UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 2015
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
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Delaware | | 001-13958 | 13-3317783 |
(State or Other Jurisdiction of Incorporation) | | (Commission File Number) | (IRS Employer Identification No.) |
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The Hartford Financial Services Group, Inc. One Hartford Plaza Hartford, Connecticut | 06155 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (860) 547-5000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02 | Results of Operations and Financial Condition |
On October 26, 2015, The Hartford Financial Services Group, Inc. (the "Company") issued (i) a press release announcing its financial results for the quarterly period ended September 30, 2015, and (ii) its Investor Financial Supplement (“IFS”) relating to its financial results for the quarterly period ended September 30, 2015. Copies of the press release and the IFS are furnished herewith as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.
The information furnished pursuant to this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.
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Item 9.01 | Financial Statements and Exhibits |
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Exhibit No. | | |
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99.1 |
| Press Release of The Hartford Financial Services Group, Inc. dated October 26, 2015 | |
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99.2 |
| Investor Financial Supplement of The Hartford Financial Services Group, Inc. for the quarterly period ended September 30, 2015 | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: | October 26, 2015 | By: | /s/ Scott R. Lewis |
| | Name: | Scott R. Lewis |
| | Title: | Senior Vice President and Controller |
NEWS RELEASE 
The Hartford Reports Third Quarter 2015 Net Income Of $0.90 Per Diluted Share And Core Earnings Of $0.86 Per Diluted Share
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• | Third quarter 2015 core earnings* decreased 24% from third quarter 2014 principally due to lower net investment income, unfavorable prior year loss reserve development and higher catastrophe losses; third quarter 2015 core earnings per diluted share* decreased 19% |
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• | Third quarter 2015 net income decreased 2% from third quarter 2014, while third quarter net income per diluted share increased 5% due to the 6% decrease in weighted average diluted shares, which include the impact of the company's equity repurchases over the last year |
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• | Net investment income decreased 10% compared with third quarter 2014 largely due to lower limited partnership and other alternative investments income |
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• | Commercial Lines third quarter 2015 combined ratio before catastrophes and prior year loss reserve development* was 91.0, a 1.0 point improvement over third quarter 2014 |
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• | Personal Lines third quarter 2015 combined ratio before catastrophes and prior year loss reserve development was 95.6, a 4.7 point deterioration over third quarter 2014 |
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• | Book value per diluted share, excluding accumulated other comprehensive income*, was $42.99, an 8% increase from Sept. 30, 2014 |
HARTFORD, Conn., Oct. 26, 2015 – The Hartford (NYSE:HIG) reported core earnings of $364 million for the three months ended Sept. 30, 2015 (third quarter 2015), a 24% or $113 million decrease from core earnings of $477 million in third quarter 2014. The decrease from third quarter 2014 was principally due to several items, including a $60 million, after-tax, decrease in investment income, largely due to lower returns on limited partnerships and other alternative investments (LPs), a $31 million, after-tax, increase in unfavorable prior year loss and loss adjustment expense reserve development (PYD), and a $23 million, after-tax, increase in catastrophe losses.
“While The Hartford delivered strong underlying performance in Commercial Lines and Group Benefits, our results this quarter reflect headwinds in several areas, resulting in a decrease in core earnings,” said The Hartford's Chairman and CEO Christopher Swift. “Lower net investment income, adverse prior year development in Commercial Lines and higher catastrophes and loss costs in Personal Lines were the primary contributors to the decrease from third quarter 2014."
*Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
The Hartford's President Doug Elliot noted, "Current accident year Commercial Lines results were strong this quarter with a 1.0 point improvement in the combined ratio versus last year, and Group Benefits achieved higher core earnings and a margin of 5.5%. However, Personal Lines results were down due to catastrophes that were lower than our expectations but higher than third quarter 2014, as well as increased homeowners losses and higher marketing expenses. We also experienced a slight increase in quarterly auto frequency trends, although year-to-date trends remain moderate.”
Swift concluded, "Despite the challenges this quarter, I'm pleased with several achievements, including increasing 12 month core earnings return on equity to 9.1%, growing book value per share by 8%, and increasing core earnings per diluted share for the first nine months of 2015 by 17%. We remain focused on executing our strategy and will continue to adapt while maintaining our underwriting discipline in the evolving environment, including more competitive market conditions."
Third quarter 2015 core earnings per diluted share declined 19% to $0.86 compared with $1.06 in third quarter 2014, including the effect of the 6% decrease in the company's weighted average diluted common shares outstanding over the past 12 months due to the equity repurchase program.
Third quarter 2015 net income totaled $381 million, down 2% from net income of $388 million in third quarter 2014, as the core earnings reduction was largely offset by a lower unlock charge of $33 million, after-tax, compared with $102 million, after-tax, in third quarter 2014. In addition, third quarter 2015 net income included a $60 million third quarter 2015 income tax benefit in Corporate, although that was offset by net realized capital losses of $30 million, after-tax and deferred acquisition costs (DAC), compared with net realized capital gains of $27 million, after-tax and DAC, in third quarter 2014.
Third quarter 2015 net income per diluted share was $0.90, an increase of 5% compared with net income of $0.86 per diluted share in third quarter 2014, as the 2% decrease in net income was more than offset by the benefit of the company's equity repurchase program on net income per diluted share.
CONSOLIDATED FINANCIAL RESULTS |
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($ in millions except per share data) | Three Months Ended |
Sept 30 2015 | Sept 30 2014 | Change2 |
Core earnings (loss): | | |
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Commercial Lines | $216 | $268 | (19)% |
Personal Lines | $17 | $71 | (76)% |
P&C Other Operations | $18 | $14 | 29% |
Property & Casualty | $251 | $353 | (29)% |
Group Benefits | $47 | $38 | 24% |
Mutual Funds | $22 | $22 | —% |
Sub-total | $320 | $413 | (23)% |
Talcott Resolution | $107 | $122 | (12)% |
Corporate | $(63) | $(58) | (9)% |
Core earnings | $364 | $477 | (24)% |
Net income | $381 | $388 | (2)% |
Weighted average diluted common shares outstanding | 423.0 | 450.8 | (6)% |
Core earnings available to common shareholders per diluted share¹ | $0.86 | $1.06 | (19)% |
Net income available to common shareholders per diluted share¹ | $0.90 | $0.86 | 5% |
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[1] | Includes dilutive potential common shares |
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[2] | The Hartford defines increases or decreases greater than or equal to 200%, or changes from a net gain to a net loss position, or vice versa, as "NM" or not meaningful |
COMMERCIAL LINES
Third Quarter 2015 Highlights:
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• | Core earnings decreased 19% over third quarter 2014 primarily due to unfavorable PYD and lower net investment income |
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• | Combined ratio before catastrophes and PYD of 91.0 improved 1.0 point over third quarter 2014 |
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• | Standard Commercial renewal written pricing increases averaged 2% |
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($ in millions) | Three Months Ended |
| Sept 30 2015 | Sept 30 2014 | Change |
Core earnings | $216 | $268 | (19)% |
Net income | $211 | $280 | (25)% |
Underwriting gain* | $90 | $124 | (27)% |
Net investment income | $208 | $250 | (17)% |
Combined ratio | 94.5 | 92.1 | (2.4) |
Catastrophes and PYD | 3.5 | 0.2 | (3.3) |
Combined ratio before catastrophes and PYD | 91.0 | 92.0 | 1.0 |
Small Commercial: | | | |
Combined ratio before catastrophes and PYD | 86.8 | 87.5 | 0.7 |
New business premium | $131 | $128 | 2% |
Policy count retention | 84% | 84% | — |
Middle Market: | | | |
Combined ratio before catastrophes and PYD | 93.8 | 93.5 | (0.3) |
New business premium | $117 | $107 | 9% |
Policy count retention | 81% | 80% | 1.0 |
Written premiums | $1,639 | $1,583 | 4% |
Standard Commercial renewal written pricing increases | 2% | 4% | (2.0) |
Third quarter 2015 core earnings in Commercial Lines decreased $52 million, after-tax, or 19%, to $216 million, after-tax, compared with third quarter 2014 largely due to a $33 million, after-tax, decrease in net investment income and a $36 million, after-tax, increase in unfavorable PYD, which was partially offset by improved current accident year underwriting results. Net investment income, before tax, of $208 million declined by $42 million, or 17%, compared with third quarter 2014 as investment income on LPs decreased by $42 million. Unfavorable PYD in third quarter 2015 was primarily in the commercial auto liability line as a result of increased claims severity predominantly in the 2010 to 2013 accident years.
Commercial Lines underwriting gain was $90 million, before tax, in third quarter 2015 for a 94.5 combined ratio compared with a third quarter 2014 underwriting gain of $124 million, before tax, for a 92.1 combined ratio. Excluding the impact of PYD on both periods, third quarter 2015 underwriting results improved by $21 million, before tax, due to improved current accident year results, including stable catastrophe losses compared with third quarter 2014.
Third quarter 2015 combined ratio before catastrophes and PYD improved 1.0 point over third quarter 2014 to 91.0, reflecting improvement in Small Commercial and Specialty Commercial, and a slight deterioration in Middle Market. The Small Commercial combined ratio before
catastrophes and PYD of 86.8 improved 0.7 point compared with third quarter 2014, driven by margin improvement in workers' compensation and lower non-catastrophe property losses. The Middle Market combined ratio before catastrophes and PYD increased 0.3 point to 93.8 compared with third quarter 2014 due to a large property loss and higher underwriting expenses, which were mostly offset by improved workers' compensation and general liability underwriting results. Specialty Commercial combined ratio before catastrophes and PYD improved 6.0 points to 99.1 due to margin improvement in Financial Products and Bond.
Third quarter 2015 written premiums in Commercial Lines grew 4% over third quarter 2014 to $1,639 million, reflecting renewal written price increases and strong retention in Small Commercial and Middle Market, which together comprise about 86% of Commercial Lines written premiums. Third quarter 2015 renewal written price increases averaged 2% in Standard Commercial, resulting from a 3% increase in Small Commercial and a 1% increase in Middle Market, exclusive of specialty programs and livestock. Policy count retention remained strong in both businesses at 84% in Small Commercial and 81% in Middle Market, stable or slightly improved compared with second quarter 2015 and third quarter 2014.
PERSONAL LINES
Third Quarter 2015 Highlights:
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• | Combined ratio before catastrophes and PYD of 95.6 increased 4.7 points over third quarter 2014 |
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• | Automobile combined ratio before catastrophes and PYD deteriorated 4.6 points compared with third quarter 2014 due to higher liability and physical damage frequency and increased marketing expenses |
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• | Homeowners combined ratio before catastrophes and PYD increased 4.8 points compared with third quarter 2014 due to increased non-weather related claims |
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($ in millions) | Three Months Ended |
| Sept 30 2015 | Sept 30 2014 | Change |
Core earnings | $17 | $71 | (76)% |
Net income | $19 | $73 | (74)% |
Underwriting gain (loss) | $(11) | $71 | NM |
Net investment income | $29 | $33 | (12)% |
Combined ratio | 101.1 | 92.6 | (8.5) |
Catastrophes and PYD | 5.6 | 1.7 | (3.9) |
Combined ratio before catastrophes and PYD | 95.6 | 90.9 | (4.7) |
Automobile | 101.6 | 97.0 | (4.6) |
Homeowners | 82.4 | 77.6 | (4.8) |
Written premiums | $1,034 | $1,019 | 1% |
Third quarter 2015 core earnings in Personal Lines were $17 million, a $54 million decrease from $71 million in third quarter 2014 as a result of higher losses due to both catastrophes and non-catastrophes losses as well as higher marketing expenses in the direct channel. Third quarter 2015 catastrophe losses increased to $68 million, before tax, including two large California wildfires, compared with $32 million, before tax, in third quarter 2014.
Personal Lines underwriting loss totaled $11 million, before tax, for a combined ratio of 101.1 in third quarter 2015 compared with third quarter 2014 underwriting gain of $71 million for a combined ratio of 92.6. Although catastrophe losses were higher than third quarter 2014, PYD was relatively flat between the two periods, totaling a favorable $14 million, before tax, in third quarter 2015 compared with favorable $15 million, before tax, in third quarter 2014. In total, catastrophes and PYD added 5.6 points to the third quarter 2015 combined ratio versus 1.7 points in third quarter 2014.
Third quarter 2015 combined ratio before catastrophes and PYD was 95.6, an increase of 4.7 points compared with third quarter 2014 due to higher automobile liability and physical damage frequency, elevated non-weather related homeowners claims and higher marketing expenses. The automobile combined ratio before catastrophes and PYD rose from 97.0 in third quarter 2014 to 101.6 in third quarter 2015. The increase in automobile frequency, which emerged during third quarter 2015, is likely correlated to stronger economic trends, including higher miles driven. The homeowners combined ratio before catastrophes and PYD increased from 77.6 in third quarter 2014 to 82.4 in third quarter 2015, primarily due to fire and water-related claims that were partially offset by lower weather-related claims.
Third quarter 2015 Personal Lines written premiums rose 1% over third quarter 2014 reflecting relatively stable premium retention and automobile new business growth in AARP Direct and AARP Agency, partially offset by lower premium in Other Agency. Premium retention was relatively stable with second quarter 2015 and third quarter 2014 at 87% for automobile and 90% for homeowners. Total automobile new business premium increased 3%, while homeowners declined 15% compared with third quarter 2014. Renewal written price increases in third quarter 2015 averaged 6% in automobile and 8% in homeowners, consistent with the past several quarters.
GROUP BENEFITS
Third Quarter 2015 Highlights:
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• | Core earnings of $47 million increased 24% over third quarter 2014 principally due to improved group disability results |
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• | Core earnings margin* increased to 5.5% from 4.5% in third quarter 2014 |
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• | Fully insured ongoing premiums grew 3% over third quarter 2014, excluding Association-Financial Institutions |
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($ in millions) | Three Months Ended |
| Sept 30 2015 | Sept 30 2014 | Change |
Core earnings | $47 | $38 | 24% |
Net income | $42 | $37 | 14% |
Fully insured ongoing premiums, excluding A-FI1 | $751 | $731 | 3% |
Loss ratio, excluding A-FI | 76.8% | 78.3% | 1.5 |
Expense ratio, excluding A-FI | 26.8% | 27.6% | 0.8 |
Net investment income | $91 | $93 | (2%) |
Core earnings margin* | 5.5% | 4.5% | 1.0 |
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[1] | Fully insured ongoing premiums exclude buyout premiums and premium equivalents; excludes A-FI premiums of $0 million and $7 million in third quarter 2015 and 2014, respectively. |
Third quarter 2015 core earnings in Group Benefits rose $9 million, after-tax, to $47 million, a 24% increase from $38 million in third quarter 2014, primarily due to improved group disability results and lower expenses. As a result, the core earnings margin increased to 5.5% in third quarter 2015 from 4.5% in third quarter 2014.
Third quarter 2015 total loss ratio was 76.8%, an improvement of 1.5 points compared with
third quarter 2014, excluding the impact of the Association-Financial Institutions (A-FI) book. The A-FI book, which was in the group life line, was fully run off as of Dec. 31, 2014 and does not impact 2015 results, although it did affect group life loss ratio and Group Benefits expense ratios in 2014. The loss ratio improvement in third quarter 2015 consisted of a 4.8 point improvement in group disability, partially offset by a 0.5 point deterioration in group life, excluding A-FI. Compared with third quarter 2014, the improvement in group disability results includes the benefit of rate increases and good incidence experience and recovery trends, while the increase in group life was due to slightly less favorable mortality. The expense ratio, excluding A-FI, improved 0.8 point compared with third quarter 2014 to 26.8% in third quarter 2015.
Third quarter 2015 fully insured ongoing premiums were $751 million, up 3%, excluding A-FI, from third quarter 2014, reflecting increased sales, strong persistency and improved pricing. Group life premiums, which comprise 48% of segment premiums, rose 5% from third quarter 2014, excluding A-FI, while group disability premiums, which comprise approximately 46%, were essentially flat. Third quarter 2015 fully insured ongoing sales rose 7% over third quarter 2014 to $61 million, reflecting sales growth for group life of 27% to $33 million, partially offset by an 8% decline in group disability sales.
MUTUAL FUNDS
Third Quarter 2015 Highlights:
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• | Core earnings of $22 million were stable with third quarter 2014 |
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• | Mutual Fund net flows, which exclude Talcott Resolution assets under management (AUM), were $0.3 billion in the quarter and $1.1 billion year-to-date in 2015 |
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• | Solid overall fund performance, with 54%, 60% and 58% of Hartford Mutual Funds outperforming peers on a 1-, 3- and 5-year basis, respectively1 |
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($ in millions) | Three Months Ended |
| Sept 30 2015 | Sept 30 2014 | Change |
Core earnings | $22 | $22 | —% |
Net income | $22 | $22 | —% |
Mutual Fund sales | $4,192 | $3,753 | 12% |
Mutual Fund net flows | $307 | $93 | NM |
Mutual Fund AUM | $71,545 | $73,295 | (2%) |
Talcott AUM | $17,498 | $22,867 | (23)% |
Total Mutual Funds segment AUM | $89,043 | $96,162 | (7)% |
Third quarter 2015 core earnings in Mutual Funds were $22 million, stable with third quarter 2014, as decreased fee income was offset by lower distribution and other operating expenses.
Total AUM for the segment declined 7% due to market depreciation combined with the continued runoff of Talcott Resolution AUM. Talcott Resolution AUM decreased 23% over the past twelve months to $17.5 billion due to continued runoff and the planned asset transfer of $2.0 billion to Hartford Investment Management Company in 4Q14. Mutual Fund AUM decreased to $71.5 billion from $73.3 billion due to lower market levels in the quarter partially offset by positive net flows during the last twelve months. During the quarter, Mutual Fund net flows were $307 million, benefiting from higher sales compared with third quarter 2014. Overall Mutual Fund performance remained solid, with 54%, 60% and 58% of funds outperforming peers on a 1-, 3- and 5-year basis, respectively.
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[1] | Hartford Mutual Funds only on Morningstar net of fee basis |
TALCOTT RESOLUTION
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($ in millions) | Three Months Ended |
| Sept 30 2015 | Sept 30 2014 | Change |
Core earnings | $107 | $122 | (12)% |
Net income | $74 | $28 | 164% |
Variable annuity contract count (in thousands) | 618 | 694 | (11)% |
Fixed annuity and other contract count (in thousands) | 130 | 143 | (9)% |
Third quarter 2015 core earnings in Talcott Resolution were $107 million, a $15 million, or 12%, decrease from third quarter 2014, due to lower net investment income, including lower income on LPs, and lower fees due to the continued runoff of the annuity business, partially offset by lower expenses. Investment income on LPs totaled $9 million, before tax, in third quarter 2015 compared with $45 million, before tax, in third quarter 2014, although the decrease was partially offset by higher income on fixed maturities from make-whole premiums and other non-routine items.
Variable annuity (VA) and fixed annuity contract counts as of Sept. 30, 2015 declined 3% and 3%, respectively, from June 30, 2015 and 11% and 9%, respectively, from Sept. 30, 2014. The decline in contract counts during the third quarter 2015 reflects normal surrender activity for VA contracts and an increase in fixed annuity surrender activity as a result of a contractholder initiative launched in June 2015. The decline in contract counts since Sept. 30, 2014 includes normal surrender activity and the impact of the company's contractholder initiatives in both VA and fixed annuity over the past twelve months.
INVESTMENTS
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($ in millions) | Three Months Ended |
Amounts presented before tax | Sept 30 2015 | Sept 30 2014 | Change |
Total investments | $74,405 | $76,231 | (2 | )% |
Net investment income on LPs | $22 | $100 | (78 | )% |
Net investment income | $730 | $810 | (10 | )% |
Net impairment losses, including mortgage loan loss reserves | $(39) | $(14) | 179 | % |
Annualized investment yield1 | 4.1% | 4.5% | (0.4 | ) |
Annualized investment yield on LPs | 2.9% | 14.4% | (11.5 | ) |
Annualized investment yield, excluding LPs | 4.2% | 4.1% | 0.1 |
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[1] | Yields, before tax, calculated using annualized net investment income divided by the monthly average invested assets at cost, amortized cost, or adjusted carrying value, as applicable, excluding repurchase agreement collateral, if any, and derivatives book value. |
Third quarter 2015 net investment income totaled $730 million, before tax, a 10% decrease from third quarter 2014 reflecting lower investment income on LPs. Investment income on LPs decreased in third quarter 2015 to $22 million, before tax, from $100 million, before tax, in third quarter 2014, largely due to losses on hedge funds and real estate partnerships, while income on private equity partnerships was comparable to third quarter 2014.
Excluding the impact of LPs, net investment income was essentially flat compared with third quarter 2014 due to a decrease in invested asset levels resulting from the runoff of Talcott Resolution, largely offset by income from higher non-routine items, including make-whole payments on fixed maturities and prepayment penalties on mortgage loans. New money yields averaged 3.7% in third quarter 2015 versus 3.2% in third quarter 2014, which was especially low due to the reinvestment of the proceeds from the sale of the Japan annuity business in short-term maturities.
Third quarter 2015 annualized investment yield declined to 4.1%, before tax, from 4.5%, before tax, in third quarter 2014 due to lower income from LPs. Third quarter 2015 annualized investment yield on LPs decreased to 2.9%, before tax, compared with 14.4%, before tax, in third quarter 2014. Third quarter 2015 annualized investment yield excluding LPs of 4.2%, before tax, was slightly higher than the 4.1% annualized yield in both second quarter 2015 and third quarter 2014. Excluding LPs and non-routine items such as make-whole payments, annualized investment yield was 3.9%, down from 4.0% in third quarter 2014.
The credit performance of the company's portfolio remained strong in third quarter 2015, although impairment losses increased compared to the prior year, which were especially favorable. Net impairment losses, including changes in mortgage loan loss reserves, in third quarter 2015 totaled $39 million, before tax, compared with $14 million, before tax, in third quarter 2014. The increase in net impairment losses primarily reflects impairments on securities the company intends to sell.
The carrying value of total investments declined to $74.4 billion at Sept. 30, 2015 compared with $76.2 billion at Sept. 30, 2014. The decline in total investments reflects stable invested assets in the P&C and Group Benefits businesses, offset by the impact in Corporate assets of the company's capital management plans over the past 12 months and by a 6% decrease in
invested assets in Talcott Resolution due to the continued run-off of the annuity blocks and the $1.0 billion in dividends paid out Talcott Resolution during 2015.
STOCKHOLDERS’ EQUITY
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($ in millions) | As of |
| Sept 30 2015 | Dec 31 2014 | Change |
Stockholders' equity | $18,204 | $18,720 | (3)% |
Stockholders' equity (ex. AOCI) | $18,064 | $17,792 | 2% |
Book value per diluted share | $43.32 | $42.84 | 1% |
Book value per diluted share (ex. AOCI) | $42.99 | $40.71 | 6% |
Weighted average common shares outstanding | 413.8 | 429.6 | (4)% |
Weighted average diluted common shares outstanding | 423.0 | 442.6 | (4)% |
The Hartford’s stockholders’ equity was $18.2 billion as of Sept. 30, 2015, a 3% decrease from $18.7 billion as of Dec. 31, 2014. The decrease was primarily due to decreased accumulated other comprehensive income (AOCI) of $788 million from Dec. 31, 2014 and the impact of common share repurchases of $800 million and common dividends of $237 million during the first nine months of 2015, partially offset by net income of $1,261 million for the first nine months of 2015. Excluding AOCI, stockholders' equity was $18.1 billion as of Sept. 30, 2015, a 2% increase compared with Dec. 31, 2014.
Weighted average common shares outstanding decreased by 4% since Dec. 31, 2014 to 413.8 million at Sept. 30, 2015. The decrease in weighted average common shares outstanding was largely the result of the company's repurchase of 18.6 million common shares for $800 million, at an average price of $42.97 per share. Weighted average diluted common shares outstanding as of Sept. 30, 2015 decreased 4% from Dec. 31, 2014 to 423.0 million.
Under the current capital management plan, the company has $4.375 billion of equity repurchase authorization for the period Jan. 1, 2014 through Dec. 31, 2016. As of October 23, 2015, the company has spent $2.690 billion for equity repurchases under this program, including $94 million since Sept. 30, 2015, leaving approximately $1.7 billion for equity repurchases through Dec. 31, 2016.
Book value per diluted common share was $43.32 as of Sept. 30, 2015, up 1% compared with Dec. 31, 2014, as the 3% decline in stockholders' equity was offset by the impact of share repurchases on weighted average diluted common shares outstanding. Excluding AOCI, book value per diluted common share rose 6% to $42.99 as of Sept. 30, 2015 from $40.71 as of Dec. 31, 2014. The increase in book value per diluted common share, excluding AOCI, was due to a 2% increase in stockholders' equity, excluding AOCI, and a 4% reduction in weighted average diluted common shares outstanding.
CONFERENCE CALL
The Hartford will discuss its third quarter 2015 financial results in a webcast on Tuesday, Oct. 27, 2015, at 9 a.m. EDT. The webcast can be accessed live or as a replay through the investor relations section of The Hartford's website at http://ir.thehartford.com.
More detailed financial information can be found in The Hartford's Quarterly Report on Form 10-Q, the Investor Financial Supplement for Sept. 30, 2015, and the Third Quarter 2015 Financial Results Presentation, all of which are available at http://ir.thehartford.com.
ABOUT THE HARTFORD
With more than 200 years of expertise, The Hartford (NYSE:HIG) is a leader in property and casualty insurance, group benefits and mutual funds. The company is widely recognized for its service excellence, sustainability practices, trust and integrity. More information on the company and its financial performance is available at www.thehartford.com.
From time to time, The Hartford uses its website to disseminate material company information. Financial and other important information regarding The Hartford is routinely accessible through and posted on our website at http://ir.thehartford.com. In addition, you may automatically receive email alerts and other information about The Hartford when you enroll your email address by visiting the “Email Alerts” section at http://ir.thehartford.com.
HIG-F
Media Contacts Investor Contacts
Michelle Loxton Sabra Purtill, CFA
860-547-7413 860-547-8691
michelle.loxton@thehartford.com sabra.purtill@thehartford.com
Matthew Sturdevant Sean Rourke
860-547-8664 860-547-5688
matthew.sturdevant@thehartford.com sean.rourke@thehartford.com
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THE HARTFORD FINANCIAL SERVICES GROUP, INC. |
CONSOLIDATING INCOME STATEMENTS |
Three Months Ended September 30, 2015 |
($ in millions) |
| Property & Casualty | Group Benefits | Mutual Funds | Talcott Resolution | Corporate | Consolidated |
Earned premiums | $ | 2,625 |
| $ | 752 |
| $ | — |
| $ | 27 |
| $ | — |
| $ | 3,404 |
|
Fee income | — |
| 17 |
| 182 |
| 248 |
| 1 |
| 448 |
|
Net investment income | 267 |
| 91 |
| — |
| 367 |
| 5 |
| 730 |
|
Other revenues | 24 |
| — |
| — |
| — |
| — |
| 24 |
|
Net realized capital gains (losses) | (16 | ) | (6 | ) | — |
| (19 | ) | (3 | ) | (44 | ) |
Total revenues | 2,900 |
| 854 |
| 182 |
| 623 |
| 3 |
| 4,562 |
|
Benefits, losses, and loss adjustment expenses | 1,747 |
| 591 |
| — |
| 372 |
| — |
| 2,710 |
|
Amortization of deferred policy acquisition costs | 329 |
| 8 |
| 5 |
| 92 |
| — |
| 434 |
|
Insurance operating costs and other expenses | 494 |
| 198 |
| 143 |
| 123 |
| 9 |
| 967 |
|
Interest expense | — |
| — |
| — |
| — |
| 88 |
| 88 |
|
Net reinsurance gain on dispositions | — |
| — |
| — |
| (20 | ) | — |
| (20 | ) |
Restructuring and other costs | — |
| — |
| — |
| — |
| 4 |
| 4 |
|
Total benefits and expenses | 2,570 |
| 797 |
| 148 |
| 567 |
| 101 |
| 4,183 |
|
Income (loss) from continuing operations, before income taxes | 330 |
| 57 |
| 34 |
| 56 |
| (98 | ) | 379 |
|
Income tax expense (benefit) | 91 |
| 15 |
| 12 |
| (16 | ) | (95 | ) | 7 |
|
Income (loss) from continuing operations, after tax | 239 |
| 42 |
| 22 |
| 72 |
| (3 | ) | 372 |
|
Income from discontinued operations, after-tax | 7 |
| — |
| — |
| 2 |
| — |
| 9 |
|
Net income (loss) | 246 |
| 42 |
| 22 |
| 74 |
| (3 | ) | 381 |
|
Less: Unlock charge, after-tax | — |
| — |
| — |
| (33 | ) | — |
| (33 | ) |
Less: Net realized capital gains (losses), after-tax and DAC, excluded from core earnings | (12 | ) | (5 | ) | — |
| (15 | ) | 2 |
| (30 | ) |
Less: Restructuring and other costs, after-tax | — |
| — |
| — |
| — |
| (2 | ) | (2 | ) |
Less: Net reinsurance gain on dispositions, after-tax | — |
| — |
| — |
| 13 |
| — |
| 13 |
|
Less: Income tax benefit from reduction in valuation allowance | — |
| — |
| — |
| — |
| 60 |
| 60 |
|
Less: Income from discontinued operations, after-tax | 7 |
| — |
| — |
| 2 |
| — |
| 9 |
|
Core earnings (losses) | $ | 251 |
| $ | 47 |
| $ | 22 |
| $ | 107 |
| $ | (63 | ) | $ | 364 |
|
|
| | | | | | | | | | | | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC. |
PROPERTY & CASUALTY |
CONSOLIDATING INCOME STATEMENTS |
Three Months Ended September 30, 2015 |
($ in millions) |
| Commercial Lines | Personal Lines | P&C Other | Property & Casualty |
Written premiums | $ | 1,639 |
| $ | 1,034 |
| $ | 1 |
| $ | 2,674 |
|
Change in unearned premium reserve | (8 | ) | 57 |
| — |
| 49 |
|
Earned premiums | 1,647 |
| 977 |
| 1 |
| 2,625 |
|
Losses and loss adjustment expenses |
|
|
|
|
|
Current accident year before catastrophes | 952 |
| 682 |
| — |
| 1,634 |
|
Current accident year catastrophes | 8 |
| 68 |
| — |
| 76 |
|
Prior year development | 50 |
| (14 | ) | 1 |
| 37 |
|
Total losses and loss adjustment expenses | 1,010 |
| 736 |
| 1 |
| 1,747 |
|
Amortization of DAC | 239 |
| 90 |
| — |
| 329 |
|
Underwriting expenses | 304 |
| 162 |
| 8 |
| 474 |
|
Dividends to policyholders | 4 |
| — |
| — |
| 4 |
|
Underwriting gain (loss) | 90 |
| (11 | ) | (8 | ) | 71 |
|
Net investment income | 208 |
| 29 |
| 30 |
| 267 |
|
Net realized capital gains (losses) | (18 | ) | 4 |
| (2 | ) | (16 | ) |
Net servicing and other income | 7 |
| (1 | ) | 2 |
| 8 |
|
Income from continuing operations before income taxes | 287 |
| 21 |
| 22 |
| 330 |
|
Income tax expense | 83 |
| 2 |
| 6 |
| 91 |
|
Income from continuing operations, after-tax | 204 |
| 19 |
| 16 |
| 239 |
|
Income from discontinued operations, after-tax | 7 |
| — |
| — |
| 7 |
|
Net income | 211 |
| 19 |
| 16 |
| 246 |
|
Less: Net realized capital gains (losses), after-tax and DAC, excluded from core earnings | (12 | ) | 2 |
| (2 | ) | (12 | ) |
Less: Income from discontinued operations, after-tax | 7 |
| — |
| — |
| 7 |
|
Core earnings | $ | 216 |
| $ | 17 |
| $ | 18 |
| $ | 251 |
|
|
| | | | | | | | | | | | | | | | | | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC. |
CONSOLIDATING INCOME STATEMENTS |
Three Months Ended September 30, 2014 |
($ in millions) |
| Property & Casualty | Group Benefits | Mutual Funds | Talcott Resolution | Corporate | Consolidated |
Earned premiums | $ | 2,542 |
| $ | 738 |
| $ | — |
| $ | 57 |
| $ | — |
| $ | 3,337 |
|
Fee income | — |
| 15 |
| 185 |
| 322 |
| 2 |
| 524 |
|
Net investment income | 316 |
| 93 |
| — |
| 396 |
| 5 |
| 810 |
|
Other revenues | 29 |
| — |
| — |
| — |
| — |
| 29 |
|
Net realized capital gains (losses) | 24 |
| (3 | ) | — |
| 37 |
| 11 |
| 69 |
|
Total revenues | 2,911 |
| 843 |
| 185 |
| 812 |
| 18 |
| 4,769 |
|
Benefits, losses, and loss adjustment expenses | 1,600 |
| 584 |
| — |
| 440 |
| — |
| 2,624 |
|
Amortization of deferred policy acquisition costs | 318 |
| 8 |
| 6 |
| 248 |
| — |
| 580 |
|
Insurance operating costs and other expenses | 472 |
| 205 |
| 143 |
| 130 |
| 4 |
| 954 |
|
Interest expense | — |
| — |
| — |
| — |
| 93 |
| 93 |
|
Restructuring and other costs | — |
| — |
| — |
| — |
| 22 |
| 22 |
|
Total benefits and expenses | 2,390 |
| 797 |
| 149 |
| 818 |
| 119 |
| 4,273 |
|
Income (loss) from continuing operations before income taxes | 521 |
| 46 |
| 36 |
| (6 | ) | (101 | ) | 496 |
|
Income tax expense (benefit) | 154 |
| 9 |
| 14 |
| (34 | ) | (35 | ) | 108 |
|
Income (loss) from continuing operations, after tax | 367 |
| 37 |
| 22 |
| 28 |
| (66 | ) | 388 |
|
Net income (loss) | 367 |
| 37 |
| 22 |
| 28 |
| (66 | ) | 388 |
|
Less: Unlock charge, after-tax | — |
| — |
| — |
| (102 | ) | — |
| (102 | ) |
Less: Net realized capital gains (losses) and other, after-tax and DAC, excluded from core earnings | 14 |
| (1 | ) | — |
| 8 |
| 6 |
| 27 |
|
Less: Restructuring and other costs, after-tax | — |
| — |
| — |
| — |
| (14 | ) | (14 | ) |
Core earnings (losses) | $ | 353 |
| $ | 38 |
| $ | 22 |
| $ | 122 |
| $ | (58 | ) | $ | 477 |
|
|
| | | | | | | | | | | | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC. |
PROPERTY & CASUALTY |
CONSOLIDATING INCOME STATEMENTS |
Three Months Ended September 30, 2014 |
($ in millions) |
| Commercial Lines | Personal Lines | P&C Other | Property & Casualty |
Written premiums | $ | 1,583 |
| $ | 1,019 |
| $ | 1 |
| $ | 2,603 |
|
Change in unearned premium reserve | 5 |
| 55 |
| 1 |
| 61 |
|
Earned premiums | 1,578 |
| 964 |
| — |
| 2,542 |
|
Losses and loss adjustment expenses | | | | |
Current accident year before catastrophes | 931 |
| 639 |
| — |
| 1,570 |
|
Current accident year catastrophes | 8 |
| 32 |
| — |
| 40 |
|
Prior year development | (5 | ) | (15 | ) | 10 |
| (10 | ) |
Total losses and loss adjustment expenses | 934 |
| 656 |
| 10 |
| 1,600 |
|
Amortization of DAC | 230 |
| 88 |
| — |
| 318 |
|
Underwriting expenses | 286 |
| 149 |
| 8 |
| 443 |
|
Dividends to policyholders | 4 |
| — |
| — |
| 4 |
|
Underwriting gain (loss) | 124 |
| 71 |
| (18 | ) | 177 |
|
Net investment income | 250 |
| 33 |
| 33 |
| 316 |
|
Net realized capital gains (losses) | 18 |
| 4 |
| 2 |
| 24 |
|
Net servicing and other income (expense) | 4 |
| (1 | ) | 1 |
| 4 |
|
Income from continuing operations before income taxes | 396 |
| 107 |
| 18 |
| 521 |
|
Income tax expense | 116 |
| 34 |
| 4 |
| 154 |
|
Net income | 280 |
| 73 |
| 14 |
| 367 |
|
Less: Net realized capital gains (losses), after-tax and DAC, excluded from core earnings | 12 |
| 2 |
| — |
| 14 |
|
Core earnings (losses) | $ | 268 |
| $ | 71 |
| $ | 14 |
| $ | 353 |
|
DISCUSSION OF NON-GAAP FINANCIAL MEASURES
The Hartford uses non-GAAP financial measures in this press release to assist investors in analyzing the company's operating performance for the periods presented herein. Because The Hartford's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing The Hartford's non-GAAP financial measures to those of other companies. Definitions and calculations of other financial measures used in this press release can be found below and in The Hartford's Investor Financial Supplement for third quarter 2015, which is available on The Hartford's website, http://ir.thehartford.com.
Book value per diluted common share excluding accumulated other comprehensive income ("AOCI”): Book value per diluted common share excluding AOCI is a non-GAAP financial measure based on a GAAP financial measure. It is calculated by dividing (a) common stockholders' equity excluding AOCI, after-tax, by (b) common shares outstanding and dilutive potential common shares. The Hartford provides book value per diluted common share excluding AOCI to enable investors to analyze the company’s stockholders’ equity excluding the effect of changes in the value of the company’s investment portfolio and other assets due to interest rates, currency and other factors. The Hartford believes book value per diluted common share excluding AOCI is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in market value. Book value per diluted common share is the most directly comparable GAAP measure. A reconciliation of book value per diluted common share, including AOCI to book value per diluted common share, excluding AOCI is set forth below.
|
| | | |
| As of |
| Sept 30 2015 | Dec 31 2014 | Change |
Book value per diluted common share, including AOCI | $43.32 | $42.84 | 1% |
Less: Per diluted share impact of AOCI | $0.33 | $2.13 | (85)% |
Book value per diluted common share, excluding AOCI | $42.99 | $40.71 | 6% |
Core Earnings: The Hartford uses the non-GAAP measure core earnings as an important measure of the company’s operating performance. The Hartford believes that the measure core earnings provides investors with a valuable measure of the performance of the company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain realized capital gains and losses, certain restructuring charges, pension settlements, loss on extinguishment of debt, reinsurance gains and losses on business disposition transactions, income tax benefit from reduction in valuation allowance, discontinued operations, and the impact of Unlocks to deferred policy acquisition costs ("DAC"), sales inducement assets ("SIA"), unearned revenue reserves ("URR") and death and other insurance benefit reserve balances. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business.
Accordingly, core earnings excludes the effect of all realized gains and losses (net of tax and the effects of DAC) that tend to be highly variable from period to period based on capital market conditions. The Hartford believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives and net periodic settlements on the
Japan fixed annuity cross-currency swap. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. Net income (loss) is the most directly comparable U.S. GAAP measure. Core earnings should not be considered as a substitute for net income (loss) and does not reflect the overall profitability of the company’s business. Therefore, the Hartford believes that it is useful for investors to evaluate both net income (loss) and core earnings when reviewing the company’s performance.
A reconciliation of core earnings to net income (loss) for the quarterly periods ended Sept. 30, 2015 and 2014, is included in this press release. A reconciliation of core earnings to net income (loss) for individual reporting segments can be found in this press release under the heading "The Hartford Financial Services Group, Inc. Consolidating Income Statements" and in The Hartford's Investor Financial Supplement for the quarter ended Sept. 30, 2015.
Core earnings available to common shareholders per diluted share: Core earnings available to common shareholders per diluted share is calculated based on the non-GAAP financial measure core earnings. It is calculated by dividing (a) core earnings, by (b) diluted common shares outstanding. The Hartford believes that the measure core earnings available to common shareholders per diluted share provides investors with a valuable measure of the company's operating performance for the same reasons applicable to its underlying measure, core earnings. Net income (loss) per diluted common share is the most directly comparable GAAP measure. Core earnings available to common shareholders per diluted share should not be considered as a substitute for net income (loss) per diluted share and does not reflect the overall profitability of the company's business.
Therefore, The Hartford believes that it is useful for investors to evaluate both net income (loss) per diluted share and core earnings available to common shareholders per diluted share when reviewing the company's performance. A reconciliation of core earnings available to common shareholders per diluted share to net income (loss) per diluted common share for the quarterly periods ended Sept. 30, 2015 and 2014 is provided in the table below.
|
| | | |
| Three Months Ended |
| Sept 30 2015 | Sept 30 2014 | Change |
PER SHARE DATA | | | |
Diluted earnings (losses) per common share: | | | |
Core earnings available to common shareholders | $0.86 | $1.06 | (19)% |
Add: Unlock charge, after-tax | (0.08) | (0.23) | 65% |
Add: Net realized capital gains (losses), after-tax and DAC, excluded from core earnings | (0.07) | 0.06 | NM |
Add: Restructuring and other costs, after-tax | — | (0.03) | NM |
Add: Net reinsurance gain on dispositions, after-tax | 0.03 | — | NM |
Add: Income tax benefit from reduction in valuation allowance | 0.14 | — | NM |
Add: Income from discontinued operations, after-tax | 0.02 | — | NM |
Net income (loss) available to common shareholders | $0.90 | $0.86 | 5% |
Core earnings margin: The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues, excluding buyouts and realized gains (losses). Net income margin 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. A reconciliation of net income margin to core earnings margin for the quarterly periods ended Sept. 30, 2015 and 2014, is set forth below.
|
| | | |
| Three Months Ended Sept 30, |
Margin | 2015 | 2014 | Change |
Net income margin | 4.9% | 4.4% | 0.5 |
Less: Effect of net capital realized gains (losses), net of tax on after-tax margin | (0.6)% | (0.1)% | (0.5) |
Core earnings margin | 5.5% | 4.5% | 1.0 |
Underwriting gain (loss): The Hartford's management evaluates profitability of the Commercial and Personal Lines segments primarily on the basis of underwriting gain or loss. Underwriting gain (loss) is a before-tax measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of The Hartford's pricing. Underwriting profitability over time is also greatly influenced by The Hartford's underwriting discipline, as management strives to manage exposure to loss through favorable risk selection and diversification, effective management of claims, use of reinsurance and its ability to manage its expenses. The Hartford believes that the measure underwriting gain (loss) provides investors with a valuable measure of profitability, before tax, derived from underwriting activities, which are managed separately from the company's investing activities. A reconciliation of underwriting results to net income for the quarterly periods ended Sept. 30, 2015 and 2014, is set forth below.
|
| | |
| Three Months Ended |
| Sept 30 2015 | Sept 30 2014 |
Commercial Lines | | |
Net income | $211 | $280 |
Less: Income from discontinued operations | 7 | — |
Add: Income tax expense | 83 | 116 |
Less: Other income (expense) | 1 | (1) |
Less: Net realized capital gains (losses) | (18) | 18 |
Less: Net investment income | 208 | 250 |
Less: Net servicing income | 6 | 5 |
Underwriting gain | $90 | $124 |
| |
|
Personal Lines | | |
Net income | $19 | $73 |
Add: Income tax expense | 2 | 34 |
Less: Other expenses | (1) | (3) |
Less: Net realized capital gains | 4 | 4 |
Less: Net investment income | 29 | 33 |
Less: Net servicing income | — | 2 |
Underwriting gain (loss) | $(11) | $71 |
Combined ratio before catastrophes and prior year development: Combined ratio before catastrophes and prior year development (PYD) is a non-GAAP financial measure. Combined ratio is the most directly comparable GAAP measure. The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. This ratio measures the cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100 demonstrates a positive underwriting result. A combined ratio above 100 indicates a negative underwriting result. The combined ratio before catastrophes and PYD represents the combined ratio for the current accident year, excluding the impact of current accident year catastrophes. The company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve. A reconciliation of the combined ratio to the combined ratio before catastrophes and PYD for individual reporting segments can be found in this press release under the headings Commercial Lines and Personal Lines.
SAFE HARBOR STATEMENT
Some of the statements in this release should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects” and similar references to the future. Examples of forward-looking statements include, but are not limited to, statements the company makes regarding future results of operations. The Hartford cautions investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ. These important risks and uncertainties include: challenges related to the Company’s current operating environment, including global political, economic and market conditions, and
the effect of financial market disruptions, economic downturns or other potentially adverse macroeconomic developments on the attractiveness of our products, the returns in our investment portfolios and the hedging costs associated with our runoff annuity block; financial risk related to the continued reinvestment of our investment portfolios and performance of our hedge program for our runoff annuity block; market risks associated with our business, including changes in interest rates, credit spreads, equity prices, market volatility and foreign exchange rates, commodities prices and implied volatility levels, as well as continuing uncertainty in key sectors such as the global real estate market; the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy; risk associated with the use of analytical models in making decisions in key areas such as underwriting, capital, hedging, reserving, and catastrophe risk management; the potential for further acceleration of deferred policy acquisition cost amortization; the potential for further impairments of our goodwill or the potential for changes in valuation allowances against deferred tax assets; the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the valuation of the Company’s financial instruments that could result in changes to investment valuations; the difficulty in predicting the Company’s potential exposure for asbestos and environmental claims; the subjective determinations that underlie the Company’s evaluation of other-than-temporary impairments on available-for-sale securities; the impact on our statutory capital of various factors, including many that are outside the Company’s control, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results; risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments; losses due to nonperformance or defaults by others, including reinsurers, sourcing partners, derivative counterparties and other third parties; the potential for losses due to our reinsurers' unwillingness or inability to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect us against losses; the possibility of unfavorable loss development including with respect to long-tailed exposures; the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses; weather and other natural physical events, including the severity and frequency of storms, hail, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns; the uncertain effects of emerging claim and coverage issues; the Company’s ability to effectively price its property and casualty policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines; technology innovations, such as telematics and other usage-based methods of determining premiums, auto technology advancements that improve driver safety and technologies that facilitate ride or home sharing, that may alter demand for the Company’s products, impact the frequency or severity of losses and/or impact the way the Company markets, distributes and underwrites its products; the possible occurrence of terrorist attacks and the Company’s ability to contain its exposure, including limitations on coverage from the federal government under applicable reinsurance terrorism laws; volatility in our statutory and United States ("U.S.") GAAP earnings and potential material changes to our results resulting from our adjustment of our risk management program to emphasize protection of economic value; the cost and other effects of increased regulation as a result of the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the potential effect of other domestic and foreign regulatory developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels; unfavorable judicial or legislative developments; regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends; the impact of changes in federal or state tax laws; the impact of potential changes in accounting principles and related financial reporting requirements; regulatory requirements that could delay, deter or prevent a takeover attempt that shareholders might consider in their best interests; the risks, challenges
and uncertainties associated with our expense reduction initiatives and other actions, which may include acquisitions, divestitures or restructurings; the risks, challenges and uncertainties associated with our capital management plan, including as a result of changes in our financial position and earnings, share price, capital position, legal restrictions, other investment opportunities, and other factors; actions by our competitors, many of which are larger or have greater financial resources than we do; the Company’s ability to market, distribute and provide investment advisory services in relation to our products through current and future distribution channels and advisory firms; the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event; the risk that our framework for managing operational risks may not be effective in mitigating material risk and loss to the Company; the potential for difficulties arising from outsourcing and similar third-party relationships; the Company’s ability to protect its intellectual property and defend against claims of infringement; and other factors described in such forward-looking statements or in The Hartford's 2014 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings The Hartford makes with the Securities and Exchange Commission.
Any forward-looking statement made by the company in this release speaks only as of the date of this release. Factors or events that could cause the company's actual results to differ may emerge from time to time, and it is not possible for the company to predict all of them. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
INVESTOR FINANCIAL SUPPLEMENT
September 30, 2015
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
|
| | | | | | | | |
| | | | | | | | |
| | As of October 21, 2015 | | | | | | |
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 |
| | Hartford Life Insurance Company | | A- | | BBB+ | | Baa2 |
Internet address: | | Hartford Life and Annuity Insurance Company | | A- | | BBB+ | | Baa2 |
http://www.thehartford.com | | | | | | | | |
| | Other Ratings: | | | | | | |
| | The Hartford Financial Services Group, Inc.: | | | | | | |
| | Senior debt | | a- | | BBB+ | | Baa2 |
Contacts: | | Commercial paper | | AMB-1 | | A-2 | | P-2 |
Sabra Purtill | | | | | | | | |
Senior Vice President | | |
Investor Relations | | |
Phone (860) 547-8691 | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Sean Rourke | | TRANSFER AGENT |
Assistant Vice President | | Shareholder correspondence should be mailed to: | | Overnight correspondence should be mailed to: |
Investor Relations | | Computershare | | Computershare |
Phone (860) 547-5688 | | P.O. Box 30170 | | 211 Quality Circle, Suite 210 |
| | College Station, TX 77842-3170 | | College Station, TX 77845 |
| | Phone (877) 272-7740 | | | | | | |
COMMON STOCK
Common stock and warrants of The Hartford Financial Services Group, Inc. are traded on the New York Stock Exchange under the symbols “HIG” and "HIG/WS", respectively.
This report is for information purposes only. It should be read in conjunction with documents filed by The Hartford Financial Services Group, Inc. with the U.S. Securities and Exchange
Commission, including, without limitation, the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTOR FINANCIAL SUPPLEMENT
TABLE OF CONTENTS |
| | |
CONSOLIDATED | Consolidated Financial Results | 1 |
| Operating Results by Segment | 2 |
| Consolidated Statements of Operations | 3 |
| Consolidating Balance Sheets | 4 |
| Capital Structure | 5 |
| Statutory Capital and Surplus to GAAP Stockholders’ Equity Reconciliation | 6 |
| Accumulated Other Comprehensive Income (Loss) | 7 |
| Deferred Policy Acquisition Costs | 8 |
| | |
PROPERTY & CASUALTY | Property & Casualty Income Statements | 9 |
| Property & Casualty Underwriting Ratios | 10 |
| Commercial Lines Underwriting Results | 11 |
| Commercial Lines Underwriting Ratios | 12 |
| Commercial Lines Supplemental Data | 13 |
| Personal Lines Underwriting Results | 14 |
| Personal Lines Underwriting Ratios | 15 |
| Personal Lines Supplemental Data | 16 |
| P&C Other Operations Underwriting Results | 17 |
| | |
GROUP BENEFITS | Income Statements | 18 |
| Supplemental Data | 19 |
| | |
MUTUAL FUNDS | Income Statements | 20 |
| Asset Value Rollforward - Assets Under Management By Asset Class | 21 |
| | |
TALCOTT RESOLUTION | Financial Highlights | 22 |
| Individual Annuity - Supplemental Data | 23 |
| Individual Annuity - Account Value Rollforward | 24 |
| | |
CORPORATE | Income Statements | 25 |
| | |
INVESTMENTS | Investment Earnings Before Tax - Consolidated | 26 |
| Investment Earnings Before Tax - Property & Casualty | 27 |
| Net Investment Income by Segment | 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 | 32 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
HIGHLIGHTS | | | | | | | | | | |
Net income (loss) | $ | 381 |
| $ | 413 |
| $ | 467 |
| $ | 382 |
| $ | 388 |
| $ | (467 | ) | $ | 495 |
| | $ | 1,261 |
| $ | 416 |
|
Core earnings | $ | 364 |
| $ | 389 |
| $ | 452 |
| $ | 426 |
| $ | 477 |
| $ | 144 |
| $ | 501 |
| | $ | 1,205 |
| $ | 1,122 |
|
Total revenues | $ | 4,562 |
| $ | 4,685 |
| $ | 4,617 |
| $ | 4,617 |
| $ | 4,769 |
| $ | 4,616 |
| $ | 4,612 |
| | $ | 13,864 |
| $ | 13,997 |
|
Total assets | $ | 231,453 |
| $ | 241,020 |
| $ | 246,960 |
| $ | 245,013 |
| $ | 247,100 |
| $ | 254,713 |
| $ | 272,923 |
| | | |
PER SHARE AND SHARES DATA | | | | | | | | | | |
Basic earnings (losses) per common share | | | | | | | | | | |
Net income (loss) available to common shareholders | $ | 0.92 |
| $ | 0.99 |
| $ | 1.11 |
| $ | 0.89 |
| $ | 0.89 |
| $ | (1.04 | ) | $ | 1.10 |
| | $ | 3.01 |
| $ | 0.93 |
|
Core earnings available to common shareholders | $ | 0.88 |
| $ | 0.93 |
| $ | 1.07 |
| $ | 0.99 |
| $ | 1.09 |
| $ | 0.32 |
| $ | 1.11 |
| | $ | 2.88 |
| $ | 2.52 |
|
Diluted earnings (losses) per common share [1] | | | | | | | | | | |
Net income (loss) available to common shareholders | $ | 0.90 |
| $ | 0.96 |
| $ | 1.08 |
| $ | 0.86 |
| $ | 0.86 |
| $ | (1.00 | ) | $ | 1.03 |
| | $ | 2.94 |
| $ | 0.89 |
|
Core earnings available to common shareholders | $ | 0.86 |
| $ | 0.91 |
| $ | 1.04 |
| $ | 0.96 |
| $ | 1.06 |
| $ | 0.31 |
| $ | 1.05 |
| | $ | 2.81 |
| $ | 2.41 |
|
Weighted average common shares outstanding (basic) | 413.8 |
| 418.7 |
| 422.6 |
| 429.6 |
| 437.2 |
| 450.6 |
| 449.8 |
| | 418.4 |
| 445.9 |
|
Dilutive effect of stock compensation | 5.1 |
| 4.4 |
| 5.5 |
| 6.8 |
| 5.9 |
| 6.3 |
| 6.2 |
| | 5.0 |
| 6.1 |
|
Dilutive effect of warrants | 4.1 |
| 5.0 |
| 5.6 |
| 6.2 |
| 7.7 |
| 11.0 |
| 22.6 |
| | 4.9 |
| 13.9 |
|
Weighted average common shares outstanding and dilutive potential common shares (diluted) | 423.0 |
| 428.1 |
| 433.7 |
| 442.6 |
| 450.8 |
| 467.9 |
| 478.6 |
| | 428.3 |
| 465.9 |
|
Common shares outstanding | 411.3 |
| 416.3 |
| 421.4 |
| 424.4 |
| 433.6 |
| 450.8 |
| 452.5 |
| | | |
Book value per common share | $ | 44.26 |
| $ | 43.78 |
| $ | 45.27 |
| $ | 44.11 |
| $ | 43.44 |
| $ | 43.10 |
| $ | 43.70 |
| | | |
Per common share impact of accumulated other comprehensive income [2] | $ | 0.34 |
| $ | 0.45 |
| $ | 2.73 |
| $ | 2.19 |
| $ | 2.49 |
| $ | 2.58 |
| $ | 1.46 |
| | | |
Book value per common share (excluding AOCI) | $ | 43.92 |
| $ | 43.33 |
| $ | 42.54 |
| $ | 41.92 |
| $ | 40.95 |
| $ | 40.52 |
| $ | 42.24 |
| | | |
Book value per diluted share | $ | 43.32 |
| $ | 42.86 |
| $ | 44.13 |
| $ | 42.84 |
| $ | 42.23 |
| $ | 41.70 |
| $ | 41.56 |
| | | |
Per diluted share impact of AOCI | $ | 0.33 |
| $ | 0.45 |
| $ | 2.66 |
| $ | 2.13 |
| $ | 2.41 |
| $ | 2.49 |
| $ | 1.39 |
| | | |
Book value per diluted share (excluding AOCI) | $ | 42.99 |
| $ | 42.41 |
| $ | 41.47 |
| $ | 40.71 |
| $ | 39.82 |
| $ | 39.21 |
| $ | 40.17 |
| | | |
Common shares outstanding and dilutive potential common shares | 420.2 |
| 425.3 |
| 432.3 |
| 437.0 |
| 446.0 |
| 465.9 |
| 475.8 |
| | | |
RETURN ON EQUITY | | | | | | | | | | |
ROE (net income last 12 months to stockholders' equity including AOCI) | 8.9 | % | 8.8 | % | 4.0 | % | 4.2 | % | 3.9 | % | 3.3 | % | 4.5 | % | | | |
ROE (core earnings last 12 months to stockholders' equity excluding AOCI) | 9.1 | % | 9.6 | % | 8.1 | % | 8.4 | % | 8.2 | % | 7.8 | % | 8.0 | % | | | |
| |
[1] | Weighted average common shares outstanding and dilutive potential common shares are used in the calculation of diluted earnings (losses) per common share in periods of losses when the impact is dilutive to income from continuing operations, net of tax, available to common shareholders. |
| |
[2] | Accumulated other comprehensive income ("AOCI") represents after-tax unrealized gain (loss) on available-for-sale securities, other than temporary impairment losses recognized in AOCI, net gain (loss) on cash-flow hedging instruments, foreign currency translation adjustments and pension and other postretirement adjustments. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Core earnings (losses): | | | | | | | | | | |
Commercial Lines | $ | 216 |
| $ | 264 |
| $ | 234 |
| $ | 251 |
| $ | 268 |
| $ | 213 |
| $ | 264 |
| | $ | 714 |
| $ | 745 |
|
Personal Lines | 17 |
| 42 |
| 75 |
| 65 |
| 71 |
| (27 | ) | 101 |
| | 134 |
| 145 |
|
P&C Other Operations | 18 |
| (113 | ) | 20 |
| — |
| 14 |
| (146 | ) | 21 |
| | (75 | ) | (111 | ) |
Property & Casualty ("P&C") | $ | 251 |
| $ | 193 |
| $ | 329 |
| $ | 316 |
| $ | 353 |
| $ | 40 |
| $ | 386 |
| | $ | 773 |
| $ | 779 |
|
Group Benefits | 47 |
| 56 |
| 52 |
| 45 |
| 38 |
| 52 |
| 45 |
| | 155 |
| 135 |
|
Mutual Funds | 22 |
| 22 |
| 22 |
| 27 |
| 22 |
| 21 |
| 21 |
| | 66 |
| 64 |
|
Sub-total | 320 |
| 271 |
| 403 |
| 388 |
| 413 |
| 113 |
| 452 |
| | 994 |
| 978 |
|
Talcott Resolution | 107 |
| 171 |
| 111 |
| 98 |
| 122 |
| 101 |
| 112 |
| | 389 |
| 335 |
|
Corporate | (63 | ) | (53 | ) | (62 | ) | (60 | ) | (58 | ) | (70 | ) | (63 | ) | | (178 | ) | (191 | ) |
CONSOLIDATED CORE EARNINGS | $ | 364 |
| $ | 389 |
| $ | 452 |
| $ | 426 |
| $ | 477 |
| $ | 144 |
| $ | 501 |
| | $ | 1,205 |
| $ | 1,122 |
|
Add: Unlock benefit (charge), after-tax | $ | (33 | ) | $ | 31 |
| $ | 19 |
| $ | 13 |
| $ | (102 | ) | $ | 15 |
| $ | 12 |
| | $ | 17 |
| $ | (75 | ) |
Add: Net realized capital gains (losses), after-tax and DAC, excluded from core earnings | (30 | ) | 4 |
| 2 |
| (9 | ) | 27 |
| (4 | ) | (34 | ) | | (24 | ) | (11 | ) |
Add: Restructuring and other costs, after-tax | (2 | ) | (2 | ) | (6 | ) | (17 | ) | (14 | ) | (5 | ) | (13 | ) | | (10 | ) | (32 | ) |
Add: Pension settlement, after-tax [1] | — |
| — |
| — |
| (83 | ) | — |
| — |
| — |
| | — |
| — |
|
Add: Loss on extinguishment of debt, after-tax [2] | — |
| (14 | ) | — |
| — |
| — |
| — |
| — |
| | (14 | ) | — |
|
Add: Net reinsurance gain on dispositions, after-tax [3] | 13 |
| 5 |
| — |
| 15 |
| — |
| — |
| — |
| | 18 |
| — |
|
Add: Income tax benefit from reduction in valuation allowance [1] | 60 |
| — |
| — |
| — |
| — |
| — |
| — |
| | 60 |
| — |
|
Add: Income (loss) from discontinued operations, after-tax [3] | 9 |
| — |
| — |
| 37 |
| — |
| (617 | ) | 29 |
| | 9 |
| (588 | ) |
Net income (loss) | $ | 381 |
| $ | 413 |
| $ | 467 |
| $ | 382 |
| $ | 388 |
| $ | (467 | ) | $ | 495 |
| | $ | 1,261 |
| $ | 416 |
|
| |
[1] | For further information, see Corporate Income Statements footnotes [2] and [4], page 25. |
| |
[2] | For further information, see Capital Structure footnote [1], page 5. |
| |
[3] | For further information, see Talcott Resolution Financial Highlights footnotes [3] and [4], page 22. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Earned premiums | $ | 3,404 |
| $ | 3,391 |
| $ | 3,322 |
| $ | 3,378 |
| $ | 3,337 |
| $ | 3,319 |
| $ | 3,302 |
| | $ | 10,117 |
| $ | 9,958 |
|
Fee income | 448 |
| 469 |
| 459 |
| 474 |
| 524 |
| 502 |
| 496 |
| | 1,376 |
| 1,522 |
|
Net investment income | 730 |
| 796 |
| 809 |
| 752 |
| 810 |
| 768 |
| 824 |
| | 2,335 |
| 2,402 |
|
Realized capital gains (losses): | | | | | | | | | | |
Total other-than-temporary impairment (“OTTI”) losses | (42 | ) | (13 | ) | (12 | ) | (18 | ) | (15 | ) | (8 | ) | (23 | ) | | (67 | ) | (46 | ) |
OTTI losses recognized in other comprehensive income | 2 |
| 2 |
| — |
| 2 |
| 1 |
| 1 |
| 1 |
| | 4 |
| 3 |
|
Net OTTI losses recognized in earnings | (40 | ) | (11 | ) | (12 | ) | (16 | ) | (14 | ) | (7 | ) | (22 | ) | | (63 | ) | (43 | ) |
Other net realized capital gains (losses) | (4 | ) | 20 |
| 17 |
| 2 |
| 83 |
| 3 |
| (13 | ) | | 33 |
| 73 |
|
Total net realized capital gains (losses) | (44 | ) | 9 |
| 5 |
| (14 | ) | 69 |
| (4 | ) | (35 | ) | | (30 | ) | 30 |
|
Other revenues | 24 |
| 20 |
| 22 |
| 27 |
| 29 |
| 31 |
| 25 |
| | 66 |
| 85 |
|
Total revenues | 4,562 |
| 4,685 |
| 4,617 |
| 4,617 |
| 4,769 |
| 4,616 |
| 4,612 |
| | 13,864 |
| 13,997 |
|
Benefits, losses and loss adjustment expenses | 2,710 |
| 2,812 |
| 2,563 |
| 2,582 |
| 2,624 |
| 3,023 |
| 2,576 |
| | 8,085 |
| 8,223 |
|
Amortization of DAC | 434 |
| 391 |
| 387 |
| 381 |
| 580 |
| 372 |
| 396 |
| | 1,212 |
| 1,348 |
|
Insurance operating costs and other expenses [1] [2] | 971 |
| 910 |
| 948 |
| 1,139 |
| 976 |
| 977 |
| 936 |
| | 2,829 |
| 2,889 |
|
Loss on extinguishment of debt | — |
| 21 |
| — |
| — |
| — |
| — |
| — |
| | 21 |
| — |
|
Reinsurance gain on disposition [3] | (20 | ) | (8 | ) | — |
| (23 | ) | — |
| — |
| — |
| | (28 | ) | — |
|
Interest expense | 88 |
| 89 |
| 94 |
| 94 |
| 93 |
| 94 |
| 95 |
| | 271 |
| 282 |
|
Total benefits, losses and expenses | 4,183 |
| 4,215 |
| 3,992 |
| 4,173 |
| 4,273 |
| 4,466 |
| 4,003 |
| | 12,390 |
| 12,742 |
|
Income from continuing operations before income taxes | 379 |
| 470 |
| 625 |
| 444 |
| 496 |
| 150 |
| 609 |
| | 1,474 |
| 1,255 |
|
Income tax expense [4] [5] | 7 |
| 57 |
| 158 |
| 99 |
| 108 |
| — |
| 143 |
| | 222 |
| 251 |
|
Income from continuing operations, after-tax | 372 |
| 413 |
| 467 |
| 345 |
| 388 |
| 150 |
| 466 |
| | 1,252 |
| 1,004 |
|
Income (loss) from discontinued operations, after-tax [6] | 9 |
| — |
| — |
| 37 |
| — |
| (617 | ) | 29 |
| | 9 |
| (588 | ) |
Net income (loss) | $ | 381 |
| $ | 413 |
| $ | 467 |
| $ | 382 |
| $ | 388 |
| $ | (467 | ) | $ | 495 |
| | $ | 1,261 |
| $ | 416 |
|
| |
[1] | The three months ended December 31, 2014 includes a pension settlement charge of $128, before tax, for voluntary lump-sum settlements with vested participants in the Company's defined benefit pension plan who had separated from service, but who had not yet commenced annuity benefits. |
| |
[2] | The three months ended June 30, 2015 includes a benefit of $20, before tax, from the resolution of litigation. |
| |
[3] | Amounts pertain to the Individual Life business sold in 2013. |
| |
[4] | The three months ended September 30, 2015 and June 30, 2015, respectively, includes a tax provision of $12 and a tax benefit of $48 due to uncertain tax positions. |
| |
[5] | The three months ended September 30, 2015 includes a tax benefit of $60 from the partial reduction of the deferred tax valuation allowance. For further information, see Corporate Income Statements footnote [4], page 25. |
| |
[6] | For further information related to the discontinued operations of the Japan annuity business, see Talcott Resolution Financial Highlights, page 22. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| PROPERTY & CASUALTY | | GROUP BENEFITS | | MUTUAL FUNDS | | TALCOTT RESOLUTION | | CORPORATE | | CONSOLIDATED |
| Sept 30 2015 | Dec 31 2014 | | Sept 30 2015 | Dec 31 2014 | | Sept 30 2015 | Dec 31 2014 | | Sept 30 2015 | Dec 31 2014 | | Sept 30 2015 | Dec 31 2014 | | Sept 30 2015 | Dec 31 2014 |
Investments | | | | | | | | | | | | | | | | | |
Fixed maturities, available-for-sale, at fair value | $ | 25,261 |
| $ | 25,484 |
| | $ | 7,466 |
| $ | 7,323 |
| | $ | 40 |
| $ | 13 |
| | $ | 25,113 |
| $ | 25,468 |
| | $ | 1,229 |
| $ | 1,096 |
| | $ | 59,109 |
| $ | 59,384 |
|
Fixed maturities, at fair value using the fair value option | 227 |
| 126 |
| | 130 |
| 83 |
| | — |
| — |
| | 191 |
| 279 |
| | — |
| — |
| | 548 |
| 488 |
|
Equity securities, available-for-sale, at fair value | 481 |
| 240 |
| | 35 |
| 159 |
| | — |
| — |
| | 167 |
| 513 |
| | 130 |
| 135 |
| | 813 |
| 1,047 |
|
Mortgage loans | 1,872 |
| 1,693 |
| | 765 |
| 753 |
| | — |
| — |
| | 2,915 |
| 3,110 |
| | — |
| — |
| | 5,552 |
| 5,556 |
|
Policy loans, at outstanding balance | — |
| — |
| | 1 |
| 1 |
| | — |
| — |
| | 1,427 |
| 1,430 |
| | — |
| — |
| | 1,428 |
| 1,431 |
|
Limited partnerships and other alternative investments | 1,614 |
| 1,506 |
| | 208 |
| 183 |
| | — |
| — |
| | 1,245 |
| 1,253 |
| | — |
| — |
| | 3,067 |
| 2,942 |
|
Other investments | 89 |
| 73 |
| | 7 |
| 18 |
| | — |
| — |
| | 352 |
| 445 |
| | 7 |
| 11 |
| | 455 |
| 547 |
|
Short-term investments | 1,075 |
| 1,038 |
| | 195 |
| 372 |
| | 158 |
| 229 |
| | 1,084 |
| 2,252 |
| | 921 |
| 992 |
| | 3,433 |
| 4,883 |
|
Total investments | $ | 30,619 |
| $ | 30,160 |
| | $ | 8,807 |
| $ | 8,892 |
| | $ | 198 |
| $ | 242 |
| | $ | 32,494 |
| $ | 34,750 |
| | $ | 2,287 |
| $ | 2,234 |
| | $ | 74,405 |
| $ | 76,278 |
|
Cash | 178 |
| 119 |
| | 33 |
| 17 |
| | 1 |
| 2 |
| | 450 |
| 261 |
| | 3 |
| — |
| | 665 |
| 399 |
|
Premiums receivable and agents’ balances | 3,343 |
| 3,175 |
| | 236 |
| 227 |
| | — |
| — |
| | 22 |
| 27 |
| | — |
| — |
| | 3,601 |
| 3,429 |
|
Reinsurance recoverables | 2,616 |
| 2,730 |
| | 599 |
| 600 |
| | — |
| — |
| | 19,872 |
| 19,590 |
| | — |
| — |
| | 23,087 |
| 22,920 |
|
DAC | 601 |
| 576 |
| | 36 |
| 36 |
| | 11 |
| 11 |
| | 1,062 |
| 1,200 |
| | — |
| — |
| | 1,710 |
| 1,823 |
|
Deferred income taxes | 344 |
| 355 |
| | (149 | ) | (168 | ) | | 4 |
| 2 |
| | 1,246 |
| 938 |
| | 1,617 |
| 1,770 |
| | 3,062 |
| 2,897 |
|
Goodwill | 119 |
| 119 |
| | — |
| — |
| | 149 |
| 149 |
| | — |
| — |
| | 230 |
| 230 |
| | 498 |
| 498 |
|
Property and equipment, net | 781 |
| 670 |
| | 64 |
| 71 |
| | 1 |
| 1 |
| | 77 |
| 80 |
| | 9 |
| 9 |
| | 932 |
| 831 |
|
Other assets | 847 |
| 858 |
| | 193 |
| 11 |
| | 76 |
| 36 |
| | 636 |
| 253 |
| | 107 |
| 78 |
| | 1,859 |
| 1,236 |
|
Separate account assets [1] | — |
| — |
| | — |
| — |
| | — |
| — |
| | 121,634 |
| 134,702 |
| | — |
| — |
| | 121,634 |
| 134,702 |
|
Total assets | $ | 39,448 |
| $ | 38,762 |
| | $ | 9,819 |
| $ | 9,686 |
| | $ | 440 |
| $ | 443 |
| | $ | 177,493 |
| $ | 191,801 |
| | $ | 4,253 |
| $ | 4,321 |
| | $ | 231,453 |
| $ | 245,013 |
|
Future policy benefits, unpaid losses and loss adjustment expenses | 21,952 |
| 21,806 |
| | 6,419 |
| 6,540 |
| | — |
| — |
| | 13,314 |
| 13,098 |
| | — |
| $ | — |
| | $ | 41,685 |
| $ | 41,444 |
|
Other policyholder funds and benefits payable | — |
| — |
| | 498 |
| 518 |
| | — |
| — |
| | 31,425 |
| 32,014 |
| | — |
| — |
| | 31,923 |
| 32,532 |
|
Unearned premiums | 5,356 |
| 5,099 |
| | 43 |
| 45 |
| | — |
| — |
| | 109 |
| 111 |
| | — |
| — |
| | 5,508 |
| 5,255 |
|
Debt | — |
| — |
| | — |
| — |
| | — |
| — |
| | 143 |
| 143 |
| | 5,383 |
| 5,966 |
| | 5,526 |
| 6,109 |
|
Other liabilities | 1,419 |
| 1,088 |
| | 395 |
| (3 | ) | | 144 |
| 159 |
| | 2,004 |
| 1,930 |
| | 3,011 |
| 3,077 |
| | 6,973 |
| 6,251 |
|
Separate account liabilities | — |
| — |
| | — |
| — |
| | — |
| — |
| | 121,634 |
| 134,702 |
| | — |
| — |
| | 121,634 |
| 134,702 |
|
Total liabilities | $ | 28,727 |
| $ | 27,993 |
| | $ | 7,355 |
| $ | 7,100 |
| | $ | 144 |
| $ | 159 |
| | $ | 168,629 |
| $ | 181,998 |
| | $ | 8,394 |
| $ | 9,043 |
| | $ | 213,249 |
| $ | 226,293 |
|
Common equity, excluding AOCI | 10,054 |
| 9,822 |
| | 2,206 |
| 2,228 |
| | 296 |
| 284 |
| | 8,104 |
| 8,607 |
| | (2,596 | ) | (3,149 | ) | | 18,064 |
| 17,792 |
|
AOCI, after-tax | 667 |
| 947 |
| | 258 |
| 358 |
| | — |
| — |
| | 760 |
| 1,196 |
| | (1,545 | ) | (1,573 | ) | | 140 |
| 928 |
|
Total stockholders’ equity | 10,721 |
| 10,769 |
| | 2,464 |
| 2,586 |
| | 296 |
| 284 |
| | 8,864 |
| 9,803 |
| | (4,141 | ) | (4,722 | ) | | 18,204 |
| 18,720 |
|
Total liabilities and equity | $ | 39,448 |
| $ | 38,762 |
| | $ | 9,819 |
| $ | 9,686 |
| | $ | 440 |
| $ | 443 |
| | $ | 177,493 |
| $ | 191,801 |
| | $ | 4,253 |
| $ | 4,321 |
| | $ | 231,453 |
| $ | 245,013 |
|
| |
[1] | Excludes Mutual Funds assets under management ("AUM") owned by the shareholders of those funds and not by the Company. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
|
| | | | | | | | | | | | | | | | | | | | | |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 |
DEBT | | | | | | | |
Short-term debt | $ | 167 |
| $ | 167 |
| $ | 167 |
| $ | 456 |
| $ | 289 |
| $ | 289 |
| $ | 532 |
|
Senior notes [1] | 4,259 |
| 4,258 |
| 4,553 |
| 4,553 |
| 4,719 |
| 4,719 |
| 4,718 |
|
Junior subordinated debentures | 1,100 |
| 1,100 |
| 1,100 |
| 1,100 |
| 1,100 |
| 1,100 |
| 1,100 |
|
Total debt | $ | 5,526 |
| $ | 5,525 |
| $ | 5,820 |
| $ | 6,109 |
| $ | 6,108 |
| $ | 6,108 |
| 6,350 |
|
STOCKHOLDERS’ EQUITY | | | | | | | |
Common stockholders' equity, excluding AOCI | $ | 18,064 |
| $ | 18,039 |
| $ | 17,927 |
| $ | 17,792 |
| $ | 17,758 |
| $ | 18,266 |
| 19,115 |
|
AOCI | 140 |
| 188 |
| 1,150 |
| 928 |
| 1,077 |
| 1,162 |
| 659 |
|
Total stockholders’ equity | $ | 18,204 |
| $ | 18,227 |
| $ | 19,077 |
| $ | 18,720 |
| $ | 18,835 |
| $ | 19,428 |
| $ | 19,774 |
|
CAPITALIZATION | | | | | | | |
Total capitalization, including AOCI, after-tax | $ | 23,730 |
| $ | 23,752 |
| $ | 24,897 |
| $ | 24,829 |
| $ | 24,943 |
| $ | 25,536 |
| $ | 26,124 |
|
Total capitalization, excluding AOCI, after-tax | $ | 23,590 |
| $ | 23,564 |
| $ | 23,747 |
| $ | 23,901 |
| $ | 23,866 |
| $ | 24,374 |
| $ | 25,465 |
|
DEBT TO CAPITALIZATION RATIOS | | | | | | | |
Total debt to capitalization, including AOCI | 23.3 | % | 23.3 | % | 23.4 | % | 24.6 | % | 24.5 | % | 23.9 | % | 24.3 | % |
Total debt to capitalization, excluding AOCI | 23.4 | % | 23.4 | % | 24.5 | % | 25.6 | % | 25.6 | % | 25.1 | % | 24.9 | % |
Total rating agency adjusted debt to capitalization [2] [3] | 26.9 | % | 26.9 | % | 26.9 | % | 28.0 | % | 26.7 | % | 26.2 | % | 26.5 | % |
| |
[1] | On May 27, 2015 the Company redeemed for cash the entire $296 aggregate principal amount of 4.0% senior notes due October 15, 2017 for $317 including a make-whole premium and interest accrued to the redemption date. The Company financed the redemption of the senior notes with cash on hand. |
| |
[2] | The leverage calculation reflects adjustments related to the Company’s defined benefit plans unfunded pension liability and the Company's rental expense on operating leases for total adjustments of $1.6 billion, $1.6 billion, $1.6 billion, $1.6 billion, $1.1 billion, $1.1 billion and $1.2 billion for the three months ended September 30, 2015, June 30, 2015, March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively. Due to a rating agency methodology change the adjustment on operating leases was reduced from 6 times the annual lease expense to 4 times the annual lease expense. Prior periods have been adjusted to reflect this change which impacted the ratio by (0.4), (0.4), (0.4), (0.3) and (0.4) percentage points as of March 31, 2015, December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively. |
| |
[3] | Reflects 25% equity credit for the Company's outstanding junior subordinated debentures. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY CAPITAL AND SURPLUS TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
SEPTEMBER 30, 2015
|
| | | | | | | | | |
| P&C | GROUP BENEFITS | TALCOTT RESOLUTION |
U.S. statutory net income [1] | $ | 1,024 |
| $ | 158 |
| $ | 188 |
|
U.S. statutory capital and surplus | $ | 8,415 |
| $ | 1,504 |
| $ | 5,024 |
|
U.S. GAAP adjustments: | | | |
DAC | 601 |
| 36 |
| 1,062 |
|
Deferred taxes including non-admitted deferred tax assets | (770 | ) | (303 | ) | 443 |
|
Goodwill | 119 |
| — |
| — |
|
Non-admitted assets other than deferred taxes | 684 |
| 76 |
| 27 |
|
Asset valuation and interest maintenance reserve |
|
| 195 |
| 563 |
|
Benefit reserves | (20 | ) | 345 |
| 492 |
|
Unrealized gains on investments | 1,125 |
| 373 |
| 1,020 |
|
Other, net | 567 |
| 238 |
| 233 |
|
U.S. GAAP stockholders’ equity | $ | 10,721 |
| $ | 2,464 |
| $ | 8,864 |
|
| |
[1] | Statutory net income is for the nine months ended September 30, 2015. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
|
| | | | | | | | | | | | | | | | | | | | | |
| AS OF |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 |
Fixed maturities net unrealized gain | $ | 1,571 |
| $ | 1,636 |
| $ | 2,565 |
| $ | 2,355 |
| $ | 2,170 |
| $ | 2,226 |
| $ | 1,663 |
|
Equities net unrealized gain (loss) | (8 | ) | 21 |
| 13 |
| 15 |
| 23 |
| 29 |
| 23 |
|
OTTI losses recognized in AOCI | (4 | ) | (7 | ) | (8 | ) | (5 | ) | (5 | ) | (7 | ) | (10 | ) |
Net gain on cash flow hedging instruments | 170 |
| 122 |
| 177 |
| 150 |
| 120 |
| 141 |
| 121 |
|
Total net unrealized gain | $ | 1,729 |
| $ | 1,772 |
| $ | 2,747 |
| $ | 2,515 |
| $ | 2,308 |
| $ | 2,389 |
| $ | 1,797 |
|
Foreign currency translation adjustments | (38 | ) | (24 | ) | (28 | ) | (8 | ) | — |
| 13 |
| 108 |
|
Pension and other postretirement adjustment | (1,551 | ) | (1,560 | ) | (1,569 | ) | (1,579 | ) | (1,231 | ) | (1,240 | ) | (1,246 | ) |
Total AOCI | $ | 140 |
| $ | 188 |
| $ | 1,150 |
| $ | 928 |
| $ | 1,077 |
| $ | 1,162 |
| $ | 659 |
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
DEFERRED POLICY ACQUISITION COSTS (“DAC”)
|
| | | | | | | | | | | | | | | |
| THREE MONTHS ENDED SEPT 30, 2015 |
| P&C | Group Benefits | Mutual Funds | Talcott Resolution | Consolidated |
Balance, beginning of period | $ | 592 |
| $ | 37 |
| $ | 12 |
| $ | 1,145 |
| $ | 1,786 |
|
Deferred costs | 338 |
| 7 |
| 4 |
| 3 |
| 352 |
|
Amortization — DAC | (329 | ) | (8 | ) | (5 | ) | (49 | ) | (391 | ) |
Amortization — DAC unlock charge, before tax | — |
| — |
| — |
| (43 | ) | (43 | ) |
Adjustments to unrealized gains and losses on securities available-for-sale and other | — |
| — |
| — |
| 6 |
| 6 |
|
Balance, end of period | $ | 601 |
| $ | 36 |
| $ | 11 |
| $ | 1,062 |
| $ | 1,710 |
|
|
| | | | | | | | | | | | | | | |
| NINE MONTHS ENDED SEPT 30, 2015 |
| | | | | |
| P&C | Group Benefits | Mutual Funds | Talcott Resolution | Consolidated |
Balance, beginning of period | $ | 576 |
| $ | 36 |
| $ | 11 |
| $ | 1,200 |
| $ | 1,823 |
|
Deferred costs | 1,005 |
| 24 |
| 16 |
| 10 |
| 1,055 |
|
Amortization — DAC | (980 | ) | (24 | ) | (16 | ) | (161 | ) | (1,181 | ) |
Amortization — DAC unlock charge, before tax | — |
| — |
| — |
| (31 | ) | (31 | ) |
Adjustments to unrealized gains and losses on securities available-for-sale and other | — |
| — |
| — |
| 44 |
| 44 |
|
Balance, end of period | $ | 601 |
| $ | 36 |
| $ | 11 |
| $ | 1,062 |
| $ | 1,710 |
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
UNDERWRITING RESULTS | | | | | | | | | | |
Written premiums | $ | 2,674 |
| $ | 2,667 |
| $ | 2,661 |
| $ | 2,470 |
| $ | 2,603 |
| $ | 2,574 |
| $ | 2,597 |
| | $ | 8,002 |
| $ | 7,774 |
|
Change in unearned premium reserve | 49 |
| 78 |
| 126 |
| (110 | ) | 61 |
| 69 |
| 128 |
| | 253 |
| 258 |
|
Earned premiums | 2,625 |
| 2,589 |
| 2,535 |
| 2,580 |
| 2,542 |
| 2,505 |
| 2,469 |
| | 7,749 |
| 7,516 |
|
Losses and loss adjustment expenses |
|
|
|
|
|
|
|
|
|
| | | |
|
| |
Current accident year before catastrophes | 1,634 |
| 1,525 |
| 1,546 |
| 1,574 |
| 1,570 |
| 1,563 |
| 1,524 |
| | 4,705 |
| 4,657 |
|
Current accident year catastrophes | 76 |
| 139 |
| 83 |
| 19 |
| 40 |
| 196 |
| 86 |
| | 298 |
| 322 |
|
Prior year development [1] | 37 |
| 220 |
| (2 | ) | 29 |
| (10 | ) | 249 |
| (40 | ) | | 255 |
| 199 |
|
Total losses and loss adjustment expenses | 1,747 |
| 1,884 |
| 1,627 |
| 1,622 |
| 1,600 |
| 2,008 |
| 1,570 |
| | 5,258 |
| 5,178 |
|
Amortization of DAC | 329 |
| 327 |
| 324 |
| 322 |
| 318 |
| 316 |
| 311 |
| | 980 |
| 945 |
|
Underwriting expenses [2] | 474 |
| 446 |
| 449 |
| 473 |
| 443 |
| 439 |
| 372 |
| | 1,369 |
| 1,254 |
|
Dividends to policyholders | 4 |
| 4 |
| 5 |
| 4 |
| 4 |
| 3 |
| 4 |
| | 13 |
| 11 |
|
Underwriting gain (loss) | 71 |
| (72 | ) | 130 |
| 159 |
| 177 |
| (261 | ) | 212 |
| | 129 |
| 128 |
|
Net investment income | 267 |
| 307 |
| 327 |
| 282 |
| 316 |
| 292 |
| 326 |
| | 901 |
| 934 |
|
Net realized capital gains (losses) | (16 | ) | (6 | ) | 13 |
| 6 |
| 24 |
| (25 | ) | (37 | ) | | (9 | ) | (38 | ) |
Net servicing and other income [3] | 8 |
| 27 |
| 6 |
| 14 |
| 4 |
| 8 |
| 5 |
| | 41 |
| 17 |
|
Income from continuing operations before income taxes | 330 |
| 256 |
| 476 |
| 461 |
| 521 |
| 14 |
| 506 |
| | 1,062 |
| 1,041 |
|
Income tax expense (benefit) | 91 |
| 67 |
| 137 |
| 140 |
| 154 |
| (11 | ) | 143 |
| | 295 |
| 286 |
|
Income from continuing operations, after-tax | 239 |
| 189 |
| 339 |
| 321 |
| 367 |
| 25 |
| 363 |
| | 767 |
| 755 |
|
Income from discontinued operations, after-tax [4] | 7 |
| — |
| — |
| 6 |
| — |
| — |
| — |
| | 7 |
| — |
|
Net income | 246 |
| 189 |
| 339 |
| 327 |
| 367 |
| 25 |
| 363 |
| | 774 |
| 755 |
|
Less: Net realized capital gains (losses), after-tax and DAC, excluded from core earnings | (12 | ) | (4 | ) | 10 |
| 5 |
| 14 |
| (15 | ) | (23 | ) | | (6 | ) | (24 | ) |
Less: Income from discontinued operations, after-tax [4] | 7 |
| — |
| — |
| 6 |
| — |
| — |
| — |
| | 7 |
| — |
|
Core earnings | $ | 251 |
| $ | 193 |
| $ | 329 |
| $ | 316 |
| $ | 353 |
| $ | 40 |
| $ | 386 |
| | $ | 773 |
| $ | 779 |
|
| |
[1] | The three months ended June 30, 2015 and 2014 include unfavorable prior year loss reserve development of $146 and $212, respectively, related to asbestos reserves and $52 and $27, respectively, related to environmental reserves. |
| |
[2] | The three months ended March 31, 2014 includes a $49 before tax reduction for New York (NY) State Workers' Compensation Board assessments. |
| |
[3] | The three months ended June 30, 2015 includes a benefit of $20, before tax, from the resolution of litigation. |
| |
[4] | Represents residual income from discontinued operations. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNDERWRITING RATIOS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
UNDERWRITING GAIN (LOSS) | $ | 71 |
| $ | (72 | ) | $ | 130 |
| $ | 159 |
| $ | 177 |
| $ | (261 | ) | $ | 212 |
| | $ | 129 |
| $ | 128 |
|
UNDERWRITING RATIOS | | | | | | | | | | |
Losses and loss adjustment expenses | | | | | | | | | | |
Current accident year before catastrophes | 62.2 |
| 58.9 |
| 61.0 |
| 61.0 |
| 61.8 |
| 62.4 |
| 61.7 |
| | 60.7 |
| 62.0 |
|
Current accident year catastrophes | 2.9 |
| 5.4 |
| 3.3 |
| 0.7 |
| 1.6 |
| 7.8 |
| 3.5 |
| | 3.8 |
| 4.3 |
|
Prior year development [1] | 1.4 |
| 8.5 |
| (0.1 | ) | 1.1 |
| (0.4 | ) | 9.9 |
| (1.6 | ) | | 3.3 |
| 2.6 |
|
Total losses and loss adjustment expenses | 66.6 |
| 72.8 |
| 64.2 |
| 62.9 |
| 62.9 |
| 80.2 |
| 63.6 |
| | 67.9 |
| 68.9 |
|
Expenses [2] | 30.6 |
| 29.9 |
| 30.5 |
| 30.8 |
| 29.9 |
| 30.1 |
| 27.7 |
| | 30.3 |
| 29.3 |
|
Policyholder dividends | 0.2 |
| 0.2 |
| 0.2 |
| 0.2 |
| 0.2 |
| 0.1 |
| 0.2 |
| | 0.2 |
| 0.1 |
|
Combined ratio | 97.3 |
| 102.8 |
| 94.9 |
| 93.8 |
| 93.0 |
| 110.4 |
| 91.4 |
| | 98.3 |
| 98.3 |
|
Current accident year catastrophes and prior year development | 4.3 |
| 13.9 |
| 3.2 |
| 1.8 |
| 1.2 |
| 17.7 |
| 1.9 |
| | 7.1 |
| 6.9 |
|
Combined ratio before catastrophes and prior year development | 93.0 |
| 88.9 |
| 91.7 |
| 92.0 |
| 91.9 |
| 92.7 |
| 89.6 |
| | 91.2 |
| 91.4 |
|
| |
[1] | Includes 7.6 point and 9.5 point unfavorable impact related to asbestos and environmental prior year loss reserve development in the three months ended June 30, 2015 and 2014, respectively. |
| |
[2] | Includes 2.0 point and 0.7 point favorable impact related to a reduction in NY State Workers' Compensation Board assessments in the three months ended March 31, 2014 and nine months ended September 30, 2014, respectively. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
UNDERWRITING RESULTS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
UNDERWRITING RESULTS | | | | | | | | | | |
Written premiums | $ | 1,639 |
| $ | 1,655 |
| $ | 1,722 |
| $ | 1,558 |
| $ | 1,583 |
| $ | 1,571 |
| $ | 1,669 |
| | $ | 5,016 |
| $ | 4,823 |
|
Change in unearned premium reserve | (8 | ) | 32 |
| 139 |
| (53 | ) | 5 |
| 12 |
| 128 |
| | 163 |
| 145 |
|
Earned premiums | 1,647 |
| 1,623 |
| 1,583 |
| 1,611 |
| 1,578 |
| 1,559 |
| 1,541 |
| | 4,853 |
| 4,678 |
|
Losses and loss adjustment expenses | | | | | | | | | | |
Current accident year before catastrophes | 952 |
| 909 |
| 928 |
| 934 |
| 931 |
| 934 |
| 934 |
| | 2,789 |
| 2,799 |
|
Current accident year catastrophes | 8 |
| 42 |
| 58 |
| 6 |
| 8 |
| 35 |
| 60 |
| | 108 |
| 103 |
|
Prior year development [2] | 50 |
| 21 |
| (2 | ) | 13 |
| (5 | ) | 12 |
| (7 | ) | | 69 |
| — |
|
Total losses and loss adjustment expenses | 1,010 |
| 972 |
| 984 |
| 953 |
| 934 |
| 981 |
| 987 |
| | 2,966 |
| 2,902 |
|
Amortization of DAC | 239 |
| 237 |
| 234 |
| 233 |
| 230 |
| 230 |
| 226 |
| | 710 |
| 686 |
|
Underwriting expenses [1] | 304 |
| 284 |
| 295 |
| 298 |
| 286 |
| 285 |
| 217 |
| | 883 |
| 788 |
|
Dividends to policyholders | 4 |
| 4 |
| 5 |
| 4 |
| 4 |
| 3 |
| 4 |
| | 13 |
| 11 |
|
Underwriting gain | $ | 90 |
| $ | 126 |
| $ | 65 |
| $ | 123 |
| $ | 124 |
| $ | 60 |
| $ | 107 |
| | $ | 281 |
| $ | 291 |
|
| |
[1] | The three months ended March 31, 2014 includes a $49 before tax reduction for NY State Workers' Compensation Board assessments. Small Commercial, Middle Market and Specialty Commercial represent $25, $15 and $9, respectively, of the reduction. |
| |
[2] | Prior year development includes the following (favorable) unfavorable prior year loss reserve development: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Auto liability | $ | 30 |
| $ | 5 |
| $ | 25 |
| $ | 9 |
| $ | — |
| $ | 9 |
| $ | 5 |
| | $ | 60 |
| $ | 14 |
|
Professional and general liability | 3 |
| (3 | ) | (30 | ) | (4 | ) | (19 | ) | (11 | ) | (8 | ) | | (30 | ) | (38 | ) |
Workers’ compensation | — |
| — |
| — |
| (12 | ) | — |
| 5 |
| — |
| | — |
| 5 |
|
Workers' compensation discount accretion | 7 |
| 7 |
| 8 |
| 7 |
| 8 |
| 7 |
| 8 |
| | 22 |
| 23 |
|
Catastrophes | 1 |
| 4 |
| (6 | ) | 3 |
| 1 |
| (6 | ) | (12 | ) | | (1 | ) | (17 | ) |
Other reserve re-estimates, net [1] | 9 |
| 8 |
| 1 |
| 10 |
| 5 |
| 8 |
| — |
| | 18 |
| 13 |
|
Total prior year development | $ | 50 |
| $ | 21 |
| $ | (2 | ) | $ | 13 |
| $ | (5 | ) | $ | 12 |
| $ | (7 | ) | | $ | 69 |
| $ | — |
|
| |
[1] | The three months ended September 30, 2015 includes releases of contract surety reserves across several accident years and commercial surety reserves for accident years 2012-2014 |
as a result of lower emerged losses. These reserve releases were offset by an increase in reserves for commercial surety bonds related to accident years 2007 and prior, as the number of new
claims reported has outpaced expectations.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
UNDERWRITING RATIOS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
UNDERWRITING GAIN | $ | 90 |
| $ | 126 |
| $ | 65 |
| $ | 123 |
| $ | 124 |
| $ | 60 |
| $ | 107 |
| | $ | 281 |
| $ | 291 |
|
UNDERWRITING RATIOS | | | | | | | | | | |
Losses and loss adjustment expenses | | | | | | | | | | |
Current accident year before catastrophes | 57.8 |
| 56.0 |
| 58.6 |
| 58.0 |
| 59.0 |
| 59.9 |
| 60.6 |
| | 57.5 |
| 59.8 |
|
Current accident year catastrophes | 0.5 |
| 2.6 |
| 3.7 |
| 0.4 |
| 0.5 |
| 2.2 |
| 3.9 |
| | 2.2 |
| 2.2 |
|
Prior year development [1] | 3.0 |
| 1.3 |
| (0.1 | ) | 0.8 |
| (0.3 | ) | 0.8 |
| (0.5 | ) | | 1.4 |
| — |
|
Total losses and loss adjustment expenses | 61.3 |
| 59.9 |
| 62.2 |
| 59.2 |
| 59.2 |
| 62.9 |
| 64.0 |
| | 61.1 |
| 62.0 |
|
Expenses [2] | 33.0 |
| 32.1 |
| 33.4 |
| 33.0 |
| 32.7 |
| 33.0 |
| 28.7 |
| | 32.8 |
| 31.5 |
|
Policyholder dividends | 0.2 |
| 0.2 |
| 0.3 |
| 0.2 |
| 0.3 |
| 0.2 |
| 0.3 |
| | 0.3 |
| 0.2 |
|
Combined ratio [3] | 94.5 |
| 92.2 |
| 95.9 |
| 92.4 |
| 92.1 |
| 96.2 |
| 93.1 |
| | 94.2 |
| 93.8 |
|
Current accident year catastrophes and prior year development | 3.5 |
| 3.9 |
| 3.6 |
| 1.2 |
| 0.2 |
| 3.0 |
| 3.4 |
| | 3.6 |
| 2.2 |
|
Combined ratio before catastrophes and prior year development | 91.0 |
| 88.4 |
| 92.4 |
| 91.2 |
| 92.0 |
| 93.1 |
| 89.6 |
| | 90.6 |
| 91.6 |
|
| | | | | | | | | | |
COMBINED RATIOS BY LINE OF BUSINESS [4] | | | | | | | | | | |
SMALL COMMERCIAL | | | | | | | | | | |
Combined ratio | 88.0 |
| 89.2 |
| 93.9 |
| 86.1 |
| 88.4 |
| 91.4 |
| 87.8 |
| | 90.3 |
| 89.2 |
|
Combined ratio before catastrophes | 87.5 |
| 86.0 |
| 90.5 |
| 85.3 |
| 88.1 |
| 88.0 |
| 85.5 |
| | 88.0 |
| 87.2 |
|
Combined ratio before catastrophes and prior year development | 86.8 |
| 85.1 |
| 89.6 |
| 86.8 |
| 87.5 |
| 87.6 |
| 85.9 |
| | 87.1 |
| 87.0 |
|
MIDDLE MARKET | | | | | | | | | | |
Combined ratio | 102.5 |
| 94.5 |
| 98.9 |
| 97.8 |
| 93.7 |
| 99.8 |
| 98.8 |
| | 98.7 |
| 97.4 |
|
Combined ratio before catastrophes | 101.5 |
| 91.1 |
| 94.6 |
| 97.6 |
| 92.3 |
| 99.3 |
| 93.5 |
| | 95.8 |
| 95.0 |
|
Combined ratio before catastrophes and prior year development | 93.8 |
| 89.3 |
| 93.7 |
| 94.7 |
| 93.5 |
| 97.6 |
| 92.2 |
| | 92.3 |
| 94.4 |
|
SPECIALTY COMMERCIAL | | | | | | | | | | |
Combined ratio | 81.5 |
| 100.4 |
| 94.5 |
| 101.4 |
| 97.8 |
| 103.7 |
| 95.9 |
| | 92.0 |
| 99.1 |
|
Combined ratio before catastrophes | 81.5 |
| 100.4 |
| 94.5 |
| 101.4 |
| 97.8 |
| 103.8 |
| 95.9 |
| | 92.0 |
| 99.2 |
|
Combined ratio before catastrophes and prior year development | 99.1 |
| 98.8 |
| 99.1 |
| 99.1 |
| 105.1 |
| 101.5 |
| 95.4 |
| | 99.0 |
| 100.6 |
|
| |
[1] | For a summary of prior year loss reserve development, refer to footnote [2] on page 11. |
| |
[2] | The expense ratio includes 3.2 point and 1.0 point favorable impact related to a reduction in NY State Workers' Compensation Board assessments in the three months ended March 31, 2014 and nine months ended September 30, 2014, respectively. |
| |
[3] | The three months ended September 30, 2015 includes 2.4 points of net unfavorable reserve development related to strengthening of reserves for commercial surety bonds that is not included in the combined ratios by line of business (shown above) for Small Commercial, Middle Market and Specialty Commercial. |
| |
[4] | Small Commercial, Middle Market and Specialty Commercial include a benefit of 3.3 points, 2.6 points and 4.4 points, respectively, for the NY State Workers' Compensation Board assessments reduction in the three months ended March 31, 2014. For additional information, refer to footnote [1] on page 11. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
SUPPLEMENTAL DATA
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
WRITTEN PREMIUMS | | | | | | | | | | |
Small Commercial | $ | 822 |
| $ | 867 |
| $ | 906 |
| $ | 754 |
| $ | 791 |
| $ | 833 |
| $ | 865 |
| | $ | 2,595 |
| $ | 2,489 |
|
Middle Market | 594 |
| 578 |
| 589 |
| 601 |
| 583 |
| 537 |
| 572 |
| | 1,761 |
| 1,692 |
|
Specialty Commercial | 215 |
| 200 |
| 219 |
| 195 |
| 201 |
| 192 |
| 223 |
| | 634 |
| 616 |
|
National Accounts | 95 |
| 82 |
| 100 |
| 80 |
| 81 |
| 77 |
| 113 |
| | 277 |
| 271 |
|
Financial Products | 64 |
| 60 |
| 61 |
| 65 |
| 64 |
| 59 |
| 55 |
| | 185 |
| 178 |
|
Bond | 50 |
| 49 |
| 46 |
| 47 |
| 51 |
| 47 |
| 43 |
| | 145 |
| 141 |
|
Other Specialty | 6 |
| 9 |
| 12 |
| 3 |
| 5 |
| 9 |
| 12 |
| | 27 |
| 26 |
|
Other | 8 |
| 10 |
| 8 |
| 8 |
| 8 |
| 9 |
| 9 |
| | 26 |
| 26 |
|
Total | $ | 1,639 |
| $ | 1,655 |
| $ | 1,722 |
| $ | 1,558 |
| $ | 1,583 |
| $ | 1,571 |
| $ | 1,669 |
| | $ | 5,016 |
| $ | 4,823 |
|
EARNED PREMIUMS | | | | | | | | | | |
Small Commercial | $ | 839 |
| $ | 833 |
| $ | 810 |
| $ | 813 |
| $ | 805 |
| $ | 790 |
| $ | 769 |
| | $ | 2,482 |
| $ | 2,364 |
|
Middle Market | 590 |
| 583 |
| 566 |
| 579 |
| 570 |
| 561 |
| 561 |
| | 1,739 |
| 1,692 |
|
Specialty Commercial | 208 |
| 198 |
| 198 |
| 212 |
| 193 |
| 199 |
| 203 |
| | 604 |
| 595 |
|
National Accounts | 88 |
| 82 |
| 83 |
| 97 |
| 79 |
| 82 |
| 80 |
| | 253 |
| 241 |
|
Financial Products | 63 |
| 63 |
| 61 |
| 63 |
| 61 |
| 61 |
| 59 |
| | 187 |
| 181 |
|
Bond | 48 |
| 47 |
| 46 |
| 45 |
| 46 |
| 44 |
| 43 |
| | 141 |
| 133 |
|
Other Specialty | 9 |
| 6 |
| 8 |
| 7 |
| 7 |
| 12 |
| 21 |
| | 23 |
| 40 |
|
Other | 10 |
| 9 |
| 9 |
| 7 |
| 10 |
| 9 |
| 8 |
| | 28 |
| 27 |
|
Total | $ | 1,647 |
| $ | 1,623 |
| $ | 1,583 |
| $ | 1,611 |
| $ | 1,578 |
| $ | 1,559 |
| $ | 1,541 |
| | $ | 4,853 |
| $ | 4,678 |
|
| | | | | | | | | | |
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | | | | | | | | | | |
New Business Premium | | | | | | | | | | |
Small Commercial | $ | 131 |
| $ | 141 |
| $ | 140 |
| $ | 122 |
| $ | 128 |
| $ | 140 |
| $ | 131 |
| | $ | 412 |
| $ | 399 |
|
Middle Market | $ | 117 |
| $ | 119 |
| $ | 124 |
| $ | 131 |
| $ | 107 |
| $ | 110 |
| $ | 110 |
| | $ | 360 |
| $ | 327 |
|
Renewal Written Price Increases [1] | | | | | | | | | | |
Standard Commercial Lines | 2 | % | 3 | % | 3 | % | 3 | % | 4 | % | 5 | % | 6 | % | | 3 | % | 5 | % |
Policy Count Retention [1] | | | | | | | | | | |
Small Commercial | 84 | % | 83 | % | 85 | % | 85 | % | 84 | % | 84 | % | 83 | % | | 84 | % | 84 | % |
Middle Market | 81 | % | 81 | % | 81 | % | 80 | % | 80 | % | 80 | % | 81 | % | | 81 | % | 80 | % |
Policies in Force (in thousands) [1] | | | | | | | | | | |
Small Commercial | 1,230 |
| 1,239 |
| 1,211 |
| 1,205 |
| 1,197 |
| 1,187 |
| 1,179 |
| | | |
Middle Market | 71 |
| 72 |
| 72 |
| 72 |
| 72 |
| 73 |
| 73 |
| | | |
| |
[1] | Excludes Middle Market specialty programs and livestock lines of business. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
UNDERWRITING RESULTS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
UNDERWRITING RESULTS | | | | | | | | | | |
Written premiums | $ | 1,034 |
| $ | 1,009 |
| $ | 939 |
| $ | 912 |
| $ | 1,019 |
| $ | 1,003 |
| $ | 927 |
| | $ | 2,982 |
| $ | 2,949 |
|
Change in unearned premium reserve | 57 |
| 43 |
| (13 | ) | (56 | ) | 55 |
| 57 |
| (1 | ) | | 87 |
| 111 |
|
Earned premiums | 977 |
| 966 |
| 952 |
| 968 |
| 964 |
| 946 |
| 928 |
| | 2,895 |
| 2,838 |
|
Losses and loss adjustment expenses | | | | | | | | | | |
Current accident year before catastrophes | 682 |
| 616 |
| 618 |
| 640 |
| 639 |
| 629 |
| 590 |
| | 1,916 |
| 1,858 |
|
Current accident year catastrophes | 68 |
| 97 |
| 25 |
| 13 |
| 32 |
| 161 |
| 26 |
| | 190 |
| 219 |
|
Prior year development [1] | (14 | ) | — |
| (4 | ) | 6 |
| (15 | ) | (3 | ) | (34 | ) | | (18 | ) | (52 | ) |
Total losses and loss adjustment expenses | 736 |
| 713 |
| 639 |
| 659 |
| 656 |
| 787 |
| 582 |
| | 2,088 |
| 2,025 |
|
Amortization of DAC | 90 |
| 90 |
| 90 |
| 89 |
| 88 |
| 86 |
| 85 |
| | 270 |
| 259 |
|
Underwriting expenses | 162 |
| 155 |
| 148 |
| 160 |
| 149 |
| 147 |
| 148 |
| | 465 |
| 444 |
|
Underwriting gain (loss) | $ | (11 | ) | $ | 8 |
| $ | 75 |
| $ | 60 |
| $ | 71 |
| $ | (74 | ) | $ | 113 |
| | $ | 72 |
| $ | 110 |
|
| |
[1] | Prior year development includes the following (favorable) unfavorable prior year loss reserve development: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Auto liability | $ | (7 | ) | $ | — |
| $ | — |
| $ | 6 |
| $ | (4 | ) | $ | — |
| $ | — |
| | $ | (7 | ) | $ | (4 | ) |
Homeowners | 2 |
| 6 |
| 1 |
| 3 |
| — |
| 3 |
| (13 | ) | | 9 |
| (10 | ) |
Catastrophes | — |
| (4 | ) | (12 | ) | (2 | ) | (3 | ) | (5 | ) | (21 | ) | | (16 | ) | (29 | ) |
Other reserve re-estimates, net | (9 | ) | (2 | ) | 7 |
| (1 | ) | (8 | ) | (1 | ) | — |
| | (4 | ) | (9 | ) |
Total prior year development | $ | (14 | ) | $ | — |
| $ | (4 | ) | $ | 6 |
| $ | (15 | ) | $ | (3 | ) | $ | (34 | ) | | $ | (18 | ) | $ | (52 | ) |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
UNDERWRITING RATIOS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
UNDERWRITING GAIN (LOSS) | $ | (11 | ) | $ | 8 |
| $ | 75 |
| $ | 60 |
| $ | 71 |
| $ | (74 | ) | $ | 113 |
| | $ | 72 |
| $ | 110 |
|
UNDERWRITING RATIOS | | | | | | | | | | |
Losses and loss adjustment expenses | | | | | | | | | | |
Current accident year before catastrophes | 69.8 |
| 63.8 |
| 64.9 |
| 66.1 |
| 66.3 |
| 66.5 |
| 63.6 |
| | 66.2 |
| 65.5 |
|
Current accident year catastrophes | 7.0 |
| 10.0 |
| 2.6 |
| 1.3 |
| 3.3 |
| 17.0 |
| 2.8 |
| | 6.6 |
| 7.7 |
|
Prior year development [1] | (1.4 | ) | — |
| (0.4 | ) | 0.6 |
| (1.6 | ) | (0.3 | ) | (3.7 | ) | | (0.6 | ) | (1.8 | ) |
Total losses and loss adjustment expenses | 75.3 |
| 73.8 |
| 67.1 |
| 68.1 |
| 68.0 |
| 83.2 |
| 62.7 |
| | 72.1 |
| 71.4 |
|
Expenses | 25.8 |
| 25.4 |
| 25.0 |
| 25.7 |
| 24.6 |
| 24.6 |
| 25.1 |
| | 25.4 |
| 24.8 |
|
Combined ratio | 101.1 |
| 99.2 |
| 92.1 |
| 93.8 |
| 92.6 |
| 107.8 |
| 87.8 |
| | 97.5 |
| 96.1 |
|
Current accident year catastrophes and prior year development | 5.6 |
| 10.0 |
| 2.2 |
| 1.9 |
| 1.7 |
| 16.7 |
| (0.9 | ) | | 6.0 |
| 5.9 |
|
Combined ratio before catastrophes and prior year development | 95.6 |
| 89.1 |
| 89.9 |
| 91.8 |
| 90.9 |
| 91.1 |
| 88.7 |
| | 91.6 |
| 90.2 |
|
PRODUCT | | | | | | | | | | |
Automobile | | | | | | | | | | |
Combined ratio | 100.4 |
| 98.3 |
| 95.4 |
| 102.9 |
| 97.8 |
| 100.1 |
| 92.6 |
| | 98.1 |
| 96.9 |
|
Combined ratio before catastrophes and prior year development | 101.6 |
| 96.6 |
| 94.6 |
| 102.4 |
| 97.0 |
| 96.0 |
| 92.8 |
| | 97.6 |
| 95.3 |
|
Homeowners | | | | | | | | | | |
Combined ratio | 105.5 |
| 100.7 |
| 85.1 |
| 73.2 |
| 84.8 |
| 125.6 |
| 76.7 |
| | 97.1 |
| 95.8 |
|
Combined ratio before catastrophes and prior year development | 82.4 |
| 72.6 |
| 79.7 |
| 68.1 |
| 77.6 |
| 81.4 |
| 78.8 |
| | 78.2 |
| 79.3 |
|
| |
[1] | For a summary of (favorable) unfavorable prior year loss reserve development refer to footnote [1] on page 14. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
DISTRIBUTION | | | | | | | | | | |
WRITTEN PREMIUMS | | | | | | | | | | |
AARP Direct | $ | 762 |
| $ | 744 |
| $ | 677 |
| $ | 642 |
| $ | 736 |
| $ | 734 |
| $ | 669 |
| | $ | 2,183 |
| $ | 2,139 |
|
AARP Agency | 95 |
| 89 |
| 87 |
| 88 |
| 88 |
| 78 |
| 71 |
| | 271 |
| 237 |
|
Other Agency | 163 |
| 163 |
| 161 |
| 171 |
| 181 |
| 179 |
| 173 |
| | 487 |
| 533 |
|
Other | 14 |
| 13 |
| 14 |
| 11 |
| 14 |
| 12 |
| 14 |
| | 41 |
| 40 |
|
Total | $ | 1,034 |
| $ | 1,009 |
| $ | 939 |
| $ | 912 |
| $ | 1,019 |
| $ | 1,003 |
| $ | 927 |
| | $ | 2,982 |
| $ | 2,949 |
|
EARNED PREMIUMS | | | | | | | | | | |
AARP Direct | $ | 709 |
| $ | 698 |
| $ | 685 |
| $ | 698 |
| $ | 699 |
| $ | 689 |
| $ | 678 |
| | $ | 2,092 |
| $ | 2,066 |
|
AARP Agency | 88 |
| 87 |
| 81 |
| 79 |
| 73 |
| 66 |
| 58 |
| | 256 |
| 197 |
|
Other Agency | 165 |
| 169 |
| 173 |
| 178 |
| 177 |
| 179 |
| 179 |
| | 507 |
| 535 |
|
Other | 15 |
| 12 |
| 13 |
| 13 |
| 15 |
| 12 |
| 13 |
| | 40 |
| 40 |
|
Total | $ | 977 |
| $ | 966 |
| $ | 952 |
| $ | 968 |
| $ | 964 |
| $ | 946 |
| $ | 928 |
| | $ | 2,895 |
| $ | 2,838 |
|
PRODUCT LINE | | | | | | | | | | |
WRITTEN PREMIUMS | | | | | | | | | | |
Automobile | $ | 707 |
| $ | 688 |
| $ | 671 |
| $ | 629 |
| $ | 690 |
| $ | 680 |
| $ | 660 |
| | $ | 2,066 |
| $ | 2,030 |
|
Homeowners | 327 |
| 321 |
| 268 |
| 283 |
| 329 |
| 323 |
| 267 |
| | 916 |
| 919 |
|
Total | $ | 1,034 |
| $ | 1,009 |
| $ | 939 |
| $ | 912 |
| $ | 1,019 |
| $ | 1,003 |
| $ | 927 |
| | $ | 2,982 |
| $ | 2,949 |
|
EARNED PREMIUMS | | | | | | | | | | |
Automobile | $ | 674 |
| $ | 665 |
| $ | 655 |
| $ | 665 |
| $ | 662 |
| $ | 650 |
| $ | 636 |
| | $ | 1,994 |
| $ | 1,948 |
|
Homeowners | 303 |
| 301 |
| 297 |
| 303 |
| 302 |
| 296 |
| 292 |
| | 901 |
| 890 |
|
Total | $ | 977 |
| $ | 966 |
| $ | 952 |
| $ | 968 |
| $ | 964 |
| $ | 946 |
| $ | 928 |
| | $ | 2,895 |
| $ | 2,838 |
|
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | | | |
New Business Premium | | | | | | | | | | |
Automobile | $ | 111 |
| $ | 96 |
| $ | 101 |
| $ | 100 |
| $ | 108 |
| $ | 103 |
| $ | 104 |
| | $ | 308 |
| $ | 315 |
|
Homeowners | $ | 29 |
| $ | 29 |
| $ | 27 |
| $ | 29 |
| $ | 34 |
| $ | 35 |
| $ | 32 |
| | $ | 85 |
| $ | 101 |
|
Renewal Written Price Increases | | | | | | | | | | |
Automobile | 6 | % | 6 | % | 6 | % | 6 | % | 5 | % | 5 | % | 5 | % | | 6 | % | 5 | % |
Homeowners | 8 | % | 8 | % | 8 | % | 8 | % | 7 | % | 8 | % | 8 | % | | 8 | % | 8 | % |
Policy Count Retention | | | | | | | | | | |
Automobile | 84 | % | 84 | % | 84 | % | 84 | % | 85 | % | 86 | % | 87 | % | | 84 | % | 86 | % |
Homeowners | 85 | % | 86 | % | 85 | % | 85 | % | 86 | % | 87 | % | 87 | % | | 85 | % | 87 | % |
Premium Retention | | | | | | | | | | |
Automobile | 87 | % | 87 | % | 87 | % | 87 | % | 87 | % | 88 | % | 89 | % | | 87 | % | 88 | % |
Homeowners | 90 | % | 90 | % | 90 | % | 90 | % | 91 | % | 92 | % | 93 | % | | 90 | % | 92 | % |
Policies in Force (in thousands) | | | | | | | | | | |
Automobile | 2,052 |
| 2,049 |
| 2,053 |
| 2,049 |
| 2,047 |
| 2,041 |
| 2,033 |
| | | |
Homeowners | 1,284 |
| 1,296 |
| 1,305 |
| 1,309 |
| 1,318 |
| 1,325 |
| 1,324 |
| | | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C OTHER OPERATIONS
UNDERWRITING RESULTS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
UNDERWRITING RESULTS | | | | | | | | | | |
Written premiums | $ | 1 |
| $ | 3 |
| $ | — |
| $ | — |
| $ | 1 |
| $ | — |
| $ | 1 |
| | $ | 4 |
| $ | 2 |
|
Change in unearned premium reserve | — |
| 3 |
| — |
| (1 | ) | 1 |
| — |
| 1 |
| | 3 |
| 2 |
|
Earned premiums | 1 |
| — |
| — |
| 1 |
| — |
| — |
| — |
| | 1 |
| — |
|
Losses and loss adjustment expenses | | | | | | | | | | |
Prior year development [1] | 1 |
| 199 |
| 4 |
| 10 |
| 10 |
| 240 |
| 1 |
| | 204 |
| 251 |
|
Total losses and loss adjustment expenses | 1 |
| 199 |
| 4 |
| 10 |
| 10 |
| 240 |
| 1 |
| | 204 |
| 251 |
|
Underwriting expenses | 8 |
| 7 |
| 6 |
| 15 |
| 8 |
| 7 |
| 7 |
| | 21 |
| 22 |
|
Underwriting loss | $ | (8 | ) | $ | (206 | ) | $ | (10 | ) | $ | (24 | ) | $ | (18 | ) | $ | (247 | ) | $ | (8 | ) | | $ | (224 | ) | $ | (273 | ) |
| |
[1] | The three months ended June 30, 2015 and 2014 include unfavorable prior year loss reserve development of $146 and $212, respectively, related to asbestos reserves, and $52 and $27, respectively, related to environmental reserves. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
INCOME STATEMENTS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Earned premiums | $ | 752 |
| $ | 780 |
| $ | 763 |
| $ | 751 |
| $ | 738 |
| $ | 761 |
| $ | 784 |
| | $ | 2,295 |
| $ | 2,283 |
|
Fee income | 17 |
| 16 |
| 17 |
| 15 |
| 15 |
| 16 |
| 15 |
| | 50 |
| 46 |
|
Net investment income | 91 |
| 95 |
| 97 |
| 90 |
| 93 |
| 95 |
| 96 |
| | 283 |
| 284 |
|
Net realized capital gains (losses) | (6 | ) | 2 |
| (1 | ) | 4 |
| (3 | ) | 6 |
| 8 |
| | (5 | ) | 11 |
|
Total revenues | 854 |
| 893 |
| 876 |
| 860 |
| 843 |
| 878 |
| 903 |
| | 2,623 |
| 2,624 |
|
Benefits, losses and loss adjustment expenses | 591 |
| 618 |
| 598 |
| 580 |
| 584 |
| 601 |
| 597 |
| | 1,807 |
| 1,782 |
|
Amortization of DAC | 8 |
| 8 |
| 8 |
| 8 |
| 8 |
| 7 |
| 9 |
| | 24 |
| 24 |
|
Insurance operating costs and other expenses | 198 |
| 191 |
| 200 |
| 208 |
| 205 |
| 195 |
| 228 |
| | 589 |
| 628 |
|
Total benefits, losses and expenses | 797 |
| 817 |
| 806 |
| 796 |
| 797 |
| 803 |
| 834 |
| | 2,420 |
| 2,434 |
|
Income before income taxes | 57 |
| 76 |
| 70 |
| 64 |
| 46 |
| 75 |
| 69 |
| | 203 |
| 190 |
|
Income tax expense | 15 |
| 20 |
| 18 |
| 16 |
| 9 |
| 20 |
| 18 |
| | 53 |
| 47 |
|
Net income | 42 |
| 56 |
| 52 |
| 48 |
| 37 |
| 55 |
| 51 |
| | 150 |
| 143 |
|
Less: Net realized capital gains (losses), after tax, excluded from core earnings | (5 | ) | — |
| — |
| 3 |
| (1 | ) | 3 |
| 6 |
| | (5 | ) | 8 |
|
Core earnings | $ | 47 |
| $ | 56 |
| $ | 52 |
| $ | 45 |
| $ | 38 |
| $ | 52 |
| $ | 45 |
| | $ | 155 |
| $ | 135 |
|
Margin | | | | | | | | | | |
Net income margin | 4.9 | % | 6.3 | % | 5.9 | % | 5.7 | % | 4.4 | % | 6.3 | % | 5.7 | % | | 5.7 | % | 5.5 | % |
Core earnings margin | 5.5 | % | 6.3 | % | 5.9 | % | 5.3 | % | 4.5 | % | 6.0 | % | 5.1 | % | | 5.9 | % | 5.2 | % |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
SUPPLEMENTAL DATA
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
PREMIUMS | | | | | | | | | | |
Fully insured ongoing premiums | | | | | | | | | | |
Group disability | $ | 344 |
| $ | 358 |
| $ | 354 |
| $ | 343 |
| $ | 343 |
| $ | 349 |
| $ | 346 |
| | $ | 1,056 |
| $ | 1,038 |
|
Group life [1] | 364 |
| 376 |
| 365 |
| 354 |
| 353 |
| 371 |
| 388 |
| | 1,105 |
| 1,112 |
|
Other | 43 |
| 46 |
| 44 |
| 42 |
| 42 |
| 41 |
| 42 |
| | 133 |
| 125 |
|
Total fully insured ongoing premiums | $ | 751 |
| $ | 780 |
| $ | 763 |
| $ | 739 |
| $ | 738 |
| $ | 761 |
| $ | 776 |
| | $ | 2,294 |
| $ | 2,275 |
|
Total buyouts [2] | 1 |
| — |
| — |
| 12 |
| — |
| — |
| 8 |
| | 1 |
| 8 |
|
Total premiums | 752 |
| 780 |
| 763 |
| 751 |
| 738 |
| 761 |
| 784 |
| | 2,295 |
| 2,283 |
|
Group disability premium equivalents [3] | 120 |
| 116 |
| 111 |
| 112 |
| 109 |
| 108 |
| 103 |
| | 347 |
| 320 |
|
Total premiums and premium equivalents | $ | 872 |
| $ | 896 |
| $ | 874 |
| $ | 863 |
| $ | 847 |
| $ | 869 |
| $ | 887 |
| | $ | 2,642 |
| $ | 2,603 |
|
SALES (GROSS ANNUALIZED NEW PREMIUMS) | | | | | | | | | | |
Fully insured ongoing sales | | | | | | | | | | |
Group disability | $ | 24 |
| $ | 27 |
| $ | 123 |
| $ | 20 |
| $ | 26 |
| $ | 20 |
| $ | 88 |
| | $ | 174 |
| $ | 134 |
|
Group life | 33 |
| 28 |
| 148 |
| 20 |
| 26 |
| 24 |
| 79 |
| | 209 |
| 129 |
|
Other | 4 |
| 3 |
| 29 |
| 4 |
| 5 |
| 1 |
| 13 |
| | 36 |
| 19 |
|
Total fully insured ongoing sales | 61 |
| 58 |
| 300 |
| 44 |
| 57 |
| 45 |
| 180 |
| | 419 |
| 282 |
|
Total buyouts [2] | 1 |
| — |
| — |
| 12 |
| — |
| — |
| 8 |
| | 1 |
| 8 |
|
Total sales | 62 |
| 58 |
| 300 |
| 56 |
| 57 |
| 45 |
| 188 |
| | 420 |
| 290 |
|
Group disability premium equivalents [3] | 5 |
| 6 |
| 37 |
| 15 |
| 3 |
| 3 |
| 25 |
| | 48 |
| 31 |
|
Total sales and premium equivalents | $ | 67 |
| $ | 64 |
| $ | 337 |
| $ | 71 |
| $ | 60 |
| $ | 48 |
| $ | 213 |
| | $ | 468 |
| $ | 321 |
|
RATIOS, EXCLUDING BUYOUTS | | | | | | | | | | |
Group disability loss ratio | 80.9 | % | 80.8 | % | 81.8 | % | 81.9 | % | 85.7 | % | 83.9 | % | 82.4 | % | | 81.2 | % | 84.0 | % |
Group life loss ratio | 73.4 | % | 76.2 | % | 73.2 | % | 70.3 | % | 71.7 | % | 72.4 | % | 67.9 | % | | 74.3 | % | 70.6 | % |
Total loss ratio | 76.8 | % | 77.6 | % | 76.7 | % | 75.3 | % | 77.6 | % | 77.3 | % | 74.5 | % | | 77.0 | % | 76.4 | % |
Expense ratio | 26.8 | % | 25.0 | % | 26.7 | % | 28.6 | % | 28.3 | % | 26.0 | % | 30.0 | % | | 26.2 | % | 28.1 | % |
SELECTED RATIOS, EXCLUDING A-FI | | | | | | | | | | |
Group life loss ratio, excluding A-FI | 73.4 | % | 76.2 | % | 73.2 | % | 71.8 | % | 72.9 | % | 72.6 | % | 74.0 | % | | 74.3 | % | 73.2 | % |
Total loss ratio, excluding A-FI | 76.8 | % | 77.6 | % | 76.7 | % | 76.0 | % | 78.3 | % | 77.5 | % | 77.6 | % | | 77.0 | % | 77.8 | % |
Expense ratio, excluding A-FI | 26.8 | % | 25.0 | % | 26.7 | % | 27.9 | % | 27.6 | % | 25.8 | % | 27.4 | % | | 26.2 | % | 26.9 | % |
| |
[1] | Association - Financial Institutions ("A-FI") business represents $2, $7, $19 and $44 for the three months ended December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively. |
| |
[2] | Takeover of open claim liabilities and other non-recurring premium amounts. |
| |
[3] | Administrative service only fees and premium equivalent of claims under claim management. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
INCOME STATEMENTS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Investment management fees | $ | 149 |
| $ | 152 |
| $ | 147 |
| $ | 149 |
| $ | 153 |
| $ | 150 |
| $ | 146 |
| | $ | 448 |
| $ | 449 |
|
Shareholder servicing fees | 19 |
| 19 |
| 19 |
| 19 |
| 19 |
| 19 |
| 19 |
| | 57 |
| 57 |
|
Other revenue | 14 |
| 13 |
| 13 |
| 13 |
| 13 |
| 14 |
| 9 |
| | 40 |
| 36 |
|
Total revenues | 182 |
| 184 |
| 179 |
| 181 |
| 185 |
| 183 |
| 174 |
| | 545 |
| 542 |
|
Sub-advisory | 53 |
| 55 |
| 52 |
| 53 |
| 53 |
| 52 |
| 51 |
| | 160 |
| 156 |
|
Employee compensation and benefits [1] | 23 |
| 25 |
| 25 |
| 29 |
| 26 |
| 26 |
| 25 |
| | 73 |
| 77 |
|
Distribution and service | 42 |
| 42 |
| 41 |
| 41 |
| 44 |
| 45 |
| 43 |
| | 125 |
| 132 |
|
General, administrative and other | 30 |
| 28 |
| 27 |
| 23 |
| 26 |
| 28 |
| 22 |
| | 85 |
| 76 |
|
Total expenses | 148 |
| 150 |
| 145 |
| 146 |
| 149 |
| 151 |
| 141 |
| | 443 |
| 441 |
|
Income before income taxes | 34 |
| 34 |
| 34 |
| 35 |
| 36 |
| 32 |
| 33 |
| | 102 |
| 101 |
|
Income tax expense | 12 |
| 12 |
| 12 |
| 12 |
| 14 |
| 11 |
| 12 |
| | 36 |
| 37 |
|
Net income | 22 |
| 22 |
| 22 |
| 23 |
| 22 |
| 21 |
| 21 |
| | 66 |
| 64 |
|
Less: Restructuring and other costs, after-tax | — |
| — |
| — |
| (4 | ) | — |
| — |
| — |
| | — |
| — |
|
Core earnings | $ | 22 |
| $ | 22 |
| $ | 22 |
| $ | 27 |
| $ | 22 |
| $ | 21 |
| $ | 21 |
| | $ | 66 |
| $ | 64 |
|
Average Total Mutual Funds segment AUM | $ | 92,350 |
| $ | 95,797 |
| $ | 94,778 |
| $ | 94,891 |
| $ | 97,511 |
| $ | 98,581 |
| $ | 97,519 |
| | $ | 91,331 |
| $ | 96,449 |
|
Return on assets (bps, after-tax) [2] | | | | | | | | | | |
Net income | 9.5 |
| 9.2 |
| 9.3 |
| 9.7 |
| 9.0 |
| 8.5 |
| 8.6 |
| | 9.6 |
| 8.8 |
|
Core earnings | 9.5 |
| 9.2 |
| 9.3 |
| 11.4 |
| 9.0 |
| 8.5 |
| 8.6 |
| | 9.6 |
| 8.8 |
|
| |
[1] | The three months ended December 31, 2014 includes restructuring costs of $6, before tax. |
| |
[2] | Represents annualized earnings divided by average assets under management. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
ASSET VALUE ROLL FORWARD
ASSETS UNDER MANAGEMENT BY ASSET CLASS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Equity | | | | | | | | | | |
Beginning balance | $ | 47,841 |
| $ | 47,131 |
| $ | 45,221 |
| $ | 44,308 |
| $ | 45,171 |
| $ | 44,489 |
| $ | 42,426 |
| | $ | 45,221 |
| $ | 42,426 |
|
Sales | 2,746 |
| 2,367 |
| 2,583 |
| 2,020 |
| 1,768 |
| 1,995 |
| 1,906 |
| | 7,696 |
| 5,669 |
|
Redemptions | (2,105 | ) | (2,145 | ) | (2,307 | ) | (2,232 | ) | (1,844 | ) | (2,145 | ) | (1,819 | ) | | (6,557 | ) | (5,808 | ) |
Net flows | 641 |
| 222 |
| 276 |
| (212 | ) | (76 | ) | (150 | ) | 87 |
| | 1,139 |
| (139 | ) |
Change in market value and other | (4,164 | ) | 488 |
| 1,634 |
| 1,125 |
| (787 | ) | 832 |
| 1,976 |
| | (2,042 | ) | 2,021 |
|
Ending balance | $ | 44,318 |
| $ | 47,841 |
| $ | 47,131 |
| $ | 45,221 |
| $ | 44,308 |
| $ | 45,171 |
| $ | 44,489 |
| | $ | 44,318 |
| $ | 44,308 |
|
Fixed Income | | | | | | | | | | |
Beginning balance | $ | 13,844 |
| $ | 14,267 |
| $ | 14,046 |
| $ | 14,765 |
| $ | 14,942 |
| $ | 14,661 |
| $ | 14,632 |
| | $ | 14,046 |
| $ | 14,632 |
|
Sales | 878 |
| 883 |
| 1,240 |
| 1,074 |
| 1,317 |
| 1,241 |
| 1,134 |
| | 3,001 |
| 3,692 |
|
Redemptions | (1,166 | ) | (1,084 | ) | (1,338 | ) | (1,516 | ) | (1,329 | ) | (1,064 | ) | (1,257 | ) | | (3,588 | ) | (3,650 | ) |
Net flows | (288 | ) | (201 | ) | (98 | ) | (442 | ) | (12 | ) | 177 |
| (123 | ) | | (587 | ) | 42 |
|
Change in market value and other | (113 | ) | (222 | ) | 319 |
| (277 | ) | (165 | ) | 104 |
| 152 |
| | (16 | ) | 91 |
|
Ending balance | $ | 13,443 |
| $ | 13,844 |
| $ | 14,267 |
| $ | 14,046 |
| $ | 14,765 |
| $ | 14,942 |
| $ | 14,661 |
| | $ | 13,443 |
| $ | 14,765 |
|
Multi-Strategy Investments [1] | | | | | | | | | | |
Beginning balance | $ | 14,566 |
| $ | 14,298 |
| $ | 13,768 |
| $ | 14,222 |
| $ | 14,217 |
| $ | 14,196 |
| $ | 13,860 |
| | $ | 13,768 |
| $ | 13,860 |
|
Sales | 568 |
| 739 |
| 887 |
| 800 |
| 668 |
| 674 |
| 652 |
| | 2,194 |
| 1,994 |
|
Redemptions | (614 | ) | (510 | ) | (536 | ) | (1,206 | ) | (487 | ) | (1,139 | ) | (598 | ) | | (1,660 | ) | (2,224 | ) |
Net flows | (46 | ) | 229 |
| 351 |
| (406 | ) | 181 |
| (465 | ) | 54 |
| | 534 |
| (230 | ) |
Change in market value and other | (736 | ) | 39 |
| 179 |
| (48 | ) | (176 | ) | 486 |
| 282 |
| | (518 | ) | 592 |
|
Ending balance | $ | 13,784 |
| $ | 14,566 |
| $ | 14,298 |
| $ | 13,768 |
| $ | 14,222 |
| $ | 14,217 |
| $ | 14,196 |
| | $ | 13,784 |
| $ | 14,222 |
|
Mutual Fund AUM | | | | | | | | | | |
Beginning balance | $ | 76,251 |
| $ | 75,696 |
| $ | 73,035 |
| $ | 73,295 |
| $ | 74,330 |
| $ | 73,346 |
| $ | 70,918 |
| | $ | 73,035 |
| $ | 70,918 |
|
Sales | 4,192 |
| 3,989 |
| 4,710 |
| 3,894 |
| 3,753 |
| 3,910 |
| 3,692 |
| | 12,891 |
| 11,355 |
|
Redemptions [2] | (3,885 | ) | (3,739 | ) | (4,181 | ) | (4,954 | ) | (3,660 | ) | (4,348 | ) | (3,674 | ) | | (11,805 | ) | (11,682 | ) |
Net flows | 307 |
| 250 |
| 529 |
| (1,060 | ) | 93 |
| (438 | ) | 18 |
| | 1,086 |
| (327 | ) |
Change in market value and other | (5,013 | ) | 305 |
| 2,132 |
| 800 |
| (1,128 | ) | 1,422 |
| 2,410 |
| | (2,576 | ) | 2,704 |
|
Ending balance | $ | 71,545 |
| $ | 76,251 |
| $ | 75,696 |
| $ | 73,035 |
| $ | 73,295 |
| $ | 74,330 |
| $ | 73,346 |
| | $ | 71,545 |
| $ | 73,295 |
|
Talcott AUM [3] | $ | 17,498 |
| $ | 19,406 |
| $ | 20,240 |
| $ | 20,584 |
| $ | 22,867 |
| $ | 24,529 |
| $ | 24,957 |
| | $ | 17,498 |
| $ | 22,867 |
|
Total Mutual Funds segment AUM | $ | 89,043 |
| $ | 95,657 |
| $ | 95,936 |
| $ | 93,619 |
| $ | 96,162 |
| $ | 98,859 |
| $ | 98,303 |
| | $ | 89,043 |
| $ | 96,162 |
|
| |
[1] | Includes balanced, allocation, and alternative investment products. |
| |
[2] | The three months ended December 31, 2014 includes a planned asset transfer of $0.7 billion to the HIMCO Variable Insurance Trust (“HVIT”) which supports legacy retirement mutual funds and runoff mutual funds (see footnote [3]). HVIT's invested assets are managed by Hartford Investment Management Company, a wholly-owned subsidiary of the Company. |
| |
[3] | Talcott AUM consists of Company-sponsored mutual fund assets held in separate accounts supporting variable insurance and investment products. The three months ended December 31, 2014 includes a planned asset transfer of $2.0 billion to HVIT. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
FINANCIAL HIGHLIGHTS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
NET INCOME (LOSS) | | | | | | | | | | |
Individual Annuity [1] | $ | 47 |
| $ | 141 |
| $ | 89 |
| $ | 84 |
| $ | (23 | ) | $ | 92 |
| $ | 108 |
| | $ | 277 |
| $ | 177 |
|
Institutional and other [2][4] | 27 |
| 76 |
| 22 |
| 60 |
| 51 |
| (596 | ) | 37 |
| | 125 |
| (508 | ) |
Talcott Resolution net income (loss) | 74 |
| 217 |
| 111 |
| 144 |
| 28 |
| (504 | ) | 145 |
| | 402 |
| (331 | ) |
Less: Unlock benefit (charge), after-tax | (33 | ) | 31 |
| 19 |
| 13 |
| (102 | ) | 15 |
| 12 |
| | 17 |
| (75 | ) |
Less: Net realized gains (losses) and other, after-tax and DAC, excluded from core earnings | (15 | ) | 10 |
| (19 | ) | (13 | ) | 8 |
| (3 | ) | (8 | ) | | (24 | ) | (3 | ) |
Less: Net reinsurance gain on dispositions, after-tax [3] | 13 |
| 5 |
| — |
| 15 |
| — |
| — |
| — |
| | 18 |
| — |
|
Less: Income (loss) from discontinued operations, after-tax [4] | 2 |
| — |
| — |
| 31 |
| — |
| (617 | ) | 29 |
| | 2 |
| (588 | ) |
Talcott Resolution core earnings | $ | 107 |
| $ | 171 |
| $ | 111 |
| $ | 98 |
| $ | 122 |
| $ | 101 |
| $ | 112 |
| | $ | 389 |
| $ | 335 |
|
CORE EARNINGS | | | | | | | | | | |
Individual Annuity | $ | 83 |
| $ | 134 |
| $ | 83 |
| $ | 80 |
| $ | 83 |
| $ | 84 |
| $ | 89 |
| | $ | 300 |
| $ | 256 |
|
Institutional and other | 24 |
| 37 |
| 28 |
| 18 |
| 39 |
| 17 |
| 23 |
| | 89 |
| 79 |
|
Talcott Resolution core earnings | $ | 107 |
| $ | 171 |
| $ | 111 |
| $ | 98 |
| $ | 122 |
| $ | 101 |
| $ | 112 |
| | $ | 389 |
| $ | 335 |
|
| |
[1] | The three months ended September 30, 2015 and June 30, 2015, respectively, includes a tax provision of $12 and a tax benefit of $48 due to uncertain tax positions. |
| |
[2] | Other consists of PPLI, residual income or tax benefits associated with the reinsurance of the policyholder and separate account liabilities of the Retirement Plans and Individual Life businesses and residual income benefits associated with International discontinued operations. |
| |
[3] | Amounts pertain to disposition of the Individual Life business. |
| |
[4] | The three months ended December 31, 2014 includes a tax benefit of $29 from the partial reduction of the deferred tax asset valuation allowance on capital loss carryovers established when the Japan annuity business was sold. The three months ended June 30, 2014 includes a loss on disposition of $659 related to the Japan annuity business. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
INDIVIDUAL ANNUITY
SUPPLEMENTAL DATA
|
| | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
CORE EARNINGS - RETURN ON ASSETS (bps, after tax) [1] | 60.0 |
| 90.8 |
| 54.5 |
| 51.2 |
| 50.7 |
| 49.0 |
| 50.3 |
| | 70.0 |
| 50.5 |
|
FULL SURRENDER RATES [2] | | | | | | | | | | |
Variable Annuity | 9.1 | % | 9.9 | % | 10.9 | % | 11.3 | % | 16.5 | % | 13.9 | % | 12.3 | % | | 10.3 | % | 14.3 | % |
CONTRACT COUNTS (in thousands) | | | | | | | | | | |
Variable Annuity | 618 |
| 634 |
| 653 |
| 674 |
| 694 |
| 721 |
| 747 |
| | | |
Fixed Annuity and Other | 130 |
| 134 |
| 137 |
| 139 |
| 143 |
| 151 |
| 163 |
| | | |
| |
[1] | Represents annualized earnings divided by a two-point average of assets under management. |
| |
[2] | Represents annualized surrenders (full contract liquidation excluding partial withdrawals) divided by a two-point average of annuity account values. |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| AS OF: | | |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | | |
VARIABLE ANNUITY DEATH AND LIVING BENEFITS | | | | | | | | | | |
S&P 500 index value at end of period | 1,920 |
| 2,063 |
| 2,068 |
| 2,059 |
| 1,972 |
| 1,960 |
| 1,872 |
| | | |
Total account value with guaranteed minimum death benefits (“GMDB”) | $ | 44,464 |
| $ | 49,359 |
| $ | 51,500 |
| $ | 52,861 |
| $ | 54,349 |
| $ | 58,350 |
| $ | 59,547 |
| | | |
Gross net amount at risk ("NAR") | 5,027 |
| 3,719 |
| 3,683 |
| 3,807 |
| 3,972 |
| 4,024 |
| 4,192 |
| | | |
NAR reinsured | 70 | % | 79 | % | 80 | % | 79 | % | 78 | % | 78 | % | 77 | % | | | |
Contracts in the Money [2] | 60 | % | 33 | % | 20 | % | 23 | % | 27 | % | 14 | % | 17 | % | | | |
% In the Money [2] [3] | 11 | % | 10 | % | 16 | % | 14 | % | 13 | % | 27 | % | 23 | % | | | |
Retained NAR [1] | 1,513 |
| 784 |
| 733 |
| 793 |
| 862 |
| 891 |
| 971 |
| | | |
Net GAAP liability for GMDB benefits | 193 |
| 184 |
| 183 |
| 196 |
| 198 |
| 210 |
| 209 |
| | | |
| | | | | | | | | | |
Total account value with guaranteed minimum withdrawal benefits (“GMWB”) | $ | 20,441 |
| $ | 22,816 |
| $ | 23,995 |
| $ | 24,840 |
| $ | 25,774 |
| $ | 28,161 |
| $ | 29,036 |
| | | |
Gross NAR | 306 |
| 168 |
| 152 |
| 156 |
| 160 |
| 139 |
| 163 |
| | | |
NAR reinsured | 31 | % | 31 | % | 28 | % | 26 | % | 24 | % | 21 | % | 21 | % | | | |
Contracts in the Money [2] | 13 | % | 7 | % | 6 | % | 6 | % | 6 | % | 5 | % | 6 | % | | | |
% In the Money [2] [3] | 9 | % | 11 | % | 12 | % | 11 | % | 10 | % | 13 | % | 12 | % | | | |
Retained NAR [1] | 212 |
| 116 |
| 109 |
| 116 |
| 122 |
| 110 |
| 129 |
| | | |
Net GAAP liability (asset) for non-lifetime GMWB benefits | 194 |
| 54 |
| 99 |
| 70 |
| 10 |
| (43 | ) | (15 | ) | | | |
Net GAAP liability for lifetime GMWB benefits | 108 |
| 105 |
| 140 |
| 136 |
| 128 |
| 121 |
| 113 |
| | | |
| |
[1] | Policies with a guaranteed living benefit also have a guaranteed death benefit. The net amount at risk (“NAR”) for each benefit is shown. These benefits are not additive. When a policy terminates due to death, any NAR related to the GMWB is released. Similarly, when a policy goes into benefit status on a GMWB, its GMDB NAR is released. |
| |
[2] | Excludes contracts that are fully reinsured. |
| |
[3] | For all contracts that are “in the money”, this represents the percentage by which the average contract was in the money. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
TALCOTT RESOLUTION
INDIVIDUAL ANNUITY
ACCOUNT VALUE ROLLFORWARD
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
VARIABLE ANNUITY | | | | | | | | | | |
Beginning balance | $ | 49,359 |
| $ | 51,500 |
| $ | 52,861 |
| $ | 54,349 |
| $ | 58,350 |
| $ | 59,547 |
| $ | 61,812 |
| | $ | 52,861 |
| $ | 61,812 |
|
Deposits | 43 |
| 52 |
| 49 |
| 56 |
| 52 |
| 58 |
| 66 |
| | 144 |
| 176 |
|
Partial withdrawals | (432 | ) | (487 | ) | (498 | ) | (589 | ) | (490 | ) | (563 | ) | (634 | ) | | (1,417 | ) | (1,687 | ) |
Full surrenders | (1,065 | ) | (1,250 | ) | (1,426 | ) | (1,517 | ) | (2,327 | ) | (2,041 | ) | (1,860 | ) | | (3,741 | ) | (6,228 | ) |
Death benefits/annuitizations/other [1] | (361 | ) | (394 | ) | (421 | ) | (437 | ) | (465 | ) | (508 | ) | (521 | ) | | (1,176 | ) | (1,494 | ) |
Transfers | — |
| — |
| — |
| (2 | ) | (1 | ) | (2 | ) | (1 | ) | | — |
| (4 | ) |
Net flows | (1,815 | ) | (2,079 | ) | (2,296 | ) | (2,489 | ) | (3,231 | ) | (3,056 | ) | (2,950 | ) | | (6,190 | ) | (9,237 | ) |
Change in market value/change in reserve/interest credited and other | (3,080 | ) | (62 | ) | 935 |
| 1,001 |
| (770 | ) | 1,859 |
| 685 |
| | (2,207 | ) | 1,774 |
|
Ending balance | $ | 44,464 |
| $ | 49,359 |
| $ | 51,500 |
| $ | 52,861 |
| $ | 54,349 |
| $ | 58,350 |
| $ | 59,547 |
| | $ | 44,464 |
| $ | 54,349 |
|
FIXED MARKET VALUE ADJUSTED (“MVA”) AND OTHER | | | | | | | | | |
Beginning balance | $ | 8,516 |
| $ | 8,666 |
| $ | 8,748 |
| $ | 8,959 |
| $ | 9,429 |
| $ | 9,917 |
| $ | 10,142 |
| | $ | 8,748 |
| $ | 10,142 |
|
Deposits | — |
| — |
| — |
| — |
| — |
| — |
| — |
| | — |
| — |
|
Surrenders | (189 | ) | (122 | ) | (108 | ) | (256 | ) | (533 | ) | (576 | ) | (331 | ) | | (419 | ) | (1,440 | ) |
Death benefits/annuitizations/other [1] | (85 | ) | (92 | ) | (82 | ) | (41 | ) | (13 | ) | (19 | ) | 7 |
| | (259 | ) | (25 | ) |
Transfers [2] | (1 | ) | (3 | ) | 36 |
| (1 | ) | 2 |
| 1 |
| 1 |
| | 32 |
| 4 |
|
Net flows | (275 | ) | (217 | ) | (154 | ) | (298 | ) | (544 | ) | (594 | ) | (323 | ) | | (646 | ) | (1,461 | ) |
Change in market value/change in reserve/interest credited and other | 31 |
| 67 |
| 72 |
| 87 |
| 74 |
| 106 |
| 98 |
| | 170 |
| 278 |
|
Ending balance | $ | 8,272 |
| $ | 8,516 |
| $ | 8,666 |
| $ | 8,748 |
| $ | 8,959 |
| $ | 9,429 |
| $ | 9,917 |
| | $ | 8,272 |
| $ | 8,959 |
|
TOTAL INDIVIDUAL ANNUITY | | | | | | | | | | |
Beginning balance | $ | 57,875 |
| $ | 60,166 |
| $ | 61,609 |
| $ | 63,308 |
| $ | 67,779 |
| $ | 69,464 |
| $ | 71,954 |
| | $ | 61,609 |
| $ | 71,954 |
|
Deposits | 43 |
| 52 |
| 49 |
| 56 |
| 52 |
| 58 |
| 66 |
| | 144 |
| 176 |
|
Surrenders | (1,686 | ) | (1,859 | ) | (2,032 | ) | (2,362 | ) | (3,350 | ) | (3,180 | ) | (2,825 | ) | | (5,577 | ) | (9,355 | ) |
Death benefits/annuitizations/other [1] | (446 | ) | (486 | ) | (503 | ) | (478 | ) | (478 | ) | (527 | ) | (514 | ) | | (1,435 | ) | (1,519 | ) |
Transfers | (1 | ) | (3 | ) | 36 |
| (3 | ) | 1 |
| (1 | ) | — |
| | 32 |
| — |
|
Net flows | (2,090 | ) | (2,296 | ) | (2,450 | ) | (2,787 | ) | (3,775 | ) | (3,650 | ) | (3,273 | ) | | (6,836 | ) | (10,698 | ) |
Change in market value/change in reserve/interest credited and other | (3,049 | ) | 5 |
| 1,007 |
| 1,088 |
| (696 | ) | 1,965 |
| 783 |
| | (2,037 | ) | 2,052 |
|
Ending balance | $ | 52,736 |
| $ | 57,875 |
| $ | 60,166 |
| $ | 61,609 |
| $ | 63,308 |
| $ | 67,779 |
| $ | 69,464 |
| | $ | 52,736 |
| $ | 63,308 |
|
| |
[1] | Includes transfers from the accumulation phase to the annuitization phase. |
| |
[2] | Transfers for the three months ended March 31, 2015 consist primarily of reinsured Individual Life business accounts formerly managed by a third-party and now managed by the Company. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Fee income | $ | 1 |
| $ | 3 |
| $ | 2 |
| $ | 1 |
| $ | 2 |
| $ | 4 |
| $ | 3 |
| | $ | 6 |
| $ | 9 |
|
Net investment income | 5 |
| 4 |
| 3 |
| 10 |
| 5 |
| 5 |
| 2 |
| | 12 |
| 12 |
|
Net realized capital gains (losses) | (3 | ) | 2 |
| 18 |
| (9 | ) | 11 |
| 14 |
| (9 | ) | | 17 |
| 16 |
|
Total revenues | 3 |
| 9 |
| 23 |
| 2 |
| 18 |
| 23 |
| (4 | ) | | 35 |
| 37 |
|
Insurance operating costs and other expenses [1] | 9 |
| 11 |
| 7 |
| 8 |
| 4 |
| 20 |
| 12 |
| | 27 |
| 36 |
|
Pension settlement [2] | — |
| — |
| — |
| 128 |
| — |
| — |
| — |
| | — |
| — |
|
Loss on extinguishment of debt [3] | — |
| 21 |
| — |
| — |
| — |
| — |
| — |
| | 21 |
| — |
|
Interest expense | 88 |
| 89 |
| 94 |
| 94 |
| 93 |
| 94 |
| 95 |
| | 271 |
| 282 |
|
Restructuring and other costs | 4 |
| 2 |
| 10 |
| 20 |
| 22 |
| 8 |
| 20 |
| | 16 |
| 50 |
|
Total expenses | 101 |
| 123 |
| 111 |
| 250 |
| 119 |
| 122 |
| 127 |
| | 335 |
| 368 |
|
Loss before income taxes | (98 | ) | (114 | ) | (88 | ) | (248 | ) | (101 | ) | (99 | ) | (131 | ) | | (300 | ) | (331 | ) |
Income tax benefit [4] | (95 | ) | (43 | ) | (31 | ) | (88 | ) | (35 | ) | (35 | ) | (46 | ) | | (169 | ) | (116 | ) |
Net loss | (3 | ) | (71 | ) | (57 | ) | (160 | ) | (66 | ) | (64 | ) | (85 | ) | | (131 | ) | (215 | ) |
Less: Net realized capital gains (losses), after tax and DAC, excluded from core losses | 2 |
| (2 | ) | 11 |
| (4 | ) | 6 |
| 11 |
| (9 | ) | | 11 |
| 8 |
|
Less: Restructuring and other costs, after tax | (2 | ) | (2 | ) | (6 | ) | (13 | ) | (14 | ) | (5 | ) | (13 | ) | | (10 | ) | (32 | ) |
Less: Pension settlement, after-tax [2] | — |
| — |
| — |
| (83 | ) | — |
| — |
| — |
| | — |
| — |
|
Less: Loss on extinguishment of debt, after tax [3] | — |
| (14 | ) | — |
| — |
| — |
| — |
| — |
| | (14 | ) | — |
|
Less: Income tax benefit from reduction in valuation allowance [4] | 60 |
| — |
| — |
| — |
| — |
| — |
| — |
| | 60 |
| — |
|
Core losses | $ | (63 | ) | $ | (53 | ) | $ | (62 | ) | $ | (60 | ) | $ | (58 | ) | $ | (70 | ) | $ | (63 | ) | | $ | (178 | ) | $ | (191 | ) |
| |
[1] | The three months ended September 30, 2014 includes a benefit of $10, before tax, for recoveries for past legal expenses associated with closed litigation. |
| |
[2] | Consists of a charge related to voluntary lump-sum settlements with vested participants in the Company's defined benefit pension plan who had separated from service, but who had not yet commenced annuity benefits. |
| |
[3] | Consists of premium associated with the redemption of $296 aggregate principal amount of 4.000% senior notes at an amount greater than the face amount, the write off of the unamortized discount and debt issuance and other costs related to the redemption. |
| |
[4] | The three months ended September 30, 2015 includes a tax benefit of $60 from the partial reduction of the deferred tax valuation allowance on capital loss carryovers established when the Japan annuity business was sold. The reduction in the valuation allowance stems primarily from taxable gains on sales of investments during the period. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE TAX
CONSOLIDATED
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Net Investment Income (Loss) | | | | | | | | | | |
Fixed maturities [1] | | | | | | | | | | |
Taxable | $ | 497 |
| $ | 490 |
| $ | 485 |
| $ | 485 |
| $ | 485 |
| $ | 483 |
| $ | 498 |
| | $ | 1,472 |
| $ | 1,466 |
|
Tax-exempt | 111 |
| 113 |
| 115 |
| 116 |
| 117 |
| 118 |
| 118 |
| | 339 |
| 353 |
|
Total fixed maturities | $ | 608 |
| $ | 603 |
| $ | 600 |
| $ | 601 |
| $ | 602 |
| $ | 601 |
| $ | 616 |
| | $ | 1,811 |
| $ | 1,819 |
|
Equity securities, available-for-sale | 8 |
| 5 |
| 6 |
| 15 |
| 9 |
| 7 |
| 7 |
| | 19 |
| 23 |
|
Mortgage loans | 67 |
| 71 |
| 69 |
| 68 |
| 65 |
| 66 |
| 66 |
| | 207 |
| 197 |
|
Policy loans | 20 |
| 20 |
| 20 |
| 21 |
| 20 |
| 19 |
| 20 |
| | 60 |
| 59 |
|
Limited partnerships and other alternative investments [2] | 22 |
| 94 |
| 99 |
| 44 |
| 100 |
| 53 |
| 97 |
| | 215 |
| 250 |
|
Other [3] | 33 |
| 31 |
| 42 |
| 44 |
| 44 |
| 48 |
| 43 |
| | 106 |
| 135 |
|
Subtotal | 758 |
| 824 |
| 836 |
| 793 |
| 840 |
| 794 |
| 849 |
| | 2,418 |
| 2,483 |
|
Investment expense | (28 | ) | (28 | ) | (27 | ) | (41 | ) | (30 | ) | (26 | ) | (25 | ) | | (83 | ) | (81 | ) |
Total net investment income | $ | 730 |
| $ | 796 |
| $ | 809 |
| $ | 752 |
| $ | 810 |
| $ | 768 |
| $ | 824 |
| | $ | 2,335 |
| $ | 2,402 |
|
Annualized investment yield, before tax [4] | 4.1 | % | 4.5 | % | 4.5 | % | 4.2 | % | 4.5 | % | 4.3 | % | 4.5 | % | | 4.4 | % | 4.4 | % |
Annualized investment yield, after-tax [4] | 2.8 | % | 3.1 | % | 3.1 | % | 2.9 | % | 3.2 | % | 3.0 | % | 3.2 | % | | 3.0 | % | 3.1 | % |
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] | 4.2 | % | 4.1 | % | 4.1 | % | 4.1 | % | 4.1 | % | 4.1 | % | 4.2 | % | | 4.1 | % | 4.1 | % |
New money yield [5] | 3.7 | % | 3.5 | % | 3.1 | % | 3.3 | % | 3.2 | % | 3.8 | % | 3.9 | % | | 3.4 | % | 3.7 | % |
Sales/maturities yield [6] | 3.9 | % | 3.6 | % | 4.1 | % | 4.0 | % | 3.7 | % | 3.9 | % | 4.2 | % | | 4.0 | % | 3.9 | % |
Portfolio duration (in years) [7] | 5.4 |
| 5.5 |
| 5.4 |
| 5.3 |
| 5.4 |
| 5.1 |
| 5.0 |
| | 5.4 |
| 5.4 |
|
| |
[1] | Includes income on short-term bonds. |
| |
[2] | Alternative investments include income on real estate joint ventures and hedge fund investments outside of limited partnerships and limited liability companies. |
| |
[3] | Primarily represents 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 cost, amortized cost, or adjusted carrying value, as applicable, excluding repurchase agreement collateral, if any, and derivatives book value. Yield calculations for each period exclude assets associated with the disposition of the Japan annuities business, as applicable. |
| |
[5] | Represents the 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 collateral, if any. |
| |
[6] | Represents the 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 collateral, if any. |
| |
[7] | Excludes certain short-term securities and derivative instruments related to hedging U.S. variable annuity liabilities and assets associated with the Company's former Japan annuities business. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT EARNINGS BEFORE TAX
PROPERTY & CASUALTY
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Net Investment Income (Loss) | | | | | | | | | | |
Fixed maturities [1] | | | | | | | | | | |
Taxable | $ | 157 |
| $ | 161 |
| $ | 165 |
| $ | 162 |
| $ | 159 |
| $ | 163 |
| $ | 166 |
| | $ | 483 |
| $ | 488 |
|
Tax-exempt | 86 |
| 88 |
| 90 |
| 91 |
| 92 |
| 93 |
| 92 |
| | 264 |
| 277 |
|
Total fixed maturities | $ | 243 |
| $ | 249 |
| $ | 255 |
| $ | 253 |
| $ | 251 |
| $ | 256 |
| $ | 258 |
| | $ | 747 |
| $ | 765 |
|
Equity securities, available-for-sale | 4 |
| 3 |
| 2 |
| 3 |
| 3 |
| 3 |
| 3 |
| | 9 |
| 9 |
|
Mortgage loans | 20 |
| 19 |
| 18 |
| 18 |
| 17 |
| 16 |
| 16 |
| | 57 |
| 49 |
|
Limited partnerships and other alternative investments [2] | 5 |
| 39 |
| 53 |
| 16 |
| 47 |
| 18 |
| 48 |
| | 97 |
| 113 |
|
Other [3] | 5 |
| 8 |
| 10 |
| 7 |
| 8 |
| 9 |
| 10 |
| | 23 |
| 27 |
|
Subtotal | 277 |
| 318 |
| 338 |
| 297 |
| 326 |
| 302 |
| 335 |
| | 933 |
| 963 |
|
Investment expense | (10 | ) | (11 | ) | (11 | ) | (15 | ) | (10 | ) | (10 | ) | (9 | ) | | (32 | ) | (29 | ) |
Total net investment income | $ | 267 |
| $ | 307 |
| $ | 327 |
| $ | 282 |
| $ | 316 |
| $ | 292 |
| $ | 326 |
| | $ | 901 |
| $ | 934 |
|
Annualized investment yield, before tax [4] | 3.6 | % | 4.2 | % | 4.5 | % | 3.9 | % | 4.4 | % | 4.1 | % | 4.5 | % | | 4.1 | % | 4.4 | % |
Annualized investment yield, after-tax [4] | 2.7 | % | 3.1 | % | 3.3 | % | 2.9 | % | 3.3 | % | 3.0 | % | 3.4 | % | | 3.0 | % | 3.3 | % |
Annualized investment yield, before tax; excluding limited partnership and other alternative investments [4] | 3.7 | % | 3.9 | % | 4.0 | % | 3.9 | % | 4.0 | % | 4.0 | % | 4.1 | % | | 3.9 | % | 4.0 | % |
New money yield [5] | 3.8 | % | 3.7 | % | 3.4 | % | 3.1 | % | 3.7 | % | 3.9 | % | 4.0 | % | | 3.6 | % | 3.9 | % |
Sales/maturities yield [6] | 4.2 | % | 4.1 | % | 4.3 | % | 4.0 | % | 4.0 | % | 4.2 | % | 4.3 | % | | 4.2 | % | 4.2 | % |
Portfolio duration (in years) [7] | 4.9 |
| 5.0 |
| 4.8 |
| 4.9 |
| 5.2 |
| 4.6 |
| 4.5 |
| | 4.9 |
| 5.2 |
|
Footnotes [1] through [7] are explained on page 26.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET INVESTMENT INCOME BY SEGMENT
CONSOLIDATED
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Net Investment Income | | | | | | | | | | |
Commercial Lines | $ | 208 |
| $ | 239 |
| $ | 257 |
| $ | 222 |
| $ | 250 |
| $ | 230 |
| $ | 256 |
| | $ | 704 |
| $ | 736 |
|
Personal Lines | 29 |
| 34 |
| 35 |
| 30 |
| 33 |
| 31 |
| 35 |
| | 98 |
| 99 |
|
P&C Other Operations | 30 |
| 34 |
| 35 |
| 30 |
| 33 |
| 31 |
| 35 |
| | 99 |
| 99 |
|
Total Property & Casualty | $ | 267 |
| $ | 307 |
| $ | 327 |
| $ | 282 |
| $ | 316 |
| $ | 292 |
| $ | 326 |
| | $ | 901 |
| $ | 934 |
|
Group Benefits | 91 |
| 95 |
| 97 |
| 90 |
| 93 |
| 95 |
| 96 |
| | 283 |
| 284 |
|
Talcott Resolution | 367 |
| 390 |
| 382 |
| 370 |
| 396 |
| 376 |
| 400 |
| | 1,139 |
| 1,172 |
|
Corporate | 5 |
| 4 |
| 3 |
| 10 |
| 5 |
| 5 |
| 2 |
| | 12 |
| 12 |
|
Total net investment income | $ | 730 |
| $ | 796 |
| $ | 809 |
| $ | 752 |
| $ | 810 |
| $ | 768 |
| $ | 824 |
| | $ | 2,335 |
| $ | 2,402 |
|
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
CONSOLIDATED
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| THREE MONTHS ENDED | | NINE MONTHS ENDED |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 | Jun 30 2014 | Mar 31 2014 | | Sept 30 2015 | Sept 30 2014 |
Net Realized Capital Gains (Losses) | | | | | | | | | | |
Gross gains on sales | $ | 83 |
| $ | 121 |
| $ | 197 |
| $ | 106 |
| $ | 116 |
| $ | 122 |
| $ | 183 |
| | $ | 401 |
| $ | 421 |
|
Gross losses on sales | (73 | ) | (112 | ) | (148 | ) | (59 | ) | (29 | ) | (33 | ) | (129 | ) | | (333 | ) | (191 | ) |
Net impairment losses | (40 | ) | (11 | ) | (12 | ) | (16 | ) | (14 | ) | (7 | ) | (22 | ) | | (63 | ) | (43 | ) |
Valuation allowances on mortgage loans | 1 |
| — |
| (3 | ) | (1 | ) | — |
| (3 | ) | — |
| | (2 | ) | (3 | ) |
Periodic net coupon settlements on credit derivatives [1] | 3 |
| 4 |
| 1 |
| — |
| — |
| 2 |
| (1 | ) | | 8 |
| 1 |
|
Results of variable annuity hedge program | | | | | | | | | | |
GMWB derivatives, net | (32 | ) | (4 | ) | 1 |
| (10 | ) | 6 |
| (6 | ) | 15 |
| | (35 | ) | 15 |
|
Macro hedge | 51 |
| (23 | ) | (4 | ) | 2 |
| 12 |
| (15 | ) | (10 | ) | | 24 |
| (13 | ) |
Total results of variable annuity hedge program | 19 |
| (27 | ) | (3 | ) | (8 | ) | 18 |
| (21 | ) | 5 |
| | (11 | ) | 2 |
|
Other net gains (losses) [2] | (37 | ) | 34 |
| (27 | ) | (36 | ) | (22 | ) | (64 | ) | (71 | ) | | (30 | ) | (157 | ) |
Total net realized capital gains (losses) | $ | (44 | ) | $ | 9 |
| $ | 5 |
| $ | (14 | ) | $ | 69 |
| $ | (4 | ) | $ | (35 | ) | | $ | (30 | ) | $ | 30 |
|
Less: Realized gains, included in core earnings, before tax | 4 |
| 4 |
| 2 |
| 2 |
| 7 |
| 7 |
| — |
| | 10 |
| 14 |
|
Total net realized capital gains (losses) and other, before tax and DAC, excluded from core earnings (losses) | (48 | ) | 5 |
| 3 |
| (16 | ) | 62 |
| (11 | ) | (35 | ) | | (40 | ) | 16 |
|
Less: Impacts of DAC | 1 |
| (1 | ) | — |
| 1 |
| 13 |
| (1 | ) | 16 |
| | — |
| 28 |
|
Less: Impacts of tax | (19 | ) | 2 |
| 1 |
| (8 | ) | 22 |
| (6 | ) | (17 | ) | | (16 | ) | (1 | ) |
Total net realized capital gains (losses), net of tax and DAC, excluded from core earnings (losses) | $ | (30 | ) | $ | 4 |
| $ | 2 |
| $ | (9 | ) | $ | 27 |
| $ | (4 | ) | $ | (34 | ) | | $ | (24 | ) | $ | (11 | ) |
| |
[1] | Included in core earnings. |
| |
[2] | Primarily consists of changes in value of non-qualifying derivatives, including credit derivatives, interest rate derivatives used to manage duration, and the fixed payout annuity hedge. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Sept 30 2015 | Jun 30 2015 | Mar 31 2015 | Dec 31 2014 | Sept 30 2014 |
| Amount [1] | Percent | Amount | Percent | Amount | Percent | Amount [1] | Percent | Amount | Percent |
Total investments | $ | 74,405 |
| 100.0 | % | $ | 74,440 |
| 100.0 | % | $ | 76,576 |
| 100.0 | % | $ | 76,278 |
| 100.0 | % | $ | 76,231 |
| 100.0 | % |
Asset-backed securities | $ | 2,716 |
| 4.6 | % | $ | 2,890 |
| 4.9 | % | $ | 3,004 |
| 5.0 | % | $ | 2,472 |
| 4.2 | % | $ | 2,439 |
| 4.1 | % |
Collateralized debt obligations | 3,031 |
| 5.1 | % | 3,218 |
| 5.4 | % | 2,982 |
| 4.9 | % | 2,841 |
| 4.8 | % | 2,445 |
| 4.1 | % |
Commercial mortgage-backed securities | 4,542 |
| 7.7 | % | 4,664 |
| 7.9 | % | 4,652 |
| 7.7 | % | 4,415 |
| 7.4 | % | 4,482 |
| 7.5 | % |
Corporate | 26,772 |
| 45.3 | % | 26,610 |
| 45.1 | % | 27,119 |
| 44.7 | % | 27,359 |
| 46.0 | % | 27,714 |
| 46.6 | % |
Foreign government/government agencies | 1,255 |
| 2.1 | % | 1,313 |
| 2.2 | % | 1,365 |
| 2.3 | % | 1,636 |
| 2.8 | % | 1,672 |
| 2.8 | % |
Municipal | 12,211 |
| 20.7 | % | 12,298 |
| 20.8 | % | 12,842 |
| 21.2 | % | 12,871 |
| 21.7 | % | 12,761 |
| 21.4 | % |
Residential mortgage-backed securities | 3,859 |
| 6.5 | % | 3,969 |
| 6.7 | % | 4,078 |
| 6.7 | % | 3,918 |
| 6.6 | % | 3,995 |
| 6.7 | % |
U.S. Treasuries | 4,723 |
| 8.0 | % | 4,166 |
| 7.0 | % | 4,513 |
| 7.5 | % | 3,872 |
| 6.5 | % | 4,078 |
| 6.8 | % |
Total fixed maturities, available-for-sale | $ | 59,109 |
| 100.0 | % | $ | 59,128 |
| 100.0 | % | $ | 60,555 |
| 100.0 | % | $ | 59,384 |
| 100.0 | % | $ | 59,586 |
| 100.0 | % |
U.S. government/government agencies | $ | 8,167 |
| 13.8 | % | $ | 7,694 |
| 13.0 | % | $ | 8,214 |
| 13.6 | % | $ | 7,596 |
| 12.8 | % | $ | 7,874 |
| 13.2 | % |
AAA | 7,444 |
| 12.6 | % | 7,675 |
| 13.0 | % | 8,100 |
| 13.4 | % | 7,251 |
| 12.2 | % | 7,074 |
| 11.9 | % |
AA | 10,400 |
| 17.6 | % | 10,298 |
| 17.4 | % | 10,020 |
| 16.5 | % | 10,056 |
| 16.9 | % | 10,094 |
| 16.9 | % |
A | 15,687 |
| 26.5 | % | 16,265 |
| 27.5 | % | 16,973 |
| 28.0 | % | 16,717 |
| 28.2 | % | 16,143 |
| 27.1 | % |
BBB | 14,215 |
| 24.1 | % | 13,952 |
| 23.6 | % | 13,946 |
| 23.0 | % | 14,397 |
| 24.2 | % | 14,764 |
| 24.8 | % |
BB & below | 3,196 |
| 5.4 | % | 3,244 |
| 5.5 | % | 3,302 |
| 5.5 | % | 3,367 |
| 5.7 | % | 3,637 |
| 6.1 | % |
Total fixed maturities, available-for-sale | $ | 59,109 |
| 100.0 | % | $ | 59,128 |
| 100.0 | % | $ | 60,555 |
| 100.0 | % | $ | 59,384 |
| 100.0 | % | $ | 59,586 |
| 100.0 | % |
| |
[1] | Amount represents the value at which the assets are presented in the Consolidating Balance Sheets (page 4). |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
SEPTEMBER 30, 2015
|
| | | | | | | | |
| Cost or
Amortized Cost | Fair Value | Percent of Total
Invested Assets |
Top Ten Corporate and Equity, Available-for-sale, Exposures by Sector | | | |
Financial services | $ | 5,977 |
| $ | 6,215 |
| 8.3 | % |
Utilities | 4,314 |
| 4,638 |
| 6.2 | % |
Consumer non-cyclical | 3,749 |
| 3,952 |
| 5.3 | % |
Technology and communications | 3,515 |
| 3,725 |
| 5.0 | % |
Energy [1] | 2,387 |
| 2,485 |
| 3.3 | % |
Consumer cyclical
| 1,930 |
| 1,993 |
| 2.7 | % |
Capital goods | 1,808 |
| 1,915 |
| 2.6 | % |
Basic industry | 1,224 |
| 1,251 |
| 1.7 | % |
Transportation | 850 |
| 897 |
| 1.2 | % |
Other | 499 |
| 515 |
| 0.7 | % |
Total | $ | 26,253 |
| $ | 27,586 |
| 37.0 | % |
Top Ten Exposures by Issuer [2] | | | |
Morgan Stanley | $ | 311 |
| $ | 315 |
| 0.4 | % |
State of California | 266 |
| 295 |
| 0.4 | % |
General Electric Co. | 290 |
| 283 |
| 0.4 | % |
Commonwealth of Massachusetts | 252 |
| 281 |
| 0.4 | % |
Bank of America Corp. | 268 |
| 272 |
| 0.4 | % |
Verizon Communications Inc. | 240 |
| 264 |
| 0.4 | % |
JP Morgan Chase & Co. | 254 |
| 261 |
| 0.4 | % |
New York State Dormitory Authority | 237 |
| 256 |
| 0.2 | % |
Goldman Sachs Group Inc. | 230 |
| 241 |
| 0.3 | % |
Wells Fargo & Company | 231 |
| 227 |
| 0.3 | % |
Total | $ | 2,579 |
| $ | 2,695 |
| 3.6 | % |
| |
[1] | The Company’s total exposure to the energy sector has a cost or amortized cost and fair value of $2.7 billion and $2.8 billion, respectively, as of September 30, 2015, and includes fixed maturities and equity securities, AFS classified within the energy, basic industry, and other sectors above, as well as investments in foreign government and government agency securities and in certain fixed maturities, FVO and short-term investments. |
| |
[2] | Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, 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 six reporting segments, Commercial Lines, Personal Lines, Property & Casualty Other Operations ("P&C Other Operations"), Group Benefits, Mutual Funds and Talcott Resolution, 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 businesses with workers' compensation, property, automobile, liability, umbrella, marine and livestock coverages under several different products, primarily throughout the United States (“U.S.”), within its standard commercial lines, which consists of the Company's small commercial and middle market lines of business. Additionally, a variety of customized insurance products and risk management services including workers' compensation, automobile, general liability, professional liability, bond, and specialty casualty coverages are offered through the segment's specialty lines. 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, currently managed by the Company, that have discontinued writing new business and substantially all of the Company's asbestos and environmental exposures.
Group Benefits provides group life, accident and disability coverage, group retiree health and voluntary benefits to individual members of employer groups, associations, affinity groups and financial institutions. Group Benefits offers disability underwriting, administration, claims processing and reinsurance to other insurers and self-funded employer plans.
Mutual Funds provides investment management, administration, distribution and related services to investors through investment products in both domestic and international markets, and is separated into two distinct asset categories referred to as Mutual Fund funds and Talcott funds. Mutual Fund funds are sold primarily through retail, bank trust and registered investment advisor channels. Talcott funds represents those assets held in separate accounts supporting the Company's legacy runoff variable insurance products.
Talcott Resolution is comprised of the runoff of the Company's U.S. annuity and institutional and private-placement life insurance businesses, and the retained Japan fixed payout annuity liabilities.
Corporate includes the Company's debt financing and related interest expense, as well as other capital raising activities; and purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments.
Certain operating and statistical measures have been incorporated herein to provide supplemental data that indicate current trends in the Company's business. These measures include sales, deposits, net flows, account value, insurance in-force, premium retention, renewal written price increases and policy count retention. Premium retention is defined as renewal premium written in the current period divided by total premium written in the prior period. Renewal written price increases represent the combined effect of rate changes and amount of insurance per unit of exposure since the prior year. Policy count retention represents the ratio of the number of policies renewed during the period divided by the number of policies from the previous policy term period.
The Company, along with others in the property and casualty insurance industry, uses underwriting ratios as measures of performance. The loss and loss adjustment expense ratio is the ratio of losses and loss adjustment expenses to earned premiums. The expense ratio is the ratio of underwriting expenses (amortization of deferred policy acquisition costs and insurance operating costs and expenses, including certain centralized services and bad debt expense) to earned premiums. The policyholder dividend ratio is the ratio of policyholder dividends to earned premiums. The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. These ratios are relative measurements that describe the related cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses. The catastrophe ratio (a component of the loss ratio) represents the ratio of catastrophe losses to earned premiums.
The Company, along with others in the life insurance industry, uses underwriting ratios as measures of the Group Benefits segment's performance. The loss ratio is the ratio of 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 to premiums and other considerations, excluding buyout premiums. Buyout premiums represent takeover of open claim liabilities and other non-recurring premium amounts.
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.
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 performance of the Company's ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain realized capital gains and losses, certain restructuring and other costs, pension settlements, loss on extinguishment of debt, reinsurance gains and losses from disposal of businesses, income tax benefit from reduction in deferred income tax valuation allowance, discontinued operations, and the impact of Unlocks to deferred policy acquisition costs (“DAC”), sales inducement assets ("SIA") and death and other insurance benefit reserve balances. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses (after-tax and the effects of DAC) 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. Net income is the most directly comparable U.S. GAAP measure. Core earnings should not be considered as a substitute for net income and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate both net income and core earnings when reviewing the Company's performance. A reconciliation of core earnings to net income (loss) is set forth on page 2.
Core earnings per share 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 per share is the most directly comparable U.S. GAAP measure. Core earnings per share should not be considered as a substitute for net income per share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate both net income per share and core earnings per share when reviewing our performance.
Book value per diluted share, excluding AOCI, is calculated based upon a non-GAAP financial measure. It is calculated by dividing (a) total stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding and dilutive potential common shares. The Company provides book value per diluted share, excluding AOCI, to enable investors to analyze the amount of the Company's net worth that is primarily attributable to the Company's business operations. The Company believes book value per diluted share, excluding AOCI, is useful to investors because it eliminates the effect of items that can fluctuate significantly from period to period, primarily based on changes in interest rates. Book value per diluted share is the most directly comparable U.S. GAAP measure. A reconciliation of book value per diluted share to book value per diluted share, excluding AOCI, is set forth on page 1.
The Company provides different measures of the return on stockholders' equity (“ROE”). ROE (core earnings last twelve months to stockholders' equity, excluding AOCI), is calculated based on non-GAAP financial measures. ROE (core earnings last twelve months to stockholders' equity, excluding AOCI) is calculated by dividing (a) core earnings for the prior four fiscal quarters by (b) average common stockholders' equity, excluding AOCI. The Company provides to investors return-on-equity measures based on its non-GAAP core earnings financial measures for the reasons set forth in the related discussion above. The Company excludes AOCI in the calculation of these return-on-equity measures to provide investors with a measure of how effectively the Company is investing the portion of the Company's net worth that is primarily attributable to the Company's business operations. ROE (net income last twelve months to stockholders' equity, including AOCI) is the most directly comparable U.S. GAAP measure.
Written premium is a statutory accounting financial measure used by the Company as an important indicator of the operating performance of the Company's Commercial Lines and Personal Lines operations. Because written premium represents the amount of premiums charged for policies issued, net of reinsurance, during a fiscal period, the Company believes it is useful to investors because it reflects current trends in the Company's sale of property and casualty insurance products. Earned premium, the most directly comparable U.S. GAAP measure, represents all premiums that are recognized as revenues during a fiscal period. The difference between written premium and earned premium is attributable to the change in unearned premium reserves. A reconciliation of written premium to earned premium for Commercial Lines and Personal Lines is set forth on pages 11 and 14, respectively.
The Company evaluates profitability of the P&C businesses primarily on the basis of underwriting gain (loss). Underwriting gain (loss) is a before tax measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of the Company's pricing. Underwriting profitability over time is also greatly influenced by the Company's 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 economies of scale and 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. A reconciliation of underwriting gain (loss) to net income for the Company's P&C businesses is set forth on page 9.
A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, earthquake, windstorm, explosion, terrorist attack and similar events. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance, and therefore their effects are not included in earnings or losses and loss adjustment expense reserves prior to occurrence. The Company believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings.
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 core earnings by revenues excluding buyouts and realized gains (losses). Net income margin (not presented herein) 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.
Return on Assets ("ROA"), core earnings, is a non-GAAP financial measure that the Company uses to evaluate the Mutual Funds and Talcott Resolution (Individual Annuity) segments' 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 these businesses because it reveals trends in our businesses that may be obscured by the effect of realized gains (losses). ROA, core earnings, should not be considered as a substitute for ROA and does not reflect the overall profitability of our businesses. Therefore, the Company believes it is important for investors to evaluate both ROA, core earnings, and ROA when reviewing the Company's performance.
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