | 37 | 31 | |||||||||||||||||||
Limited partnerships and other alternative investments [2] | 13 | 10 | 10 | 11 | 10 | 6 | 15 | 33 | 31 | |||||||||||||||||||
Other [3] | 1 | — | 1 | 1 | 2 | 3 | 4 | 2 | 9 | |||||||||||||||||||
Subtotal | 127 | 125 | 127 | 126 | 123 | 120 | 126 | 379 | 369 | |||||||||||||||||||
Investment expense | (6 | ) | (4 | ) | (6 | ) | (5 | ) | (6 | ) | (5 | ) | (5 | ) | (16 | ) | (16 | ) | ||||||||||
Total net investment income | $ | 121 | $ | 121 | $ | 121 | $ | 121 | $ | 117 | $ | 115 | $ | 121 | $ | 363 | $ | 353 | ||||||||||
Annualized investment yield, before tax [4] | 4.2 | % | 4.2 | % | 4.2 | % | 4.2 | % | 4.1 | % | 4.1 | % | 4.3 | % | 4.2 | % | 4.2 | % | ||||||||||
Annualized limited partnerships and other alternative investment yield, before tax [4] | 19.0 | % | 14.0 | % | 15.6 | % | 17.2 | % | 15.4 | % | 10.6 | % | 28.3 | % | 16.9 | % | 18.8 | % | ||||||||||
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4]* | 3.8 | % | 3.9 | % | 3.9 | % | 3.9 | % | 3.9 | % | 3.9 | % | 3.8 | % | 3.9 | % | 3.9 | % | ||||||||||
Annualized investment yield, net of tax [4] | 3.4 | % | 3.4 | % | 3.4 | % | 3.4 | % | 3.4 | % | 3.4 | % | 3.5 | % | 3.4 | % | 3.4 | % | ||||||||||
Annualized investment yield, net of tax, excluding limited partnership and other alternative investments [4]* | 3.1 | % | 3.2 | % | 3.2 | % | 3.2 | % | 3.2 | % | 3.3 | % | 3.2 | % | 3.2 | % | 3.2 | % | ||||||||||
Average reinvestment rate [5] | 3.4 | % | 3.8 | % | 4.0 | % | 4.3 | % | 4.1 | % | 4.2 | % | 3.9 | % | 3.7 | % | 4.1 | % | ||||||||||
Average sales/maturities yield [6] | 4.3 | % | 4.2 | % | 4.0 | % | 3.9 | % | 3.6 | % | 3.8 | % | 3.0 | % | 4.2 | % | 3.4 | % | ||||||||||
Portfolio duration (in years) [7] | 6.0 | 5.9 | 5.8 | 5.7 | 6.1 | 6.0 | 6.1 | 6.0 | 6.1 |
Footnotes [1] through [7] are explained on page 25.
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET INVESTMENT INCOME
CONSOLIDATED
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Net Investment Income by Segment | Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | |||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||||||
Commercial Lines | $ | 291 | $ | 281 | $ | 259 | $ | 247 | $ | 250 | $ | 242 | $ | 258 | $ | 831 | $ | 750 | ||||||||||
Personal Lines | 46 | 46 | 42 | 39 | 39 | 37 | 40 | 134 | 116 | |||||||||||||||||||
P&C Other Operations | 21 | 21 | 22 | 22 | 22 | 22 | 24 | 64 | 68 | |||||||||||||||||||
Total Property & Casualty | $ | 358 | $ | 348 | $ | 323 | $ | 308 | $ | 311 | $ | 301 | $ | 322 | $ | 1,029 | $ | 934 | ||||||||||
Group Benefits | 121 | 121 | 121 | 121 | 117 | 115 | 121 | 363 | 353 | |||||||||||||||||||
Hartford Funds | 1 | 2 | 2 | 2 | 1 | 1 | 1 | 5 | 3 | |||||||||||||||||||
Corporate | 10 | 17 | 24 | 26 | 15 | 11 | 7 | 51 | 33 | |||||||||||||||||||
Total net investment income by segment | $ | 490 | $ | 488 | $ | 470 | $ | 457 | $ | 444 | $ | 428 | $ | 451 | $ | 1,448 | $ | 1,323 | ||||||||||
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Net Investment Income From Limited Partnerships and Other Alternative Investments | Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | |||||||||||||||||||
Total Property & Casualty | $ | 52 | $ | 50 | $ | 46 | $ | 37 | $ | 35 | $ | 33 | $ | 58 | $ | 148 | $ | 126 | ||||||||||
Group Benefits | 13 | 10 | 10 | 11 | 10 | 6 | 15 | 33 | 31 | |||||||||||||||||||
Total net investment income from limited partnerships and other alternative investments [1] | $ | 65 | $ | 60 | $ | 56 | $ | 48 | $ | 45 | $ | 39 | $ | 73 | $ | 181 | $ | 157 |
[1] | Amounts are included above in total net investment income by segment. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
CONSOLIDATED
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Net Realized Capital Gains (Losses) | ||||||||||||||||||||||||||||
Gross gains on sales | $ | 77 | $ | 69 | $ | 44 | $ | 23 | $ | 26 | $ | 46 | $ | 19 | $ | 190 | $ | 91 | ||||||||||
Gross losses on sales | (4 | ) | (19 | ) | (21 | ) | (43 | ) | (41 | ) | (31 | ) | (57 | ) | (44 | ) | (129 | ) | ||||||||||
Equity securities [1] | 19 | 30 | 132 | (136 | ) | 46 | 26 | 16 | 181 | 88 | ||||||||||||||||||
Net impairment losses | (1 | ) | — | (2 | ) | — | (1 | ) | — | — | (3 | ) | (1 | ) | ||||||||||||||
Valuation allowances on mortgage loans | — | 1 | — | — | — | — | — | 1 | — | |||||||||||||||||||
Transactional foreign currency revaluation | — | — | — | — | — | — | 1 | — | 1 | |||||||||||||||||||
Non-qualifying foreign currency derivatives | 2 | (1 | ) | 1 | 1 | 1 | 4 | (3 | ) | 2 | 2 | |||||||||||||||||
Other net gains (losses) [2] [3] | (4 | ) | — | 9 | (17 | ) | 7 | 7 | (6 | ) | 5 | 8 | ||||||||||||||||
Total net realized capital gains (losses) | 89 | 80 | 163 | (172 | ) | 38 | 52 | (30 | ) | 332 | 60 | |||||||||||||||||
Net realized capital gains, included in core earnings, before tax | (1 | ) | (1 | ) | (3 | ) | (3 | ) | (1 | ) | (2 | ) | — | (5 | ) | (3 | ) | |||||||||||
Total net realized capital gains (losses) excluded from core earnings, before tax | 88 | 79 | 160 | (175 | ) | 37 | 50 | (30 | ) | 327 | 57 | |||||||||||||||||
Income tax benefit (expense) related to net realized capital gains (losses) excluded from core earnings | (18 | ) | (18 | ) | (34 | ) | 38 | (8 | ) | (10 | ) | 5 | (70 | ) | (13 | ) | ||||||||||||
Total net realized capital gains (losses) excluded from core earnings | $ | 70 | $ | 61 | $ | 126 | $ | (137 | ) | $ | 29 | $ | 40 | $ | (25 | ) | $ | 257 | $ | 44 |
[1] | Includes all changes in fair value and trading gains and losses for equity securities. |
[2] | Includes changes in value of non-qualifying derivatives, including credit derivatives and interest rate derivatives used to manage duration. |
[3] | Includes periodic net coupon settlements on credit derivatives which are included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | |||||||||||||||||||||
Amount [1] | Percent | Amount | Percent | Amount | Percent | Amount [1] | Percent | Amount | Percent | ||||||||||||||||
Total investments | $ | 52,577 | 100.0 | % | $ | 50,769 | 100.0 | % | $ | 47,895 | 100.0 | % | $ | 46,790 | 100.0 | % | $ | 46,134 | 100.0 | % | |||||
Asset-backed securities | $ | 1,337 | 3.1 | % | $ | 1,029 | 2.5 | % | $ | 968 | 2.6 | % | $ | 1,276 | 3.6 | % | $ | 1,191 | 3.3 | % | |||||
Collateralized loan obligations | 2,158 | 5.1 | % | 1,925 | 4.7 | % | 1,438 | 3.9 | % | 1,437 | 4.0 | % | 1,326 | 3.7 | % | ||||||||||
Commercial mortgage-backed securities | 4,254 | 10.1 | % | 3,905 | 9.5 | % | 3,568 | 9.7 | % | 3,552 | 9.9 | % | 3,657 | 10.2 | % | ||||||||||
Corporate | 17,801 | 42.0 | % | 16,748 | 40.7 | % | 14,403 | 39.1 | % | 13,398 | 37.6 | % | 13,492 | 37.3 | % | ||||||||||
Foreign government/government agencies | 1,117 | 2.6 | % | 1,072 | 2.6 | % | 882 | 2.4 | % | 847 | 2.4 | % | 952 | 2.6 | % | ||||||||||
Municipal [2] | 9,895 | 23.4 | % | 10,278 | 25.0 | % | 10,346 | 28.1 | % | 10,346 | 29.1 | % | 10,602 | 29.3 | % | ||||||||||
Residential mortgage-backed securities | 4,732 | 11.1 | % | 4,566 | 11.0 | % | 3,548 | 9.7 | % | 3,279 | 9.2 | % | 3,118 | 8.5 | % | ||||||||||
U.S. Treasuries | 1,095 | 2.6 | % | 1,643 | 4.0 | % | 1,666 | 4.5 | % | 1,517 | 4.2 | % | 1,828 | 5.1 | % | ||||||||||
Total fixed maturities, available-for-sale | $ | 42,389 | 100.0 | % | $ | 41,166 | 100.0 | % | $ | 36,819 | 100.0 | % | $ | 35,652 | 100.0 | % | $ | 36,166 | 100.0 | % | |||||
U.S. government/government agencies | $ | 5,588 | 13.2 | % | $ | 5,714 | 13.9 | % | $ | 4,847 | 13.2 | % | $ | 4,430 | 12.4 | % | $ | 4,735 | 13.1 | % | |||||
AAA | 6,360 | 15.0 | % | 6,214 | 15.1 | % | 6,160 | 16.7 | % | 6,440 | 18.1 | % | 6,379 | 17.6 | % | ||||||||||
AA | 8,202 | 19.4 | % | 7,890 | 19.1 | % | 7,016 | 19.0 | % | 6,985 | 19.6 | % | 7,085 | 19.6 | % | ||||||||||
A | 10,894 | 25.7 | % | 10,552 | 25.6 | % | 8,871 | 24.1 | % | 8,370 | 23.5 | % | 8,543 | 23.6 | % | ||||||||||
BBB | 9,850 | 23.2 | % | 9,246 | 22.5 | % | 8,530 | 23.2 | % | 8,163 | 22.9 | % | 8,232 | 22.8 | % | ||||||||||
BB | 994 | 2.3 | % | 1,076 | 2.6 | % | 926 | 2.5 | % | 794 | 2.2 | % | 721 | 2.0 | % | ||||||||||
B | 463 | 1.1 | % | 445 | 1.1 | % | 429 | 1.2 | % | 448 | 1.2 | % | 446 | 1.2 | % | ||||||||||
CCC | 29 | 0.1 | % | 27 | 0.1 | % | 29 | 0.1 | % | 21 | 0.1 | % | 23 | 0.1 | % | ||||||||||
CC & below | 9 | — | % | 2 | — | % | 11 | — | % | 1 | — | % | 2 | — | % | ||||||||||
Total fixed maturities, available-for-sale | $ | 42,389 | 100.0 | % | $ | 41,166 | 100.0 | % | $ | 36,819 | 100.0 | % | $ | 35,652 | 100.0 | % | $ | 36,166 | 100.0 | % |
[1] | Amount represents the value at which the assets are presented in the Consolidating Balance Sheets (page 4). |
[2] | Primarily comprised of $7.3 billion in Property & Casualty, $2.4 billion in Group Benefits, and $0.2 billion in Corporate as of September 30, 2019. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
SEPTEMBER 30, 2019
Cost or Amortized Cost | Fair Value | Percent of Total Invested Assets | ||||||
Top Ten Corporate Fixed Maturity, AFS and Equity Exposures by Sector | ||||||||
Financial services | $ | 4,312 | $ | 4,472 | 8.5 | % | ||
Technology and communications | 2,710 | 2,912 | 5.5 | % | ||||
Consumer non-cyclical | 2,522 | 2,650 | 5.0 | % | ||||
Utilities | 2,120 | 2,263 | 4.3 | % | ||||
Energy [1] | 1,525 | 1,609 | 3.1 | % | ||||
Capital goods | 1,498 | 1,567 | 3.0 | % | ||||
Consumer cyclical | 1,253 | 1,308 | 2.5 | % | ||||
Transportation | 789 | 833 | 1.6 | % | ||||
Basic industry | 700 | 734 | 1.4 | % | ||||
Other | 852 | 867 | 1.6 | % | ||||
Total | $ | 18,281 | $ | 19,215 | 36.5 | % | ||
Top Ten Exposures by Issuer [2] | ||||||||
New York State Dormitory Authority | $ | 248 | $ | 263 | 0.5 | % | ||
Wells Fargo & Company | 228 | 234 | 0.4 | % | ||||
New York City Transitional Finance Authority | 210 | 220 | 0.4 | % | ||||
IBM Corporation | 198 | 213 | 0.4 | % | ||||
Commonwealth of Massachusetts | 196 | 211 | 0.4 | % | ||||
Comcast Corporation | 183 | 204 | 0.4 | % | ||||
Apple Inc. | 187 | 204 | 0.4 | % | ||||
Bank of America Corporation | 184 | 196 | 0.4 | % | ||||
Massachusetts St. Development Finance Agency | 182 | 195 | 0.4 | % | ||||
Morgan Stanley | 175 | 186 | 0.3 | % | ||||
Total | $ | 1,991 | $ | 2,126 | 4.0 | % |
[1] | Excludes investments in foreign government, government agency securities or other fixed maturities that are correlated to energy exposure but are not direct obligations of or exposures to energy-related companies. |
[2] | Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, exchange-traded mutual funds, and exposures resulting from derivative transactions. |
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 five reporting segments: Commercial Lines, Personal Lines, Property & Casualty Other Operations ("P&C Other Operations"), Group Benefits and Hartford Funds, as well as a Corporate category.
Property & Casualty ("P&C") businesses consist of three reporting segments: Commercial Lines, Personal Lines and P&C Other Operations. Commercial Lines provides workers’ compensation, property, automobile, general liability, umbrella, professional liability, bond, marine, livestock and accident and health reinsurance to businesses in the United States ("U.S.") and internationally. Commercial Lines generally consists of products written for small businesses, middle market companies as well as national and multi-national accounts, largely distributed through retail agents and brokers, wholesale agents and global and specialty reinsurance brokers. Small commercial and middle market lines within middle & large commercial are generally referred to as standard commercial lines. Global specialty provides a variety of customized insurance products, including reinsurance. Personal Lines provides automobile, homeowners and personal umbrella 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, managed by the Company, that have discontinued writing new business and represent approximately 90% of the Company's asbestos and environmental exposures.
Group Benefits provides group life, accident and disability coverage, group retiree health and voluntary benefits to individual members of employer groups and associations. Group Benefits offers disability underwriting, administration, claims processing and reinsurance to other insurers and self-funded employer plans.
Hartford Funds provides investment management, administration, distribution and related services to investors through investment products in domestic markets. Mutual fund and exchange-traded products are sold primarily through retail, bank trust and registered investment advisor channels.
The Company includes in the Corporate category discontinued operations related to the life and annuity business sold in May 2018, reserves for run-off structured settlement and terminal funding agreement liabilities, capital raising activities (including equity financing, debt financing and related interest expense), transaction expenses incurred in connection with an acquisition, purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments. Corporate also includes investment management fees and expenses related to managing third party business, including management of the invested assets of Talcott Resolution Life, Inc. and its subsidiaries ("Talcott Resolution"). Talcott Resolution is the new holding company of the life and annuity business that we sold in May 2018. In addition, Corporate includes a 9.7% ownership interest in the legal entity that acquired the life and annuity business sold.
Certain operating and statistical measures for P&C standard commercial lines (small commercial and middle market lines within middle & large commercial) and for Personal Lines have been incorporated herein to provide supplemental data that indicate current trends in the Company's business. These measures include sales, redemptions, net flows, account value, policies in-force, new business, premium retention, policy count retention and renewal earned and written price increases. Premium retention is defined as renewal premium written in the current period divided by total premium written in the prior period. Policy count retention represents the ratio of the number of policies renewed during the period divided by the number of policies from the previous policy term period. Renewal earned price increases represent the portions of the prior and current period renewal written price increases that have been earned based on the period of time the underlying renewal policies have been in effect. Renewal written price increases for Commercial Lines represent the combined effect of rate changes, amount of insurance and individual risk pricing decisions per unit of exposure since the prior year on policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Lines, renewal written price increases represent the total change in premium per policy since the prior year on those policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Lines, other changes in exposure include, but are not limited to, the effect of changes in number of drivers, vehicles and incidents, as well as changes in customer policy elections, such as deductibles and limits.
The 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 less fee income to earned premiums. Underwriting expenses included in the expense ratio consists of amortization of deferred policy acquisition costs and insurance operating costs and expenses, including certain centralized services and bad debt expense, but excluding integration and transaction costs associated with an acquired business.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, expenses and policyholder dividends 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 and loss adjustment expenses to earned premiums. The prior accident year loss and loss adjustment expense ratio (a component of the loss ratio) represents the increase (decrease) in the estimated cost of settling catastrophe and non-catastrophe claims incurred in prior accident years as recorded in the current calendar year divided by earned premiums.
The Company, along with others in the insurance industry, uses underwriting ratios as measures of the Group Benefits segment's performance. The loss ratio is the ratio of benefits, losses and loss adjustment expenses to premiums and other considerations, excluding buyout premiums. The expense ratio is the ratio of insurance operating costs and other expenses (excluding integration and transaction costs associated with an acquired business) to premiums and other considerations, excluding buyout premiums. Buyout premiums represent takeover of open claim liabilities and other non-recurring premium amounts.
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 and the events are unpredictable as to timing or loss amount. Catastrophe losses are not included in earnings or losses and loss adjustment expense reserves prior to occurrence of the catastrophe event. The Company believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings. For U.S. events, a catastrophe is an event that causes $25 or more in industry insured property losses and affects a significant number of property and casualty policyholders and insurers, as defined by the Property Claim Service office of Verisk. For international events, the Company's approach is similar, informed, in part, by how Lloyd's of London defines catastrophes.
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. 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. Non-GAAP measures are indicated with an asterisk the first time they appear in this document.
The Company uses the non-GAAP financial measure core earnings as an important measure of the Company's operating performance. The Company believes that core earnings provides investors with a valuable measure of the underlying performance of the Company’s 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, any deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain, integration and transaction costs in connection with an acquired business, loss on extinguishment of debt, gains and losses on reinsurance transactions, change in loss reserves upon acquisition of a business, income tax benefit from reduction in deferred income tax valuation allowance, and results of discontinued operations. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses (net of tax) that tend to be highly variable from period to period based on capital market conditions. The Company believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain are excluded from core earnings given that these reinsurance agreements economically transfer risk to the reinsurers and including the benefit from retroactive reinsurance in core earnings provides greater insight into the economics of the business. Core earnings are net of preferred stock dividends declared since they are a cost of financing more akin to interest expense on debt and are expected to be a recurring expense as long as the preferred stock is outstanding. Results from discontinued operations are excluded from core earnings for businesses held for sale because such results could obscure trends in our ongoing businesses that are valuable to our investors' ability to assess the Company's financial performance. Net income (loss), net income (loss) available to common stockholders and income from continuing operations, net of tax, available to common stockholders (during periods when the Company reports significant discontinued operations) are the most directly comparable U.S. GAAP measures to core earnings. Income from continuing operations, net of tax, available to common stockholders is net income (loss) available to common stockholders, excluding the income (loss) from discontinued operations, net of tax. Core earnings should not be considered as a substitute for net income (loss), net income (loss) available to common stockholders or income (loss) from continuing operations, net of tax, available to common stockholders and does not reflect the overall profitability of the Company’s business. Therefore, the Company believes that it is useful for investors to evaluate net income (loss), net income (loss) available to common stockholders, income (loss) from continuing operations, net of tax, available to common stockholders and core earnings when reviewing the Company’s performance. A reconciliation of net income (loss) available to common stockholders to core earnings is set forth on page 2.
Core earnings per share, both basic and diluted, is calculated based on the non-GAAP financial measure core earnings. The Company believes 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 (loss) available to common stockholders per share (defined as "net income (loss) per share") and income (loss) from continuing operations, net of tax, available to common stockholders per share are the most directly comparable U.S. GAAP measures. Core earnings per share should not be considered as a substitute for net income (loss) per share or income (loss) from continuing operations, net of tax, available to common stockholders per share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate net income (loss) per share, income (loss) from continuing operations, net of tax, available to common stockholders per share and core earnings per share when reviewing our performance.
BASIC EARNINGS PER SHARE
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | |||||||||||
Net Income available to common stockholders per share | 1.45 | 1.03 | 1.74 | 0.53 | 1.20 | 1.62 | 1.67 | 4.21 | 4.50 | ||||||||||
Income from discontinued operations, after tax | — | — | — | — | 0.01 | 0.41 | 0.47 | — | 0.90 | ||||||||||
Income from continuing operations, net of tax, available to common stockholders | 1.45 | 1.03 | 1.74 | 0.53 | 1.19 | 1.21 | 1.20 | 4.21 | 3.60 | ||||||||||
Adjustments made to reconcile income from continuing operations, net of tax, available to common stockholders to core earnings per share: | |||||||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | (0.24 | ) | (0.22 | ) | (0.44 | ) | 0.49 | (0.10 | ) | (0.14 | ) | 0.08 | (0.91 | ) | (0.16 | ) | |||
Loss on extinguishment of debt, before tax | 0.25 | — | — | — | — | 0.02 | — | 0.25 | 0.02 | ||||||||||
Loss on reinsurance transactions, before tax | — | 0.25 | — | — | — | — | — | 0.25 | — | ||||||||||
Integration and transaction costs associated with an acquired business, before tax | 0.08 | 0.09 | 0.03 | 0.03 | 0.03 | 0.03 | 0.03 | 0.19 | 0.10 | ||||||||||
Change in loss reserves upon acquisition of a business, before tax | — | 0.27 | — | — | — | — | — | 0.27 | — | ||||||||||
Income tax expense (benefit) on items excluded from core earnings | (0.02 | ) | (0.08 | ) | 0.08 | (0.26 | ) | 0.05 | 0.03 | (0.02 | ) | 0.01 | 0.05 | ||||||
Core earnings per share | 1.52 | 1.34 | 1.41 | 0.79 | 1.17 | 1.15 | 1.29 | 4.27 | 3.61 |
DILUTED EARNINGS PER SHARE
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | |||||||||||||
Net Income available to common stockholders per diluted share | 1.43 | 1.02 | 1.71 | 0.52 | 1.19 | 1.60 | 1.64 | $ | 4.17 | $ | 4.42 | ||||||||||
Income from discontinued operations, after tax | — | — | — | — | 0.02 | 0.41 | 0.46 | — | 0.88 | ||||||||||||
Income from continuing operations, net of tax, available to common stockholders | 1.43 | 1.02 | 1.71 | 0.52 | 1.17 | 1.19 | 1.18 | $ | 4.17 | $ | 3.54 | ||||||||||
Adjustments made to reconcile income from continuing operations, net of tax, available to common stockholders to core earnings per diluted share: | |||||||||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | (0.24 | ) | (0.22 | ) | (0.44 | ) | 0.48 | (0.10 | ) | (0.14 | ) | 0.08 | (0.90 | ) | (0.16 | ) | |||||
Loss on extinguishment of debt, before tax | 0.25 | — | — | — | — | 0.02 | — | 0.25 | 0.02 | ||||||||||||
Loss on reinsurance transactions, before tax | — | 0.25 | — | — | — | — | — | 0.25 | — | ||||||||||||
Integration and transaction costs associated with an acquired business, before tax | 0.08 | 0.08 | 0.03 | 0.03 | 0.03 | 0.03 | 0.03 | 0.19 | 0.10 | ||||||||||||
Change in loss reserves upon acquisition of a business, before tax | — | 0.27 | — | — | — | — | — | 0.27 | — | ||||||||||||
Income tax expense (benefit) on items excluded from core earnings | (0.02 | ) | (0.07 | ) | 0.09 | (0.25 | ) | 0.05 | 0.03 | (0.02 | ) | (0.01 | ) | 0.05 | |||||||
Core earnings per diluted share | 1.50 | 1.33 | 1.39 | 0.78 | 1.15 | 1.13 | 1.27 | $ | 4.22 | $ | 3.55 |
Book value per diluted share is a U.S. GAAP financial measure that represents a per share assessment of the value of a company's equity. It is calculated by dividing (a) common stockholders' equity by (b) common shares outstanding and dilutive potential common shares. The Company provides book value per diluted share to enable investors to assess the value of the Company’s equity. Reconciliations of book value per common share and book value per diluted share to book value per common share, excluding AOCI and book value per diluted share, excluding AOCI, are set forth on page 1.
The Company provides different measures of the return on stockholders' equity (“ROE”). Net income (loss) ROE is calculated by dividing (a) net income (loss) available to common stockholders for the prior four fiscal quarters by (b) average common stockholders' equity, including AOCI. Core earnings ROE is calculated based on non-GAAP financial measures. Core earnings ROE is calculated by dividing (a) core earnings for the prior four fiscal quarters by (b) average common stockholders' equity, excluding AOCI. Net income (loss) available to common stockholders' ROE ("Net income (loss) ROE") is the most directly comparable U.S. GAAP measure. ROEs at the segment level and for consolidated, represent a levered view of ROE with debt financing and related interest expense attributed to the businesses consistent with the overall average debt to capitalization ratios of the consolidated entity. Similarly, in this levered view of ROE, preferred stock and related preferred dividends are attributed to the businesses. The Company excludes AOCI in the calculation of core earnings ROE 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. The Company provides investors with return on equity measures based on its non-GAAP core earnings financial measures for the reasons set forth in the related discussion above.
A reconciliation of Net income (loss) ROE to Core earnings ROE is set forth below:
LAST TWELVE MONTHS ENDED | ||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | ||||||||
Net income (loss) ROE | 12.0 | % | 11.8 | % | 13.5 | % | 13.7 | % | (14.0 | %) | (15.4 | %) | (19.3 | )% |
Adjustments to reconcile net income (loss) ROE to core earnings ROE: | ||||||||||||||
Net realized capital losses (gains), excluded from core earnings, before tax | (1.1 | %) | (0.7 | %) | (0.5 | %) | 0.9 | % | (0.8 | %) | (0.7 | %) | (0.7 | )% |
Loss on extinguishment of debt, before tax | 0.6 | % | — | % | — | % | — | % | — | % | — | % | — | % |
Loss on reinsurance transaction, before tax | 0.6 | % | 0.7 | % | — | % | — | % | — | % | — | % | — | % |
Pension settlement, before tax | — | % | — | % | — | % | — | % | — | % | — | % | 5.0 | % |
Integration and transaction costs associated with an acquired business, before tax | 0.6 | % | 0.5 | % | 0.3 | % | 0.4 | % | 0.3 | % | 0.3 | % | 0.2 | % |
Changes in loss reserves upon acquisition of a business, before tax | 0.7 | % | 0.7 | % | — | % | — | % | — | % | — | % | — | % |
Income tax expense (benefit) on items not included in core earnings | (0.7 | %) | (0.5 | %) | (0.3 | %) | (0.6 | %) | 6.1 | % | 6.1 | % | 4.3 | % |
Loss (income) from discontinued operations, net of tax | — | % | — | % | (1.1 | %) | (2.5 | %) | 18.8 | % | 18.4 | % | 18.4 | % |
Impact of AOCI, excluded from denominator of core earnings ROE | (0.4 | %) | (0.8 | %) | (0.4 | %) | (0.3 | %) | (0.1 | %) | (0.3 | %) | (0.1 | )% |
Core earnings ROE | 12.3 | % | 11.7 | % | 11.5 | % | 11.6 | % | 10.3 | % | 8.4 | % | 7.8 | % |
The Company evaluates profitability of the individual 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 and policyholder dividends. 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 pricing and 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 its management of acquisition costs and other underwriting expenses. Net income (loss) is the most directly comparable U.S. GAAP measure. The Company believes 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. Reconciliations of net income (loss) to underwriting gain (loss) for the Company's P&C businesses are set forth below.
Underlying underwriting gain (loss) represents underwriting gain (loss) before current accident year catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. The most directly comparable GAAP measure is net income (loss). The Company believes underlying underwriting gain (loss) is important to understand the Company’s periodic earnings because the volatile and unpredictable nature (i.e., the timing and amount) of catastrophes and prior accident year reserve development could obscure underwriting trends. The changes to loss reserves upon acquisition of a business are also excluded from underlying underwriting gain (loss) because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial performance. A reconciliation of net income (loss) to underlying underwriting gain (loss) for individual reporting segments is set forth below.
PROPERTY & CASUALTY
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Net income | $ | 448 | $ | 264 | $ | 482 | $ | 59 | $ | 349 | $ | 383 | $ | 404 | $ | 1,194 | $ | 1,136 | ||||||||||
Adjustments to reconcile net income to underlying underwriting gain (loss): | ||||||||||||||||||||||||||||
Net investment income | (358 | ) | (348 | ) | (323 | ) | (308 | ) | (311 | ) | (301 | ) | (322 | ) | (1,029 | ) | (934 | ) | ||||||||||
Net realized capital losses (gains) | (73 | ) | (66 | ) | (143 | ) | 132 | (37 | ) | (50 | ) | 9 | (282 | ) | (78 | ) | ||||||||||||
Net servicing and other expense (income) | 14 | 2 | (2 | ) | 1 | (7 | ) | (3 | ) | (5 | ) | 14 | (15 | ) | ||||||||||||||
Loss on reinsurance transaction | — | 91 | — | — | — | — | — | 91 | — | |||||||||||||||||||
Income tax expense (benefit) | 106 | 60 | 107 | (10 | ) | 76 | 83 | 92 | 273 | 251 | ||||||||||||||||||
Underwriting gain (loss) | 137 | 3 | 121 | (126 | ) | 70 | 112 | 178 | 261 | 360 | ||||||||||||||||||
Current accident year catastrophes | 106 | 138 | 104 | 361 | 169 | 188 | 103 | 348 | 460 | |||||||||||||||||||
Prior accident year development | (47 | ) | 35 | (11 | ) | (28 | ) | (60 | ) | (47 | ) | (32 | ) | (23 | ) | (139 | ) | |||||||||||
Current accident year change in loss reserves upon acquisition of a business | — | 29 | — | — | — | — | — | 29 | — | |||||||||||||||||||
Underlying underwriting gain | $ | 196 | $ | 205 | $ | 214 | $ | 207 | $ | 179 | $ | 253 | $ | 249 | $ | 615 | $ | 681 |
COMMERCIAL LINES
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Net income | $ | 336 | $ | 191 | $ | 363 | $ | 253 | $ | 289 | $ | 372 | $ | 298 | $ | 890 | $ | 959 | ||||||||||
Adjustments to reconcile net income to underlying underwriting gain (loss): | ||||||||||||||||||||||||||||
Net servicing loss (income) | (2 | ) | (2 | ) | 1 | (2 | ) | 1 | (1 | ) | — | (3 | ) | — | ||||||||||||||
Net investment income | (291 | ) | (281 | ) | (259 | ) | (247 | ) | (250 | ) | (242 | ) | (258 | ) | (831 | ) | (750 | ) | ||||||||||
Net realized capital losses (gains) | (60 | ) | (54 | ) | (115 | ) | 106 | (29 | ) | (42 | ) | 8 | (229 | ) | (63 | ) | ||||||||||||
Other expense (income) | 20 | 6 | 1 | 3 | (2 | ) | 3 | (2 | ) | 27 | (1 | ) | ||||||||||||||||
Loss on reinsurance transaction | — | 91 | — | — | — | — | — | 91 | — | |||||||||||||||||||
Income tax expense | 79 | 44 | 79 | 55 | 61 | 83 | 68 | 202 | 212 | |||||||||||||||||||
Underwriting gain (loss) | 82 | (5 | ) | 70 | 168 | 70 | 173 | 114 | 147 | 357 | ||||||||||||||||||
Current accident year catastrophes | 74 | 90 | 70 | 37 | 95 | 74 | 69 | 234 | 238 | |||||||||||||||||||
Prior accident year development | (19 | ) | 22 | (10 | ) | (55 | ) | (53 | ) | (73 | ) | (19 | ) | (7 | ) | (145 | ) | |||||||||||
Current accident year change in loss reserves upon acquisition of a business | — | 29 | — | — | — | — | — | 29 | — | |||||||||||||||||||
Underlying underwriting gain | $ | 137 | $ | 136 | $ | 130 | $ | 150 | $ | 112 | $ | 174 | $ | 164 | $ | 403 | $ | 450 |
PERSONAL LINES
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Net income (loss) | $ | 94 | $ | 62 | $ | 96 | $ | (178 | ) | $ | 51 | $ | 6 | $ | 89 | $ | 252 | $ | 146 | |||||||||
Adjustments to reconcile net income (loss) to underlying underwriting gain (loss): | ||||||||||||||||||||||||||||
Net servicing income | (4 | ) | (4 | ) | (3 | ) | (3 | ) | (5 | ) | (4 | ) | (4 | ) | (11 | ) | (13 | ) | ||||||||||
Net investment income | (46 | ) | (46 | ) | (42 | ) | (39 | ) | (39 | ) | (37 | ) | (40 | ) | (134 | ) | (116 | ) | ||||||||||
Net realized capital losses (gains) | (9 | ) | (8 | ) | (19 | ) | 17 | (5 | ) | (5 | ) | — | (36 | ) | (10 | ) | ||||||||||||
Other expense (income) | — | 2 | (1 | ) | 2 | (1 | ) | (1 | ) | 1 | 1 | (1 | ) | |||||||||||||||
Income tax expense (benefit) | 23 | 14 | 23 | (52 | ) | 13 | (1 | ) | 21 | 60 | 33 | |||||||||||||||||
Underwriting gain (loss) | 58 | 20 | 54 | (253 | ) | 14 | (42 | ) | 67 | 132 | 39 | |||||||||||||||||
Current accident year catastrophes | 32 | 48 | 34 | 324 | 74 | 114 | 34 | 114 | 222 | |||||||||||||||||||
Prior accident year development | (28 | ) | 4 | (1 | ) | (11 | ) | (18 | ) | 10 | (13 | ) | (25 | ) | (21 | ) | ||||||||||||
Underlying underwriting gain | $ | 62 | $ | 72 | $ | 87 | $ | 60 | $ | 70 | $ | 82 | $ | 88 | $ | 221 | $ | 240 |
Underlying combined ratio is a non-GAAP financial measure that represents the combined ratio before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a business. Combined ratio is the most directly comparable GAAP measure. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses, prior accident year loss and loss adjustment expense reserve development and change in loss reserves upon acquisition of a business. A reconciliation of the combined ratio to the underlying combined ratio for Property & Casualty, Commercial Lines, and Personal Lines is set forth on pages 9, 12 and 16, respectively.
Core earnings margin 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. Core earnings margin is calculated by dividing (a) core earnings by (b) revenues excluding buyouts and realized gains (losses). Net income margin is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and realized gains (losses). Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance.
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | |||||||||||
Net income margin | 9.6 | % | 7.3 | % | 7.7 | % | 7.5 | % | 5.1 | % | 6.3 | % | 3.6 | % | 8.2 | % | 5.0 | % | |
Adjustments to reconcile net income margin to core earnings margin: | |||||||||||||||||||
Net realized capital losses (gains) excluded from core earnings, before tax | (0.9 | )% | (0.4 | )% | (0.3 | )% | 1.4 | % | 0.2 | % | — | % | 1.7 | % | (0.5 | )% | 0.6 | % | |
Integration and transaction costs associated with acquired business, before tax | 0.6 | % | 0.7 | % | 0.6 | % | 0.7 | % | 0.8 | % | 0.8 | % | 0.8 | % | 0.6 | % | 0.8 | % | |
Income tax benefit | 0.1 | % | (0.1 | )% | — | % | (0.7 | )% | 0.6 | % | (0.2 | )% | (0.5 | )% | — | % | — | % | |
Core earnings margin | 9.4 | % | 7.5 | % | 8.0 | % | 8.9 | % | 6.7 | % | 6.9 | % | 5.6 | % | 8.3 | % | 6.4 | % |
Return on Assets ("ROA"), core earnings, is a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of, the Hartford Funds segment’s operating performance. ROA is the most directly comparable U.S. GAAP measure. The Company believes that ROA, core earnings, provides investors with a valuable measure of the performance of the Hartford Funds segment because it reveals trends in our 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 Hartford Funds business. Therefore, the Company believes it is important for investors to evaluate both ROA, core earnings, and ROA when reviewing the Hartford Funds segment performance. ROA, core earnings is calculated by dividing (a) core earnings by (b) a daily average AUM.
Net investment income, excluding limited partnerships and other alternative investments is the amount of net investment income earned from invested assets excluding the net investment income related to limited partnerships and other alternative investments. The Company believes that net investment income, excluding limited partnerships and other alternative investments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments. Net investment income is the most directly comparable GAAP measure.
CONSOLIDATED
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Total net investment income | $ | 490 | $ | 488 | $ | 470 | $ | 457 | $ | 444 | $ | 428 | $ | 451 | $ | 1,448 | $ | 1,323 | ||||||||||
Limited partnerships and other alternative investments ("Limited Partnerships") | (65 | ) | (60 | ) | (56 | ) | (48 | ) | (45 | ) | (39 | ) | (73 | ) | (181 | ) | (157 | ) | ||||||||||
Net investment income excluding limited partnerships and other alternative investments | $ | 425 | $ | 428 | $ | 414 | $ | 409 | $ | 399 | $ | 389 | $ | 378 | $ | 1,267 | $ | 1,166 |
PROPERTY & CASUALTY
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Total net investment income | $ | 358 | $ | 348 | $ | 323 | $ | 308 | $ | 311 | $ | 301 | $ | 322 | $ | 1,029 | $ | 934 | ||||||||||
Limited partnerships and other alternative investments | (52 | ) | (50 | ) | (46 | ) | (37 | ) | (35 | ) | (33 | ) | (58 | ) | (148 | ) | (126 | ) | ||||||||||
Net investment income excluding limited partnerships and other alternative investments | $ | 306 | $ | 298 | $ | 277 | $ | 271 | $ | 276 | $ | 268 | $ | 264 | $ | 881 | $ | 808 |
GROUP BENEFITS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | ||||||||||||||||||||
Total net investment income | $ | 121 | $ | 121 | $ | 121 | $ | 121 | $ | 117 | $ | 115 | $ | 121 | $ | 363 | $ | 353 | ||||||||||
Limited partnerships and other alternative investments | (13 | ) | (10 | ) | (10 | ) | (11 | ) | (10 | ) | (6 | ) | (15 | ) | (33 | ) | (31 | ) | ||||||||||
Net investment income excluding limited partnerships and other alternative investments | $ | 108 | $ | 111 | $ | 111 | $ | 110 | $ | 107 | $ | 109 | $ | 106 | $ | 330 | $ | 322 |
Annualized investment yield, excluding limited partnerships and other alternative investments, is the annualized net investment income excluding limited partnerships and other alternative investments divided by the monthly average invested assets at amortized cost, excluding repurchase agreement and securities lending collateral, derivatives book value, and limited partnership and other alternative invested assets. The company believes that annualized net investment income, excluding limited partnerships and other alternative investments, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments. Annualized investment yield is the most directly comparable GAAP measure.
CONSOLIDATED
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | |||||||||||
Annualized investment yield | 4.0 | % | 4.2 | % | 4.1 | % | 4.0 | % | 4.0 | % | 3.9 | % | 4.2 | % | 4.1 | % | 4.0 | % | |
Limited partnerships and other alternative investments | (0.4 | )% | (0.4 | )% | (0.4 | )% | (0.3 | )% | (0.3 | )% | (0.2 | )% | (0.5 | )% | (0.4 | )% | (0.3 | )% | |
Annualized investment yield excluding limited partnerships and other alternative investments | 3.6 | % | 3.8 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.7 | % |
PROPERTY & CASUALTY
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | |||||||||||
Annualized investment yield | 4.0 | % | 4.2 | % | 4.2 | % | 4.0 | % | 4.1 | % | 4.0 | % | 4.3 | % | 4.2 | % | 4.1 | % | |
Limited partnerships and other alternative investments | (0.4 | )% | (0.4 | )% | (0.4 | )% | (0.3 | )% | (0.3 | )% | (0.2 | )% | (0.6 | )% | (0.5 | )% | (0.4 | )% | |
Annualized investment yield excluding limited partnerships and other alternative investments | 3.6 | % | 3.8 | % | 3.8 | % | 3.7 | % | 3.8 | % | 3.8 | % | 3.7 | % | 3.7 | % | 3.7 | % |
GROUP BENEFITS
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||
Sept 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Sept 30 2019 | Sept 30 2018 | |||||||||||
Annualized investment yield | 4.2 | % | 4.2 | % | 4.2 | % | 4.2 | % | 4.1 | % | 4.1 | % | 4.3 | % | 4.2 | % | 4.2 | % | |
Limited partnerships and other alternative investments | (0.4 | )% | (0.3 | )% | (0.3 | )% | (0.3 | )% | (0.2 | )% | (0.2 | )% | (0.5 | )% | (0.3 | )% | (0.3 | )% | |
Annualized investment yield excluding limited partnerships and other alternative investments | 3.8 | % | 3.9 | % | 3.9 | % | 3.9 | % | 3.9 | % | 3.9 | % | 3.8 | % | 3.9 | % | 3.9 | % |