2025 Proxy
Statement and
2024 Annual
Report
NOTICE OF 2025 ANNUAL MEETING
OF SHAREHOLDERS
Date and Time
Wednesday, May 21, 2025
12:30 p.m. EDT
Access*
www.virtualshareholdermeeting.com/HIG2025
Record Date
You may vote if you were a shareholder of record at the close of business on
March 24, 2025.
Voting Items
Shareholders will vote on the following items of business:
VOTING
By internet
www.proxyvote.com
By toll-free telephone
1-800-690-6903
By mail
Follow the instructions on
your proxy card
Board
Recommendation
Page
At the Annual Meeting
Follow the instructions on
the virtual meeting site
1. Elect a Board of Directors for the coming year;
FOR
11
2. Ratify the appointment of Deloitte & Touche LLP as our
independent registered public accounting firm for the
fiscal year ending December 31, 2025;
FOR
32
IMPORTANT INFORMATION IF YOU
PLAN TO ATTEND THE ANNUAL
MEETING:
You are entitled to participate (i.e., submit
questions and/or vote) in the Annual
Meeting if you were a shareholder of
record at the close of business on
March 24, 2025, the record date, or hold a
legal proxy for the meeting provided by
your bank, broker, or nominee.
To participate, you will need the 16-digit
control number provided on your proxy
card, voting instruction form or notice.
Shareholders may also vote or submit
questions in advance of the meeting at
www.proxyvote.com using their 16-digit
control number.
If you are not a shareholder or do not
have a control number, you may still
access the meeting as a guest, but you will
not be able to participate.
If you have difficulty accessing the Annual
Meeting, please call the number on the
registration page of the virtual meeting
site. Technicians will be available to assist
you.
3. Consider and approve, on a non-binding, advisory basis,
the compensation of our named executive officers as
disclosed in this proxy statement;
FOR
34
4. Consider and approve the Company’s 2025 Long Term
Incentive Stock Plan;
FOR
68
5. Vote on shareholder proposal that the Company adopt
special meeting rights for shareholders; and
AGAINST
71
6. Act upon any other business that may properly come
before the Annual Meeting or any adjournment
thereof.
The Hartford’s proxy materials are available via the internet at
http://ir.thehartford.com** and www.proxyvote.com, which allows us to reduce
printing and delivery costs and lessen adverse environmental impacts.
We hope that you will participate in the Annual Meeting, either by attending and
voting at the virtual meeting or by voting through other means. For instructions on
voting, please refer to page 76 under “How do I vote my shares?”
We urge you to review the proxy statement carefully and exercise your right to
vote.
Dated: April 10, 2025
By order of the Board of Directors
Terence Shields
Corporate Secretary
* In order to provide a convenient opportunity for shareholders to participate from wherever they are located, the Annual Meeting will be
held in a virtual meeting format via audio webcast only, and not at a physical location.
**References in this proxy statement to our website address are provided only as a convenience and do not constitute, and should not be
viewed as, an incorporation by reference of the information contained on, or available through, the website. Therefore, such information
should not be considered part of this proxy statement.
2025 Proxy Statement
1
LETTER FROM OUR
CHAIRMAN & CEO AND LEAD
DIRECTOR
Dear fellow shareholders:
For The Hartford, 2024 was another outstanding year of financial performance and achievement of our strategic objectives. As the
2025 Annual Meeting of Shareholders approaches, it is our privilege as Chairman and Lead Director to share details on the Board’s
2024 activities, including its oversight of strategy, innovation, and board composition and management succession planning.
Strategy
Throughout the year, the Board remained highly engaged in overseeing the Company's execution of its strategy to drive superior
peer-relative performance and maximize long-term value creation for you, our shareholders. In 2024 these strategies resulted in an
outstanding year with a net income ROE of 19.9% and a core earnings ROE of 16.7%*, driven by sustained momentum in Business
Insurance, which once again generated strong top-line growth at highly profitable margins, significant progress in Personal
Insurance toward restoring target profitability in auto, continued strong margins in Employee Benefits, and a higher investment
portfolio yield.
Innovation
Overseeing innovation is a core responsibility of the Board, and in 2024, the Board continued to focus on advancing the use of
technology, including leveraging artificial intelligence ("AI") to improve the business and gain a competitive advantage while
addressing the risks enabled by AI. Throughout the year, senior management provided “deep dive” presentations on growth and
innovation, technology, data and AI, with specific strategy sessions focusing on leveraging these tools for business outcomes.
Notable engagements also included visits and discussions with technology industry leaders to discuss these topics.
Board Composition and Management Succession Planning
Board composition and talent management remain critical areas of Board focus, as they have for the past several years, because the
Board firmly believes that people are key to The Hartford achieving outstanding results. Following the identification of candidates
who would best complement the skills and attributes of the existing directors and position the Board to oversee the company's
long-term strategy, the Board appointed two seasoned and highly successful leaders: Kathleen Winters, the former CFO of ADP,
and Annette Rippert, the former CEO of the Strategy and Consulting group at Accenture.
Additionally, the Board focused on management succession planning with increased emphasis on familiarity with, and talent
development of, leaders one to two levels below the CEO. Directors have also engaged with members of management for exposure,
development, and mentorship. We are proud to say these efforts continue to yield results, including naming Mo Tooker as the
Company’s President and the promotion of internal candidates to succeed the Company’s Heads of Personal Insurance and
Employee Benefits, General Counsel, and Chief Underwriting Officer. These key leadership appointments affirm the Company's
strategic succession planning and executive development and showcase its exceptional talent pipeline.
The Board consistently operates at an exceptional level, collaborating closely with management and ensuring the Company is well-
equipped to innovate, achieve profitable growth, and deliver sustained value to our shareholders. We appreciate your continued
support.
Sincerely,
Christopher J. Swift
Trevor Fetter
Chairman and Chief Executive Officer
Lead Director
* Denotes a non-GAAP financial measure. For definitions and reconciliations to the most directly comparable GAAP measure, see Appendix A.
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TABLE OF CONTENTS
PROXY SUMMARY
4
BOARD AND GOVERNANCE MATTERS
11
Item 1: Election of Directors
11
Governance Practices and Framework
11
Board Composition and Refreshment
14
Committees of the Board
16
The Board's Role and Responsibilities
19
Director Compensation
22
Certain Relationships and Related Party Transactions
24
Communicating with the Board
24
Director Nominees
25
AUDIT MATTERS
32
Item 2: Ratification of Independent Registered Public Accounting Firm
32
Fees of the Independent Registered Public Accounting Firm
32
Audit Committee Pre-Approval Policies and Procedures
33
Report of the Audit Committee
33
COMPENSATION MATTERS
34
Item 3: Advisory Vote to Approve Executive Compensation
34
Compensation Discussion and Analysis
35
Executive Summary
35
Components of the Compensation Program
40
Process for Determining Senior Executive Compensation (Including NEOs)
48
2024 Named Executive Officers' Compensation and Performance
48
Compensation Policies and Practices
50
Effect of Tax and Accounting Considerations on Compensation Design
51
Report of the Compensation and Management Development Committee
52
Executive Compensation Tables
53
CEO Pay Ratio
64
Pay Versus Performance
64
Item 4: Consideration and Approval of the 2025 Long Term Incentive Stock Plan
68
SHAREHOLDER PROPOSALS
71
Item 5: Vote on Shareholder Proposal that the Company Adopt Special Meeting Rights for Shareholders
71
INFORMATION ON STOCK OWNERSHIP
73
Directors and Executive Officers
73
Certain Shareholders
74
INFORMATION ABOUT THE HARTFORD’S ANNUAL MEETING OF SHAREHOLDERS
75
Householding of Proxy Materials
75
Frequently Asked Questions
75
Other Information
79
APPENDIX A: RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
80
APPENDIX B: Summary of the 2025 Long Term Incentive Stock Plan
85
APPENDIX C: 2025 Long Term Incentive Stock Plan
91
Certain statements made in this proxy statement should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These include
statements about The Hartford’s future results of operations. We caution 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, including those discussed in The Hartford's news
release issued on January 30, 2025, our 2024 Annual Report on Form 10-K, subsequent Quarterly Reports on Forms 10-Q, and the other filings we make with the U.S. Securities and
Exchange Commission. We assume no obligation to update this document, which speaks as of the date of filing.
2025 Proxy Statement
3
PROXY SUMMARY
This summary highlights information contained elsewhere in this proxy statement. It does not contain all the information you should
consider and you should read the entire proxy statement carefully before voting.
BOARD AND GOVERNANCE HIGHLIGHTS
ITEM 1
ELECTION OF DIRECTORS
Each director nominee has an established record of accomplishment in areas relevant to overseeing our businesses and possesses
qualifications and characteristics that are essential to a well-functioning and deliberative governing body.
✓
The Board recommends a vote "FOR" each director nominee
Director Nominee, Current Age
and Present or Most Recent Experience
Independent
Director
since
Current
Committees(1) Other Current
Public Company Boards
Larry D. De Shon, 65
Former President, CEO and COO,
Avis Budget Group
✓
2020
• Audit
• FIRMCo*
• NCG
• United Rentals, Inc.
• Air New Zealand
Carlos Dominguez, 66
Former Vice Chairman and Lead Evangelist,
Sprinklr
✓
2018
• Comp
• FIRMCo
• NCG
None
Trevor Fetter,(2) 65
Senior Lecturer,
Harvard Business School
✓
2007
• Comp
• FIRMCo
None
Donna James, 67
President and CEO,
Lardon & Associates
✓
2021
• Audit*
• FIRMCo
• NCG
• Victoria's Secret
• American Electric
Power**
Annette Rippert, 59
Former CEO, Strategy and Consulting,
Accenture plc
✓
2025
• FIRMCo
• Open Text
Corporation
Teresa W. Roseborough, 66
Executive Vice President, General Counsel and
Corporate Secretary, The Home Depot
✓
2015
• Comp
• FIRMCo
• NCG*
None
Virginia P. Ruesterholz, 63
Former Executive Vice President,
Verizon Communications
✓
2013
• Comp
• FIRMCo
• NCG
None
Christopher J. Swift, 64
Chairman and CEO,
The Hartford
2014
• FIRMCo
• Citizens Financial
Group
Matthew E. Winter, 68
Former President,
The Allstate Corporation
✓
2020
• Comp*
• FIRMCo
• ADT
• H&R Block
Kathleen Winters, 57
Former CFO,
Automatic Data Processing
✓
2024
• Audit
• FIRMCo
• Global Business
Travel Group
• Definitive Healthcare
* Denotes committee chair.
** Ms. James will not stand for reelection at American Electric Power's 2025 Annual Meeting of Shareholders on April 29, 2025.
(1)
Full committee names are as follows: Audit – Audit Committee; Comp – Compensation and Management Development Committee; FIRMCo –
Finance, Investment and Risk Management Committee; NCG – Nominating and Corporate Governance Committee.
(2)
Mr. Fetter serves as the Lead Director. For more details on the Lead Director’s role, see page 12 .
4
www.thehartford.com
GOVERNANCE BEST PRACTICES
The Board and management regularly review best practices in corporate governance and modify our governance policies and
practices as warranted. Our current best practices are highlighted below.
Independent
Oversight
✓All directors are independent, other than the CEO
✓Independent key committees (Audit, Compensation, Nominating)
✓Empowered and engaged independent Lead Director
Engaged
Board /
Shareholder
Rights
✓All directors elected annually
✓Majority vote standard (with plurality carve-out for contested elections)
✓Proxy access right with market terms
✓Director resignation policy
✓Over-boarding policy limits total public company boards, including The Hartford, to four for non-CEOs
and two for sitting CEOs
✓Rigorous Board and committee self-evaluation conducted annually; third-party Board and individual
director evaluations conducted triennially
✓Meaningful Board education and training on recent and emerging governance and industry trends
✓Annual shareholder engagement program focused on governance, compensation and sustainability
issues
✓Shareholder right to call special meeting
Other
Governance
Practices
✓Board diversity of experience, tenure, age, gender, race and ethnicity
✓Mandatory retirement age of 75
✓Policies to identify director candidates encompassing the right mix of experience, qualifications, skills
and backgrounds
✓Annual review of CEO succession plan by the independent directors with the CEO
✓Annual Board review of long-term and emergency succession plans for senior management and the
CEO
✓Stock-ownership requirements of 6x salary for CEO and 4x salary for other named executive officers
✓Annual Nominating Committee review of The Hartford's political and lobbying policies and
expenditures
AUDIT HIGHLIGHTS
ITEM 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Board is asking shareholders to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting
firm for 2025.
✓
The Board recommends a vote "FOR" this item
PROXY SUMMARY
2025 Proxy Statement
5
COMPENSATION HIGHLIGHTS
ITEM 3
ADVISORY VOTE TO APPROVE EXECUTIVE
COMPENSATION
The Board is asking shareholders to approve, on an advisory basis, the compensation of our named executive officers as disclosed
in this proxy statement. Our executive compensation program is designed to promote long-term shareholder value creation and
support our strategy by: (1) encouraging profitable organic growth and ROE performance while maintaining an ethical culture, (2)
providing market-competitive compensation opportunities designed to attract and retain talent needed for long-term success,
and (3) appropriately aligning pay with short- and long-term performance.
✓
The Board recommends a vote "FOR" this item
The Hartford’s mission is to provide people with the support and protection they need to pursue their unique ambitions, seize
opportunity, and prevail through unexpected challenges. Our strategy to maximize value creation for all stakeholders remains
consistent and focuses on:
•
Advancing leading underwriting capabilities across our portfolio;
•
Investing in end-to-end transformation, responsibly leveraging data, analytics, digital and artificial intelligence capabilities
to drive better, faster decisions and enhance customer experiences;
•
Maximizing distribution channels and product breadth to increase market share;
•
Optimizing organizational efficiency with a focus on continuous improvement; and
•
Continuing to advance the Company's sustainability leadership to drive value creation while impacting society at large.
We endeavor to maintain and enhance our position as a market leader by leveraging our core strengths of underwriting excellence,
risk management, claims, product development and distribution.
An ethical, people, and performance-driven culture drives our values. We are committed to maintaining and enhancing our culture
and are proud of our reputation for ethics and integrity.
PURPOSE AND STRATEGIC PRIORITIES
PROXY SUMMARY
6
www.thehartford.com
2024 FINANCIAL RESULTS
Our 2024 financial results were excellent, primarily due to a higher P&C underwriting gain, driven by earned premium growth
across all lines of business as well as 9.1 points of improvement in the Personal Insurance loss and loss adjustment expense ratio,
higher net investment income, lower net realized losses, and improvement in the group life loss ratio, partially offset by a higher
expense ratio and higher loss ratios on group disability and supplemental health products. Full year net income available to common
stockholders and core earnings* were $3.1 billion ($10.35 per diluted share) and $3.1 billion ($10.30 per diluted share),
respectively. Net income and core earnings return on equity ("ROE")*† were 19.9% and 16.7%, respectively.
Highlighted below are year-over-year comparisons of our net income available to common stockholders and core earnings
performance and our three-year net income ROE and core earnings ROE results. Core earnings is the primary determinant of our
annual incentive plan ("AIP") funding, as described on page 40, and average annual core earnings ROE over a three-year
performance period is the metric used for two-thirds of performance shares granted to Senior Executives, as described on page 42
(in each case, as adjusted for compensation purposes).
$ (Millions)
Net Income
Available to
Common
Stockholders
$2,483
$3,090
2023
2024
$ (Millions)
Core Earnings*
$2,767
$3,076
2023
2024
Net Income ROE†
11.7%
17.5%
19.9%
2022
2023
2024
Core Earnings ROE*
14.5%
15.8%
16.7%
2022
2023
2024
* Denotes a non-GAAP financial measure. For definitions and reconciliations to the most directly comparable GAAP measure, see Appendix A.
† Net income ROE represents net income available to common stockholders ROE.
TOTAL SHAREHOLDER RETURN
The following chart shows The Hartford's total shareholder return ("TSR") relative to the 2024 Corporate Peer Group (provided on
page 49), S&P 500 Insurance Composite, S&P P&C index and S&P 500.
37%
69%
27%
57%
26%
53%
34%
78%
26%
29%
The Hartford (HIG)
2024 Corporate Peer Group
S&P 500 Insurance Composite
S&P 500 Property and Casualty
S&P 500
ONE-YEAR (2024)
THREE-YEAR (2022-2024)
Includes reinvestment of dividends.
COMPONENTS OF COMPENSATION AND PAY MIX
NEO compensation is heavily weighted toward variable compensation (including both annual and long-term incentives), where
actual amounts earned may differ from target amounts based on company and individual performance. Each NEO has a target total
compensation opportunity that is reviewed annually by the Compensation Committee (in the case of the CEO, by the independent
directors) to ensure alignment with our compensation objectives and market practice.
PROXY SUMMARY
2025 Proxy Statement
7
Compensation Component
Description
Base Salary
• Fixed level of cash compensation based on market data, internal pay equity, experience,
responsibility, expertise and performance
Annual Incentive Plan
• Variable cash award based primarily on annual company operating performance against a
predetermined financial target and achievement of individual performance goals aligned with
the company's strategic priorities
Long-Term Incentive Plan
• Variable awards granted based on individual performance and market data.
• Designed to drive long-term performance, align senior executive interests with shareholders,
and foster retention.
• Award mix (75% performance shares and 25% stock options) rewards stock price performance,
peer-relative shareholder returns (stock price and dividends) and operating performance.
Approximately 93% of CEO target annual compensation and approximately 80% of other NEO target annual compensation are
variable based on performance, including stock price performance:
Target Pay Mix — CEO
Salary
7%
Annual Incentive
20%
Long-Term Incentive
73%
Variable with Performance: 93%
Target Pay Mix — Other NEOs
Salary
20%
Annual Incentive
31%
Long-Term Incentive
49%
Variable with Performance: 80%
2024 COMPENSATION DECISIONS
2024 Compensation Decisions
Rationale
The Compensation Committee
updated the award mix for
2024 long-term incentive
awards.
For 2024 LTI awards, the Compensation Committee updated the LTI award mix from 50%
performance shares and 50% options to 75% performance shares and 25% options. In addition,
the weighting of performance metrics within performance shares was changed from 50%
Compensation Core ROE and 50% TSR to two-thirds Compensation Core ROE and one-third
TSR.
The Compensation Committee
approved an AIP funding level
of 143% of target.
Performance against the pre-established Compensation Core Earnings target produced a
formulaic AIP funding level of 143% of target (page 41). The Compensation Committee
undertook its qualitative review of performance and concluded that the formulaic AIP funding
level appropriately reflected 2024 performance. Accordingly, no adjustments were made.
The Compensation Committee
certified a 2022-2024
performance share award
payout at 180% of target.
The Company's average annual Compensation Core ROE during the performance period was
16.3%, resulting in a payout of 200% of target for the ROE component (50% of the award). The
company's TSR during the period was at the 73rd percentile of the performance peers,
resulting in a 160% payout for the TSR component (50% of the award). The combined
performance metrics yielded a payout of 180% of target (page 43).
The Compensation Committee (and, in the case of the CEO, the independent directors) approved the following compensation for
each NEO:
PROXY SUMMARY
8
www.thehartford.com
Base Salary
AIP Award
LTI Award
Total Compensation
NEO
2024
Change
from 2023
2024
Change
from 2023
2024
Change
from 2023
2024
Change
from 2023
Christopher Swift $ 1,200,000
0.0 % $ 4,719,000
22.2 % $ 12,000,000
14.3 % $ 17,919,000
15.2 %
Beth Costello
$ 800,000
3.2 % $ 1,930,500
22.2 % $ 2,600,000
7.2 % $ 5,330,500
11.5 %
A. Morris Tooker
$ 750,000
NA* $ 1,569,400
NA* $ 1,700,000
NA* $ 4,019,400
NA*
Deepa Soni
$ 750,000
7.1 % $ 1,561,100
66.8 % $ 1,600,000
14.3 % $ 3,911,100
28.8 %
Amy Stepnowski
$ 600,000
0.0 % $ 1,573,000
22.2 % $ 1,400,000
27.3 % $ 3,573,000
19.6 %
*Mr. Tooker was not previously an NEO.
This table provides a concise picture of compensation decisions made in 2024, and highlights changes from 2023. Another view of
2024 compensation for the NEOs is available in the Summary Compensation Table on page 53.
COMPENSATION BEST PRACTICES
Our current compensation best practices include the following:
WHAT WE DO
✓
Compensation heavily weighted toward variable pay
✓
Senior Executives generally receive the same benefits as other full-time employees
✓
Double-trigger requirement for cash severance and equity vesting upon a change of control*
✓
Cash severance upon a change of control not to exceed 2x base salary + bonus
✓
Independent compensation consultant
✓
Risk mitigation in plan design and annual review of compensation plans, policies and practices
✓
Comprehensive claw-back policy (includes misconduct) that covers both time and performance based incentive awards
✓
Prohibition on hedging, monetization, derivative and similar transactions with company securities
✓
Prohibition on Senior Executives pledging company securities
✓
Stock ownership guidelines for Directors and requirements for Senior Executives
✓
Periodic review of compensation peer groups
✓
Competitive burn rate and dilution for equity program
* Double-trigger vesting for equity awards applies if the awards are assumed or replaced with substantially equivalent awards.
WHAT WE DON'T DO
û
No Senior Executive tax gross-ups for perquisites or excise taxes on severance payments
û
No individual employment agreements
û
No granting of stock options with an exercise price less than the fair market value of our common stock on the date of grant
û
No re-pricing of stock options
û
No buy-outs of underwater stock options
û
No reload provisions in any stock option grant
û
No payment of dividends or dividend equivalents on equity awards until vesting (no dividends on stock options)
SAY-ON-PAY RESULTS
At our 2024 annual meeting, we received approximately 91% support on Say-on-Pay. The Compensation Committee considered
the vote to be an endorsement of The Hartford’s executive compensation programs and policies, and recent program changes. They
took this strong level of support into account in their ongoing review of those programs and policies. Management also discussed
the vote, along with aspects of its executive compensation, sustainability and corporate governance practices, during our annual
shareholder engagement program to gain a deeper understanding of shareholders’ perspectives. Feedback regarding the
compensation program remained generally positive, with many shareholders complimentary of our practices. For further discussion
of our shareholder engagement program, see page 19.
PROXY SUMMARY
2025 Proxy Statement
9
ITEM 4
CONSIDERATION AND APPROVAL OF 2025 LONG
TERM INCENTIVE STOCK PLAN
We are asking stockholders to approve the 2025 Long Term Incentive Stock Plan (the “Plan”), which is intended to replace the
2020 Stock Incentive Plan (the “2020 Plan”). The Plan authorizes the issuance of up to 8.5 million shares, which includes the
remaining shares under the 2020 Plan, and makes certain other minor changes. On the recommendation of the Compensation and
Management Development Committee (the “Compensation Committee” as referenced throughout this Item 4), the Board
approved the Plan and recommends approval by stockholders. The Plan is an important part of the pay-for-performance
compensation program and the authorized number of shares available for grant permits the Company to continue the program.
The Board considers equity compensation that is aligned with the interests of the Company’s shareholders as a significant
component in achieving its goal of attracting, retaining and developing talent needed for long-term success. A detailed summary of
the Plan is attached to this proxy statement as Appendix B, which is qualified in its entirety by reference to the text of the Plan,
which is attached to this proxy statement as Appendix C.
✓
The Board recommends that shareholders vote “FOR” the approval of the 2025 Long Term Incentive Stock Plan.
ITEM 5
SHAREHOLDER PROPOSAL ON THE RIGHT TO CALL A
SPECIAL MEETING
Vote on the shareholder proposal that The Hartford's Board of Directors amend the appropriate company governing documents
to give the owners of a combined 10% of our outstanding common stock the power to call a special shareholder meeting or the
owners of the lowest percentage of shareholders, as governed by state law, the power to call a special shareholder meeting.
×
The Board of Directors recommends that shareholders vote "AGAINST" this Proposal for the following reasons:
•
The Hartford already provides a special meeting right at a threshold that better protects the long-term
interests of the Company and its shareholders.
•
The Hartford’s existing special meeting right is more consistent with market practice and shareholder
feedback.
•
The Hartford is committed to strong corporate governance practices and provides shareholders with other
channels to raise concerns outside the annual meeting cycle.
PROXY SUMMARY
10
www.thehartford.com
BOARD AND GOVERNANCE MATTERS
ITEM 1
ELECTION OF DIRECTORS
The full Board, including its Nominating and Corporate Governance Committee, believes the director nominees possess
qualifications, skills and experience that are consistent with the standards for the selection of nominees for election to the Board
set forth in our Corporate Governance Guidelines described beginning on page 14 and have demonstrated the ability to
effectively oversee The Hartford’s corporate, investment and business operations. Biographical information for each director
nominee is described beginning on page 25, including the principal occupation and other public company directorships (if any) held
in the past five years and a description of the specific experience and expertise that qualifies each nominee to serve as a director
of The Hartford.
✓
The Board recommends a vote "FOR" each director nominee
GOVERNANCE PRACTICES AND FRAMEWORK
At The Hartford, we aspire to be the most trusted insurer, emboldening customers' success and enabling resiliency in an ever-
changing world. We believe strong governance practices and responsible corporate behavior are central to this vision and
contribute to our long-term performance. Accordingly, the Board and management regularly consider best practices in corporate
governance and shareholder feedback and modify our governance policies and practices as warranted. Our current best practices
include:
Independent
Oversight
✓All directors are independent, other than the CEO
✓Independent key committees (Audit, Compensation, Nominating)
✓Empowered and engaged independent Lead Director
Engaged
Board /
Shareholder
Rights
✓All directors elected annually
✓Majority vote standard (with plurality carve-out for contested elections)
✓Proxy access right with market terms
✓Director resignation policy
✓Over-boarding policy limits total public company boards, including The Hartford, to four for non-CEOs and
two for sitting CEOs
✓Rigorous Board and committee self-evaluation conducted annually; third-party Board and individual
director evaluations conducted triennially
✓Meaningful Board education and training on recent and emerging governance and industry trends
✓Annual shareholder engagement program focused on governance, compensation and sustainability issues
✓Shareholder right to call special meeting
Other
Governance
Practices
✓Board diversity of experience, tenure, age, gender, race and ethnicity
✓Mandatory retirement age of 75
✓Policies to identify director candidates encompassing the right mix of experience, qualifications, skills and
backgrounds
✓Annual review of CEO succession plan by the independent directors with the CEO
✓Annual Board review of long-term and emergency succession plans for senior management and the CEO
✓Stock-ownership requirements of 6x salary for CEO and 4x salary for other named executive officers
✓Annual Nominating Committee review of The Hartford's political and lobbying policies and expenditures
The fundamental responsibility of our directors is to exercise their business judgment to act in what they reasonably believe to be
the best interests of The Hartford and its shareholders. The Board fulfills this responsibility within the general governance
framework provided by the following documents:
•
Articles of Incorporation
•
By-laws
2023 Proxy Statement
11
•
Corporate Governance Guidelines (compliant with the listing standards of the New York Stock Exchange ("NYSE") and
including guidelines for determining director independence and qualifications)
•
Charters of the Board’s four standing committees (the Audit Committee; the Compensation and Management
Development Committee ("Compensation Committee"); the Finance, Investment and Risk Management Committee
("FIRMCo"); and the Nominating and Corporate Governance Committee ("Nominating Committee"))
•
Code of Ethics and Business Conduct
•
Code of Ethics and Business Conduct for Members of the Board of Directors
Copies of these documents are available on our investor relations website at http://ir.thehartford.com or upon request sent to our
Corporate Secretary (see page 78 for details).
DIRECTOR INDEPENDENCE
The Board annually reviews director independence under applicable law, the listing standards of the NYSE and our Corporate
Governance Guidelines. In addition, per our Corporate Governance Guidelines, in order to identify potential conflicts of interest
and to monitor and preserve independence, any director who wishes to become a director of another for-profit entity must obtain
the pre-approval of the Nominating Committee. The Board has affirmatively determined that all directors other than Mr. Swift are
independent.
BOARD LEADERSHIP STRUCTURE
Board Chair
Independent Lead Director
The roles of CEO and Chairman of the Board (“Chairman”) are
held by Christopher Swift. Mr. Swift has served as CEO since
July 1, 2014, and was appointed Chairman on January 5, 2015.
In late 2014, before Mr. Swift assumed the role of Chairman,
the Board deliberated extensively on our board leadership
structure, seeking feedback from shareholders and considering
corporate governance analysis. The Board concluded then, and
continues to believe, that our historical approach of combining
the roles of CEO and Chairman while maintaining strong,
independent board leadership is the optimal leadership
structure for the Board to carry out its oversight of our
strategy, business operations and risk management.
The Board believes other elements of our corporate
governance structure ensure independent directors can
perform their role as fiduciaries in the Board’s oversight of
management and our business, and minimize any potential
conflicts that may result from combining the roles of CEO and
Chairman. For example:
• All directors other than Mr. Swift are independent;
• An empowered and engaged Lead Director provides
independent Board leadership and oversight; and
• At each regularly scheduled Board meeting, the non-
management directors meet in executive session without
the CEO and Chairman present (six such meetings in
2024).
As part of its evaluation process, the Board reviews its
leadership structure annually to ensure it continues to serve
the best interests of shareholders and positions the Company
for future success.
Whenever the CEO and Chairman roles are combined, our
Corporate Governance Guidelines require the independent
directors to elect an independent Lead Director. Trevor Fetter
was elected our Lead Director in May 2017. The responsibilities
and authority of the Lead Director include the following:
• Presiding at all meetings of the Board at which the
Chairman is not present, including executive sessions of the
independent directors;
• Serving as a liaison between the CEO and Chairman and the
non-management directors;
• Regularly conferring with the Chairman on matters of
importance that may require action or oversight by the
Board, ensuring the Board focuses on key issues and tasks
facing The Hartford;
• Approving information sent to the Board and meeting
agendas for the Board;
• Approving the Board meeting schedules to help ensure that
there is sufficient time for discussion of all agenda items;
• Maintaining the authority to call meetings of the
independent non-management directors;
• Approving meeting agendas and information for the
independent non-management sessions and briefing, as
appropriate, the Chairman on any issues arising out of these
sessions;
• If requested by shareholders, ensuring that they are
available, when appropriate, for consultation and direct
communication; and
• Leading the Board’s evaluation process and discussion on
board refreshment and director tenure, as well as setting
and reviewing board goals.
The Board believes that these duties and responsibilities provide
for strong independent Board leadership and oversight.
ANNUAL BOARD EVALUATION PROCESS
The Nominating Committee oversees the Board's multi-step evaluation process to ensure an ongoing, rigorous assessment of the
Board’s effectiveness, composition and priorities and to inform the Board's succession planning. In addition to the full Board
evaluation process, the standing committees of the Board undertake separate self-assessments on an annual basis.
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As part of a multi-year effort to enhance the evaluation process, the Board has adopted the following changes:
•
2016 - Adopted individual director interviews led by the Lead Director and a mid-year review of progress against formal
Board goals;
•
2018 - Adopted third-party facilitated evaluations every three years, commencing in 2019, to promote more candid
conversations, provide a neutral perspective, and help the Board benchmark its corporate governance practices; and
•
2020 - Adopted individual director evaluations every three years, commencing in 2022, as part of the third-party
facilitated Board evaluation.
In each case, the Board sought and considered shareholder feedback on the merits of these changes prior to adoption.
Board Evaluation and
Development of Goals
(May)
The Lead Director, or third-party evaluator, leads a Board evaluation discussion in an executive
session guided by the Board’s self-assessment questionnaire and key themes identified through one-
on-one discussions. The Board identifies successes and areas for improvement from the prior Board
year and establishes formal goals for the year ahead.
Annual Corporate
Governance Review /
Shareholder Engagement
Program
(October to December)
The Nominating Committee performs an annual review of The Hartford's corporate governance
policies and practices in light of best practices, recent developments and trends. In addition, the
Nominating Committee reviews feedback on governance issues provided by shareholders during our
annual shareholder engagement program.
Interim Review of Goals
(December)
The Lead Director leads the Board's interim review of progress made against the goals established in
May.
Board Self-Assessment
Questionnaires
(February)
The governance review and shareholder feedback inform the development of written questionnaires
that the Board and its standing committees use to help guide self-assessment. The Board’s
questionnaire covers a wide range of topics, including the Board’s:
• Fulfillment of its responsibilities under the Corporate Governance Guidelines;
• Effectiveness in overseeing our business plan, strategy and risk management;
• Leadership structure and composition;
• Relationship with management; and
• Processes to support the Board’s oversight function.
One-on-One Discussions
(February to May)
The Lead Director, or third-party evaluator, meets individually with each independent director on
Board effectiveness, dynamics and areas for improvement. Beginning in 2022, third-party led
discussions also include directors' evaluations of their peers.
When the Lead Director led the Board evaluation session in May 2024, there was consensus that the Board is effectively overseeing
the Company’s strategy and risk management. In addition, the Board reviewed the progress made during the board year, including
“deep dive” reviews of each of the focus areas identified in its 2023-2024 goals. The Board also noted improvements to certain
Board practices arising from prior evaluations, including the development of a standing strategic IT investment summary, an
invitation for all directors to participate in the Audit Committee’s annual update on cybersecurity programs, increased director site
visits and employee engagement, and enhancements to the materials prepared for each board meeting. There was also consensus
around goals for the 2024-2025 Board year, which addressed specific priorities in areas of continuing focus, including peer-relative
performance, innovation and technology, human capital management and Board structure and composition.
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13
BOARD COMPOSITION AND REFRESHMENT
DIRECTOR SUCCESSION PLANNING
The Nominating Committee is responsible for identifying and recommending to the Board candidates for Board membership.
Throughout the year, the Nominating Committee considers the Board’s composition, skills and attributes to determine whether
they are aligned with our long-term strategy and major risks, and each year devotes a session to board succession planning over a
longer-term (generally three-year) period. The succession planning process is informed by the results of the Board and committee
evaluation processes, as well as anticipated needs in light of The Hartford’s retirement policy (described below). To assist the
Nominating Committee in identifying prospective Board nominees when undertaking a search, the Company retains an outside
search firm. The Nominating Committee also considers candidates suggested by Board members, management and shareholders.
The Nominating Committee evaluates candidates against the standards and qualifications set forth in our Corporate Governance
Guidelines as well as other relevant factors.
The graphic below illustrates our typical succession planning process, which begins with an assessment of the Board's current skills
and attributes, and then identifies skills or attributes that are needed, or may be needed in the future, in light of the Company's
strategy.
Overview of Director Search Process
Development of Candidate
Specification
Screening of Candidates
Meeting With Candidates
Decision and Nomination
•
Develop skills matrix to
identify desired skills
and attributes
•
Target areas of
expertise aligned with
our strategy
•
Select outside search
firms to lead process
and/or consider
internal or shareholder
recommendations
•
Screen candidates for
each specification
identified
•
Top candidates are
interviewed by
Nominating
Committee members,
other directors, and
management
•
Finalist candidates
undergo background
and conflicts checks
•
Nominating Committee
recommendation of
candidates and
committee assignments
to full Board
•
Board consideration
and adoption of
recommendation
DIRECTOR ONBOARDING AND ENGAGEMENT
All directors are expected to invest the time and energy required to gain an in-depth understanding of our business and strategy.
Our director onboarding program is designed to reduce the learning curve for new members and enable them to provide meaningful
contributions to the oversight of the Company as early in their tenures as possible. It consists of two phases. Phase one is designed
to provide a solid foundation on our businesses, financial performance, strategy, risk and governance. New directors devote
numerous briefing sessions with senior management to review key functional areas of the Company and their committee
assignment responsibilities. Phase two is an opportunity for new directors to continue learning about the business at their
discretion after they have been on the Board for six to twelve months. Directors are afforded time to familiarize themselves with
the Company so they can identify areas for additional education and development. In addition, we have formalized our board
mentorship program to help integrate members with experienced directors. New directors are also encouraged to attend all
committee meetings during their first year to help accelerate their understanding of the Company and the Board.
Our Board members also participate in Company activities and engage directly with our employees at a variety of events
throughout the year, including participation in senior leadership team meetings, employee town halls and employee resource group
meetings.
BOARD COMPOSITION AND DIRECTOR TENURE
The Nominating Committee strives for a Board that includes a mix of varying perspectives and breadth of experience. Newer
directors bring fresh ideas and perspectives, while longer tenured directors bring extensive knowledge of our complex operations.
As part of its annual evaluation process, the Board assesses its overall composition, including director tenure, and does not believe
the independence of any director nominee is compromised solely due to Board tenure. The Board believes that its rigorous self-
evaluation process (described above), combined with its mandatory retirement policy at age 75, are effective in promoting Board
renewal, as demonstrated by the addition of ten new directors since 2015.
The chart below reflects the tenure range and average tenure of the director nominees standing for election.
BOARD AND GOVERNANCE MATTERS
14
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7.4 Years Average Tenure*
3
4
3
0-5 years
5-10 years
>10 years
* As of April 10, 2025.
The Board believes a diverse membership with varying perspectives and breadth of experience is an important attribute of a well-
functioning board and contributes to driving positive outcomes. The Nominating Committee considers diversity in the context of
the Board as a whole and takes into account the range of perspectives the directors bring to their Board work. As part of its
consideration of prospective nominees, the Board and the Nominating Committee monitor whether the directors as a group meet
The Hartford’s criteria for the composition of the Board. In addition the Board's Corporate Governance Guidelines require that
diverse candidates are included in the pool from which board candidates are selected. The director nominees standing for election
at the date of the Annual Meeting of Shareholders are composed of 50% women and 30% people of color.
SHAREHOLDER PROPOSED NOMINEES
The Nominating Committee will consider director candidates recommended by shareholders using the same criteria described
above. Shareholders may also directly nominate someone for election at an annual meeting. Nominations for director candidates
are closed for 2025. To nominate a candidate at our 2026 Annual Meeting, notice must be received by our Corporate Secretary at
the address below by February 20, 2026 and must include the information specified in our By-laws, including, but not limited to, the
name of the candidate, together with a brief biography, an indication of the candidate’s willingness to serve if elected, and evidence
of the nominating shareholder’s ownership of our Common Stock.
Pursuant to our proxy access By-law, a shareholder, or group of up to 20 shareholders, may nominate a director and have the
nominee included in our proxy statement. The shareholder, or group collectively, must have held at least 3% of our Common Stock
for three years in order to make a nomination, and may nominate as many as two directors, or a number of directors equal to 20% of
the Board, whichever is greater, provided that the shareholder(s) and the nominee(s) satisfy the requirements in our By-laws.
Notice of proxy access director nominees for inclusion in our 2026 proxy statement must be received by our Corporate Secretary at
the address below no earlier than November 11, 2025 and no later than December 11, 2025.
In each case, submissions must be delivered or mailed to Terence Shields, Corporate Secretary, The Hartford Insurance Group, Inc.,
One Hartford Plaza, Hartford, CT 06155.
BOARD AND GOVERNANCE MATTERS
2025 Proxy Statement
15
COMMITTEES OF THE BOARD
The Board has four standing committees: the Audit Committee; the Compensation Committee; FIRMCo; and the Nominating
Committee. The Board has determined that all of the members of the Audit Committee, the Compensation Committee and the
Nominating Committee qualify as “independent” under applicable law, the listing standards of the NYSE and our Corporate
Governance Guidelines. The current members of the Board, the committees on which they serve and the primary functions of each
committee are identified below.
AUDIT COMMITTEE
CURRENT MEMBERS:*
L. De Shon
D. James (Chair)
K. Winters
MEETINGS IN 2024: 9
“During 2024, the Audit Committee maintained a heightened focus on technology risks, particularly cyber
threats and advances in artificial intelligence. The Committee also dedicated significant attention to
reviewing in-depth assessments of the overall risk and control environments across various lines of business
and functional areas, including a strong emphasis on the IT control environment. Additionally, the
Committee spent time evaluating management’s loss reserve estimates and addressing new disclosure
requirements.”
Donna James, Committee Chair since 2024
ROLES AND RESPONSIBILITIES
• Oversees the integrity of the company's financial statements.
• Oversees accounting, financial reporting and disclosure processes and the adequacy of
management’s systems of internal control over financial reporting.
• Oversees the company's relationship with, and performance of, the independent registered
public accounting firm, including its qualifications and independence.
• Considers appropriateness of rotation of independent registered public accounting firm.
• Oversees the qualifications, independence and performance of the internal audit function.
• Oversees operational risk, business resiliency and cybersecurity.
• Oversees the company's compliance with legal and regulatory requirements and our Code of
Ethics and Business Conduct.
• Discusses with management policies with respect to risk assessment and risk management.
* The Board has determined
that all members are
“financially literate” within
the meaning of the listing
standards of the NYSE and
“audit committee financial
experts” within the meaning
of the SEC’s regulations.
BOARD AND GOVERNANCE MATTERS
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COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
CURRENT MEMBERS:
C. Dominguez
T. Fetter
T. Roseborough
V. Ruesterholz
M. Winter (Chair)
MEETINGS IN 2024: 6
“In 2024, the Compensation and Management Development Committee focused on the execution of key
leadership appointments including the appointment of Mo Tooker as the Company’s President, as well as
appointments resulting from the retirements of the Company’s General Counsel, Heads of Personal Insurance
and Employee Benefits and Chief Underwriting Officer, affirming the Company's strategic succession planning
and executive development and showcasing its exceptional talent pipeline. The Committee also oversaw the
restructuring of the Claims function to report directly to the CEO, with Operations merging into IT.
Additionally, executive stock ownership requirements were revised based on shareholder engagement
feedback, enhancing transparency and mandating ownership levels.”
Matthew Winter, Committee Chair since 2021
ROLES AND RESPONSIBILITIES
• Oversees executive compensation and assists in defining an executive total compensation
policy.
• Works with management to develop a clear relationship between pay levels, performance and
returns to shareholders, and to align compensation structure with objectives.
• Has the authority to delegate, and has delegated to the Executive Vice President, Human
Resources, or her designee, the authority to carry out administrative responsibilities under
incentive compensation plans.
• Has sole authority to retain, compensate and terminate any consulting firm used to evaluate
and advise on executive compensation matters.
• Considers independence standards required by the NYSE or applicable law prior to retaining
compensation consultants, accountants, legal counsel or other advisors.
• Reviews initiatives and progress in the area of human capital management and of the
company’s process and analysis for assessing pay equity.
• Reviews succession and continuity plans for the CEO and each member of the executive
leadership team that reports to the CEO.
• Meets annually with a senior risk officer to discuss and evaluate whether incentive
compensation arrangements create material risks to the Company.
• Responsible for compensation actions and decisions with respect to certain senior executives,
as described in the Compensation Discussion and Analysis beginning on page 35.
FINANCE, INVESTMENT AND RISK MANAGEMENT COMMITTEE
CURRENT MEMBERS:
L. De Shon (Chair)
C. Dominguez
T. Fetter
D. James
A. Rippert
T. Roseborough
V. Ruesterholz
C. Swift
M. Winter
K. Winters
MEETINGS IN 2024: 5
“In 2024, FIRMCo regularly reviewed the macroeconomic outlook and its implications for the Company’s
investment portfolio, including private credit and commercial real estate, and insurance underwriting
performance; emerging risks related to cyber insurance and the evolving external cyber threat environment;
and insurance underwriting practices, including investments across technology, data and AI.”
Larry De Shon, Committee Chair since 2023
ROLES AND RESPONSIBILITIES
• Reviews and recommends changes to enterprise policies governing management activities
relating to major risk exposures such as market risk; liquidity and capital requirements;
insurance risks, including acts of terrorism and changing climate or weather patterns; and any
other risk that poses a material threat to the strategic viability of the company.
• Reviews the company's overall risk appetite framework, which includes an enterprise risk
appetite statement, risk preferences, risk tolerances, and an associated limit structure for each
of the company's major risks.
• Reviews and recommends changes to financial, investment and risk management guidelines.
• Provides a forum for discussion among management and the entire Board of key financial,
investment, and risk management matters.
BOARD AND GOVERNANCE MATTERS
2025 Proxy Statement
17
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Current Members:
L. De Shon
C. Dominguez
D. James
T. Roseborough (Chair)
V. Ruesterholz
MEETINGS IN 2024: 5
“In 2024, the Nominating and Corporate Governance Committee continued its focus on board composition
and effectiveness. As a result of the Committee’s identification of candidates that would best complement
the skills and attributes of the existing directors and position the Board to oversee the company's long-term
strategy, the Board appointed two seasoned and highly successful leaders: Kathleen Winters, the former
CFO of ADP, and Annette Rippert, the former CEO of the Strategy and Consulting group at Accenture. The
Committee also continued its focus on ensuring strong sustainability governance practices, and its oversight
of the Company’s political engagement and lobbying activities.”
Teresa Roseborough, Committee Chair since 2021
ROLES AND RESPONSIBILITIES
• Advises and makes recommendations to the Board on corporate governance matters.
• Considers potential nominees to the Board.
• Makes recommendations on the organization, size and composition of the Board and its
committees.
• Considers the qualifications, compensation and retirement of directors.
• Reviews policies and reports on political contributions.
• Oversees the establishment, management and processes related to ESG activities.
BOARD AND GOVERNANCE MATTERS
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THE BOARD’S ROLE AND RESPONSIBILITIES
BOARD RISK OVERSIGHT
The Board has ultimate responsibility for risk oversight. We have a formal enterprise Risk Appetite Framework reviewed by the
Board, which sets forth the Company's risk preferences, tolerances, and limits. Throughout 2024, the Board focused on the
macroeconomic outlook and implications to the investment portfolio, and insurance underwriting performance and property
catastrophe risk management. The Board also continued to focus on talent management, cybersecurity risk and sustainability.
The Board exercises its oversight function through its standing committees, each of which has primary risk oversight responsibility
for all matters within the scope of its charter. Annually, each committee reviews and reassesses the adequacy of its charter and the
Nominating Committee reviews all charters and recommends any changes to the Board for approval. The chart below provides
examples of each committee’s risk oversight responsibilities.
BOARD OF DIRECTORS
AUDIT COMMITTEE
• Financial reporting
• Operational risk
• Cybersecurity
• Legal and regulatory
compliance
COMPENSATION AND
MANAGEMENT
DEVELOPMENT COMMITTEE
• Executive compensation
• Talent acquisition,
retention and
development
• Succession planning
FINANCE, INVESTMENT AND
RISK MANAGEMENT
COMMITTEE
• Insurance risk
• Market risk
• Liquidity and capital
requirements
• Climate risk
NOMINATING AND
CORPORATE GOVERNANCE
COMMITTEE
• Governance policies and
procedures
• Board organization and
membership
• Sustainability governance
In addition to the risks identified above, FIRMCo oversees the investment, financial, and risk management activities of the Company
and has oversight of all risks that do not fall within the oversight responsibility of any other standing committee. FIRMCo meets at
each regular Board meeting and is briefed on the company's risk profile and risk management activities. In addition, the Audit
Committee discusses with management policies with respect to risk assessment and risk management.
For a detailed discussion of management's day-to-day management of risks, including sources, impact, and management of specific
categories of risk, as well as information on oversight of risks related to safeguarding the Company’s data and maintaining the
availability of our systems in the event of cyber or other information security incidents, see Part II - Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations and the “Cybersecurity” discussion in Part I - Item 1C in
our Annual Report on Form 10-K for the year ended December 31, 2024.
BOARD AND SHAREHOLDER MEETING ATTENDANCE
During 2024, the Board met 6 times, with each of the directors attending 75% or more of the aggregate number of meetings of the
Board and the committees on which they served. We encourage our directors to attend the Annual Meeting of Shareholders, and all
directors attended the virtual Annual Meeting of Shareholders held on May 15, 2024.
SHAREHOLDER ENGAGEMENT
Our Board and management value shareholder views and engage with shareholders in different ways throughout the year to solicit
feedback. Management routinely speaks with analysts and investors at investor conferences and other formal events, as well as in
group and one-on-one meetings. In addition, management and our Lead Director engage with shareholders on governance,
compensation and sustainability issues to understand their concerns and ensure our practices align with shareholder interests. In
the fall of 2024, management reached out to shareholders representing approximately 55% of shares outstanding and had
discussions with, or received written feedback from, shareholders representing approximately 49% of shares outstanding. As a
BOARD AND GOVERNANCE MATTERS
2025 Proxy Statement
19
result of shareholder feedback received in 2024 and prior years, and an analysis of governance trends and best practices, the Board
and management took several important actions in 2024 and 2025 to enhance the company's corporate governance practices.
What we heard from shareholders
Actions taken
Recognition of the increased demands on public company
directors' time, and support for reducing the number of boards
permitted under overboarding policies.
Amended the company's Corporate Governance Guidelines to
lower the overboarding threshold for non-CEO directors from
four boards (in addition to The Hartford) to three.
Support for shareholders' right to call a special meeting at a
reasonable threshold.
Amended the company's By-Laws to allow shareholders who
own at least 25% of the Company’s common stock to require
that the Company call a special meeting of shareholders (see
page 11 for more details).
Support for more rigorous stock ownership requirements and
increased disclosure.
Adopted a revised stock ownership and retention policy and
increased disclosure about which forms of equity are recognized
for adherence (see page 50 for more details).
TALENT DEVELOPMENT AND SUCCESSION PLANNING
Talent development and succession planning are important parts of the Board’s governance responsibilities. The CEO and
independent directors conduct an annual review of succession and continuity plans for the CEO. Succession planning includes the
identification and development of potential successors, policies and principles for CEO selection, and plans regarding succession in
the case of an emergency or the retirement of the CEO. Each year, the Compensation Committee reviews succession and continuity
plans for the CEO and each member of the executive leadership team that reports to the CEO. The Compensation Committee’s
charter requires that it discuss the results of these reviews with the independent directors and/or the CEO. However, given the
importance of the topic and the engagement of the full Board on the issue, all directors are invited to these sessions. The full Board
routinely meets and interacts with employees who have been identified as potential future leaders of the Company.
In recent years, the Board's robust talent development and succession planning efforts have resulted in the appointment of Mo
Tooker as the Company’s President, as well as internal promotions resulting from the retirements of the Company’s General
Counsel, Heads of Personal Insurance and Employee Benefits and Chief Underwriting Officer.
BUSINESS ETHICS AND CONDUCT
“We always strive to act with integrity and honesty and be accountable in
everything we do.”
The Hartford's Code of Ethics and Business Conduct
Striving to do the right thing every day and in every situation is fundamental to our culture, and we are proud that we have received
the following honors:
•
Recognized fifteen times by The Ethisphere® Institute as one of the “World’s Most Ethical Companies”
•
Listed on JUST Capital and CNBC's list of America's Most "JUST" Companies for 2025 (seventh straight year recognized
on the JUST 100 list)
We have adopted a Code of Ethics and Business Conduct, which applies to all employees, including our chief executive officer, chief
financial officer and controller. We have also adopted a Code of Ethics and Business Conduct for Members of the Board of Directors
(the “Board Code of Ethics”), which was revised last year to reinforce and strengthen whistlebower protections. These codes require
that all of our employees and directors engage in honest and ethical conduct in performing their duties, provide guidelines for the
ethical handling of actual or apparent conflicts of interest, and provide mechanisms to report unethical conduct. All employees
certify annually that they have read the Code and fully understand their responsibilities. Directors certify compliance with the
Board Code of Ethics annually.
We provide our employees with a comprehensive and ongoing educational program, including courses on our Code of Ethics and
Business Conduct, potential conflicts of interest, privacy and information protection, marketplace conduct, and ethical decision-
making. Hotlines and online portals have been established for employees, vendors, or others to raise potential code violations,
including through anonymous reporting. Employees are encouraged to speak up whenever they have an ethics or compliance
concern or question, and The Hartford's zero-tolerance policy for retaliation is strictly enforced.
INSIDER TRADING POLICY
We are committed to promoting high standards of ethical business conduct and compliance with applicable laws, rules,
and regulations. In furtherance of this commitment, the Company has adopted an insider trading policy and procedures governing
the purchase, sale, and other transactions involving our securities by the Company and its directors, officers, and employees that we
BOARD AND GOVERNANCE MATTERS
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believe is reasonably designed to promote compliance with insider trading laws, rules, and regulations, and the NYSE listing
standards. For more information about our insider trading policy, please see the full text of the Insider Trading Policy, a copy of
which was filed as Exhibit 19.01 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
POLITICAL ACTIVITIES
In 2024, The Hartford was again recognized as a top tier company and "trendsetter" in the CPA-Zicklin Index of Corporate Political
Disclosure and Accountability for our clear disclosure of political spending, policies in place and oversight and governance of those
policies. We believe in supporting the institutions that underlie a healthy democracy and the value of robust civic discourse. As a
company, we follow a principled approach to determining when we engage in public policy. We do so when we have a legitimate and
authentic interest as an insurance company and employer. We also seek to align our engagement with our values, stated goals and
stakeholders. We are transparent about our political activities, and remain committed to robust disclosure.
The Nominating Committee reviews the Company's political and lobbying policies and reports of political contributions annually. As
part of our Code of Ethics and Business Conduct, we do not make corporate contributions to political candidates or parties, and we
require that no portion of our dues paid to trade associations be used for political contributions. We do allow the use of corporate
resources for non-partisan political activity, including voter education and registration. We have two political action committees
(“PACs”), The Hartford Advocates Fund and The Hartford Advocates Federal Fund. The PACs are solely funded by voluntary
contributions from eligible employees in management-level roles and directors. The PACs support candidates for federal and state
office who are willing to listen to and understand our priorities, and promote practical, reasonable solutions to key public policy
challenges. The PACs contribution guidelines have been expanded to include a focus on policymakers who demonstrate a record of
operating in a bipartisan manner. The PACs also formalized a commitment to proactively educate lawmakers on The Hartford’s
core values. Lastly, the PACs are driving increased transparency into our contribution strategy across the entire enterprise by
providing the following information on its website: (1) contributions made by The Hartford's PACs; (2) our policy on corporate
contributions for political purposes; and (3) annual dues, assessments and contributions of $25,000 or more to trade associations
and coalitions. To learn more, please access our most current Political Activities Report, at https://ir.thehartford.com/corporate-
governance/political-engagement.
SUSTAINABILITY
The Hartford is actively implementing business, talent and engagement strategies that we believe will maximize our ability to drive
sustainable value creation. Our approach to corporate sustainability focuses on developing innovative business strategies and
solutions that address the current needs of our stakeholders while ensuring we are prepared to meet future demands. We believe
innovation is essential for continued success, and we are committed to insuring the economy of tomorrow. By adopting a long-term
perspective, we seize opportunities and navigate risks arising from sustainability issues. These principles are integrated into our
business operations to drive value creation for all stakeholders, fostering sustainable, long-term performance for our shareholders.
Sustainability Governance
Under our Corporate Governance Guidelines, the full Board retains oversight responsibility for The Hartford's sustainability
matters, including climate-risk issues. Specifically, the Board has the goal of overseeing the company’s journey to operationalizing
and embedding sustainability principles into broader enterprise strategy – adapting to the continued rise of stakeholder capitalism
and how business lines are managing sustainability risks and seizing opportunities. In addition to the Board's oversight
responsibility of substantive sustainability topics, the Nominating Committee retains oversight of the company’s sustainability
governance framework.
BOARD AND GOVERNANCE MATTERS
2025 Proxy Statement
21
DIRECTOR COMPENSATION
We use a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on the Board.
Members of the Board who are employees of The Hartford or its subsidiaries are not compensated for service on the Board or any
of its committees.
For the 2024-2025 Board service year, non-management directors received a $115,000 annual cash retainer and a $190,000
annual equity grant of restricted stock units (“RSUs”). In September 2023, following a market assessment by our independent
compensation consultant, the Board increased the annual cash retainer from $110,000 to $115,000 and the annual equity grant
from $180,000 to $190,000 to bring those retainers to market levels effective for the 2024-2025 Board service year.
ANNUAL CASH FEES
Cash compensation for the 2024-2025 Board service year beginning on May 15, 2024, the date of the 2024 Annual Meeting of
Shareholders, and ending on May 21, 2025, the date of the 2025 Annual Meeting, is set forth below. Directors may elect to defer all
or part of the annual Board cash retainer and any Committee Chair or Lead Director cash retainer into RSUs, to be distributed as
common stock following the end of the director’s Board service.
Director Compensation Program
Annual Cash Compensation
Annual Cash Retainer
$115,000
Committee Chair Retainer: Audit
$35,000
Committee Chair Retainer: FIRMCo
$35,000
Committee Chair Retainer: Compensation
$30,000
Committee Chair Retainer: Nominating
$25,000
Lead Director Retainer
$50,000
ANNUAL EQUITY GRANT
In 2024, directors received an annual equity grant of $190,000, payable solely in RSUs pursuant to The Hartford 2020 Stock
Incentive Plan. Directors may not sell, exchange, transfer, pledge, or otherwise dispose of the RSUs.
The RSUs vest and are distributed as common stock at the end of the Board service year, unless the director has elected to defer
distribution until the end of Board service. Resignation from the Board will result in a forfeiture of all unvested RSUs at the time of
such resignation unless otherwise determined by the Compensation Committee. However, RSUs will automatically vest upon the
occurrence of any of the following events: (a) retirement from service on the Board in accordance with our Corporate Governance
Guidelines; (b) death of the director; (c) total disability of the director; (d) resignation by the director under special circumstances
where the Compensation Committee, in its sole discretion, consents to waive the remaining vesting period; or (e) a “change of
control,” as defined in the 2020 Stock Incentive Plan. Outstanding RSUs are credited with dividend equivalents equal to dividends
paid to holders of our common stock.
OTHER
We provide each director with $100,000 of group life insurance coverage and $750,000 of accidental death and dismemberment
and permanent total disability coverage while they serve on the Board. We also reimburse directors for travel and related expenses
they incur in connection with their Board and committee service.
STOCK OWNERSHIP GUIDELINES AND RESTRICTIONS ON TRADING
The Board has established stock ownership guidelines for each director to obtain, by the third anniversary of the director’s
appointment to the Board, an ownership position in our common stock equal to five times the total annual cash retainer (including
cash retainers paid for committee chair or Lead Director responsibilities). All directors with at least three years of Board service met
the stock ownership guidelines as of December 31, 2024.
Our insider trading policy contains a robust prohibition against directors engaging in hedging, monetization, derivative, speculative
and similar transactions involving company securities, including holding stock in a margin account or pledging stock as collateral for
a loan, and permits directors to engage in transactions involving The Hartford's equity securities only through: (1) a pre-established
trading plan pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); or (2) during
“trading windows” of limited duration following: (a) the public release of the Company's financial results for the most recently
completed fiscal period, and (b) a determination by the Company that the director is not in possession of material non-public
information. Even if pre-clearance is granted, directors must make an independent determination that they do not possess material
non-public information. In addition, our insider trading policy grants us the ability to suspend trading of our equity securities by
directors.
BOARD AND GOVERNANCE MATTERS
22
www.thehartford.com
DIRECTOR SUMMARY COMPENSATION TABLE
We paid the following compensation to directors for the fiscal year ended December 31, 2024.
Name
Fees Earned or
Paid in Cash
($)(1)
Stock Awards
($)(2)
All Other
Compensation
($)
Total
($)
Larry D. De Shon
150,000
190,000
2,159
342,159
Carlos Dominguez
115,000
190,000
2,159
307,159
Trevor Fetter
165,000
190,000
1,427
356,427
Donna James(3)
144,300
190,000
2,159
336,459
Edmund Reese(4)
115,000
—
750
115,750
Teresa W. Roseborough
140,000
190,000
2,159
332,159
Virginia P. Ruesterholz
115,000
190,000
1,427
306,427
Matthew E. Winter
145,000
190,000
2,159
337,159
Kathleen A. Winters(5)
115,000
190,000
893
305,893
Greig Woodring(6)
120,800
190,000
2,311
313,111
(1)
Director Fetter elected to receive deferred vested RSUs in lieu of cash compensation. The vested RSUs will be distributed as
common stock following the end of the director's Board service.
(2)
These amounts reflect the aggregate grant date fair value (as computed in accordance with FASB ASC Topic 718) of RSU
awards granted during the fiscal year ended December 31, 2024.
(3)
Donna James replaced Greig Woodring as Audit Committee chair in July 2024, resulting in a pro rata Audit Committee Chair
Retainer of $29,300 for 10 months service.
(4)
Mr. Reese resigned from the Board effective May 31, 2024.
(5)
Ms. Winters’ fees were paid directly to Winters Advisory Inc., an entity controlled by Ms. Winters.
(6)
Mr. Woodring resigned from the Board effective September 4, 2024.
DIRECTOR COMPENSATION TABLE—OUTSTANDING EQUITY
The following table shows the number and value of unvested equity awards outstanding as of December 31, 2024. The value of
these unvested awards is calculated using a market value of $109.40, the NYSE closing price per share of our common stock on
December 31, 2024. The numbers have been rounded to the nearest whole dollar or share. The following table does not include
vested RSUs granted at a director's election in lieu of the annual cash retainer.
Stock Awards(1)
Name
Stock
Grant Date(2)
Number
of Shares or
Units of Stock
That Have Not
Vested (#)(3)
Market Value
of Shares or
Units of Stock
That Have Not
Vested ($)
Larry D. De Shon
7/29/2024
1,733
189,590
Carlos Dominguez
7/29/2024
1,733
189,590
Trevor Fetter
7/29/2024
1,733
189,590
Donna James
7/29/2024
1,733
189,590
Teresa W. Roseborough
7/29/2024
1,733
189,590
Virginia P. Ruesterholz
7/29/2024
1,733
189,590
Matthew E. Winter
7/29/2024
1,733
189,590
Kathleen Winters
7/29/2024
1,733
189,590
(1)
Additional stock ownership information is set forth in the beneficial ownership table on page 73.
(2)
The RSUs were granted on July 29, 2024, the second trading day following the filing of our Form 10-Q for the quarter ended
June 30, 2024.
(3)
The number of RSUs for each award was determined by dividing $190,000 by $110.09, the closing price of our common stock
as reported on the NYSE on the date of the award. The number shown also reflects dividend equivalents credited to
outstanding RSUs. The RSUs will vest on May 21, 2025, and will be distributed at that time in shares of the Company’s common
stock unless the director had previously elected to defer distribution of all or a portion of their annual RSU award until the end
of Board service. Directors Fetter, James and Winters have made elections to defer distribution of 100% of their RSU award.
BOARD AND GOVERNANCE MATTERS
2025 Proxy Statement
23
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The Board has adopted a Policy for the Review, Approval or Ratification of Transactions with Related Persons. This policy requires
our directors and Section 16 executive officers to promptly disclose any actual or potential material conflict of interest to the Chair
of the Nominating Committee and the Chairman for evaluation and resolution. If the transaction involves a Section 16 executive
officer or an immediate family member of a Section 16 executive officer, the matter must also be disclosed to our General Auditor
or Director of Compliance for evaluation and resolution.
We did not have any transactions requiring review under this policy during 2024.
COMMUNICATING WITH THE BOARD
Shareholders and other interested parties may communicate with directors by contacting Terence Shields, Corporate Secretary of
The Hartford Insurance Group, Inc., One Hartford Plaza, Hartford, CT 06155. The Corporate Secretary will relay appropriate
questions or messages to the directors. Only items related to the duties and responsibilities of the Board will be forwarded.
Anyone interested in raising a complaint or concern regarding accounting issues or other compliance matters directly with the
Audit Committee may do so anonymously and confidentially by contacting EthicsPoint:
By internet
By telephone
By mail
Visit 24/7
www.ethicspoint.com
1-866-737-6812 (U.S. and Canada)
1-866-737-6850 (all other countries)
The Hartford c/o EthicsPoint
P.O. Box 230369
Portland, Oregon 97281
BOARD AND GOVERNANCE MATTERS
24
www.thehartford.com
DIRECTOR NOMINEES
Ten individuals will be nominated for election as directors at the Annual Meeting. The terms of office for each elected director will
run until the next annual meeting of shareholders and until their successor is elected and qualified, or until their earlier death,
retirement, resignation or removal from office.
In accordance with our Corporate Governance Guidelines, each director has submitted a contingent, irrevocable resignation that
the Board may accept if the director fails to receive more votes “for” than “against” in an uncontested election. In that situation, the
Nominating Committee (or another committee comprised of at least three non-management directors) would make a
recommendation to the Board about whether to accept or reject the resignation. The Board, not including the subject director, will
act on this recommendation within 90 days from the date of the Annual Meeting, and we will publicly disclose the Board's decision
promptly thereafter.
If for any reason a nominee should become unable to serve as a director, either the shares of common stock represented by valid
proxies will be voted for the election of another individual nominated by the Board, or the Board will reduce the number of directors
in order to eliminate the vacancy.
The Nominating Committee believes that each director nominee has an established record of accomplishment in areas relevant to
our business and objectives, and possesses the characteristics identified in our Corporate Governance Guidelines as essential to a
well-functioning and deliberative governing body, including integrity, independence and commitment. Other experience,
qualifications and skills the Nominating Committee looks for include the following:
Experience /
Qualification
Relevance to The Hartford
Leadership
Experience in significant leadership positions provides us with new insights, and demonstrates key
management disciplines that are relevant to the oversight of our business.
Insurance and Financial
Services Industries
Extensive experience in the insurance and financial services industries provides an understanding of the
complex regulatory and financial environment in which we operate and is highly important to strategic
planning and oversight of our business operations.
Digital/Technology
Expertise in digital and technology, including artificial intelligence and data, is important in light of the
speed of digital progress and the development of disruptive technologies both in the insurance industry
and more broadly.
Corporate Governance
An understanding of organizations and governance supports management accountability, transparency
and protection of shareholder interests.
Risk Management
Risk management experience is critical in overseeing the risks we face today and those emerging risks
that could present in the future.
Finance and Accounting Finance and accounting experience is important in understanding and reviewing our business operations,
strategy and financial results.
Business Operations
and Strategic Planning
An understanding of business operations and processes, and experience making strategic decisions, are
critical to the oversight of our business, including the assessment of our operating plan and business
strategy.
Regulatory
An understanding of laws and regulations is important because we operate in a highly regulated industry
and we are directly affected by governmental actions.
Human Capital
Management
We place great importance on attracting and retaining superior talent, and motivating employees to
achieve desired enterprise and individual performance objectives.
The Nominating Committee believes that our current Board is a diverse group whose collective experiences and qualifications bring
a variety of perspectives to the oversight of The Hartford. All of our directors hold, or have held, senior leadership positions in large,
complex corporations and/or charitable and not-for-profit organizations. In these positions, they have demonstrated their
leadership, intellectual and analytical skills and gained deep experience in core disciplines significant to their oversight
responsibilities on our Board. Their roles in these organizations also permit them to offer senior management a diverse range of
perspectives about the issues facing a complex financial services company like The Hartford. Key qualifications, skills and
experience our independent directors bring to the Board that are important to the oversight of The Hartford are identified and
described in the matrix and nominee biographies below:
BOARD AND GOVERNANCE MATTERS
2025 Proxy Statement
25
Independent Director:
Larry
De Shon
Carlos
Dominguez
Trevor
Fetter
Donna
James
Annette
Rippert
Teresa
Roseborough
Virginia
Ruesterholz
Matthew
Winter
Kathleen
Winters
COMPETENCIES
Public Company CEO/
President Experience
✓
✓
✓
✓
✓
CFO Experience/
Finance and
Accounting
✓
✓
✓
✓
✓
Leadership
Experience
✓
✓
✓
✓
✓
✓
✓
✓
✓
Insurance Industry
Experience
✓
✓
✓
Financial Services
Industry Experience
✓
✓
✓
✓
Digital/ Technology
✓
✓
✓
✓
✓
Corporate
Governance
✓
✓
✓
✓
✓
✓
✓
✓
✓
Risk Management
✓
✓
✓
✓
✓
✓
✓
✓
✓
Business Operations/
Strategic Planning
✓
✓
✓
✓
✓
✓
✓
✓
✓
Regulatory
✓
✓
✓
✓
✓
✓
Human Capital
Management
✓
✓
✓
✓
✓
✓
✓
✓
✓
LARRY D. DE SHON INDEPENDENT
Professional highlights:
• Avis Budget Group, Inc.
– President (2017-2019)
– Chief Executive Officer and Chief Operating
Officer (2016-2019)
– President and Chief Operating Officer (Oct.
2015-Dec. 2015)
– President, International (2011-Oct. 2015)
– Executive Vice President, Operations
(2006-2011)
• UAL Corporation (parent of United Airlines)
– Positions of increasing responsibility, including
Senior Vice President positions in marketing, on-
board service and global airport operations
(1978-2006)
Director since: 2020
Age: 65
Committees:
• Audit
• FIRMCo (Chair)
• Nominating
Other public company directorships:
• United Rentals, Inc. (2021-present)
• Air New Zealand (2020-present)
Skills and qualifications relevant to The Hartford:
As a former chief executive officer and director of Avis Budget Group, Mr. De Shon provides extensive leadership and corporate
governance experience, deep operating skills and international expertise. He has successfully led organizations through times of
disruption and global transformations, developed innovative solutions to strengthen his companies’ positions in the marketplace
and modernized systems for better customer and employee experiences. At Avis Budget Group Mr. De Shon created the first end-
to-end digital car rental experience, migrated the platform to the cloud, and built one of the largest connected car fleets in the
world. In addition, he oversaw businesses in Europe, the Middle East, Africa, Asia, Australia and New Zealand. Prior to joining Avis,
Mr. De Shon had a 28-year career with United Airlines, most recently leading an organization of 23,000 employees in 29
countries.
BOARD AND GOVERNANCE MATTERS
26
www.thehartford.com
CARLOS DOMINGUEZ INDEPENDENT
Professional highlights:
• Sprinklr Inc.
– Vice Chairman of the Board and Lead Evangelist
(2020-2022)
– President (2015-2020)
– Chief Operating Officer (2015-2018)
• Cisco Systems, Inc.
– Senior Vice President, Office of the Chairman and
Chief Executive Officer (2008-2015)
– Senior Vice President, Worldwide Service
Provider Operations (2004-2008)
– Vice President, U.S. Network Services Provider
Sales (1999-2004)
– Positions of increasing responsibility in
operations and sales (1992-1999)
Director since: 2018
Age: 66
Committees:
• Compensation
• FIRMCo
• Nominating
Other public company directorships:
• PROS Holdings, Inc. (2020-2024)
Skills and qualifications relevant to The Hartford:
Mr. Dominguez has more than 30 years of enterprise technology experience. He provides extensive and relevant digital expertise
as The Hartford focuses on data analytics and digital capabilities to continuously improve the way it operates and delivers value to
customers. As President of Sprinklr Inc., Mr. Dominguez guided strategic direction and led the marketing, sales, services, and
partnerships teams for a leading social media management company. Prior to joining Sprinklr, he spent seven years as a
technology representative for the Chairman and CEO of Cisco Systems, Inc. In this role, Mr. Dominguez engaged with senior
executives in the Fortune 500 and government leaders worldwide, sharing insights on how to leverage technology to enhance and
transform their businesses. In addition, he led the creation and implementation of Cisco's Innovation Academy, which delivered
innovation content to Cisco employees globally.
TREVOR FETTER INDEPENDENT — LEAD DIRECTOR
Professional highlights:
• Senior Lecturer, Harvard Business School (Jan. 2019-
present)
• Tenet Healthcare Corporation
– Chairman (2015-2017)
– Chief Executive Officer (2003-2017)
– President (2002-2017)
• Chairman and Chief Executive Officer, Broadlane, Inc.
(2000-2002)
• Chief Financial Officer, Tenet Healthcare Corporation
(1996-2000)
Director since: 2007
Age: 65
Committees:
• Compensation
• FIRMCo
Other public company directorships:
• None
Skills and qualifications relevant to The Hartford:
Mr. Fetter has nearly two decades of experience as chief executive officer of public and private companies. He has demonstrated
his ability to lead the management, strategy and operations of complex organizations. As a Senior Lecturer at Harvard Business
School, he teaches leadership and corporate accountability and financial reporting and control. He provides significant experience
in corporate finance and financial reporting acquired through senior executive finance roles, including as a chief financial officer of
a publicly traded company. He has experience navigating complex regulatory frameworks as the president and chief executive
officer of a highly-regulated, publicly traded healthcare company. Since 2017, Mr. Fetter has served as The Hartford's lead
director, providing strong independent Board leadership. He also has extensive corporate governance expertise from his service
as director of large public companies, including four years as Chairman of the Board’s Nominating and Corporate Governance
Committee.
BOARD AND GOVERNANCE MATTERS
2025 Proxy Statement
27
DONNA A. JAMES INDEPENDENT
Professional highlights:
• Lardon & Associates, LLC
– President and Chief Executive Officer (2006-
present)
• Nationwide Mutual Insurance and Financial Services
– President, Nationwide Strategic Investments
(2003-2006)
– Positions of increasing responsibility, including
Executive Vice President – Chief Administrative
Officer; Co-President Shared Services; Executive
Vice President Human Resource; and Vice
President Office of the Chief Executive Officer
(1993-2003)
Director since: 2021
Age: 67
Committees:
• Audit (Chair)
• FIRMCo
• Nominating
Other public company directorships:
• Boston Scientific, Inc. (2015-2023)
• Victoria's Secret (2021-present)
• American Electric Power (2022-
present*)
• L Brands, Inc. (2003-2021)
Skills and qualifications relevant to The Hartford:
Ms. James brings to the Board extensive insurance-industry experience in a range of functions, including accounting, investing,
operations, treasury and human resources. She is president and CEO of Lardon & Associates, a business-advisory firm specializing
in corporate governance, new business development, strategy, and financial and risk management. She had a 25-year career with
Nationwide Mutual Insurance Company, culminating in the role of president of strategic investments. Before that, she held a
variety of positions, including chief administrative officer, chief human resources officer, assistant to the CEO and director of
operations and treasury services. Ms. James has significant corporate governance experience by virtue of her service on several
major public company boards, including as audit committee chair.
* Ms. James will not stand for reelection at American Electric Power's 2025 Annual Meeting of Shareholders on April 29, 2025
ANNETTE RIPPERT INDEPENDENT
Professional highlights:
• Accenture plc
–
Chief Executive Officer, Strategy and
Consulting (2020-2022)
–
Positions of increasing responsibility in
technology, communications, and media
(1986-2020)
Director since: 2025
Age: 59
Committees:
• FIRMCo
Other public company directorships:
• Open Text Corporation (2024-
present)
Skills and qualifications relevant to The Hartford:
Ms. Rippert brings to the Board extensive experience as the retired CEO of the Strategy and Consulting group at Accenture,
where she transformed a $15 billion portfolio of advisory services by accelerating the use of artificial intelligence and data
analytics to drive new and differentiated growth. She also led numerous strategic acquisitions to expand Accenture’s advisory
services while successfully driving reskilling and other human-capital-management strategies critical to the success of Accenture’s
growth agenda. Ms. Rippert spent her career with Accenture in roles of increasing responsibility, including leading the North
America Technology business, the company’s largest market, and serving as the Technology and Innovation Lead for Accenture
Federal Services, overseeing growth initiatives in digital, cloud and emerging technologies.
BOARD AND GOVERNANCE MATTERS
28
www.thehartford.com
TERESA WYNN ROSEBOROUGH INDEPENDENT
Professional highlights:
• Executive Vice President, General Counsel and
Corporate Secretary, The Home Depot (2011-present)
• Senior Chief Counsel Compliance & Litigation and
Deputy General Counsel, MetLife, Inc. (2006-2011)
• Partner, Sutherland, Asbill & Brennan LLP
(1996-2006)
• Deputy Assistant Attorney General, Office of Legal
Counsel, U.S. Department of Justice (1994-1996)
Director since: 2015
Age: 66
Committees:
• Compensation
• FIRMCo
• Nominating (Chair)
Other public company directorships:
• None
Skills and qualifications relevant to The Hartford:
Ms. Roseborough has over three decades of experience as a senior legal advisor in government, law firm and corporate settings.
She has experience as a senior leader responsible for corporate compliance matters at major publicly traded companies and as an
attorney focused on complex litigation matters, including before the U.S. Supreme Court. She provides extensive regulatory
experience acquired as a government attorney providing legal counsel to the White House and all executive branch agencies, as
well as corporate governance expertise from service as General Counsel and Corporate Secretary of a publicly-traded company.
Ms. Roseborough also has in-depth knowledge of the financial services industry gained through senior legal positions at MetLife,
Inc., a major provider of insurance and employee benefits.
VIRGINIA P. RUESTERHOLZ INDEPENDENT
Professional highlights:
• Verizon Communications, Inc.
– Executive Vice President (Jan. 2012-Jul. 2012)
– President, Verizon Services Operations
(2009-2011)
– President, Verizon Telecom (2006-2008)
– President, Verizon Partner Solutions (2005-2006)
• Positions of increasing responsibility in operations,
sales and customer service, New York Telephone
(1984-2005)
Director since: 2013
Age: 63
Committees:
• Compensation
• FIRMCo
• Nominating
Other public company directorships:
• Bed Bath & Beyond Inc. (2017-2022)
Skills and qualifications relevant to The Hartford:
Ms. Ruesterholz has held a variety of senior executive positions, including as Executive Vice President at Verizon
Communications and President of the former Verizon Services Operations. As a senior leader of a Fortune 100 company, she has
held principal oversight responsibility for key strategic initiatives, navigated the regulatory landscape of large-scale operations,
and led an organization with over 25,000 employees. Ms. Ruesterholz provides vast experience in large-scale operations,
including sales and marketing, customer service, technology and risk management. Ms. Ruesterholz also brings to the Board
substantial financial and strategic expertise acquired as president of various divisions within Verizon and is currently a Trustee of
the Board of Stevens Institute of Technology where she served as Chairman of the Board from 2013-2018.
BOARD AND GOVERNANCE MATTERS
2025 Proxy Statement
29
CHRISTOPHER J. SWIFT — CHAIRMAN
Professional highlights:
• The Hartford Insurance Group, Inc.
– Chairman (2015-present)
– Chief Executive Officer (2014-present)
– Executive Vice President and Chief Financial
Officer (2010-2014)
• Vice President and Chief Financial Officer, Life and
Retirement Services, American International Group,
Inc. (2003-2010)
• Partner, KPMG, LLP (1999-2003)
• Executive Vice President, Conning Asset Management,
General American Life Insurance Company
(1997-1999)
• KPMG, LLP
– Partner (1993-1997)
– Auditor (1983-1993)
Director since: 2014
Age: 64
Committees:
• FIRMCo
Other public company directorships:
• Citizens Financial Group, Inc. ( 2021-
present)
Skills and qualifications relevant to The Hartford:
Mr. Swift has over 30 years of experience in the financial services industry, with a focus on insurance. As Chairman and CEO of
The Hartford, he brings to the Board unique insight and knowledge into the complexities of our businesses, relationships,
competitive and financial positions, senior leadership and strategic opportunities and challenges. Mr. Swift leads the execution of
our strategy, directs capital management actions and strategic investments, and oversees the continuous strengthening of the
Company’s leadership pipeline. In his prior role as The Hartford's Chief Financial Officer, he led the team that developed the
Company’s go-forward strategy. He is a certified public accountant with experience working at a leading international accounting
firm, including serving as head of its Global Insurance Industry Practice.
MATTHEW E. WINTER INDEPENDENT
Professional highlights:
• The Allstate Corporation
– President (2015-2018)
– President, Allstate Personal Lines (2013-2015)
– President and Chief Executive Officer, Allstate
Financial (2009-2012)
• American International Group, Inc.
– Vice Chairman (Apr. 2009-Oct. 2009)
– President and CEO, of AIG American General
(2006-2009)
• Massachusetts Mutual Life Insurance Company
– Executive Vice President (2002-2006)
– Positions of increasing responsibility (1996-2002)
Director since: 2020
Age: 68
Committees:
• Compensation (Chair)
• FIRMCo
Other public company directorships:
• ADT Inc. (2018-present)
• H&R Block, Inc. (2017-present)
Skills and qualifications relevant to The Hartford:
As President of The Allstate Corporation, Mr. Winter oversaw the complete range of Allstate’s P&C and life insurance products
and was responsible for business operations, including field offices located across the U.S. and in Canada, and distribution through
Allstate and independent agencies. He brings to the Board significant expertise in areas relevant to our business, including
operations, distribution and risk management, gained from over 25 years as a senior leader in the insurance industry. Before
joining Allstate, Mr. Winter held numerous senior executive positions at large insurance providers, including as vice chairman of
American International Group, where he was responsible for a number of business units with global reach; and executive vice
president at Massachusetts Mutual Life Insurance Company, where he led the company's domestic insurance businesses. In
addition, he spent more than 12 years on active duty with the United States Army and also practiced law for several years before
joining the insurance industry.
BOARD AND GOVERNANCE MATTERS
30
www.thehartford.com
KATHLEEN WINTERS INDEPENDENT
Professional highlights:
• Automatic Data Processing, Inc.
– Vice President and Chief Financial Officer
(2019-2021)
• MSCI, Inc.
– Chief Financial Officer (2016-2019)
• Honeywell International Inc.
– Vice President and Chief Financial Officer
(2012-2016)
– Positions of increasing responsibility in finance,
accounting and business analysis and planning
(2002-2012)
• PricewaterhouseCoopers, LLP
– Senior Manager, Technology Information
Communications and Entertainment Practice
(1989-2001)
Director since: 2024
Age: 57
Committees:
• Audit
• FIRMCo
Other public company directorships:
• Global Business Travel Group, Inc.
(2022-present)
• Definitive Healthcare Corp. (2021-
present)
Skills and qualifications relevant to The Hartford:
Ms. Winters is the former chief financial officer for Automatic Data Processing, Inc. (ADP), where she drove transformation with a
focus on financial and operational performance. Ms. Winters brings to the Board a combination of C-suite experience, deep
financial expertise, and a focus on business growth and profitability. Prior to ADP, Winters also served as chief financial officer for
MSCI, Inc. Previously, she held a series of roles of increasing responsibility at Honeywell International, Inc., culminating in her role
as chief financial officer for Performance Materials and Technologies. Winters began her career at PricewaterhouseCoopers, LLP,
where she served as a senior manager in the Technology Information Communications and Entertainment Practice. Ms. Winters is
also an experienced independent director, currently serving on the boards of Global Business Travel Group, Inc. and Definitive
Healthcare Corp.
BOARD AND GOVERNANCE MATTERS
2025 Proxy Statement
31
AUDIT MATTERS
ITEM 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
In accordance with its Board-approved charter, the Audit Committee is directly responsible for the appointment, compensation,
retention and oversight of the independent external audit firm retained to audit the company’s financial statements. The Audit
Committee has appointed Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accounting firm for
the fiscal year ending December 31, 2025. Deloitte has been retained as the Company’s independent registered public accounting
firm since 2002. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there
should be a regular rotation of the independent registered public accounting firm.
In selecting Deloitte for fiscal year 2025, the Audit Committee carefully considered, among other items:
• The professional qualifications of Deloitte, the lead audit partner and other key engagement partners;
• Deloitte’s depth of understanding of the Company’s businesses, accounting policies and practices and internal control
over financial reporting;
• Deloitte’s quality controls and its processes for maintaining independence; and
• The appropriateness of Deloitte’s fees for audit and non-audit services.
The Audit Committee oversees and is ultimately responsible for the outcome of audit fee negotiations associated with the
Company’s retention of Deloitte. In addition, when a rotation of the audit firm’s lead engagement partner is mandated, the Audit
Committee and its chair are directly involved in the selection of Deloitte’s new lead engagement partner. The members of the
Audit Committee and the Board believe that the continued retention of Deloitte to serve as the Company’s independent external
auditor is in the best interests of the Company and its investors.
Although shareholder ratification of the appointment of Deloitte is not required, the Board requests ratification of this
appointment by shareholders. If shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to
retain Deloitte.
Representatives of Deloitte will attend the Annual Meeting, will have the opportunity to make a statement if they desire to do so,
and will be available to respond to appropriate questions.
✓
The Board recommends that shareholders vote “FOR” the ratification of the appointment of Deloitte & Touche LLP as
our independent registered public accounting firm for the fiscal year ending December 31, 2025
FEES OF THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The following table presents fees for professional services provided by Deloitte, the member firms of Deloitte Touche Tohmatsu,
and their respective affiliates (collectively, the “Deloitte Entities”) for the years ended December 31, 2024 and 2023.
Year Ended December 31, 2024
Year Ended December 31, 2023
Audit fees
$
10,958,000
$
11,273,000
Audit-related fees(1)
$
1,576,000
$
1,598,000
Tax fees(2)
$
60,000
$
60,000
All other fees(3)
$
—
$
68,000
Total
$
12,594,000
$
12,999,000
(1)
Fees principally consisted of procedures related to internal control related services and regulatory filings.
(2)
Fees principally consisted of tax compliance services.
(3)
Fees pertain to permissible services not related to financial reporting.
The Audit Committee reviewed the non-audit services provided by the Deloitte Entities during 2024 and 2023 and concluded that
they were compatible with maintaining the Deloitte Entities’ independence.
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AUDIT COMMITTEE PRE-APPROVAL POLICIES AND
PROCEDURES
The Audit Committee has established policies requiring pre-approval of audit and non-audit services provided by the independent
registered public accounting firm. These policies require that the Audit Committee pre-approve specific categories of audit and
audit-related services annually.
The Audit Committee approves categories of audit services and audit-related services, and related fee budgets. For all pre-
approvals, the Audit Committee considers whether such services are consistent with the rules of the SEC and the Public Company
Accounting Oversight Board ("PCAOB") on auditor independence. The independent registered public accounting firm and
management report to the Audit Committee on a timely basis regarding the services rendered by, and actual fees paid to, the
independent registered public accounting firm to ensure that such services are within the limits approved by the Audit Committee.
The Audit Committee’s policies require specific pre-approval of all tax services, internal control-related services and all other
permitted services on an individual project basis.
As provided by its policies, the Audit Committee has delegated to its Chair the authority to address any requests for pre-approval of
services between Audit Committee meetings, up to a maximum of $100,000. The Chair must report any pre-approvals to the full
Audit Committee at its next scheduled meeting.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee currently consists of three independent directors, each of whom is “financially literate” within the meaning of
the listing standards of the NYSE and an “audit committee financial expert” within the meaning of the SEC’s regulations. The Audit
Committee oversees The Hartford's financial reporting process on behalf of the Board. Management has the primary responsibility
for establishing and maintaining adequate internal financial controls, for preparing the financial statements and for the public
reporting process. Deloitte, our independent registered public accounting firm for 2024, is responsible for expressing opinions that
(1) our consolidated financial statements present fairly, in all material respects, the financial position, results of operations and cash
flows in conformity with generally accepted accounting principles and (2) we maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2024.
In this context, the Audit Committee has:
(1) Reviewed and discussed the audited financial statements for the year ended December 31, 2024 with management;
(2) Discussed with Deloitte the matters required to be discussed by the applicable requirements of the PCAOB and the SEC;
and
(3) Received the written disclosures and the letter from Deloitte required by applicable requirements of the PCAOB
regarding the independent accountant’s communications with the Audit Committee concerning independence, and has
discussed with Deloitte the independent accountant’s independence.
Based on the review and discussions described in this report, the Audit Committee recommended to the Board that the audited
financial statements should be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024
for filing with the SEC.
Report Submitted: February 19, 2025
Members of the Audit Committee:
Donna James, Chair
Larry De Shon
Kathleen Winters
AUDIT MATTERS
2025 Proxy Statement
33
COMPENSATION MATTERS
ITEM 3
ADVISORY APPROVAL OF 2024 COMPENSATION OF
NAMED EXECUTIVE OFFICERS
Section 14A of the Exchange Act provides our shareholders with the opportunity to vote to approve, on an advisory basis, the
compensation of our NEOs as disclosed in this proxy statement in accordance with the rules of the SEC. We currently intend to
hold these votes on an annual basis.
As described in detail in the Compensation Discussion and Analysis beginning on page 35, our executive compensation program is
designed to promote long-term shareholder value creation and support our strategy by: (1) encouraging profitable organic
growth and ROE performance while maintaining an ethical culture, (2) providing market-competitive compensation opportunities
designed to attract and retain talent needed for long-term success, and (3) appropriately aligning pay with short- and long-term
performance. The advisory vote on this resolution is not intended to address any specific element of compensation; rather, it
relates to the overall compensation of our NEOs, as well as the philosophy, policies and practices described in this proxy
statement. You have the opportunity to vote for, against or abstain from voting on the following resolution relating to executive
compensation:
RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the named executive officers, as
disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the
Compensation Discussion and Analysis, the compensation tables and the narrative discussion contained in this proxy
statement.
Because the required vote is advisory, it will not be binding upon the Board. The Compensation Committee will, however, take
into account the outcome of the vote when considering future executive compensation arrangements.
✓
The Board recommends that shareholders vote “FOR” the above resolution to approve our compensation of named
executive officers as disclosed in the Compensation Discussion and Analysis, the compensation tables and the narrative
discussion contained in this proxy statement.
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COMPENSATION DISCUSSION AND ANALYSIS
This section explains our compensation philosophy, summarizes our compensation programs and reviews compensation decisions
for the Named Executive Officers (“NEOs”) listed below. It also describes programs that apply to the CEO and all of his executive
direct reports, other than senior executives directly supporting our Hartford Funds business who have an independent
compensation program (collectively, “Senior Executives”).
Name
Title
Christopher Swift
Chairman and Chief Executive Officer
Beth Costello
Executive Vice President and Chief Financial Officer
Adin Morris Tooker
President
Deepa Soni*
Executive Vice President and Chief Information and Operations Officer
Amy Stepnowski
Executive Vice President and Chief Investment Officer; President of HIMCO
*Ms. Soni resigned as executive vice president and chief information and operations officer of the Company effective March 27, 2025.
EXECUTIVE SUMMARY
The Hartford’s mission is to provide people with the support and protection they need to pursue their unique ambitions, seize
opportunity, and prevail through unexpected challenges. Our strategy to maximize value creation for all stakeholders remains
consistent and focuses on:
•
Advancing leading underwriting capabilities across our portfolio;
•
Investing in end-to-end transformation, responsibly leveraging data, analytics, digital and artificial intelligence capabilities
to drive better, faster decisions and enhance customer experiences;
•
Maximizing distribution channels and product breadth to increase market share;
•
Optimizing organizational efficiency with a focus on continuous improvement; and
•
Continuing to advance the Company's sustainability leadership to drive value creation while impacting society at large.
We endeavor to maintain and enhance our position as a market leader by leveraging our core strengths of underwriting excellence,
risk management, claims, product development and distribution.
An ethical, people-oriented, and performance-driven culture drives our values. We are committed to maintaining and enhancing our
culture and are proud of our reputation for ethics and integrity.
PURPOSE AND STRATEGIC PRIORITIES
2025 Proxy Statement
35
2024 FINANCIAL RESULTS
Our 2024 financial results were excellent, primarily due to a higher P&C underwriting gain, driven by earned premium growth
across all lines of business as well as 9.1 points of improvement in the Personal Insurance loss and loss adjustment expense ratio,
higher net investment income, lower net realized losses, and improvement in the group life loss ratio, partially offset by a higher
expense ratio and higher loss ratios on group disability and supplemental health products. Full year net income available to common
stockholders and core earnings* were $3.1 billion ($10.35 per diluted share) and $3.1 billion ($10.30 per diluted share),
respectively. Net income and core earnings return on equity ("ROE")*† were 19.9% and 16.7%, respectively.
Highlighted below are year-over-year comparisons of our net income available to common stockholders and core earnings
performance and our three-year net income ROE and core earnings ROE results. Core earnings is the primary determinant of our
annual incentive plan ("AIP") funding, as described on page 40, and average annual core earnings ROE over a three-year
performance period is the metric used for two-thirds of performance shares granted to Senior Executives, as described on page 42
(in each case, as adjusted for compensation purposes).
YEAR-OVER-YEAR PERFORMANCE
$ (Millions)
Net Income
Available to
Common
Stockholders
$2,483
$3,090
2023
2024
$ (Millions)
Core Earnings*
$2,767
$3,076
2023
2024
THREE-YEAR PERFORMANCE
Net Income ROE†
11.7%
17.5%
19.9%
2022
2023
2024
Core Earnings ROE*
14.5%
15.8%
16.7%
2022
2023
2024
2024 BUSINESS PERFORMANCE
The Hartford delivered an outstanding year of financial performance and strategic achievements across our complementary
underwriting businesses, with significant contribution from our investment portfolio. In P&C, Business Insurance, our largest
business segment, generated strong top-line growth at highly profitable margins, while Personal Insurance made significant
progress toward restoring target profitability in auto. In our Employee Benefits business, which serves more than 20 million
individuals throughout the United States, we achieved strong margins, demonstrating focused execution, a resilient economy,
improved mortality trends, and continued strong disability results. Our 2024 financial results have showcased the effectiveness of
our strategy and the value in our ongoing investments.
* Denotes a non-GAAP financial measure. For definitions and reconciliations to the most directly comparable GAAP measure, see Appendix A.
† Net income ROE represents net income available to common stockholders ROE.
COMPENSATION MATTERS
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Key 2024 Accomplishments
Business Insurance
Personal Insurance
Employee Benefits
Achieved significant written premium
growth of 9%, while maintaining highly
profitable margins, with a combined
ratio(1) of 89.9 and an underlying
combined* ratio of 87.9, consistent with
the prior year.
Achieved the first underwriting gain in
two years, with the combined ratio and
underlying combined ratio* improving to
99.1 and 94.1, respectively.
2024 was a transformative year,
positioning auto to achieve targeted
profitability by mid-2025.
Delivered net income and core earnings
margins* of 7.9% and 8.2%, exceeding
the long-term target for this business,
driven by improvement in the life loss
ratio, partially offset by a higher loss
ratio in paid family and medical leave
products.
(1) The combined ratio measures the cost of claims and expenses for every $100 of earned premiums. If the combined ratio is less than 100, the Company is
making an underwriting profit.
* Denotes a non-GAAP financial measure. For definitions and reconciliations to the most directly comparable GAAP measure, see Appendix A.
TOTAL SHAREHOLDER RETURN
The following chart shows The Hartford's total shareholder return ("TSR") relative to the 2024 Corporate Peer Group (provided on
page 49), S&P 500 Insurance Composite, S&P P&C index and S&P 500.
37%
69%
27%
57%
26%
53%
34%
78%
26%
29%
The Hartford (HIG)
2024 Corporate Peer Group
S&P 500 Insurance Composite
S&P 500 Property and Casualty
S&P 500
ONE-YEAR (2024)
THREE-YEAR (2022-2024)
Includes reinvestment of dividends.
COMPONENTS OF COMPENSATION AND PAY MIX
NEO compensation is heavily weighted toward variable compensation (including both annual and long-term incentives), where
actual amounts earned may differ from target amounts based on company and individual performance. Each NEO has a target total
compensation opportunity that is reviewed annually by the Compensation Committee (in the case of the CEO, by the independent
directors) to ensure alignment with our compensation objectives and market practice.
Compensation Component
Description
Base Salary
• Fixed level of cash compensation based on market data, internal pay equity, experience,
responsibility, expertise and performance
Annual Incentive Plan
• Variable cash award based primarily on annual company operating performance against a
predetermined financial target and achievement of individual performance goals aligned with
the company's strategic priorities
Long-Term Incentive Plan
• Variable awards granted based on individual performance and market data.
• Designed to drive long-term performance, align senior executive interests with shareholders,
and foster retention.
• Award mix (75% performance shares and 25% stock options) rewards stock price performance,
peer-relative shareholder returns (stock price and dividends) and operating performance.
Approximately 93% of CEO target annual compensation and approximately 80% of other NEO target annual compensation are
variable based on performance, including stock price performance:
COMPENSATION MATTERS
2025 Proxy Statement
37
Target Pay Mix — CEO
Salary
7%
Annual Incentive
20%
Long-Term Incentive
73%
Variable with Performance: 93%
Target Pay Mix — Other NEOs
Salary
20%
Annual Incentive
31%
Long-Term Incentive
49%
Variable with Performance: 80%
2024 COMPENSATION DECISIONS
2024 Compensation Decisions
Rationale
The Compensation Committee
updated the award mix for
2024 long-term incentive
awards.
For 2024 LTI awards, the Compensation Committee updated the LTI award mix from 50%
performance shares and 50% options to 75% performance shares and 25% options. In addition,
the weighting of performance metrics within performance shares was changed from 50%
Compensation Core ROE and 50% TSR to two-thirds Compensation Core ROE and one-third
TSR.
The Compensation Committee
approved an AIP funding level
of 143% of target.
Performance against the pre-established Compensation Core Earnings target produced a
formulaic AIP funding level of 143% of target (page 41). The Compensation Committee
undertook its qualitative review of performance and concluded that the formulaic AIP funding
level appropriately reflected 2024 performance. Accordingly, no adjustments were made.
The Compensation Committee
certified a 2022-2024
performance share award
payout at 180% of target.
The Company's average annual Compensation Core ROE during the performance period was
16.3%, resulting in a payout of 200% of target for the ROE component (50% of the award). The
company's TSR during the period was at the 73rd percentile of the performance peers,
resulting in a 160% payout for the TSR component (50% of the award). The combined
performance metrics yielded a payout of 180% of target (page 43).
COMPENSATION MATTERS
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The Compensation Committee (and, in the case of the CEO, the independent directors) approved the following compensation for
each NEO:
Base Salary
AIP Award
LTI Award
Total Compensation
NEO
2024
Change
from 2023
2024
Change
from 2023
2024
Change
from 2023
2024
Change
from 2023
Christopher Swift $ 1,200,000
0.0 % $ 4,719,000
22.2 % $ 12,000,000
14.3 % $ 17,919,000
15.2 %
Beth Costello
$ 800,000
3.2 % $ 1,930,500
22.2 % $ 2,600,000
7.2 % $ 5,330,500
11.5 %
A. Morris Tooker
$ 750,000
NA* $ 1,569,400
NA* $ 1,700,000
NA* $ 4,019,400
NA*
Deepa Soni
$ 750,000
7.1 % $ 1,561,100
66.8 % $ 1,600,000
14.3 % $ 3,911,100
28.8 %
Amy Stepnowski
$ 600,000
0.0 % $ 1,573,000
22.2 % $ 1,400,000
27.3 % $ 3,573,000
19.6 %
*Mr. Tooker was not previously an NEO.
This table provides a concise picture of compensation decisions made in 2024, and highlights changes from 2023. Another view of
2024 compensation for the NEOs is available in the Summary Compensation Table on page 53.
COMPENSATION BEST PRACTICES
Our current compensation best practices include the following:
WHAT WE DO
✓
Compensation heavily weighted toward variable pay
✓
Senior Executives generally receive the same benefits as other full-time employees
✓
Double-trigger requirement for cash severance and equity vesting upon a change of control*
✓
Cash severance upon a change of control not to exceed 2x base salary + bonus
✓
Independent compensation consultant
✓
Risk mitigation in plan design and annual review of compensation plans, policies and practices
✓
Comprehensive claw-back policy (includes misconduct) that covers both time and performance based incentive awards
✓
Prohibition on hedging, monetization, derivative and similar transactions with company securities
✓
Prohibition on Senior Executives pledging company securities
✓
Stock ownership guidelines for Directors and requirements for Senior Executives
✓
Periodic review of compensation peer groups
✓
Competitive burn rate and dilution for equity program
* Double-trigger vesting for equity awards applies if the awards are assumed or replaced with substantially equivalent awards.
WHAT WE DON'T DO
û
No Senior Executive tax gross-ups for perquisites or excise taxes on severance payments
û
No individual employment agreements
û
No granting of stock options with an exercise price less than the fair market value of our common stock on the date of grant
û
No re-pricing of stock options
û
No buy-outs of underwater stock options
û
No reload provisions in any stock option grant
û
No payment of dividends or dividend equivalents on equity awards until vesting (no dividends on stock options)
SAY-ON-PAY RESULTS
At our 2024 annual meeting, we received approximately 91% support on Say-on-Pay. The Compensation Committee considered
the vote to be an endorsement of The Hartford’s executive compensation programs and policies, and recent program changes. They
took this strong level of support into account in their ongoing review of those programs and policies. Management also discussed
the vote, along with aspects of its executive compensation, sustainability and corporate governance practices, during our annual
shareholder engagement program to gain a deeper understanding of shareholders’ perspectives. Feedback regarding the
compensation program remained generally positive, with many shareholders complimentary of our practices. For further discussion
of our shareholder engagement program, see page 19.
COMPENSATION MATTERS
2025 Proxy Statement
39
COMPONENTS OF THE COMPENSATION PROGRAM
Each Senior Executive has a target total compensation opportunity comprised of both fixed (base salary) and variable (including
both annual and long-term incentive) compensation. In addition, Senior Executives are eligible for benefits available to employees
generally. This section describes the three main components of our compensation program for Senior Executives and lays out the
framework in which compensation decisions are made. For a discussion of the 2024 compensation decisions made within this
framework, see 2024 Named Executive Officers' Compensation and Performance on page 44.
1. BASE SALARY
Each Senior Executive’s base salary is reviewed by the Compensation Committee (in the case of the CEO, the independent
directors) annually, upon promotion, or following a change in job responsibilities. Salary decisions are based on market data, internal
pay equity and level of responsibility, experience, expertise and performance.
2. ANNUAL INCENTIVE PLAN AWARDS
Our employees, including the Senior Executives, are eligible to earn cash awards based on annual company and individual
performance. Each employee has a target AIP opportunity. The Compensation Committee uses the following process to determine
individual Senior Executive AIP awards.
Determination of AIP Funding Level
At the beginning of the year, the Compensation Committee sets a “Compensation Core Earnings” target based on The Hartford’s
operating plan. The operating plan is approved by the Board and incorporates management's business, competitive, capital market,
catastrophe and other assumptions. It is achievable only with superior execution to deliver strong business performance. Because
the operating plan forms the basis for our AIP financial targets, the interests of our Senior Executives in achieving strong earnings
are aligned with those of our shareholders. In addition to a Compensation Core Earnings target, the Compensation Committee sets
a threshold performance level (80% of target), below which no AIP awards are earned, and a maximum funding level of 200% for
performance significantly exceeding target (120% of target). The AIP curve reduces the slope for payouts in the range of +/-5% of
target, which increases predictability and reduces volatility of payouts for performance in that range.
The Compensation Committee selected core earnings because:
•
It currently believes core earnings best reflects annual operating performance;
•
Core earnings is a metric commonly used by investment analysts when evaluating annual performance;
•
Core earnings is a prevalent incentive plan metric among peers; and
•
All employees can impact core earnings.
Certain adjustments are made to core earnings for compensation purposes to ensure employees are held accountable for operating
decisions made that year, and are neither advantaged nor disadvantaged by the effect of certain external items that do not reflect
operating year performance. At the beginning of the year, the Compensation Committee approves a definition of "Compensation
Core Earnings." The definition lists adjustments that will be made to core earnings at year-end in order to arrive at Compensation
Core Earnings, such as non-recurring tax benefits or charges, catastrophe losses above or below budget, and unusual or non-
recurring items. The 2024 definition and a reconciliation from GAAP net income to Compensation Core Earnings are provided in
Appendix A.
To ensure a holistic review of performance, the Compensation Committee also considers a number of qualitative factors, including:
quality of earnings, risk and compliance, peer-relative performance, expense management, and non-financial and strategic
objectives. Informed by this qualitative review, the Compensation Committee may then adjust the formulaic funding up or down to
arrive at an AIP funding level more commensurate with the Company’s performance.
The Compensation Committee believes retaining the flexibility to adjust the formulaic AIP funding is aligned with
shareholders' interests because it allows the Compensation Committee to arrive at a final AIP funding level that best rewards
holistic company performance and mitigates the risk inherent in a strictly formulaic approach. Using a strict formula may
have unintended consequences due to events or market conditions unanticipated when goals are set, or may overemphasize
short-term performance at the expense of long-term shareholder returns or undervalue achievements that are not yet
evident in our financial performance. These factors are particularly relevant in the P&C insurance industry, where the “cost of
goods sold” (that is, the amount of insured losses) is not known at the time of sale and develops over time — in some cases
over many years. Because of this industry dynamic, a substantial majority of our 2024 Corporate Peer Group (listed on page
49) include discretion in their annual award design.
COMPENSATION MATTERS
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2024 Compensation Core Earnings*
2024 AIP Funding Level: When setting
the operating plan, which forms the
basis for the Compensation Core
Earnings target, management and the
Board anticipated strong premium
growth in Property & Casualty and
modest growth in Employee Benefits,
significant improvement in personal
auto loss ratios and modest
improvement in the group life loss ratio,
and higher net investment income;
partially offset by rising group disability
and voluntary loss ratios, increased
underwriting and operating expenses,
higher Business Insurance non-cat
property losses, a slight deterioration in
workers’ compensation, and higher
current accident year catastrophes.
* Denotes a non-GAAP financial measure. For definitions and reconciliations to the most directly comparable GAAP measure, see Appendix A.
The 2024 AIP Compensation Core Earnings target was set at $2.84 billion, which was above both the 2023 Compensation Core
Earnings target of $2.56 billion, and actual 2023 compensation core earnings of $2.74 billion.
Actual Compensation Core Earnings for 2024 were $3.15 billion, which produced a formulaic AIP funding level of 143% of target,
with above target performance primarily driven by strong business performance in Employee Benefits and Property & Casualty
lines; Employee Benefits outperformance due to favorable life incidence and positive long-term disability outcomes; net favorable
P&C prior year reserve development; and higher fixed maturity income resulting from increased interest rates and asset levels,
offset by lower returns from limited partnerships in commercial real estate and private equities.
In assessing overall performance and arriving at the 2024 AIP funding level, the Compensation Committee started with the
formulaic AIP funding level and undertook a qualitative review of a variety of metrics in the categories described below. The
Compensation Committee determined that, while the Company performed well in these categories, the formulaic AIP funding
factor of 143% appropriately reflected strong 2024 performance. Accordingly, the Compensation Committee concluded that no
adjustment to the formulaic AIP funding factor was necessary.
Qualitative Criteria
Rationale
Composition of Earnings
Understanding trends that drove earnings informs how the Compensation Committee thinks
about holistic company performance.
Strategic Initiatives
Strategic initiatives position the Company for long term-growth and often represent significant
successes in a given year, but such initiatives may not be reflected or may reflect negatively in
the quantitative formula.
Peer-Relative Performance
Performance against the public companies within our 2024 Corporate Peer Group on key
financial metrics and TSR is not captured in the quantitative formula but informs how the
Compensation Committee thinks about holistic company performance.
Risk and Compliance
Linked to strategy of attracting and retaining talent, as prospective employees are significantly
more likely to work for a company that has a strong reputation of ethical conduct.
Strategic Expense
Management
Managing expenses is critical to maintaining competitive pricing and freeing up resources for
investments in the business.
Determination of Individual NEO Awards
The AIP funding level multiplied by an individual’s target AIP opportunity produces an initial AIP award, which the Committee may
adjust based on individual performance. In light of his responsibility for overall company performance, the CEO's AIP award has
equaled the AIP funding level, without further adjustment, every year since he assumed the position in 2014. For awards granted to
the NEOs in February 2025 for 2024 performance under the AIP, see 2024 Named Executive Officer's Compensation and Performance
beginning on page 44.
COMPENSATION MATTERS
2025 Proxy Statement
41
3. LONG-TERM INCENTIVE AWARDS
Long-term incentive ("LTI") awards are designed to drive long-term performance and encourage share ownership among Senior
Executives, aligning their interests with those of shareholders. LTI awards are granted on an annual basis following an assessment of
individual performance and market data. For 2024, the Compensation Committee updated the LTI award mix from 50%
performance shares and 50% options to 75% performance shares and 25% options. In addition, the weighting of performance
metrics within performance shares was changed from 50% Compensation Core ROE and 50% TSR to two-thirds Compensation
Core ROE and one-third TSR, as illustrated below. This LTI mix continues to rewards stock price performance, peer-relative
shareholder returns (stock price and dividends) and operating performance. The heavier weighting of performance shares linked to
Compensation Core ROE within LTI emphasizes a strategic measure that drives shareholder value creation, and highlights our
dedication to executing our strategy for achieving and sustaining long-term profitable growth.
2023-2025 LTI Awards
2024-2026 LTI Awards
Stock Options
50%
Performance
Shares
(TSR-linked)
25%
➞
Stock Options
25%
Performance
Shares
(TSR-linked)
25%
Performance
Shares
(Compensation Core
ROE-linked)
25%
Performance Shares
(Compensation Core ROE-linked)
50%
2024-2026 Performance Shares (75% of LTI Award)
Performance shares are designed to reward and retain Senior Executives by allowing them to earn shares of our common stock
based on predetermined performance criteria. Performance shares have a three-year performance period, and are settled in shares
of common stock ranging from 0% to 200% of the number of performance shares granted depending upon the performance
achieved on the following metrics:
Performance Metric
Rationale
Compensation Core ROE
(two thirds of performance shares)
Strategic measure that drives shareholder value creation
Peer-relative TSR
(one third of performance shares)
Measure of our performance against peers that are competing investment
choices in the capital markets
Compensation Core ROE: For two thirds of the performance share award, payouts at the end of the performance period, if any, will
depend upon achieving a target average annual ROE over a three-year measurement period, as adjusted for compensation
purposes. Because of the adjustments made for compensation purposes, Compensation Core ROE will differ from both the net
income ROE and Core Earnings ROE provided in our financial statements. The Compensation Committee's definition of
Compensation Core ROE for 2024 performance share awards is provided in Appendix A.
COMPENSATION MATTERS
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In January 2024, the Compensation
Committee set the target for 2024-2026
performance share awards at an average
annual Compensation Core ROE for
2024, 2025, and 2026 of 15.5%, as
reflected in the 2024-2026 operating
plan. As illustrated in the graph at right,
the Compensation Committee also set a
threshold performance level (80% of
target), below which no payout for the
ROE component of awards is received,
and a maximum payout for the ROE
component of 200% for performance
significantly exceeding target (120% of
target).
2024-2026 Compensation Core ROE*
* Denotes a non-GAAP financial measure. For definitions and reconciliations to the most directly comparable GAAP measure, see Appendix A.
Peer-Relative TSR: For the other third of the performance share award, payouts, if any, will be based on company TSR performance
at the end of the three-year performance period relative to a Performance Peer Group. The current Performance Peer Group
represents 15 industry specific public companies against which we benchmark performance for compensation purposes. While
there is some overlap, the Performance Peer Group is distinct from the Corporate Peer Group described on page 49, which includes
mutual companies where financial data is not publicly available, as well as companies that compete with us for talent. The
Compensation Committee believes that the Performance Peer Group should be limited to publicly traded companies that offer
similar products and services and are competing investment choices in capital markets. The Compensation Committee reviews the
composition of the Performance Peer Group annually and did not make any changes to this group for 2024 performance share
awards.
For each company in the Performance Peer Group, TSR will be measured using a 20-day stock price average at the beginning and
the end of the performance period in order to smooth out any volatility. In response to shareholder feedback in prior years, the TSR
payout curve for performance share awards targets above-median performance. There is no payout for performance below the 30th
percentile; 35% payout for performance at the 30th percentile; target payout for performance at the 55th percentile; and 200%
payout for performance at the 85th percentile.
2024 Performance Peer Group
Three-Year Relative TSR Ranking
Allstate Corp.
American Financial Group, Inc.
Berkley (W. R.) Corp.
Chubb Limited
Cincinnati Financial Corp.
CNA Financial Corp.
Everest Re Group, Ltd.
Hanover Insurance Group, Inc.
Markel Corporation
Mercury General Corp.
MetLife, Inc.
Old Republic International Corp.
Progressive Corp.
Travelers Companies, Inc.
Unum Group
Stock Options (25% of LTI Awards)
The use of stock options directly aligns the interests of our Senior Executives with those of shareholders because options only have
value if the price of our common stock on the exercise date exceeds the stock price on the grant date. The stock options are granted
at fair market value, vest in three equal installments over three years, and have a 10-year term.
COMPENSATION MATTERS
2025 Proxy Statement
43
Certification of 2022-2024 Performance Share Awards
On February 23, 2022, the Compensation Committee granted Senior Executives performance shares tied 50% to achievement of
average annual Compensation Core ROE goals over a three-year measurement period, and 50% to TSR performance relative to a
peer group of 15 companies.(1) For the Core ROE component of the award, achievement of average annual Compensation Core ROE
of 10.8%, 13.5% and 16.2% during the measurement period would have resulted in payouts of 35%, 100% and 200% of target,
respectively. For the TSR component of the award, there would be no payout for performance below the 30th percentile, 35%
payout for performance at the 30th percentile, target payout for performance at the 55th percentile, and 200% payout for
performance at the 85th percentile.
These performance shares vested as of December 31, 2024, the end of the three-year performance period, and the Compensation
Committee certified a payout at 180% of target on February 18, 2025 based on the following results:
•
The average of the Company's Compensation Core ROE for each year of the measurement period was 16.3%, resulting in
achievement of 200% of target for the Compensation Core ROE component, or 50% of the awards.
•
The Company’s TSR during the performance period was at the 73rd percentile ranking, resulting in the achievement of
160% of target for the TSR component, or 50% of the awards.
Details of the 2022 performance shares are given on pages 46 to 47 of our 2023 proxy statement filed with the Securities and
Exchange Commission on April 6, 2023.
(1) While the peer group at the time of the grant consisted of 16 companies, Berkshire Hathaway subsequently acquired Alleghany Corp., resulting in a 2022 performance peer group
of 15 companies.
EXECUTIVE BENEFITS AND PERQUISITES
Senior Executives are eligible for the same benefits as full-time employees generally, including health, life insurance, disability and
retirement benefits. Non-qualified savings and retirement plans, including those that have been frozen, provide benefits that would
otherwise be provided but for the Internal Revenue Code limits that apply to tax-qualified benefit plans.
Certain additional perquisites are available to Senior Executives, including reimbursement of costs for annual physicals and
associated travel, relocation benefits when a move is required, personal executive support services, certain travel and commuting
benefits (described below) and occasional use of tickets for sporting and special events previously acquired by the Company when
no other business use has been arranged and there is no incremental cost to the Company. For actual perquisites received by NEOs
in 2024, see the “Summary Compensation Table – All Other Compensation” on page 54.
We own a fractional interest in a corporate aircraft to allow Senior Executives to safely and efficiently travel for business purposes.
The corporate aircraft enables Senior Executives to use travel time productively by providing a confidential environment in which
to conduct business and eliminating the schedule constraints imposed by commercial airline service. In 2024, the CEO was
permitted personal use of corporate aircraft to minimize time spent on personal travel and to increase the time available for
business purposes. Corporate aircraft also provides the necessary security for, and maintains the health and safety of, our CEO and
enables the CEO to work more productively while traveling for time-sensitive personal matters. Our aircraft usage policy otherwise
prohibits personal travel via corporate aircraft by Senior Executives except in extraordinary circumstances. There was no personal
use by Senior Executives due to extraordinary circumstances in 2024. In 2024, the CEO was also provided the use of a company car
and driver to allow for greater efficiency while commuting.
From time to time, a Senior Executive’s expenses for a purpose deemed important to the business may not be considered “directly
and integrally related” to the performance of the Senior Executive’s duties as required by applicable SEC rules. These expenses are
considered perquisites for disclosure purposes. Examples of such expenses may include attendance at conferences, seminars or
award ceremonies, as well as attendance of a Senior Executive’s spouse or guest at business events or dinners where spousal or
guest attendance is expected.
Whenever required to do so under Internal Revenue Service regulations, we attribute income to Senior Executives for perquisites
and the Senior Executive is responsible for the associated tax obligation.
2024 NAMED EXECUTIVE OFFICERS' COMPENSATION AND PERFORMANCE
In evaluating individual performance, the Compensation Committee considered each NEO's achievements to advance the
Company's strategic priorities of focusing on ROE performance, driven by advancing underwriting excellence, emphasizing digital
capabilities, maximizing distribution channels, optimizing organizational efficiency, and embedding sustainability principles into our
business to drive value creation while impacting society at large.
CHRISTOPHER SWIFT
Chairman and Chief Executive Officer
COMPENSATION MATTERS
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Mr. Swift has served as CEO since July 1, 2014; he was also appointed Chairman on January 5, 2015. As CEO, he is responsible for
the Company’s strategy and growth, capital allocation, performance, culture and leadership.
2024 Performance
In reviewing Mr. Swift's performance, the independent directors noted that under his leadership, the company surpassed its
financial goals for 2024, achieving an industry-leading net income ROE of 19.9% and core earnings ROE of 16.7%*, and net income
available to common stockholders and core earnings* of $3.1 billion ($10.35 per diluted share) and $3.1 billion ($10.30 per diluted
share), respectively. These financial results exceeded 2023's. They also recognized Mr. Swift's strong leadership and overall
performance in meeting operational and strategic objectives, including the superior execution of digital and technology investments
that enhanced business ease for customers and distribution partners. Additionally, his oversight in leading the company's brand
refresh, driven by innovation and a persistent focus on customers, was considered. Mr. Swift’s continued emphasis on sustainability
practices, and ethics ultimately yielded the company recognition from Ethisphere as one of the “World’s Most Ethical Companies”
for the 15th consecutive year. His focus on talent management, including successful implementation of succession plans following
retirements, was also acknowledged.
2024 Compensation Decisions
• Salary. $1,200,000, unchanged from 2023.
• AIP Award. Target of $3,300,000, unchanged from 2023. The Compensation Committee approved a 2024 AIP award of
$4,719,000 (143% of target), which was equal to the company AIP funding level of 143% for 2024.
• LTI Award. In February 2024, the Compensation Committee granted him an LTI award of $12,000,000, an increase of 14.3%
from the previous year, in the form of 25% stock options and 75% performance shares.
BETH COSTELLO
Executive Vice President and Chief Financial Officer
Ms. Costello has served as CFO since July 1, 2014. As the Company’s CFO, Ms. Costello is responsible for the finance, treasury,
capital, accounting, investor relations, underwriting, procurement and actuarial functions.
2024 Performance
In reviewing Ms. Costello’s performance, the Compensation Committee noted the company's exceptional financial results and the
successful execution of its capital management plan, which returned $2.1 billion to stockholders, including $1.5 billion in equity
repurchases and an 11% increase in our common stock dividend. Her effective management of expenses and investments led to
operational efficiencies and process improvements that supported business growth. Additionally, Ms. Costello’s engagement with
investors and external stakeholders, including rating agencies, resulted in the reaffirmation of the company's long-term credit
rating and financial strength.
2024 Compensation Decisions
• Salary. $800,000, a 3.2% increase from 2023.
• AIP Award. Target of $1,350,000, unchanged from 2023. For 2024, the Compensation Committee approved an AIP award of
$1,930,500 (143% of target), which was equal to the Company AIP funding level of 143% for 2024.
• LTI Award. In February 2024, the Compensation Committee granted her an LTI award of $2,600,000,an increase of 7.2%
from the previous year, in the form of 25% stock options and 75% performance shares.
* Denotes a non-GAAP financial measure. For definitions and reconciliations to the most directly comparable GAAP measure, see Appendix A.
ADIN MORRIS TOOKER
President
Mr. Tooker has served as the Company's President since February 1, 2025. He is responsible for overseeing Business Insurance,
Personal Insurance, as well as Enterprise Sales & Distribution and Risk Services. Mr. Tooker joined The Hartford in 2015 as chief
underwriting officer and has served in a number of critical leadership roles during the last nine years, most recently as head of
Business Insurance.
2024 Performance
In reviewing Mr. Tooker’s performance, the Compensation Committee recognized his effective leadership as Head of Business
Insurance, which resulted in solid business performance, including strong premium growth and financial results. His leadership skills
and focus on talent have led to positive employee engagement and high talent retention metrics, as well as his commitment to
COMPENSATION MATTERS
2025 Proxy Statement
45
profitable growth through disciplined underwriting. Additionally, Mr. Tooker’s execution of customer experience initiatives is
evident through industry-leading digital adoption.
2024 Compensation Decisions
• Salary. $750,000
• AIP Award. Target of $1,097,500. This reflects a proration between Mr. Tooker's initial 2024 AIP target of $835,000 when
he was overseeing middle & large business, global specialty and enterprise sales & distribution, and his AIP target of
$1,150,000 which took effect in March when he took on additional oversight responsibility for small business and became
head of Business Insurance. For 2024, the Compensation Committee approved an AIP award of $1,569,400 (143% of target),
which was equal to the Company AIP funding level of 143% for 2024.
• LTI Award. In February 2024, the Compensation Committee granted him an LTI award of $1,700,000 in the form of 25%
stock options and 75% performance shares.
DEEPA SONI
Executive Vice President, Chief Information and Operations Officer
Ms. Soni served as Executive Vice President from August 2, 2021 to March 27, 2025. She was responsible for The Hartford's
technology, data, analytics, and information security operations. Beginning in March 2024, Ms. Soni also assumed responsibility for
The Hartford's customer-facing operations.
2024 Performance
In reviewing Ms. Soni's performance, the Compensation Committee acknowledged her successful delivery of digital investments
that drove significant transformation and business value, while also achieving expense savings and process improvement. Her
implementation of new digital capabilities for agents and customers earned external recognition, including the #1 ranking from
Keynova Group for digital delivery in Small Business and #4 in Personal Insurance. Additionally, her continued successful
integration of Technology, Data and Analytics, and Operations led to end-to-end process improvements and continued expansion of
cloud technology, enhancing customer experiences and yielding operational efficiencies.
2024 Compensation Decisions
• Salary. $750,000, a 7.1% increase from 2023.
• AIP Award. Target of $1,091,700, an increase of 36% from 2023. This reflects a proration between Ms. Soni's initial 2024 AIP
target of $800,000 as Chief Information Officer, and her AIP target of $1,150,000 which took effect in March when she began
leading Operations as well. For 2024, the Compensation Committee approved an AIP award of $1,561,100 (143% of target),
which was equal to the Company AIP funding level of 143% for 2024.
• LTI Award. In February 2024, the Compensation Committee granted her an LTI award of $1,600,000, an increase of 14.3%
from the previous year, in the form of 25% stock options and 75% performance shares.
AMY STEPNOWSKI
Executive Vice President, Chief Investment Officer, and President of HIMCO
Ms. Stepnowski has served as Executive Vice President since August 1, 2020. She is responsible for The Hartford's investment
operations.
2024 Performance
In reviewing Ms. Stepnowski's performance, the Compensation Committee considered HIMCO's outstanding portfolio
performance, which yielded $2.6 billion before tax, positively impacting core earnings and contributing to the company's overall
exceptional results, despite a dynamic environment. Her strong talent management skills led to top quartile employee engagement
and talent retention metrics against relative benchmarks, including the successful execution of succession planning within HIMCO.
Additionally, Ms. Stepnowski's expanded relationships with private equity and private credit firms enhancing strategic partnerships.
COMPENSATION MATTERS
46
www.thehartford.com
2024 Compensation Decisions
• Salary. $600,000, unchanged from 2023.
• AIP Award. Target of $1,100,000, unchanged from 2023. For 2024, the Compensation Committee approved an AIP award of
$1,573,000 (143% of target), which was equal to the Company AIP funding level of 143% for 2024.
• LTI Award. In February 2024, the Compensation Committee granted her an LTI award of $1,400,000, an increase of 27.3%
from the previous year, in the form of 25% stock options and 75% performance shares.
COMPENSATION MATTERS
2025 Proxy Statement
47
PROCESS FOR DETERMINING SENIOR EXECUTIVE COMPENSATION (INCLUDING
NEOs)
COMPENSATION COMMITTEE
The Compensation Committee is responsible for reviewing the performance of and approving compensation awarded to those
executives who either report to the CEO or who are subject to the filing requirements of Section 16 of the Exchange Act (other than
the CEO). The Compensation Committee also evaluates the CEO’s performance and recommends his compensation for approval by
the independent directors. With this input from the Compensation Committee, the independent directors review the CEO’s
performance and determine his compensation level in the context of the established goals and objectives for the enterprise and his
individual performance. The Compensation Committee and the independent directors typically review performance and approve
annual incentive awards for the prior fiscal year at their February meeting, along with annual LTI awards and any changes to base
salary and target bonus for the current year. To assist in this process, the Compensation Committee, with the support of its
consultant, reviews market and historical compensation information for each NEO to understand how each element of
compensation relates to other elements and to the compensation package as a whole, including outstanding equity awards.
Highlights of Annual Compensation Design, Payout and Performance Goal-Setting Process
December to January
• Review feedback from Fall shareholder engagement
• Approve design of AIP and LTI programs for the upcoming year, including updates to Performance and Corporate Peer
Groups
• Determine enterprise AIP funding based on the previous year's actual performance against the pre-established
Compensation Core Earnings target and a review of qualitative factors
• Review Senior Executive stock ownership
February
• Review Senior Executive performance for previous year and determine individual AIP awards
• Establish AIP and LTI performance targets based on the Company's approved operating plan
• Review and approve current year total compensation recommendations for Senior Executives, including salary, AIP targets
and LTI awards
• Establish Senior Executive leadership goals and objectives for the current year
May to July
• Review Say-on-Pay voting results and recommendations of proxy advisory firms
• Review results of the company's pay equity analysis
• Review talent succession planning
September
• Review Enterprise Risk Management's annual compensation risk assessment
• Review AIP and LTI program design for the coming year
• Receive independent consultant's annual report on executive compensation trends and regulatory trends
• Review executive perquisites
Ongoing
• Monitor the company's year-to-date performance in relation to targets
• Review and consider compensation plans, policies and practices in light of company performance, strategy, shareholder
feedback and best practices
• Periodic review of the Company’s key talent and employee engagement measures (e.g., attrition, hiring, promotion and
employee engagement)
COMPENSATION CONSULTANT
Compensation Advisory Partners, LLP (“CAP”) is the Compensation Committee’s independent compensation consultant and has
regularly attended Compensation Committee meetings since its engagement. Pursuant to the Compensation Committee’s charter,
during its engagement, CAP has not provided services to the Company other than consulting services provided to the
Compensation Committee and, with respect to CEO and director compensation, the Board. CAP has provided market data, analysis,
and advice regarding executive and director compensation. Following a review of its records and practice guidelines, CAP provided
the Compensation Committee a report that confirmed its conformity with independence factors under applicable SEC rules and the
listing standards of the NYSE.
COMPENSATION MATTERS
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ROLE OF MANAGEMENT
Our Human Resources team supports the Compensation Committee in the execution of its responsibilities. Our Chief Human
Resources Officer oversees the development of the materials for each Compensation Committee meeting, including market data,
historical compensation and outstanding equity awards, individual and company performance metrics and compensation
recommendations for consideration by the Compensation Committee (in the case of the CEO, by the independent directors). No
member of our management team, including the CEO, has a role in determining their own compensation.
BENCHMARKING
On an annual basis, the Compensation Committee reviews and considers a number of factors in establishing or recommending a
target total compensation opportunity for each individual including, but not limited to, market data, time in role, experience,
sustained performance, retention, and internal pay equity. Although the Compensation Committee considers competitive market
data, it does not target a specific market position. The various sources of compensation information the Compensation Committee
uses to determine the competitive market for our executive officers are described in more detail below.
2024 Corporate Peer Group
The Compensation Committee reviews the peer group used for compensation benchmarking (the "Corporate Peer Group")
periodically or upon a significant change in business conditions for the Company or its peers. As part of its review, the
Compensation Committee considers many factors, including market capitalization, revenues, assets, lines of business and sources
and destinations of talent. For this reason, the Corporate Peer Group differs from the Performance Peer Group described earlier for
purposes of the TSR performance measure applicable to performance shares. The Compensation Committee did not make any
changes to the Corporate Peer Group in 2024.
Data in millions – as of 12/31/2024(1)
Company Name(2)
Revenues
Assets
Market Cap
Allstate Corp.
$
64,106
$
111,617
$
51,051
American International Group, Inc.
$
27,251
$
161,322
$
45,410
Berkley (W. R.) Corp.
$
13,639
$
40,567
$
22,300
Chubb Ltd.
$
56,724
$
246,341
$
111,376
Cincinnati Financial Corp.
$
11,337
$
36,501
$
22,462
CNA Financial Corp.
$
14,270
$
66,492
$
13,101
Hanover Insurance Group, Inc.
$
6,237
$
15,317
$
5,573
Lincoln National Corp.
$
18,442
$
390,831
$
5,402
MetLife Inc.
$
70,986
$
677,457
$
56,695
Principal Financial Group Inc.
$
16,128
$
313,664
$
17,706
Progressive Corp.
$
75,343
$
105,745
$
140,366
Travelers Companies Inc.
$
46,423
$
133,189
$
54,687
Unum Group
$
12,887
$
61,959
$
13,336
Voya Financial Inc.
$
8,050
$
163,889
$
6,623
25TH PERCENTILE
$
13,075
$
63,092
$
13,160
MEDIAN
$
17,285
$
122,403
$
22,381
75TH PERCENTILE
$
54,149
$
225,728
$
53,778
THE HARTFORD
$
26,535
$
80,917
$
31,714
PERCENT RANK
61%
34%
57%
(1)
Data provided by S&P Global Market Intelligence. The amounts shown in the “Revenues” column reflect adjustments by S&P
Global Market Intelligence to facilitate comparability across companies.
(2)
An additional four non-public companies are included in the Corporate Peer Group as they submit data to relevant
compensation surveys utilized in determining appropriate pay levels for Senior Executives: Liberty Mutual, MassMutual,
Nationwide Financial, and State Farm.
Use of Corporate Peer Group Compensation Data
When evaluating and determining individual pay levels, the Compensation Committee periodically reviews compensation data
prepared by third parties showing the 25th, 50th and 75th percentiles of various pay elements for the companies listed above. As
noted previously, the Compensation Committee does not target a specific market position in pay.
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49
The Compensation Committee also reviews general industry survey data published by third parties as a general indicator of
relevant market conditions and pay practices, including perquisites. Neither the Compensation Committee nor management has
any input into companies included in these general industry or financial services company surveys.
COMPENSATION POLICIES AND PRACTICES
STOCK OWNERSHIP AND RETENTION REQUIREMENTS
In 2024, following a market review and discussion with shareholders, the Compensation Committee adopted a policy requiring
Senior Executives to meet or exceed the following stock ownership levels within five years of appointment to position:
Level
(As a Multiple of Base Salary)
CEO
6x
Other NEOs
4x
Under the policy, the following forms of equity are recognized as contributing to the stock ownership requirements:
•
Shares held directly by the executive;
•
Shares held indirectly by trust, by immediate family members, or through the Company’s 401(k) and Excess Savings plans;
•
Unvested performance shares (valued at 50% of target); and
•
Unvested RSUs.
Unvested or vested and unexercised stock options are not counted for purposes of the requirements. The policy also provides that
executives who have not achieved these stock ownership levels within five years of appointment are required to retain at least 50%
of the shares acquired upon vesting and award distributions until the ownership requirements are fully met.
The Compensation Committee believes these requirements align the interests of our NEOs with shareholders, and reviews
ownership levels annually. As of March 24, 2025, the CEO and each of the other NEOs met their respective requirement.
TIMING OF EQUITY GRANTS
Equity grants may be awarded four times per year, on the second trading day following the filing of our Form 10-Q or 10-K for the
prior period. Our practice is to grant annual equity awards following the filing of our Annual Report on Form 10-K. This timing
ensures that grants are made at a time when the stock price reflects the most current public data regarding our performance and
financial condition.
The Company does not grant equity awards in anticipation of the release of material nonpublic information that is likely to result in
changes to the price of our common stock. In addition, we generally do not grant stock options (i) during trading blackout periods
established under our insider trading policy, or (ii) at any time during the four business days prior to or the one business day
following the filing of our periodic reports or the filing or furnishing of a Form 8-K that discloses material nonpublic information.
During fiscal year 2024, (i) none of our NEOs were awarded equity grants with an effective grant date during any period beginning
four business days before the filing or furnishing of a Form 10-Q, Form 10-K, or Form 8-K that disclosed material nonpublic
information, and ending one business day after the filing or furnishing of such reports, and (ii) we did not time the disclosure of
material nonpublic information for the purpose of affecting the value of executive compensation.
CLAWBACK POLICY
In September 2023, the Board approved a comprehensive Clawback Policy, revising and expanding upon our previous recoupment
policy. The Clawback Policy governs the circumstances under which the Company must attempt to recover “erroneously awarded”
incentive-based compensation paid to certain executive officers to the extent such compensation was based on a misstated
financial reporting measure that results in an accounting restatement, as required by SEC rules and NYSE listing standards. The
Clawback Policy applies to time-based and performance-based incentive compensation. The Clawback Policy also incorporates our
long-standing recoupment policy applicable to all employees, which has been in place since 2011, and allows for the recoupment of
any incentive compensation (cash or equity) and/or severance paid or payable at any time to the extent such recoupment either (i)
is required by applicable law or listing standards, or (ii) is necessary or appropriate in light of an employee’s action, or failure to act,
which is inimical to the best interests of the Company.
RISK MITIGATION IN PLAN DESIGN
Management has concluded that our compensation policies and practices are not reasonably likely to have a material adverse effect
on the Company. Our Enterprise Risk Management function performs a risk review of any new incentive compensation plans or any
material changes to existing plans annually and engages an independent third party to complete a comprehensive review of all
COMPENSATION MATTERS
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incentive compensation plans every five years. In 2024, Enterprise Risk Management conducted its comprehensive review of all
incentive compensation plans and discussed the results of that review with the Compensation Committee. Enterprise Risk
Management concluded that current incentive plans do not promote unnecessary risk-taking nor encourage the manipulation of
reported earnings.
The following features of our executive compensation program guard against excessive risk-taking:
Feature
Rationale
Pay Mix
•
A mix of fixed and variable, annual and long-term, and cash and equity compensation encourages strategies
and actions that are in the company’s long-term best interests
•
Long-term compensation awards and overlapping vesting periods encourage executives to focus on sustained
company results and stock price appreciation
Performance
Metrics
•
Incentive awards based on a variety of performance metrics diversify the risk associated with any single
indicator of performance
Equity
Incentives
•
Stock ownership requirements align executive and shareholder interests
•
Equity grants are made only during a trading window following the release of financial results
•
No reload provisions are included in any stock option awards
Plan Design
•
Incentive plans are not overly leveraged, cap the maximum payout, and include design features intended to
balance pay for performance with an appropriate level of risk-taking
•
Our equity incentive plans do not allow:
◦
Stock options with an exercise price less than the fair market value of our common stock on the grant
date;
◦
Re-pricing (reduction in exercise price) of stock options without shareholder approval; or
◦
Single trigger vesting of awards upon a Change of Control if awards are assumed or replaced with
substantially equivalent awards
Recoupment
•
As described above, we have a comprehensive clawback policy, that requires the Company to recover
incentive compensation in the event of an accounting restatement, and permits recovery for employee
misconduct
HEDGING AND PLEDGING COMPANY SECURITIES
We have robust policies prohibiting our employees and directors from engaging in hedging, monetization, derivative, speculative
and similar transactions involving company securities. In addition, Directors and Senior Executives are prohibited from holding
stock in a margin account or pledging stock as collateral for a loan.
POTENTIAL SEVERANCE AND CHANGE OF CONTROL PAYMENTS
The Company does not have individual employment agreements. NEOs are covered under a severance pay plan that provides
severance in a lump sum equal to two times the sum of annual base salary plus target bonus, whether severance occurs before or
after a change of control (no gross-up is provided for any change of control excise taxes that might apply). As a condition to
receiving severance, Senior Executives must agree to restrictive covenants covering such items as non-competition, non-solicitation
of business and employees, non-disclosure and non-disparagement.
The Company maintains change of control benefits to ensure continuity of management and to permit executives to focus on their
responsibilities without undue distraction related to concerns about personal financial security if the Company is confronted with a
contest for control. These benefits are also designed to ensure that in any such contest, management is not influenced by events
that could occur following a change of control.
The 2020 Stock Incentive Plan provides for “double trigger” vesting on a change of control. If an NEO terminates employment for
“Good Reason” or their employment is terminated without “Cause” (see definitions on page 63) within two years following a Change
of Control (as defined in the plan), then any awards that were assumed or replaced with substantially equivalent awards vest. If the
awards were not assumed or replaced with substantially equivalent awards, the awards vest immediately upon the Change of
Control.
EFFECT OF TAX AND ACCOUNTING CONSIDERATIONS ON COMPENSATION
DESIGN
In designing our compensation programs, we consider the tax and accounting impact of our decisions. In doing so, we strive to strike
a balance between designing appropriate and competitive compensation programs for our executives, maximizing the deductibility
of such compensation, and, to the extent reasonably possible, avoiding adverse accounting effects and ensuring that any accounting
consequences are appropriately reflected in our financial statements.
Tax considerations are factored into the design of our compensation programs, including compliance with the requirements of
Section 409A of the Internal Revenue Code, which can impose additional taxes on participants in certain arrangements involving
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2025 Proxy Statement
51
deferred compensation, and Sections 280G and 4999 of the Internal Revenue Code, which affect the deductibility of, and impose
certain additional excise taxes on, certain payments that are made upon or in connection with a change of control.
Section 162(m) of the Internal Revenue Code generally disallows a federal income tax deduction to any publicly held corporation for
compensation paid in excess of $1,000,000 in any taxable year to any person who is a “covered employee” under this rule. The term
“covered employee” includes any person who is or was a named executive officer of the Company under the proxy disclosure rules
in any year after 2016. Accordingly, to the extent that compensation in excess of $1 million is payable to any such person, it is likely
that the excess amount will not be deductible by the Company or its subsidiaries for federal income tax purposes.
REPORT OF THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and has
recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Report submitted as of March 21, 2025 by:
Members of the Compensation Committee:
Matthew E. Winter, Chair
Carlos Dominguez
Trevor Fetter
Teresa W. Roseborough
Virginia P. Ruesterholz
COMPENSATION MATTERS
52
www.thehartford.com
EXECUTIVE COMPENSATION TABLES
SUMMARY COMPENSATION TABLE
The table below reflects total compensation paid to or earned by each NEO.
Name and Principal
Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)(1)
Option
Awards
($)(2)
Non-Equity
Incentive Plan
Compensation
($)(3)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(4)
All Other
Compensation
($)(5)
Total
($)
Christopher Swift
Chairman and Chief
Executive Officer
2024
1,200,000
—
10,072,800
3,000,000
4,719,000
25,133
326,415
19,343,348
2023
1,200,000
—
5,747,175
5,250,000
3,861,000
37,310
312,765
16,408,250
2022
1,187,500
—
5,153,500
5,000,000
4,440,000
—
305,469
16,086,469
Beth Costello
Executive Vice
President and Chief
Financial Officer
2024
793,750
—
2,182,440
650,000
1,930,500
3,937
65,325
5,625,952
2023
775,000
—
1,327,324
1,212,500
1,579,500
43,481
53,154
4,990,959
2022
762,500
—
1,288,375
1,250,000
1,924,000
—
66,100
5,290,975
Adin Morris Tooker*,
President
2024
740,000
—
1,426,980
425,000
1,569,400
—
87,114
4,248,494
2023
NA
NA0
NA0
NA0
NA0
NA0
NA0
NA
2022
NA
NA0
NA0
NA0
NA0
NA0
NA0
NA
Deepa Soni
Executive Vice
President, Chief
Information and
Operations Officer
2024
741,667
—
1,343,040
400,000
1,561,100
—
52,575
4,098,382
2023
687,500
—
766,290
700,000
936,000
—
57,733
3,147,523
2022
637,500
—
644,188
625,000
1,036,000
—
57,900
3,000,588
Amy Stepnowski
Executive Vice
President and Chief
Investment Officer;
President of HIMCO
2024
600,000
—
1,175,160
350,000
1,573,000
766
52,200
3,751,126
2023
587,500
—
602,085
550,000
1,287,000
13,711
52,800
3,093,096
2022
525,000
—
515,350
500,000
1,480,000
—
66,100
3,086,450
*Mr. Tooker was not an NEO prior to 2024.
(1)
This column reflects the aggregate grant date fair value of performance shares calculated in accordance with FASB ASC Topic
718 for the fiscal years ended December 31, 2024, 2023 and 2022. Detail on the 2024 grants, which were made under The
Hartford 2020 Stock Incentive Plan, is provided in the Grants of Plan Based Awards Table on page 55. The amounts in this
column are not reduced for estimated forfeiture rates during the applicable vesting periods. Other assumptions used in the
calculation of these amounts are included in footnote 19 of the Company's Annual Report on Form 10-K for 2024, footnote 20
of the Company's Annual Report on Form 10-K for 2023, and footnote 19 of the Company's Annual Reports on Form 10-K for
2022.
To determine the fair value of the 2024 performance share award under FASB ASC Topic 718, the market value on the grant
date is adjusted to reflect the probable outcome of the performance condition(s), based in part on a Monte Carlo simulation and
consistent with the estimated aggregate compensation cost to be recognized over the service period, determined as of the
grant date. These adjustments result in a value under FASB ASC Topic 718 that is 111.92% of the market value on the grant
date.
The number of shares payable under these awards will be based on the actual results as compared to pre-established
performance conditions and can range from 0-200% of the target award. The value* of performance shares assuming the
highest possible outcome of the performance conditions determined at the time of grant (200% of the target award) would in
total be:
NEO
2024 Performance
Shares ($)
(February 27, 2024 grant date)
2023 Performance
Shares ($)
(February 28, 2023 grant date)
2022 Performance Shares ($)
(February 23, 2022 grant date)
C. Swift
18,000,000
10,500,000
10,000,000
B. Costello
3,900,000
2,425,000
2,500,000
A. Morris Tooker
2,550,000
NA
NA
D. Soni
2,400,000
1,400,000
1,250,000
A. Stepnowski
2,100,000
1,100,000
1,000,000
*Does not include the value of any dividend equivalents credited on the performance shares during the performance period.
Under the 2020 Stock Incentive Plan, no more than 3,000,000 shares in the aggregate can be granted to an individual employee
with respect to any awards in a single calendar year, except in the event of a new hire or promotion.
COMPENSATION MATTERS
2025 Proxy Statement
53
(2)
This column reflects the aggregate grant date fair value for the fiscal years ended December 31, 2024, 2023 and 2022
calculated in accordance with FASB ASC Topic 718. The amounts in this column are not reduced for estimated forfeitures
during the applicable vesting periods. Other assumptions used in the calculation of these amounts are included in footnote 19
of the Company's Annual Report on Form 10-K for 2024, footnote 20 of the Company's Annual Report on Form 10-K for 2023,
and in footnote 19 of the Company's Annual Report on Form 10-K for 2022.
(3)
This column reflects cash AIP awards paid for the respective years.
(4)
This column reflects the actuarial increase, if any, in the present value of the accumulated benefits of the NEOs under all
pension plans established by the Company (these plans were frozen as of December 31, 2012 and no longer accrue benefits,
other than interest on cash balance benefits). The amounts were calculated using discount rate and form of payment
assumptions consistent with those used in the Company’s GAAP financial statements. Actuarial assumptions for 2024 are
described in further detail in footnote 2 of the Pension Benefits Table on page 58. Having joined the Company after December
31, 2012, when these plans were frozen, Ms. Soni and Mr. Tooker do not have a benefit under either pension plan.
(5)
This column reflects amounts detailed in the Summary Compensation Table—All Other Compensation.
Summary Compensation Table - All Other Compensation
This table provides more details on the amounts presented in the “All Other Compensation” column in the Summary Compensation
Table on page 53 for the NEOs.
Name
Year
Perquisites
($)(1)
Contributions or
Other
Allocations to Defined
Contribution Plans
($)(2)
Total
($)
Christopher Swift
2024
268,215
58,200
326,415
Beth Costello
2024
—
65,325
65,325
Adin Morris Tooker
2024
20,214
66,900
87,114
Deepa Soni
2024
—
52,575
52,575
Amy Stepnowski
2024
—
52,200
52,200
(1)
As permitted by SEC rules, we have included the perquisites and other personal benefits that we provided in 2024 where the
aggregate amount of such compensation to an NEO exceeds $10,000. Perquisite amounts for Mr. Swift include personal use of
corporate aircraft not requiring reimbursement to the Company ($230,409), commuting costs, and expenses associated with
his spouse's attendance at business functions. The perquisite for Mr. Tooker includes expenses related to an executive physical
and expenses associated with his spouse's travel to and attendance at business functions.
(2)
This column represents Company contributions under the Company’s tax-qualified 401(k) plan (The Hartford Investment and
Savings Plan) and The Hartford Excess Savings Plan (the “Excess Savings Plan”), a non-qualified plan established to “mirror” the
qualified plan to facilitate deferral of amounts that cannot be deferred under the 401(k) plan due to Internal Revenue Code
limits. Additional information can be found under the “Excess Savings Plan” section of the Non-Qualified Deferred Compensation
Table beginning on page 58. On March 6, 2025, the Company made additional contributions for the 2024 plan year, which
represented the difference between the maximum allowable contribution by the Company in 2024 and the actual amount
contributed by the Company in 2024 ("true up contributions"). The true up contributions are not reflected in the Contributions
or Other Allocations to Defined Contribution Plans table or the Summary Compensation Table above. The 2024 true up
contributions for the NEOs were as follows: (i) $8,700 for Mr. Swift; (ii) $1,575 for Ms. Costello; (iii) $0 for Mr. Tooker; (iv)
$14,325 for Ms. Soni; and (v) $14,700 for Ms. Stepnowski.
COMPENSATION MATTERS
54
www.thehartford.com
GRANTS OF PLAN BASED AWARDS TABLE
This table discloses information about equity awards granted to the NEOs in 2024 pursuant to the 2020 Stock Incentive Plan. The
table also discloses potential payouts under the AIP. Actual AIP payouts are reported in the Summary Compensation Table on page 53
under the heading “Non-Equity Incentive Plan Compensation.” Equity awards have been rounded to the nearest whole share or
option.
Name
Plan
Grant
Date
Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards(1)
Estimated Future Payouts
Under
Equity Incentive Plan
Awards(2)
All
Other
Stock
Awards:
Number
of
Shares
of
Stock or
Units (#)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(3)
Exercise
or Base
Price of
Option
Awards
($/Sh)
Grant
Date Fair
Value of
Stock and
Option
Awards
($)(4)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
C.
Swift
2024 AIP
1,155,000
3,300,000
9,900,000
Stock Options
2/27/2024
116,414
95.74
3,000,000
Performance
Shares
2/27/2024
10,967
94,005
188,009
10,072,800
B. Costello
2024 AIP
472,500
1,350,000
4,050,000
Stock Options
2/27/2024
25,223
95.74
650,000
Performance
Shares
2/27/2024
2,376
20,368
40,735
2,182,440
A. Morris
Tooker
2024 AIP
384,125
1,097,500
3,292,500
Stock Options
2/27/2024
16,492
95.74
425,000
Performance
Shares
2/27/2024
1,554
13,317
26,635
1,426,980
D. Soni
2024 AIP
382,095
1,091,700
3,275,100
Stock Options
2/27/2024
15,522
95.74
400,000
Performance
Shares
2/27/2024
1,462
12,534
25,068
1,343,040
A.
Stepnowski
2024 AIP
385,000
1,100,000
3,300,000
Stock Options
2/27/2024
13,582
95.74
350,000
Performance
Shares
2/27/2024
1,280
10,967
21,934
1,175,160
(1)
The “Threshold” column shows the payout amount for achieving the minimum level of performance for which an amount is
payable under the AIP at 35% of target (no amount is payable if this level of performance is not reached). The “Maximum”
column shows the maximum amount payable at 300% of target (the maximum amount payable for an individual AIP award).
The actual 2024 AIP award for each NEO is reported in the “Non-Equity Incentive Plan Compensation” column in the Summary
Compensation Table. Mr. Tooker's target reflects a proration between his initial 2024 AIP target of $835,000 and his revised
AIP target of $1,150,000 which took effect in March. Ms. Soni's target reflects a proration between her initial 2024 AIP target
of $800,000 and her revised AIP target of $1,150,000 which took effect in March.
(2)
The performance shares granted on February 27, 2024 vest on December 31, 2026, the end of the three year performance
period. The vesting percentage is based on the Company’s TSR performance relative to the 2024 Performance Peer Group (as
described on page 43) and performance based on pre-established Compensation Core ROE targets. These two measures are
weighted in a 1:2 ratio (as described on page 42), and each one has an independent minimum payout level of 35% of target. The
“Threshold” column for this grant represents 11.7% of target, which reflects the minimum possible amount that could be paid
under these awards (no amount is payable if the threshold level of performance is not reached for at least one performance
measure). The “Maximum” column for this grant represents 200% of target and is the maximum amount payable. See Payments
upon Termination or Change of Control table for a description of the circumstances in which vesting is accelerated.
(3)
The options granted in 2024 to purchase shares of the Company's common stock vest 1/3 per year on each anniversary of the
grant date and each option has an exercise price equal to the fair market value of one share of common stock on the grant date.
The value of each stock option award is $25.77 and was determined under FASB ASC Topic 718 by using a hybrid lattice/
Monte-Carlo based option valuation model; this value was not reduced to reflect estimated forfeitures during the vesting
period. See Payments upon Termination or Change of Control table for a description of the circumstances in which vesting is
accelerated.
(4)
The NYSE closing price per share of the Company’s common stock on February 27, 2024, the date of the 2024 LTI grants for
the NEOs, was $95.74. To determine the fair value of the 2024 performance share award under FASB ASC Topic 718, the
market value on the grant date is adjusted to reflect the probable outcome of the performance condition(s), based in part on a
Monte Carlo simulation and consistent with the estimated aggregate compensation cost to be recognized over the service
period, determined as of the grant date. These adjustments result in a value under FASB ASC Topic 718 that is 111.92% of the
market value on the grant date..
COMPENSATION MATTERS
2025 Proxy Statement
55
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
This table shows outstanding stock option awards classified as exercisable and unexercisable and the number and market value of
any unvested or unearned equity awards outstanding as of December 31, 2024 and valued using $109.40, the NYSE closing price
per share of the Company’s common stock on December 31, 2024.
Name
Option Awards
Stock Awards
Grant Date
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)(1)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(1)
Option
Exercise
Price
($)
Option
Expiration
Date
Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)(2)
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)(3)
Christopher
Swift
3/1/2016
294,481
43.59
3/1/2026
2/28/2017
302,908
48.89
2/28/2027
2/27/2018
284,819
53.81
2/27/2028
2/26/2019
352,263
49.01
2/26/2029
2/25/2020
327,679
55.27
2/25/2030
2/23/2021
310,820
51.87
2/23/2031
2/23/2022
201,288
100,644
69.41
2/23/2032
2/28/2023
82,977
165,956
78.28
2/28/2033
138,357
15,136,256
2/27/2024
116,414
95.74
2/27/2034
189,648
20,747,491
Beth
Costello
2/28/2017
70,679
48.89
2/28/2027
2/27/2018
63,194
53.81
2/27/2028
2/26/2019
75,790
49.01
2/26/2029
2/25/2020
71,318
55.27
2/25/2030
2/23/2021
67,204
51.87
2/23/2031
2/23/2022
50,322
25,161
69.41
2/23/2032
2/28/2023
19,164
38,328
78.28
2/28/2033
31,954
3,495,768
2/27/2024
25,223
95.74
2/27/2034
41,090
4,495,246
Adin Morris
Tooker
3/1/2016
13,728
43.59
3/1/2026
2/28/2017
20,194
48.89
2/28/2027
2/27/2018
24,922
53.81
2/27/2028
2/26/2019
26,687
49.01
2/26/2029
2/25/2020
24,094
55.27
2/25/2030
2/23/2021
25,202
51.87
2/23/2031
2/23/2022
16,103
8,052
69.41
2/23/2032
2/28/2023
8,100
16,201
78.28
2/28/2033
13,506
1,477,556
2/27/2024
16,492
95.74
2/27/2034
26,867
2,939,250
Deepa Soni
2/23/2022
25,161
12,581
69.41
2/23/2032
2/28/2023
11,063
22,128
78.28
2/28/2033
18,448
2,018,211
2/27/2024
15,522
95.74
2/27/2034
25,286
2,766,288
Amy
Stepnowski
2/23/2021
28,562
51.87
2/23/2031
2/23/2022
20,128
10,065
69.41
2/23/2032
2/28/2023
8,693
17,386
78.28
2/28/2033
14,495
1,585,753
2/27/2024
13,582
95.74
2/27/2034
22,126
2,420,584
(1) Stock options granted to the NEOs vest and become exercisable 1/3 per year on each anniversary of the grant date and
generally expire on the tenth anniversary of the grant date. See “(2) Accelerated Stock Option Vesting” on page 62 following
the Payments upon Termination or Change of Control table for a description of the circumstances in which vesting is accelerated.
(2) This column represents unvested performance share awards at 200% of target assuming that the Company has achieved the
highest performance level with respect to awards granted on February 28, 2023 and February 27, 2024. Dividend equivalents
are credited on performance shares, which remain subject to the same terms and conditions as the underlying performance
shares to which they relate and are paid only if, and to the extent that, the underlying performance shares vest and are paid out.
See “(3) Accelerated Vesting of Performance Shares and Other LTI Awards” on page 62 following the Payments upon
Termination or Change of Control table for a description of the circumstances in which vesting is accelerated for performance
shares.
•
Performance shares granted on February 28, 2023 vest on December 31, 2025, the end of the three year
performance period, based on the Company’s TSR performance relative to the peer group established by the
Compensation Committee and performance against pre-established Compensation Core ROE targets, with the two
measures weighted equally (50/50), as described on page 49 of the 2024 proxy statement.
COMPENSATION MATTERS
56
www.thehartford.com
•
Performance shares granted on February 27, 2024 vest on December 31, 2026, the end of the three year
performance period, based on the Company’s TSR performance relative to the peer group established by the
Compensation Committee and performance against pre-established Compensation Core ROE targets, with the two
measures weighted in a 1:2 ratio, as described on page 42 of this proxy statement.
(3) This column reflects the market value of performance shares at 200% of target, plus the value of dividend equivalents credited
on the performance shares, as of December 31, 2024.
OPTION EXERCISES AND STOCK VESTED TABLE
This table provides information regarding option awards exercised and stock awards that vested during 2024. The numbers have
been rounded to the nearest whole dollar or share.
Name
Option Awards
Stock Awards
Number of
Shares
Acquired on
Exercise
(#)
Value
Realized
on Exercise
($)(1)
Number of
Shares
Acquired on
Vesting
(#)(2)
Value
Realized
on Vesting
($)(3)
Christopher Swift
201,258
8,846,674
137,460
15,508,231
Beth Costello
110,991
6,152,758
34,365
3,877,058
Adin Morris Tooker
6,865
504,234
10,997
1,240,658
Deepa Soni
20,161
1,191,338
17,183
1,938,529
Amy Stepnowski
—
—
13,746
1,550,823
(1)
The amounts in this column reflect the aggregated dollar value realized upon the exercise of vested stock options during 2024.
The value realized is the difference between the fair market value of common stock on the date of exercise and the exercise
price of the option.
(2)
The numbers in this column reflect the total shares of common stock paid out on stock awards that vested in 2024. This includes,
for each NEO, performance shares granted on February 23, 2022 that vested on December 31, 2024 and paid out at 180% of
target following the Compensation Committee’s February 18, 2025 certification as further outlined on page 44.
(3) The value realized on vesting for the performance share awards is based on the NYSE closing price per share of the Company's
common stock on February 18, 2025 ($112.82), the date the Compensation Committee certified the vesting percentage.
COMPENSATION MATTERS
2025 Proxy Statement
57
PENSION BENEFITS TABLE
The table below shows the number of years of credited service, the actuarial present value of the accumulated pension benefit, and
the actual cash balance account as of December 31, 2024 under the Company’s tax-qualified pension plan (The Hartford
Retirement Plan for U.S. Employees, or the “Retirement Plan”) and the non-qualified pension plan (The Hartford Excess Pension
Plan II, or the “Excess Pension Plan”) for each of the NEOs.
Name
Plan Name
Number of
Years
Credited
Service
(#)(1)
Present
Value of
Accumulated
Benefit
($)(2)
Actual Cash
Balance
Account or
Accrued
Benefit
($)
Payments
During
Last Fiscal
Year
($)
Christopher Swift
Retirement Plan
2.83
88,029
89,308
—
Excess Pension Plan
2.83
489,587
496,702
—
Beth Costello
Retirement Plan
8.67
177,952
196,279
—
Excess Pension Plan
8.67
221,230
244,014
—
Adin Morris Tooker
Retirement Plan
—
—
—
—
Excess Pension Plan
—
—
—
—
Deepa Soni
Retirement Plan
—
—
—
—
Excess Pension Plan
—
—
—
—
Amy Stepnowski
Retirement Plan
4.33
90,132
100,271
—
Excess Pension Plan
4.33
30,631
34,077
—
(1)
This column reflects the years of credited service under the Retirement Plan and Excess Pension Plan (each a "Plan" or together
the "Plans") as of December 31, 2012. Benefit accruals ceased as of December 31, 2012 under each Plan. As of December 31,
2024, Messr. Swift and Mses. Costello and Stepnowski were vested at 100% in their cash balance accounts under the Plans.
Having joined the Company after December 31, 2012, when these Plans were frozen, Mr. Tooker and Ms. Soni do not have a
benefit under either Plan.
(2)
The present value of accumulated benefits under each Plan is calculated assuming that benefits commence at age 65, no pre-
retirement mortality, a lump sum form of payment and the same actuarial assumptions used by the Company for GAAP
financial reporting purposes. The present value is determined using a discount rate of 5.65%, and the cash balance amounts are
projected to age 65 using an assumed interest crediting rate of 4.36% for 2025 and 4.30% for 2026 and beyond.
Cash Balance Formula
For employees hired on or after January 1, 2001, including Messr. Swift and Mses. Costello and Stepnowski, retirement benefits
accrued under the cash balance formula until December 31, 2012. Effective December 31, 2012, the cash balance formula under
the Retirement Plan and the Excess Pension Plan was frozen for all Plan participants, including the NEOs. Interest continues to be
credited on previously accrued amounts, at a rate of 3.3% or based on the 10 year Treasury rate, whichever is greater. All Plan
participants are currently vested in their account balances, which they may elect to receive following termination of employment in
the form of a single lump sum payment or an actuarially-equivalent form of annuity.
In the event of a Change of Control (as defined in the Excess Pension Plan), each NEO would automatically receive a lump sum of the
value of their Excess Pension Plan cash balance benefit as of the date of the Change of Control, provided that the Change of Control
also constitutes a “change in control” as defined in regulations issued under Section 409A of the Internal Revenue Code.
NON-QUALIFIED DEFERRED COMPENSATION TABLE
Excess Savings Plan
NEOs, as well as other employees, may contribute to the Company’s Excess Savings Plan, a non-qualified plan established as a
“mirror” to the Company’s tax-qualified 401(k) plan (The Hartford Investment and Savings Plan). The Excess Savings Plan is
intended to facilitate deferral of amounts that cannot be deferred under the 401(k) plan for employees whose compensation
exceeds the Internal Revenue Code limit for the 401(k) plan ($345,000 in 2024). When an eligible employee’s annual compensation
reaches that Internal Revenue Code limit, the eligible employee can contribute up to six percent (6%) of compensation in excess of
that limit to the Excess Savings Plan, up to a combined $1 million annual limit on compensation for both plans. The Company makes
a matching contribution to the Excess Savings Plan in an amount equal to 100% of the employee’s contribution. Company
contributions to the Excess Savings Plan are fully vested and plan balances are payable in a lump sum following termination of
employment.
The table below shows the notional investment options available under the Excess Savings Plan during 2024 and their annual rates
of return for the calendar year ended December 31, 2024, as reported by the administrator of the Excess Savings Plan. The notional
investment options available under the Excess Savings Plan correspond to the investment options available to participants in the
401(k) plan.
COMPENSATION MATTERS
58
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Excess Savings Plan Notional Investment Options
Name of Fund
Rate of Return
(for the year ended
December 31, 2024)
Name of Fund
Rate of Return
(for the year ended
December 31, 2024)
The Hartford Stock Fund
38.41 %
Vanguard Target Retirement 2020 Trust
7.80 %
ISP International Equity Fund(1)
3.48 %
Vanguard Target Retirement 2025 Trust
9.50 %
ISP Active Large Cap Equity Fund(2)
23.63 %
Vanguard Target Retirement 2030 Trust
10.67 %
ISP Small/Mid Cap Equity Fund(3)
12.37 %
Vanguard Target Retirement 2035 Trust
11.77 %
State Street S&P 500 Index Non-Lending
Series Fund
25.01 %
Vanguard Target Retirement 2040 Trust
12.85 %
Hartford Stable Value Fund
2.56 %
Vanguard Target Retirement 2045 Trust
13.87 %
Hartford Total Return Bond HLS Fund
2.33 %
Vanguard Target Retirement 2050 Trust
14.69 %
SSgA Real Asset Fund
4.42 %
Vanguard Target Retirement 2055 Trust
14.68 %
Vanguard Federal Money Market Fund
5.23 %
Vanguard Target Retirement 2060 Trust
14.67 %
State Street Global All Cap Equity Ex-U.S.
Index Non-Lending Series Fund
5.11 %
Vanguard Target Retirement 2065 Trust
14.66 %
State Street Russell Small/Mid Cap
Index Non-Lending Series Fund
17.10 %
Vanguard Target Retirement 2070 Trust
14.65 %
Vanguard Target Retirement Income Trust
6.64 %
(1)
The ISP International Equity Fund is a multi-fund portfolio made up of two underlying mutual funds that provides a blended
rate of return. The underlying funds are the Hartford International Opportunities HLS Fund (50%) and Sprucegrove All
Country World ex USA CIT Fund (50%).
(2)
The ISP Active Large Cap Equity Fund is a multi-fund portfolio made up of two underlying funds that provides a blended rate of
return. The underlying funds are the Hartford Dividend and Growth HLS Fund (50%) and the Loomis Sayles Large Cap Growth
Fund (50%).
(3)
The ISP Small/Mid Cap Equity Fund is a multi-fund portfolio made up of four underlying funds that provides a blended rate of
return. The underlying funds are the T. Rowe Price QM U.S. Small-Cap Growth Equity Fund (20%), Chartwell Investment
Partners Small Cap Value Fund (20%), JP Morgan Mid Cap Growth Fund (30%) and Leeward Investments Mid Cap Value Fund
(30%).
Non-Qualified Deferred Compensation - Excess Savings Plan
The table below shows the NEO and company contributions, the aggregate earnings credited, and the total balance of each NEO’s
account under the Excess Savings Plan as of December 31, 2024.
Name
Executive
Contributions
in Last FY ($)(1)
Registrant
Contributions
in Last FY ($)(2)
Aggregate
Earnings
in Last FY ($)(3)
Aggregate
Withdrawals /
Distributions ($)
Aggregate
Balance
at Last FYE ($)(4)
Christopher Swift
39,300
39,300
246,048
—
2,105,091
Beth Costello
39,300
39,300
63,089
—
1,268,387
Adin Morris Tooker
39,300
39,300
83,652
—
973,698
Deepa Soni
39,300
39,300
67,114
—
433,744
Amy Stepnowski
39,300
39,300
111,782
—
1,128,574
(1)
The amounts shown reflect executive contributions to the Excess Savings Plan during 2024 with respect to AIP awards paid in
2024 in respect of performance during 2023. These amounts are included in the “Non-Equity Incentive Plan Compensation”
column of the Summary Compensation Table in the 2024 proxy statement.
(2)
The amounts shown reflect the Company’s matching contributions into the Excess Savings Plan based on the NEO's executive
contributions in 2024. These amounts are also included with the Company's contributions to the 401(k) plan in the “All Other
Compensation” column of the Summary Compensation Table on page 53.
(3)
The amounts shown represent investment gains (or losses) during 2024 on notional investment funds available under the
Excess Savings Plan (which mirror investment options available under the Company's 401(k) plan). No portion of these
amounts is included in the Summary Compensation Table on page 53 as the Company does not provide above-market rates of
return.
(4)
The amounts shown represent the cumulative amount that has been credited to each NEO’s account under the applicable plan
as of December 31, 2024. The amounts reflect the sum of the contributions made by each NEO and the Company since the
NEO first began participating in the Excess Savings Plan (including executive and company contributions reported in the
Summary Compensation Tables in previous years), adjusted for any earnings or losses as a result of the performance of the
notional investments. The reported balances are not based solely on 2024 service. The December 31, 2023 aggregate balances
are included in the “Aggregate Balance at Last FYE” column of the Non-Qualified Deferred Compensation - Excess Savings Plan
table in the 2024 proxy statement.
COMPENSATION MATTERS
2025 Proxy Statement
59
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The following section provides information concerning the value of potential payments and benefits as of December 31, 2024 that
would be payable to NEOs following termination of employment under various circumstances or in the event of a Change of Control
(as defined on page 64). Benefit eligibility and values as of December 31, 2024 vary based on the reason for termination.
Severance Pay for Senior Executives
The NEOs participate in The Hartford Senior Executive Officer Severance Pay Plan ("Severance Plan"). The Severance Plan provides
specified payments and benefits to participants upon termination of employment as a result of severance eligible events. The
Severance Plan applies to the NEOs and other executives that the Chief Human Resources Officer (the “Plan Administrator”)
approves for participation. As a condition to participate, the NEOs must agree to such restrictive covenants as are required by the
Plan Administrator. In addition to confidentiality and non-disparagement provisions that continue after termination of employment,
the NEOs have agreed that, while employed and for a one-year period following a termination of employment, they are subject to
non-competition and non-solicitation provisions.
If an NEO is involuntarily terminated, other than for Cause (as defined on page 63), the NEO would receive a lump sum severance
amount equal to two times the sum of their annual base salary and the target AIP award, both determined as of the involuntary
termination date, payable within 60 days of termination (upon signing a release of claims in favor of the Company). Treatment of
the AIP award for the year in which the termination occurs, outstanding and unvested LTI awards and other benefits as of the
termination date if an NEO is involuntarily terminated other than for Cause (including if the NEO is, or is not, retirement eligible) are
described in Footnotes 1, 2, 3 and 5 to the table below.
Treatment upon a Change of Control
If, within the two year period following a Change of Control (as defined on page 64), (1) the NEO is involuntarily terminated by the
Company other than for Cause, or (2) the NEO voluntarily terminates employment with the Company for Good Reason (as defined
on page 64), then the NEO would receive a lump sum severance amount equal to two times the sum of their annual base salary and
the target AIP award (upon signing a release of claims in favor of the Company). All NEOs would be eligible for a pro rata AIP
award , except that the pro rata AIP award payable would be at least the same percentage of the target level of payout as is
generally applicable to executives whose employment did not terminate. LTI awards would not vest automatically upon a Change of
Control so long as the Compensation Committee determines that, upon the Change of Control, the awards would either continue to
be honored or be replaced with substantially equivalent alternative awards. If the awards were so honored or replaced, then those
awards would fully vest if, within the two year period following the Change of Control, (1) the NEO was involuntarily terminated by
the Company other than for Cause, or (2) the NEO voluntarily terminated employment with the Company for Good Reason. If the
NEO is terminated for Cause, all unvested options and stock awards would be cancelled and neither severance nor AIP would be
paid.
In the event of a Change of Control, the NEO would receive a lump sum equal to the present value of their benefit under the Excess
Pension Plan and their Excess Savings Plan balance, provided that the Change of Control also constituted a “change in control” as
defined in regulations issued under Section 409A of the Internal Revenue Code.
No gross-up would be provided for any excise taxes that apply to an NEO upon a Change of Control.
Other Benefits in the Event of Death or Disability
In the event of death, an NEO would receive a company-paid life insurance benefit in addition to whatever voluntary group term life
insurance coverage is in effect. The Company paid benefit would equal two times salary with a cap of $1,000,000, unless the
employee had elected a flat amount of $50,000.
In the event of disability, the NEO would be entitled to short and long term disability benefits if they were disabled in accordance
with the terms of the applicable plan. Upon the commencement of long term disability benefits and while in receipt of long term
disability benefits, each NEO would be eligible to participate in company health benefit and life insurance plans for up to a maximum
of three years.
Eligibility for Retirement Treatment
For AIP awards, an NEO will receive retirement treatment if they meet the following retirement definition as of the last date paid: (i)
the NEO is at least age 55 with at least 5 years of service, and (ii) age plus service equals or exceeds 65 (the "Rule of 65"). All of the
NEOs except for Mr. Tooker and Ms. Soni were eligible to receive retirement treatment for their AIP awards as of December 31,
2024, under the Rule of 65, as described in Footnote 1 below.
For the 2022, 2023 and 2024 LTI awards, an NEO will receive retirement treatment if they provide written notice three months in
advance of their planned retirement date, continue to perform their job responsibilities satisfactorily, and meet the Rule of 65. All
of the NEOs except for Mr. Tooker and Ms. Soni were eligible to receive retirement treatment for their 2022, 2023 and 2024 LTI
awards under the Rule of 65, as described in Footnotes 2 and 3 below.
COMPENSATION MATTERS
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Payments upon Termination or Change of Control
The table and further discussion below address benefits that would be payable to the NEOs as of December 31, 2024 assuming
their termination of employment on December 31, 2024 under various circumstances or in the event of a Change of Control
effective December 31, 2024. The benefits discussed below are in addition to:
•
The vested stock options set forth in the Outstanding Equity Awards at Fiscal Year-End Table on page 56,
•
The vested performance shares set forth in the Option Exercises and Stock Vested Table on page 57,
•
The vested pension benefits set forth in the Pension Benefits Table on page 58, and
•
The vested benefits set forth in the Non-Qualified Deferred Compensation Table on page 59 (benefits payable from the
Excess Savings Plan).
The amounts shown for accelerated stock option and other LTI vesting are calculated using the NYSE closing price per share of the
Company’s common stock on December 31, 2024 of $109.4.
Payment Type
Christopher
Swift
Beth
Costello
Adin Morris
Tooker
Deepa Soni
Amy
Stepnowski
VOLUNTARY TERMINATION OR RETIREMENT
2024 AIP Award ($)(1)
4,719,000
1,930,500
—
—
1,573,000
Accelerated Stock Option Vesting ($)(2)
10,779,520
2,543,502
—
—
1,129,082
Accelerated Performance Share Vesting ($)(3)
17,941,874
3,995,507
—
—
2,003,169
Accelerated Other LTI Vesting ($)(3)
—
—
—
—
—
Benefits Continuation and Outplacement ($)(5)
—
—
—
—
—
TOTAL TERMINATION BENEFITS ($)
33,440,394
8,469,509
—
—
4,705,251
INVOLUNTARY TERMINATION – NOT FOR CAUSE
2024 AIP Award ($)(1)
4,719,000
1,930,500
1,569,400
1,561,100
1,573,000
Cash Severance ($)(4)
9,000,000
4,300,000
3,695,000
3,683,400
3,400,000
Accelerated Stock Option Vesting ($)(2)
10,779,520
2,543,502
826,175
1,191,738
1,129,082
Accelerated Performance Share Vesting ($)(3)
17,941,874
3,995,507
982,394
1,133,785
2,003,169
Accelerated Other LTI Vesting ($)(3)
—
—
—
—
—
Benefits Continuation and Outplacement ($)(5)
37,733
43,719
45,704
43,719
43,719
TOTAL TERMINATION BENEFITS ($)
42,478,127
12,813,228
7,118,673
7,613,742
8,148,970
CHANGE OF CONTROL/ INVOLUNTARY TERMINATION
NOT FOR CAUSE OR TERMINATION FOR GOOD REASON
2024 AIP Award ($)(1)
4,719,000
1,930,500
1,569,400
1,561,100
1,573,000
Cash Severance ($)(4)
9,000,000
4,300,000
3,695,000
3,683,400
3,400,000
Accelerated Stock Option Vesting ($)(2)
10,779,520
2,543,502
1,051,455
1,403,768
1,129,082
Accelerated Performance Share Vesting ($)(3)
17,941,874
3,995,507
2,208,403
2,392,250
2,003,169
Accelerated Other LTI Vesting ($)(3)
—
—
—
—
—
Benefits Continuation and Outplacement ($)(5)
37,733
43,719
45,704
43,719
43,719
TOTAL TERMINATION BENEFITS ($)
42,478,127
12,813,228
8,569,962
9,084,237
8,148,970
INVOLUNTARY TERMINATION – DEATH OR DISABILITY
2024 AIP Award ($)(1)
4,719,000
1,930,500
1,569,400
1,561,100
1,573,000
Accelerated Stock Option Vesting ($)(2)
10,779,520
2,543,502
1,051,455
1,403,768
1,129,082
Accelerated Performance Share Vesting ($)(3)
17,941,874
3,995,507
2,208,403
2,392,250
2,003,169
Accelerated Other LTI Vesting ($)(3)
—
—
—
—
—
Benefits Continuation ($)(5)
51,988
69,946
75,899
69,946
69,946
TOTAL TERMINATION BENEFITS ($)
33,492,382
8,539,455
4,905,157
5,427,064
4,775,197
COMPENSATION MATTERS
2025 Proxy Statement
61
(1) 2024 AIP Award
Voluntary Termination or Retirement. Generally, upon a voluntary termination of employment during 2024, the NEO would
not be eligible to receive an AIP award for 2024 unless the Compensation Committee determined otherwise. However, an
NEO who is eligible for retirement treatment for an AIP award would be entitled to receive a pro rata award for 2024 based
on the portion of the year served, payable no later than March 15 following the calendar year of termination. All of the NEOs,
except for Mr. Tooker and Ms. Soni, were eligible for retirement treatment as of December 31, 2024 under the AIP. The
amounts shown represent the actual award payable for 2024, as reflected in the “Non-Equity Incentive Plan Compensation”
column of the Summary Compensation Table on page 53.
Involuntary Termination – Not For Cause. Each NEO would be eligible for a pro rata portion of their 2024 AIP award. The
amounts shown represent the actual award payable for 2024, as reflected in the “Non-Equity Incentive Plan Compensation”
column of the Summary Compensation Table on page 53.
Involuntary Termination – Not For Cause, or a Termination For Good Reason, Within Two Years Following a Change of
Control. Each NEO would be eligible for a pro rata portion of their 2024 AIP award, commensurate with amounts received by
the executives who did not terminate employment. The amounts shown represent the actual award payable for 2024, as
reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 53.
Involuntary Termination For Cause. No AIP award would be payable.
Death or Disability. Each NEO would receive a 2024 AIP award comparable to the award that would have been paid had they
been subject to an involuntary termination (not for Cause).
(2) Accelerated Stock Option Vesting
Voluntary Termination or Retirement. For a voluntary termination, all unvested options would be canceled, unless the
Compensation Committee determined otherwise. Each NEO would be entitled to exercise stock options vested as of the date
of their termination of employment within the four month period following termination of employment but not beyond the
scheduled expiration date.
If the NEO is retirement eligible, unvested stock options would immediately vest. Vested options would need to be exercised
no later than the scheduled expiration date. All of the NEOs except for Mr. Tooker and Ms. Soni were eligible for retirement
treatment as of December 31, 2024 on their 2022, 2023 and 2024 option awards.
Involuntary Termination – Not For Cause. Each NEO would be entitled to pro rata vesting of unvested stock options as long
as the options had been outstanding for at least one year from the date of grant. Stock options vested as of the date of
termination of employment would need to be exercised within the four month period following termination of employment
but not beyond the scheduled expiration date.
If the NEO is retirement eligible, unvested stock options would immediately vest. Vested options would need to be exercised
no later than the scheduled expiration date. All of the NEOs except for Mr. Tooker and Ms. Soni were eligible for retirement
treatment as of December 31, 2024 on their 2022, 2023, and 2024 option awards.
Change of Control. Stock options would not automatically vest upon a Change of Control so long as the Compensation
Committee determined that, upon the Change of Control, the awards would either be honored or replaced with substantially
equivalent alternative awards. If the stock option awards were so honored or replaced, then vesting of those awards would
only be accelerated if the NEO’s employment were to be terminated within two years following the Change of Control
without Cause or by the NEO for Good Reason. Stock options, if vested upon the Change of Control, would be exercisable for
the remainder of their original term. The amounts shown in the Change of Control section of the table provide the value of
accelerated stock option vesting presuming that all options were to vest upon a Change of Control on December 31, 2024
(i.e., that the stock option awards were not honored or replaced, or that the NEOs were terminated at the time of the Change
of Control without Cause) or quit for Good Reason.
Involuntary Termination For Cause. All unvested stock options would be canceled.
Death or Disability. All unvested stock options would fully vest and would need to be exercised no later than the scheduled
expiration date.
(3) Accelerated Vesting of Performance Shares and Other LTI Awards
Voluntary Termination or Retirement. For a voluntary termination, unvested performance shares would be canceled as of
the termination of employment date, unless the Compensation Committee determined otherwise. For retirement eligible
employees, the 2023 and 2024 performance share awards would vest, subject to the Company's performance against
performance measures and the NEO's compliance with a non-competition provision. As of December 31, 2024, all of the
NEOs except for Mr. Tooker and Ms. Soni were eligible to receive retirement treatment on their outstanding performance
share awards, subject to the Company's performance against performance measures and the NEO's compliance with the non-
competition provision. The amounts shown included dividend equivalents accrued as of December 31, 2024 on performance
awards.
Mr. Tooker and Ms. Soni are not retirement eligible and would forfeit their performance shares if they voluntarily terminated
employment.
COMPENSATION MATTERS
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Involuntary Termination – Not For Cause. All of the NEOs except for Mr. Tooker and Ms. Soni would receive full vesting,
subject to the Company's performance against performance measures, in their 2023 and 2024 performance share awards due
to eligibility for retirement treatment, subject to the NEO's compliance with the non-competition provision. Mr. Tooker and
Ms. Soni, who are not retirement eligible, would be entitled to pro rata vesting of their 2022 and 2023 performance share
awards (subject to the Company's performance against performance measures). The amount shown is the value the NEO
would be entitled to at the end of the respective performance period for these awards to which pro rata or full payment
applies, based on $109.40, the closing stock price on December 31, 2024, and payout at target. The amounts shown include
dividend equivalents accrued as of December 31, 2024 on performance awards.
Change Of Control. The 2023 and 2024 Performance share awards would not automatically vest upon a Change of Control so
long as the Compensation Committee determined that, upon the Change of Control, the awards would either be honored or
replaced with substantially equivalent alternative awards. If the performance share awards were so honored or replaced,
then vesting of those awards would only be accelerated if the NEO’s employment were to be terminated within two years
following the Change of Control without Cause or by the NEO for Good Reason. The amounts shown in the Change of Control
section of the table indicate the value of accelerated vesting presuming that all awards were to vest upon the Change of
Control (i.e., the performance share awards were not honored or replaced, or that the NEOs were terminated at the time of
the Change of Control without Cause or quit for Good Reason), based on $109.40, the closing stock price on December 31,
2024, and a payout at target. The Compensation Committee could determine that performance share awards would pay out
at greater than the target amount if it determined that actual performance exceeded target upon Change in Control. The
amounts shown include dividend equivalents accrued on performance awards.
Involuntary Termination For Cause. All unvested awards would be canceled.
Death or Disability. Performance share awards granted in 2023 and 2024 would vest in full at target and be payable within 60
days of the termination date. The amounts shown include dividend equivalents accrued as of December 31, 2024 on
performance awards.
(4) Cash Severance Payments
Voluntary Termination or Retirement, Involuntary Termination For Cause, Death or Disability. No benefits would be
payable.
Involuntary Termination - Not For Cause Before or After a Change of Control, or Termination For Good Reason Within Two
Years Following a Change of Control. Each NEO would receive a severance payment calculated as a lump sum equal to two
times the sum of base salary and the target AIP award at the time of termination (assumed to be December 31, 2024 for this
purpose).
In the event of termination after a Change of Control, if the aggregate present value of payments contingent on the Change of
Control would result in payment by the NEO of an excise tax on “excess parachute payments,” as described in regulations
under Sections 280G and 4999 of the Internal Revenue Code, then the severance amounts shown would be reduced if, as a
result, the NEO would thereby receive more on an after-tax basis than they would receive if the reduction in the severance
amount was not made. The amounts shown assume that such reduction does not occur.
(5) Benefits Continuation and Outplacement
Voluntary Termination or Retirement. No benefits would be payable: executive outplacement services would not be
provided and health benefit coverage ends. NEOs who terminate employment after attaining age 55 and completing 10 years
of service can elect coverage under a company high deductible health plan until age 65 at their own expense.
Involuntary Termination - Not For Cause, Before or After A Change of Control, or Termination For Good Reason Within
Two Years Following a Change of Control. Each NEO would be provided up to one year of health benefits at the employee
cost and up to one year of executive outplacement services. The amounts shown represent the estimated employer cost of
health coverage continuation and outplacement for one year.
Involuntary Termination - Disability or Death. Each NEO would be provided 36 months of life and health benefits
continuation from the date of termination due to long term disability. The amounts shown represent the estimated employer
cost of life and health coverage continuation for three years.
DEFINITIONS
“Cause” as used above is defined differently, depending upon whether an event occurs before or after a Change of Control.
•
Prior to a Change of Control, “Cause” is generally defined as termination for misconduct or other disciplinary action. With
respect to 2024 LTI awards, prior to a Change of Control, "Cause" is defined as termination of the executive's employment
due to the executive engaging in any of the following (as determined by the Company in its sole discretion): (i) the willful
failure to perform substantially the executive's employment-related duties; (ii) the executive's willful or serious
misconduct that has caused or could reasonably be expected to result in material injury to the business or reputation of
the Company; (iii) the executive's conviction of, or entering a plea of guilty or nolo contendere to, a crime constituting a
felony; or (iv) the executive's breach of any written covenant or agreement with the Company or any material written
policy of the Company.
COMPENSATION MATTERS
2025 Proxy Statement
63
•
Upon the occurrence of a Change of Control, “Cause” is generally defined as the termination of the executive’s
employment due to: (i) a felony conviction; (ii) an act or acts of dishonesty or gross misconduct which result or are intended
to result in damage to the Company’s business or reputation; or (iii) repeated violations by the executive of the obligations
of their position, which violations are demonstrably willful and deliberate and which result in damage to the Company’s
business or reputation.
“Change of Control” is generally defined as:
•
The filing of a report with the SEC disclosing that a person is the beneficial owner of 40% or more of the outstanding stock
of the Company entitled to vote in the election of directors of the Company;
•
A person purchases shares pursuant to a tender offer or exchange offer to acquire stock of the Company (or securities
convertible into stock), provided that after consummation of the offer, the person is the beneficial owner of 20% or more
of the outstanding stock of the Company entitled to vote in the election of directors of the Company;
•
The consummation of a merger, consolidation, recapitalization or reorganization of the Company approved by the
stockholders of the Company, other than in a transaction immediately following which the persons who were the
beneficial owners of the outstanding securities of the Company entitled to vote in the election of directors of the Company
immediately prior to such transaction are the beneficial owners of at least 55% of the total voting power represented by
the securities of the entity surviving such transaction entitled to vote in the election of directors of such entity in
substantially the same relative proportions as their ownership of the securities of the Company entitled to vote in the
election of directors of the Company immediately prior to such transaction;
•
The consummation of a sale, lease, exchange or other transfer of all or substantially all the assets of the Company
approved by the stockholders of the Company; or
•
Within any 24 month period, the persons who were directors of the Company immediately before the beginning of such
period (the “Incumbent Directors”) cease (for any reason other than death) to constitute at least a majority of the Board or
the board of directors of any successor to the Company, provided that any director who was not a director at the beginning
of such period shall be deemed to be an Incumbent Director if such director (A) was elected to the Board by, or on the
recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors
either actually or by prior operation of this clause, and (B) was not designated by a person who has entered into an
agreement with the Company to effect a merger or sale transaction described above.
“Good Reason” is generally defined as:
•
The assignment of duties inconsistent in any material adverse respect with the executive’s position, duties, authority or
responsibilities, or any other material adverse change in position, including titles, authority or responsibilities;
•
A material reduction in base pay or target AIP award;
•
Being based at any office or location more than 50 miles from the location at which services were performed immediately
prior to the Change of Control (provided that such change of office or location also entails a substantially longer
commute);
•
A failure by the Company to obtain the assumption and agreement to perform the provisions of the Senior Executive
Officer Plan by a successor; or
•
A termination asserted by the Company to be for cause that is subsequently determined not to constitute a termination
for Cause.
CEO PAY RATIO
For 2024, Mr. Swift had total compensation, as reported in the Summary Compensation Table on page 53, of $19,343,348, while our
median employee (excluding the CEO) had total compensation of $101,161, yielding a CEO pay ratio of 191 times the median.
Annual base salary at year-end 2024 was used to determine the median employee; no statistical sampling was used. The median
employee's total compensation was calculated in the same manner as for the CEO in the Summary Compensation Table. All non-U.S.
employees were excluded using the 5% de minimis rule (200 employees were based in the U.K., 8 in Canada, 5 in Hong Kong, 4 in
Switzerland, and 1 in Singapore).
PAY VERSUS PERFORMANCE
The table below provides information about the relationship between "Compensation Actually Paid" (as defined by the SEC) to
NEOs and certain financial performance metrics of the Company. Compensation Actually Paid does not represent amounts actually
received by the individuals during the year or the compensation decisions described in the "Compensation Discussion and Analysis”
on page 35. Compensation Actually Paid is an amount calculated in accordance with SEC rules and includes, among other things,
year-over-year changes in the fair value of unvested equity-based awards.
COMPENSATION MATTERS
64
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Value of Initial Fixed $100
Investment Based on:(4)
Year
Summary
Compensation
Table (SCT)
Total for CEO
($)(1)
Compensation
Actually Paid
(CAP) to CEO
($)(2)
Average
SCT Total for
Other NEOs
($)(1)
Average CAP
to Other NEOs
($)(3)
Company
TSR ($)
Peer Group
TSR ($)
Net Income
($ in millions) (4)
Compensation
Core Earnings
($ in millions) (5)
2024 19,343,348 48,649,863
4,430,989
8,551,319
202
201
3,111
3,152
2023 16,408,250 11,750,729
3,710,379
3,144,402
146
158
2,504
2,737
2022 16,086,469 26,534,011
5,409,204
8,245,362
135
145
1,819
2,561
2021 15,824,348 38,804,005
4,793,726 10,351,296
120
132
2,371
2,163
2020 11,806,195
(783,220)
3,927,876
524,850
83
100
1,737
1,767
(1) The CEO for each year reported was Christopher Swift. The names of each of the other NEOs included for purposes of
calculating the average amounts in each applicable year are as follows: (i) for 2024, Beth Costello, Adin Tooker, Deepa Soni, and
Amy Stepnowski; (ii) for 2023, Beth Costello, David Robinson, Deepa Soni, and Amy Stepnowski; (iii) for 2022, Beth Costello,
Douglas Elliot, David Robinson, and Deepa Soni; (iv) for 2021, Beth Costello, Douglas Elliot, David Robinson, Amy Stepnowski, and
William Bloom; and (v) for 2020, Beth Costello, Douglas Elliot, David Robinson, William Bloom, and Brion Johnson.
(2) In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to the CEO's total
compensation for each year to determine the compensation actually paid. For purposes of the pension valuation adjustments shown
below, there was no pension service or prior service cost.
Year
SCT Total ($)
Less: Change in
Pension Value
($)
Less: Stock
Awards from
SCT and Option
Awards from
SCT ($)
Year-End Fair
Value of
Unvested
Equity Awards
and Applicable
Dividend
Equivalents
Granted in the
Year ($)
Change in Fair
Value of
Unvested
Equity Awards
and Applicable
Dividend
Equivalents
Granted in Prior
Years ($)
Vesting Date
Fair Value of
Equity Awards
and Applicable
Dividend
Equivalents
Granted and
Vested in the
Year ($)
Change in Fair
Value of Equity
Awards and
Applicable
Dividend
Equivalents
Granted in Prior
Years Which
Vested in the
Year ($)
CAP ($)
2024
19,343,348
25,133
13,072,800
17,572,818
13,283,469
—
11,548,161
48,649,863
2023
16,408,250
37,310
10,997,175
10,390,607
(298,113)
—
(3,715,530)
11,750,729
2022
16,086,469
—
10,153,500
14,890,747
5,123,290
—
587,005
26,534,011
2021
15,824,348
8,184
9,626,475
19,016,242
9,006,971
—
4,591,103
38,804,005
2020
11,806,195
33,824
7,990,850
6,834,642
(5,693,269)
—
(5,706,114)
(783,220)
(3) In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total
compensation for the NEOs as a group (excluding the CEO) for each year to determine the compensation actually paid, using the
same methodology described above in footnote 2. For purposes of the pension valuation adjustments shown below, there was no
pension service or prior service cost.
Year
SCT Total ($)
Less: Change in
Pension Value
($)
Less: Stock
Awards from
SCT and Option
Awards from
SCT ($)
Year-End Fair
Value of
Unvested
Equity Awards
and Applicable
Dividend
Equivalents
Granted in the
Year ($)
Change in Fair
Value of
Unvested
Equity Awards
and Applicable
Dividend
Equivalents
Granted in Prior
Years ($)
Vesting Date
Fair Value of
Equity Awards
and Applicable
Dividend
Equivalents
Granted and
Vested in the
Year ($) (a)
Change in Fair
Value of Equity
Awards and
Applicable
Dividend
Equivalents
Granted in Prior
Years Which
Vested in the
Year ($)
CAP ($)
2024
4,430,989
1,176
1,988,155
2,672,537
1,872,359
—
1,564,765
8,551,319
2023
3,710,379
21,025
1,760,857
1,663,735
(48,651)
—
(399,179)
3,144,402
2022
5,409,204
—
2,842,980
3,231,047
1,053,592
938,364
456,135
8,245,362
2021
4,793,726
1,170
2,362,389
4,335,398
1,972,862
340,965
1,271,904
10,351,296
2020
3,927,876
21,586
2,164,110
1,718,080
(1,391,173)
132,902
(1,677,139)
524,850
(a) Equity awards vest during the year granted only in the case of retirement. Retirements occurred in 2022, 2021, and 2020
for Messrs. Elliot, Bloom, and Johnson, respectively.
(4) Reflects the value of a fixed $100 investment on December 31, 2019. The peer group used for this purpose is the published
industry index: S&P Insurance Composite Index, the same peer group used for purposes of the performance graph included in the
Company’s Annual Reports on Form 10-K for each of the fiscal years ended December 31, 2024, 2023, 2022, 2021, and 2020.
(5) The Compensation Core Earnings definition and a reconciliation from GAAP net income available to common stockholders to
Compensation Core Earnings for each year in the table are provided in Appendix A.
COMPENSATION MATTERS
2025 Proxy Statement
65
FINANCIAL PERFORMANCE MEASURES
As described in greater detail in “Compensation Discussion and Analysis” the Company’s executive compensation program is
heavily weighted toward variable compensation and designed to promote long-term shareholder value creation and support our
strategy. The most important financial performance measures used by the Company to link compensation actually paid to the
Company’s NEOs to Company performance are as follows:
•
Compensation Core Earnings
•
Compensation Core ROE
•
TSR
ANALYSIS OF THE INFORMATION PRESENTED IN THE PAY VERSUS PERFORMANCE TABLE
Below are graphs showing the relationship of “Compensation Actually Paid” to our CEO and the average for our other NEOs in
2020, 2021, 2022, 2023 and 2024 relative to (i) TSR; (ii) net income; and (iii) Compensation Core Earnings:
COMPENSATION MATTERS
66
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All information provided above under the heading “Pay Versus Performance” will not be deemed to be incorporated by reference
into any of the company's filings under the Securities Act of 1933, as amended, or the Exchange Act whether made before or after
the date hereof and irrespective of any general incorporation language in any such filing, except to the extent the company
specifically incorporates such information by reference.
COMPENSATION MATTERS
2025 Proxy Statement
67
ITEM 4
CONSIDERATION AND APPROVAL OF 2025 LONG
TERM INCENTIVE STOCK PLAN
We are asking stockholders to approve the 2025 Long Term Incentive Stock Plan (the “Plan”), which is intended to replace the
2020 Stock Incentive Plan (the “2020 Plan”). The Plan authorizes the issuance of up to 8.5 million shares, which includes the
remaining shares under the 2020 Plan, and makes certain other minor changes. On the recommendation of the Compensation
and Management Development Committee (the “Compensation Committee” as referenced throughout this Item 4), the Board
approved the Plan and recommends approval by stockholders. The Plan is an important part of the pay-for-performance
compensation program and the authorized number of shares available for grant permits the Company to continue the program.
The Board considers equity compensation that is aligned with the interests of the Company’s shareholders as a significant
component in achieving its goal of attracting, retaining and developing talent needed for long-term success. A detailed summary
of the Plan is attached to this proxy statement as Appendix B, which is qualified in its entirety by reference to the text of the Plan,
which is attached to this proxy statement as Appendix C.
✓
The Board recommends that shareholders vote “FOR” the approval of the 2025 Long Term Incentive Stock Plan.
HIGHLIGHTS OF THE PROGRAM
•
Minimum vesting provisions. Awards made under the Plan generally have a one-year minimum vesting provision.
•
No discounted awards. Awards that have an exercise price cannot be granted with an exercise price less than the fair
market value on the grant date.
•
No evergreen provision. There is no evergreen feature under which the shares authorized for issuance under the Plan can
be automatically replenished.
•
No repricing or exchange of stock options or stock appreciation rights. The Plan does not permit repricing of options or stock
appreciation rights (“SARs”) or the exchange of underwater options or SARs for cash or other awards without stockholder
approval.
•
No reload options or SARs. There is no reload feature entitling the holder to automatic, additional grants upon the exercise
of an award.
•
Double-trigger vesting. A change in control of the company does not, by itself, trigger vesting of awards under the Plan.
•
Dividend payouts. No dividends or dividend equivalents on unvested awards will be paid until those awards are earned and
vested. No dividends or dividend equivalents will be paid with respect to stock options or SARs.
•
Administered by an independent committee. The Plan is administered by the Compensation Committee, which is comprised
of independent directors, and is benchmarked against peers with the assistance of an independent compensation
consultant.
•
Forfeiture and clawback. The Compensation Committee may determine in its discretion that an award will be forfeited and/
or repaid to the company upon violation of the Clawback Policy or post-termination violation of certain restrictive
covenants. Additionally, awards are forfeited upon termination for cause.
•
Executive minimum retention requirement. Award agreements anticipated for 2025 will require certain executives to hold
up to 50% net shares acquired until they have met stock ownership requirements established by the Board.
•
No transferability. Awards generally may not be transferred, except by will or the laws of descent and distribution.
•
Historical equity award practices are appropriate. Our three-year average share usage rate and dilution percentages
demonstrate a prudent use of shares and are in line with the benchmarks used by major proxy advisory firms and our
corporate peer group.
SHARES TO BE AUTHORIZED UNDER THE PLAN
Authorizes for issuance 8,500,000 shares. This represents an increase of 3,026,664 shares over the number of shares authorized
but not issued under the 2020 Plan as of immediately prior to the Annual Meeting (which the company will forfeit the ability to
grant awards under upon stockholder approval of the Plan). Shares not yet issued but subject to outstanding awards under the 2020
Plan may be added to the total number of shares authorized and available for award if they expire or otherwise fail to be issued.
COMPENSATION MATTERS
68
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GRANT PRACTICES, OUTSTANDING AWARDS AND
DILUTION
In setting the number of proposed additional shares issuable under the Plan, the Compensation Committee and the Board
considered a number of factors, including:
•
Shares currently available for issuance and how long the shares available (both currently and assuming the approval by
stockholders of this Item 4) are expected to last.
•
Total potential dilution (commonly referred to as overhang).
•
Historical equity award granting practices, including the three-year average share usage rate (commonly referred to as
burn rate)
As of February 28, 2025, 288,025,305 shares of common stock were outstanding, while 8,231,095 shares (excluding dividend
equivalents) were subject to outstanding equity awards and 5,473,336 shares were available for future awards under the 2020
Plan. The following provides additional detail on the outstanding equity awards:
Outstanding Awards(1)
Number of Shares
Weighted-Average
Exercise Price of Stock
Options
Weighted-
Average
Remaining Term
of Stock Options
Stock Options
4,765,565 $
63.79
5.5
Non Vested Full Value Awards:
Performance Shares
940,999
Restricted Stock and Restricted Stock Units
2,524,531
Non Vested Total Full Value Awards
3,465,530
Total Options and Full Value Awards
8,231,095
(1) Dividend equivalent rights are not included in this table.
Accordingly, our fully diluted overhang as of February 28, 2025 was 4.5%, which is below the 40th percentile of our corporate peer
group. If the Plan is approved, our full dilution level on a pro forma basis on February 28, 2025 was approximately 5.5%. Full dilution
is (a) the 8,500,000 new shares requested for issuance under the Plan; plus (b) 8,231,095 shares that were subject to equity awards
that remained outstanding under prior equity plans as of February 28, 2025 (assuming that all outstanding options will be exercised
in full and that all outstanding performance awards will achieve target performance and service-based restricted stock units will
vest, but excluding dividend equivalent rights) divided by the sum of (a) and (b) above (16,731,095) plus common stock outstanding.
While our fully diluted overhang, if the Plan is approved, will increase to approximately 5.5%, the result is at median of our
corporate peer group, demonstrating a reasonable level of dilution on a comparative basis.
Total Potential Dilution (or Overhang) at February 28, 2025:
Total equity
based awards
outstanding
+
Shares available
for future
issuance
÷
Total number of
issued and
outstanding shares
of common stock
+
Total equity
based awards
outstanding
+
Shares available
for future
issuance
=
Overhang
8,231,095
8,500,000
288,025,305
8,231,095
8,500,000
5.5%
Equity Award Granting Practices and Share Usage. In setting and recommending to stockholders the increase in the number of shares
authorized, the Compensation Committee and the Board considered historic share usage and resulting burn rate as reflected in the
table below. Burn rate provides a measure of our annual share utilization. As shown in the following table, the company’s three-year
average “value-adjusted burn rate” was 1.45% (reflecting ISS methodology, which calculates burn rate on a full-share equivalent
basis), which is above the ISS benchmark of 0.98% applied to our industry.
COMPENSATION MATTERS
2025 Proxy Statement
69
As of December 31, 2024, the burn rate calculation is as follows:
Options Granted
Full-Value Shares
Granted
Total Granted (1)
Weighted Average
Number of Common
Shares Outstanding
Burn Rate (2)
2024
270,000
1,175,000
3,795,000
293,900,000
1.29 %
2023
593,000
1,287,000
4,454,000
307,100,000
1.45%
2022
876,000
1,453,000
5,235,000
324,800,000
1.61%
3-year average burn rate:
1.45 %
(1) Full-value awards were converted to option equivalents using a conversion factor of 3.0 per ISS methodology.
(2) Calculated by dividing the total granted by the weighted average shares outstanding (basic). Excluding the conversion factor, our three-year
average burn rate was 0.61% (approximately 85th percentile of our Corporate Peer Group).
The proposed additional shares, together with shares currently available, are expected to be sufficient, based on historical granting
practices and the recent trading price of the common stock, to cover awards for approximately 4 years.
Given the size of the share request relative to the statistics that it reviewed, the Compensation Committee recommended to the
Board approval of a request for 8,500,000 shares.
The Board recommends a vote for the approval of the 2025 Long Term Incentive Stock Plan.
COMPENSATION MATTERS
70
www.thehartford.com
ITEM 5
SHAREHOLDER PROPOSAL ON THE RIGHT TO CALL A
SPECIAL MEETING
We have received notice of the intention of shareholder John Chevedden to present the following proposal at the Annual Meeting.
In accordance with federal securities regulations, the text of the stockholder proposal and supporting statement appears below
exactly as received, other than minor formatting changes. The contents of the proposal or supporting statement are the sole
responsibility of the proponent, and we are not responsible for the content of the proposal or any inaccuracies it may contain. The
Company will promptly provide the address of the proponent and the number of shares owned by it upon request directed to the
Company’s Corporate Secretary.
Proposal 5 - Support for Shareholder Ability to Call for a Special Shareholder Meeting
Shareholders ask our Board of Directors to take the steps necessary to amend the appropriate company governing documents to
give the owners of a combined 10% of our outstanding common stock the power to call a special shareholder meeting or the
owners of the lowest percentage of shareholders, as governed by state law, the power to call a special shareholder meeting.
A shareholder right to call for a special shareholder meeting, as called for in this proposal, can help make shareholder engagement
meaningful. A shareholder right to call for a special shareholder meeting will help ensure that the Hartford Board and management
engages with shareholders in good faith because shareholders will have a viable Plan B by calling for a special shareholder meeting.
To guard against the Hartford Board of Directors becoming complacent shareholders need the ability to call a special shareholder
meeting to help the Board adopt new strategies when the need arises.
This proposal topic is now more important than ever because there has been a mad rush of Board exculpation proposals to limit
the financial liability of directors when they violate their fiduciary duty. This is a disincentive for improved director performance.
Since a special shareholder meeting can be called to replace a director, adoption of this proposal could foster better performance
by our directors.
Companies often claim that shareholders have multiple means to communicate with management but in most cases these means
are as effective as mailing a letter to the CEO.
With the widespread use of online shareholder meetings it is much easier for a company to conduct a special shareholder meeting
for important issues and Hartford bylaws thus need to be updated accordingly.
Please vote yes:
Support for Shareholder Ability to Call for a Special Shareholder Meeting - Proposal 5
BOARD RESPONSE
×
The Board of Directors recommends that shareholders vote "AGAINST" this Proposal for the following reasons:
•
The Hartford already provides a special meeting right at a threshold that better protects the long-term
interests of the Company and its shareholders.
•
The Hartford’s existing special meeting right is more consistent with market practice and shareholder
feedback.
•
The Hartford is committed to strong corporate governance practices and provides shareholders with other
channels to raise concerns outside the annual meeting cycle.
COMPENSATION MATTERS
2025 Proxy Statement
71
After careful consideration, the Board of Directors has concluded that the Proposal is unnecessary and not in the best interests of
the Company or its shareholders.
The Hartford already provides a special meeting right at a threshold that better protects the long-term interests of the Company
and its shareholders.
In February 2025, the Board amended the Company’s By-Laws to allow one or more shareholders who own at least 25% of the
Company’s common stock, and who satisfy certain procedures, to require that the Company call a special meeting of shareholders.
The Board believes its existing special meeting right at a 25% ownership threshold strikes a reasonable and appropriate balance
between empowering shareholders with an important right and protecting against unnecessary expense or distraction that could
arise when holders of a small number of shares seek to call a special meeting of shareholders.
Special meetings are expensive, disruptive, and time-consuming undertakings that may divert Company resources and the Board
and management’s focus from the Company’s business objectives. The Board therefore believes that special meetings of
shareholders should only be called in exceptional circumstance to advance the long-term interests of shareholders. Lowering the
ownership threshold for the special meeting right to 10% would increase the risk that a small minority of shareholders with narrow
interests that do not reflect the views of most other shareholders could call special meetings to advance their own particular, short-
term interests that are not aligned with the long-term interests of the Company and its other shareholders.
The Company’s existing 25% ownership threshold helps to mitigate the risk of a special meeting being called when there is not
meaningful support for the meeting among the Company’s shareholders.
The Hartford’s existing special meeting right is more consistent with market practice and shareholder feedback.
Prior to adopting a special meeting right at a 25% ownership threshold, the Board considered, among other factors, the results of
benchmarking data, which showed that a 25% ownership threshold is the most common approach among S&P 500 companies that
offer the special meeting right, and prevalent among the Company’s peers. The Board also considered feedback received from
institutional investors during prior years’ engagement, which indicated a strong preference for the adoption of shareholders’ right
to call a special meeting, but at a level that would prevent abuse and not allow a small group of shareholders a disproportionate
amount of influence over the Company’s affairs.
The Hartford is committed to strong corporate governance practices and provides shareholders with other channels to raise
concerns outside the annual meeting cycle.
As described on page 11, The Hartford’s Board and management regularly consider best practices in corporate governance and
shareholder feedback and modify our governance policies and practices as warranted. Among these practices, the Company
provides shareholders with multiple channels to raise concerns outside the annual meeting cycle. For example:
•
Since 2011, the Company annually reaches out to shareholders representing over 50% of shares outstanding to solicit
their feedback on issues important to them; in recent years, our Lead Director has also engaged directly with shareholders.
•
Shareholders may communicate directly with non-management directors, or raise a complaint or concern, by contacting
EthicsPoint, an external vendor retained by the Company to take calls and report concerns to the appropriate persons for
proper handling (see page 24).
•
If important matters arise between annual meetings, special shareholder meetings may be called by a majority of Board or
the Board’s Chairman.
In light of the Company’s existing special meeting right, market trends, and the Company’s other strong corporate governance
practices, the Board believes that adoption of this Proposal is unnecessary and not in the best interests of the Company and its
stockholders.
Accordingly, the Board of Directors unanimously recommends a vote “AGAINST” this proposal.
COMPENSATION MATTERS
72
www.thehartford.com
INFORMATION ON STOCK OWNERSHIP
DIRECTORS AND EXECUTIVE OFFICERS
The following table shows, as of March 24, 2025: (1) the number of shares of our common stock beneficially owned by each director
and NEO, and (2) the aggregate number of shares of common stock and common stock-based equity (including RSUs, performance
shares granted at target and stock options that will not vest or become exercisable within 60 days, as applicable) held by all
directors, NEOs and Section 16 executive officers as a group.
As of March 24, 2025, no individual director, NEO or Section 16 executive officer beneficially owned 1% or more of the total
outstanding shares of our common stock. The directors, NEOs and Section 16 executive officers as a group beneficially owned
approximately 1.5% of the total outstanding shares of our common stock as of March 24, 2025.
Name of Beneficial Owner
Common Stock(1)
Total(2)
Beth Costello
557,977
671,828
Larry De Shon
15,154
15,154
Carlos Dominguez
27,295
27,295
Trevor Fetter(3)
136,794
136,794
Donna James
11,299
11,299
Annette Rippert
667
667
Deepa Soni
103,049
219,861
Teresa W. Roseborough
33,165
33,165
Virginia P. Ruesterholz
48,263
48,263
Amy Stepnowski
110,167
172,389
Adin Morris Tooker
198,804
286,220
Christopher J. Swift(4)
2,688,836
3,201,552
Matthew E. Winter
16,115
16,115
Kathleen Winters
1,741
1,741
All directors, NEOs and Section 16 executive officers as a group (19 persons)(5)
4,263,299
5,309,678
(1)
All shares of common stock are owned directly except as otherwise indicated below. Pursuant to SEC regulations, shares of
common stock beneficially owned include shares of common stock that, as of March 24, 2025: (i) may be acquired by
directors, NEOs and Section 16 executive officers upon the vesting or distribution of stock-settled RSUs or the exercise of
stock options exercisable within 60 days after March 24, 2025, (ii) are allocated to the accounts of Section 16 executive
officers under the Company’s tax-qualified 401(k) plan, (iii) are held by Section 16 executive officers under The Hartford
Employee Stock Purchase Plan or (iv) are owned by a director’s, NEO's or a Section 16 executive officer’s spouse or minor
child. Of the number of shares of common stock shown above, the following shares may be acquired upon exercise of stock
options as of March 24, 2025 or within 60 days thereafter by: Ms. Costello, 470,403 shares; Ms. Soni, 65,043; Ms.
Stepnowski, 80,668 shares; Mr. Swift, 2,281,500 shares; Mr. Tooker, 167,083 shares; and all NEOs and Section 16 executive
officers as a group, 3,320,725 shares.
(2)
This column shows the individual’s total stock-based holdings in the Company, including the securities shown in the “Common
Stock” column (as described in footnote 1), plus RSUs that vest and stock options that become exercisable more than 60 days
after March 24, 2025, and all outstanding performance shares (at target).
(3)
The amount shown includes 60,945 shares of common stock held by a trust for which Mr. Fetter serves as trustee.
(4)
The amount shown includes 40,003 shares of common stock held by Mr. Swift’s spouse and 156,251 held in two trusts for
which Mr. Swift or his spouse serves as trustee.
(5)
The amount shown includes 1,865 shares of common stock allocated to the account of a Section 16 executive officer under
the Company’s tax-qualified 401(k) plan.
INFORMATION ON STOCK OWNERSHIP
2025 Proxy Statement
73
CERTAIN SHAREHOLDERS
The following table shows those persons known to the Company as of February 14, 2025 to be the beneficial owners of more than
5% of our common stock. In furnishing the information below, we have relied on information filed with the SEC by the beneficial
owners.
Name and Address of Beneficial Owner
Amount and Nature of Beneficial
Ownership
Percent of Class(1)
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
38,754,269(2)
12.89%
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
29,018,062(3)
10.0%
State Street Corporation
One Lincoln Street
Boston, MA 02111
16,712,364(4)
5.56%
(1)
The percentages contained in this column are based solely on information provided in Schedules 13G or 13G/A filed with the
SEC by each of the beneficial owners listed above regarding their respective holdings of our common stock as of the dates set
forth below.
(2)
This information is based solely on information contained in a Schedule 13G/A filed on February 13, 2024 by The Vanguard
Group to report that it was the beneficial owner of 38,754,269 shares of our common stock as of December 31, 2024.
Vanguard has (i) sole power to vote or to direct the vote with respect to none of such shares; (ii) shared power to vote or to
direct the vote with respect to 389,257 of such shares, (iii) sole power to dispose or direct the disposition with respect to
37,464,665 of such shares and (iv) the shared power to dispose or direct the disposition of 1,289,604 of such shares.
(3)
This information is based solely on information contained in a Schedule 13G/A filed on December 6, 2024 by BlackRock, Inc. to
report that it was the beneficial owner of 29,018,062 shares of our common stock as of November 30, 2024. BlackRock has (i)
sole power to vote or to direct the vote with respect to 25,942,249 of such shares; (ii) shared power to vote or to direct the
vote with respect to none of such shares; (iii) sole power to dispose or direct the disposition of 29,018,062 of such shares; and
(iv) shared power to dispose or direct the disposition of none of such shares.
(4)
This information is based solely on information contained in a Schedule 13G filed on January 30, 2024 by State Street
Corporation to report that it was the beneficial owner of 16,712,364 shares of our common stock as of December 31, 2024.
State Street has (i) sole power to vote or to direct the vote with respect to none of such shares; (ii) shared power to vote or to
direct the vote with respect to 11,304,205 of such shares and (iii) sole power to dispose or to direct the disposition of none of
such shares; and (iv) shared power to dispose or direct the disposition of 16,691,974 of such shares.
INFORMATION ON STOCK OWNERSHIP
74
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INFORMATION ABOUT THE HARTFORD’S
ANNUAL MEETING OF SHAREHOLDERS
HOUSEHOLDING OF PROXY MATERIALS
SEC rules permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and notices
with respect to two or more shareholders sharing the same address by delivering a single proxy statement or a single notice
addressed to those shareholders. This process, which is commonly referred to as “householding,” provides cost savings for
companies. Some brokers household proxy materials, delivering a single proxy statement or notice to multiple shareholders sharing
an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from
your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a
separate proxy statement or notice, please notify your broker. You may also call (800) 542-1061 or write to: Householding
Department, 51 Mercedes Way, Edgewood, New York 11717, and include your name, the name of your broker or other nominee,
and your account number(s). You can also request prompt delivery of copies of the Notice of 2025 Annual Meeting of Shareholders,
Proxy Statement and 2024 Annual Report by writing to Terence Shields, Corporate Secretary, The Hartford Insurance Group, Inc.,
One Hartford Plaza, Hartford, CT 06155.
FREQUENTLY ASKED QUESTIONS
The Board of Directors of The Hartford is soliciting shareholders’ proxies in connection with the 2025 Annual Meeting of
Shareholders, and at any adjournment or postponement thereof. The mailing to shareholders of the notice of Internet availability of
proxy materials took place on or about April 10, 2025.
Q: Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of
proxy materials?
A: Instead of mailing a printed copy of our proxy materials to each shareholder of record, the SEC permits us to furnish proxy
materials by providing access to those documents on the Internet. Shareholders will not receive printed copies of the proxy
materials unless they request them. The notice instructs you as to how to submit your proxy on the Internet. If you would like to
receive a paper or email copy of our proxy materials, you should follow the instructions in the notice for requesting them.
Q: How are shares voted if additional matters are presented at the Annual Meeting?
A: Other than the items of business described in this proxy statement, we are not aware of any other business to be acted upon at
the Annual Meeting. If you grant a proxy, the persons named as proxyholders, Donald C. Hunt, Executive Vice President and
General Counsel, and Terence Shields, Corporate Secretary, will have the discretion to vote your shares on any additional
matters properly presented for a vote at the Annual Meeting in accordance with Delaware law and our By-laws.
Q: Who may vote at the Annual Meeting?
A: Holders of our common stock at the close of business on March 24, 2025 (the “Record Date”) may vote at the Annual Meeting.
On the Record Date, we had 285,395,412 shares of common stock outstanding and entitled to be voted at the Annual Meeting.
You may cast one vote for each share of common stock you hold on all matters presented at the Annual Meeting.
Participants in The Hartford Investment and Savings Plan (“ISP”) and The Hartford Deferred Restricted Stock Unit Plan (“Bonus
Swap Plan”) may instruct plan trustees as to how to vote their shares using the methods described on page 76. The trustees of
the ISP and the Bonus Swap Plan will vote shares for which they have not received direction in accordance with the terms of
the ISP and the Bonus Swap Plan, respectively.
Participants in The Hartford's Employee Stock Purchase Plan (“ESPP”) may vote their shares as described on page 76.
INFORMATION ABOUT THE MEETING
2025 Proxy Statement
75
Q: What vote is required to approve each proposal?
A: Proposal
Voting Standard
1
Election of Directors
A director will be elected if the number of shares voted “for” that
director exceeds the number of votes “against” that director.
2
To ratify the appointment of our independent
registered public accounting firm
An affirmative vote requires the majority of those shares present in
person or represented by proxy and entitled to vote.
3
To approve, on a non-binding, advisory basis, the
compensation of our named executive officers as
disclosed in this proxy statement
An affirmative vote requires the majority of those shares present in
person or represented by proxy and entitled to vote.
4
Consider and act on the Company’s 2025 Long Term
Stock Incentive Plan; and
An affirmative vote requires the majority of those shares present in
person or represented by proxy and entitled to vote.
5
Vote on shareholder proposal that the Company
adopt special meeting rights for shareholders
An affirmative vote requires the majority of those shares present in
person or represented by proxy and entitled to vote.
Q: What is the difference between a “shareholder of record” and a “street name” holder?
A: These terms describe the manner in which your shares are held. If your shares are registered directly in your name through
Computershare, our transfer agent, you are a “shareholder of record.” If your shares are held in the name of a brokerage firm,
bank, trust or other nominee as custodian on your behalf, you are a “street name” holder.
Q: How do I vote my shares?
A: Subject to the limitations described below, you may vote by proxy:
By internet
By telephone
Visit 24/7
www.proxyvote.com
Dial toll-free 24/7
1-800-690-6903
By mailing your Proxy Card
At the annual meeting
Cast your ballot, sign your proxy card and send by mail
Follow the instructions on the virtual meeting site
When voting on proposal items 1-5, you may vote “for” or “against” the item or you may abstain from voting.
Voting Through the Internet or by Telephone Prior to the Annual Meeting. Whether you hold your shares directly as the shareholder of
record or beneficially in “street name,” you may direct your vote by proxy without attending the Annual Meeting. You can vote by
proxy using the Internet or a telephone by following the instructions provided in the notice you received.
Voting by Proxy Card or Voting Instruction Form. Each shareholder, including any employee of The Hartford who owns common stock
through the ISP, the Bonus Swap Plan or the ESPP, may vote by using the proxy card(s) or voting instruction form(s) provided to
them. When you return a proxy card or voting instruction form that is properly completed and signed, the shares of common stock
represented by that card will be voted as you specified.
Q: Can I vote my shares at the virtual Annual Meeting?
A: You may vote online during the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/HIG2025, entering the
16-digit control number provided on your proxy card, voting instruction form or notice, and following the on-screen
instructions.
Q: Can my shares be voted even if I abstain or don’t vote by proxy or attend the Annual Meeting?
A: If you cast a vote of “abstention” on a proposal, your shares cannot be voted otherwise unless you change your vote (see
below). Because they are considered to be present and entitled to vote for purposes of determining voting results, abstentions
INFORMATION ABOUT THE MEETING
76
www.thehartford.com
will have the effect of a vote against Proposal #2, Proposal #3, Proposal #4, and Proposal #5. Note, however, that abstentions
will have no effect on Proposal #1, since only votes “for” or “against” a director nominee will be considered in determining the
outcome.
Abstentions are included in the determination of shares present for quorum purposes.
If you don’t vote your shares held in “street name,” your broker can vote your shares in its discretion on matters that the NYSE
has ruled discretionary. The ratification of Deloitte & Touche LLP as independent registered public accounting firm is a
discretionary item under the NYSE rules. If no contrary direction is given, your shares will be voted on this matter by your
broker in its discretion. The NYSE deems the election of directors, matters relating to executive compensation, and shareholder
proposals opposed by management as non-discretionary matters in which brokers may not vote shares held by a beneficial
owner without instructions from such beneficial owner. Accordingly, brokers will not be able to vote your shares for the
election of directors or the advisory vote on compensation of our named executive officers if you fail to provide specific
instructions. If you do not provide instructions, a “broker non-vote” results, and the underlying shares will not be considered
voting power present at the Annual Meeting. Therefore, these shares will not be counted in the vote on those matters.
If you do not vote shares for which you are the shareholder of record, your shares will not be voted.
Q: What constitutes a quorum, and why is a quorum required?
A: A quorum is required for our shareholders to conduct business at the Annual Meeting. The presence at the Annual Meeting, in
person or by proxy, of the holders of a majority of the shares entitled to vote on the Record Date will constitute a quorum,
permitting us to conduct the business of the meeting. Abstentions and proxies submitted by brokers (even with limited voting
power such as for discretionary matters only) will be considered “present” at the Annual Meeting and counted in determining
whether there is a quorum present.
Q: Can I change my vote after I have delivered my proxy?
A: Yes. If you are a shareholder of record, you may revoke your proxy at any time before it is exercised by:
1.
Entering a new vote prior to the Annual Meeting at www.proxyvote.com or via telephone;
2.
Giving written notice of revocation to our Corporate Secretary;
3.
Submitting a subsequently dated and properly completed proxy card; or
4.
Entering a new vote during the Annual Meeting at www.virtualshareholdermeeting.com/HIG2025 (your attendance at the
Annual Meeting will not by itself revoke your proxy).
If you hold shares in “street name,” you may submit new voting instructions by contacting your broker, bank or other nominee.
You may also change your vote or revoke your proxy by voting online during the virtual Annual Meeting.
Q: Where can I find voting results of the Annual Meeting?
A: We will announce preliminary voting results at the Annual Meeting and publish the results in a Form 8-K filed with the SEC
within four business days after the date of the Annual Meeting.
Q: How can I submit a proposal for inclusion in the 2026 proxy statement?
A: We must receive proposals submitted by shareholders for inclusion in the 2026 proxy statement relating to the 2026 Annual
Meeting no later than the close of business on December 11, 2025. Any proposal received after that date will not be included in
our proxy materials for 2026. In addition, all proposals for inclusion in the 2026 proxy statement must comply with all of the
requirements of Rule 14a-8 under the Exchange Act. No proposal may be presented at the 2026 Annual Meeting unless we
receive notice of the proposal by Friday, February 20, 2026. Proposals should be addressed to Terence Shields, Corporate
Secretary, The Hartford Insurance Group, Inc., One Hartford Plaza, Hartford, CT 06155. All proposals must comply with the
requirements set forth in our By-laws, a copy of which may be obtained from our Corporate Secretary or on the Corporate
Governance page of the investor relations section of our website at http://ir.thehartford.com.
Q: How may I obtain other information about The Hartford?
A: General information about The Hartford is available on our website at www.thehartford.com. You may view the Corporate
Governance page of the investor relations section of our website at http://ir.thehartford.com for the following information,
which is also available in print without charge to any shareholder who requests it in writing:
INFORMATION ABOUT THE MEETING
2025 Proxy Statement
77
SEC Filings
• Copies of this proxy statement
• Annual Report on Form 10-K for the fiscal year ended December 31, 2024
• Other filings we have made with the SEC
Governance
Documents
• Articles of Incorporation
• By-laws
• Corporate Governance Guidelines (including guidelines for determining director
independence and qualifications)
• Charters of the Board’s committees
• Code of Ethics and Business Conduct
• Code of Ethics and Business Conduct for Members of the Board of Directors
Written requests for print copies of any of the above-listed documents should be addressed to Terence Shields, Corporate
Secretary, The Hartford Insurance Group, Inc., One Hartford Plaza, Hartford, CT 06155.
For further information, you may also contact our Investor Relations Department at the following address: The Hartford
Insurance Group, Inc., One Hartford Plaza, Hartford, CT 06155, or call (860) 547-2537.
INFORMATION ABOUT THE MEETING
78
www.thehartford.com
OTHER INFORMATION
As of the date of this proxy statement, the Board of Directors has no knowledge of any business that will be properly presented for
consideration at the Annual Meeting other than that described above. As to other business, if any, that may properly come before
the Annual Meeting, the proxies will vote in accordance with their judgment.
Present and former directors and present and former officers and other employees of the Company may solicit proxies by
telephone, telegram or mail, or by meetings with shareholders or their representatives. The Company will reimburse brokers, banks
or other custodians, nominees and fiduciaries for their charges and expenses in forwarding proxy material to beneficial owners. The
Company has engaged Sodali & Co to solicit proxies for the Annual Meeting for a fee of $16,000, plus the payment of Sodali & Co's
out-of-pocket expenses. The Company will bear all expenses relating to the solicitation of proxies.
The proxy materials are available to you via the Internet. Shareholders who access the Company’s materials this way get the
information they need electronically, which allows us to reduce printing and delivery costs and lessen adverse environmental
impacts. The notice of Internet availability contains instructions as to how to access and review these materials. You may also refer
to the notice for instructions regarding how to request paper copies of these materials.
We hereby incorporate by reference into this proxy statement “Item 10: Directors, Executive Officers and Corporate Governance
of The Hartford” and “Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
By order of the Board of Directors,
Terence Shields
Corporate Secretary
Dated: April 10, 2025
SHAREHOLDERS ARE URGED TO VOTE BY PROXY, WHETHER OR NOT THEY EXPECT TO ATTEND THE VIRTUAL ANNUAL
MEETING. A SHAREHOLDER MAY REVOKE THEIR PROXY AND VOTE AT THE VIRTUAL ANNUAL MEETING (STREET HOLDERS
MUST OBTAIN A LEGAL PROXY FROM THEIR BROKER, BANKER OR TRUSTEE TO VOTE AT THE VIRTUAL ANNUAL MEETING).
INFORMATION ABOUT THE MEETING
2025 Proxy Statement
79
APPENDIX A: RECONCILIATION OF GAAP TO NON-
GAAP FINANCIAL MEASURES
The Hartford uses non-GAAP financial measures in this proxy statement 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 non-GAAP and other financial measures used in this proxy statement can
be found below.
On January 1, 2023, the Company adopted FASB's LDTI guidance, which was applied on a modified retrospective basis as of
January 1, 2021. Impacted prior periods in this document have been restated to reflect the adoption of LDTI where noted. For
additional information refer to Note 1 - Basis of Presentation and Significant Accounting Policies of Notes to Consolidated
Financial Statements and Schedules in the Company's 2023 Annual Report on Form 10-K.
Core Earnings: The Hartford uses the non-GAAP measure core earnings as an important measure of the Company’s
operating performance. The Hartford believes that core earnings provides investors with a valuable measure of the performance of
the Company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be
obscured by including the net effect of certain items. Therefore, the following items are excluded from core earnings:
•
Certain realized gains and losses - Generally realized gains and losses are primarily driven by investment decisions and
external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of
our business. Accordingly, core earnings excludes the effect of all realized gains and losses that tend to be highly variable from
period to period based on capital market conditions. The Hartford believes, however, that some realized gains and losses are
integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic
settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the
income statement such as net investment income.
•
Restructuring and other costs - Costs incurred as part of a restructuring plan are not a recurring operating expense of the
business.
•
Loss on extinguishment of debt - Largely consisting of make-whole payments or tender premiums upon paying debt off before
maturity, these losses are not a recurring operating expense of the business.
•
Gains and losses on reinsurance transactions - Gains or losses on reinsurance, such as those entered into upon sale of a
business or to reinsure loss reserves, are not a recurring operating expense of the business.
•
Integration and other non-recurring M&A costs – These costs, including transaction costs incurred in connection with an
acquired business, are incurred over a short period of time and do not represent an ongoing operating expense of the
business.
•
Change in loss reserves upon acquisition of a business - These changes in loss reserves are excluded from core earnings
because such changes could obscure the ability to compare results in periods after the acquisition to results of periods prior to
the acquisition.
•
Deferred gain resulting from retroactive reinsurance and subsequent changes in the deferred gain - Retroactive reinsurance
agreements economically transfer risk to the reinsurers and excluding the deferred gain on retroactive reinsurance and
related amortization of the deferred gain from core earnings provides greater insight into the economics of the business.
•
Change in valuation allowance on deferred taxes related to non-core components of before tax income - These changes in
valuation allowances are excluded from core earnings because they relate to non-core components of before tax income, such
as tax attributes like capital loss carryforwards.
•
Results of discontinued operations - These results are excluded from core earnings for businesses sold or held for sale because
such results could obscure the ability to compare period over period results for our ongoing businesses.
In addition to the above components of net income available to common stockholders that are excluded from core earnings,
preferred stock dividends declared, which are excluded from net income, are included in the determination of core earnings.
Preferred stock dividends are a cost of financing more akin to interest expense on debt and are expected to be a recurring expense
as long as the preferred stock is outstanding.
Net income (loss) and net income (loss) available to common stockholders are the most directly comparable U.S. GAAP measures to
core earnings. Core earnings should not be considered as a substitute for net income (loss) or net income (loss) available to common
stockholders and does not reflect the overall profitability of the Company’s business. Therefore, The Hartford believes that it is
useful for investors to evaluate net income (loss), net income (loss) available to common stockholders, and core earnings when
reviewing the Company’s performance. Below is a reconciliation of net income (loss) available to common stockholders to core
earnings for the years ended December 31, 2024, 2023, 2022, 2021 and 2020.
APPENDIX A
80
www.thehartford.com
($ in millions)
Year Ended
Dec. 31, 2024
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
Year Ended
Dec. 31, 2021
Year Ended
Dec. 31, 2020
Net income available to common stockholders(1)
$
3,090 $
2,483 $
1,798 $
2,350 $
1,716
Adjustments to reconcile net income available to
common stockholders to core earnings:
Net realized losses (gains), excluded from core
earnings, before tax
56
152
626
(505)
18
Restructuring and other costs, before tax
2
6
13
1
104
Loss on extinguishment of debt, before tax
—
—
9
—
—
Integration and other non-recurring M&A costs,
before tax
8
8
21
58
51
Change in deferred gain on retroactive
reinsurance, before tax
(83)
194
229
246
312
Income tax expense (benefit)(2)
3
(76)
(200)
34
(115)
Core Earnings(1)
$
3,076 $
2,767 $
2,496 $
2,184 $
2,086
(1) Adopting LDTI resulted in an after tax increase to net income and core earnings of $4 for 2022 and $6 for 2021.
(2) Primarily represents federal income tax expense (benefit) related to before tax items not included in core earnings.
Compensation Core Earnings: As discussed under “Annual Incentive Plan Awards” on page 40, at the beginning of
each year, the Compensation Committee approves a definition of “Compensation Core Earnings,” a non-GAAP financial measure.
Compensation Core Earnings is used to set AIP award targets and threshold levels below which no AIP award is earned. Below are
the Compensation Committee’s 2024, 2023, 2022, 2021 and 2020 definitions of “Compensation Core Earnings” and reconciliations
of core earnings to this non-GAAP financial measure.
($ in millions)
Year Ended
Dec. 31, 2024
Year Ended
Dec. 31, 2023
Year Ended
Dec. 31, 2022
Year Ended
Dec. 31, 2021
Year Ended
Dec. 31, 2020
Core Earnings as reported(1)
$
3,076 $
2,767 $
2,492 $
2,178 $
2,086
Adjustments to reconcile core
earnings to compensation core
earnings, after tax:
Total catastrophe losses, including
reinstatement premiums, state
catastrophe fund assessments and
terrorism losses, that are (below) or
above the annual catastrophe budget
(35)
(13)
44
10
(319)
Prior accident year reserve
development associated with asbestos
and environmental reserves, net of
reinsurance recoveries, included in core
earnings
111
—
—
—
—
Entire amount of a (gain) or loss (or such
percentage of a gain or loss as
determined by the Compensation
Committee) associated with any other
unusual or non-recurring item,
including but not limited to reserve
development, litigation and regulatory
settlement charges and/or prior/
current year non-recurring tax benefits
or charges
3
(17)
(24)
(4)
18
Total equity method earnings that are
below the annual operating budget
from the limited partnership that owns
Talcott Resolution
19
(21)
Total Hartford Funds earnings that are
below or (above) the annual operating
budget
(3)
—
49
(40)
3
Compensation Core Earnings
$
3,152 $
2,737 $
2,561 $
2,163 $
1,767
(1) Core Earnings as reported in this table for 2022 and 2021 do not reflect impacts of the Company's adoption of FASB's LDTI guidance.
APPENDIX A
2025 Proxy Statement
81
Core Earnings Margin: The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an
important measure of, the Employee Benefits segment's operating performance. Core earnings margin is calculated by dividing core
earnings by revenues, excluding buyouts and realized gains (losses). Net income margin, calculated by dividing net income by
revenues, is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors
with a valuable measure of the performance of Employee Benefits because it reveals trends in the business that may be obscured by
the effect of buyouts and realized gains (losses) as well as other items excluded in the calculation of core earnings. Core earnings
margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Employee
Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income
margin when reviewing performance. Below is a reconciliation of net income margin to core earnings margin for the year ended
December 31, 2024.
Year Ended Dec. 31,
2024
Net income margin
7.9 %
Adjustments to reconcile net income margin to core earnings margin:
Net realized losses before tax
0.4 %
Income tax benefit
(0.1) %
Core earnings margin
8.2 %
Core Earnings Return on Equity: The Company provides different measures of the return on stockholders' equity
(ROE). Core earnings ROE is calculated based on non-GAAP financial measures. Core earnings ROE is calculated by dividing (a) the
non-GAAP measure core earnings for the prior four fiscal quarters by (b) the non-GAAP measure average common stockholders'
equity, excluding AOCI. Net income ROE is the most directly comparable U.S. GAAP measure. The Company excludes AOCI in the
calculation of core earnings ROE to provide investors with a measure of how effectively the Company is investing the portion of the
Company's net worth that is primarily attributable to the Company's business operations. The Company provides to investors
return on equity measures based on its non-GAAP core earnings financial measure for the reasons set forth in the core earnings
definition. A reconciliation of consolidated net income ROE to Consolidated Core earnings ROE is set forth below.
Year
Ended
Dec. 31, 2024
Year
Ended
Dec. 31, 2023
Year
Ended
Dec. 31, 2022
Net Income available to common stockholders ROE(1)
19.9 %
17.5 %
11.7 %
Adjustments to reconcile net income ROE to core earnings ROE:
Net realized losses, excluded from core earnings, before tax
0.4 %
1.1 %
4.1 %
Restructuring and other costs, before tax
— %
— %
0.1 %
Loss on extinguishment of debt, before tax
— %
— %
0.1 %
Integration and other non-recurring M&A costs, before tax
0.1 %
0.1 %
0.1 %
Change in deferred gain on retroactive reinsurance, before tax
(0.5) %
1.4 %
1.5 %
Income tax benefit on items not included in core earnings
— %
(0.5) %
(1.3) %
Impact of AOCI, excluded from denominator of Core Earnings ROE
(3.2) %
(3.8) %
(1.8) %
Core earnings ROE
16.7 %
15.8 %
14.5 %
(1) For 2022, adopting LDTI resulted in Net Income available to common stockholders ROE increases of .1, as well as a core earnings ROE increase of .1.
APPENDIX A
82
www.thehartford.com
Compensation Core ROE: As discussed under "Long-Term Incentive Awards" on page 42, Compensation Core ROE is
used to set performance share targets and threshold levels below which there is no payout. The adjustments described in the left
hand column of the table below constitute the Compensation Committee’s 2024 definition of “Compensation Core ROE.” A
reconciliation of GAAP net income to Compensation Core ROE for the 2024 performance share awards will not be available until
the end of the performance period in 2026. Reconciliations for each year covered by the 2022 performance share awards are
provided in the table below, with any variations from the 2024 performance share award definition explained in the notes below the
table.
($ in millions)
Year Ended
Dec. 31,
2024
Year Ended
Dec. 31,
2023
Year Ended
Dec. 31,
2022(1)
Net income available to common shareholders as reported
$3,090
$2,483
$1,794
Adjustments to reconcile net income available to common stockholders to core
earnings:
Net realized losses excluded from core earnings, before tax
56
152
626
Restructuring and other costs, before tax
2
6
13
Loss on extinguishment of debt, before tax
—
—
9
Integration and other non-recurring M&A costs, before tax
8
8
21
Change in deferred gain on retroactive reinsurance, before tax
(83)
194
229
Income tax expense (benefit)
3
(76)
(200)
Core Earnings as reported
3,076
2,767
2,492
Adjusted for after tax:
Total catastrophe losses, including reinstatement premiums, state catastrophe fund
assessments and terrorism losses that are (below) or above the catastrophe budget.(2)
13
(2)
18
Prior accident year reserve development associated with asbestos and environmental
reserves, net of reinsurance recoveries, included in core earnings
111
—
—
Total Hartford Funds earnings that are below or (above) the annual operating budget
as set for each year in February 2022
81
84
49
Core Earnings as adjusted
$
3,281
$
2,849
$
2,559
Prior year ending common stockholders' equity, excluding accumulated other
comprehensive income (AOCI) as reported
$ 17,842
$ 17,183
$ 17,337
Current year ending common stockholders' equity, excluding AOCI as reported
$ 18,999
$ 17,842
$ 17,173
Average common stockholders' equity, excluding AOCI as reported
$ 18,421
$ 17,513
$ 17,255
Compensation Core ROE
17.8 %
16.3 %
14.8 %
Average of 2022, 2023 and 2024 Compensation Core ROE = 16.3%
(1)
The amounts as reported in this table for 2022 do not reflect impacts of the Company's adoption of FASB's LDTI guidance.
(2)
The catastrophe budget for each year will be based on the multi-year outlook finalized in the first quarter of the year of grant. The catastrophe budget will be adjusted only for
changes in exposures between what is assumed in the multi-year outlook versus exposures as the book is actually constituted in each respective year.
APPENDIX A
2025 Proxy Statement
83
Underlying Combined Ratio: This non-GAAP financial measure of underwriting results represents the combined ratio
before catastrophes, prior accident year development and current accident year change in loss reserves upon acquisition of a
business. Combined ratio is the most directly comparable GAAP measure. The Company believes this ratio is an important measure
of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss
and loss adjustment expense reserve development. The changes to loss reserves upon acquisition of a business are excluded from
underlying combined ratio because such changes could obscure the ability to compare results in periods after the acquisition to
results of periods prior to the acquisition as such trends are valuable to our investors' ability to assess the Company's financial
performance. Below is a reconciliation of combined ratio to the underlying combined ratio for individual reporting segments for the
year-ended December 31, 2024.
Business
Insurance
Personal
Insurance
Combined Ratio
89.9
99.1
Impact of current accident year catastrophes and prior accident year development
on combined ratio
(2.0)
(5.1)
Underlying Combined Ratio
87.9
94.1
Core earnings per diluted share: This non-GAAP per share measure is calculated using the non-GAAP financial
measure core earnings rather than the GAAP measure net income. The Company believes that core earnings 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) available to common stockholders per diluted common share is the most
directly comparable GAAP measure. Core earnings per diluted share should not be considered as a substitute for net income (loss)
available to common stockholders per diluted common share and does not reflect the overall profitability of the Company's
business. Therefore, the Company believes that it is useful for investors to evaluate net income (loss) available to common
stockholders per diluted common share and core earnings per diluted share when reviewing the Company's performance. Below is a
reconciliation of net income available to common stockholders per diluted share to core earnings per diluted share for the year-
ended December 31, 2024.
Year Ended
Dec. 31, 2024
Net Income available to common stockholders per diluted share
$
10.35
Adjustments made to reconcile net income available to common stockholders per diluted share to core
earnings per diluted share:
Net realized losses, excluded from core earnings, before tax
0.19
Restructuring and other costs, before tax
0.01
Integration and other non-recurring M&A costs, before tax
0.03
Change in deferred gain on retroactive reinsurance, before tax
(0.28)
Core earnings per diluted share
$
10.30
APPENDIX A
84
www.thehartford.com
APPENDIX B: SUMMARY OF THE HARTFORD 2025
LONG TERM INCENTIVE STOCK PLAN
Set forth below is a description of the material terms of The Hartford 2025 Long Term Incentive Stock Plan (the “2025 LTI Stock
Plan”). The following summary is qualified in its entirety by reference to the specific provisions of the proposed form of the 2025 LTI
Stock Plan, the full text of which is available in Appendix C to this Proxy Statement. Capitalized terms used but not defined herein
shall have the meanings set forth in the 2025 LTI Stock Plan.
General Applicability. The 2025 LTI Stock Plan is intended to replace The Hartford 2020 Stock Incentive Plan, as amended and
restated effective October 2, 2023 (the “2020 Stock Incentive Plan”). Upon approval and adoption of the 2025 LTI Stock Plan, no
further awards will be made under the 2020 Stock Incentive Plan. The material terms of the 2025 LTI Stock Plan are similar to the
terms of the 2020 Stock Incentive Plan, with minor refinements to more explicitly capture current administrative practices.
Changes include but are not limited to: 1) with respect to performance share awards that, after the end of the 3-year performance
period, the Compensation Committee certifies the performance results before awards are paid out; 2) when awards are granted
that (except in the case of senior executives) the Compensation Committee approves a pool for annual LTI awards for other
recipients, rather than each individual recipient's award; 3) clarifies that vested, forfeited, and/or cancelled awards will not be
reinstated upon rehire; 4) clarifies that certain eligibility determinations can be delegated; and 5) clarifies that, in the event of a
change in control where existing performance-based awards are not assumed or replaced, performance shall be deemed satisfied at
the greater of target or the percentage of performance measures achieved upon the change in control.
Shares Subject to 2025 LTI Stock Plan. If the 2025 LTI Stock Plan is approved by shareholders, the maximum number of shares that
may be issued in connection with the grant of options and other stock-based or stock-denominated awards is 8,500,000
(approximately 3.0% of the total 288,025,305 outstanding common shares of the company as of February 28, 2025, which
represents an increase of approximately 3,026,664 shares over the number of shares authorized but not issued under the 2020
Stock Incentive Plan. For purposes of applying this limit in the context of a Performance-Based Award, the number of shares of
common stock equal to the value of the award is based upon the target payout, in each case determined as of the date on which such
award is granted. To the extent that shares of common stock remain available for issuance under the 2020 Stock Incentive Plan but
are not subject to outstanding awards on May 21, 2025, such shares shall be available for awards under the 2025 LTI Stock Plan and
such shares are included in the total number of shares available under the 2025 LTI Stock Plan described above. To the extent that
any award under the 2020 Stock Incentive Plan is forfeited, terminated, surrendered, exchanged, expires, or is settled in cash in lieu
of stock (including to effect tax withholding), the shares subject to such award (or the relevant portion thereof) shall be available for
awards under the 2025 LTI Stock Plan and such shares shall be added to the total number of shares available under the 2025 LTI
Stock Plan.
The 2025 LTI Stock Plan provides that the maximum number of shares that may be granted to any participant with respect to
awards shall be 3,000,000 in any calendar year. The 2025 LTI Stock Plan further provides that the Compensation Committee may
provide for awards in excess of the above limitations at its discretion in any calendar year in which (i) a participant’s employment
with the company commences or (ii) the participant is promoted to a more senior position with the company.
The aggregate awards granted to any non-employee director with respect to any calendar year, solely with respect to his or her
services a member of the Board, taken together with any cash fees paid during the calendar year to the director, may not exceed
$750,000 in total value (calculating the value of any such awards based on the grant date). The Board may make exceptions to this
limit for individual non-employee directors in extraordinary circumstances, as the Board may determine in its discretion, provided
that the non-employee director receiving such additional compensation may not participate in the decision to award such
compensation.
In connection with a merger or consolidation of an entity with the company or the acquisition by the company of property or stock
of an entity, the company may grant substitute awards for options or other stock or stock-based awards granted by such entity on
terms determined by the Compensation Committee. Such substitute awards shall not count against the maximum number of shares
that may be issued or any individual sub-limits of the 2025 LTI Stock Plan except as otherwise required by the Internal Revenue
Code.
Purpose of the 2025 LTI Stock Plan. The company benefits when employees’ interests are aligned with those of non-employee
shareholders through the ownership of company stock. The company desires to preserve its flexible program of stock-based awards
designed to retain exceptional employees and to motivate their efforts on behalf of the company. The company believes that the
adoption of the 2025 LTI Stock Plan will enable the company to continue providing an effective source of incentives to reward the
efforts of highly motivated employees, and to attract new employees in an effort to meet the varying business needs of the company
and to compete effectively in its markets. In addition, the 2025 LTI Stock Plan provides for awards to non-employee directors in
connection with their compensation for services on the Board of Directors, consistent with the company’s desire that non-employee
directors achieve stock ownership levels equivalent to five times their annual cash retainer for service on the company’s Board of
Directors by the third anniversary of the director’s appointment to the Board of Directors. The 2025 LTI Stock Plan also permits
APPENDIX B
2025 Proxy Statement
85
awards to third party service providers. Awards may be granted by the Compensation Committee in its discretion and, therefore,
future benefits to be allocated to any individual or group of individuals under the 2025 LTI Stock Plan are not presently
determinable.
The Board has determined that it is in the best interests of the company and its shareholders to adopt the 2025 Long Term Incentive
Stock Plan.
Eligibility. All employees, officers and directors of the Company are eligible to receive grants under the 2025 LTI Stock Plan. The
Committee may also grant awards under the 2025 LTI Stock Plan to certain consultants and advisors. As of December 31, 2024, the
Company had approximately 19,147 employees. In 2024, awards were granted under the 2020 Stock Incentive Plan to
approximately 2,253 employees, Company’s directors, and no consultants or advisors.
Plan Administration. The Compensation and Management Development Committee (the “Compensation Committee”), all of the
current members of which are “non-employee directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934, as amended (the “Exchange Act”) and “independent directors” under the standards set forth in the company’s Corporate
Governance Guidelines, in accordance with the requirements of the listing standards of the New York Stock Exchange will
administer the 2025 LTI Stock Plan. The Compensation Committee will make determinations, including but not limited to, the
designation of those participants or groups of participants who shall receive awards, the number of shares to be covered by options,
SARs, Restricted Stock, RSUs, and other types of awards, the exercise price of options and the grant price of SARs (which may not be
less than 100% of the Fair Market Value of Common Stock on the date of grant), other option and SARs terms and conditions, the
number of Performance-Based Awards to be granted and the applicable performance objectives, and the effect on an award of a
participant’s termination of employment resulting from disability, death, retirement or other cessation of employment, authorized
leave of absence or other change in the employment or other status of the participant. The Compensation Committee may impose
such additional terms and conditions on an award as it deems advisable. The Compensation Committee may also grant other forms
of stock-based and cash-based awards. The Compensation Committee’s decisions in the administration of the 2025 LTI Stock Plan
shall be binding on all persons for all purposes.
The Compensation Committee may, in its sole discretion, delegate such of its powers as it deems appropriate to certain members of
senior management of the company, except that awards to Section 16 executive officers shall be made solely by the Compensation
Committee or the Board of Directors.
The 2025 LTI Stock Plan provides that any participant that accepts an award under the 2025 LTI Stock Plan agrees to be bound by
the company’s Clawback Policy, which governs the circumstances under which the Company must attempt to recover “erroneously
awarded” incentive-based compensation paid to certain executive officers to the extent such compensation was based on a
misstated financial reporting measure that results in an accounting restatement, as required by SEC rules and NYSE listing
standards. The Clawback Policy also permits the company to recoup any amounts paid or payable by the company at any time
(including any award made under the 2025 LTI Stock Plan) to the extent such recoupment either (i) is required by applicable law,
regulation or listing standards, or (ii) is determined by the company to be necessary or appropriate in light of business circumstances
or employee misconduct.
Minimum Vesting. Awards granted under the 2025 LTI Stock Plan which vest on the basis of a participant’s continued employment
with the company shall be subject to a minimum vesting period of one year, except (i) up to 5% of the maximum number of shares
that may be issued in connection with the grant of options and other stock-based or stock-denominated awards may provide for
vesting over a period of less than one year and (ii) the Compensation Committee may accelerate the vesting of any award, or waive
the one-year vesting restriction, in circumstances where the Compensation Committee determines such acceleration or waiver to
be in the best interests of the company.
Stock Options and SARs. Stock options and SARs under the 2025 LTI Stock Plan shall expire within ten years after grant. The
exercise price for options and the grant price for SARs must be at least equal to the Fair Market Value of the Common Stock on the
date of grant. The exercise price for options must be paid to the Company at the time of exercise and, in the discretion of the
Compensation Committee, may be paid in the form of cash, a notice of an exercise-and-sell transaction (in the case of nonqualified
options) or by such other lawful consideration as the Compensation Committee may determine. The Compensation Committee will
generally determine the time or times at which options and SARs granted under the 2025 LTI Stock Plan, including options and
SARs granted to directors, may be exercised. No option or SAR shall provide for the payment or accrual of dividends or dividend
equivalents. No option or SAR shall contain any provision entitling a participant to the automatic grant of additional options or SARs
in connection with any exercise of the original option or SAR. The Compensation Committee cannot reprice options or SARs
without first obtaining approval of shareholders. During the lifetime of a participant, an option or SAR may be exercised only by the
participant (or a permitted transferee) at any time during its term and the participant’s continued service.
Performance-Based Awards. Awards under the 2025 LTI Stock Plan may be made subject to the achievement of performance goals as
prescribed by the Compensation Committee. The Compensation Committee shall specify that the degree of granting, vesting and/
or payout of Performance-Based Awards shall be subject to the achievement of performance goals established by the
Compensation Committee. Such performance goals may vary by participant and may be different for different awards, may be
particular to a participant or the department, line of business, subsidiary or other unit in which the participant works, and may cover
such period as specified by the Compensation Committee, provided that such period must be at least twelve months. The
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Compensation Committee shall, following the end of a performance period and prior to payment or vesting, determine the level of
performance achieved against the performance goals. The Compensation Committee may adjust the cash or number of shares
payable pursuant to a Performance-Based Award and may waive the achievement of the applicable performance goals, including in
the case of death or total disability of the participant. Dividend equivalents may be credited with respect to Performance-Based
Awards, provided that such dividend equivalents will be subject to the same restrictions on transfer and forfeitability as the
Performance-Based Award with respect to which they are paid. Dividend equivalents may only be paid as and when the underlying
Performance-Based Award vests and is payable, and no interest will be paid on dividend equivalents.
Restricted Stock and RSUs. Restricted Stock and RSUs, which provide a contractual right to receive shares of Common Stock,
awarded under the 2025 LTI Stock Plan will be issued subject to a restriction period set by the Compensation Committee, during
which time any restricted shares may not be sold, transferred, assigned or pledged or otherwise disposed of. The Compensation
Committee will determine the terms and conditions applicable to any award of Restricted Stock or RSUs to any participant.
Dividends (in the case of Restricted Stock) and dividend equivalents (in the case of RSUs) may be credited with respect to Restricted
Stock and RSUs, provided that such dividend equivalents will be subject to the same restrictions on transfer and forfeitability as the
award with respect to which they are paid. Dividends and dividend equivalents so credited may only be paid as and when the
underlying Restricted Stock or RSU vests and is payable, and no interest will be paid on dividend equivalents. Recipients of
Restricted Stock shall have voting rights with respect to Restricted Stock. Recipients of RSUs shall have no voting rights with
respect to RSUs. The Compensation Committee shall establish the terms and conditions of any RSUs, including the restriction
period applicable thereto, and date on which Common Stock may be issued in respect thereof. The Compensation Committee may
determine that vesting of Restricted Stock or RSUs will be dependent upon attainment of performance goals established by the
Compensation Committee.
The Compensation Committee, or its delegate(s), may also permit any participant to receive RSUs in exchanged for or in lieu of
other compensation (including salaries, annual bonuses, annual retainer and meeting fees) that would otherwise have been payable
to such participant in cash. The Compensation Committee, or its delegate(s), may also permit RSUs to be deferred, on a mandatory
basis or at the election of a participant, in a manner that complies with Section 409A of the Internal Revenue Code. The
Compensation Committee, or its delegate(s) shall establish the terms and conditions applicable to any election by a participant to
receive RSUs (including the time at which any such election shall be made).
Cash-Based Awards. The Compensation Committee or the company may also grant Awards that are settled or denominated in cash
rather than Shares.
Compensation Upon Change of Control. The 2025 LTI Stock Plan provides limited protection of intended economic benefits for
participants upon a change of control of the company.
“Change of Control” is generally defined in the 2025 LTI Stock Plan as any of the following events:
i.
The filing of a report with the Securities and Exchange Commission disclosing that a person is the beneficial
owner of forty percent or more of the outstanding stock of the company entitled to vote in the election of
directors of the company;
ii.
A person purchases shares pursuant to a tender offer or exchange offer to acquire stock of the company (or
securities convertible into stock), provided that after consummation of the offer, the person is the beneficial
owner of twenty percent or more of the outstanding stock of the company entitled to vote in the election of
directors of the company;
iii.
The consummation of a merger, consolidation, recapitalization, or reorganization of the company approved by
the stockholders of the company, other than in a transaction immediately following which the persons who were
the beneficial owners of the outstanding securities of the company entitled to vote in the election of directors of
the company immediately prior to such transaction are the beneficial owners of at least 55% of the total voting
power represented by the securities of the entity surviving such transaction entitled to vote in the election of
directors of such entity in substantially the same relative proportions as their ownership of the securities of the
company entitled to vote in the election of directors of the company immediately prior to such transaction;
iv.
The consummation of a sale, lease, exchange or other transfer of all or substantially all the assets of the company
approved by the stockholders of the company; or
v.
Within any 24 month period, the persons who were directors of the company immediately before the beginning
of such period (the “Incumbent Directors”) cease (for any reason other than death) to constitute at least a
majority of the Board or the board of directors of any successor to the company, provided that any director who
was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director
(A) was elected to the Board by, or on the recommendation of the directors who then qualified as Incumbent
Directors either actually or by operation of this clause (v), and (B) was not designated by a person who has
entered into an agreement with the company to effect a transaction described in clause (iii) or (iv) above.
APPENDIX B
2025 Proxy Statement
87
Under the 2025 LTI Stock Plan, awards will not automatically vest and become exercisable upon a Change of Control if the
Compensation Committee reasonably determines in good faith prior to the occurrence of the Change of Control that the awards
will be assumed or replaced with an Alternative Award immediately following the Change of Control. Such an Alternative Award
must:
•
Relate to a security that is traded on a recognized U.S. national securities exchange;
•
Provide rights and entitlements that are substantially equivalent to or better than the rights and entitlements under the
existing award (in the case of existing Performance-Based Awards, the performance goals must be deemed satisfied at
target (or, if greater, as specified by the Compensation Committee), and the Alternative Award must be in the form of
restricted stock or restricted stock units, without a performance objective, unless otherwise determined by the
Compensation Committee);
•
Be of substantially equivalent economic value; and
•
Provide that awards become fully vested and exercisable if the participant’s employment is terminated within two years
following the Change of Control without Cause or by the participant for Good Reason. For this purpose, “Good Reason”
and “Cause” are as defined in the company’s applicable severance pay plan or, if no such agreement or plan exists or does
not defined such terms, as defined in the applicable award agreement.
In the event that awards were not assumed or replaced with such Alternative Awards, then, upon the Change of Control, the
following would occur:
•
Each option and SAR outstanding would generally immediately vest and become exercisable to the full extent of the
original grant for the remainder of its term. The Compensation Committee could, in its discretion, provide that each option
and SAR be surrendered or exercised for cash equal to the excess of the Fair Market Value of the Common Stock at the
time of exercise over the exercise price;
•
The restrictions applicable to shares of Restricted Stock and RSUs held by participants pursuant to the 2025 LTI Stock
Plan would lapse upon the occurrence of the Change of Control, and immediately following the Change in Control
participants would receive unrestricted certificates for all shares of Restricted Stock or RSUs. The Compensation
Committee could, in its discretion, provide that Restricted Stock or RSUs shall be exchanged for an immediate cash
payment equal to the number of outstanding shares or units multiplied by the Fair Market Value of a share of Common
Stock. Distributions of awards that constituted nonqualified deferred compensation under Section 409A of the Internal
Revenue Code would be made at the time otherwise payable without regard to the occurrence of the Change of Control.
•
If the Change of Control occurred during the course of a performance period applicable to a Performance-Based Award,
then participants would be deemed to have satisfied the performance goals at the applicable target level, or, if greater, the
percentage of performance measures (as determined the Compensation Committee) achieved as of the date of the Change
in Control (or such date as otherwise specified by the Compensation Committee). The portion of any Performance-Based
Award that fails to vest in accordance with the deemed performance would be immediately forfeited and canceled. The
Compensation Committee could, in its discretion, provide that Performance-Based Awards be exchanged for cash equal to
the number of shares awarded based on deemed performance multiplied by the Fair Market Value of a share of Common
Stock. Distributions of amounts payable to participants with respect to Performance-Based Awards would be made
immediately following the occurrence of the Change of Control, provided that the awards did not constitute nonqualified
deferred compensation under Section 409A of the Internal Revenue Code.
Authorization of Sub-Plans; Non-U.S. Employees. The Compensation Committee, or its delegate(s), may establish sub-plans under the
2025 LTI Stock Plan for purposes of satisfying applicable securities, tax or other laws of various jurisdictions. Awards may be
granted to participants who are non-U.S. citizens or residents employed or on assignment outside the United States, or both, on
such terms and conditions different from those applicable to awards to participants employed in the United States as may be
appropriate in order to recognize differences in local law or tax policy.
Amendment and Termination of the 2025 LTI Stock Plan. The Compensation Committee may amend or discontinue the 2025 LTI
Stock Plan at any time and, specifically may make such modifications to the 2025 LTI Stock Plan as it deems necessary to avoid the
application of Section 409A of the Internal Revenue Code and the United States Treasury regulations thereunder. However, no
amendment shall, without shareholder approval, (i) materially increase the number of shares reserved for awards (except as
provided in the 2025 LTI Stock Plan with respect to stock splits or other similar changes), (ii) expand the types of awards that may
be granted, (iii) materially expand the group of participants eligible for awards, or (iv) with respect to the grant of all options and
SARs, allow the Compensation Committee to reprice options or SARs.
The Compensation Committee has not specified the participants who may receive awards under the 2025 LTI Stock Plan in the
future. Information regarding the options, performance shares and Restricted Stock Units granted to the company’s named
executive officers during 2024 under the 2020 Stock Incentive Plan is set forth in the various compensation tables included under
Executive Compensation Tables beginning on page 53 of this proxy statement.
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Registration of Shares. If the 2025 LTI Stock Plan is approved by shareholders, the shares available for award grants thereunder will
be registered under the Securities Act of 1933, as amended, and a Subsequent Listing Application will be filed with the NYSE to list
the shares.
Federal Income Tax Consequences. The following is a brief summary of the current federal income tax rules generally applicable to
options, SARs, Performance Awards, Restricted Stock, and RSUs. Awardees should consult their own tax advisors as to the specific
Federal, state and local tax consequences applicable to them.
•
Incentive Stock Options. An incentive stock option results in no taxable income to the optionee or deduction to the company
at the time it is granted or exercised. However, the excess of the Fair Market Value of the shares acquired over the option
price is an item of adjustment in computing the alternative minimum taxable income of the optionee. If the optionee holds
the stock received as a result of an exercise of an incentive stock option for at least two years from the date of the grant
and one year from the date of exercise, then the gain realized on disposition of the stock is treated as long-term capital
gain. If the share is disposed of during such periods, however, (i.e. a “disqualifying disposition”), then the optionee will
include in income, as compensation for the year of the disposition, an amount equal to the excess, if any, of the Fair Market
Value of the shares upon exercise of the option over the option price (or, if less, the excess of the amount realized upon
disposition over the option price). The excess, if any, of the sale price over the Fair Market Value on the date of exercise
will be a short-term capital gain. In such case, the company would be entitled to a deduction, in the year of such a
disposition, for the amount includible in the optionee’s income as compensation. The optionee’s basis in the shares
acquired upon exercise of an incentive stock option is equal to the option price paid, plus any amount includible in his or
her income as a result of a disqualifying disposition.
•
Non-Qualified Stock Options. An optionee is not subject to Federal income tax upon grant of a non-qualified option. At the
time of exercise, the optionee will realize compensation income (subject to withholding) to the extent that the then Fair
Market Value of the stock exceeds the option price. The amount of such income will constitute an addition to the
optionee’s tax basis in the optioned stock. Sale of the shares will result in capital gain or loss (long-term or short-term
depending on the optionee’s holding period). The company is entitled to a Federal tax deduction at the same time and to
the same extent that the optionee realizes compensation income.
•
Stock Appreciation Rights (“SARs”). A grantee is not taxed upon the grant of SARs. An optionee exercising SARs for cash or
stock will realize compensation income (subject to withholding) in the amount of the cash and/or stock received. The
company is entitled to a tax deduction at the same time and to the same extent that the grantee realizes compensation
income.
•
Performance Shares. No income will be recognized at the time of grant by the recipient of a Performance Share if such
award is subject to a substantial risk of forfeiture. Generally, at the time the substantial risk of forfeiture terminates with
respect to Performance Awards, the then Fair Market Value of the stock will constitute ordinary income to the participant.
Subject to the applicable provisions of the Internal Revenue Code, a deduction for federal income tax purposes will be
allowable to the company in an amount equal to the compensation realized by the participant.
•
Restricted Stock/RSUs. An awardee of Restricted Stock or RSUs will generally realize compensation income (subject to
withholding) when and to the extent that the restrictions on the shares or units lapse and delivery of the shares
corresponding to the units is not deferred, as measured by the value of the shares or units at the time of lapse. The
awardee’s holding period for the shares or units will not commence until the date of lapse, and dividends paid on Restricted
Stock during the restriction period will be treated as compensation. However, if an awardee makes an election to realize
compensation income at the time of an award of Restricted Stock in accordance with the Internal Revenue Code, the
recipient will be taxed at the time of the grant in an amount equal to the excess of the Fair Market Value of the Restricted
Stock at that time (determined without regard to any of the applicable restrictions) over the amount, if any, paid for such
Restricted Stock. In such case, the recipient’s holding period will commence on the date of the grant and his or her tax basis
in the shares will be increased by the amount of income recognized by reason of such election. However, if the recipient
subsequently forfeits the shares of Restricted Stock, he or she will only be entitled to recognize a loss with respect to the
amount, if any, paid for the shares (and not the taxes recognized by reason of such election). A grantee of RSUs may not
make such an election. The company will be entitled to a Federal tax deduction at the same time and to the same extent
that the awardee realizes compensation income. However, if the recipient has elected to recognize income at the time of
the grant and subsequently forfeits the Restricted Stock, the company must include as ordinary income the amount it
previously deducted in the year of grant with respect to such shares.
•
Tax Treatment of Awards to Participants Outside the United States. The grant and exercise of options and awards under the
2025 LTI Stock Plan to participants outside the United States may be taxed on a different basis.
•
Golden Parachute Tax Penalties. Options, SARs, Performance Awards, Restricted Stock or RSUs which are granted,
accelerated, or enhanced upon the occurrence of a takeover (i.e., a Change of Control) may give rise, in whole or in part, to
“excess parachute payments” within the meaning of Section 280G of the Internal Revenue Code and, to such extent, will be
nondeductible by the company and subject to a 20% excise tax to the awardee.
APPENDIX B
2025 Proxy Statement
89
•
Limitation on the Ability to Deduct Compensation Payable to Covered Employees. Section 162(m) of the Internal Revenue Code
generally disallows a federal income tax deduction to any publicly held corporation for compensation paid in excess of
$1,000,000 in any taxable year to any person who is a “covered employee” under this rule. The term “covered employee”
includes any person who is or was a named executive officer of the Company under the proxy disclosure rules in any year
after 2016. It is likely that some or potentially all of the compensation payable under the 2025 LTI Stock Plan to persons
who are covered employees will not be deductible by the Company or its subsidiaries for federal income tax purposes
Information Regarding Existing Equity Compensation Plans
Plan Category
(a) Number of
Securities to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights (1)
(b) Weighted-average
Exercise Price of
Outstanding Options,
Warrants and Rights (2)
(c) Number of
Securities Remaining
Available for Future
Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column
(a)) (3)
Equity compensation plans approved by
stockholders
7,910,934 $
60.51
9,267,171
Equity compensation plans not approved by
stockholders
—
—
—
Total
7,910,934 $
60.51
9,267,171
(1) The amount shown in this column includes the following equity compensation awarded under the Stock Plans: 4,518,040
outstanding options; 2,677,935 outstanding restricted stock units, 594,213 outstanding performance shares at 100% of target
(which excludes 567,394 shares that vested on December 31, 2024, related to the 2022-2024 performance period) and 120,746
non-vested dividend equivalent shares as of December 31, 2024. The maximum number of performance shares that could be
awarded is 1,188,426 (200% of target) if the Company achieved the highest performance level.
(2) The weighted-average exercise price reflects outstanding options and does not reflect outstanding restricted stock units or
performance shares because they do not have exercise prices.
(3) Of these shares, 3,014,109 remain available for purchase under the ESPP as of December 31, 2024. 6,253,061 shares remain
available for issuance as options, restricted stock units, restricted stock awards or performance shares under the 2020 Stock Plan
as of December 31, 2024.
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APPENDIX C: THE HARTFORD 2025 LONG TERM
INCENTIVE STOCK PLAN
THE HARTFORD 2025 LONG TERM INCENTIVE STOCK PLAN
1.
Purpose
The purpose of this 2025 Long Term Incentive Stock Plan (the "Plan") of The Hartford Insurance Group, Inc. (the
“Company”), is to attract, retain, motivate and reward sustained long-term performance of individuals who are expected to make
important contributions to the Company by providing equity ownership opportunities that are aligned with the interests of the
Company's shareholders. Except where the context otherwise requires, the term "Company" shall include any of the Company's
present or future parent or subsidiary corporations (“Affiliated Corporation”) as defined in Sections 424(e) or (f) of the Internal
Revenue Code of 1986, as amended , and any regulations thereunder (the "Code"), as determined by the Compensation and
Management Development Committee or such other committee of the Board as may be designated by the Board of Directors of the
Company (the "Board") to administer the Plan (the “Committee”).
2.
Eligibility
The Committee, or its designee(s), shall designate the employees, officers and directors of the Company who are eligible for
an Award (as defined below) under the Plan (either by individual, group or other categorization). The Committee, or its designee(s),
may also designate consultants and advisors to the Company (as those terms are defined for purposes of Form S-8 under the
Securities Act of 1933, as amended (the "1933 Act”), or any successor form) as eligible for an Award under the Plan. Each person
who is granted an Award under the Plan is deemed a "Participant". Notwithstanding the foregoing, nothing hereunder shall require
that an employee, officer or director is granted an Award under the Plan.
3.
Awards under the Plan
a.
Types. The Plan provides for the following types of awards, each of which is referred to as an “Award”: Options
(as defined in Section 6), SARs (as defined in Section 7), Restricted Stock (as defined in Section 8), RSUs (as
defined in Section 8), Performance Shares (as defined in Section 9(a)), and Other Stock-Based Awards (as defined
in Section 3(b)). Awards under this Plan may be designated Performance-Based Awards (as defined in Section
9(b)). Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to
any other Award. The terms of each Award need not be identical, and the Committee need not treat Participants
uniformly.
b.
Other Stock-Based Awards. The Committee may grant Awards of Shares (as defined in Section 5), and other
Awards that are valued in whole or in part by reference to, or are otherwise based on, Shares or other property
("Other Stock-Based Awards"). Such Other Stock-Based Awards may also be available, upon vesting, as a form of
payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to
which a Participant is otherwise entitled.
c.
Cash Based Awards. The Committee or the Company may also grant Awards under this Plan that are settled or
denominated in cash rather than Shares ("Cash-Based Awards").
d.
Substitute Awards. In connection with a merger or consolidation of an entity with the Company or the acquisition
by the Company of property or stock of an entity, the Committee may grant Awards in substitution for any
options or other stock or stock-based awards granted by such entity or an affiliate thereof (“Substitute Awards”).
Substitute Awards may be granted on such terms as the Committee deems appropriate under the circumstances.
Substitute Awards shall not count against the overall share limit set forth in Section 5(a) or any sublimits
contained in the Plan, except as may be required by reason of Section 422 and related provisions of the Code.
e.
Dividends or Dividend Equivalents. The Committee may provide that an Award of Restricted Stock or
Performance Shares shall be credited with dividends or that an RSU or other Performance-Based Award shall be
credited with units or equivalents to reflect dividends declared on Shares (“Dividend Equivalents”), as set forth in
the Award agreement. Unless the Committee shall otherwise determine (either at or after grant), all dividends or
Dividend Equivalents credited to an Award under this Plan of Restricted Stock, RSUs or Performance-Based
Awards shall be deemed reinvested in that number of Restricted Stock, RSUs or Performance Awards, as
applicable, determined based on the Fair Market Value on the date the corresponding dividend on the Share is
payable to stockholders. Unless the Committee determines otherwise, “Fair Market Value” shall be deemed, as of
any date, to be equal to the reported closing price for one Share on the New York Stock Exchange (“NYSE”) or, if
no sales of Shares have taken place on such date, the reported closing price on the most recent date on which
selling prices were quoted, the determination to be made in the discretion of the Committee. Such dividends or
Dividend Equivalents, as applicable, may be payable in cash or settled in Shares, and shall be subject to the same
terms and conditions (including any restriction or vesting period(s), payment date or performance measure(s)) as
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the applicable Award. In the case of Performance-Based Awards, dividends, or Dividend Equivalents, as
applicable, shall be credited during the vesting period based on target performance and then adjusted after the
Performance-Based Award vests based on achievement of the Performance-Based Award’s performance
measures. Neither Options nor SARs shall be credited with dividends or Dividend Equivalents under the Plan.
No dividends or Dividend Equivalents shall be paid on unvested Awards, and no interest will be paid on dividends
or Dividend Equivalents.
4.
Granting of Awards; Administration and Delegation
The Committee shall have authority to grant Awards under the Plan. The Plan will be administered by the Committee, and
the Committee may adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem
advisable. The Committee shall have full power, discretion, and authority to interpret, construe and administer the Plan and any
Award agreements entered into under the Plan and such interpretations and constructions shall be, except as otherwise
determined by the Board, final, conclusive and binding on all persons for all purposes. The Committee may correct any defect,
supply any omission, or reconcile any inconsistency in the Plan or any Award. The Committee’s decisions and determinations under
the Plan need not be uniform and may be made selectively among Participants, whether or not such Participants are similarly
situated. The Board as a whole (or any committee of the Board that it designates) may take any action under the Plan that would
otherwise be the responsibility of the Committee; should this occur, all references in this Plan to the “Committee” shall be deemed
to refer to the Board or any such committee. The Committee may, in its sole discretion, delegate such of its powers as it deems
appropriate to the Company’s Chief Human Resources Officer (or other person holding a similar position) or the Company’s Chief
Executive Officer, except that Awards to an officer of the Company who is subject to the reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934, as amended (the “1934 Act”) (“Section 16 Officers”) shall be made, and matters related thereto
shall be determined, solely by the Committee.
5.
Shares Available for Awards
a.
Number of Shares; Share Counting
i.
Authorized Number of Shares. Subject to adjustment under Section 10, Awards may be made under the
Plan (any or all of which Awards may be in the form of Incentive Stock Options, as defined in Section
6(b)) of shares of the Company’s common stock (“Shares”). The aggregate number of Shares shall be up
to the sum of:
1.
3,026,664 Shares not previously authorized for issuance under any plan;
plus
2.
5,473,336 Shares available for issuance under the Company's 2020 Stock Incentive Plan, as
amended, 2014 Incentive Stock Plan, as amended, (collectively, the "Prior Plan") as of February
28, 2025;
plus
3.
any of the 8,231,095 Shares subject to outstanding awards as of February 28, 2025 under the
Prior Plan, which subsequently expire, terminate or are otherwise surrendered, canceled,
forfeited, or are settled in cash in lieu of shares of the Company’s common stock (including to
effect tax withholding).
ii.
As of the Effective Date, no further awards will be granted under the Prior Plan.
iii.
Share Counting. The following rules shall be used to determine the number of Shares available for the
grant of Awards under the Plan for purposes of both this Section 5(a) and the sublimits contained in
Section 5(b):
1.
Shares shall be counted as of the Award’s grant date;
2.
Shares for Performance-Based Awards shall be counted at target performance based on the
Performance-Based Award’s grant date;
3.
Any portion of an Award that is settled in cash shall not be counted against any limit;
4.
Shares associated with all or that portion of an Award that is forfeited, terminated or
surrendered shall again be available for the future grant of Awards under this Plan;
5.
For Options or SARs, all or any portion of the Shares subject to an Award that were not
exercised and expired shall be available for the future grant of Awards under this Plan;
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6.
Shares that are used for tax withholding, up to the Company's minimum statutory withholding
obligations, with respect to Awards other than Options or SARs shall be available for the
future grant of Awards under this Plan;
7.
Incentive Stock Option Awards shall be subject to any further limitations established under
the Code;
8.
Shares delivered (either by actual delivery, attestation, or net exercise) to the Company by a
Participant to purchase Shares upon the exercise of an Award shall not be added back to the
number of Shares available for the future grant of Awards; and
9.
Shares repurchased by the Company on the open market shall not increase the number of
Shares available for future grant of Awards.
b.
Sublimits. Subject to adjustment under Section 10, the following sublimits on the number of Shares shall apply:
i.
Per-Participant Limit.
1.
Calendar Year Limit. The maximum number of Shares that may be granted to any Participant in
any calendar year pursuant to Awards under the Plan shall be 3,000,000 Shares.
2.
New Hires & Promotions. Awards to a Participant may, at the discretion of the Committee,
exceed the limit set out in A. above: for the first calendar year of his or her employment at the
Company or for the calendar year of a Participant’s promotion to a more senior position within
the Company.
3.
Non-Employee Director Limit. Awards granted to any non-employee director for a board
service year for his or her service as a member of the Board, taken together with any cash fees
paid for that board service year, may not exceed $750,000 in total value (calculated as of the
Award’s grant date). This limit shall not apply to any outstanding Award that was granted in
recognition for service provided in a prior board service year. The Board may make exceptions
to this limit in extraordinary circumstances, as the Board may determine in its discretion,
provided that the non-employee director receiving such additional compensation may not
participate in the decision to award such compensation.
c.
Dividends and Dividend Equivalents. Dividends shall not count against the limits set forth in Section 5(a).
Dividend Equivalents shall count against the limits set forth in Section 5(a).
d.
Shares Subject to the Plan. Shares to be issued under the Plan may be made available from the authorized but
unissued shares, or shares held by the Company in treasury or from shares purchased in the open market.
6.
Stock Options
a.
General. The Committee may grant options to purchase Shares (each, an “Option”) and determine the number of
Shares to be covered by each Option, the exercise price of each Option, and impose any conditions or limitations
on the exercise of an Option that the Committee considers appropriate.
b.
Incentive Stock Options. An Option that the Committee intends to be an “incentive stock option” as defined in
Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of the Company or any of
its Affiliated Corporations (or other option holder permitted under Section 422 of the Code) and shall be subject
to and shall be construed consistently with the requirements of Section 422 of the Code. An Option that is not
intended to be an Incentive Stock Option shall be designated a “Nonqualified Stock Option”. The Company shall
have no liability to a Participant, or any other person, if an Option (or any part thereof) that is intended to be an
Incentive Stock Option is not an Incentive Stock Option, or if the Company converts an Incentive Stock Option to
a Nonqualified Stock Option.
c.
Exercise Price. The Committee shall establish the exercise price of each Option or the formula by which such
exercise price shall be determined. The exercise price shall be specified in the applicable Option agreement. The
exercise price shall be not less than 100% of the Fair Market Value of a Share as determined by (or in a manner
approved by) the Committee on the date the Option is granted; provided that if the Committee approves the
grant of an Option with an exercise price to be determined on a future date, the exercise price shall be not less
than 100% of the Fair Market Value of a Share on such future date.
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d.
Terms; Duration of Options. Each Option shall be exercisable at such times and subject to such terms, conditions
and limitations as the Committee may specify in the applicable Option agreement; provided, however, that no
Option will be granted with a term in excess of 10 years.
e.
Exercise of Options. Options may be exercised by delivery to the Company of a notice of exercise in a form
approved by the Company, together with payment in full of the exercise price (in a manner specified in Section
6(f)) for the number of Shares for which the Option is exercised. If not exercised prior, each outstanding Option
shall be deemed to be exercised, in the manner set forth below, at the close of business on the scheduled
expiration date of such Option if at such time the Option by its terms remains exercisable and, if so exercised,
would result in a distribution to the holder of such Option of at least one Share net of any applicable tax
withholding requirements (“Deemed Exercise”). Such Deemed Exercise may be effected without notification by
the Participant to the Company or by the Company to the Participant. Upon such Deemed Exercise, the
Company shall issue and deliver to the Participant the greatest number of whole Shares equal to the quotient of i.
divided by ii., with the quotient reduced as necessary to satisfy applicable tax withholding requirements, where i.
and ii. are:
i.
The product of (x) the number of Shares as to which the Option is being deemed exercised and (y) the
excess of the Fair Market Value on the Deemed Exercise date over the exercise price per share of such
Option, and
ii.
The Fair Market Value on such date, with any remainder being payable in cash to the Participant. If, on
the scheduled expiration date of any Option, the exercise of such Option would not result in a Deemed
Exercise, then such Option shall be canceled without further action by the Participant, the Committee,
or the Company on the date following the last date on which such Option may have been exercised in
accordance with this Section 6.
f.
Payment upon Exercise. Shares purchased upon the exercise of an Option granted under the Plan shall be paid for
by the delivery of the following (or any combination thereof), unless otherwise provided in the applicable Award
agreement or approved by the Committee:
i.
In cash or by check, in the manner specified by the Company or its plan administrator;
ii.
Through the liquidation of some or all shares acquired from the exercise, via an exercise-and-sell-to-
cover transaction or an exercise-and-sell transaction (respectively) in the manner specified by the
Company or its Plan administrator; or
iii.
Such other lawful consideration as the Committee may determine; provided, however, that in no event
may a promissory note of the Participant be used to pay the Option exercise price.
g.
Limitation on Repricing. Unless such action is approved by the Company's shareholders, the Company may not
(except as provided for under Section 10): (1) amend any outstanding Option granted under the Plan to provide
an exercise price per share that is lower than the then-current exercise price per share of such outstanding
Option, (2) cancel (or accept surrender of) any outstanding option (whether or not granted under the Plan) and
grant new Awards under the Plan (other than Awards granted pursuant to Section 3(d)) covering the same or a
different number of Shares and having an exercise price per share lower than the then-current exercise price per
share of the cancelled option, (3) cancel (or accept surrender) in exchange for a cash payment any outstanding
Option with an exercise price per share above the then-current Fair Market Value of the Shares, or (4) take any
other action under the Plan that constitutes a "repricing" within the meaning of the rules of the NYSE.
h.
No Reload Options. No Option granted under the Plan shall contain any provision entitling the Participant to the
automatic grant of additional Options in connection with any exercise of the original Option.
7.
Stock Appreciation Rights
a.
General. The Committee may grant Awards consisting of stock appreciation rights ("SARs”) entitling the holder,
upon exercise, to receive an amount of Shares or cash or a combination thereof (such form to be determined by
the Committee) determined by reference to appreciation, from and after the date of grant, in the Fair Market
Value of a Share over the measurement price established pursuant to Section 7(b). The date as of which such
appreciation is determined shall be the exercise date.
b.
Measurement Price. The Committee shall establish the measurement price of each SAR and specify it in the
applicable SAR agreement. The measurement price shall not be less than 100% of the Fair Market Value of the
Shares on the date the SAR is granted; provided that if the Committee approves the grant of an SAR effective as
of a future date, the measurement price shall be not less than 100% of the Fair Market Value of the Shares on
such future date.
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c.
Duration of SARs. Each SAR shall be exercisable at such times and subject to such terms and conditions as the
Committee may specify in the applicable SAR agreement; provided, however, that no SAR will be granted with a
term in excess of 10 years.
d.
Exercise of SARs. SARs may be exercised by delivery to the Company of a notice of exercise in a form approved
by the Company, together with any other documents required by the Committee. Each outstanding SAR shall be
subject to Deemed Exercise at the close of business on the scheduled expiration date of such SAR if at such time
the SAR by its terms remains exercisable and, if so exercised, would result in a distribution to the holder of such
SAR of at least one Share net of any applicable tax withholding requirements. If, on the scheduled expiration date
of any SAR, the exercise of such SAR would not result in a Deemed Exercise, then such SAR shall be canceled
without further action by the Participant, the Committee, or the Company on the date following the last date on
which such SAR may have been exercised in accordance with this Section 7.
e.
Limitation on Repricing. Unless such action is approved by the Company's shareholders, the Company may not
(except as provided for under Section 10): (1) amend any outstanding SAR granted under the Plan to provide a
measurement price per share that is lower than the then-current measurement price per share of such
outstanding SAR, (2) cancel (or accept surrender of) any outstanding SAR (whether or not granted under the
Plan) and grant in substitution therefor new Awards under the Plan (other than Awards granted pursuant to
Section 3(d)) covering the same or a different number of Shares and having a measurement price per share lower
than the then-current measurement price per share of the cancelled SAR, (3) cancel (or accept surrender) in
exchange for a cash payment any outstanding SAR with a measurement price per share above the then-current
Fair Market Value of a Share, or (4) take any other action under the Plan that constitutes a "repricing" within the
meaning of the rules of the NYSE.
f.
No Reload SARs. No SAR granted under the Plan shall contain any provision entitling the Participant to the
automatic grant of additional SARs in connection with any exercise of the original SAR.
8.
Restricted Stock; Restricted Stock Units
a.
General. The Committee may grant Awards entitling recipients to acquire Shares, subject to the right of the
Company to require forfeiture of such Shares in the event that conditions specified by the Committee in the
applicable Award agreement are not satisfied prior to the end of the applicable restriction period or periods
established by the Committee for such Award ("Restricted Stock”). The Committee may also grant restricted stock
unit Awards entitling the recipient to receive Shares or cash at the end of the applicable restriction period or
periods established by the Committee for such Award ("RSUs").
b.
Terms and Conditions for Restricted Stock and RSUs. The Committee shall determine the terms and conditions of
Restricted Stock and RSUs, including the conditions for vesting and forfeiture and the issue price, if any,
applicable to the Award, which shall be set out in the applicable Award agreement.
c.
Additional Provisions Relating to Restricted Stock.
i.
Evidence of Ownership. Subject to Section 12(g) and Section 13(b), the Company shall cause the
issuance of each award of Restricted Stock to be evidenced on its books and records in a manner
consistent with its practices for evidencing share ownership. The Company shall take such actions as it
shall deem necessary or appropriate to reflect in such records the terms, conditions and restrictions, if
any, applicable to such Award (including appropriate stop-transfer orders), and may require that the
Participant acknowledge such terms, conditions and restrictions in such manner as the Company shall
reasonably request. Upon the lapse of the restriction period or the Participant otherwise vesting in
respect to Restricted Stock, such Shares shall no longer be subject to the restrictions imposed under this
Section and the Company shall take appropriate actions to reflect the lapse of such restrictions.
ii.
Voting Rights. A Participant shall have voting rights with respect to Restricted Stock.
d.
Additional Provisions Relating to RSUs.
i.
Settlement. Upon the vesting of and/or lapsing of any restrictions (i.e., settlement) with respect to each
RSU, the Participant shall be entitled to receive from the Company the number of Shares specified in the
Award agreement or (if so provided in the applicable Award agreement or otherwise determined by the
Committee) an amount of cash equal to the Fair Market Value of the number of Shares or a combination
thereof. The Committee may provide that settlement of RSUs shall be deferred, on a mandatory basis
or at the election of the Participant, in a manner that complies with Section 409A of the Code or any
successor provision thereto, and the regulations thereunder ("Section 409A").
ii.
Voting Rights. A Participant shall have no voting rights with respect to any RSUs.
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9.
Performance Shares and Other Performance-Based Awards
a.
Grants of Performance Shares. The Committee may issue Awards under the Plan that are subject to the
achievement of performance measures pursuant to this Section ("Performance Shares"), which shall be established
at the time of grant.
b.
Grants of Other Performance-Based Awards. In addition to any Performance Shares granted pursuant to
subsection (a) above, the Committee may designate any other Award as a Performance-Based Award (which
includes, for the avoidance of doubt, Performance Shares), which shall be subject to the achievement of
performance measures pursuant to this Section and shall be established at the time of grant.
c.
Performance Measures. The Committee shall specify in the Award agreement that the degree of granting, vesting
and/or payout of any Performance-Based Award shall be subject to the achievement of one or more performance
measures established by the Committee. Such performance measures: (x) may vary by Participant and may be
different for different Awards; (y) may be particular to a Participant or the department, line of business,
subsidiary or other unit in which the Participant works; and (z) may cover such period as may be specified by the
Committee; provided, however, that any such period must be at least twelve months.
d.
Determination of Attainment of Performance Goals. Following the end of a performance period and prior to any
payment or vesting in respect of such Performance Cycle, the Committee shall approve results against
established or adjusted performance goals.
e.
Adjustments. Subject to the terms of the Plan, if during the course of a performance period there shall occur
significant events which the Committee expects to have a substantial effect on the applicable performance
measures during such period, the Committee may revise such performance measures. In the case of the death or
disability of the Participant, a change described in Section 10, or a Change of Control of the Company, the
Committee may waive the achievement of the applicable performance measures.
10. Adjustments in Event of Change in Shares
In the event of any reorganization, merger, recapitalization, consolidation, liquidation, special cash dividend, stock
dividend, stock split, reclassification, combination of shares, rights offering, split-up or extraordinary dividend (including a spin-off)
or divestiture, or any other change in the corporate structure or shares, the Committee shall make such adjustment in the Shares
subject to Awards (including Shares subject to purchase by an Option or issuable in respect of RSUs), as shall be necessary to
preserve the Participant’s rights substantially proportionate to those rights existing immediately prior to such transaction or event
including (i) converting rights and Awards in respect of Shares into rights and Awards in respect of cash, other classes or types of
securities or other property, or (ii) modifying the terms, conditions or restrictions on Shares or Awards, including the price payable
upon the exercise of such Option and the number of shares subject to Restricted Stock or RSUs.
11. Change of Control
If the Committee reasonably determines in good faith that a Change of Control has occurred, then the following rules shall
apply:
a.
If the Committee (as constituted immediately prior to the Change of Control) determines that all Awards shall,
immediately following the Change of Control, be honored or assumed by the employer or other entity to which
the Participant provides his or her services (or the parent or a subsidiary of such entity) through the issuance of
Alternative Awards, then all Awards under this Plan shall be cancelled and terminated, provided that such
Alternative Awards must:
i.
Relate to a class of equity that is (or will be within five business days following the Change of Control)
listed to trade on a U.S. national securities exchange;
ii.
Fully vest and become exercisable if a Participant’s employment or other services are terminated upon
or within two years following such Change of Control by the Participant’s employer (or other service
recipient) other than for Cause or by the Participant for Good Reason; provided, however, that with
respect to any Award that does not qualify for any applicable exemption from the application of Section
409A of the Code, the payment or distribution of the Alternative Award shall only be made at the time
otherwise specified under the Plan or the Award agreements without regard to the occurrence of the
Change of Control (including any six-month delay in payment applicable to a “specified employee”, as
determined in accordance with Section 409A of the Code);
iii.
Provide the Participants with rights and entitlements substantially equivalent to or better than the
rights and entitlements applicable under such Award, including, but not limited to an identical or better
exercise or vesting schedule (including all provisions for accelerated vesting) and identical or better
timing and methods of payment;
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iv.
In the case of existing Performance-Based Awards, be in the form of restricted stock or restricted stock
units, unless otherwise determined by the Committee (the value of any such Alternative Award shall be
determined based on deemed satisfaction of the performance measures at the target level (or such
higher amount established by the Committee)); and
v.
Have substantially equivalent economic value to the existing Award.
b.
If the Committee determines that existing Awards will not be honored or assumed through the issuance of
Alternative Awards immediately following the Change of Control, then all Awards shall fully vest and become
exercisable upon the occurrence of a Change of Control and:
i.
Options and SARs may be exercised throughout the remainder of the original term;
ii.
Any performance measures applicable to Performance-Based Awards shall be deemed to have been
satisfied at the target level for such Award, or, if greater, the percentage of performance measures
achieved (as determined by the Committee) as of the date of the Change in Control (or such other date
as determined by the Committee). The portion of any Performance-Based Award that does not vest in
accordance with the preceding sentence shall be forfeited and canceled without any payment therefor.
iii.
All Restricted Stock, RSUs and Performance Shares shall be distributed and paid out immediately in
Shares following (but in no event later than 30 days following) the occurrence of the Change of Control,
provided that the Committee has determined that each such distribution is permitted by or qualifies for
an exemption from the application of Section 409A of the Code.
iv.
As an alternative to the foregoing, the Committee may, in its discretion, provide for any of the following:
1.
Each Option and SAR shall be surrendered or exercised for an immediate lump sum cash
amount equal to the excess of the Fair Market Value of the Shares subject to such Option or
SAR determined as of the time of such surrender or exercise over the exercise price; or
2.
Each Restricted Stock, RSU and Performance Award shall be exchanged for an immediate lump
sum cash amount equal to the number of outstanding units or shares awarded to such
Participant (with the performance objectives for Performance-Based Awards deemed satisfied
at the target level for such Award or, if greater, the percentage of performance measures
achieved (as determined by the Committee) as of the date of the Change in Control (or such
other date as determined by the Committee) multiplied by the Fair Market Value of a Share as
of the date of such exchange. The portion of any Performance-Based Award that does not vest
in accordance with the preceding sentence shall immediately be forfeited and canceled
without any payment therefor.
v.
If the Committee determines that all or any portion of an Award cannot be distributed as a result of the
application of Section 409A of the Code, then distribution or payment of such Award shall be made at
the time otherwise specified in the Plan or the applicable Award agreement without regard to the
occurrence of a Change of Control (including any six-month delay in payment applicable to a "specified
employee", as determined in accordance with Section 409A of the Code). Without limiting the
foregoing, nothing in this Section 11(b) shall be construed to prevent any Participant's rights in respect
of any Award from becoming non-forfeitable upon the occurrence of a Change of Control.
c.
Notwithstanding any provision in this Plan to the contrary, in the event of a Change of Control as described in
Section 11(d)(iii) or Section 11(d)(iv), in the case of an awardee whose employment or service involuntarily
terminates on or after the date of a shareholder approval described in either of such sections but before the date
of a consummation described in either of such sections, and the consummation occurs within 60 days of such date
of termination, then the date of termination of such an awardee’s employment or service shall be deemed for
purposes of the Plan to be the date following the date of the applicable consummation.
d.
For purposes of this Plan, a Change of Control shall occur:
i.
if a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to
Section 13(d) of the 1934 Act disclosing that any Person, other than the Company or a subsidiary of the
Company or any employee benefit plan sponsored by the Company or a subsidiary of the Company is
the Beneficial Owner of forty percent or more of the outstanding stock of the Company entitled to vote
in the election of directors of the Company;
ii.
if any Person other than the Company or a subsidiary of the Company or any employee benefit plan
sponsored by the Company or a subsidiary of the Company shall purchase shares pursuant to a tender
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offer or exchange offer to acquire any stock of the Company (or securities convertible into stock) for
cash, securities or any other consideration, provided that after consummation of the offer, the Person in
question is the Beneficial Owner of twenty percent or more of the outstanding stock of the Company
entitled to vote in the election of directors of the Company (calculated as provided in paragraph (d) of
Rule 13d-3 under the 1934 Act in the case of rights to acquire stock);
iii.
upon the consummation of any merger, consolidation, recapitalization or reorganization of the
Company approved by the stockholders of the Company, other than any such transaction immediately
following which the persons who were the Beneficial Owners of the outstanding securities of the
Company entitled to vote in the election of directors of the Company immediately prior to such
transaction are the Beneficial Owners of at least 55% of the total voting power represented by the
securities of the entity surviving such transaction entitled to vote in the election of directors of such
entity (or the ultimate parent of such entity) in substantially the same relative proportions as their
ownership of the securities of the Company entitled to vote in the election of directors of the Company
immediately prior to such transaction; provided that, such continuity of ownership (and preservation of
relative voting power) shall be deemed to be satisfied if the failure to meet such threshold (or to
preserve such relative voting power) is due solely to the acquisition of voting securities by an employee
benefit plan of the Company, such surviving entity or any subsidiary of such surviving entity;
iv.
upon the consummation of any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the Company approved by the stockholders
of the Company; or
v.
if within any 24 month period, the persons who were directors of the Company immediately before the
beginning of such period (the “Incumbent Directors”) shall cease (for any reason other than death) to
constitute at least a majority of the Board or the board of directors of any successor to the Company,
provided that any director who was not a director at the beginning of such period shall be deemed to be
an Incumbent Director if such director (A) was elected to the Board by, or on the recommendation of or
with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors
either actually or by prior operation of this clause (v), and (B) was not designated by a Person who has
entered into an agreement with the Company to effect a transaction described in Section 11(d)(iii) or
Section 11(d)(iv) of the Plan.
e.
For purposes of the Plan, “Beneficial Owner” means any Person who, directly or indirectly, has the right to vote or
dispose of or has “beneficial ownership” (within the meaning of Rule 13d-3 under the 1934 Act) of any securities
of a company, including any such right pursuant to any agreement, arrangement or understanding (whether or
not in writing), provided that: (a) a Person shall not be deemed the Beneficial Owner of any security as a result of
an agreement, arrangement or understanding to vote such security (i) arising solely from a revocable proxy or
consent given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the
1934 Act and the applicable rules and regulations thereunder, or (ii) made in connection with, or to otherwise
participate in, a proxy or consent solicitation made, or to be made, pursuant to, and in accordance with, the
applicable provisions of the 1934 Act and the applicable rules and regulations thereunder, in either case
described in clause (i) or (ii) above, whether or not such agreement, arrangement or understanding is also then
reportable by such Person on Schedule 13D under the 1934 Act (or any comparable or successor report); and (b)
a Person engaged in business as an underwriter of securities shall not be deemed to be the Beneficial Owner of
any security acquired through such Person’s participation in good faith in a firm commitment underwriting until
the expiration of forty days after the date of such acquisition. “Person” has the meaning ascribed to such term in
Section 3(a)(9) of the 1934 Act, as supplemented by Section 13(d)(3) of the 1934 Act; provided, however, that
Person shall not include: (a) the Company, any subsidiary of the Company or any other Person controlled by the
Company, (b) any trustee or other fiduciary holding securities under any employee benefit plan of the Company
or of any subsidiary of the Company, or (c) a corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of securities of the Company.
f.
For purposes of this Section 11., “Cause” and “Good Reason” shall be as defined in the employment agreement,
severance agreement, or severance pay plan applicable to such Participant or, if no such agreement or plan exists
or does not define such terms, as defined in the applicable Award agreement.
12. General Provisions Applicable to Awards
a.
Transferability of Awards. During periods of restriction (including but not limited to vesting and holding
requirements under the Executive Stock Ownership Requirements Policy), Awards granted under the Plan and
Shares issued in connection with the exercise of an Option or a SAR or the vesting of an Award, may not be sold,
pledged, hypothecated, assigned, margined, or otherwise transferred by a Participant in any manner other than
by will or the laws of descent and distribution, unless and until the shares underlying such Award have been
issued, and all restrictions applicable to such shares have lapsed or have been waived by the Committee. No
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Award or interest or right therein shall be subject to the debts, contracts, or engagements of a Participant or his
or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment, or any other means whether such disposition be voluntary or involuntary or by
operation of law, by judgment, lien, levy, attachment, garnishment, or any other legal or equitable proceedings
(including bankruptcy and divorce), and any attempted disposition thereof shall be null and void, of no effect, and
not binding on the Company in any way. Notwithstanding the foregoing, all or a portion of a Non-Qualified
Option or SAR may be transferred and assigned by such persons designated by the Committee, to such persons
or groups of persons designated as permissible transferees by the Committee, and upon such terms and
conditions as the Committee may from time to time authorize and determine in its sole discretion.
Notwithstanding the preceding sentence, no Award under the Plan may be transferred for value (as defined in
the General Instructions to Form S-8 with respect to the registration, pursuant to the 1933 Act, of employee
benefit plan securities and/or interests).
b.
Documentation. Each Award shall be evidenced by an Award agreement in such form (written, electronic or
otherwise) as the Committee, or its designee(s), shall determine. Each Award agreement may contain terms and
conditions in addition to those set forth in the Plan.
c.
Minimum Vesting Requirement. Except as may be provided in Section 11 regarding a Change of Control, all
Awards granted under the Plan which vest on the basis of a Participant’s continued employment with or provision
of service to the Company shall be subject to a minimum vesting period of one year, except:
i.
Five Percent Exclusion. Awards which vest on the basis of an employee’s continued employment with
the Company may provide for vesting over a period less than one year; provided, however, that any such
Awards shall be limited in the aggregate to a maximum of five percent of the maximum number of
Shares authorized under Section 5(a)(i) above; and
ii.
Other Circumstances. The Committee may provide for earlier vesting of Awards upon death, disability,
retirement, or such other circumstances, such as a reduction in force or a divestiture or sale of a
business or unit, if the Committee finds that a waiver of the one-year vesting restriction (or any portion
thereof) would be in the best interests of the Company.
d.
Termination of Employment. The Committee shall determine and set forth in the Award agreement (including by
amendment adopted in accordance with the provisions of the Plan) the effect on an Award of a Participant’s
termination of employment resulting from disability, death, retirement or other cessation of employment,
authorized leave of absence or other change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, or the Participant's legal representative, conservator,
guardian or Beneficiary, may exercise rights, or receive any benefits, under an Award. Unless otherwise provided
in the Award agreement or the Award is accelerated pursuant to subsection (h) below, if a Participant’s
employment is terminated by the Company for any reason, all of such Participant’s Awards outstanding as of the
date of termination (whether or not then exercisable) shall be canceled without further action by the Participant,
the Committee or the Company coincident with the effective date of such termination. For the avoidance of
doubt, in the event that a Participant terminates employment and subsequently returns to employment with the
Company, the Participant’s prior Awards, which vested, forfeited or were canceled, as applicable, following the
Participant’s termination, shall not be reinstated upon the Participant’s subsequent return to employment.
e.
Withholding. All Awards under this Plan are subject to and the Participant must satisfy all applicable
international, federal, state, local or other jurisdiction income and employment tax or similar withholding
obligations before the Company will deliver the Shares or otherwise recognize ownership of Shares under an
Award. The Company may elect to satisfy the withholding obligations through additional withholding on salary
or wages or as a deduction from other forms of payment made to the Participant by the Company. If the
Company elects not to or cannot withhold from such other compensation or payment, the Participant must pay
the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal
to the withholding obligations. Payment of withholding obligations is due before the Company will issue any
Shares on exercise, vesting or release from forfeiture of an Award or at the same time as payment of the exercise
or purchase price, unless the Company determines otherwise in its sole discretion. Unless otherwise provided for
in the Award agreement, a Participant may satisfy the withholding obligations in whole or in part by delivery
(either by actual delivery or attestation) of Shares, including Shares retained from the Award creating the
withholding obligation, valued at their Fair Market Value; provided, however, that the total withholding where
Shares are being used to satisfy such obligations may exceed the Company's minimum statutory withholding
obligations (based on minimum statutory withholding rates for applicable tax purposes, including payroll taxes,
that are applicable to such supplemental income) to the extent permitted by the Company and as otherwise
permitted by applicable law, except that, to the extent that the Company is able to retain Shares having a Fair
Market Value that exceeds the statutory minimum applicable withholding obligation without financial accounting
implications or the Company is withholding in a jurisdiction that does not have a statutory minimum withholding
obligation, the Company may retain such number of Shares (up to the number of Shares having a Fair Market
APPENDIX C
2025 Proxy Statement
99
Value equal to the maximum individual statutory rate of tax as permitted by applicable law) as the Company shall
determine in its sole discretion to satisfy the withholding obligation associated with any Award. Shares used to
satisfy withholding obligation requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements.
f.
Amendment of Award. Except as otherwise provided in Sections 6(g) and 7(e), the Committee may amend, modify
or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the
same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to
a Nonqualified Stock Option. Without limiting the generality of the foregoing, if a Change of Control has not
occurred and the Committee determines that a Participant has taken action inimical to the best interests of the
Company (including the failure to act where circumstances required action), the Committee may, in its sole
discretion, terminate in whole or in part such portion of any Award as has not yet become vested or exercisable at
the time of termination.
g.
Conditions on Delivery of Stock. The Company will not be obligated to deliver any Shares pursuant to the Plan or
to remove restrictions from Shares previously issued or delivered under the Plan until (i) all conditions of the
Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company's counsel,
all other legal matters in connection with the issuance and delivery of such Shares have been satisfied, including
any applicable securities laws and regulations and any applicable stock exchange or stock market rules and
regulations, and (iii) the Participant has executed and delivered to the Company such representations or
agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or
regulations.
h.
Acceleration. Subject to the limitations in Section 11 regarding a Change of Control and Section 12(c) regarding
the minimum vesting requirement on Award grants, the Committee may at any time provide that any Award shall
become immediately exercisable in whole or in part, free from some or all restrictions or conditions, or otherwise
realizable in whole or in part, as the case may be, as the Committee determines to be in the best interests of the
Company.
13. Miscellaneous
a.
No Right to Employment or Other Status. No person shall have any claim or right to be granted an Award by
virtue of the adoption of the Plan, and the grant of an Award shall not be construed as giving a Participant the
right to continued employment or any other relationship with the Company. The Company expressly reserves
the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or
claim under the Plan, except as expressly provided in the applicable Award agreement. No Award payable under
the Plan shall be deemed salary or compensation for the purpose of computing benefits under any employee
benefit plan or other arrangement of the Company for the benefit of its employees unless the Company shall
determine otherwise. To the extent that any person acquires a right to receive payments from the Company
under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company.
Any cash payments made hereunder shall be paid from the general funds of the Company and no special or
separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts
except as provided in Section 8(c)(i) with respect to Restricted Stock.
b.
No Rights as Shareholder. Subject to the provisions of the applicable Award agreement, no Participant or
Beneficiary shall have any rights as a shareholder with respect to any Shares to be issued with respect to an
Award until becoming the record holder of such Shares.
c.
Forfeiture of Award; Clawback. In accepting an Award under the Plan, the Participant agrees to be bound by any
forfeiture policy (including the termination of an Award pursuant to section 12(f)) and clawback policy that is
then in effect or adopted in the future. The Committee shall have the obligation or the right, as applicable, at any
time to recoup any amount paid or payable hereunder to the fullest extent provided for under the Company’s
Clawback Policy. The Company may reduce other amounts payable under the Plan if the Participant refuses to
repay amounts subject to the Clawback Policy.
d.
Beneficiary. Each Participant may file with the Company a written designation on a form (or other medium or
mode of submission) approved by the Company of one or more persons as the beneficiary who shall be entitled to
receive the Award, if any, payable under the Plan upon his or her death (the “Beneficiary”). A Participant may
from time to time revoke or change his or her Beneficiary designation without the consent of any prior
Beneficiary by filing a new designation with the Company. The last such designation received by the Company
shall be controlling; provided, however, that, unless otherwise determined by the Company, no designation, or
change or revocation thereof, shall be effective unless received by the Company prior to the Participant’s death,
and in no event shall it be effective as of a date prior to such receipt. If no such Beneficiary designation is in effect
at the time of death of a Participant, or if no Beneficiary survives the Participant, the spouse of the Beneficiary,
or, if none, his or her estate, shall be entitled to receive the Award, if any, payable under the Plan upon his or her
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death. If the Committee is in doubt as to the right of any person to receive such Award, the Company may retain
such Award, without liability for any interest thereon, until the Committee determines the rights thereto, or the
Company may pay such Award into any court of appropriate jurisdiction and such payment shall be a complete
discharge of the liability of the Company therefore.
e.
Effective Date and Term of Plan. The Plan shall become effective on the date the Plan is approved by the
Company's shareholders (the "Effective Date"). No Awards shall be granted under the Plan after the expiration of
10 years from the date that the Plan is adopted by the Board or the Effective Date, whichever is earlier, but
Awards previously granted may extend beyond that date.
f.
Amendment and Termination of Plan. The Committee may amend, suspend or terminate the Plan or any portion
thereof, at any time provided that (i) no amendment that would require shareholder approval under the rules of
the NYSE may be made effective unless and until the Company's shareholders approve such amendment; and (ii)
if the NYSE does not have rules regarding when shareholder approval of amendments to equity compensation
plans is required (or if the Shares are not then listed on any national securities exchange), then no amendment to
the Plan (A) materially increasing the number of shares authorized under the Plan (other than pursuant to Section
3(d) or 10), (B) expanding the types of Awards that may be granted under the Plan, or (C) materially expanding
the class of participants eligible to participate in the Plan shall be effective unless and until the Company's
shareholders approve such amendment. In addition, if at any time, the approval of the Company's shareholders is
required as to any other modification or amendment under Section 422 of the Code or any successor provision
with respect to Incentive Stock Options, the Committee may not affect such modification or amendment without
such approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance
with this Section shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the
time the amendment is adopted. No Award (other than an Award settled in cash) shall be made that is
conditioned upon shareholder approval of any amendment to the Plan unless the Award provides that (1) it will
terminate or be forfeited if shareholder approval of such amendment is not obtained within 12 months from the
date of grant and (2) it may not be exercised or settled (or otherwise result in the issuance of Shares) prior to such
shareholder approval. Notwithstanding anything in this Plan to the contrary, the Plan shall not be amended,
modified, suspended or terminated during the period in which a Change of Control is threatened. For purposes of
the preceding sentence, a Change of Control shall be deemed to be threatened for the period beginning on the
date of any threatened Change of Control, and ending upon the earlier of: (I) the second anniversary of the date
of such threatened Change of Control, (II) the date a Change of Control occurs, or (III) the date the Board or the
Committee determines in good faith that a Change of Control is no longer threatened. Solely for this purpose, a
threatened Change of Control shall occur if (i) a Person shall commence a tender offer, which if successfully
consummated, would result in such Person being the Beneficial Owner of at least 20% of the stock of the
Company entitled to vote in the election of directors of the Company; (ii) the Company enters into an agreement,
the consummation of which would constitute a Change of Control; (iii) proxies are solicited for the election of
directors of the Company by anyone other than the Company, which, if such directors were elected, would result
in the occurrence of a Change of Control as described in Section 11(d)(v); or (iv) any other event shall occur which
is deemed to be a threatened Change of Control for this purpose by the Board, the Committee, or any other
appropriate committee of the Board in its sole discretion. Further, notwithstanding anything in this Plan to the
contrary, no amendment, modification, suspension or termination following a Change of Control shall adversely
impair or reduce the rights of any person with respect to a prior Award without the consent of such person.
Notwithstanding the preceding provisions, the Board or the Committee may amend the Plan or an Award
agreement to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of
conforming the Plan or an Award agreement to any present or future law relating to plans of this or similar nature
and the administrative regulations and rulings promulgated thereunder (including, but not limited to,
amendments deemed necessary or advisable to avoid payments being subject to additional tax under Code
Section 409A).
g.
Authorization of Sub-Plans. The Committee may from time to time establish one or more sub-plans under the
Plan for purposes of satisfying applicable securities, tax or other laws of various jurisdictions. The Committee
shall establish such sub-plans by adopting supplements to the Plan containing (i) such limitations on the
Committee's discretion under the Plan as the Committee deems appropriate or (ii) such additional terms and
conditions not otherwise inconsistent with the Plan as the Committee shall deem appropriate. All supplements
adopted by the Committee shall be deemed to be part of the Plan, but each supplement shall apply only to
Participants within the affected jurisdiction and the Company shall not be required to provide copies of any
supplement to Participants in any jurisdiction which is not the subject of such supplement.
h.
Non U.S. Employees. Awards may be granted to Participants who are non-U.S. citizens or residents employed or
on assignment outside the United States, or both, on such terms and conditions different from those applicable to
Awards to Participants employed in the United States as may, in the judgment of the Committee, be appropriate
in order to recognize differences in local law or tax policy.
APPENDIX C
2025 Proxy Statement
101
i.
Compliance with Section 409A of the Code. To the extent that any Award granted under the Plan is subject to
Section 409A, the Award agreement evidencing such Award shall incorporate any terms and conditions required
by Section 409A. To the extent applicable, the Plan and Award agreements shall be interpreted in accordance
with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued
thereunder, including without limitation any such regulations or other guidance that may be issued after the
adoption of the Plan. If and to the extent (i) any portion of any payment, compensation or other benefit provided
to a Participant pursuant to the Plan in connection with the termination of his or her employment constitutes
"nonqualified deferred compensation" within the meaning of Section 409A and (ii) the Participant is a specified
employee as defined in Section 409A(a)(2)(B)(i), in each case as determined by the Company in accordance with
its procedures, by which determinations the Participant (through accepting the Award) agrees that he or she is
bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six
months plus one day after the date of "separation from service" (as determined under Section 409A) (the "New
Payment Date"), except as Section 409A may then permit. The aggregate of any payments that otherwise would
have been paid to the Participant during the period between the date of separation from service and the New
Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remaining
payments will be paid on their original schedule. The Company makes no representations or warranty and shall
have no liability to the Participant or any other person if any provisions of or payments, compensation or other
benefits under the Plan are determined to constitute nonqualified deferred compensation subject to Section
409A but do not satisfy the conditions of that section. No provision of this Plan or an Award agreement shall be
construed to indemnify any Participant for any taxes incurred by reason of Section 409A (or timing of incurrence
thereof).
j.
Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director,
officer, employee or agent of the Company will be liable to any Participant, former Participant, Beneficiary, or any
other person for any claim, loss, liability, or expense incurred in connection with the Plan, nor will such individual
be personally liable with respect to the Plan because of any contract or other instrument he or she executes in his
or her capacity as a director, officer, employee or agent of the Company. The Company will indemnify and hold
harmless each director, officer, employee or agent of the Company to whom any duty or power relating to the
administration or interpretation of the Plan has been or will be delegated, against any cost or expense (including
attorneys' fees) or liability (including any sum paid in settlement of a claim with the Committee's approval) arising
out of any act or omission to act concerning the Plan unless arising out of such person's own fraud or bad faith.
k.
No Representations or Warranties Regarding Taxes. Notwithstanding any provision of the Plan to the contrary,
the Company, the Board and the Committee neither represent nor warrant the tax treatment under any federal,
state, local or foreign laws and regulations thereunder (individually and collectively referred to as the “Tax Laws”)
of any Award granted or any amounts paid to any Participant under the Plan including, but not limited to, when
and to what extent such Awards or amounts may be subject to tax, penalties and interest under the Tax Laws.
l.
Governing Law. The Plan and the grant of Awards shall be subject to all applicable federal and state laws, rules,
and regulations and to such approvals by any government or regulatory agency as may be required. The Plan and
each Award shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule
or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of
another jurisdiction. Unless otherwise provided in the Award, recipients of an Award under the Plan are deemed
to submit to the exclusive jurisdiction and venue of the federal or state courts of Connecticut to resolve any and
all issues that may arise out of or relate to the Plan or any related Award.
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THE HARTFORD INSURANCE GROUP, INC.
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2024
TABLE OF CONTENTS
Item
Description
Page
Part I
1
BUSINESS
4
1A.
RISK FACTORS
16
1C.
CYBERSECURITY
29
Part II
5
MARKET FOR THE HARTFORD'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
31
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
33
9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
9A.
CONTROLS AND PROCEDURES
110
9B.
OTHER INFORMATION
112
Part III
10
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE HARTFORD
113
11
EXECUTIVE COMPENSATION
[a]
13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
[b]
14
PRINCIPAL ACCOUNTANT FEES AND SERVICES
[c]
Part IV
15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
##
[a] The information called for by Item 11 will be set forth in the Proxy Statement under the subcaptions "Compensation Discussion and Analysis", "Executive
Compensation Tables", "Director Compensation", "Report of the Compensation and Management Development Committee", "Pay Versus Performance" and "CEO
Pay Ratio" and is incorporated herein by reference.
[b] Any information called for by Item 13 will be set forth in the Proxy Statement under the caption and subcaption "Board and Governance Matters" and "Director
Independence" and is incorporated herein by reference.
[c] The information called for by Item 14 will be set forth in the Proxy Statement under the caption "Audit Matters" and is incorporated herein by reference.
1
Forward-looking Statements
Certain of the statements contained herein are forward-looking statements made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,”
“seeks,” “believes,” “estimates,” “expects,” “projects,” and similar references to future periods.
Forward-looking statements are based on management's current expectations and assumptions regarding future economic, competitive,
legislative and other developments and their potential effect upon The Hartford Insurance Group, Inc. and its subsidiaries (collectively, the
"Company" or "The Hartford"). Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks
and changes in circumstances that are difficult to predict. Actual results could differ materially from expectations depending on the
evolution of various factors, including the risks and uncertainties identified below, as well as factors described in such forward-looking
statements; or in Part I, Item 1A, Risk Factors, in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, and those identified from time to time in our other filings with the Securities and Exchange Commission.
•
Risks Relating to Economic, Political and Global Market Conditions:
◦
challenges related to the Company’s current operating environment, including global political, economic and market conditions,
and the effect of financial market disruptions, economic downturns, changes in trade regulation including tariffs and other barriers
or other potentially adverse macroeconomic developments on the demand for our products and returns in our investment
portfolios;
◦
market risks associated with our business, including changes in credit spreads, equity prices, interest rates, inflation rate, foreign
currency exchange rates and market volatility;
◦
the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;
◦
the impacts of changing climate and weather patterns on our businesses, operations and investment portfolio including on
claims, demand and pricing of our products, the availability and cost of reinsurance, our modeling data used to evaluate and
manage risks of catastrophes and severe weather events, the value of our investment portfolios and credit risk with reinsurers
and other counterparties;
•
Insurance Industry and Product-Related Risks:
◦
the possibility of unfavorable loss development, including with respect to long-tailed exposures;
◦
the significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental
claims;
◦
the possibility of a pandemic, civil unrest, earthquake, or other natural or man-made disaster that may adversely affect our
businesses;
◦
weather and other natural physical events, including the intensity and frequency of thunderstorms, tornadoes, hail, wildfires,
flooding, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns;
◦
the possible occurrence of terrorist attacks and the Company’s inability to contain its exposure as a result of, among other
factors, the inability to exclude coverage for terrorist attacks from workers' compensation policies and limitations on reinsurance
coverage from the federal government under applicable laws;
◦
the Company’s ability to effectively price its products and policies, including its ability to obtain regulatory consents to pricing
actions or to non-renewal or withdrawal of certain product lines;
◦
actions by competitors that may be larger or have greater financial resources than we do;
◦
technological changes, including usage-based methods of determining premiums, advancements in certain emerging
technologies, including machine learning, predictive analytics, “big data” analysis or other artificial intelligence functions,
advancements in automotive safety features, the development of autonomous vehicles, and platforms that facilitate ride sharing;
◦
the Company's ability to market, distribute and provide insurance products and investment advisory services through current and
future distribution channels and advisory firms;
◦
the uncertain effects of emerging claim and coverage issues; political instability, politically motivated violence or civil unrest,
which may increase the frequency and severity of insured losses;
•
Financial Strength, Credit and Counterparty Risks:
◦
risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the
Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments;
◦
capital requirements which are subject to many factors, including many that are outside the Company’s control, such as National
Association of Insurance Commissioners ("NAIC") risk based capital formulas, rating agency capital models, Funds at Lloyd's
and Solvency Capital Requirement, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory
compliance and other aspects of our business and results;
2
•
losses due to nonperformance or defaults by others, including credit risk with counterparties associated with investments,
derivatives, premiums receivable, reinsurance recoverables and indemnifications provided by third parties in connection with
previous dispositions;
◦
the potential for losses due to our reinsurers' unwillingness or inability to meet their obligations under reinsurance contracts and
the availability, pricing and adequacy of reinsurance to protect the Company against losses;
◦
state and international regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay
dividends;
•
Risks Relating to Estimates, Assumptions and Valuations:
◦
risks associated with the use of analytical models in making decisions in key areas such as underwriting, pricing, capital
management, reserving, investments, reinsurance and catastrophe risk management;
◦
the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the Company’s fair
value estimates for its investments and the evaluation of intent-to-sell impairments and allowance for credit losses on available-
for-sale securities and mortgage loans;
◦
the potential for impairments of our goodwill;
•
Strategic and Operational Risks:
◦
the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster,
cyber breach or other information security incident, technology failure or other unanticipated event;
◦
the potential for difficulties arising from outsourcing and similar third-party relationships;
◦
the risks, challenges and uncertainties associated with capital management plans, expense reduction initiatives and other
actions;
◦
risks associated with acquisitions and divestitures, including the challenges of integrating acquired companies or businesses,
which may result in our inability to achieve the anticipated benefits and synergies and may result in unintended consequences;
◦
difficulty in attracting and retaining talented and qualified personnel, including key employees, such as executives, managers and
employees with strong technological, analytical and other specialized skills;
◦
the Company’s ability to protect its intellectual property and defend against claims of infringement;
•
Regulatory and Legal Risks:
◦
the cost and other potential effects of increased federal, state and international regulatory and legislative developments,
including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels;
◦
unfavorable judicial or legislative developments;
◦
the impact of changes in federal, state or foreign tax laws;
◦
regulatory requirements that could delay, deter or prevent a takeover attempt that stockholders might consider in their best
interests; and
◦
the impact of potential changes in accounting principles and related financial reporting requirements.
Any forward-looking statement made by the Company in this document speaks only as of the date of the filing of this Annual Report.
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.
3
Item 1.
BUSINESS
(Dollar amounts in millions, except for per share data, unless otherwise stated)
Index
Description
Page
General
4
Organization
4
Reportable Segments and Corporate
4
Reserves
13
Underwriting for P&C and Employee Benefits
14
Claims Administration for P&C and Employee Benefits
14
Reinsurance
14
Investment Operations
15
GENERAL
The Hartford Insurance Group, Inc. ("HIG") (together with its
subsidiaries, “The Hartford”, the “Company”, “we”, or “our”) is a
holding company for a group of subsidiaries that provide
property and casualty ("P&C") insurance, employee group
benefits insurance and services, and mutual funds and
exchange-traded funds ("ETF") to individual and business
customers in the United States, as well as in the United
Kingdom and other international locations. Previously known as
The Hartford Financial Services Group, Inc., the Company
changed its name to The Hartford Insurance Group, Inc. on
February 6, 2025. The Hartford is headquartered in Connecticut
and its oldest subsidiary, Hartford Fire Insurance Company,
dates back to 1810. As of December 31, 2024, total assets and
total stockholders’ equity of The Hartford were $80.9 billion and
$16.4 billion, respectively.
ORGANIZATION
The Hartford strives to maintain and enhance its position as a
market leader within the insurance industry. The Company sells
diverse and innovative products through multiple distribution
channels to individuals and businesses and is considered a
leading property and casualty and employee group benefits
insurer. The Hartford Stag logo is one of the most recognized
symbols in the financial services industry.
As a holding company, HIG is separate and distinct from its
subsidiaries and has no significant business operations of its
own. The holding company relies on the dividends from its
insurance companies and other subsidiaries as the principal
source of cash flow to meet its obligations, pay dividends and
repurchase common stock. Information regarding the cash flow
and liquidity needs of The Hartford Insurance Group, Inc. may
be found in Part II, Item 7, Management’s Discussion and
Analysis of Financial Condition and Results of Operations
(“MD&A”) — Capital Resources and Liquidity.
REPORTABLE
SEGMENTS AND
CORPORATE
The Hartford conducts business principally in five reportable
segments, including Business Insurance (formerly "Commercial
Lines"), Personal Insurance (formerly "Personal Lines"),
Property & Casualty Other Operations, Employee Benefits
(formerly "Group Benefits") and Hartford Funds, as well as a
Corporate category.
The following discussion describes the principal products and
services, marketing and distribution, and competition of The
Hartford's reportable segments. For further discussion of the
reportable segments, including financial disclosures of revenues
by product line, net income (loss), and assets for each
reportable segment, see Note 3 - Segment Information of Notes
to Consolidated Financial Statements.
2024 Revenues of $26,535 by Segment/Category
Business Insurance
$14,406
54%
Employee
Benefits
$7,066
27%
Personal
Insurance
$3,779
14%
Hartford Funds
$1,067
4%
Other [1]
$217
1%
[1]Includes Revenue of $70 for Property & Casualty Other Operations and
$147 for Corporate.
Part I - Item 1. Business
4
|BUSINESS INSURANCE
2024 Earned Premiums of $12,721 by Line of
Business
Small
Business
$5,210
41%
Middle &
Large
Business
$4,151
33%
Global Specialty
$3,303
26%
Other
$57
0%
2024 Earned Premiums of $12,721 by Product
Workers'
Compensation
$3,677
29%
Package
Business
$2,308
18%
General
Liability
$2,218
17%
Commercial
Property
$1,258
10%
Commercial
Automobile
$1,078
9%
Professional
Liability
$820
6%
Assumed
Reinsurance
$758
6%
Bond
$326
3%
Marine
$278
2%
Principal Products and Services
Workers'
Compensation
Covers employers for losses incurred due to employees sustaining an injury, illness or disability in connection with their
work. Benefits paid under workers’ compensation policies may include reimbursement of medical care costs,
replacement income, compensation for permanent injuries and benefits to survivors. Workers’ compensation is provided
under both guaranteed cost policies (coverage for a fixed premium) and loss sensitive policies where premiums are
adjustable based on the loss experience of the employer.
General
Liability
Covers a business in the event it is sued for causing harm to a person and/or damage to property. General liability
insurance covers third-party claims arising from accidents occurring on the insured’s premises or arising out of their
operations. General liability insurance may also cover losses arising from product liability.
Marine
Encompasses various ocean and inland marine coverages including cargo, craft, hull, specie, transport and liability,
among others.
Package
Business
Covers both commercial property and general liability damages.
Commercial
Property
Covers the building a business owns or leases as well as its personal property, including tools and equipment, inventory,
and furniture. A commercial property insurance policy covers losses resulting from fire, wind, hail, earthquake, theft and
other covered perils, including coverage for assets such as accounts receivable and valuable papers and records.
Commercial property may include specialized equipment insurance, which provides coverage for loss or damage
resulting from the mechanical breakdown of boilers and machinery. A commercial property insurance policy may also
provide replacement of lost income resulting from a covered loss that interrupts business operations.
Professional
Liability
Covers liability arising from directors and officers acting in their official capacity and liability for errors and omissions
committed by professionals and others. Coverage may also provide employment practices insurance relating to
allegations of wrongful termination and discrimination.
Bond
Encompasses fidelity and surety insurance, including commercial surety, contract surety and fidelity bonds. Commercial
surety includes bonds that insure non-performance by contractors, license and permit bonds to help meet government-
mandated requirements and probate and judicial bonds for fiduciaries and civil court proceedings. Contract surety
bonds may include payment and performance bonds for contractors. Fidelity bonds may include ERISA bonds related to
the handling of retirement plan assets and bonds protecting against employee theft or fraud. The Company also
provides credit and political risk insurance ("CPRI") offered to clients with global operations.
Assumed
Reinsurance
Includes assumed reinsurance of property, liability, surety, credit and political, marine and agriculture risks throughout
the world but principally in Europe and the Americas. Business principally provides coverage on broad books of
business (i.e. treaty), as opposed to individual risks (i.e. facultative).
Commercial
Automobile
Covers damage to a business's fleet of vehicles due to collision or other perils (automobile physical damage). In
addition to first party automobile physical damage, commercial automobile covers liability for bodily injuries and property
damage suffered by third parties and losses caused by uninsured or under-insured motorists.
Part I - Item 1. Business
5
Through its three lines of business, small business (formerly
"small commercial"), middle & large business (formerly "middle
& large commercial"), and global specialty, Business Insurance
offers its products and services to businesses in the United
States ("U.S.") and internationally. Business Insurance generally
consists of products written for small businesses and middle
market companies as well as national and multi-national
accounts, largely distributed through retail agents and brokers,
wholesale agents and global and specialty insurance and
reinsurance brokers. The majority of Business Insurance written
premium is generated by small business and middle market
lines, which provide coverage options and customized pricing
based on the policyholder’s individual risk characteristics.
Small business provides coverages for small businesses, which
the Company generally considers to be businesses with an
annual payroll under $20, revenues under $50 and property
values less than $20 per location. Primary coverages provided
include workers' compensation, property, general liability and
commercial automobile. Within small business, both property
and general liability coverages are offered under a single
package policy, marketed under the Spectrum name. Small
business also provides excess and surplus lines coverage to
small businesses including umbrella, general liability, property
and other coverages.
Middle & large business provides insurance coverages to
medium-sized and national accounts businesses, which are
companies whose payroll, revenue and property values exceed
the small business definition. In addition to offering standard
commercial lines products, including workers' compensation,
property, general liability and commercial automobile products,
middle & large business includes program business which
provides tailored programs, primarily to customers with common
risk characteristics. For national accounts, a significant portion
of the business is written through large deductible programs.
Other programs written within middle & large business are
retrospectively-rated where the ultimate premium collected from
the insured is adjusted based on how incurred losses for the
policy year develop over time, subject to a minimum and
maximum premium. Also within middle & large business, the
Company writes captive programs business, which provides
tailored programs to those seeking a loss sensitive solution
where premiums are adjustable based on loss experience. In
addition, through business partners, middle & large business
offers business insurance coverages to exporters and other U.S.
companies with a physical presence overseas.
Lines of business written by small business and middle & large
business are subject to rate regulation and written pricing
increases or decreases that are partly in response to loss cost
trends. Workers’ compensation rates are based on loss
experience and are informed by data submitted through the
National Council on Compensation Insurance ("NCCI").
Workers’ compensation rates have been under downward
pressure for the industry due to favorable loss cost trends in
recent years.
Global specialty provides a variety of customized insurance
products, including property, general liability, marine,
professional liability, and bond. In the U.S., global specialty
serves both the admitted and non-admitted markets and
produces business through both wholesale and retail brokers.
Global specialty also offers various products internationally as a
sole corporate member of Lloyd’s Syndicate 1221 ("Lloyd's
Syndicate"). In addition to offering insurance products, global
specialty also offers assumed reinsurance for various risks
including property, liability, surety, marine, credit and political,
and agricultural primarily in Europe and the America’s.
Marketing and Distribution
Business Insurance provides insurance products and services
through the Company’s regional offices, branches and sales and
policyholder service centers throughout the United States and,
to a lesser extent, overseas, principally in the United Kingdom.
The products are marketed and distributed using independent
retail agents and brokers, wholesale agents and global and
specialty insurance and reinsurance brokers, with business also
sold direct-to-consumer. In addition, the Company offers
insurance products to customers of payroll service providers
through its relationships with major national payroll companies
in the United States and to members of affinity organizations. As
the sole corporate member of Lloyd's Syndicate 1221, the
Company has the exclusive right to underwrite business up to
an approved level of premium in the Lloyd’s of London
("Lloyd's") market.
In the United States, independent agents, brokers and
wholesalers are consolidating. While the acquisition activity has
slowed with the rise of rates, we continue to expect large deals
by well positioned companies. This will likely result in a larger
proportion of written premium being concentrated among fewer
agents, brokers and wholesalers. These distribution partners are
looking to exercise more control over the insurance value chain
and are leveraging data and analytics for bargaining power.
Competition
Small Business
In small business, The Hartford competes against large national
carriers, regional carriers and direct writers. Competitors include
stock companies, mutual companies and other underwriting
organizations. The small business market remains highly
competitive and fragmented as carriers seek to differentiate
themselves through product expansion, price, enhanced service
and leading technology. Larger carriers such as The Hartford
are continually advancing their pricing sophistication and ease
of doing business with agents and customers through the use of
technology, analytics and other capabilities that improve the
process of evaluating a risk, quoting new business and servicing
customers. The Company also continuously enhances digital
capabilities as customers and distributors demand more access
and convenience, and expands product and underwriting
capabilities to accommodate both larger accounts and a broader
risk appetite.
Existing competitors and new entrants, including start-up and
non-traditional carriers, are actively looking to expand sales of
business insurance products to small businesses through
increasing their underwriting appetite, deepening their
relationships with distribution partners, leveraging emerging
artificial intelligence capabilities, and through on-line and direct-
to-consumer marketing. Carriers that can quote business in an
automated way have a competitive advantage by shortening the
time from quoting to issuance. Through its ICON quoting tool,
The Hartford quotes over 75% of its Spectrum package
business and workers’ compensation new business policies
without human intervention.
Part I - Item 1. Business
6
Middle & Large Business
Middle & large business is considered “higher touch” and
involves highly specialized expertise, including individual
underwriting and pricing decisions. Competition in this market
includes stock companies, mutual companies, alternative risk
sharing groups and other underwriting organizations. In addition,
some larger brokers are now becoming competitors through
acquisition of managing general agents or managing general
underwriters.
The pricing of middle market and national accounts is prone to
significant volatility over time due to changes in individual
account characteristics and exposure, as well as legislative and
macro-economic forces. National and regional carriers
participate in the middle & large business insurance sector,
resulting in a competitive environment where pricing and policy
terms are critical to securing new business and retaining
existing accounts. As a means to mitigate the cost of insurance,
middle market and large commercial buyers may opt for loss-
sensitive products in-lieu of guaranteed cost policies.
Within this competitive environment, The Hartford is continuing
to invest in its underwriting systems and capabilities, including
investing in speed to market solutions for the lower end of
middle market, enhancing its digital experience, leveraging its
sales and underwriting talent and expanding its use of data
analytics, artificial intelligence capabilities and third party data to
make risk selection and pricing decisions as the firm pursues
responsible growth strategies to deliver target returns. In
product development and related areas such as claims and risk
engineering, the Company has expanded its capabilities in
industry verticals, such as energy, construction, media arts &
entertainment, technology and life sciences.
Global Specialty
Global specialty competes against multi-national insurance and
reinsurance companies, in the U.S and London markets. Global
specialty writes many surplus lines of business, which are lines
of business not written through standard products licensed or
admitted in a state ("nonadmitted"). In recent years, surplus
lines have accounted for a significant portion of the total U.S.
property and casualty commercial market, and The Hartford
continues to grow its surplus book of business.
Customers served by the global specialty marketplace expect
tailored policy language for their unique risks and, increasingly,
are looking for a single insurance carrier to meet all their
coverage needs. The Company has been successful in cross-
selling global specialty product lines to customers of small
business and of middle & large business and seeks to expand
cross-sell opportunities in the future. The Hartford competes on
the basis of its underwriting capabilities where it uses data and
actuarial insights to enhance risk selection. The Company seeks
to drive greater efficiency, shorten the quoting process and
improve the customer’s experience through expanded use of
digital and artificial intelligence capabilities.
Global specialty also writes business in the London market via
its Lloyd’s syndicate platform. The Lloyd’s platform is comprised
of over 50 syndicates and 350 brokers, who benefit from the
ability to write risks in over 200 countries using Lloyd’s
international licenses. The Lloyd’s platform has shifted from
remediation to growth in recent years, as the market emerged
from consecutive underwriting losses, returning to more
profitable underwriting conditions in recent years. Lloyd’s
is regulated by the Financial Conduct Authority ("FCA") and
Prudential Regulatory Authority ("PRA") in the U.K. For further
discussion, see Part II, Item 7, MD&A - Capital Resources and
Liquidity.
Part I - Item 1. Business
7
|PERSONAL INSURANCE
2024 Earned Premiums of $3,453 by Line of
Business
AARP Direct
$2,954
86%
AARP
Agency
$244
7%
Other Agency
$238
7%
Other
$17
0%
2024 Earned Premiums of $3,453 by Product
Personal Automobile
$2,401
70%
Homeowners
$1,052
30%
Principal Products and Services
Personal
Automobile
Covers damage to an individual insured’s own vehicle due to collision or other perils and is referred to as automobile
physical damage. In addition to first party automobile physical damage, automobile insurance covers liability for bodily
injuries and property damage suffered by third parties and losses caused by uninsured or under-insured motorists.
Also, under no-fault laws, policies written in some states provide first party personal injury protection. Some of the
Company’s personal automobile insurance policies also offer personal umbrella liability coverage for an additional
premium.
Homeowners
Insures against losses to residences and contents from fire, wind and other perils. Homeowners insurance includes
owned dwellings, rental properties and coverage for tenants. The policies may provide other coverages, including loss
related to recreational vehicles or watercraft, identity theft and personal items such as jewelry.
Personal Insurance provides automobile, homeowners and
personal umbrella coverages to individuals across the United
States, mostly through a program designed exclusively for
members of AARP (“AARP Program”). The Hartford's
automobile and homeowners products provide coverage options
and pricing tailored to a customer's individual risk. The Hartford
has individual customer relationships with AARP Program
policyholders and, as a group, they represent a significant
portion of the total Personal Insurance's business. Business
sold to AARP members, either direct or through independent
agents, amounted to earned premiums of $3.2 billion, $2.9
billion and $2.7 billion in 2024, 2023 and 2022, respectively. The
AARP relationship provides The Company with a competitive
advantage to capitalize on the continued growth of the over age
50 population.
The Company has rolled out its new cloud-based product and
platform, Prevail, which is now in market in nearly all states.
Prevail is tailored to the mature market and includes digital
service capabilities that provide real time transaction support.
Among other things, overall rate levels, price segmentation,
rating factors and underwriting procedures are being updated
through the introduction of Prevail. Personal Insurance works
with carrier partners to provide risk protection options for AARP
members with needs beyond the company’s current product
offering.
Marketing and Distribution
Personal Insurance reaches diverse customers through multiple
distribution channels, including direct-to-consumer and
independent agents. In the direct-to-consumer channel,
Personal Insurance markets its products through a mix of
media, including digital marketing, direct mail, print advertising,
and television. In the agency channel, Personal Insurance
provides products and services to customers through a network
of independent agents in the standard personal lines market,
primarily serving mature, preferred consumers. These
independent agents are not employees of the Company.
Personal Insurance has made significant investments in offering
direct and agency-based customers the opportunity to interact
with the company on-line, including via mobile devices. In
addition, its technology platform for telephone sales centers
enables sales representatives to provide an enhanced
experience for direct-to-consumer customers, positioning the
Part I - Item 1. Business
8
Company to offer unique capabilities to AARP’s member base.
Most of Personal Insurance's sales are associated with its
exclusive licensing arrangement with AARP, with the current
agreement in place through December 31, 2032, to market
automobile, homeowners and personal umbrella coverages to
AARP's approximately 38 million members. This relationship
with AARP, which has been in place since 1984, provides
Personal Insurance with an important competitive advantage
given the increase in the population of those over age 50 and
the strength of the AARP brand.
Prior to May 2021, in most states, new business automobile and
home policies were issued to AARP members with a lifetime
continuation agreement endorsement, providing that the policies
will be renewed as long as certain terms are met, such as timely
payment of premium and maintaining a driver’s license in good
standing. However, beginning in May 2021, Personal Insurance
no longer offers the lifetime continuation agreement to new
home and automobile policies. The endorsement will remain on
renewal policies with original effective dates prior to May 2021.
In addition to selling to AARP members, Personal Insurance
offers its automobile and homeowners products to non-AARP
customers, primarily through the independent agent channel.
Personal Insurance leverages its agency channel to primarily
target the over age 50 preferred mature market, which values
the advice of an independent agent and recognizes the
differentiated experience the Company provides. In particular,
the Company has taken action to distinguish its brand within the
over age 50 preferred mature market and improve profitability in
the independent agent channel, placing more emphasis on our
highly partnered agents.
Competition
The personal automobile and homeowners insurance markets
are highly competitive. In 2024, many personal lines insurance
companies, including The Hartford, increased marketing spend
in order to increase new business production after returning to
new business rate adequacy. Personal Insurance is written by
insurance companies of varying sizes that compete principally
on the basis of price, product, service, including claims handling,
the insurer's ratings and brand recognition. Companies with
strong ratings, recognized brands, direct sales capability and
economies of scale will have a competitive advantage.
Insurers that distribute products principally through agency
channels compete by offering commissions and additional
incentives to attract new business. To distinguish themselves in
the marketplace, top tier insurers are offering digital and self-
service capabilities that make it easier for agents and
consumers to do business with the insurer. A large majority of
agents have been using “comparative rater” tools that allow the
agent to compare premium quotes among several insurance
companies. The use of comparative rater tools increases price
competition. Insurers that are able to capitalize on their brand
and reputation, differentiate their products and deliver strong
customer service are more likely to be successful in this market.
The use of data mining and predictive modeling is used by more
and more carriers to target the most profitable business, and
carriers have further segmented their pricing plans to expand
market share in what they believe to be the most profitable
segments. The Company continues to invest in capabilities to
better utilize data and analytics, and thereby, refine and manage
underwriting and pricing. Many carriers, including The Hartford,
continue to invest in telematics capabilities to enable better risk
selection and pricing segmentation in response to changes in
driving patterns. Currently in the states where the Prevail
product has rolled out, The Hartford offers its telematics
program, TrueLane, which uses a mobile app solution to offer
discounts for good driving behavior based on such attributes as
braking, speed, distracted driving, and acceleration.
Also, automobile technology advancements, including lane
departure warnings, backup cameras, automatic braking and
active collision alerts, continue to be deployed and are
expected to improve driver safety and reduce the likelihood of
vehicle collisions. However, these features include expensive
parts, contributing to increasing average claim severity.
In 2024, inflation continued to impact the industry. Supply chain
pressures, advanced vehicle technology, body shop capacity,
and a tight labor market have increased the cost of automobile
repairs, although there were some areas of moderation such as
used car prices. In addition, a tight labor market and inflation on
material prices increased the cost to repair homes.
|P&C OTHER OPERATIONS
Property & Casualty Other Operations includes certain property
and casualty operations managed by the Company that have
discontinued writing new business and includes substantially all
of the Company's pre-1986 asbestos and environmental ("A&E")
exposures. For a discussion of coverages provided under
policies written with exposure to A&E prior to 1986 reported
within the P&C Other Operations segment (“Run-off A&E”), run-
off assumed reinsurance and all other non-A&E exposures, see
Part II, Item 7, MD&A - Critical Accounting Estimates, Property &
Casualty Insurance Product Reserves, Net of Reinsurance.
Part I - Item 1. Business
9
|EMPLOYEE BENEFITS
2024 Premiums and Other Considerations of $6,615
Group
disability
$3,576
54%
Group life
$2,617
40%
Other
$422
6%
Principal Products and Services
Group Life
Typically is term life insurance provided in the form of a yearly renewable policy. Other life coverages in this
category include accidental loss of life and severe injury benefits and business travel accident insurance.
Group Disability
Typically comprised of short-term disability, long-term disability, and paid family leave plans that pay a
percentage of an employee’s salary for a period of time if they are ill or injured and cannot perform the duties
of their job. Short-term and long-term disability policies have elimination periods that must be satisfied prior
to benefit payments. The Company also earns fee income from leave management services for federal, state
and employer family and medical leave and workplace accommodation programs, as well as the
administration of employer self-funded disability plans.
Other Products
Includes other group coverages such as retiree health insurance, critical illness, accident and hospital
indemnity coverages.
Employee Benefits provides group life, disability and other group
coverages to members of employer groups, associations and
affinity groups through direct insurance policies and provides
reinsurance to other insurance companies. Group insurance
typically covers an entire group of people under a single
contract, most typically the employees of a single employer or
members of an association. In addition to employer paid
coverages, the segment offers voluntary product coverages
which are offered through employee payroll deductions.
Employee Benefits also offers disability underwriting,
administration, and claims processing to self-funded employer
plans. In addition, the segment offers a single-company leave
management solution, which integrates work absence data from
the insurer’s short-term and long-term group disability and
workers’ compensation insurance business with its leave
management administration services.
Statutory paid family leave ("PFL") and paid family and medical
leave ("PFML") programs are a source of growth as the
Company offers fully insured coverage or administers self-
insured coverage for some of these programs. As of year-end
2024, thirteen states and the District of Columbia have enacted
mandated PFL or PFML programs. Alabama, Arkansas, Florida,
Kentucky, New Hampshire, South Carolina, Tennessee, Texas,
Vermont, and Virginia have also created opt-in paid family leave
programs, and additional states are considering adopting PFL or
PFML programs.
Employee Benefits generally offers term insurance policies,
allowing for the adjustment of rates or policy terms at renewal in
order to minimize the adverse effect of market trends, loss
costs, changes in interest rates and other factors. Policies are
typically sold with one, two or three-year rate guarantees
depending upon the product and market segment.
Marketing and Distribution
The Employee Benefits distribution network is managed through
a regional sales office system to distribute its group insurance
products and services through a variety of distribution outlets
including brokers, consultants, third-party administrators and
trade associations. Additionally, the segment has relationships
with several private exchanges which offer its products to
employer groups. Technology providers, including human
resources platform vendors, are taking an increasingly
prominent role in influencing customer decisions that also
influence selection of the employee benefits insurance provider.
Part I - Item 1. Business
10
Competition
Employee Benefits competes with numerous insurance
companies and financial intermediaries marketing insurance
products. The market for employee benefits continues to grow
as employees and employers continue to demand employee
benefits for addressing mental health, wellness, and caregiving
costs.
In order to differentiate itself, Employee Benefits uses its risk
management expertise and economies of scale to derive a
competitive advantage. Competitive factors include the extent of
products offered, price, the quality of customer and claims
handling services, digital capabilities, and the Company's
relationship with third-party distributors and private exchanges.
Active price competition continues in the marketplace, resulting
in multi-year rate guarantees being offered to customers. Top
tier insurers in the marketplace also offer digital and self-service
capabilities to third party distributors and consumers. The
relatively large size and underwriting capacity of the Employee
Benefits business provides a competitive advantage over
smaller competitors.
The Company's market presence has increased in recent years,
benefiting from our industry leading digital technology and
integrated absence management and claims platform.
Additionally, as employers continue to focus on reducing the
cost of employee benefits, we expect more companies to offer
voluntary products paid for by employees. Across the industry,
the sale of voluntary product offerings, including supplemental
health coverage, is growing at a faster rate than employer-
provided benefits. Competitive factors affecting the sale of
voluntary products include the breadth of products, product
education, enrollment capabilities and overall customer service.
The Company, as well its competitors, are investing in
technology to offer digital capabilities, and to improve product
offerings and service levels, particularly with voluntary products.
We offer our voluntary products including critical illness,
accident and hospital indemnity coverage to employees through
our Employee Choice Benefits programs. The Company's
enhanced enrollment and marketing tools, such as My
Tomorrow©, are providing additional opportunities to educate
individual participants about supplementary benefits and deepen
their knowledge about product selection.
In addition to providing group disability, leave management and
life insurance, we offer integrated claim, leave and benefits
administration with The Hartford's Ability Advantage platform.
|HARTFORD FUNDS
Hartford Funds Segment Assets Under
Management ("AUM") of $139,598 as of
December 31, 2024
Mutual Fund
$123,571
89%
Third-party life and
annuity separate
accounts
$11,544
8%
Exchange-Traded
Funds ("ETF")
$4,483
3%
Mutual Fund AUM of $123,571 as of
December 31, 2024
Equity
$84,000
68%
Multi-
strategy
investments
$18,512
15%
Fixed
income
$21,059
17%
Part I - Item 1. Business
11
Principal Products and Services
Mutual Funds
Includes approximately 60 actively managed mutual funds across a variety of asset
classes including domestic and international equity, fixed income, and multi-strategy
investments, principally sub-advised by two unaffiliated institutional asset
management firms.
Exchange-traded funds
Exchange-traded funds ("ETF") include actively managed ETFs and multifactor
ETFs. Actively-managed ETFs include fixed income, domestic equity and
commodity products utilizing the same investment platform as our mutual funds.
Multifactor ETFs are designed to track indices using passive investment techniques
that strive to improve performance relative to traditional capitalization-weighted
indices.
Third-party life and annuity separate accounts
under management
Relates to assets of the life and annuity business sold in May 2018 that are still
managed by the Company's Hartford Funds segment.
The Hartford Funds segment provides investment management,
administration, product distribution and related services to
investors through a diverse set of investment products in
domestic markets. Hartford Funds' comprehensive range of
products and services assist clients in achieving their desired
investment objectives. AUM are separated into three distinct
categories referred to as mutual funds, ETFs and third-party life
and annuity separate accounts under management.
Marketing and Distribution
Our funds and ETFs are sold through national and regional
broker-dealer organizations, independent financial advisers,
defined contribution plans, financial consultants, bank trust
groups and registered investment advisers. Our distribution
team is organized to sell primarily in the United States.
Competition
The investment management industry is mature and highly
competitive. Firms are differentiated by investment performance,
range of products offered, brand recognition, financial strength,
proprietary distribution channels, quality of service and level of
fees charged relative to quality of investment products. The
Hartford Funds segment competes with a large number of asset
management firms and other financial institutions and
differentiates itself through its global sub-advisors, product
breadth, competitive fees and strong distribution. The segment
also competes directly with lower cost passive investment
strategies, which continue taking share from active managers.
|CORPORATE
The Company includes in the Corporate category capital raising
activities (including equity financing, debt financing and related
interest expense), purchase accounting adjustments related to
goodwill, reserves for run-off structured settlement and terminal
funding agreement liabilities, restructuring costs, transaction
expenses incurred in connection with an acquisition, certain
M&A costs, and other expenses not allocated to the reportable
segments. Corporate also includes investment management
fees and expenses related to managing third-party assets.
Part I - Item 1. Business
12
RESERVES
Total Reserves as of December 31, 2024 [1]
P&C Unpaid losses
and loss
adjustment
expenses
$36,404
80%
Employee Benefits
Unpaid losses
and loss
adjustment
expenses
$8,206
18%
All Other [1]
$1,062
2%
[1]Includes reserves for future policy benefits and other policyholder funds
and benefits payable of $448 and $614, respectively, of which $290 and
$401, respectively, relate to the Employee Benefits segment with the
remainder related to run-off structured settlement and terminal funding
agreements within Corporate.
The reserve for unpaid losses and loss adjustment expenses
("LAE") includes a liability for unpaid losses, including those that
have been incurred but not yet reported, as well as estimates of
all expenses associated with processing and settling these
insurance claims, including reserves related to both Property &
Casualty and Employee Benefits.
Total Property & Casualty Reserves as of
December 31, 2024
Business Insurance
$31,380
86%
P&C Other
Operations
$2,784
8%
Personal Insurance
$2,240
6%
Further discussion of The Hartford’s property and casualty
insurance product reserves, including run-off asbestos and
environmental claims reserves within P&C Other Operations,
may be found in Part II, Item 7, MD&A — Critical Accounting
Estimates — Property and Casualty Insurance Product
Reserves, Net of Reinsurance. Additional discussion may be
found in Notes to Consolidated Financial Statements, including
in the Company’s accounting policies for insurance product
reserves within Note 1 - Basis of Presentation and Significant
Accounting Policies and in Note 10 - Reserve for Unpaid Losses
and Loss Adjustment Expenses of Notes to Consolidated
Financial Statements.
Total Employee Benefits Reserves as of
December 31, 2024 [1]
LTD
$6,864
77%
Life,
including
premium
waiver
$1,120
13%
Other [1]
$512
6%
Other policyholder
funds and
benefits payable
$401
4%
[1]Includes short duration contract reserves of $183 for short-term disability
and $39 of supplemental health as well as reserves for future policy
benefits that include $204 of paid up life reserves and policy reserves on
life policies, $67 of reserves for conversions to individual life and $19 of
other reserves.
Employee Benefits reserves include unpaid loss and loss
adjustments expenses for long-term disability ("LTD"), group life
and other lines of business as well as reserves for other
policyholder funds and reserves for future policy benefits. Other
policyholder funds and benefits payable represent deposits from
policyholders, including policyholders of short-duration
insurance contracts, where the Company does not have
insurance risk but is subject to investment risk. Reserves for
future policy benefits represent life-contingent reserves for
which the Company is subject to insurance, interest rate, and
investment risk.
Discussion of The Hartford's Employee Benefits long-term
disability reserves may be found in Part II, Item 7, MD&A —
Critical Accounting Estimates — Employee Benefit LTD
Reserves, Net of Reinsurance. Additional discussion may be
found in Notes to Consolidated Financial Statements, including
in the Company’s accounting policies for insurance product
reserves within Note 1 - Basis of Presentation and Significant
Accounting Policies and in Note 10 - Reserve for Unpaid Losses
and Loss Adjustment Expenses of Notes to Consolidated
Financial Statements.
Part I - Item 1. Business
13
UNDERWRITING FOR
P&C AND EMPLOYEE
BENEFITS
The Company underwrites the risks it insures in order to
manage exposure to loss through favorable risk selection and
diversification. Risk modeling is used to manage, within
specified limits, the aggregate exposure taken in each line of
business and across the Company. For property and casualty
business, aggregate exposure limits are set by geographic zone
and peril. Products are priced according to the risk
characteristics of the insured’s exposures. Rates charged for
Personal Insurance products are filed with the states in which
we write business. Rates for most Business Insurance products
are also filed with the states but the premium charged may be
modified based on the insured’s relative risk profile and workers’
compensation policies may be subject to modification based on
prior loss experience. The Company also writes coverage in the
excess and surplus lines market, primarily within global
specialty, which is characterized by the absence of regulation
related to rate and form and allows for more pricing and
coverage flexibility to write certain classes of business. Pricing
for Employee Benefits products, including long-term disability
and life insurance, is also based on an underwriting of the risks
and a projection of estimated losses, including consideration of
investment income.
Pricing adequacy depends on a number of factors, including the
ability to obtain regulatory approval for rate changes, proper
evaluation of underwriting risks, the ability to project future loss
cost frequency and severity based on historical loss experience
adjusted for known trends, the Company’s response to rate
actions taken by competitors, its expense levels and
expectations about regulatory and legal developments. The
Company seeks to price its insurance policies such that
insurance premiums and future net investment income earned
on premiums received will cover underwriting expenses and the
ultimate cost of paying claims reported on the policies and
provide for a profit margin. For many of its insurance products,
the Company is required to obtain approval for its premium rates
from state insurance departments and the Lloyd's Syndicate's
ability to write business is subject to Lloyd's approval for its
premium capacity each year.
Geographic Distribution of Earned Premium
(% of total)
Location
Business
Insurance
Personal
Insurance
Employee
Benefits
Total
California
8 %
2 %
2 %
12 %
New York
6 %
1 %
3 %
10 %
Texas
5 %
2 %
2 %
9 %
Florida
3 %
1 %
2 %
6 %
All other [1]
35 %
9 %
19 %
63 %
Total
57 %
15 %
28 %
100 %
[1]No other single state or country accounted for 5% or more of the
Company's consolidated earned premium in 2024.
CLAIMS
ADMINISTRATION FOR
P&C AND EMPLOYEE
BENEFITS
Claims administration includes functions associated with the
receipt of initial loss notices, claims adjudication and estimates,
legal representation for insureds where appropriate,
establishment of case reserves, payment of losses and
notification to reinsurers. These activities are performed by
approximately 6,900 claim employees including, among others,
claim adjusters, appraisers, attorneys, doctors, nurses,
behavioral health specialists, investigators and data analytics
professionals as well as training staff, management, and support
staff. The Company contracts with a select number of approved
regional, national and international suppliers to enhance claim
capabilities and business resiliency.
The Company's claims teams manage losses across the U.S.
and internationally, working from locations across the U.S. and
in two of our international offices. The teams are organized to
meet the specific claim service needs for our various product
offerings. The claims organization is supported by data and
analytics, technology, and strategy located across the U.S. and
in two of our international offices.
As a leading provider of workers’ compensation and employee
benefits coverages, the Company leverages data analytics to
return employees to active, productive lives as soon and safely
as possible. Clinical experts focus on opioid usage, vocational
rehabilitation, behavioral health and medical case management
which we believe provides the Company with a competitive
advantage for managing medical costs.
The Company maintains a dedicated catastrophe claims
organization that is positioned to respond to large-scale
catastrophic events across the country. For the most severe
events, the team is supplemented with additional Company staff
to respond to claimants promptly after an event.
The Company's claims organization has a nationwide staff of
attorneys who represent insureds in key jurisdictions, including
dedicated lawyers specializing in complex litigation.
Claim payments for benefits, losses and loss adjustment
expenses are the largest expenditure for the Company.
REINSURANCE
For discussion of reinsurance, see Part II, Item 7, MD&A —
Enterprise Risk Management and Note 8 - Reinsurance of
Notes to Consolidated Financial Statements.
Part I - Item 1. Business
14
INVESTMENT
OPERATIONS
Hartford Investment Management Company (“HIMCO”) is an
SEC registered investment advisor and manages the
Company's investment operations. HIMCO provides customized
investment strategies for The Hartford's investment portfolio, as
well as for The Hartford's pension plan and institutional clients.
As of December 31, 2024 and 2023, the fair value of HIMCO’s
total assets under management was approximately $112.0
billion and $108.5 billion, respectively, including $50.9 billion and
$50.3 billion, respectively, that were held in HIMCO managed
third party accounts and $3.6 billion and $3.8 billion,
respectively, that support the Company's pension and other
postretirement benefit plans.
The Hartford's Investment Portfolio of $59.2
billion as of December 31, 2024
Taxable fixed
maturities (excl.
U.S. treasuries &
govt. agencies)
57%
U.S. treasuries and
gov't agencies and
short-terms
15%
Mortgage loans
11%
Limited partnerships
and other alternative
investments
9%
Tax-exempt fixed
maturities
7%
Equity and other
1%
Management of The Hartford's
Investment Portfolio
HIMCO manages the Company's investment portfolios to
maximize economic value, ensure sufficient funding of the
Company's liabilities, and achieve enterprise financial objectives
while remaining within acceptable risk tolerances. Portfolio
objectives and guidelines are developed based upon the asset/
liability profile, including timing and amount of claim payment
obligations, investment return opportunity, and risk
characteristics. The Company attempts to minimize adverse
impacts to the portfolio and the Company’s results of operations
from changes in economic conditions through asset
diversification, asset allocation limits, asset/liability duration
matching, and active portfolio management, which may include
the use of derivatives. Risk tolerances considered include, but
are not limited to, asset sector exposure limits, credit issuer
allocation limits, portfolio quality constraints including maximum
exposure to below investment grade holdings, and interest rate
duration limits. For further discussion of HIMCO’s portfolio
management approach, see Part II, Item 7, MD&A — Enterprise
Risk Management.
Part I - Item 1. Business
15
Item 1A.
RISK FACTORS
In deciding whether to invest in The Hartford, you should
carefully consider the following risks, any of which could have a
material adverse effect on our business, financial condition,
results of operations or liquidity and could also impact the
trading price of our securities. These risks are not exclusive, and
additional risks to which we are subject include, but are not
limited to, the factors mentioned under “Forward-Looking
Statements” above and the risks of our businesses described
elsewhere in this Annual Report.
The following risk factors have been organized by category for
ease of use, however many of the risks may have impacts in
more than one category. The occurrence of certain of them may,
in turn, cause the emergence or exacerbate the effect of others.
Such a combination could materially increase the severity of the
impact of these risks on our business, results of operations,
financial condition or liquidity.
Risks Relating to
Economic, Political and
Global Market
Conditions
Unfavorable economic, political and global
market conditions may adversely impact our
business and results of operations.
The Company’s investment portfolio, Hartford Funds business,
and insurance businesses are sensitive to changes in economic,
political and global capital market conditions, such as the effect
of a weak economy, including:
•
labor supply shortages
•
low labor force participation
•
lower family income
•
high unemployment
•
changes in interest rate levels
•
changes in credit spreads
•
equity market disruptions
•
rising inflation
•
changes in foreign currency exchange rates
•
a weak real estate market
•
lower business investment
•
lower consumer spending
In an economic downturn, these factors may adversely affect
the demand for insurance and financial products, insurance loss
costs, valuation and returns on the investment portfolio, and
lower the Company's profitability in some cases, including
adverse impacts to our net investment income and operating
results.
The Company could experience credit losses on various asset
balances, including receivables and the principal amount of
various invested assets, including fixed maturities and mortgage
loans. In addition to credit losses on invested assets, the
Company could experience declines in the value of available for
sale debt securities if credit spreads were to widen significantly,
which would reduce stockholders’ equity. In addition, disruption
in equity markets could result in net realized or unrealized
losses on our equity securities carried at fair value or reduce net
investment income in future periods from our non-fixed income
investment portfolio, including from limited partnerships and
other alternative investments. The Company could also
experience higher reinsurance costs and/or more limited
availability of reinsurance coverage.
Furthermore, political instability, politically motivated violence or
civil unrest, may increase the frequency and severity of insured
losses. In addition, a deterioration in global economic conditions
and/or geopolitical conditions, including due to military action,
trade wars, tariffs or other actions with respect to international
trade agreements or policies, has the potential to, among other
things, reduce demand for our products, reduce exposures we
insure, drive higher inflation that could increase the Company’s
loss costs and result in increased incidence of claims,
particularly for workers’ compensation and disability claims. If
current regional and/or global conflicts were to expand, the
insurance losses and adverse economic impacts could be more
severe than what is currently foreseeable.
Below are several key factors impacted by changes in
economic, political, and global market conditions and their
potential effect on the Company’s business and results of
operations:
•
Credit Spread Risk - Credit spread exposure is reflected in
the market prices of fixed income instruments where lower
rated securities generally trade at a higher credit spread. If
issuer credit spreads increase or widen, the market value of
our investment portfolio may decline. If the credit spread
widening is significant and occurs over an extended period
of time, the Company may recognize credit losses, resulting
in decreased earnings. If credit spreads tighten significantly,
the Company’s net investment income associated with new
purchases of fixed maturities may be reduced. In addition,
the value of credit derivatives under which the Company
assumes exposure or purchases protection are impacted by
changes in credit spreads, with losses occurring when
credit spreads widen for assumed exposure or when credit
spreads tighten if credit protection has been purchased.
•
Equity Markets Risk - A decline in equity markets may
result in net realized losses on sales of equity securities,
Part I - Item 1A. Risk Factors
16
unrealized losses on equity securities held at fair value,
reduce net investment income in future periods from our
non-fixed income investment portfolio, including from limited
partnerships and other alternative investments, or lower
earnings from Hartford Funds where fee income is earned
based upon the fair value of the assets under management.
For additional information on equity market sensitivity, see
Part II, Item 7, MD&A - Enterprise Risk Management,
Financial Risk- Equity Risk.
•
Interest Rate Risk - Increases in interest rates or
persistently high interest rates could lead to recession or
economic stagnation, which could lower the demand for
many of the Company's products and may result in realized
or unrealized losses on existing fixed income assets in the
investment portfolio. This could also impact property
valuations and financing costs for mortgage loans and real
estate joint ventures within limited partnerships and other
alternative investments. Alternatively, a deterioration in
global economic conditions could result in a lower interest
rate environment, which would pressure our net investment
income and could result in lower margins on certain
products.
New and renewal business for our property and casualty
and employee benefits products is priced considering
prevailing interest rates. As interest rates decline, in order
to achieve the same economic return, we would have to
increase product prices to offset the lower anticipated
investment income earned on invested premiums.
Conversely, as interest rates rise, pricing targets will tend to
decrease to reflect higher anticipated investment income.
Our ability to effectively react to such changes in interest
rates may affect our competitiveness in the marketplace,
and in turn, could reduce written premium and earnings.
In addition, due to the long-term nature of the liabilities
within our Employee Benefits operations, particularly for
long-term disability, declines in interest rates over an
extended period of time would result in our having to
reinvest at lower yields. On the other hand, a rise in interest
rates, in the absence of other countervailing changes,
would reduce the market value of our investment portfolio. A
decline in market value of invested assets due to an
increase in interest rates could also limit our ability to
realize tax benefits from recognized capital losses.
Our reserves for future policy benefits are sensitive to
changing interest rate conditions. U.S. Generally Accepted
Accounting Principles ("GAAP") guidance requires that we
update reserves for future policy benefits for changes in
discount rates quarterly which could cause volatility in our
stockholders' equity.
For additional information on interest rate sensitivity, see
Part II, Item 7, MD&A - Enterprise Risk Management,
Financial Risk - Interest Rate Risk.
•
Inflation Risk - Inflation is a risk to our property and
casualty business because, in many cases, claims are paid
out many years after a policy is written and premium is
collected for the risk. A greater than expected increase in
inflation may impact medical services, repair costs or other
claim settlement expenses, which can result in higher claim
costs than what was estimated at the time the policy was
written. Inflation can also affect consumer spending and
business investment which can reduce the demand for our
products and services. In addition, sustained inflation may
result in an increase in interest rates, which would result in
a reduction in the fair value of our investment portfolio.
•
Changes in the Labor Market - Evolving labor market
conditions, including increased competition for talent, could
make it difficult to hire and retain employees and could
increase compensation and benefits expense. New
technologies may lead to changes in skill sets needed from
the workforce, resulting in difficulty in attracting, developing
and retaining employees. If insured businesses cannot hire
enough qualified people to sell products and services to
customers, economic activity may be depressed and lower
insured exposure, hindering the Company's growth.
•
Foreign Currency Exchange Rates - Changes in foreign
currency exchange rates may impact our non-U.S. dollar
denominated investments and foreign subsidiaries. We hold
cash and fixed maturity securities denominated in foreign
currencies, including British Pounds and Canadian dollars,
among others, and also have other assets and liabilities
denominated in foreign currencies such as premiums
receivable and loss reserves. While the Company
predominately uses asset-liability matching, including the
use of derivatives, to hedge certain of these exposures to
fluctuations in foreign currency exchange rates, these
actions do not eliminate the risk that changes in the
exchange rates of foreign currencies to the U.S. dollar
could result in financial loss to the Company, including
realized or unrealized losses resulting from currency
revaluation and increases to regulatory capital requirements
for foreign subsidiaries that have net assets that are not
denominated in their local currency. For additional
information on foreign exchange risk, see Part II, Item 7,
MD&A - Enterprise Risk Management, Financial Risk.
Concentration of our investment portfolio
increases the potential for significant losses.
The concentration of our investment portfolios in any particular
industry, collateral type, group of related industries or
geographic region could have an adverse effect on our
investment portfolios and consequently on our business,
financial condition, results of operations, or liquidity. Events or
developments that have a negative impact on any particular
industry, collateral type, group of related industries or
geographic region may have a greater adverse effect on our
investment portfolio to the extent that the portfolio is
concentrated rather than diversified.
Further, if issuers of securities or loans we hold are acquired,
merge or otherwise consolidate with other issuers of securities
or loans held by the Company, our investment portfolio’s credit
concentration risk to issuers could increase for a period of time,
until the Company is able to sell securities to get back in
compliance with the established investment credit policies.
Changing climate and weather patterns may
adversely affect our business, financial
condition and results of operation.
Climate change presents risks to us as an insurer, investor and
employer. Climate models indicate that rising temperatures will
Part I - Item 1A. Risk Factors
17
likely result in rising sea levels over the decades to come and
may increase the frequency and intensity of natural
catastrophes and severe weather events. Extreme weather
events such as abnormally high temperatures may result in
increased losses associated with our property, automobile,
workers’ compensation and employee benefits businesses.
Changing climate patterns may also increase the duration,
frequency and intensity of heat/cold waves, which may result in
increased claims for property damage, business interruption and
losses under workers’ compensation, group disability and group
life coverages. Precipitation patterns across the U.S. are
projected to change, which if realized, may increase risks of
flash floods, wildfires, and other severe weather events. If third
parties assert that climate change-related risks and damages
are caused by insured businesses, or arise from alleged
mismanagement at insured businesses, we may experience
increased claims under general liability and management liability
policies. Additionally, there may be an impact on the demand,
price and availability of automobile and homeowners insurance,
and there is a risk of higher reinsurance costs or more limited
availability of reinsurance coverage. Changes in climate
conditions may also cause our underlying modeling data to not
adequately reflect frequency and severity, limiting our ability to
effectively evaluate and manage risks of catastrophes and
severe weather events. Among other impacts, this could result
in not charging enough premiums or not obtaining timely state
approvals for rate increases to cover the risks we insure. We
may also experience significant interruptions to the Company’s
systems and operations that hinder our ability to sell and service
business, manage claims and operate our business.
In addition, climate change-related risks, including risks
associated with global energy transition, may adversely impact
the value of the investments that we hold, resulting in potential
realized or unrealized losses on our invested assets. Our
decision to invest in certain securities, loans, or other
investments may also be impacted by changes in climate
patterns due to:
•
changes in supply/demand for traditional sources of energy
(e.g., coal, oil, natural gas);
•
advances in low-carbon technology and renewable energy
development;
•
effects of extreme weather events on the physical and
operational exposure of industries and issuers; and
•
internal investment guidelines and policies related to the
global energy transition.
The effects of climate change could also lead to increased credit
risk of other counterparties we transact business with, including
reinsurers. Climate change effects may also lead to decreases
in real estate values in various locations and for a variety of
reasons, reducing premium and demand for commercial
property and homeowners insurance and adversely impacting
the value of our real estate-related investments. Additionally,
government policies or regulations to slow climate change, such
as emission controls or technology mandates, may have an
adverse impact on sectors such as utilities, transportation and
manufacturing, affecting demand for our products and our
investments in these sectors. Moreover, regulators may
undertake actions to minimize the effects of climate change on
consumers, which could affect coverage provided under
insurance contracts and administrative process.
These emerging regulatory initiatives, or other climate-related
policies we adopt, may result in non-renewal of business or
reduced appetite for underwriting or investing in certain industry
sectors.
Because there is significant variability associated with the
impacts of climate change, we cannot predict how physical,
legal, regulatory and social responses may impact our business.
For additional discussion about climate change related risks,
see the Risk Factor, “We are vulnerable to losses from
catastrophes, both natural and man-made.”
Insurance Industry and
Product Related Risks
Unfavorable loss development may adversely
affect our business, financial condition, results
of operations or liquidity.
We establish property and casualty and employee benefits loss
reserves to cover our estimated liability for the payment of all
unpaid losses and loss adjustment expenses incurred with
respect to premiums earned on our policies. Loss reserves are
estimates of what we expect the ultimate settlement and
administration of claims will cost, less what has been paid to
date. These estimates are based upon actuarial projections and
on our assessment of currently available data, as well as
estimates of claims severity and frequency, legal theories of
liability, available benefit offsets, and other factors. For risks due
to evolving changes in social, economic and environmental
conditions, see the Risk Factor, “Unexpected and unintended
claim and coverage issues under our insurance contracts may
adversely impact our financial performance.”
Loss reserve estimates are refined periodically as experience
develops and claims are reported and settled, potentially
resulting in increases to our reserves. Increases in reserves
would be recognized as an expense during the periods in which
these determinations are made, thereby adversely affecting our
results of operations for those periods. In addition, since reserve
estimates of aggregate loss costs for prior years are used in
pricing our insurance products, inaccurate reserves can lead to
our products not being priced adequately to cover actual losses
and related loss expenses in order to generate a profit.
In property and casualty, we continue to receive A&E claims, the
vast majority of which relate to policies written before 1986.
Estimating the ultimate gross reserves needed for unpaid losses
and related expenses for A&E claims is particularly difficult for
insurers and reinsurers. The actuarial tools and other
techniques used to estimate the ultimate cost of more traditional
insurance exposures tend to be less precise when used to
estimate reserves for some A&E exposures.
Moreover, the assumptions used to estimate gross reserves for
A&E claims, such as claim frequency over time, average
severity, and how various policy provisions will be interpreted,
are subject to significant uncertainty. It is also not possible to
predict changes in the legal and legislative environment and
their effect on the future development of A&E claims. These
Part I - Item 1A. Risk Factors
18
factors, among others, make the variability of gross reserves
estimates for these longer-tailed exposures significantly greater
than for other more traditional exposures.
Effective December 31, 2016, the Company entered into an
agreement with National Indemnity Company (“NICO”), a
subsidiary of Berkshire Hathaway Inc. (“Berkshire”) whereby the
Company was reinsured for subsequent adverse development
on substantially all of its net A&E reserves up to an aggregate
net limit of $1.5 billion. As of December 31, 2024, the Company
has exhausted the $1.5 billion treaty limit, and as such, any
further development that increases our recorded net reserves
could have a material adverse effect on our financial condition,
results of operations or liquidity. We remain directly liable to
claimants and if the reinsurer does not fulfill its obligations under
the agreement we may need to increase our recorded net
reserves. For additional information related to risks associated
with the adverse development cover ("ADC"), see Note 10 -
Reserve for Unpaid Losses and Loss Adjustment Expenses of
Notes to Consolidated Financial Statements.
We are vulnerable to losses from
catastrophes, both natural and man-made.
Our insurance operations expose us to claims arising out of
catastrophes. Catastrophes can be caused by various
unpredictable natural events, including, among others,
earthquakes, hurricanes, hailstorms, severe winter weather,
wind storms, fires, tornadoes, and pandemics. Catastrophes can
also be man-made, such as terrorist attacks, civil unrest, cyber-
attacks, explosions or infrastructure failures. Catastrophes may
also include some major international events designated by
Lloyd's of London.
The geographic distribution of our business subjects us to
various catastrophe exposures across different regions of the
United States. We are also exposed to catastrophe losses in
other parts of the world through our global specialty business.
Any increases in the values and concentrations of insureds and
property in these areas would increase the severity of
catastrophic events in the future. In addition, changes in climate
and/or weather patterns may increase the frequency and/or
intensity of severe weather and natural catastrophe events
potentially leading to increased insured losses. Potential
examples include, but are not limited to:
•
an increase in the frequency or intensity of wind and
thunderstorm and tornado/hailstorm events due to
increased convection in the atmosphere,
•
more frequent and larger wildfires in certain geographies,
•
higher incidence of deluge flooding, and
•
the potential for an increase in frequency and severity of
hurricane events.
Insufficient incorporation of climatic trends into widely used
catastrophe models and internal tools to assess risk from
natural catastrophe perils could lead to ineffective evaluation
and management of catastrophe risk. For a further discussion of
climate-related risks, see the above-referenced Risk Factor,
“Changing climate and weather patterns may adversely affect
our business, financial condition and results of operation.”
Our businesses also have exposure to global or nationally
occurring pandemics caused by highly infectious and potentially
fatal diseases spread through human, animal or plant
populations.
In the event of one or more catastrophes, policyholders may be
unable to meet their obligations to pay premiums on our
insurance policies. Further, our liquidity could be constrained by
a catastrophe, or multiple catastrophes. In addition, in part
because accounting rules do not permit insurers to reserve for
such catastrophic events until they occur, claims from
catastrophic events could have a material adverse effect on our
business, financial condition, results of operations or liquidity.
The amount we charge for catastrophe exposure may be
inadequate if the frequency or severity of catastrophe losses
changes over time or if the models we use to estimate the
exposure prove inadequate. In addition, regulators or legislators
could limit our ability to charge adequate pricing for catastrophe
exposures or shift more responsibility for covering risk.
Terrorism is an example of a significant man-made potential
catastrophe. Private sector catastrophe reinsurance is limited
and generally unavailable for terrorism losses caused by attacks
with nuclear, biological, chemical or radiological weapons. In
addition, workers' compensation policies generally do not have
exclusions or limitations for terrorism losses. Reinsurance
coverage from the federal government under the Terrorism Risk
Insurance Program (the "Program") Reauthorization Act of 2019
(“TRIPRA 2019”) is also limited and only applies for certified
acts of terrorism that exceed a certain threshold of industry
losses. Accordingly, the effects of a terrorist attack in the
geographic areas we serve may result in claims and related
losses for which we do not have adequate reinsurance. TRIPRA
2019 also requires that the federal government create the
following reports, which could lead to additional legislation or
regulation: (1) Treasury Department to include in its biennial
report on the effectiveness of the Program an evaluation of the
availability and affordability of terrorism risk insurance for places
of worship; and (2) Government Accountability Office report to
analyze and address the vulnerabilities and potential costs of
cyber terrorism, to assess adequacy of coverage under the
Program, and to make recommendations for future legislative
changes to address evolving cyber terrorism risks. Further, the
continued threat of terrorism and the occurrence of terrorist
attacks, as well as heightened security measures and military
action in response to these threats and attacks or other
geopolitical or military crises, may cause significant volatility in
global financial markets, disruptions to commerce and reduced
economic activity. These consequences could have an adverse
effect on the value of the assets in our investment portfolio and/
or cause a reduction in demand for our products. Terrorist
attacks also could disrupt our operation centers. In addition,
TRIPRA 2019 expires on December 31, 2027 and if the U.S.
Congress does not reauthorize the program or significantly
reduces the government’s share of covered terrorism losses, the
Company’s exposure to terrorism losses could increase
materially unless it can purchase alternative terrorism
reinsurance protection in the private markets at affordable prices
or takes actions to materially reduce its exposure in lines of
business subject to terrorism risk. For a further discussion of
TRIPRA, see Part II, Item 7, MD&A - Enterprise Risk
Management - Insurance Risk Management, Reinsurance as a
Risk Management Strategy.
Cyber risk exposure exists through stand-alone cyber policies
as well as cyber coverage endorsements on some property,
Part I - Item 1A. Risk Factors
19
general liability, management liability and directors and officers
policies. Increasing frequency of cyber attacks and the evolving
nature of cyber risk taking place across the globe may
potentially lead to increased insured losses across the industry
and for the businesses we insure. Our insureds may be
increasingly exposed to cyber-related attacks with insured
losses to property (including data and systems), breach of data,
ransom payments and business interruption. Geopolitical crises
or hostile actions taken by nation states or terrorist
organizations may heighten the risk of cyber-attacks on
companies we insure and on our own operations.
As a result, it is possible that any, or a combination of all, of
these factors related to a catastrophe, or multiple catastrophes,
whether natural or man-made, can have a material adverse
effect on our business, financial condition, results of operations
or liquidity.
Pricing for our products is subject to our
ability to adequately assess risks, estimate
losses and comply with state and
international insurance regulations.
We seek to price our property and casualty and employee
benefits insurance policies such that insurance premiums and
future net investment income earned on premiums received will
provide for an acceptable profit in excess of underwriting
expenses and the cost of paying claims. Pricing adequacy
depends on a number of factors, including proper evaluation of
underwriting risks, the ability to project future claim costs, our
expense levels, net investment income realized, our response to
rate actions taken by competitors, legal and regulatory
developments, including in international markets, and the ability
to obtain regulatory approval for rate changes.
State insurance departments regulate many of the premium
rates we charge and also propose rate changes for the benefit
of the insurance consumer at the expense of the insurer, which
may not allow us to reach targeted levels of profitability.
Moreover, regulators may seek to prohibit or constrain the use
of certain underwriting and rating factors, which may affect our
ability to price risks. In addition to regulating rates, certain states
have enacted laws that require a property and casualty insurer
to participate in assigned risk plans, reinsurance facilities, joint
underwriting associations and other residual market plans. State
regulators also require that an insurer offer property and
casualty coverage to all consumers and often restrict an
insurer's ability to charge the price it might otherwise charge or
restrict an insurer's ability to offer or enforce specific policy
deductibles. In these markets, we may be compelled to
underwrite significant amounts of business at lower than desired
rates or accept additional risk not contemplated in our existing
rates, participate in the operating losses of residual market
plans or pay assessments to fund operating deficits of state-
sponsored funds, which could lead to lower than anticipated
profitability. The laws and regulations of many states also limit
an insurer's ability to withdraw from one or more lines of
insurance in the state, except pursuant to a plan that is
approved by the state's insurance department. Additionally,
certain states require insurers to participate in guaranty funds
for impaired or insolvent insurance companies. These funds
periodically assess losses against all insurance companies
doing business in the state. Any of these factors could have a
material adverse effect on our business, financial condition,
results of operations or liquidity. For more on international
regulatory risks, see the Risk Factor, “Regulatory and legislative
developments could have a material adverse impact on our
business, financial condition, results of operations or liquidity.”
Additionally, the property and casualty and employee benefits
insurance markets have been historically cyclical, experiencing
periods characterized by relatively high levels of price
competition, less restrictive underwriting standards, more
expansive coverage offerings, multi-year rate guarantees and
declining premium rates, followed by periods of relatively low
levels of competition, more selective underwriting standards,
more coverage restrictions and increasing premium rates. In all
of our property and casualty and employee benefits insurance
product lines, there is a risk that the premium we charge may
ultimately prove to be inadequate as reported losses emerge. In
addition, there is a risk that regulatory constraints, price
competition or incorrect pricing assumptions could prevent us
from achieving targeted returns. Inadequate pricing could have
a material adverse effect on our business, financial condition,
results of operations or liquidity.
Competitive activity, use of emerging
technologies, or other technological changes
may adversely affect our market share,
demand for our products, or our financial
results.
The industries in which we operate are highly competitive. Our
principal competitors are other property and casualty insurers,
employee benefits providers and providers of mutual funds and
exchange traded funds. Competitors may expand their risk
appetites in products and services where The Hartford currently
enjoys a competitive advantage. Larger competitors with more
capital and new entrants to the market could result in increased
pricing pressures on a number of our products and services and
may harm our ability to maintain or increase our profitability. For
example, larger competitors, including those formed through
consolidation or who may acquire new entrants to the market,
such as insurtech firms, may have lower operating costs and an
ability to absorb greater risk while maintaining their financial
strength ratings, thereby allowing them to price their products
more competitively.
In addition, technological advancements and innovation are
occurring in distribution, underwriting, claims and operations at a
rapid pace that may continue to accelerate. Insurers are using
or may begin using certain emerging technologies, such as
machine learning, predictive analytics, "big data" analysis or
other artificial intelligence functions to, among other things,
improve pricing accuracy, be more targeted in marketing,
strengthen customer relationships and provide more customized
loss prevention services. Nontraditional competitors could enter
the insurance market and further accelerate these trends. If
competitors are able to use these emerging technologies more
effectively and/or efficiently, it may provide them a competitive
advantage. Because of the highly competitive nature of the
industries The Hartford competes in, there can be no assurance
that the Company will continue to compete effectively with our
industry rivals, or that competitive pressure will not have a
material adverse effect on our business, financial condition,
results of operations or liquidity.
Part I - Item 1A. Risk Factors
20
Our business could be affected by other technological changes,
including further advancements in automotive safety features,
the development of autonomous or “self-driving” vehicles, and
platforms that facilitate ride sharing. These technologies could
impact the frequency or severity of losses, disrupt the demand
for certain of our products, or reduce the size of the automobile
insurance market as a whole. The risks we insure are also
affected by the increased use of technology in homes and
businesses, including technology used in heating, ventilation, air
conditioning and security systems and the introduction of more
automated loss control measures. Increased use of advanced
analytics (e.g., artificial intelligence) and automation in the
workplace could potentially affect the demand for workers'
compensation insurance products over time. In addition, our
business may be disrupted due to failures of accelerated
technological changes, including our automation of minimally
complex tasks, which may adversely impact our business and
results of operations. While there is substantial uncertainty
about the timing, penetration and reliability of such technologies,
and the legal frameworks that may apply, such as to
autonomous vehicles, any such impacts could have a material
adverse effect on our business and results of operations.
We may experience difficulty in marketing
and providing insurance products and
investment advisory services through
distribution channels and advisory firms.
We distribute our insurance products, mutual funds and ETFs
through a variety of distribution channels and financial
intermediaries, including brokers, independent agents,
wholesale agents, reinsurance brokers, broker-dealers, banks,
registered investment advisors, affinity partners, our own
internal sales force and other third-party organizations. In some
areas of our business, we generate a significant portion of our
business through third-party arrangements. For example, we
market Personal Insurance products in large part through an
exclusive licensing arrangement with AARP that continues
through December 31, 2032. Our ability to distribute products
through the AARP program may be adversely impacted by
membership levels and the pace of membership growth. In
addition, the independent agent and broker distribution channel
is consolidating, which could result in a larger proportion of
written premium being concentrated among fewer agents and
brokers, potentially increasing our cost of acquiring new
business. While we periodically seek to renew or extend third
party arrangements, there can be no assurance that our
relationship with these third parties will continue or that the
economics of these relationships won't change to make them
less financially attractive to the Company. An interruption in our
relationship with certain of these third parties could materially
affect our ability to market our products and could have a
material adverse effect on our business, financial condition,
results of operations or liquidity.
Unexpected and unintended claim and
coverage issues under our insurance contracts
may adversely impact our financial
performance.
Changes in industry practices and in legal, judicial, social and
other environmental conditions, technological advances or
fraudulent activities, may require us to pay claims we did not
intend to cover when we wrote the policies. Social, economic,
political and environmental issues, including rising income
inequality, reduction and further delays in government social
programs such as Social Security Disability, attorney
representation rates, legal system abuse, climate change,
prescription drug use and addiction, exposures to new
substances or those substances previously considered to be
safe and found to have latent exposure, along with the use of
social media to proliferate messaging around such issues, has
expanded the theories for reporting claims, which may increase
our claims administration and/or litigation costs. State and local
governments' increased efforts aimed to respond to the costs
and concerns associated with these types of issues may also
lead to expansive, new theories for reporting claims or may lead
to the passage of "reviver" statutes that extend the statute of
limitations for the reporting of these claims, including statutes
passed in certain states with respect to sexual molestation and
sexual abuse claims. In addition, these and other social,
economic, political and environmental issues may extend
coverage beyond our underwriting intent, potentially increase
jury awards, and/or increase the frequency or severity of claims.
Some of these changes, advances or activities may not become
apparent until some time after we have issued insurance
contracts that are affected by the changes, advances or
activities and/or we may be unable to compensate for such
losses through future pricing and underwriting. As a result, the
full extent of liability under our insurance contracts may not be
known for many years after a contract is issued, and this liability
may have a material adverse effect on our business, financial
condition, results of operations or liquidity at the time it becomes
known.
Financial Strength,
Credit and Counterparty
Risks
Downgrades in our financial strength or credit
ratings may make our products less attractive,
increase our cost of capital and inhibit our
ability to refinance our debt.
Financial strength and credit ratings are important in
establishing the competitive position of insurance companies.
Rating agencies assign ratings based upon several factors.
While most of the factors relate to the rated company, others
relate to the views of the rating agency (including its
assessment of the strategic importance of the rated company to
the insurance group), general economic conditions, and
circumstances outside the rated company's control. In addition,
rating agencies may employ different models and formulas to
assess the financial strength of a rated company, and from time
to time rating agencies have altered these models. Changes to
the models or factors used by the rating agencies to assign
ratings could adversely impact a rating agency's judgment of its
internal rating and the publicly issued rating it assigns us.
Our financial strength ratings, which are intended to measure
our ability to meet policyholder obligations, are an important
factor affecting public confidence in most of our products and,
as a result, our competitiveness. A downgrade or a potential
Part I - Item 1A. Risk Factors
21
downgrade in the rating of our financial strength or of one of our
principal insurance subsidiaries could affect our competitive
position and reduce future sales of our products.
Our credit ratings also affect our cost of capital. A downgrade or
a potential downgrade of our credit ratings could make it more
difficult or costly to refinance maturing debt obligations, to
support business growth at our insurance subsidiaries and to
maintain or improve the financial strength ratings of our principal
insurance subsidiaries. These events could materially adversely
affect our business, financial condition, results of operations or
liquidity. For a further discussion of potential impacts of ratings
downgrades on derivative instruments, including potential
collateral calls, see Part II, Item 7, MD&A - Capital Resources
and Liquidity - Derivative Commitments.
The amount of capital that we must hold to
maintain our financial strength and credit
ratings and meet other requirements can vary
significantly from time to time and is sensitive
to a number of factors outside of our control.
We conduct the vast majority of our business through licensed
insurance company subsidiaries. In the United States, statutory
accounting standards and statutory capital and reserve
requirements for these entities are prescribed by the applicable
insurance regulators and the National Association of Insurance
Commissioners ("NAIC"). The minimum capital we must hold is
based on risk-based capital (“RBC”) formulas for both property
and casualty and life companies. The RBC formula for property
and casualty companies establishes capital requirements
relating to underwriting, asset, credit, catastrophe, operational
and off-balance sheet risks. The RBC formula for life companies
is applicable to our employee benefits business and establishes
capital requirements relating to insurance, business, asset,
credit, interest rate and off-balance sheet risks.
Countries in which our international insurance subsidiaries are
incorporated or deemed commercially domiciled are subject to
minimum capital requirements as defined by the applicable
regulatory regime, including a phased program of changes to
the prudential and solvency regime in the U.K. following the
U.K.'s departure from the European Union. In addition, our
Lloyd’s member company must maintain required Funds at
Lloyd's ("FAL") to meet the capital requirements of its syndicate.
The FAL is determined based on the syndicate’s Solvency
Capital Requirement (“SCR”) under the Solvency II capital
adequacy model plus an economic capital assessment
determined by the Lloyd’s Franchise Board (which is
responsible for the day-to-day management of the Lloyd's
market).
In any particular year, statutory surplus amounts, RBC ratios,
FAL and SCR may increase or decrease depending on a variety
of factors, some of which are outside the Company's control,
including:
•
the amount of statutory income or losses generated by our
insurance subsidiaries;
•
the amount of additional capital our insurance subsidiaries
must hold to support business growth;
•
the amount of dividends or distributions paid to the holding
company;
•
the value of certain fixed maturities, equity securities, and
limited partnership and other alternative investments in our
investment portfolio;
•
changes in interest rates;
•
admissibility of deferred tax assets;
•
changes to the regulatory capital formulas; and
•
regulatory changes to accounting guidance for determining
capital adequacy.
Among other factors, rating agencies consider the level of
statutory capital and surplus of our U.S. insurance subsidiaries
as well as the level of GAAP capital held by the Company in
determining the Company's financial strength and credit ratings.
Rating agencies may implement changes to their capital
formulas that have the effect of increasing the amount of capital
we must hold in order to maintain our current ratings. If our
capital resources are insufficient to maintain a particular rating
by one or more rating agencies, we may need to raise capital
through public or private equity or debt financing. If we were not
to raise additional capital, either at our discretion or because we
were unable to do so, our financial strength and credit ratings
might be downgraded by one or more rating agencies.
Losses due to nonperformance or defaults by
counterparties can have a material adverse
effect on the value of our investments and
reduce our profitability or sources of liquidity.
We have credit risk with counterparties associated with
investments, derivatives, premiums receivable, reinsurance
recoverables and indemnifications provided by third parties in
connection with previous dispositions. Among others, our
counterparties include issuers of fixed maturity and equity
securities we hold, borrowers of mortgage loans we hold,
customers, trading counterparties, counterparties under swaps
and other derivative contracts, reinsurers, clearing agents,
exchanges, clearing houses and other financial intermediaries
and guarantors. These counterparties may default on their
obligations to us due to bankruptcy, insolvency, lack of liquidity,
adverse economic conditions, operational failure, fraud,
government intervention and other reasons. In addition, for
exchange-traded derivatives, such as futures, options and
"cleared" over-the-counter ("OTC") derivatives, the Company is
generally exposed to the credit risk of the relevant central
counterparty clearing house. Defaults by these counterparties
on their obligations to us could have a material adverse effect
on the value of our investments, financial condition, results of
operations or liquidity. Additionally, if the underlying assets
supporting the structured securities we invest in default on their
payment obligations, our securities may incur losses.
The availability of reinsurance and our ability
to recover under reinsurance contracts may
not be sufficient to protect us against losses.
As an insurer, we frequently use reinsurance to reduce the
effect of losses that may arise from, among other things,
catastrophes and other risks that can cause unfavorable results
of operations. In addition, our assumed reinsurance business
purchases retrocessional coverage for a portion of the risks it
assumes. Under these reinsurance arrangements, other
Part I - Item 1A. Risk Factors
22
insurers assume a portion of our losses and related expenses;
however, we remain liable as the direct insurer on all risks
reinsured. Consequently, ceded reinsurance arrangements do
not eliminate our obligation to pay claims, and we are subject to
our reinsurers' credit risk with respect to our ability to recover
amounts due from them. The inability or unwillingness of any
reinsurer or retrocessionaire to meet its financial obligations to
us, including the impact of any insolvency or rehabilitation
proceedings involving a reinsurer or retrocessionaire that could
affect the Company's access to collateral held in trust, could
have a material adverse effect on our financial condition, results
of operations or liquidity.
In addition, should the availability and cost of reinsurance
change materially, we may have to pay higher reinsurance
costs, accept an increase in our net liability exposure, reduce
the amount of business we write, or access to the extent
possible other alternatives to reinsurance, such as use of the
capital markets. Further, due to the inherent uncertainties as to
collection and the length of time before reinsurance
recoverables will be due, it is possible that future adjustments to
the Company’s reinsurance recoverables, net of the allowance,
could be required, which could have a material adverse effect
on the Company’s consolidated results of operations or liquidity
in a particular quarterly or annual period.
Our ability to declare and pay dividends is
subject to limitations.
The payment of future dividends on our capital stock is subject
to the discretion of our Board of Directors, which considers,
among other factors, our operating results, overall financial
condition, credit-risk considerations and capital requirements, as
well as general business and market conditions. Our Board of
Directors may only declare such dividends out of funds legally
available for such payments. Moreover, our common
stockholders are subject to the prior dividend rights of any
holders of depositary shares representing preferred stock then
outstanding. The terms of our outstanding junior subordinated
debt securities prohibit us from declaring or paying any
dividends or distributions on our capital stock or purchasing,
acquiring, or making a liquidation payment on such stock, if we
have given notice of our election to defer interest payments and
the related deferral period has not yet commenced or a deferral
period is continuing.
Moreover, as a holding company that is separate and distinct
from its insurance subsidiaries, HIG has no significant business
operations of its own. Therefore, HIG relies on dividends from
our insurance company subsidiaries and other subsidiaries as
the principal source of cash flow to meet its obligations.
Subsidiary dividends fund payments on its debt securities and
the payment of dividends to stockholders on its capital stock.
Connecticut state laws and certain other U.S. jurisdictions in
which we operate limit the payment of dividends and require
notice to and approval by the state insurance commissioner for
the declaration or payment of dividends above certain levels.
The laws and regulations of the countries in which its
international insurance subsidiaries are incorporated or deemed
commercially domiciled, as well as requirements of the Council
of Lloyd’s, also impose limitations on the payment of dividends
which, in some instances, are more restrictive. Dividends paid
from its insurance subsidiaries are further dependent on their
cash requirements. In addition, in the event of liquidation or
reorganization of a subsidiary, prior claims of a subsidiary’s
creditors may take precedence over the holding company’s right
to a dividend or distribution from the subsidiary except to the
extent that the holding company may be a creditor of that
subsidiary. For further discussion on dividends from insurance
subsidiaries, see Part II, Item 7, MD&A - Capital Resources &
Liquidity.
Risks Relating to
Estimates, Assumptions
and Valuations
Actual results could materially differ from the
analytical models we use to assist our decision
making in key areas such as underwriting,
pricing, capital management, reserving,
investments, reinsurance and catastrophe
risks.
We use models to support, among other things, underwriting,
pricing, capital allocation, reserving, investments, reinsurance,
and catastrophe risk management. Both proprietary and third
party models used incorporate numerous assumptions and
forecasts about the future level and variability of interest rates,
inflation, credit spreads, equity markets, currency exchange
rates, loss frequency and severity, and capital requirements,
among others. The models are subject to the inherent limitations
of any statistical analysis as the historical internal and industry
data and assumptions used in the models may not be indicative
of what will happen in the future. Consequently, actual results
may differ materially from our modeled results. The profitability
and financial condition of the Company substantially depends on
the extent to which our actual experience is consistent with
assumptions we use in our models and ultimate model outputs.
If, based upon these models or other factors, we misprice our
products or our estimates of the risks we are exposed to prove
to be materially inaccurate, our business, financial condition,
results of operations or liquidity may be adversely affected.
The valuation of our securities and
investments and the determination of
allowances and credit losses are highly
subjective and based on methodologies,
estimations and assumptions that are subject
to differing interpretations and market
conditions.
Estimated fair values of the Company’s investments are based
on available market information and judgments about financial
instruments, including estimates of the timing and amounts of
expected future cash flows and the credit standing of the issuer
or counterparty. During periods of market disruption, it may be
difficult to value certain of our securities if trading becomes less
frequent and/or market data becomes less observable. There
may be certain asset classes that were in active markets with
significant observable data that become illiquid due to the
financial environment. In addition, there may be certain
securities whose fair value is based on one or more
Part I - Item 1A. Risk Factors
23
unobservable inputs, even during normal market conditions. As
a result, the determination of the fair values of these securities
may include inputs and assumptions that require more
estimation and management judgment and the use of complex
valuation methodologies. These fair values may differ materially
from the value at which the investments may be ultimately sold.
Further, rapidly changing or unprecedented credit and equity
market conditions could materially impact the valuation of
securities and the period-to-period changes in value could vary
significantly. Decreases in value could have a material adverse
effect on our business, results of operations, financial condition
or liquidity.
Similarly, management’s decision on whether to record an
allowance for credit losses ("ACL") is subject to significant
judgments and assumptions regarding changes in general
economic conditions, the issuer's financial condition or future
recovery prospects, estimated future cash flows, the expected
recovery period and the accuracy of third party information used
in internal assessments. As a result, management’s evaluations
and assessments are highly judgmental and its projections of
future cash flows over the life of certain investments may
ultimately prove incorrect as facts and circumstances change.
If our businesses do not perform well, we may
be required to recognize an impairment of
our goodwill.
Goodwill represents the excess of the amounts we paid to
acquire subsidiaries and other businesses over the fair value of
their net assets at the date of acquisition. We test goodwill at
least annually for impairment. Impairment testing is performed
based upon estimates of the fair value of the “reporting unit” to
which the goodwill relates. The reporting unit is the operating
segment or a business one level below an operating segment if
discrete financial information is prepared and regularly reviewed
by management at that level. The fair value of the reporting unit
could decrease if new business, customer retention, profitability
or other drivers of performance differ from expectations. If it is
determined that the goodwill has been impaired, the Company
must write down the goodwill by the amount of the impairment,
with a corresponding charge to net income (loss). These write
downs could have a material adverse effect on our results of
operations or financial condition.
Strategic and
Operational Risks
Our businesses may suffer and we may incur
substantial costs if we are unable to access
our systems and safeguard the security of our
data in the event of a disaster, cyber breach,
other information security incident or
technology failure.
We use technology to process, store, retrieve, evaluate and
analyze customer and company data and information. Our
information technology and telecommunications systems, in
turn, interface with and rely upon third-party systems. We and
our third party vendors must be able to access our systems to
provide insurance quotes, process premium payments, make
changes to existing policies, file and pay claims, administer
mutual funds, provide customer support, manage our
investment portfolios, report on financial results and perform
other necessary business functions.
Systems failures or outages could compromise our ability to
perform these business functions in a timely manner, which
could harm our ability to conduct business and hurt our
relationships with our business partners and customers. Our
business may be disrupted by failures to effectively maintain or
update existing technologies, implement new technology,
automate business processes or use emerging technologies
(e.g. artificial intelligence). In the event of a disaster such as a
natural catastrophe, a pandemic, civil unrest, an industrial
accident, a cyber-attack, a blackout, a terrorist attack (including
conventional, nuclear, biological, chemical or radiological) or
war, systems upon which we rely may be inaccessible to our
employees, customers or business partners for an extended
period of time. Even if our employees and business partners are
able to report to work, they may be unable to perform their
duties for an extended period of time if our data or systems used
to conduct our business are disabled or destroyed.
Our systems have been, and will likely continue to be, subject to
viruses or other malicious code, unauthorized access, cyber-
attacks (such as ransomware and denial of service), cyber
frauds or other computer related penetrations. The frequency
and sophistication of such threats continue to increase as well.
While, to date, The Hartford is not aware of having experienced
a material breach of our cyber security systems, administrative,
accounting and technical controls as well as other preventive
actions may be insufficient to prevent physical and electronic
break-ins, denial of service, cyber-attacks, business email
compromises, ransomware or other security breaches to our
systems or those of third parties with whom we do business.
Such an event could compromise our confidential information as
well as that of our clients and third parties, impede or interrupt
our business operations and result in other negative
consequences, including remediation costs, loss of revenue,
additional regulatory scrutiny and litigation and reputational
damage. In addition, we routinely transmit to third parties
personal, confidential and proprietary information, which may be
related to employees and customers, by email and other
electronic means, along with receiving and storing such
information on our systems. Although we attempt to protect
proprietary and confidential information, we may be unable to
secure the information in all events, especially with clients,
vendors, service providers, counterparties and other third
parties who may not have appropriate controls to protect
confidential information.
Our businesses must comply with regulations to control the
privacy of customer, employee and third party data, and state,
federal and international regulations regarding data privacy are
becoming increasingly more onerous. A misuse or mishandling
of confidential or proprietary information could result in legal
liability, regulatory action and reputational harm.
Third parties, including third party administrators and cloud-
based systems, are also subject to cyber-attacks and breaches
of confidential information, along with the other risks outlined
above, any one of which may result in our incurring substantial
costs and other negative consequences, including a material
adverse effect on our business, reputation, financial condition,
Part I - Item 1A. Risk Factors
24
results of operations or liquidity. Our increased use of open
source software, cloud technology and software as a service
can make it more difficult to identify and remedy such situations
due to the disparate location of code utilized in our operations.
While we maintain cyber liability insurance that provides both
third party liability and first party insurance coverages, our
insurance may not be sufficient to protect against all loss.
Performance problems due to outsourcing
and other third-party relationships may
compromise our ability to conduct business.
We outsource certain business and administrative functions and
rely on third-party vendors to perform certain functions or
provide certain services on our behalf and have a significant
number of information technology and business processes
outsourced with a single vendor. If we are unable to reach
agreement in the negotiation of contracts or renewals with
certain third-party providers, or if such third-party providers
experience disruptions in their processes or with relied upon
vendors, or if they do not perform as anticipated, we may be
unable to meet our obligations to customers and claimants,
incur higher costs and lose business which may have a material
adverse effect on our business and results of operations. For
other risks associated with our outsourcing of certain functions,
see the Risk Factor, “Our businesses may suffer and we may
incur substantial costs if we are unable to access our systems
and safeguard the security of our data in the event of a disaster,
cyber breach or other information security incident.”
Our ability to execute on capital management
plans and other actions is subject to material
challenges, uncertainties and risks.
The ability to execute on capital management plans is subject to
material challenges, uncertainties and risks. From time to time,
our capital management plans may include the repurchase of
common stock, the paydown of outstanding debt or both. We
may not achieve all of the benefits we expect to derive from
these plans. An equity repurchase plan approved by the Board
of Directors can be subject to execution risks, including, among
others, risks related to market fluctuations, investor interest and
potential legal constraints that could delay execution at an
otherwise optimal time. There can be no assurance that we will
fully execute any such plan. We may take future actions,
including acquisitions, divestitures or restructurings that may
involve additional uncertainties and risks that negatively impact
our business, financial condition, results of operations or liquidity
and could impact our ability to execute our capital management
plans.
Acquisitions and divestitures may not produce
the anticipated benefits and may result in
unintended consequences, which could have
a material adverse impact on our financial
condition and results of operations.
We may not be able to successfully integrate acquired
businesses or achieve the expected synergies as a result of
such acquisitions or divestitures. The process of integrating an
acquired company or business can be complex and costly and
may create unforeseen operating difficulties including ineffective
integration of underwriting, risk management, claims handling,
finance, information technology and actuarial practices.
Difficulties integrating an acquired business may also result in
the acquired business performing differently than we expected
including through the loss of customers or in our failure to
realize anticipated increased premium growth or expense-
related efficiencies. We could be adversely affected by the
acquisition due to unanticipated performance issues and
additional expense, unforeseen liabilities, transaction-related
charges, downgrades by third-party rating agencies, diversion of
management time and resources to integration challenges, loss
of key employees, regulatory requirements, exposure to tax
liabilities, amortization of expenses related to intangibles and
charges for impairment of long-term assets or goodwill. In
addition, we may be adversely impacted by uncertainties related
to reserve estimates of the acquired company and its design
and operation of internal controls over financial reporting. We
may be unable to distribute as much capital to the holding
company as planned due to regulatory restrictions or other
reasons, or we may be required to contribute capital to a
subsidiary, either of which could adversely affect our liquidity.
In addition, in the case of business or asset dispositions, we
may have continued financial exposure to the divested
businesses through reinsurance, indemnification or other
financial arrangements following the transaction. The expected
benefits of acquired or divested businesses may not be realized
and involve additional uncertainties and risks that may
negatively impact our business, financial condition, results of
operations or liquidity.
Difficulty in attracting and retaining talented
and qualified personnel may adversely affect
the execution of our business strategies.
Our ability to attract, develop and retain talented employees,
managers and executives is critical to our success. There is
significant competition within and outside the insurance and
financial services industry for qualified employees, particularly
for individuals with highly specialized knowledge in areas such
as underwriting, actuarial, data and analytics, technology and
digital commerce and investment management. Our continued
ability to compete effectively in our businesses and to expand
into new business areas depends on our ability to attract new
employees and to develop, retain and motivate our existing
employees. The loss of key employees, including executives,
managers and employees with strong technological, analytical
and other specialized skills, may adversely impact the execution
of our business objectives or result in loss of important
institutional knowledge. Our inability to attract and retain key
personnel could have a material adverse effect on our financial
condition or results of operations.
We may not be able to protect our intellectual
property and may be subject to infringement
claims.
We rely on a combination of contractual rights and copyright,
trademark, patent and trade secret laws to establish and protect
our intellectual property. Although we use a broad range of
measures to protect our intellectual property rights, third parties
may infringe or misappropriate our intellectual property. We may
have to litigate to enforce and protect our intellectual property
and to determine its scope, validity or enforceability, which could
be costly, divert significant resources and may not prove
Part I - Item 1A. Risk Factors
25
successful. The inability to secure or enforce the protection of
our intellectual property assets could harm our reputation and
have a material adverse effect on our business and our ability to
compete. We also may be subject to costly litigation in the event
that another party alleges our operations or activities infringe
upon their intellectual property rights, including patent rights, or
violate license usage rights. Any such intellectual property
claims and any resulting litigation could result in significant
expense and liability for damages, and in some circumstances
we could be enjoined from providing certain products or services
to our customers, or utilizing and benefiting from certain patent,
copyrights, trademarks, trade secrets or licenses, or
alternatively could be required to enter into costly licensing
arrangements with third parties, all of which could have a
material adverse effect on our business, results of operations or
financial condition.
Regulatory and Legal
Risks
Regulatory and legislative developments
could have a material adverse impact on our
business, financial condition, results of
operations or liquidity.
We are subject to extensive laws, regulations and executive
orders that are complex, subject to change and often conflict in
their approach or intended outcomes. Compliance with these
laws, regulations and executive orders can increase cost, affect
our strategy, and constrain our ability to adequately price our
products.
In the U.S., regulatory initiatives and legislative developments
may significantly affect our operations and prospects in ways
that we cannot predict. For example, federal and state
legislative efforts on Paid Family and Medical Leave, data
privacy and cyber security, risk-based pricing, and sustainability
practices could have unanticipated consequences for the
Company and its businesses. It is unclear whether and to what
extent Congress, the current Administration or individual states
will continue to pursue these types of proposals, and how those
changes might impact the Company, its business, financial
conditions, results of operations or liquidity.
Our U.S. insurance subsidiaries are regulated by the insurance
departments of the states in which they are domiciled, licensed
or authorized to conduct business. State regulations generally
seek to protect the interests of policyholders rather than an
insurer or the insurer’s stockholders and other investors. U.S.
state laws grant insurance regulatory authorities broad
administrative powers with respect to, among other things,
licensing and authorizing lines of business, approving policy
forms and premium rates, setting statutory capital and reserve
requirements, limiting the types and amounts of certain
investments and restricting underwriting practices. State
insurance departments also set constraints on domestic insurer
transactions with affiliates and dividends and, in many cases,
must approve affiliate transactions and extraordinary dividends
as well as strategic transactions such as acquisitions and
divestitures.
Our international insurance subsidiaries are subject to the laws
and regulations of the relevant jurisdictions in which they
operate, including the requirements of the PRA and the FCA in
the U.K, the Bermuda Monetary Authority in Bermuda and the
Insurance Authority in Hong Kong. Our Lloyd’s Syndicate is also
subject to management and supervision by the Council of
Lloyd’s, which has wide discretionary powers to regulate
members’ underwriting at Lloyd’s, as well as regulations
imposed by overseas regulators where the Lloyd’s Syndicate
conducts business.
Following the U.K.’s withdrawal from the European Union, the
U.K entered into a free trade agreement with the E.U. on
December 30, 2020. Under this agreement, a Trade Partnership
Committee meets on a regular basis to discuss areas of
cooperation. It is possible that deliberations of this Trade
Partnership Committee could affect how U.K. domiciled financial
services and insurance firms are regulated.
In addition, future regulatory initiatives could be adopted at the
federal, state and international level that could affect the
profitability of our businesses. For example, the NAIC and state
insurance regulators periodically reexamine existing laws and
regulations, specifically focusing on modifications to U.S.
statutory accounting principles, interpretations of existing laws
and the development of new laws and regulations. The NAIC
continues to enhance the U.S. system of insurance solvency
regulation, with a particular focus on group supervision, risk-
based capital, accounting and financial reporting, enterprise risk
management and reinsurance which could, among other things,
affect statutory measures of capital adequacy, including risk-
based capital ratios.
Lawmakers and regulators at the federal, state and international
levels are enacting laws and promulgating regulations and
guidance related to climate change, with conflicts from
jurisdiction to jurisdiction possible, which may impose additional
costs on the Company, or expose us to new or additional risks.
For example, regulators could impose new disclosure
requirements regarding underwriting or investment in certain
industry sectors or take other actions such as implementing a
temporary moratorium on cancellation of policies within
catastrophe prone areas. In March of 2024, the U.S. Securities
and Exchange Commission (“SEC”) issued final rules to
enhance and standardize climate-related disclosures for
investors. The rules were challenged by various stakeholders
and have been stayed pending the outcome of that litigation. If
allowed to take effect in their current form, the rules will require
extensive narrative and quantitative reporting on climate change
and decarbonization in SEC filings and could pose potential
compliance and litigation risks to the Company. In addition, the
Federal Insurance Office continues to analyze the potential for
climate change to affect insurance and reinsurance coverage,
which could result in increased data collection and reporting.
Regulators may also impose new requirements affecting our
operations such as disclosure related to greenhouse gas
emissions (GHGe) and other climate-related information,
increasing our operating expenses and litigation risk. The state
of California is adopting mandatory climate reporting for
companies doing business there, and other state regulators may
impose similar obligations and related risks.
There has also been increased regulatory scrutiny of the use of
emerging technologies related to artificial intelligence, including
Part I - Item 1A. Risk Factors
26
machine learning, predictive analytics and other “big data’
techniques. We may be subject to new regulations that could
materially adversely affect our operations or ability to write
business profitably in one or more jurisdictions. The NAIC has
adopted a Model Bulletin on the Use of Artificial Intelligence
Systems by Insurers. This would need to be adopted at the
individual state level in order to become effective. We anticipate
some states will do so in the future. State insurance regulators
may adopt their own guidelines for insurers independent of the
NAIC guidance. In addition, regulators have recently requested
information from insurers on their use of algorithms, artificial
intelligence and machine learning. We cannot predict what, if
any, legislative or regulatory actions may be taken regarding
these or other emerging technologies, but any inquiries and/or
limitations could have a material impact on our business,
business processes, financial condition, and results of
operations.
In addition, changes in laws, regulations or executive orders,
particularly relating to privacy and data security, may materially
impede our ability to execute on business strategies and/or our
ability to be competitive.
Any proposed or future legislation or NAIC initiatives, if adopted,
may be more restrictive on our ability to conduct business than
current regulatory requirements or may result in higher costs or
increased statutory capital and reserve requirements. The
International Association of Insurance Supervisors ("IAIS")
continues to advance the development of insurance group
capital standards for use with Internationally Active Insurance
Groups ("IAIGs"). Working through the NAIC, U.S. state
insurance regulators adopted a group capital calculation for use
in solvency-monitoring activities. The calculation is intended to
provide additional analytical information to the lead state for use
in assessing group risks and capital adequacy to complement
the current holding company analysis in the U.S. In December,
2024, the IAIS approved the final version of the global Insurance
Capital Standard (ICS) as a prescribed capital requirement for
IAIGs. The IAIS also finalized the comparability assessment of
the United States (US)-developed Aggregation Method (AM),
concluding that a US AM provides a basis for implementation of
the ICS to produce comparable results.
Further, a particular regulator or enforcement authority may
interpret a legal, accounting, or reserving issue differently than
we have, exposing us to different or additional regulatory risks.
The application of these regulations and guidelines by insurers
involves interpretations and judgments that may be challenged
by state insurance departments and other regulators. The result
of those potential challenges could require us to increase levels
of regulatory capital and reserves or incur higher operating and/
or tax costs.
In addition, our asset management businesses are also subject
to extensive regulation in the various jurisdictions where they
operate. These laws, regulations and executive orders are
primarily intended to protect investors in the securities markets
or investment advisory clients and generally grant supervisory
authorities broad administrative powers. Compliance with these
laws, regulations and executive orders is costly, time consuming
and personnel intensive, and may have an adverse effect on our
business, financial condition, results of operations or liquidity.
Our insurance business is sensitive to
significant changes in the legal environment
that could adversely affect The Hartford’s
results of operations or financial condition or
harm its businesses.
Like any major insurance company, litigation is a routine part of
The Hartford’s business - both in defending and indemnifying
our insureds and in litigating insurance coverage and benefits
disputes. The Hartford accounts for such activity by establishing
unpaid loss and loss adjustment expense reserves. Significant
changes in the legal environment could cause our ultimate
liabilities to change from our current expectations. Such
changes could be judicial in nature, like trends in the size of jury
awards, developments in the law relating to tort liability or the
liability of insurers, and rulings concerning the scope of
insurance coverage or the amount or types of damages covered
by insurance. Such changes also can be legislative or
regulatory, including changes in federal or state laws and
regulations relating to the liability of insurers or policyholders,
including state laws expanding “bad faith” liability and state
“reviver” statutes, extending statutes of limitations for certain
sexual molestation and sexual abuse claims, could result in
changes in business practices, additional litigation, or
unexpected losses, including increased frequency and severity
of claims. Such changes could also come in the form of
executive orders. Also, the emergence of new targets and new
and expanding theories of liability for claims involving issues like
global climate change, risks from products and substances
alleged to cause damage, physical and mental health crises,
new technologies, legal system abuse, attorney representation
rates, and socioeconomic and political dynamics also could
result in additional litigation exposure and unexpected losses. It
is impossible to forecast such changes reliably, much less to
predict how they might affect our loss reserves or how those
changes might adversely affect our ability to price our insurance
products appropriately. Thus, significant judicial or legislative
developments could adversely affect The Hartford’s business,
financial condition, results of operations or liquidity.
Changes in federal, state or foreign tax laws
could adversely affect our business, financial
condition, results of operations or liquidity.
Changes in federal, state or foreign tax laws and tax rates,
regulations, or related executive orders could have a material
adverse effect on our profitability or financial condition by
increasing the Company's overall tax and compliance burdens.
The Company’s federal and state tax returns reflect certain
items such as tax-exempt bond interest, tax credits, and
insurance reserve deductions. There is an increasing risk that,
in the context of tax reform in the U.S., federal and/or state tax
legislation could modify or eliminate these items, impacting the
Company, its investments, investment strategies, and/or its
policyholders.
Regulatory requirements could delay, deter or
prevent a takeover attempt that stockholders
might consider in their best interests.
Before a person can acquire control of a U.S. insurance
company, prior written approval must be obtained from the
Part I - Item 1A. Risk Factors
27
insurance commissioner of the state where the domestic insurer
is domiciled. Prior to granting approval of an application to
acquire control of a domestic insurer, the state insurance
commissioner will consider such factors as the financial strength
of the applicant, the acquirer's plans for the future operations of
the domestic insurer, and any such additional information as the
insurance commissioner may deem necessary or appropriate for
the protection of policyholders or in the public interest.
Generally, state statutes provide that control over a domestic
insurer is presumed to exist if any person, directly or indirectly,
owns, controls, holds with the power to vote, or holds proxies
representing 10 percent or more of the voting securities of the
domestic insurer or its parent company. Because a person
acquiring 10 percent or more of our common stock would
indirectly control the same percentage of the stock of our U.S.
insurance subsidiaries, the insurance change of control laws of
various U.S. jurisdictions would likely apply to such a
transaction. Other laws or required approvals pertaining to one
or more of our existing subsidiaries, or a future subsidiary, may
contain similar or additional restrictions on the acquisition of
control of the Company. These laws and similar rules applying
to subsidiaries domiciled outside of the United States may
discourage potential acquisition proposals and may delay, deter,
or prevent a change of control, including transactions that our
Board of Directors and some or all of our stockholders might
consider to be desirable.
Changes in accounting principles and
financial reporting requirements could
adversely affect our results of operations or
financial condition.
As an SEC registrant, we are currently required to prepare our
financial statements in accordance with U.S. GAAP, as
promulgated by the Financial Accounting Standards Board.
Accordingly, we are required to adopt new guidance or
interpretations which may have a material effect on our results
of operations or financial condition that is either unexpected or
has a greater impact than expected. For a description of
changes in accounting standards that are currently pending and,
if known, our estimates of their expected impact, see Note 1 -
Basis of Presentation and Significant Accounting Policies of
Notes to the Consolidated Financial Statements.
Part I - Item 1A. Risk Factors
28
Item 1C.
CYBERSECURITY
The Hartford has implemented an information protection
program with established governance routines for assessing
and managing risks. The Hartford employs a ‘defense-in-depth’
strategy that uses multiple security measures to protect the
integrity of the Company's information assets. This ‘defense-in-
depth’ strategy aligns to the National Institute of Standards and
Technology Cybersecurity Framework, where controls are
implemented throughout our environments to achieve the six
categorical objectives of governance, identification, protection,
detection, response and recovery.
Our 'defense in depth' program uses several methods to protect
against intrusion by a bad actor, including such techniques as
reputational filtering, anti-virus scans, intrusion prevention, multi-
factor authentication, and account isolation among others. We
also use numerous approaches to detect ransomware and other
cyber attacks, including, among others, dark web searches,
email sandboxing, endpoint detection, and intrusion detection.
The Hartford continues to monitor and enhance its framework to
respond to evolving cyber threats and regulations for data
privacy, including the European Union General Data Protection
Regulation, the California Consumer Privacy Act and the New
York Department of Financial Services Cybersecurity
Regulation.
We regularly assess our programs and control environment,
leveraging externally conducted cyber tests and evaluations
along with internally managed cyber risk assessments and
testing. Additionally, the Company collaborates with industry
associations, government authorities and external advisors to
monitor the threat environment and to inform our security
practices.
In connection with regular assessments of third-party service
providers, our information protection team performs an
assessment of each vendor’s information security practices and
protocols, including its readiness to protect against and respond
to cybersecurity breaches. Third-party service providers are
categorized in tiers depending on the significance of their
operations to the Company’s business processes and risk
assessments for vendors in the highest tier are completed
periodically. With respect to cyber, we have procedures to verify
each service provider’s information security controls, and each
vendor completes a cyber questionnaire that also addresses
their resiliency in the event of an intrusion to their systems. We
proactively communicate with suppliers to understand mitigation
steps taken when major cyber exposures are identified.
We are executing on a multi-year roadmap to, among other
things, further improve our ability to defend against, respond to,
and recover from ransomware and other cyber events; enhance
application cybersecurity capabilities, including defenses against
fraud attacks; and to ensure security capabilities are built into
new cloud-based platforms that we adopt. A number of states
where our insurance companies are domiciled, including
Connecticut, have adopted the NAIC Insurance Data Security
Model Law. Our legal team monitors the status of new
cybersecurity regulations, including notification requirements.
To the best knowledge of Management, no risks from
cybersecurity threats have materially affected or are reasonably
likely to materially affect the Company, including its business
strategy, results of operations, or financial condition. For further
discussion of the Company's risks related to cybersecurity, see
Part I, Item 1A, — Risk Factors for the risk factor "Our
businesses may suffer and we may incur substantial costs if we
are unable to access our systems and safeguard the security of
our data in the event of a disaster, cyber breach or other
information security incident."
From a governance perspective, senior members of our
Enterprise Risk Management, Information Protection and
Internal Audit functions provide detailed, regular reports on
cybersecurity matters to the Board of Directors, primarily
through the Audit Committee, which oversees controls for the
Company's major risk exposures and has principal responsibility
for oversight of cybersecurity risk, and the Finance, Investment
and Risk Management Committee ("FIRMCo"), which oversees
business risk related to cyber insurance products. The topics
covered by these updates include the Company's activities,
policies and procedures to prevent, detect and respond to
cybersecurity incidents, as well as lessons learned from
cybersecurity incidents and internal and external testing of our
cyber defenses.
The Audit Committee is provided with updates on technology
and cybersecurity risks at least four times annually, including
annual reviews of the Company's cybersecurity program and
technology risks and controls, and bi-annual updates on
operational risks (in spring and fall). Given its importance, the
full Board of Directors is invited to attend the annual
cybersecurity program update and time is reserved at each
Audit Committee meeting for cybersecurity technology matters
that warrant discussion between the standing sessions. In
addition, Enterprise Risk Management provides FIRMCo an
assessment of cyber insurance risk once per year. The Audit
Committee, FIRMCo and the full Board of Directors are apprised
of developments in the external environment and business
strategies that present additional potential cyber risk exposure
to the Company on an as-needed basis. As a result,
cybersecurity and cyber risk are typically discussed more
frequently than the annual minimum requirements.
The Company has established an Executive Privacy & Security
Council ("EPSC") that meets semi-annually. The EPSC consists
of a cross-functional senior leaders, including the Chief
Information Officer ("CIO"), the Chief Information Security
Officer ("CISO"), the Chief Risk Officer ("CRO"), the Chief
Privacy Officer ("CPO") and General Counsel, among others.
The EPSC receives a monthly written executive briefing on
topics, and with metrics related to cybersecurity, including
incident prevention, detection, mitigation and remediation.
Quarterly, the Information Technology ("IT') Risk Council, made
up of senior IT leaders, is also provided with an update of
cybersecurity risks and preparedness. Various other meetings
are held on cybersecurity topics periodically, including monthly
business operating reviews, and meetings of the Enterprise Risk
and Capital Committee ("ERCC") and executive leadership
team.
Part I - Item 1C. Cybersecurity
29
Both the CIO and the CISO have expertise assessing and
managing cybersecurity risks. The CIO has served in her
current role since 2019 and served in similar technology
leadership roles before her current role. She has nineteen years
of executive leadership experience in the financial services
industry and twenty-nine years of overall technology experience,
during which time she has led large scale business
transformation, delivered innovative technology strategies and
has overseen and modernized complex technology portfolios.
The CISO has held several senior-level information technology
roles in his twenty-six-year tenure with the Company and has
served in his current role since 2021. In his various roles, he has
been responsible for providing senior leadership in the areas of
information security, IT governance risk & compliance, business
continuity, and disaster recovery.
Part I - Item 1C. Cybersecurity
30
Item 5.
MARKET FOR THE
HARTFORD'S COMMON
EQUITY, RELATED
STOCKHOLDER MATTERS
AND ISSUER PURCHASES
OF EQUITY SECURITIES
The Hartford’s common stock is traded on the New York Stock
Exchange (“NYSE”) under the trading symbol “HIG”. As of
February 20, 2025, the Company had approximately 7,485
registered holders of record of the Company's common stock. A
substantially greater number of holders of our common stock
are “street name” holders or beneficial holders, whose shares
are held of record by banks, brokers and other financial
institutions.
The Hartford's cash dividends paid on common stock and
expected payment of future cash dividends are discussed in the
Summary of Capital Resources and Liquidity and Liquidity
Requirements and Sources of Capital - Dividends sections of
Part II, Item 7, MD&A — Capital Resources and Liquidity.
For information related to securities authorized for issuance
under equity compensation plans, see Part III, Item 12, Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
Repurchases of common stock by the Company during the
quarter ended December 31, 2024 are set forth below. During
the period from January 1, 2025 through February 20, 2025, the
Company repurchased 2.2 million shares for $248.
Repurchases of Common Stock by the Issuer for the Three Months Ended December 31, 2024
Period
Total Number
of Shares
Purchased [1]
Average Price
Paid Per
Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Approximate Dollar Value
of Shares that May Yet
Be
Purchased Under
the Plans or Programs [2]
(in millions)
October 1, 2024 - October 31, 2024
1,507,644 $
117.71
1,499,511 $
3,373
November 1, 2024 - November 30, 2024
779,493 $
117.75
758,991 $
3,285
December 1, 2024 - December 31, 2024
1,176,909 $
117.26
1,176,909 $
3,148
Total
3,464,046 $
117.57
3,435,411
[1]Includes 28,635 shares in net settlement of employee tax withholding obligations related to equity awards under the Company's incentive stock plans, which were
not part of publicly announced share repurchase authorizations. The Company paid an average price per share of $113.44 in employee tax withholding
obligations related to net share settlements in the three months ended December 31, 2024.
[2]On July 28, 2022, the Board of Directors approved a share repurchase authorization for up to $3.0 billion effective from August 1, 2022 to December 31, 2024. In
addition to the authorization covering the period from August 1, 2022 to December 31, 2024, on July 25, 2024, the Board of Directors approved a share
repurchase authorization for up to $3.3 billion effective from August 1, 2024 to December 31, 2026. The timing of any repurchases is dependent on several
factors, including the market price of the Company's securities, the Company's capital position, consideration of the effect of any repurchases on the Company's
financial strength or credit ratings, the Company's blackout periods, and other considerations.
Part II - Item 5. Market for the Hartford's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
31
|TOTAL RETURN TO STOCKHOLDERS
The following table presents The Hartford’s five-year total return on its common stock including reinvestment of dividends in comparison to
the S&P 500 and the S&P Insurance Composite Index.
Cumulative Five-Year Total Return
Base
Period
Company/Index
2019
2020
2021
2022
2023
2024
The Hartford Insurance Group, Inc.
$
100 $
83.08 $
119.85 $
134.61 $
146.09 $
202.42
S&P 500 Index
$
100 $
118.40 $
152.39 $
124.79 $
157.59 $
197.02
S&P Insurance Composite Index
$
100 $
99.56 $
131.54 $
144.86 $
158.28 $
200.73
The Hartford Insurance Group, Inc.
S&P 500 Index
S&P Insurance Composite Index
Dec 2019
Dec 2020
Dec 2021
Dec 2022
Dec 2023
Dec 2024
$0
$50
$100
$150
$200
$250
Part II - Item 5. Market for the Hartford's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
32
Item 7.
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF
OPERATIONS
(Dollar amounts in millions, except for per share data, unless
otherwise stated)
The Hartford provides projections and other forward-looking
information in the following discussions, which contain many
forward-looking statements, particularly relating to the
Company’s future financial performance. These forward-looking
statements are estimates based on information currently
available to the Company, are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995
and are subject to the cautionary statements set forth on pages
4 and 5 of this Annual Report. Actual results are likely to differ,
and in the past have differed, materially from those forecast by
the Company, depending on the outcome of various factors,
including, but not limited to, those set forth in the following
discussion and in Part I, Item 1A, Risk Factors, and those
identified from time to time in our other filings with the Securities
and Exchange Commission. The Hartford undertakes no
obligation to publicly update any forward-looking statements,
whether as a result of new information, future developments or
otherwise.
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.
For discussion of the earliest of the three years included in the
financial statements of the current filing, refer to Part II, Item 7,
MD&A in The Hartford’s 2023 Annual Report.
Index
Description
Page
Key Performance Measures and Ratios
33
The Hartford's Operations
38
Financial Highlights
40
Consolidated Results of Operations
41
Investment Results
44
Critical Accounting Estimates
46
Business Insurance
66
Personal Insurance
71
Property & Casualty Other Operations
76
Employee Benefits
77
Hartford Funds
79
Corporate
81
Enterprise Risk Management
82
Capital Resources and Liquidity
102
Impact of New Accounting Standards
109
KEY PERFORMANCE
MEASURES AND RATIOS
The Company considers the measures and ratios in the
following discussion to be key performance indicators for its
businesses. Management believes that these ratios and
measures are useful in understanding the underlying trends in
The Hartford’s businesses. However, these key performance
indicators should only be used in conjunction with, and not in
lieu of, the results presented in the segment discussions that
follow in this MD&A. These ratios and measures may not be
comparable to other performance measures used by the
Company’s competitors.
Definitions of Non-GAAP and Other
Measures and Ratios
Assets Under Management (“AUM”)- Include mutual
fund and ETF assets. AUM is a measure used by the
Company's Hartford Funds segment because a significant
portion of the segment’s revenues and expenses are based
upon asset values. These revenues and expenses increase or
decrease with a rise or fall in AUM whether caused by changes
in the market or through net flows.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
33
Book Value per Diluted Share excluding
accumulated other comprehensive income
("AOCI")- This is a non-GAAP per share measure that is
calculated by dividing (a) common stockholders' equity,
excluding AOCI, after tax, by (b) common shares outstanding
and dilutive potential common shares. The Company provides
this measure to enable investors to analyze the amount of the
Company's net worth that is primarily attributable to the
Company's business operations. The Company believes that
excluding AOCI from the numerator is useful to investors
because it eliminates the effect of items that can fluctuate
significantly from period to period, primarily based on changes in
interest rates. Book value per diluted share is the most directly
comparable U.S. GAAP measure.
Combined Ratio- The sum of the loss and loss adjustment
expense ratio, the expense ratio and the policyholder dividend
ratio. This ratio is a relative measurement that describes the
related cost of losses and expenses for every $100 of earned
premiums. A combined ratio below 100 demonstrates
underwriting profit; a combined ratio above 100 demonstrates
underwriting losses.
Core Earnings- The Hartford uses the non-GAAP measure
core earnings as an important measure of the Company’s
operating performance. The Hartford believes that core earnings
provides investors with a valuable measure of the performance
of the Company’s ongoing businesses because it reveals trends
in our insurance and financial services businesses that may be
obscured by including the net effect of certain items. Therefore,
the following items are excluded from core earnings:
•
Certain realized gains and losses - Generally realized gains
and losses are primarily driven by investment decisions and
external economic developments, the nature and timing of
which are unrelated to the insurance and underwriting
aspects of our business. Accordingly, core earnings
excludes the effect of all realized gains and losses that tend
to be highly variable from period to period based on capital
market conditions. The Hartford believes, however, that
some realized gains and losses are integrally related to our
insurance operations, so core earnings includes net
realized gains and losses such as net periodic settlements
on credit derivatives. These net realized gains and losses
are directly related to an offsetting item included in the
income statement such as net investment income.
•
Restructuring and other costs - Costs incurred as part of a
restructuring plan are not a recurring operating expense of
the business.
•
Loss on extinguishment of debt - Largely consisting of
make-whole payments or tender premiums upon paying
debt off before maturity, these losses are not a recurring
operating expense of the business.
•
Gains and losses on reinsurance transactions - Gains or
losses on reinsurance, such as those entered into upon
sale of a business or to reinsure loss reserves, are not a
recurring operating expense of the business.
•
Integration and other non-recurring M&A costs - These
costs, including transaction costs incurred in connection
with an acquired business, are incurred over a short period
of time and do not represent an ongoing operating expense
of the business.
•
Change in loss reserves upon acquisition of a business -
These changes in loss reserves are excluded from core
earnings because such changes could obscure the ability to
compare results in periods after the acquisition to results of
periods prior to the acquisition.
•
Deferred gain resulting from retroactive reinsurance and
subsequent changes in the deferred gain - Retroactive
reinsurance agreements economically transfer risk to the
reinsurers and excluding the deferred gain on retroactive
reinsurance and related amortization of the deferred gain
from core earnings provides greater insight into the
economics of the business.
•
Change in valuation allowance on deferred taxes related to
non-core components of before tax income - These
changes in valuation allowances are excluded from core
earnings because they relate to non-core components of
before tax income, such as tax attributes like capital loss
carryforwards.
•
Results of discontinued operations - These results are
excluded from core earnings for businesses sold or held for
sale because such results could obscure the ability to
compare period over period results for our ongoing
businesses.
In addition to the above components of net income available to
common stockholders that are excluded from core earnings,
preferred stock dividends declared, which are excluded from net
income, are included in the determination of core earnings.
Preferred stock dividends are a cost of financing more akin to
interest expense on debt and are expected to be a recurring
expense as long as the preferred stock is outstanding.
Net income (loss) and net income (loss) available to common
stockholders are the most directly comparable U.S. GAAP
measures to core earnings. Core earnings should not be
considered as a substitute for net income (loss) or net income
(loss) available to common stockholders and does not reflect the
overall profitability of the Company's business. Therefore, The
Hartford believes that it is useful for investors to evaluate net
income (loss), net income (loss) available to common
stockholders, and core earnings when reviewing the Company's
performance.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
34
Reconciliation of Net Income to Core Earnings
For the years ended December 31,
2024
2023
2022
Net income
$
3,111 $
2,504 $
1,819
Preferred stock dividends
21
21
21
Net income available to common stockholders
3,090
2,483
1,798
Adjustments to reconcile net income available to common stockholders to core
earnings:
Net realized losses excluded from core earnings, before tax
56
152
626
Restructuring and other costs, before tax
2
6
13
Loss on extinguishment of debt, before tax
—
—
9
Integration and other non-recurring M&A costs, before tax
8
8
21
Change in deferred gain on retroactive reinsurance, before tax
(83)
194
229
Income tax expense (benefit) [1]
3
(76)
(200)
Core earnings
$
3,076 $
2,767 $
2,496
[1] Primarily represents the federal income tax expense (benefit) related to before tax items not included in core earnings.
Core Earnings Margin- The Hartford uses the non-GAAP
measure core earnings margin to evaluate, and believes it is an
important measure of, the Employee Benefits segment's
operating performance. Core earnings margin is calculated by
dividing core earnings by revenues, excluding buyouts and
realized gains (losses). Net income margin, calculated by
dividing net income by revenues, is the most directly
comparable U.S. GAAP measure. The Company believes that
core earnings margin provides investors with a valuable
measure of the performance of Employee Benefits because it
reveals trends in the business that may be obscured by the
effect of buyouts and realized gains (losses) as well as other
items excluded in the calculation of core earnings. Core
earnings margin should not be considered as a substitute for net
income margin and does not reflect the overall profitability of
Employee Benefits. Therefore, the Company believes it is
important for investors to evaluate both core earnings margin
and net income margin when reviewing performance. A
reconciliation of net income margin to core earnings margin is
set forth in the Results of Operations section within MD&A -
Employee Benefits.
Current Accident Year Catastrophe Ratio- A
component of the loss and loss adjustment expense ratio,
represents the ratio of catastrophe losses incurred in the current
accident year ("CAY") (net of reinsurance) to earned premiums.
For U.S. events, a catastrophe is an event that causes $25 or
more in industry insured property losses and affects a significant
number of property and casualty policyholders and insurers, as
defined by the Property Claim Services office of Verisk. For
international events, the Company's approach is similar,
informed, in part, by how Lloyd's of London defines major
losses. Lloyd's of London is an insurance market-place
operating worldwide ("Lloyd's"). Lloyd's does not underwrite
risks. The Company accepts risks as the sole member of Lloyd's
Syndicate 1221 ("Lloyd's Syndicate"). The current accident year
catastrophe ratio includes the effect of catastrophe losses, but
does not include the effect of reinstatement premiums.
Expense Ratio- For Business Insurance and Personal
Insurance is the ratio of underwriting expenses less fee income,
to earned premiums. Underwriting expenses include the
amortization of deferred policy acquisition costs ("DAC"),
amortization of other intangible assets and insurance operating
costs and other expenses, including certain centralized services
costs and bad debt expense. DAC includes commissions, taxes,
licenses and fees and other incremental direct underwriting
expenses and are amortized over the policy term.
The expense ratio for Employee Benefits is expressed as the
ratio of insurance operating costs and other expenses including
amortization of intangibles and amortization of DAC, to
premiums and other considerations, excluding buyout
premiums.
The expense ratio for Business Insurance, Personal Insurance
and Employee Benefits does not include integration and other
transaction costs associated with an acquired business.
Fee Income- Is largely driven from amounts earned as a
result of contractually defined percentages of AUM in our
Hartford Funds business. These fees are generally earned on a
daily basis. Therefore, this fee income increases or decreases
with the rise or fall in AUM whether caused by changes in the
market or through net flows.
Gross New Business Premium- Represents the
amount of premiums charged, before ceded reinsurance, for
policies issued to customers who were not insured with the
Company in the previous policy term. Gross new business
premium plus gross renewal written premium less ceded
reinsurance equals total written premium.
Loss and Loss Adjustment Expense Ratio- A
measure of the cost of claims incurred in the calendar year
divided by earned premium and includes losses and loss
adjustment expenses incurred for both the current and prior
accident years. Among other factors, the loss and loss
adjustment expense ratio needed for the Company to achieve
its targeted return on equity ("ROE") fluctuates from year to year
based on changes in the expected investment yield over the
claim settlement period, the timing of expected claim
settlements and the targeted returns set by management based
on the competitive environment.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
35
The loss and loss adjustment expense ratio is affected by claim
frequency and claim severity, particularly for shorter-tail property
lines of business, where the emergence of claim frequency and
severity is credible and likely indicative of ultimate losses. Claim
frequency represents the percentage change in the average
number of reported claims per unit of exposure in the current
accident year compared to that of the previous accident year.
Claim severity represents the percentage change in the
estimated average cost per claim in the current accident year
compared to that of the previous accident year. As one of the
factors used to determine pricing, the Company’s practice is to
first make an overall assumption about claim frequency and
severity for a given line of business and then, as part of the rate-
making process, adjust the assumption as appropriate for the
particular state, product or coverage.
Underlying Loss and Loss Adjustment Expense
Ratio- This non-GAAP financial measure is the cost of non-
catastrophe loss and loss adjustment expenses incurred in the
current accident year divided by earned premiums. The loss and
loss adjustment expense ratio is the most directly comparable
GAAP measure. Management believes that the underlying loss
and loss adjustment expense ratio is a performance measure
that is useful to investors as it removes the impact of volatile
and unpredictable catastrophe losses and prior accident year
development ("PYD"). A reconciliation of the loss and loss
adjustment expense ratio to the underlying loss and loss
adjustment expense ratio is set forth in the Reportable Segment
and Corporate Operating Summaries section within MD&A.
Loss Ratio, excluding Buyouts- Utilized for the
Employee Benefits segment and is expressed as a ratio of
benefits, losses and loss adjustment expenses, excluding those
related to buyout premiums, to premiums and other
considerations, excluding buyout premiums. Since Employee
Benefits occasionally buys a block of claims for a stated
premium amount, the Company excludes this buyout from the
loss ratio used for evaluating the profitability of the business as
buyouts may distort the loss ratio. Buyout premiums represent
takeover of open claim liabilities and other non-recurring
premium amounts.
Net investment income excluding limited
partnerships and other alternative investments-
This non-GAAP measure is the amount of net investment
income on a consolidated level earned from invested assets,
excluding the net investment income related to limited
partnerships and other alternative investments. The Company
believes that net investment income excluding limited
partnerships and other alternative instruments, provides
investors with an important measure of the trend in investment
earnings because it excludes the impact of the volatility in
returns related to limited partnerships and other alternative
instruments. Net investment income is the most directly
comparable GAAP measure. A reconciliation of net investment
income to net investment income excluding limited partnerships
and other alternative investments - is set forth in the Investment
Results section within MD&A.
Mutual Fund and Exchange-Traded Fund Assets-
Are owned by the shareowners of those products and not by the
Company and, therefore, are not reflected in the Company’s
Consolidated Financial Statements, except in instances where
the Company seeds new investment products.
Mutual fund and ETF assets are a measure used by the
Company primarily because a significant portion of the
Company’s Hartford Funds segment revenues and expenses
are based upon asset values. These revenues and expenses
increase or decrease with a rise or fall in AUM whether caused
by changes in the market or through net flows.
Net New Business Premium- Represents the amount of
premiums charged, after ceded reinsurance, for policies issued
to customers who were not insured with the Company in the
previous policy term. Net new business premium plus renewal
written premium equals total written premium.
Policy Count Retention- Represents the number of
renewal policies issued during the current year period divided by
the new and renewal policies issued in the prior period. Policy
count retention is affected by a number of factors, including the
percentage of renewal policy quotes accepted and decisions by
the Company to non-renew policies because of specific policy
underwriting concerns or because of a decision to reduce
premium writings in certain classes of business or states. Policy
count retention is also affected by advertising and rate actions
taken by us and competitors.
Effective Policy Count Retention- Represents the
number of policies expected to renew in the current year period,
based on contract effective dates, divided by the new and
renewal policies effective in the prior period. Effective policy
count retention is affected by a number of factors, including the
percentage of renewal policy quotes accepted and decisions by
the Company to non-renew policies because of specific policy
underwriting concerns or because of a decision to reduce
premium writings in certain classes of business or states.
Effective policy count retention is also affected by advertising
and rate actions taken by us and competitors, as well as the
effect of subsequent cancellations and non-renewals by
customers. Effective policy count retention statistics are subject
to change from period to period based on the effect of
differences between actual and expected policy cancellations
throughout the policy period.
Policies in-force- Represents the number of policies with
coverage in effect as of the end of the period. The number of
policies in-force is a growth measure used for Personal
Insurance, small business, and middle market lines within
middle & large business, and is affected by both new business
growth and policy count retention.
Policyholder Dividend Ratio- The ratio of policyholder
dividends to earned premium.
Premium Retention- For middle & large business,
represents the ratio of prior period premiums that were
successfully renewed divided by premiums associated with
policies available for renewal in the current period. Premium
retention excludes premium amounts from annual audits,
renewal written price increases and changes in exposure,
including amount of insurance. Premium retention statistics are
subject to change from period to period based on a number of
factors, including the effect of subsequent cancellations and
non-renewals.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
36
Prior Accident Year Loss and Loss Adjustment
Expense Ratio- Represents the increase (decrease) in the
estimated cost of settling catastrophe and non-catastrophe
claims incurred in prior accident years as recorded in the current
calendar year divided by earned premiums.
Reinstatement Premiums- Represents additional ceded
premium paid for the reinstatement of the amount of reinsurance
coverage that was reduced as a result of the Company ceding
losses to reinsurers.
Renewal Earned Price Increase (Decrease)-
Written premiums are earned over the policy term, which is six
months for certain personal automobile business and
twelve months for substantially all of the remainder of the
Company’s P&C business. Since the Company earns premiums
over the six to twelve month term of the policies, renewal earned
price increases (decreases) lag renewal written price increases
(decreases) by six to twelve months.
Renewal Written Price Increase (Decrease)- For
Business Insurance, represents the combined effect of rate
changes, and individual risk pricing decisions per unit of
exposure on policies that renewed and includes amount of
insurance. For Personal Insurance, renewal written price
increases represent the total change in premium per policy
since the prior year on those policies that renewed and includes
the combined effect of rate changes, amount of insurance and
other changes in exposure. For Personal Insurance, other
changes in exposure include, but are not limited to, the effect of
changes in number of drivers, vehicles and incidents, as well as
changes in customer policy elections, such as deductibles and
limits. The rate component represents the change in rate
impacting renewal policies as previously filed with and approved
by state regulators during the period. Amount of insurance
represents the change in the value of the rating base, such as
model year/vehicle symbol for automobiles, building
replacement costs for property and wage inflation for workers’
compensation. A number of factors affect renewal written price
increases (decreases) including expected loss costs as
projected by the Company’s pricing actuaries, rate filings
approved by state regulators, risk selection decisions made by
the Company’s underwriters and marketplace competition.
Renewal written price changes reflect the property and casualty
insurance market cycle. Prices tend to increase for a particular
line of business when insurance carriers have incurred
significant losses in that line of business in the recent past or the
industry as a whole commits less of its capital to writing
exposures in that line of business. Prices tend to decrease when
recent loss experience has been favorable or when competition
among insurance carriers increases. Renewal written price
statistics are subject to change from period to period, based on
a number of factors, including changes in actuarial estimates
and the effect of subsequent cancellations and non-renewals,
and modifications made to better reflect ultimate pricing
achieved.
Return on Assets ("ROA"), Core Earnings-The
Company uses this non-GAAP financial measure to evaluate,
and believes is an important measure of, the Hartford Funds
segment’s operating performance. ROA, core earnings is
calculated by dividing annualized core earnings by a daily
average AUM. ROA is the most directly comparable U.S. GAAP
measure. The Company believes that ROA, core earnings,
provides investors with a valuable measure of the performance
of the Hartford Funds segment because it reveals trends in our
business that may be obscured by the effect of items excluded
in the calculation of core earnings. ROA, core earnings, should
not be considered as a substitute for ROA and does not reflect
the overall profitability of our Hartford Funds business.
Therefore, the Company believes it is important for investors to
evaluate both ROA, and ROA, core earnings when reviewing
the Hartford Funds segment performance. A reconciliation of
ROA to ROA, core earnings is set forth in the Results of
Operations section within MD&A - Hartford Funds.
Underlying Combined Ratio-This non-GAAP financial
measure of underwriting results represents the combined ratio
before catastrophes, prior accident year development and
current accident year change in loss reserves upon acquisition
of a business. Combined ratio is the most directly comparable
GAAP measure. The Company believes this ratio is an
important measure of the trend in profitability since it removes
the impact of volatile and unpredictable catastrophe losses and
prior accident year loss and loss adjustment expense reserve
development. The changes to loss reserves upon acquisition of
a business are excluded from underlying combined ratio
because such changes could obscure the ability to compare
results in periods after the acquisition to results of periods prior
to the acquisition as such trends are valuable to our investors'
ability to assess the Company's financial performance. A
reconciliation of combined ratio to underlying combined ratio is
set forth in the Results of Operations section within MD&A -
Business Insurance and Personal Insurance.
Underwriting Gain (Loss)- The Hartford's management
evaluates profitability of the Business and Personal Insurance
segments primarily on the basis of underwriting gain or loss.
Underwriting gain (loss) is a before tax non-GAAP measure that
represents earned premiums less incurred losses, loss
adjustment expenses and underwriting expenses. Net income
(loss) is the most directly comparable GAAP measure.
Underwriting gain (loss) is influenced significantly by earned
premium growth and the adequacy of The Hartford's pricing.
Underwriting profitability over time is also greatly influenced by
The Hartford's underwriting discipline, as management strives to
manage exposure to loss through favorable risk selection and
diversification, effective management of claims, use of
reinsurance and its ability to manage its expenses. The Hartford
believes that 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.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
37
Reconciliation of Net Income to Underwriting Gain (Loss)
For the years ended December 31,
2024
2023
2022
Business Insurance
Net income
$
2,349 $
2,085 $
1,624
Adjustments to reconcile net income to underwriting gain:
Net investment income
(1,714)
(1,532)
(1,415)
Net realized losses
73
156
385
Other expense
5
1
12
Income tax expense
576
502
426
Underwriting gain
$
1,289 $
1,212 $
1,032
Personal Insurance
Net income (loss)
$
208 $
(39) $
91
Adjustments to reconcile net income (loss) to underwriting gain (loss):
Net investment income
(222)
(171)
(140)
Net realized losses
14
16
35
Net servicing and other income
(18)
(21)
(17)
Income tax expense (benefit)
49
(15)
22
Underwriting gain (loss)
$
31 $
(230) $
(9)
P&C Other Ops
Net loss
$
(127) $
(130) $
(190)
Adjustments to reconcile net loss to underwriting loss:
Net investment income
(74)
(69)
(63)
Net realized losses
4
7
16
Other expense
4
—
—
Income tax benefit
(35)
(36)
(52)
Underwriting loss
$
(228) $
(228) $
(289)
Written and Earned Premiums- Written premium
represents the amount of premiums charged for policies issued,
net of reinsurance, during a fiscal period. Premiums are
considered earned and are included in the financial results on a
pro rata basis over the policy period. Management believes that
written premium is a performance measure that is useful to
investors as it reflects current trends in the Company’s sale of
property and casualty insurance products. Written and earned
premium are recorded net of ceded reinsurance premium.
Traditional life and disability insurance type products, such as
those sold by Employee Benefits, collect premiums from
policyholders in exchange for financial protection for the
policyholder from a specified insurable loss, such as death or
disability. These premiums, together with net investment income
earned, are used to pay the contractual obligations under these
insurance contracts.
Two major factors, new sales and persistency, impact premium
growth. Sales can increase or decrease in a given year based
on a number of factors including, but not limited to, customer
demand for the Company’s product offerings, pricing
competition, distribution channels and the Company’s reputation
and ratings. Persistency refers to the percentage of premium
remaining in-force from year-to-year.
THE HARTFORD'S
OPERATIONS
The Hartford conducts business principally in five reportable
segments including Business Insurance, Personal Insurance,
Property & Casualty Other Operations, Employee Benefits and
Hartford Funds, as well as a Corporate category. The Company
includes in the Corporate category capital raising activities
(including equity financing, debt financing and related interest
expense), purchase accounting adjustments related to goodwill,
reserves for run-off structured settlement and terminal funding
agreement liabilities, restructuring costs, transaction expenses
incurred in connection with an acquisition, certain M&A costs,
and other expenses not allocated to the reportable segments.
Corporate also includes investment management fees and
expenses related to managing third-party assets.
The Company derives its revenues principally from:
(a) premiums earned for insurance coverage provided to
insureds; (b) management fees on mutual fund and ETF assets;
(c) net investment income; (d) fees earned for services provided
to third parties; and (e) net realized gains and losses. Premiums
charged for insurance coverage are earned principally on a pro
rata basis over the terms of the related policies in-force.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
38
The profitability of the Company's property and casualty
insurance businesses over time is greatly influenced by the
Company’s underwriting discipline, which seeks to manage
exposure to loss through favorable risk selection and
diversification, its management of claims, its use of reinsurance,
the size of its in force block, making reliable estimates of actual
mortality and morbidity, and its ability to manage its expense
ratio which it accomplishes through economies of scale and its
management of acquisition costs and other insurance operating
costs. Pricing adequacy depends on a number of factors,
including the ability to obtain regulatory approval for rate
changes, proper evaluation of underwriting risks, the ability to
project future loss cost frequency and severity based on
historical loss experience adjusted for known trends, the
Company’s response to rate actions taken by competitors, its
expense levels and expectations about regulatory and legal
developments. The Company seeks to price its insurance
policies such that insurance premiums and future net investment
income earned on premiums received will cover insurance
operating costs and the ultimate cost of paying claims reported
on the policies and provide for a profit margin. For many of its
insurance products, the Company is required to obtain approval
for its premium rates from state insurance departments and the
Lloyd's Syndicate's ability to write business is subject to Lloyd's
approval for its premium capacity each year. Most of Personal
Insurance written premium is associated with our exclusive
licensing agreement with AARP, which is effective through
December 31, 2032. This agreement provides an important
competitive advantage given the size of the 50 plus population
and the strength of the AARP brand.
Similar to property and casualty, profitability of the Employee
Benefits business depends, in large part, on the ability to
evaluate and price risks appropriately and make reliable
estimates of mortality, morbidity, disability and longevity. To
manage the pricing risk, Employee Benefits generally offers
term insurance policies, allowing for the adjustment of rates or
policy terms in order to minimize the adverse effect of market
trends, loss costs, declining interest rates and other factors.
However, as policies are typically sold with rate guarantees an
average of three years, pricing for the Company’s products
could prove to be inadequate if loss and expense trends emerge
adversely during the rate guarantee period or if investment
returns are lower than expected at the time the products were
sold. For some of its products, the Company is required to
obtain approval for its premium rates from state insurance
departments. New and renewal business for employee benefits
business, particularly for LTD, are priced using an assumption
about expected investment yields over time. While the Company
employs asset-liability duration matching strategies to mitigate
risk and may use interest-rate sensitive derivatives to hedge its
exposure in the Employee Benefits investment portfolio, cash
flow patterns related to the payment of benefits and claims are
uncertain and actual investment yields could differ significantly
from expected investment yields, affecting profitability of the
business. In addition to appropriately evaluating and pricing
risks, the profitability of the Employee Benefits business
depends on other factors, including the Company’s response to
pricing decisions and other actions taken by competitors, its
ability to offer voluntary products and self-service capabilities,
the persistency of its sold business and its ability to manage its
expenses which it seeks to achieve through economies of scale
and operating efficiencies.
The financial results of the Company’s mutual fund and ETF
businesses depend largely on the amount of AUM and the level
of fees charged based, in part, on asset share class and fund
type. Changes in AUM are driven by the two main factors of net
flows and the market return of the funds, which are heavily
influenced by the return realized in the equity and bond markets.
Net flows are comprised of new sales less redemptions by
mutual fund and ETF shareowners. Financial results are highly
correlated to the growth in AUM since these funds generally
earn fee income on a daily basis.
The investment return, or yield, on invested assets is an
important element of the Company’s earnings since insurance
products are priced with the assumption that premiums received
can be invested for a period of time before benefits, losses and
loss adjustment expenses are paid. Due to the need to maintain
sufficient liquidity to satisfy claim obligations, the majority of the
Company’s invested assets have been held in available-for-sale
("AFS") securities, including, among other asset classes,
corporate bonds, municipal bonds, government debt, short-term
debt, mortgage-backed securities, asset-backed securities
("ABS") and collateralized loan obligations ("CLOs"). The
Company also invests in commercial mortgage loans as well as
limited partnerships and other alternative investments, which are
private investments that are less liquid, but have the potential to
generate higher returns. The primary investment objective for
the Company is to maximize economic value, consistent with
acceptable risk parameters, including the management of credit
risk and interest rate sensitivity of invested assets, while
generating sufficient net of tax income to meet policyholder and
corporate obligations. Investment strategies are developed
based on a variety of factors including business needs,
regulatory requirements and tax considerations.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
39
2024 FINANCIAL HIGHLIGHTS
Net Income Available to Common
Stockholders
Net Income Available to Common
Stockholders per Diluted Share
Book Value per Diluted Share
$2,483
$3,090
2023
2024
$7.97
$10.35
2023
2024
$49.43
$55.09
12/31/2023
12/31/2024
Ý
Increased $607 or 24%
Ý
Increased $2.38 or 30%
Ý
Increased $5.66 or 11%
+
The effect of higher earned premiums in
P&C and Employee Benefits
+
Increase in net income available to common
stockholders
+
Net income in excess of common
stockholder dividends
+
Higher net investment income
+
Reduction in outstanding shares due to
share repurchases
-
Dilutive effect of share repurchases
+
Lower underlying loss and LAE ratio in
Personal Insurance
+
Favorable P&C prior accident year reserve
development in the 2024 period
+
Lower net realized losses
+
Lower group life loss ratio
-
Higher catastrophe losses in P&C
-
Higher expense ratio in P&C and Employee
Benefits
-
Higher group disability and supplemental
health loss ratios
Investment Yield, After Tax
Property & Casualty Combined
Ratio
Employee Benefits Net Income
Margin
3.3%
3.5%
2023
2024
94.9
93.2
2023
2024
7.7%
7.9%
2023
2024
Ý
Increased 20 bps
Þ
Improved 1.7 points
Ý
Increased 0.2 points
+
A higher yield on fixed maturity securities
due to reinvesting at higher rates
+
Lower underlying loss and LAE ratio in
Personal Insurance
+
Improved group life loss ratio
+
Lower net realized losses
-
Lower returns on limited partnerships and
other alternative investments
+
Favorable prior accident year reserve
development in the 2024 period
-
Higher expense ratio
-
Higher loss ratio on paid family and medical
leave and supplemental health products
-
A slightly higher expense ratio in P&C
-
Higher catastrophe losses in P&C
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
40
CONSOLIDATED
RESULTS OF
OPERATIONS
The Consolidated Results of Operations should be read in
conjunction with the Company's Consolidated Financial
Statements and the related Notes as well as with the Reportable
Segment and Corporate Operating Summaries within the
MD&A.
Consolidated Results of Operations
2024
2023
2022
Increase
(Decrease) From
2023 to 2024
Increase
(Decrease) From
2022 to 2023
Earned premiums
$ 22,567 $ 21,026 $ 19,390
7%
8%
Fee income
1,373
1,300
1,349
6%
(4%)
Net investment income
2,568
2,305
2,177
11%
6%
Net realized losses
(61)
(188)
(627)
68%
70%
Other revenues
88
84
73
5%
15%
Total revenues
26,535
24,527
22,362
8%
10%
Benefits, losses and loss adjustment expenses
14,874
14,238
13,138
4%
8%
Amortization of deferred policy acquisition costs ("DAC")
2,282
2,044
1,824
12%
12%
Insurance operating costs and other expenses
5,258
4,881
4,841
8%
1%
Interest expense
199
199
213
—%
(7%)
Amortization of other intangible assets
71
71
71
—%
—%
Restructuring and other costs
2
6
13
(67%)
(54%)
Total benefits, losses and expenses
22,686
21,439
20,100
6%
7%
Income before income taxes
3,849
3,088
2,262
25%
37%
Income tax expense
738
584
443
26%
32%
Net income
3,111
2,504
1,819
24%
38%
Preferred stock dividends
21
21
21
—%
—%
Net income available to common stockholders
$
3,090 $
2,483 $
1,798
24%
38%
Year ended December 31, 2024
compared to year ended
December 31, 2023
Net income available to common stockholders
increased by $607, primarily driven by:
•
An increase in P&C underwriting gain of $338, before tax,
driven by the effect of earned premium growth, a lower
underlying loss and LAE ratio in Personal Insurance, and a
change from unfavorable to favorable prior accident year
reserve development, partially offset by higher CAY
catastrophe losses and a slightly higher expense ratio;
•
Higher net investment income of $263, before tax, primarily
driven by a higher level of invested assets and a higher
yield on fixed maturities, partially offset by lower income
from limited partnerships and other alternative investments;
•
Lower net realized losses of $127, before tax; and
•
In Employee Benefits, a lower group life loss ratio and the
effect of higher fully insured ongoing premiums, partially
offset by a higher expense ratio, a higher group disability
loss ratio, and a higher loss ratio on supplemental health
products.
For a discussion of the Company's operating results by
segment, see MD&A - Reportable Segment and Corporate
Operating Summaries.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
41
REVENUE
Earned Premiums
$19,390
$21,026
$22,567
$13,520
$14,728
$16,174
$5,870
$6,298
$6,393
Property & Casualty
Employee Benefits
2022
2023
2024
$0
$5,000
$10,000
$15,000
$20,000
$25,000
Earned premiums increased by $1,541 or 7% primarily
due to:
•
An increase in P&C reflecting a 9% increase in Business
Insurance and a 12% increase in Personal Insurance.
–
Contributing to the increase in Business Insurance
was the effect of an increase in new business
across most lines of business, earned pricing
increases, and higher insured exposures,
principally in workers’ compensation and property
lines.
–
For Personal Insurance, earned premium
increased primarily due to the effect of earned
pricing increases, partially offset by non-renewals.
•
An increase in Employee Benefits earned premium of 2%
including an increase in exposure on existing accounts,
new business sales, and persistency in excess of 90%.
Fee income increased primarily due to a $62 increase in
Hartford Funds driven by higher daily average assets resulting
from an increase in equity market levels, partially offset by net
outflows over the preceding twelve month period.
Net Investment Income
$2,177
$2,305
$2,568
$1,662
$2,093
$2,420
$515
$212
$148
NII excluding limited partnerships and other
alternative investments
Limited partnerships and other
alternative investments
2022
2023
2024
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Net investment income increased primarily due to a
higher level of invested assets and the impact of higher
reinvestment rates, partially offset by a lower level of income on
limited partnerships and other alternative investments.
Net realized losses improved primarily due to:
•
Losses on credit derivatives in the 2023 period;
•
Gains on transactional foreign currency revaluation in the
2024 period compared to losses in the 2023 period; and
•
A favorable change in the ACL on mortgage loans and
fewer net credit losses on fixed maturities, AFS.
These improvements were partially offset by:
•
Greater net losses on sales of fixed maturities.
For further discussion of investment results, see MD&A -
Investment Results, Net Investment Income and MD&A -
Investment Results, Net Realized Gains (Losses).
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
42
BENEFITS, LOSSES AND EXPENSES
Losses and LAE Incurred for P&C
$8,613
$9,548
$10,185
2022
2023
2024
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Benefits, losses and loss adjustment expenses
increased $636, due to:
•
An increase in Property & Casualty of $637, which was
attributable to:
–
An increase in P&C CAY loss and LAE before
catastrophes of $675, before tax, primarily due to the
effect of higher earned premiums, partially offset by a
lower underlying loss and LAE ratio in Personal
Insurance; and
–
An increase in CAY catastrophe losses of $92, before
tax. Catastrophe losses in the 2024 period included
losses from tornado, wind and hail events across
several regions of the United States, as well as
hurricanes and tropical storms primarily in the
Southeast, South and Mid-Atlantic regions, and, to a
lesser extent, from winter storms, primarily in the
Pacific, Northeast, and South regions. Catastrophe
losses in the 2023 period included losses from tornado,
wind and hail events across several regions of the
United States, and losses from winter storms along the
East and West Coasts.
Employee Benefits Losses and LAE Incurred
$4,517
$4,683
$4,681
2022
2023
2024
$0
$1,000
$2,000
$3,000
$4,000
$5,000
Partially offset by:
–
A favorable change of $130, before tax, in P&C net
prior accident year reserve development, with
development in the 2024 period of a net favorable
$120, before tax, and development in the 2023 period
of a net unfavorable $10, before tax. Among other
reserve changes, prior year reserve development
included adverse development for A&E reserves of
$203 and $194, before tax, in 2024 and 2023
respectively, of which $62 and $194, respectively, was
ceded to NICO under the A&E ADC and accounted for
as a deferred gain under retroactive reinsurance
accounting. The 2024 period also included a benefit of
$145 related to amortization of the Navigators ADC
deferred gain.
Apart from the A&E reserve changes and the
amortization of the Navigators ADC deferred gain, net
favorable reserve development was $6 lower in 2024.
Favorable prior year reserve development in the 2024
period was primarily driven by decreases in reserves
related to workers' compensation, catastrophes, bond,
personal automobile liability and physical damage,
homeowners, professional liability and uncollectible
reinsurance, partially offset by increases in reserves for
general liability, commercial automobile liability,
assumed reinsurance, and unallocated loss adjustment
expense ("ULAE") reserves related to A&E reserves in
P&C Other Operations. Favorable development in the
2023 period was primarily driven by decreases in
reserves related to workers' compensation,
catastrophes, bond and package, partially offset by
increases in reserves for general liability, assumed
reinsurance, personal automobile physical damage,
and ULAE reserves related to A&E reserves in P&C
Other Operations.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
43
For further discussion, see Note 10 - Reserve for Unpaid
Losses and Loss Adjustment Expenses of Notes to
Consolidated Financial Statements.
•
A slight decrease in Employee Benefits of $2, before
tax, primarily driven by lower group life mortality,
favorable long-term disability claim recoveries and
incidence, and a favorable change in the long-term
disability recovery rate assumption, offset by the effect
of higher earned premiums and a higher loss ratio on
paid family and medical leave products.
Amortization of deferred policy acquisition costs
increased from the prior year period driven by Business
Insurance, reflecting an increase in earned premiums across all
lines of business.
Insurance operating costs and other expenses
increased due to:
•
Increased expense from higher staffing costs, including
higher incentive compensation and benefits costs, and
commissions, partly in response to increased business
volume; and
•
Higher direct marketing costs in Personal Insurance.
Income tax expense increased primarily due to an
increase in income before tax. For further discussion of income
taxes, see Note 16 - Income Taxes of Notes to Consolidated
Financial Statements.
INVESTMENT RESULTS
Composition of Invested Assets
December 31, 2024
December 31, 2023
Amount
Percent
Amount
Percent
Fixed maturities, AFS, at fair value
$
42,567
71.9 % $
39,818
71.2 %
Fixed maturities, at fair value using the fair value option ("FVO Securities")
308
0.5 %
327
0.6 %
Equity securities, at fair value
603
1.0 %
864
1.5 %
Mortgage loans (net of allowance for credit losses ("ACL") of $44 and $51)
6,396
10.8 %
6,087
10.9 %
Limited partnerships and other alternative investments
5,042
8.5 %
4,785
8.6 %
Other investments [1]
226
0.4 %
191
0.3 %
Short-term investments
4,068
6.9 %
3,850
6.9 %
Total investments
$
59,210
100.0 % $
55,922
100.0 %
[1]Primarily consists of equity fund investments, overseas deposits, consolidated investment funds, and derivative instruments which are carried at fair value.
December 31, 2024 compared to
December 31, 2023
Total investments increased primarily due to an increase
in fixed maturities, AFS, at fair value.
Fixed maturities, AFS, at fair value increased
primarily due to net additions of corporate bonds, high-quality
residential mortgage-backed securities ("RMBS") and ABS,
partially offset by net reductions to tax-exempt municipal bonds,
U.S. Treasuries, and commercial mortgage-backed securities
("CMBS").
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
44
Net Investment Income
For the years ended December 31,
2024
2023
2022
(Before tax)
Amount
Yield [1]
Amount
Yield [1]
Amount
Yield [1]
Fixed maturities [2]
$
2,204
4.6 % $
1,895
4.2 % $
1,469
3.4 %
Equity securities
35
5.3 %
45
3.7 %
57
3.0 %
Mortgage loans
266
4.2 %
235
3.9 %
211
3.6 %
Limited partnerships and other alternative investments
148
3.0 %
212
4.8 %
515
14.4 %
Other [3]
14
9
5
Investment expense
(99)
(91)
(80)
Total net investment income
2,568
4.3 %
2,305
4.1 %
2,177
3.9 %
Adjustment for net investment income from limited partnerships
and other alternative investments
(148)
0.1 %
(212)
(0.1) %
(515)
(0.7) %
Total net investment income excluding limited partnerships
and other alternative investments
$
2,420
4.4 % $
2,093
4.0 % $
1,662
3.2 %
[1]Yields calculated using annualized net investment income divided by the monthly average invested assets at amortized cost, as applicable, excluding derivatives
book value.
[2]Includes net investment income on short-term investments.
[3]Primarily includes changes in fair value of certain equity fund investments and income from derivatives that qualify for hedge accounting and are used to hedge
fixed maturities.
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Total net investment income increased primarily due to
a higher level of invested assets and the impact of higher
reinvestment rates, partially offset by a lower level of income on
limited partnerships and other alternative investments.
Annualized net investment income yield, excluding
limited partnerships and other alternative investments, was up
primarily due to the impact of reinvesting at higher rates.
Average reinvestment rate, on fixed maturities and
mortgage loans, excluding U.S. Treasury securities, for the year-
ended December 31, 2024 was 5.9%, which was above the
average yield of sales and maturities of 5.0% for the same
period. Average reinvestment rate, on fixed maturities and
mortgage loans, excluding U.S. Treasury securities, for the year-
ended December 31, 2023 was 5.8%, which was above the
average yield of sales and maturities of 4.4% for the same
period.
For the 2025 calendar year, we expect the annualized net
investment income yield, excluding limited partnerships and
other alternative investments, to be marginally higher than the
portfolio yield earned in 2024. The estimated impact on
annualized net investment income yield is subject to variability
including the impact of evolving market conditions.
Net Realized Gains (Losses)
For the years ended December 31,
(Before tax)
2024
2023
2022
Gross gains on sales of fixed maturities
$
31 $
30 $
57
Gross losses on sales of fixed maturities
(198)
(149)
(315)
Equity securities [1]
73
78
(349)
Net credit losses on fixed maturities, AFS [2]
(2)
(14)
(18)
Change in ACL on mortgage loans [3]
3
(15)
(7)
Intent-to-sell impairments [2]
—
—
(6)
Other, net [4]
32
(118)
11
Net realized gains (losses)
$
(61) $
(188) $
(627)
[1]The change in net unrealized gains (losses) on equity securities still held as of the end of the period and included in net realized gains (losses) were $68, $17, and
$(108) for the years ended December 31, 2024, 2023, and 2022, respectively.
[2]See Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments within the Investment Portfolio Risks and Risk Management section of the MD&A.
[3]See ACL on Mortgage Loans within the Investment Portfolio Risks and Risk Management section of the MD&A.
[4]Includes gains (losses) on non-qualifying derivatives for the years ended December 31, 2024, 2023, and 2022 of $13, $(108), and $46, respectively, and gains
(losses) from transactional foreign currency revaluation of $20, $(15), and $28, respectively.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
45
Year ended December 31, 2024
Gross gains and losses on sales were primarily due
to sales of U.S. treasuries, corporate securities, tax-exempt
municipals, and CMBS largely to fund purchases of higher-
yielding investments.
Equity securities net gains were primarily driven by an
increase in value due to higher equity market levels.
Other, net gains primarily included gains of $20 on
transactional foreign currency revaluation and gains of $8 on
interest rate derivatives driven by changes in interest rates.
Year ended December 31, 2023
Gross gains and losses on sales were primarily due
to sales of corporate securities and tax-exempt municipals, in
addition to sales of U.S. treasuries which were used to manage
duration and liquidity, and to fund purchases of higher yielding
investments.
Equity securities net gains were primarily driven by sales
due to higher equity market levels.
Other, net losses were primarily driven by losses of $105 on
credit derivatives due to tighter credit spreads and losses of $15
on transactional foreign currency revaluation.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ, and in the past have differed, from those
estimates.
The Company has identified the following estimates as critical in
that they involve a higher degree of judgment and are subject to
a significant degree of variability:
•
property and casualty insurance product reserves, net of
reinsurance;
•
employee benefit LTD reserves, net of reinsurance;
•
evaluation of goodwill for impairment;
•
valuation of investments and derivative instruments
including evaluation of credit losses on fixed maturities,
AFS and ACL on mortgage loans; and
•
contingencies relating to corporate litigation and regulatory
matters.
In developing these estimates management makes subjective and
complex judgments that are inherently uncertain and subject to
material change as facts and circumstances develop. Although
variability is inherent in these estimates, management believes the
amounts provided are appropriate based upon the facts available
upon compilation of the financial statements. Certain of these
estimates are particularly sensitive to market conditions, and
deterioration and/or volatility in the worldwide debt or equity markets
could have a material impact on the Consolidated Financial
Statements.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
46
|PROPERTY & CASUALTY INSURANCE PRODUCT RESERVES, NET OF
REINSURANCE
Loss and LAE Reserves, Net of Reinsurance as of December 31, 2024
Business
Insurance
Personal
Insurance
Property &
Casualty
Other
Operations
Total Property
&
Casualty
Insurance
% Total
Reserves-
net
Workers’ compensation
$
12,660 $
— $
— $
12,660
42.7%
General liability
5,935
—
—
5,935
20.0%
Marine
343
—
—
343
1.2%
Package business [1]
2,590
—
—
2,590
8.7%
Commercial property
612
—
—
612
2.1%
Automobile liability
1,554
1,727
—
3,281
11.1%
Automobile physical damage
31
78
—
109
0.4%
Professional liability
1,577
—
—
1,577
5.3%
Bond
443
—
—
443
1.5%
Homeowners
—
403
—
403
1.4%
Asbestos and environmental
83
8
224
315
1.1%
Assumed reinsurance
758
—
71
829
2.8%
All other
157
4
393
554
1.9%
Total reserves-net
26,743
2,220
688
29,651
100.0%
Reinsurance and other recoverables
4,637
20
2,096
6,753
Total reserves-gross
$
31,380 $
2,240 $
2,784 $
36,404
[1]Business Insurance policy packages that include property and general liability coverages are generally referred to as the package line of business.
P&C Loss and Loss Adjustment Expense Reserves,
Net of Reinsurance, by Segment as of December 31,
2024
Business Insurance
$26,743
90%
Personal Insurance
$2,220
8%
Property &
Casualty Other
Operations
$688
2%
For descriptions of the coverages provided under the lines of
business shown above, see Part I - Item1, Business.
Overview of Reserving for
Property and Casualty Insurance
Claims
It typically takes many months or years to pay claims incurred
under a property and casualty insurance product; accordingly,
the Company must establish reserves at the time the loss is
incurred. Most of the Company’s policies provide for
occurrence-based coverage where the loss is incurred when a
claim event happens, like an automobile accident, house or
building fire or injury to an employee under a workers’
compensation policy. Some of the Company's policies, mostly
for directors and officers insurance and errors and omissions
insurance, are claims-made policies where the loss is incurred
in the period the claim event is reported to the Company even if
the loss event itself occurred in an earlier period.
Loss and loss adjustment expense reserves provide for the
estimated ultimate costs of paying claims under insurance
policies written by the Company, less amounts paid to date.
These reserves include estimates for both claims that have
been reported and those that have not yet been reported, and
include estimates of all expenses associated with processing
and settling these claims. Case reserves are established by a
claims handler on each individual claim and are adjusted as new
information becomes known during the course of handling the
claim. Incurred but not reported (“IBNR”) reserves represent the
difference between the estimated ultimate cost of all claims and
the actual loss and loss adjustment expenses reported to the
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
47
Company by claimants to date (“reported losses”). Reported
losses represent cumulative loss and loss adjustment expenses
paid plus case reserves for outstanding reported claims. For
most lines, Company actuaries evaluate the total reserves
(IBNR and case reserves) on an accident year basis. An
accident year is the calendar year in which a loss is incurred, or,
in the case of claims-made policies, the calendar year in which a
loss is reported. For certain lines, total reserves are evaluated
on a policy year basis and then converted to accident year. A
policy year is the calendar year in which a policy incepts.
Factors that Change Reserve Estimates- Reserve
estimates can change over time because of unexpected
changes in the external environment. Higher than expected
inflation in claim costs, such as with medical care, hospital care,
automobile parts, wages, and home and building repair, would
cause claims to settle for more than they are initially reserved.
Changes in the economy can cause an increase or decrease in
the number of reported claims (claim frequency). For example,
an improving economy could result in more automobile miles
driven and a higher number of automobile-related claims, or a
change in economic conditions can lead to more or fewer
workers’ compensation reported claims. An increase in the
number or percentage of claims litigated can increase the
average settlement amount per claim (claim severity). Changes
in the judicial environment can affect interpretations of damages
and how policy coverage applies, which could increase or
decrease claim severity. Over time, judges or juries in certain
jurisdictions may be more inclined to determine liability and
award damages. New legislation can also change how damages
are defined or change the statutes of limitations for the filing of
civil suits, resulting in greater claim frequency or severity. In
addition, new types of injuries may arise from exposures not
contemplated when the policies were written. Past examples
include pharmaceutical products, silica, lead paint, sexual
molestation and sexual abuse and construction defects.
Additionally, social inflationary pressures, such as increased
litigation funding and aggressive tactics by plaintiff attorneys,
can introduce the risk of potentially increasing jury awards and
an increase in the percentage of litigated claims impacting both
general liability and automobile claim frequency and severity.
Reserve estimates can also change over time because of
changes in internal Company operations. A delay or acceleration
in handling claims may signal a need to increase or reduce
reserves from what was initially estimated. New lines of
business may have loss development patterns that are not well
established. Changes in the geographic mix of business,
changes in the mix of business by industry and changes in the
mix of business by policy limit or deductible can increase the
risk that losses will ultimately develop differently than the loss
development patterns assumed in our reserving. In addition,
changes in the quality of risk selection in underwriting and
changes in interpretations of policy language could increase or
decrease ultimate losses from what was assumed in
establishing the reserves.
In the case of assumed reinsurance, all of the above risks apply.
The Company assumes property and casualty risks from other
insurance companies as part of its Global Re business and from
certain pools and associations. Global Re, which is a part of the
global specialty business, mostly assumes property, casualty
and specialty risks. Changes in the case reserving and reporting
patterns of insurance companies ceding to The Hartford can
create additional uncertainty in estimating the reserves. Due to
the inherent complexity of the assumptions used, final claim
settlements may vary significantly from the present estimates of
direct and assumed reserves, particularly when those
settlements may not occur until well into the future.
Reinsurance Recoverables- Through both facultative
and treaty reinsurance agreements, the Company cedes a
share of the risks it has underwritten to other insurance
companies. The Company records reinsurance recoverables for
losses and loss adjustment expenses ceded to its reinsurers
representing the anticipated recovery from reinsurers of unpaid
claims, including IBNR.
The Company estimates the portion of losses and loss
adjustment expenses to be ceded based on the terms of any
applicable facultative and treaty reinsurance, including an
estimate of IBNR for losses that will ultimately be ceded.
The Company provides an allowance for uncollectible
reinsurance, reflecting management’s best estimate of
reinsurance cessions that may be uncollectible in the future due
to reinsurers’ unwillingness or inability to pay. The allowance for
uncollectible reinsurance comprises an ACL and an allowance
for disputed balances. The ACL primarily considers the credit
quality of the Company's reinsurers while the allowance for
disputes considers recent outcomes in arbitration and litigation
in disputes between reinsurers and cedants and recent
commutation activity between reinsurers and cedants that may
signal how the Company’s own reinsurance claims may settle.
Where its reinsurance contracts permit, the Company secures
reinsurance recoverables with various forms of collateral,
including irrevocable letters of credit, secured trusts, funds held
accounts and group-wide offsets. The allowance for
uncollectible reinsurance was $72 as of December 31, 2024,
comprised of $30 related to Business Insurance, $1 related to
Personal Insurance and $41 related to Property & Casualty
Other Operations.
The Company’s estimate of reinsurance recoverables, net of an
allowance for uncollectible reinsurance, is subject to similar risks
and uncertainties as the estimate of the gross reserve for unpaid
losses and loss adjustment expenses for direct and assumed
exposures.
Review of Reserve Adequacy- The Hartford regularly
reviews the appropriateness of reserve levels at the line of
business or more detailed level, taking into consideration the
variety of trends that impact the ultimate settlement of claims.
For Property & Casualty Other Operations, asbestos and
environmental (“Run-off A&E”) reserves are reviewed by type of
event rather than by line of business.
Reserve adjustments, which may be material, are reflected in
the operating results of the period in which the adjustment is
determined to be necessary. In the judgment of management,
information currently available has been properly considered in
establishing the reserves for unpaid losses and loss adjustment
expenses and in recording the reinsurance recoverables for
ceded unpaid losses.
Reserving Methodology
The following is a discussion of the reserving methods used for
the Company's property and casualty lines of business other
than asbestos and environmental.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
48
Reserves are set by line of business within the operating
segments. A single line of business may be written in more than
one segment. Lines of business for which reported losses
emerge over a long period of time are referred to as long-tail
lines of business. Lines of business for which reported losses
emerge more quickly are referred to as short-tail lines of
business. The Company’s shortest-tail lines of business are
homeowners, commercial property, marine property and
automobile physical damage. The longest-tail lines of business
include workers’ compensation, general liability, professional
liability and assumed reinsurance. For short-tail lines of
business, emergence of paid losses and case reserves is
credible and likely indicative of ultimate losses. For long-tail
lines of business, emergence of paid losses and case reserves
is less credible in the early periods after a given accident year
and, accordingly, may not be indicative of ultimate losses.
Use of Actuarial Methods and Judgments- The
Company’s reserving actuaries regularly review reserves for
both current and prior accident years using the most current
claim data. A variety of actuarial methods and judgments are
used for most lines of business to arrive at selections of
estimated ultimate losses and loss adjustment expenses. New
methods may be added for specific lines over time to inform
these selections where appropriate. The reserve selections
incorporate input, as appropriate, from claims personnel, pricing
actuaries and operating management about reported loss cost
trends and other factors that could affect the reserve estimates.
Some reserves are reviewed fully each quarter, including loss
and loss adjustment expense reserves for commercial property,
homeowners, personal automobile, and most workers’
compensation lines. Other reserves, including commercial
automobile, marine, package business, and most general
liability and professional liability lines, are reviewed semi-
annually. Certain additional reserves are also reviewed semi-
annually or annually, including reserves for losses incurred in
accident years older than twelve years for Personal Insurance
and older than twenty years for Business Insurance, as well as
reserves for bond, assumed reinsurance, latent exposures such
as construction defects, and ULAE. For reserves that are
reviewed semi-annually or annually, management monitors the
emergence of paid and reported losses in the intervening
quarters and, if warranted, performs a reserve review to
determine whether the reserve estimate should change.
An expected loss ratio ("ELR") is used in initially recording the
reserves for both short-tail and long-tail lines of business. This
ELR is determined by starting with the average loss ratio of
recent prior accident years and adjusting that ratio for the effect
of expected changes to earned pricing, loss frequency and
severity, mix of business, ceded reinsurance and other factors.
For short-tail lines, IBNR for the current accident year gives
weight to both the initial ELR multiplied by earned premium
approach as well as a loss development approach, given early
reported losses are more credible than in long tailed lines. For
long-tailed lines, IBNR for the current accident year is initially
recorded as the product of the ELR for the period and the
earned premium for the period, less reported losses for the
period.
As losses emerge or develop in periods subsequent to a given
accident year, reserving actuaries use other methods to
estimate ultimate unpaid losses in addition to the ELR method.
These primarily include paid and reported loss development
methods, frequency/severity techniques and the Bornhuetter-
Ferguson method (a combination of the ELR method with the
paid development or reported development method). Within any
one line of business, the methods that are given more weight
vary based primarily on the maturity of the accident year, the
mix of business and the particular internal and external
influences impacting the claims experience or the methods. The
output of the reserve reviews are reserve estimates
representing a range of actuarial indications.
Reserve Discounting- Most of the Company’s property
and casualty insurance product reserves are not discounted.
However, the Company has discounted liabilities funded through
structured settlements and has discounted a portion of workers’
compensation reserves that have a fixed and determinable
payment stream. For further discussion of these discounted
liabilities, see Note 1 - Basis of Presentation and Significant
Accounting Policies of Notes to Consolidated Financial
Statements.
Differences Between GAAP and Statutory Basis
Reserves- As of December 31, 2024 and 2023, U.S. property
and casualty insurance product reserves for losses and loss
adjustment expenses, net of reinsurance recoverables, reported
under U.S. GAAP were approximately $1.5 billion lower than net
reserves reported on a statutory basis, primarily due to
reinsurance recoverables on two adverse development cover
reinsurance agreements that are recorded as a reduction of
other liabilities under statutory accounting. For further
discussion of these adverse development cover reinsurance
agreements, see Note 1 - Basis of Presentation and Significant
Accounting Policies of Notes to Consolidated Financial
Statements. Excluding the effect of these retroactive
reinsurance agreements, U.S. property and casualty insurance
product reserves for losses and loss adjustment expenses, net
of reinsurance recoverables, reported under U.S. GAAP were
approximately equal to net reserves reported on a statutory
basis.
Reserving Methods by Line of Business- Apart
from Run-off A&E, which is discussed in the following section on
Property & Casualty Other Operations, below is a general
discussion of which reserving methods are preferred by line of
business. Because the actuarial estimates are generated at a
much finer level of detail than line of business (e.g., by
distribution channel, coverage, accident period), other methods
than those described for the line of business may also be
employed for a coverage and accident year within a line of
business. Also, as circumstances change, the methods that are
given more weight will change.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
49
Preferred Reserving Methods by Line of Business
Commercial property,
homeowners and
automobile physical
damage
These short-tailed lines are relatively fast-developing and paid and reported development techniques are used.
These methods use historical data to generate paid and reported loss development patterns, which are then
applied to cumulative paid and reported losses by accident period to estimate ultimate losses. In addition to
paid and reported development methods, for the most immature accident months, the Company uses
frequency/severity techniques and methods that incorporate the initial expected loss ratio ("ELR"). The
advantage of frequency/severity techniques is that frequency estimates are generally more stable and external
information can be used to supplement internal data in estimating average severity. For personal automobile
physical damage, the Company also considers gross loss, salvage and subrogation estimates to project net
ultimate losses for recent accident periods.
Personal automobile
liability
For personal automobile liability, and bodily injury in particular, in addition to traditional paid and reported
development methods, the Company relies on frequency/severity techniques and the initial ELR. The Company
generally uses the reported development method for older accident years and a combination of reported
development, frequency/severity and the initial ELR for more recent accident years. For older accident periods,
reported losses are a good indicator of ultimate losses given the high percentage of ultimate losses reported to
date. For more recent periods, where there is more uncertainty and a higher percentage of open and
unreported claims, putting some reliance on frequency/severity and initial expectations is prudent. The
Company supplements these standard actuarial methods with a comprehensive review of claims diagnostics
such as attorney representation, litigation, settlement rates, large loss impacts, and case reserve adequacy.
Through reviewing the standard actuarial methods and claims diagnostics, a loss estimate can be calculated
that considers these results and the age of the accident year that is being estimated.
Commercial
automobile liability
The Company performs a variety of techniques, including the paid and reported development methods and
frequency/severity techniques. For older, more mature accident years, the Company primarily uses reported
development techniques. For more recent accident years, the Company relies on several methods that
incorporate ELR, reported loss development, paid loss development, and frequency/severity.
Professional liability
Reported and paid loss development patterns for this line tend to be volatile. Therefore, the Company typically
supplements the ELR method and paid and reported development methods with others such as individual claim
reviews and frequency and severity techniques.
General liability, bond
and large deductible
workers’
compensation
For these long-tailed lines of business, the Company generally relies on the ELR and paid and reported
development techniques. The Company generally weights these techniques together, relying more heavily on
the ELR method at early ages of development and shifting more weight onto paid and reported development
methods as an accident year matures. The Company also uses various frequency/severity methods aimed at
capturing large loss development and in some bond lines individual claim reviews are used.
Workers’
compensation
Workers’ compensation is the Company’s single largest reserve line of business and a wide range of methods
are used. Due to the long-tailed nature of workers' compensation, the selection of methods is driven by ELR
methods for recent accident years and then, as an accident year matures, shifting first to Bornhuetter-Ferguson
and frequency/severity methods, then to paid and reported development methods, and finally to methods that
are responsive to the inventory of open claims. Across these techniques, there are adjustments related to
changes in emergence patterns across years, projections of future cost inflation, and outlier claims.
Marine
For marine liability, the Company generally relies on the ELR, Bornhuetter-Ferguson, and reported
development techniques. The Company generally weights these techniques together, relying more heavily on
the ELR method at early ages of development and then shifts towards Bornhuetter-Ferguson and then more
towards the reported development method as an accident year matures. For marine property segments, the
Company relies on Bornhuetter-Ferguson methods for early development ages then shifts to reported
development techniques.
Assumed reinsurance
and all other
Standard methods, such as ELR, Bornhuetter-Ferguson and reported development techniques are applied.
These methods are informed by underlying treaty analyses supporting the ELRs, and cedant data will often
inform the loss development patterns. In some instances, reserve indications may also be influenced by
information gained from claims and underwriting audits. Policy quarter and policy year loss reserve estimates
are then converted to an accident year basis.
Allocated loss
adjustment expenses
("ALAE")
For some lines of business (e.g., professional liability, assumed reinsurance, and the acquired Navigators
Group book of business), ALAE and losses are analyzed together. For most lines of business, however, ALAE
is analyzed separately, using paid development techniques and a ratio of paid ALAE to paid loss applied to loss
reserves to estimate unpaid ALAE.
Unallocated loss
adjustment expenses
("ULAE")
ULAE is analyzed separately from loss and ALAE. For most lines of business, future ULAE costs to be paid are
projected based on a claim projection method that applies an expected claim handling cost per unit to projected
claims, leveraging the anticipated claim closure pattern and the ratio of paid ULAE to paid loss applied to
estimated unpaid losses. For some lines, a simplified paid-to-paid approach is used.
The recorded reserve for losses and loss adjustment expenses
represents the Company's best estimate of the ultimate
settlement amount of unpaid losses and loss adjustment
expenses. In applying judgment, the best estimate is selected
after considering the estimates derived from a number of
actuarial methods, giving more weight to those methods
deemed more predictive of ultimate unpaid losses and loss
adjustment expenses. The Company does not produce a
statistical range or confidence interval of reserve estimates and,
since reserving methods with more credibility are given greater
weight, the selected best estimate may differ from the mid-point
of the various estimates produced by the actuarial methods
used.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
50
Assumptions used in arriving at the selected actuarial
indications consider a number of factors, including the
immaturity of emerged claims in recent accident years,
emerging trends in the recent past, and the level of volatility
within each line of business.
Adjustments to reserves for prior accident years are referred to
as “prior accident year development”. Increases in previous
estimates of ultimate loss costs are referred to as either an
increase in prior accident year reserves or as unfavorable
reserve development. Decreases in previous estimates of
ultimate loss costs are referred to as either a decrease in prior
accident year reserves or as favorable reserve development.
Reserve development can influence the comparability of year
over year underwriting results.
For a discussion of changes to reserve estimates recorded in
2024, see Note 10 - Reserve for Unpaid Losses and Loss
Adjustment Expenses in the Notes to Consolidated Financial
Statements.
Current Trends Contributing to
Reserve Uncertainty
The Hartford is a multi-line company in the property and
casualty insurance business. The Hartford is, therefore, subject
to reserve uncertainty stemming from changes in loss trends
and other conditions which could become material at any point
in time. As market conditions and loss trends develop,
management must assess whether those conditions constitute a
long-term trend that should result in a reserving action (i.e.,
increasing or decreasing reserves).
General liability- Within Business Insurance and Property
& Casualty Other Operations, the Company has exposure to
general liability claims, including from bodily injury, property
damage and product liability. Reserves for these exposures can
be particularly difficult to estimate due to the long development
pattern and uncertainty around how cases will settle. In
particular, the Company has exposure to bodily injury claims
that arise from long-term or continuous exposure to harmful
products or substances. Examples include, but are not limited
to, pharmaceutical products, silica, talcum powder, per-and
polyfluoroalkyl substances ("PFAS"), CTE exposures and lead
paint. The Company also has exposure to claims from
construction defects, where property damage or bodily injury
from negligent construction is alleged. In addition, the Company
has exposure to claims asserted against religious institutions,
and other organizations relating to sexual molestation and
sexual abuse. For information related to the Company's
settlement agreement with the Boy Scouts of America ("BSA"),
see Note 10 - Reserve for Unpaid Losses and Loss Adjustment
Expenses in the Notes to Consolidated Financial Statements.
State “reviver” statutes, extending statutes of limitations for
certain sexual molestation and sexual abuse claims, could result
in additional litigation or could result in unexpected sexual
molestation and sexual abuse losses. Such exposures may
involve potentially long latency periods and may implicate
coverage in multiple policy periods, which can raise complex
coverage issues with significant effects on the ultimate scope of
coverage. Such exposures may also be impacted by insured
bankruptcies. These factors make reserves for such claims
more uncertain than other bodily injury or property damage
claims. With regard to these exposures, the Company monitors
trends in litigation, the external environment including
legislation, the similarities to other mass torts and the potential
impact on the Company’s reserves. The Company also monitors
the effects of social inflation and the impact of increased
litigation funding and aggressive trial tactics by plaintiff attorneys
that can introduce the risk of potentially increasing jury awards
and an increase in the percentage of litigated claims.
Additionally, uncertainty in estimated claim severity causes
reserve variability, including the effect of changes in internal
claim handling and case reserving practices.
Workers’ compensation- Included in both small business
and middle & large business, workers’ compensation is the
Company’s single biggest line of business, and the property and
casualty line of business with the longest pattern of loss
emergence. To the extent that patterns in the frequency of
settlement payments deviate from historical patterns, loss
reserve estimates would be less reliable. Medical costs make up
approximately 50% of workers’ compensation payments. As
such, reserve estimates for workers’ compensation are
particularly sensitive to changes in medical inflation, the
changing use of medical care procedures and changes in state
legislative and regulatory environments. In addition, changes in
the economic environment could reduce the ability of an injured
worker to return to work and thus lengthen the time a worker
receives disability benefits. In national accounts, reserves for
large deductible workers’ compensation insurance require
estimating losses attributable to the deductible amount that will
be paid by the insured; if such losses are not paid by the insured
due to financial difficulties, the Company is contractually liable.
Commercial automobile- Uncertainty in estimated claim
severity causes reserve variability for commercial automobile
losses including reserve variability due to changes in internal
claim handling and case reserving practices as well as due to
changes in the external environment, including but not limited to
the impacts of social inflation mentioned in the general liability
section above and many of the same drivers detailed in the
personal automobile section below.
Directors and officers insurance- Uncertainty
regarding the number and severity of security class action suits
can result in reserve volatility for directors and officers insurance
claims. Additionally, the Company’s exposure to losses under
directors and officers insurance policies, both domestically and
internationally, is primarily in excess layers, making estimates of
loss more complex.
Personal automobile- While claims emerge over relatively
shorter periods, estimates can still vary due to a number of
factors, including uncertain estimates of frequency and severity
trends. Severity trends are affected by changes in internal claim
handling and case reserving practices as well as by changes in
the external environment, such as due to inflation in labor and
materials because of supply chain disruptions affecting repair
costs. Severity trends can also be impacted by social inflation
whereby increased litigation funding and aggressive trial tactics
by plaintiff attorneys can introduce the risk of potentially
increasing jury awards and an increase in the percentage of
litigated claims. Changes in claim practices increase the
uncertainty in the interpretation of case reserve data, which
increases the uncertainty in recorded reserve levels. Severity
trends have increased in recent accident years, in part driven by
more expensive parts associated with new automobile
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
51
technology and increased attorney representation, causing
additional uncertainty about the reliability of past patterns. In
addition, the introduction of new products and class plans can
lead to a different mix of business by type of insured than the
Company experienced in the past. Changes in mix increase the
uncertainty of the reserve projections since historical data and
reporting patterns may not be applicable to the new business.
Assumed reinsurance- While pricing and reserving
processes can be challenging and idiosyncratic for insurance
companies, the inherent uncertainties of setting prices and
estimating such reserves are even greater for the reinsurer. This
is primarily due to the longer time between the date of an
occurrence and the reporting of claims to the reinsurer, the
diversity of development patterns among different types of
reinsurance treaties or contracts, the necessary reliance on the
ceding companies for information regarding reported claims and
differing pricing and reserving practices among ceding
companies. In addition, trends that have affected development
of liabilities in the past may not necessarily occur or impact
liability development in the same manner or to the same degree
in the future. As a result, actual losses and LAE may deviate,
perhaps substantially, from the expected estimates.
International business- In addition to several of the line-
specific trends listed above, international business may have
additional uncertainty due to geopolitical, foreign currency, and
trade dispute risks.
Catastrophes- Within Business Insurance and Personal
Insurance, the Company is exposed to losses from catastrophe
events, primarily for damage to property. Reserves for
hurricanes, tropical storms, tornado/hail, wildfires, earthquakes
and other catastrophe events are subject to significant
uncertainty about the number and average severity of claims
arising from those events, particularly in cases where the event
occurs near the end of a financial reporting period when there is
limited information about the extent of damages. For example,
after a catastrophe event, it may take a period of time before we
are able to access the impacted areas limiting the ability of our
claims adjusting staff to inspect losses, make estimates and
determine the damages that are covered by the policy. To
estimate catastrophe losses, we consider information from claim
notices received to date, third party data, visual images of the
affected area where we have exposures and our own historical
experience of loss reporting patterns for similar events.
Impact of Key Assumptions on
Reserves
As stated above, the Company’s practice is to estimate reserves
using a variety of methods, assumptions, and data elements
within its reserve estimation. The Company does not use
statistical loss distributions or confidence levels in the process of
determining its reserve estimate and, as a result, does not
disclose reserve ranges.
Across most lines of business, the most important reserve
assumptions are future loss development factors applied to paid
or reported losses to date. The trend in loss cost frequency and
severity is also a key assumption, particularly in the most recent
accident years, where loss development factors are less
credible.
The following discussion discloses possible variation from
current estimates of loss reserves due to a change in certain
key indicators of potential losses. For automobile liability lines in
both Personal Insurance and Business Insurance, the key
indicator is the annual loss cost trend, particularly the severity
trend component of loss costs. For workers’ compensation and
general liability, loss development patterns are a key indicator,
particularly for more mature accident years. For workers’
compensation, paid loss development patterns have been
impacted by medical cost inflation and other changes in loss
cost trends. For general liability, incurred loss development
patterns have been impacted by, among other things,
emergence of new types of claims (e.g., PFAS claims) and a
shift in the mixture between smaller, more routine claims and
larger, more complex claims.
Each of the impacts described below is estimated individually,
without consideration for any correlation among key indicators
or among lines of business. Therefore, it would be inappropriate
to take each of the amounts described below and add them
together in an attempt to estimate volatility for the Company’s
reserves in total. For any one reserving line of business, the
estimated variation in reserves due to changes in key indicators
is a reasonable estimate of potential reserve development that
may occur in the future, likely over a period of several calendar
years. The variation discussed is not meant to be a worst-case
scenario, and, therefore, it is possible that future variation may
be more than the amounts discussed below. Moreover, the
variation discussed does not represent a statistical range of
potential reserve outcomes, and factors exist beyond the key
indicators considered which have the potential to drive
additional variation to the Company's reserves.
Possible
Change in
Key Indicator
Reserves,
Net of
Reinsurance
December 31,
2024
Estimated
Range of
Potential
Reserve
Development
Personal
Automobile
Liability
+/- 2.5 points
to the annual
assumed
change in loss
cost severity
for the two
most recent
accident years
$1.7 billion
+/- $90
Commercial
Automobile
Liability
+/- 2.5 points
to the annual
assumed
change in loss
cost severity
for the two
most recent
accident years
$1.6 billion
+/- $50
Workers'
Compensation
2% change in
paid loss
development
patterns
$12.7 billion
+/- $400
General
Liability
8% change in
reported loss
development
patterns
$5.9 billion
+/- $700
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
52
Reserving for Asbestos and
Environmental Claims
How A&E Reserves are Set- The process for
establishing reserves for asbestos and environmental claims
first involves estimating the required reserves gross of ceded
reinsurance and then estimating reinsurance recoverables.
In establishing reserves for gross asbestos claims, the
Company evaluates its insureds’ estimated liabilities for such
claims by examining exposures for individual insureds and
assessing how coverage applies. The Company considers a
variety of factors, including the jurisdictions where underlying
claims have been brought, past, pending and anticipated future
claim activity, the level of plaintiff demands, disease mix, past
settlement values of similar claims, dismissal rates, allocated
loss adjustment expense, and potential impact of other
defendants being in bankruptcy.
Similarly, the Company reviews exposures to establish gross
environmental reserves. The Company considers several
factors in estimating environmental liabilities, including historical
values of similar claims, the number of sites involved, the
insureds’ alleged activities at each site, the alleged
environmental damage, the respective shares of liability of
potentially responsible parties, the appropriateness and cost of
remediation, the nature of governmental enforcement activities
or mandated remediation efforts and potential impact of other
defendants being in bankruptcy.
After evaluating its insureds’ probable liabilities for asbestos
and/or environmental claims, the Company evaluates the
insurance coverage in place for such claims. The Company
considers its insureds’ total available insurance coverage,
including the coverage issued by the Company. The Company
also considers relevant judicial interpretations of policy
language, the nature of how policy limits are enforced on multi-
year policies and applicable coverage defenses or
determinations, if any.
The estimated liabilities of insureds and the Company’s
exposure to the insureds depends heavily on an analysis of the
relevant legal issues and litigation environment. This analysis is
conducted by the Company’s lawyers and is subject to
applicable privileges.
For both asbestos and environmental reserves, the Company
also analyzes its historical paid and reported losses and
expenses year by year, to assess any emerging trends,
fluctuations or characteristics suggested by the aggregate paid
and reported activity. The historical losses and expenses are
analyzed on both a direct basis and net of reinsurance.
Once the gross ultimate exposure for indemnity and allocated
loss adjustment expense is determined for its insureds by each
policy year, the Company calculates its ceded reinsurance
recoverables based on any applicable facultative and treaty
reinsurance and the Company’s experience with reinsurance
collections. See the section that follows entitled A&E Adverse
Development Cover that discusses the impact the reinsurance
agreement with NICO may have on future adverse development
of asbestos and environmental reserves, if any.
Uncertainties Regarding Adequacy of A&E
Reserves- A number of factors affect the variability of
estimates for gross asbestos and environmental reserves
including assumptions with respect to the frequency of claims,
the average severity of those claims settled with payment, the
dismissal rate of claims with no payment, resolution of coverage
disputes with our policyholders and the expense to indemnity
ratio. Reserve estimates for gross asbestos and environmental
reserves are subject to greater variability than reserve estimates
for more traditional exposures.
The process of estimating asbestos and environmental reserves
remains subject to a wide variety of uncertainties, which are
detailed in Note 14 - Commitments and Contingencies of Notes
to Consolidated Financial Statements. The Company believes
that its current asbestos and environmental reserves are
appropriate. Future developments could continue to cause the
Company to change its estimates of its gross asbestos and
environmental reserves. Losses ceded under the adverse
development cover ("A&E ADC") with NICO in excess of the
ceded premium paid of $650 have resulted in a deferred gain
resulting in a timing difference between when gross reserves
are increased and when reinsurance recoveries are recognized.
This timing difference results in a charge to net income until
such periods when the recoveries are recognized. Consistent
with past practice, the Company will continue to monitor its
reserves in Property & Casualty Other Operations regularly,
including its annual reviews of asbestos liabilities, reinsurance
recoverables, the allowance for uncollectible reinsurance, and
environmental liabilities. Where future developments indicate,
we will make appropriate adjustments to the reserves at that
time.
Total P&C Insurance Product
Reserves Development
In the opinion of management, based upon the known facts and
current law, the reserves recorded for the Company’s property
and casualty insurance products at December 31, 2024
represent the Company’s best estimate of its ultimate liability for
unpaid losses and loss adjustment expenses. However,
because of the significant uncertainties surrounding reserves, it
is possible that management’s estimate of the ultimate liabilities
for these claims may change in the future and that the required
adjustment to currently recorded reserves could be material to
the Company’s results of operations or liquidity.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
53
Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the
Year Ended December 31, 2024
Business
Insurance
Personal
Insurance
Property &
Casualty
Other
Operations
Total
Property &
Casualty
Insurance
Beginning liabilities for unpaid losses and loss adjustment
expenses, gross
$
29,181 $
2,068 $
2,795 $
34,044
Reinsurance and other recoverables
4,599
28
2,069
6,696
Beginning liabilities for unpaid losses and loss adjustment
expenses, net
24,582
2,040
726
27,348
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes
7,186
2,351
—
9,537
Current accident year ("CAY") catastrophes
486
282
—
768
Prior accident year development ("PYD")
(231)
(108)
219
(120)
Total provision for unpaid losses and loss adjustment expenses
7,441
2,525
219
10,185
Change in deferred gain on retroactive reinsurance included in the
provision for the period but reflected in other liabilities
145
—
(62)
83
Payments
(5,400)
(2,345)
(195)
(7,940)
Foreign currency adjustment
(25)
—
—
(25)
Ending liabilities for unpaid losses and loss adjustment expenses,
net
26,743
2,220
688
29,651
Reinsurance and other recoverables
4,637
20
2,096
6,753
Ending liabilities for unpaid losses and loss adjustment expenses,
gross
$
31,380 $
2,240 $
2,784 $
36,404
Earned premiums and fee income
$
12,764 $
3,486
Loss and loss adjustment expense paid ratio [1]
42.3
67.3
Loss and loss adjustment expense ratio
58.5
73.1
Prior accident year development (pts) [2]
(1.8)
(3.1)
[1]The “loss and loss adjustment expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income.
[2]“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
Current Accident Year Catastrophe Losses for the Year Ended December 31, 2024, Net of
Reinsurance
Business
Insurance
Personal
Insurance
Total
Wind and hail
$
210 $
190 $
400
Winter storms
52
18
70
Hurricanes and tropical storms [1]
136
64
200
Wildfires
1
10
11
Other international
1
—
1
Catastrophes before assumed reinsurance
400
282
682
Global assumed reinsurance business [2]
86
—
86
Total catastrophe losses
$
486 $
282 $
768
[1]Includes losses from Hurricane Helene of $121, net of reinsurance, including $20 of hurricane losses in the global assumed reinsurance business.
[2]Catastrophe losses incurred on global assumed reinsurance business are not covered under the Company's aggregate property catastrophe treaty. For further
information on the treaty, refer to Enterprise Risk Management — Insurance Risk section of this MD&A.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
54
Unfavorable (Favorable) Prior Accident Year Development for the Year Ended December 31, 2024
Business
Insurance
Personal
Insurance
Property &
Casualty Other
Operations
Total Property
& Casualty
Insurance
Workers’ compensation
$
(258) $
— $
— $
(258)
Workers’ compensation discount accretion
44
—
—
44
General liability
211
—
—
211
Marine
(1)
—
—
(1)
Package business
(6)
—
—
(6)
Commercial property
(7)
—
—
(7)
Professional liability
(27)
—
—
(27)
Bond
(56)
—
—
(56)
Assumed reinsurance
24
—
—
24
Automobile liability
47
(30)
—
17
Homeowners
—
(28)
—
(28)
Net asbestos and environmental reserves [1]
—
—
141
141
Catastrophes
(67)
(20)
—
(87)
Uncollectible reinsurance
(7)
—
(12)
(19)
Other reserve re-estimates, net [2]
17
(30)
28
15
Prior accident year development before change in
deferred gain
(86)
(108)
157
(37)
Change in deferred gain on retroactive reinsurance included
in other liabilities [1][3]
(145)
—
62
(83)
Total prior accident year development
$
(231) $
(108) $
219 $
(120)
[1]The 2024 A&E reserve review resulted in an increase in reserves before ADC reinsurance of $203, for which $62 was recorded as a deferred gain on retroactive
reinsurance.
[2]Other reserve re-estimates for the year ended December 31, 2024 includes a $32 decrease in personal automobile physical damage reserves.
[3] The change in deferred gain on retroactive reinsurance for the year ended December 31, 2024, included a benefit for amortization of the Navigators ADC deferred
gain of $145.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
55
Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the
Year Ended December 31, 2023
Business
Insurance
Personal
Insurance
Property &
Casualty Other
Operations
Total Property
& Casualty
Insurance
Beginning liabilities for unpaid losses and loss adjustment
expenses, gross
$
28,453 $
1,857 $
2,773 $
33,083
Reinsurance and other recoverables
4,574
28
1,863
6,465
Beginning liabilities for unpaid losses and loss adjustment
expenses, net
23,879
1,829
910
26,618
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes
6,575
2,287
—
8,862
Current accident year catastrophes
436
240
—
676
Prior accident year development
(225)
11
224
10
Total provision for unpaid losses and loss adjustment
expenses
6,786
2,538
224
9,548
Change in deferred gain on retroactive reinsurance included in
other liabilities
—
—
(194)
(194)
Payments [1]
(6,101)
(2,327)
(214)
(8,642)
Foreign currency adjustment
18
—
—
18
Ending liabilities for unpaid losses and loss adjustment
expenses, net
24,582
2,040
726
27,348
Reinsurance and other recoverables
4,599
28
2,069
6,696
Ending liabilities for unpaid losses and loss adjustment
expenses, gross
$
29,181 $
2,068 $
2,795 $
34,044
Earned premiums and fee income
$
11,682 $
3,117
Loss and loss adjustment expense paid ratio [2]
52.2
74.7
Loss and loss adjustment expense ratio
58.3
82.2
Prior accident year development (pts) [3]
(1.9)
0.4
[1]Includes the $787 settlement paid to the BSA on April 20, 2023. For further information, see "Settlement Agreement with Boy Scouts of America" in Note 10 -
Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.
[2]The “loss and loss adjustment expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income.
[3]“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
Current Accident Year Catastrophe Losses for the Year Ended December 31, 2023, Net of
Reinsurance
Business
Insurance
Personal
Insurance
Total
Wind and hail
$
278 $
214 $
492
Winter storms
68
15
83
Hurricanes and tropical storms
10
3
13
Wildfires
3
8
11
Other international
6
—
6
Catastrophes before assumed reinsurance
365
240
605
Global assumed reinsurance business [1]
71
—
71
Total catastrophe losses
$
436 $
240 $
676
[1]Catastrophe losses incurred on global assumed reinsurance business are not covered under the Company's aggregate property catastrophe treaty. For further
information on the treaty, refer to Enterprise Risk Management — Insurance Risk section of this MD&A.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
56
Unfavorable (Favorable) Prior Accident Year Development for the Year Ended December 31, 2023
Business
Insurance
Personal
Insurance
Property &
Casualty Other
Operations
Total Property
& Casualty
Insurance
Workers’ compensation
$
(236) $
— $
— $
(236)
Workers’ compensation discount accretion
42
—
—
42
General liability
41
—
—
41
Marine
(2)
—
—
(2)
Package business
(24)
—
—
(24)
Commercial property
(7)
—
—
(7)
Professional liability
(2)
—
—
(2)
Bond
(27)
—
—
(27)
Assumed reinsurance
34
—
—
34
Automobile liability
20
—
—
20
Homeowners
—
(6)
—
(6)
Net asbestos and environmental reserves [1]
—
—
—
—
Catastrophes
(83)
(4)
—
(87)
Uncollectible reinsurance
7
1
5
13
Other reserve re-estimates, net [2]
12
20
25
57
Prior accident year development before change in
deferred gain
(225)
11
30
(184)
Change in deferred gain on retroactive reinsurance included
in other liabilities [1]
—
—
194
194
Total prior accident year development
$
(225) $
11 $
224 $
10
[1]The year ended December 31, 2023 included $194 of adverse development on net asbestos and environmental reserves that was ceded to NICO but for which the
Company recorded a deferred gain on retroactive reinsurance.
[2]Other reserve re-estimates for the year ended December 31, 2023 includes a $22 increase in personal automobile physical damage reserves.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
57
Rollforward of Property and Casualty Insurance Product Liabilities for Unpaid Losses and LAE for the
Year Ended December 31, 2022
Business
Insurance
Personal
Insurance
Property &
Casualty Other
Operations
Total Property
& Casualty
Insurance
Beginning liabilities for unpaid losses and loss adjustment
expenses, gross
$
26,906 $
1,844 $
2,699 $
31,449
Reinsurance and other recoverables
4,480
37
1,564
6,081
Beginning liabilities for unpaid losses and loss adjustment
expenses, net
22,426
1,807
1,135
25,368
Provision for unpaid losses and loss adjustment expenses
Current accident year before catastrophes
5,959
1,969
—
7,928
Current accident year catastrophes
441
208
—
649
Prior accident year development [1]
(231)
(13)
280
36
Total provision for unpaid losses and loss adjustment
expenses
6,169
2,164
280
8,613
Change in deferred gain on retroactive reinsurance included in
other liabilities
—
—
(229)
(229)
Payments
(4,684)
(2,142)
(276)
(7,102)
Foreign currency adjustment
(32)
—
—
(32)
Ending liabilities for unpaid losses and loss adjustment
expenses, net
23,879
1,829
910
26,618
Reinsurance and other recoverables
4,574
28
1,863
6,465
Ending liabilities for unpaid losses and loss adjustment
expenses, gross
$
28,453 $
1,857 $
2,773 $
33,083
Earned premiums and fee income
$
10,610 $
2,979
Loss and loss adjustment expense paid ratio [1]
44.1
71.9
Loss and loss adjustment expense ratio
58.4
73.4
Prior accident year development (pts) [2]
(2.2)
(0.4)
[1]The “loss and loss adjustment expense paid ratio” represents the ratio of paid losses and loss adjustment expenses to earned premiums and fee income.
[2]“Prior accident year development (pts)” represents the ratio of prior accident year development to earned premiums.
Current Accident Year Catastrophe Losses for the Year Ended December 31, 2022, Net of Reinsurance
Business
Insurance
Personal
Insurance
Total
Wind and hail
$
107 $
104 $
211
Winter storms [1]
163
21
184
Hurricanes and Tropical Storms [2]
74
80
154
Wildfires
—
3
3
Ukraine conflict [3]
23
—
23
Other international
1
—
1
Catastrophes before assumed reinsurance
368
208
576
Global assumed reinsurance business [1] [2] [3]
73
—
73
Total catastrophe losses
$
441 $
208 $
649
[1]Includes losses from Winter Storm Elliott of $167, including $3 in the global assumed reinsurance business. Gross losses from Winter Storm Elliott of $202 were
partially offset by a $35 reinsurance recoverable since, under a per occurrence property catastrophe treaty layer covering losses from earthquakes and named
storms other than hurricanes and tropical storms, the Company is able to cede 70% of up to $250 in excess of a $100 attachment point subject to a $50 annual
aggregate deductible.
[2]Includes losses from Hurricane Ian of $186, net of reinsurance, including $35 of hurricane losses in the global assumed reinsurance business.
[3]Total catastrophe losses resulting from the Ukraine conflict were $27, net of reinsurance, including $4 within global assumed reinsurance, all in the first quarter,
which included exposures under political violence and terrorism policies, including aviation war, as well as credit and political risk insurance policies.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
58
Unfavorable (Favorable) Prior Accident Year Development for the Year Ended December 31, 2022
Business
Insurance
Personal
Insurance
Property &
Casualty Other
Operations
Total Property
& Casualty
Insurance
Workers’ compensation
$
(204) $
— $
— $
(204)
Workers’ compensation discount accretion
36
—
—
36
General liability
25
—
31
56
Marine
2
—
—
2
Package business
(39)
—
—
(39)
Commercial property
(11)
—
—
(11)
Professional liability
(11)
—
—
(11)
Bond
(32)
—
—
(32)
Assumed reinsurance
19
—
—
19
Automobile liability
38
(14)
—
24
Homeowners
—
(1)
—
(1)
Net asbestos and environmental reserves [1]
—
—
—
—
Catastrophes
(60)
(2)
—
(62)
Uncollectible reinsurance
(1)
(2)
6
3
Other reserve re-estimates, net
7
6
14
27
Prior accident year development before change in
deferred gain
(231)
(13)
51
(193)
Change in deferred gain on retroactive reinsurance included
in other liabilities [1]
—
—
229
229
Total prior accident year development
$
(231) $
(13) $
280 $
36
[1]The year ended December 31, 2022 included $229 of adverse development on net asbestos and environmental reserves that was ceded to NICO but for which the
Company recorded a deferred gain on retroactive reinsurance.
For discussion of the factors contributing to unfavorable
(favorable) for the prior accident year reserve development
2024, 2023, and 2022 periods, refer to Note 10 - Reserve for
Unpaid Losses and Loss Adjustment Expenses of Notes to
Consolidated Financial Statements.
|PROPERTY & CASUALTY OTHER OPERATIONS
Net reserves and reserve activity in Property & Casualty Other
Operations are categorized and reported as asbestos,
environmental, and “all other”. The “all other” category of
reserves covers a wide range of insurance and assumed
reinsurance coverages, including, but not limited to, potential
liability for lead paint, silica, pharmaceutical products, head
injuries, sexual molestation and sexual abuse and other long-tail
liabilities. In addition to various insurance and assumed
reinsurance exposures, "all other" includes unallocated loss
adjustment expense reserves. "All other" also includes the
Company’s allowance for uncollectible reinsurance. When the
Company commutes a ceded reinsurance contract or settles a
ceded reinsurance dispute, net reserves for the related cause of
loss (including asbestos, environmental or all other) are
increased for the portion of the allowance for uncollectible
reinsurance attributable to that commutation or settlement.
Asbestos and Environmental
Reserves
The vast majority of the Company's exposure to A&E relates to
policy coverages provided prior to 1986 and is reported within
the P&C Other Operations segment (“Run-off A&E”). In addition,
since 1986 the Company has written A&E exposures under
general liability policies and pollution liability under homeowners
policies, which are reported in the Business Insurance and
Personal Insurance segments, respectively.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
59
Run-off A&E Summary as of December 31, 2024
Asbestos
Environmental
Total Run-off A&E
Gross
Direct
$
1,415 $
372 $
1,787
Assumed Reinsurance
444
65
509
Total
1,859
437
2,296
Ceded- other than NICO
(474)
(60)
(534)
Total net reserves, before ceded losses to NICO and intersegment
balances
$
1,385 $
377
1,762
Ceded - NICO A&E ADC "Run-off" and intersegment balances [1]
(1,538)
Net
$
224
[1]Including $1,538 of ceded losses for Run-off A&E and a $38 reduction in ceded losses for Business Insurance and Personal Insurance, cumulative net incurred
losses of $1,500 have been ceded to NICO under an adverse development cover reinsurance agreement. See the section that follows entitled A&E Adverse
Development Cover for additional information.
Rollforward of Run-off A&E Losses and LAE
Asbestos
Environmental
Total Run-off
A&E
2024
Beginning net reserves before reinsurance recoverable from NICO
$
1,337 $
387 $
1,724
Losses and loss adjustment expenses incurred before ceding to NICO A&E ADC
167
36
203
Losses and loss adjustment expenses paid
(120)
(49)
(169)
Reclassification of allowance for uncollectible reinsurance [1]
1
3
4
Ending net reserves before reinsurance recoverable from NICO and
intersegment balances
$
1,385 $
377
1,762
Reinsurance recoverable from NICO A&E ADC and intersegment balances
(1,538)
Ending net reserves
$
224
2023
Beginning net reserves before reinsurance recoverable from NICO
$
1,298 $
374 $
1,672
Losses and loss adjustment expenses incurred before ceding to NICO A&E ADC
156
38
194
Losses and loss adjustment expenses paid
(120)
(25)
(145)
Reclassification of allowance for uncollectible reinsurance [1]
3
—
3
Ending net reserves before reinsurance recoverable from NICO and
intersegment balances
$
1,337 $
387
1,724
Reinsurance recoverable from NICO A&E ADC and intersegment balances
(1,476)
Ending net reserves
$
248
2022
Beginning net reserves before reinsurance recoverable from NICO
$
1,263 $
394 $
1,657
Losses and loss adjustment expenses incurred before ceding to NICO A&E ADC
161
68
229
Losses and loss adjustment expenses paid
(128)
(89)
(217)
Reclassification of allowance for uncollectible reinsurance [1]
2
1
3
Ending net reserves before reinsurance recoverable from NICO and
intersegment balances
$
1,298 $
374
1,672
Reinsurance recoverable from NICO A&E ADC and intersegment balances
(1,282)
Ending liability — net
$
390
[1]Related to the reclassification of an allowance for uncollectible reinsurance from the "all other" category of P&C Other Operations reserves.
A&E Adverse Development Cover
Effective December 31, 2016, the Company entered into an
A&E ADC reinsurance agreement with NICO to reduce
uncertainty about potential adverse development. Under the
A&E ADC, the Company paid a reinsurance premium of $650
for NICO to assume adverse net loss and allocated loss
adjustment expense reserve development up to $1.5 billion
above the Company’s existing net A&E reserves as of
December 31, 2016 of approximately $1.7 billion, including both
Run-off A&E and A&E reserves in Business Insurance and
Personal Insurance. The $650 reinsurance premium was placed
in a collateral trust account as security for NICO’s claim
payment obligations to the Company. The Company has
retained the risk of collection on amounts due from other third-
party reinsurers and continues to be responsible for claims
handling and other administrative services, subject to certain
conditions. The A&E ADC covered substantially all the
Company’s A&E reserve development up to the reinsurance
limit, which as of December 31, 2024, has been exhausted.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
60
Under retroactive reinsurance accounting, net adverse A&E
reserve development after December 31, 2016 results in an
offsetting reinsurance recoverable up to the $1.5 billion
limit. Cumulative ceded losses up to the $650 reinsurance
premium paid have been recognized as a dollar-for-dollar offset
to direct losses incurred. Cumulative ceded losses exceeding
the $650 reinsurance premium paid have resulted in a deferred
gain. As of December 31, 2024, the Company has exhausted
the treaty limit and incurred a cumulative $1.5 billion in adverse
development on A&E reserves that have been ceded under the
A&E ADC treaty with NICO, including $1,538 for Run-off A&E
reserves, partially offset by a $38 reduction for A&E reserves in
Business Insurance and Personal Insurance. As such, no
remaining coverage is available for any future adverse net
reserve development, which may be significant. The Company
has recorded a $850 deferred gain within other liabilities,
representing the difference between the reinsurance
recoverable of $1.5 billion and ceded premium paid of $650.
Recoveries from NICO will be collected once the Company has
paid cumulative losses in excess of the $1.7 billion attachment
point. The deferred gain will be recognized over the claim
settlement period in the proportion of the amount of cumulative
ceded losses collected from the reinsurer to the estimated
ultimate reinsurance recoveries.
Net and Gross Survival Ratios
Net and gross survival ratios are a measure of the quotient of
the carried reserves divided by average annual payments (net of
reinsurance and on a gross basis) and is an indication of the
number of years that carried reserves would last (i.e., survive) if
future annual payments were consistent with the calculated
historical average.
Since December 31, 2016, asbestos and environmental net
reserves have been declining since all adverse development
has been ceded to NICO, up to the limit of $1.5 billion, and the
deferred gain on retroactive reinsurance has been recorded
within other liabilities rather than in net loss and loss adjustment
expense reserves. Recoveries from NICO will not be collected
until the Company has cumulative loss payments of more than
the attachment point of $1.7 billion, which was based on the
carrying value of net reserves as of December 31, 2016.
Accordingly, the payment of losses without any current
collection of recoveries from NICO has reduced the Company’s
net loss reserves which decreases the net survival ratios such
that, unadjusted, the net survival ratios would not be
representative of the true number of years of average loss
payments covered by the reserves. Therefore, the net survival
ratios presented in the table below are calculated before
considering the effect of the A&E ADC reinsurance agreement
but net of other reinsurance in place.
Net and Gross Survival Ratios
Asbestos Environmental
One year net survival ratio
11.5
7.7
Three year net survival ratio
11.3
6.9
One year gross survival ratio
11.7
5.8
Three year gross survival ratio
11.4
6.4
Run-off A&E Paid and Incurred Losses and LAE Development
Asbestos
Environmental
Total A&E
Paid Losses &
LAE
Incurred
Losses & LAE
Paid Losses &
LAE
Incurred
Losses & LAE
Paid Losses &
LAE
Incurred
Losses & LAE
2024
Gross
$
159 $
206 $
75 $
49 $
234 $
255
Ceded- other than NICO
(39)
(39)
(26)
(13)
(65)
(52)
Net - Gross of ADC
$
120 $
167 $
49 $
36
169
203
Ceded - NICO A&E ADC
—
(62)
Net
$
169 $
141
2023
Gross
$
171 $
206 $
24 $
49 $
195 $
255
Ceded- other than NICO
(51)
(50)
1
(11)
(50)
(61)
Net - Gross of ADC
$
120 $
156 $
25 $
38
145
194
Ceded - NICO A&E ADC
—
(194)
Net
$
145 $
—
2022
Gross
$
160 $
227 $
106 $
80 $
266 $
307
Ceded- other than NICO
(32)
(66)
(17)
(12)
(49)
(78)
Net - Gross of ADC
$
128 $
161 $
89 $
68
217
229
Ceded - NICO A&E ADC
—
(229)
Net
$
217 $
—
Annual Reserve Reviews
Review of Asbestos and Environmental
Reserves
The Company performs its regular comprehensive annual
review of asbestos and environmental reserves in the fourth
quarter, including both Run-off A&E (P&C Other Operations) and
asbestos and environmental reserves included in Business
Insurance and Personal Insurance. As part of the evaluation of
asbestos and environmental reserves in the fourth quarter of
2024, the Company reviewed all of its open direct domestic
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
61
insurance accounts exposed to asbestos and environmental
liability, as well as assumed reinsurance accounts.
2024 comprehensive annual reviews
As a result of the 2024 fourth quarter review, the Company
increased asbestos reserves before NICO reinsurance by $167
in P&C Other Operations, primarily driven by higher-than-
expected frequency, higher settlement values for certain
accounts, an increase in the Company’s share of liability due to
insolvencies and cost sharing agreements and an increase in
claim settlement rates.
As a result of the 2024 fourth quarter review, the Company
increased environmental reserves before NICO reinsurance by
$36 in P&C Other Operations, primarily due to higher severity
on recently emerged accounts, higher environmental site
cleanup and monitoring costs, and higher legal expenses.
The total $203 increase in asbestos and environmental reserves
was charged to earnings in 2024 within P&C Other Operations,
which includes $62 that was ceded to the NICO ADC and
recorded as a deferred gain under retroactive reinsurance
accounting. As of December 31, 2024, the Company has ceded
the cumulative treaty limit of $1.5 billion and as such, any future
adverse development will be charged to earnings.
2023 comprehensive annual reviews
As a result of the 2023 fourth quarter review, the Company
increased asbestos reserves before NICO reinsurance by $156
in P&C Other Operations, primarily driven by an increase in the
Company’s share of liability due to insolvencies and cost
sharing agreements, an increase in claim settlement rates, as
well as higher defense costs. The increase in asbestos reserves
was offset by a $156 reinsurance recoverable under the NICO
treaty.
As a result of the 2023 fourth quarter review, the Company
increased environmental reserves before NICO reinsurance by
$38 in P&C Other Operations, primarily due to higher severity
on recently emerged accounts, higher environmental site
cleanup and monitoring costs, including increased estimates of
liability for PFAS exposures, and higher legal expenses. The
increase in environmental reserves was offset by a $38
reinsurance recoverable under the NICO treaty.
The total $194 increase in asbestos and environmental reserves
in P&C Other Operations was offset by a $194 reinsurance
recoverable under the NICO treaty. Since cumulative losses
ceded to the A&E ADC exceed the $650 of ceded premium paid,
the Company recognized a $194 increase in deferred gain on
retroactive reinsurance, resulting in the Company recording a
charge to earnings of $194 in 2023.
For information regarding the 2022 comprehensive annual
review, refer to Part II, Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations in The
Hartford’s 2023 Annual Report.
Review of "All Other" Reserves in Property &
Casualty Other Operations
Prior year development on all other reserves resulted in
increases of $16, $30 and $51, respectively for calendar years
2024, 2023 and 2022. Included in the 2024 adverse reserve
development was an increase in ULAE reserves, primarily due
to an increase in expected aggregate claim handling costs
associated with asbestos and environmental claims.
The Company provides an allowance for uncollectible
reinsurance, reflecting management’s best estimate of
reinsurance cessions that may be uncollectible in the future due
to reinsurers’ unwillingness or inability to pay. In performing its
assessment, the Company evaluates the collectibility of the
reinsurance recoverables and the adequacy of the allowance for
uncollectible reinsurance associated with older, long-term
casualty liabilities reported in Property & Casualty Other
Operations. In conducting these evaluations, the Company used
its most recent detailed evaluations of ceded liabilities reported
in the segment. The Company analyzed the overall credit quality
of the Company’s reinsurers, recent trends in arbitration and
litigation outcomes in disputes between cedants and reinsurers,
and recent developments in commutation activity between
reinsurers and cedants. As of 2024, 2023, and 2022 the
allowance for uncollectible reinsurance for Property & Casualty
Other Operations totaled $41, $53 and $56, respectively. Due to
the inherent uncertainties as to collection and the length of time
before reinsurance recoverables become due, particularly for
older, long-term casualty liabilities, it is possible that future
adjustments to the Company’s reinsurance recoverables, net of
the allowance, could be required.
|IMPACT OF RE-ESTIMATES ON PROPERTY & CASUALTY INSURANCE
PRODUCT RESERVES
Estimating property and casualty insurance product reserves
uses a variety of methods, assumptions and data elements.
Ultimate losses may vary materially from the current estimates.
Many factors can contribute to these variations and the need to
change the previous estimate of required reserve levels. Prior
accident year reserve development is generally due to the
emergence of additional facts that were not known or
anticipated at the time of the prior reserve estimate and/or due
to changes in interpretations of information and trends.
The table below shows the range of annual reserve re-estimates
experienced by The Hartford over the past ten years. The range
of prior accident year development shown in the table below is
net of losses ceded, including losses ceded under two adverse
development cover reinsurance agreements with NICO that are
accounted for as a deferred gain on retroactive reinsurance. The
amount of prior accident year development (as shown in the
reserve rollforward) for a given calendar year is expressed as a
percent of the beginning calendar year reserves, net of
reinsurance. The ranges presented are significantly influenced
by the facts and circumstances of each particular year and by
the fact that only the last ten years are included in the range.
Accordingly, these percentages are not intended to be a
prediction of the range of possible future variability. For further
discussion of the potential for variability in recorded loss
reserves, see Preferred Reserving Methods by Line of Business
and Impact of Key Assumptions on Reserves sections.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
62
Range of Prior Accident Year Unfavorable (Favorable) Development for the Ten Years Ended
December 31, 2024
Business
Insurance
Personal
Insurance
Property &
Casualty Other
Operations
Total Property &
Casualty [1]
Annual range of prior accident year unfavorable
(favorable) development for the ten years ended
December 31, 2024
(1.3%) - 0.4%
(20.5%) - 8.3%
0.9% - 21.6%
(1.9%) - 2.4%
[1]Excluding the reserve increases for asbestos and environmental reserves, over the past ten years, reserve re-estimates for total property and casualty insurance
ranged from (1.9%) to 1.0%.
The potential variability of the Company’s property and casualty
insurance product reserves would normally be expected to vary
by segment and the types of loss exposures insured by those
segments. Illustrative factors influencing the potential reserve
variability for each of the segments are discussed under Critical
Accounting Estimates for Property & Casualty Insurance
Product Reserves and Asbestos and Environmental Reserves.
See the section entitled Property & Casualty Other Operations,
Annual Reserve Reviews about the impact that the A&E ADC
retroactive reinsurance agreement with NICO has on net
reserve changes of asbestos and environmental reserves.
|EMPLOYEE BENEFIT LTD RESERVES, NET OF REINSURANCE
The Company establishes reserves for group life and accident &
health contracts, including long-term disability coverage, for both
reported claims and claims related to insured events that the
Company estimates have been incurred but have not yet been
reported. As long-term disability reserves are long-tail claim
liabilities, they are discounted because the payment pattern and
the ultimate costs are reasonably fixed and determinable on an
individual claim basis. The Company held $6,609 and $6,619 of
LTD unpaid losses and loss adjustment expenses, net of
reinsurance, as of December 31, 2024 and 2023, respectively.
Reserving Methodology
How Reserves are Set - A Disabled Life Reserve ("DLR")
is calculated for each LTD claim. The DLR for each claim is the
expected present value of all future benefit payments starting
with the known monthly gross benefit which is reduced for
estimates of the expected claim recovery due to return to work
or claimant death, offsets from other income including offsets
from Social Security benefits, and discounting, where the
discount rate is tied to expected investment yield at the time the
claim is incurred. Estimated future benefit payments represent
the monthly income benefit that is paid until recovery, death or
expiration of benefits. Claim recoveries are estimated based on
claim characteristics such as age and diagnosis and represent
an estimate of benefits that will terminate, generally as a result
of the claimant returning to work or being deemed able to return
to work. For claims recently closed due to recovery, a portion of
the DLR is retained for the possibility that the claim reopens
upon further evidence of disability. In addition, a reserve for
estimated unpaid claim expenses is included in the DLR.
The DLR also includes a liability for potential payments to
pending claimants beyond the elimination period who have not
yet been approved for LTD. In these cases, the present value of
future benefits is reduced for the likelihood of claim denial based
on Company experience.
Estimates for IBNR claims are made by applying completion
factors to expected emerged experience by line of business.
Included within IBNR are bulk reserves for claims reported but
still within the waiting period until benefits are paid, typically 3 or
6 months depending on the contract. Completion factors are
derived from standard actuarial techniques using triangles that
display historical claim count emergence by incurral month.
These estimates are reviewed for reasonableness and are
adjusted for current trends and other factors expected to cause
a change in claim emergence. The reserves include an estimate
of unpaid claim expenses, including a provision for the cost of
initial set-up of the claim once reported.
For all products, including LTD, there is a period generally
ranging from two to twelve months, depending on the product
and line of business, where emerged claims for an incurral year
are not yet credible enough to be a basis for estimating
reserves. In these cases, the ultimate loss is estimated using
earned premium multiplied by an expected loss ratio based on
pricing assumptions of claim incidence, claim severity, and
earned pricing adjusted for emerging trends as needed.
Impact of Key Assumptions on
Reserves
The key assumptions affecting long-term disability, which is the
largest reserve within Employee Benefits, include:
Discount Rate - The discount rate is the interest rate at
which expected future claim cash flows are discounted to
determine the present value. A higher selected discount rate
results in a lower reserve. If the discount rate is higher than our
future investment returns, our invested assets will not earn
enough investment income to cover the discount accretion on
our claim reserves which would negatively affect our profits. For
each incurral year, the discount rates are estimated based on
investment yields expected to be earned net of investment
expenses. The incurral year is the year in which the claim is
incurred and the estimated settlement pattern is determined.
Once established, discount rates for each incurral year are
unchanged except that LTD reserves assumed from the
acquisition of Aetna's U.S. group life and disability business are
all discounted using rates as of the November 1, 2017
acquisition date. The weighted average discount rate on LTD
reserves was 3.3% and 3.2% in 2024 and 2023, respectively.
Had the discount rate for each incurral year been 10 basis
points lower at the time they were established, our LTD unpaid
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
63
loss and loss adjustment expense reserves would be higher by
$30, before tax, as of December 31, 2024.
Claim Termination Rates (inclusive of mortality,
recoveries, and expiration of benefits) - Claim
termination rates are an estimate of the rate at which claimants
will cease receiving benefits during a given calendar year.
Terminations result from a number of factors, including death,
recoveries and expiration of benefits. The probability that
benefits will terminate in each future month for each claim is
estimated using a predictive model that uses past Company
experience, contract provisions, job characteristics and other
claimant-specific characteristics such as diagnosis, time since
disability began, and age. Actual claim termination experience
will vary from period to period. Over the past 10 years, claim
termination rates for a single incurral year have generally
increased and have ranged from 7% below to 7% above current
assumptions over that time period. For a single recent incurral
year (such as 2024), a one percent decrease in our assumption
for LTD claim termination rates would increase our reserves by
$13. For all incurral years combined, as of December 31, 2024,
a one percent decrease in our assumption for our LTD claim
termination rates would increase our Employee Benefits unpaid
losses and loss adjustment expense reserves by $29.
Current Trends Contributing to
Reserve Uncertainty
We have observed delays in the Social Security Administration’s
processing of disability claims, which reduces or slows down the
recognition of offsets to claimant benefits. If we have a downturn
in the economy and/or in employment levels, we could
experience an increase in claim incidence on long-term disability
claims.
By investing in fixed income securities of similar duration to our
liabilities, we hedge our interest rate exposure over a three year
period at the time we price and sell long-term disability policies
given average three year rate guarantees. Our weighted
average discount rate assumption for the 2024 incurral year is
up from that of the 2023 incurral year.
|EVALUATION OF GOODWILL FOR IMPAIRMENT
Goodwill balances are reviewed for impairment at least annually,
or more frequently if events occur or circumstances change that
would indicate that a triggering event for a potential impairment
has occurred. The recognition and measurement of goodwill
impairment is based on the excess of the carrying value of the
reporting unit over its estimated fair value, up to the amount of
the reporting unit’s goodwill.
The estimated fair value of each reporting unit incorporates
multiple inputs into discounted cash flow calculations including
assumptions that market participants would make in valuing the
reporting unit. Assumptions include levels of economic capital,
future business growth, earnings projections, assets under
management for Hartford Funds and the weighted average cost
of capital used for purposes of discounting. Decreases in
business growth, decreases in earnings projections and
increases in the weighted average cost of capital will all cause a
reporting unit’s fair value to decrease, increasing the possibility
of impairment.
A reporting unit is defined as an operating segment or one level
below an operating segment. The Company’s reporting units to
which goodwill has been allocated consist of Business
Insurance, Personal Insurance, Employee Benefits and Hartford
Funds.
The annual goodwill assessment for the reporting units was
completed as of October 31, 2024, and resulted in no write-
downs of goodwill for the year ended December 31, 2024. All
reporting units passed the annual impairment test with a
significant margin. For information on goodwill see Note 9 -
Goodwill & Other Intangible Assets of Notes to Consolidated
Financial Statements.
|VALUATION OF INVESTMENTS AND DERIVATIVE INSTRUMENTS
Fixed Maturities, Equity Securities,
Short-term Investments, and
Derivatives
The Company generally determines fair values using valuation
techniques that use prices, rates, and other relevant information
evident from market transactions involving identical or similar
instruments. Valuation techniques also include, where
appropriate, estimates of future cash flows that are converted
into a single discounted amount using current market
expectations. The Company uses a "waterfall" approach
comprised of the following pricing sources which are listed in
priority order: quoted prices, prices from third-party pricing
services, internal matrix pricing, and independent broker quotes.
The fair values of derivative instruments are determined
primarily using a discounted cash flow model or option model
technique and incorporate counterparty credit risk. In some
cases, quoted market prices for exchange-traded transactions
and transactions cleared through central clearing houses
("OTC-cleared") may be used and in other cases independent
broker quotes may be used. For further discussion, see the
Fixed Maturities, Equity Securities, Short-term Investments and
Derivatives section in Note 4 - Fair Value Measurements of
Notes to Consolidated Financial Statements.
Evaluation of Credit Losses on
Fixed Maturities, AFS and ACL on
Mortgage Loans
Each quarter, a committee of investment and accounting
professionals evaluates investments to determine if a credit loss
is present for fixed maturities, AFS or an ACL is required for
mortgage loans. This evaluation is a quantitative and qualitative
process, which is subject to risks and uncertainties. For further
discussion of the accounting policies, see the Significant
Investment Accounting Policies Section in Note 1 - Basis of
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
64
Presentation and Significant Accounting Policies of Notes to
Consolidated Financial Statements. For a discussion of credit
losses recorded, see the Credit Losses on Fixed Maturities, AFS
and Intent-to-Sell Impairments and ACL on Mortgage Loans
sections within the Investment Portfolio Risks section of the
MD&A.
|CONTINGENCIES RELATING TO CORPORATE LITIGATION AND
REGULATORY MATTERS
Management evaluates each contingent matter separately. A
loss is recorded if probable and reasonably estimable.
Management establishes reserves for these contingencies at its
“best estimate,” or, if no one number within the range of possible
losses is more probable than any other, the Company records
an estimated reserve at the low end of the range of losses.
The Company has a quarterly monitoring process involving legal
and accounting professionals. Legal personnel first identify
outstanding corporate litigation and regulatory matters posing a
reasonable possibility of loss. These matters are then jointly
reviewed by accounting and legal personnel to evaluate the
facts and changes since the last review in order to determine if a
provision for loss should be recorded or adjusted, the amount
that should be recorded, and the appropriate disclosure. The
outcomes of certain contingencies currently being evaluated by
the Company, which relate to corporate litigation and regulatory
matters, are inherently difficult to predict, and the reserves that
have been established for the estimated settlement amounts are
subject to significant changes. Management expects that the
ultimate liability, if any, with respect to such lawsuits, after
consideration of provisions made for estimated losses, will not
be material to the consolidated financial condition of the
Company. In view of the uncertainties regarding the outcome of
these matters, as well as the tax-deductibility of payments, it is
possible that the ultimate cost to the Company of these matters
could exceed the reserve by an amount that would have a
material adverse effect on the Company’s consolidated results
of operations or liquidity in a particular quarterly or annual
period.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
65
REPORTABLE SEGMENT AND CORPORATE
OPERATING SUMMARIES
|BUSINESS INSURANCE - RESULTS OF OPERATIONS
Underwriting Summary
2024
2023
2022
Increase
(Decrease)
From 2023 to
2024
Increase
(Decrease)
From 2022 to
2023
Written premiums
$ 13,351 $ 12,279 $ 11,158
9%
10%
Change in unearned premium reserve
630
638
587
(1%)
9%
Earned premiums
12,721
11,641
10,571
9%
10%
Fee income
43
41
39
5%
5%
Losses and loss adjustment expenses
Current accident year before catastrophes
7,186
6,575
5,959
9%
10%
Current accident year catastrophes [1]
486
436
441
11%
(1%)
Prior accident year development [1]
(231)
(225)
(231)
(3%)
3%
Total losses and loss adjustment expenses
7,441
6,786
6,169
10%
10%
Amortization of DAC
1,993
1,779
1,563
12%
14%
Insurance operating costs
1,973
1,837
1,788
7%
3%
Amortization of other intangible assets
29
29
29
—%
—%
Dividends to policyholders
39
39
29
—%
34%
Underwriting gain
1,289
1,212
1,032
6%
17%
Net investment income [2]
1,714
1,532
1,415
12%
8%
Net realized losses [2]
(73)
(156)
(385)
53%
59%
Other income (expense) [3]
(5)
(1)
(12)
NM
92%
Income before income taxes
2,925
2,587
2,050
13%
26%
Income tax expense [4]
576
502
426
15%
18%
Net income
$
2,349 $
2,085 $
1,624
13%
28%
[1]For additional information on current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property and
Casualty Insurance Product Reserves Development, Net of Reinsurance and Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to
Consolidated Financial Statements.
[2]For discussion of consolidated investment results, see MD&A - Investment Results.
[3]Includes integration costs in connection with the 2019 acquisition of Navigators Group.
[4]For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
66
Premium Measures
2024
2023
2022
Small Business:
Net new business premium
$
1,101
$
915
$
768
Policy count retention
84 %
85 %
86 %
Renewal written price increases
6.4 %
4.6 %
3.8 %
Renewal earned price increases
6.1 %
4.3 %
3.5 %
Policies in-force as of end of period (in thousands)
1,570
1,492
1,421
Middle Market [1]:
Net new business premium
$
717
$
617
$
531
Premium retention
84 %
83 %
83 %
Renewal written price increases
6.9 %
7.2 %
5.6 %
Renewal earned price increases
7.5 %
6.5 %
5.7 %
Global Specialty:
Global specialty gross new business premium [2]
$
944
$
883
$
825
Renewal written price increases [3]
5.8 %
4.4 %
5.9 %
Renewal earned price increases [3]
5.9 %
5.4 %
9.3 %
[1]Except for net new business premium, metrics for middle market exclude loss sensitive and programs businesses.
[2]Excludes Global Re and is before ceded reinsurance.
[3]Excludes Global Re, offshore energy policies, credit and political risk insurance policies, political violence and terrorism ("PV&T") policies, and any business under
which the managing agent of our Lloyd's Syndicate delegates underwriting authority to coverholders and other third parties.
Underwriting Ratios
2024
2023
2022
Increase
(Decrease)
From 2023
to 2024
Increase
(Decrease)
From 2022
to 2023
Loss and loss adjustment expense ratio
58.5
58.3
58.4
0.2
(0.1)
Expense ratio
31.1
31.0
31.6
0.1
(0.6)
Policyholder dividend ratio
0.3
0.3
0.3
—
—
Combined ratio
89.9
89.6
90.2
0.3
(0.6)
Adjustment to reconcile combined ratio to underlying combined ratio:
Current accident year catastrophes and prior year development
(2.0)
(1.8)
(2.0)
(0.2)
0.2
Underlying combined ratio
87.9
87.8
88.3
0.1
(0.5)
Underlying loss and loss adjustment expense ratio
56.5
56.5
56.4
—
0.1
Current accident year catastrophes
3.8
3.7
4.2
0.1
(0.5)
Prior accident year development
(1.8)
(1.9)
(2.2)
0.1
0.3
Total loss and loss adjustment expense ratio
58.5
58.3
58.4
0.2
(0.1)
Loss and loss adjustment expense ratio
58.5
58.3
58.4
0.2
(0.1)
Adjustment to reconcile loss and loss adjustment expense ratio to
underlying loss and loss adjustment expense ratio:
Current accident year catastrophes and prior year development
(2.0)
(1.8)
(2.0)
(0.2)
0.2
Underlying loss and loss adjustment expense ratio
56.5
56.5
56.4
—
0.1
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
67
Net Income
$1,624
$2,085
$2,349
2022
2023
2024
$0
$500
$1,000
$1,500
$2,000
$2,500
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Net income increased primarily due to higher net investment
income, lower net realized losses and a higher underwriting
gain. For further discussion of investment results, see MD&A -
Investment Results.
Underwriting Gain
$1,032
$1,212
$1,289
2022
2023
2024
$0
$500
$1,000
$1,500
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Underwriting gain increased due to the effect of earned
premium growth and slightly higher favorable prior accident year
development, including $145 of a benefit for amortization of a
deferred gain on the Navigators ADC in the current year period.
Expense ratio increased modestly as higher staffing costs,
including higher incentive compensation and benefits costs, and
higher commissions were largely offset by the impact of higher
earned premium.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
68
Earned Premiums
$10,571
11,641
$12,721
$4,379
$4,801
$5,210
$3,494
$3,806
$4,151
$2,652
$2,982
$3,303
Small Business
Middle & Large Business
Global Specialty
Other [1]
2022
2023
2024
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
[1]Other of $46, $52 and $57 for 2022, 2023 and 2024, respectively, is
included in the total.
Written Premiums
11,158
12,279
13,351
$4,586
$5,033
$5,475
$3,650
$3,989
$4,332
$2,876
$3,205
$3,486
Small Business
Middle & Large Business
Global Specialty
Other [1]
2022
2023
2024
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
[1]Other written premiums of $46, $52 and $58 for the year ended
December 31, 2022, 2023 and 2024, respectively, is included in the total.
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Earned premiums increased in 2024 due to written
premium increases over the prior twelve months, including the
effect of higher insured exposures, principally in workers’
compensation and property lines.
Written premiums increased in 2024 driven by growth
across small business, middle & large business and global
specialty.
•
Small business written premium increased driven by
double-digit new business growth, renewal written price
increases in all lines and higher insured exposures. Written
premium grew in nearly all lines of business, including
package business, excess and surplus and automobile.
•
Middle & large business written premium increased driven
by double-digit new business growth, renewal written price
increases in all lines and higher insured exposures. Written
premium grew in nearly all lines across industry verticals,
specialty markets, general industries and large property.
•
Global specialty written premium increased driven by
written price increases across almost all lines as well as an
increase in gross new business, primarily in U.S. and
international casualty insurance lines. Written premiums
also grew in global reinsurance, primarily in property and
liability.
Renewal written price increases were recognized in most
lines other than directors and officers ("D&O").
•
In small business, renewal written price increases were
higher in 2024, with accelerating double-digit price
increases in package business and automobile and
moderating double-digit price increases in excess and
surplus lines. Workers' compensation pricing was slightly
positive and consistent with 2023.
•
In middle market, renewal written price increases were
generally flat to 2023, with high single-digit to low double-
digit price increases in most lines other than workers’
compensation, which was slightly positive. Property pricing
has moderated from elevated levels in 2023 while
automobile pricing has accelerated.
•
In global specialty, U.S. price increases were higher than
prior year levels and we achieved mid single-digit renewal
written price increases overall, with high single to low
double-digit increases in marine, casualty and auto lines.
D&O pricing continues to be negative, but to a lesser extent
than the prior year.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
69
Underlying Loss and LAE Ratio
56.4
56.5
56.5
2022
2023
2024
0
25
50
75
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Underlying Loss and LAE ratio was flat in 2024 as a
higher general liability loss ratio was offset by lower net non-
catastrophe property losses.
Catastrophes and Unfavorable (Favorable) Prior
Accident Year Development
$441
$436
$486
$(231)
$(225)
$(231)
CAY CATs
PYD
2022
2023
2024
$-300
$-200
$-100
$0
$100
$200
$300
$400
$500
Year ended December 31, 2024 compared to the
year ended December 31, 2023
Current accident year catastrophe losses for 2024
included losses from tornado, wind and hail events across
several regions of the United States, as well as hurricanes and
tropical storms primarily in the Southeast and South regions,
and, to a lesser extent, winter storms mainly in the Pacific,
Northeast and South regions.
Current accident year catastrophe losses for 2023 included
losses from tornado, wind and hail events across several
regions of the United States, and losses from winter storms
along the East and West coasts.
Prior accident year development was net favorable for
2024 and included reserve decreases for workers'
compensation, catastrophes, bond and professional liability,
partially offset by reserve increases for general liability,
automobile liability and assumed reinsurance. Also included is a
benefit of $145 related to amortization of the Navigators ADC
deferred gain. For additional information regarding the ADC
reinsurance agreement, refer to Note 10 - Reserve for Unpaid
Losses and Loss Adjustment Expenses of Notes to the
Consolidated Financial Statements.
Prior accident year development was net favorable for 2023 and
included reserve decreases for workers' compensation,
catastrophes, bond and package business, partially offset by
reserve increases for general liability, assumed reinsurance and
automobile liability.
2025 Outlook
In 2025, the Company expects written premium growth to arise
from new business, including from expanding addressable
markets and distribution, and increases in written pricing in
nearly all lines of business. While we anticipate slight, pricing-
related headwinds in workers’ compensation margins in 2025,
we expect to generate earned pricing in excess of loss trends in
the remainder of Business Insurance.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
70
| PERSONAL INSURANCE - RESULTS OF OPERATIONS
Underwriting Summary
2024
2023
2022
Increase
(Decrease)
From 2023 to
2024
Increase
(Decrease)
From 2022 to
2023
Written premiums
$
3,598 $
3,198 $
2,961
13%
8%
Change in unearned premium reserve
145
111
12
31%
NM
Earned premiums
3,453
3,087
2,949
12%
5%
Fee income
33
30
30
10%
—%
Losses and loss adjustment expenses
Current accident year before catastrophes
2,351
2,287
1,969
3%
16%
Current accident year catastrophes [1]
282
240
208
18%
15%
Prior accident year development [1]
(108)
11
(13)
NM
NM
Total losses and loss adjustment expenses
2,525
2,538
2,164
(1%)
17%
Amortization of DAC
255
231
228
10%
1%
Insurance operating costs
673
576
594
17%
(3%)
Amortization of other intangible assets
2
2
2
—%
—%
Underwriting gain (loss)
31
(230)
(9)
NM
NM
Net investment income [2]
222
171
140
30%
22%
Net realized losses [2]
(14)
(16)
(35)
13%
54%
Net servicing and other income (expense) [3]
18
21
17
(14%)
24%
Income (loss) before income taxes
257
(54)
113
NM
NM
Income tax expense (benefit) [4]
49
(15)
22
NM
NM
Net income (loss)
$
208 $
(39) $
91
NM
NM
[1]For discussion of current accident year catastrophes and prior accident year development, see MD&A - Critical Accounting Estimates, Property and Casualty
Insurance Product Reserves, Net of Reinsurance and Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial
Statements.
[2]For discussion of consolidated investment results, see MD&A - Investment Results.
[3]Includes servicing revenues of $85, $81, and $73 for 2024, 2023, and 2022, respectively and includes servicing expenses of $66, $60, and $55 for 2024, 2023,
and 2022, respectively.
[4]For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
Written and Earned Premiums
Written Premiums
2024
2023
2022
Increase
(Decrease)
From 2023 to
2024
Increase
(Decrease)
From 2022 to
2023
Product Line
Automobile
$
2,456 $
2,213 $
2,020
11%
10%
Homeowners
1,142
985
941
16%
5%
Total
$
3,598 $
3,198 $
2,961
13%
8%
Earned Premiums
Product Line
Automobile
$
2,401 $
2,134 $
2,025
13%
5%
Homeowners
1,052
953
924
10%
3%
Total
$
3,453 $
3,087 $
2,949
12%
5%
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
71
Premium Measures
2024
2023
2022
Policies in-force end of period (in thousands)
Automobile
1,171
1,257
1,323
Homeowners
712
704
740
New business written premium
Automobile
$
314
$
224
$
227
Homeowners
$
200
$
93
$
74
Policy count retention
Automobile
83 %
85 %
84 %
Homeowners
84 %
84 %
84 %
Effective policy count retention
Automobile
80 %
83 %
86 %
Homeowners
83 %
84 %
85 %
Renewal written price increase
Automobile
22.1 %
16.3 %
4.5 %
Homeowners
14.8 %
14.2 %
10.7 %
Renewal earned price increase
Automobile
21.4 %
10.5 %
3.2 %
Homeowners
14.7 %
12.9 %
8.9 %
Underwriting Ratios
2024
2023
2022
Increase
(Decrease)
From 2023
to 2024
Increase
(Decrease)
From 2022
to 2023
Loss and loss adjustment expense ratio
73.1
82.2
73.4
(9.1)
8.8
Expense Ratio
26.0
25.2
26.9
0.8
(1.7)
Combined Ratio
99.1
107.5
100.3
(8.4)
7.2
Adjustment to reconcile combined ratio to underlying combined ratio:
Current accident year catastrophes and prior year development
(5.1)
(8.2)
(6.7)
3.1
(1.5)
Underlying combined ratio
94.1
99.3
93.7
(5.2)
5.6
Underlying loss and loss adjustment expense ratio
68.1
74.1
66.8
(6.0)
7.3
Current accident year catastrophes
8.2
7.8
7.1
0.4
0.7
Prior accident year development
(3.1)
0.4
(0.4)
(3.5)
0.8
Total loss and loss adjustment expense ratio
73.1
82.2
73.4
(9.1)
8.8
Loss and loss adjustment expense ratio
73.1
82.2
73.4
(9.1)
8.8
Adjustment to reconcile loss and loss adjustment expense ratio to
underlying loss and loss adjustment expense ratio:
Current accident year catastrophes and prior year development
(5.1)
(8.2)
(6.7)
3.1
(1.5)
Underlying loss and loss adjustment expense ratio
68.1
74.1
66.8
(6.0)
7.3
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
72
Product Combined Ratios
2024
2023
2022
Increase
(Decrease)
From 2023 to
2024
Increase
(Decrease)
From 2022 to
2023
Automobile
Combined ratio
103.3
112.8
104.1
(9.5)
8.7
Adjustment to reconcile combined ratio to
underlying combined ratio:
Current accident year catastrophes
(2.6)
(1.8)
(3.5)
(0.8)
1.7
Prior accident year development
2.8
(1.1)
0.7
3.9
(1.8)
Underlying combined ratio
103.4
109.8
101.3
(6.4)
8.5
Homeowners
Combined ratio
90.1
96.4
92.2
(6.3)
4.2
Adjustment to reconcile combined ratio to
underlying combined ratio:
Current accident year catastrophes
(20.9)
(21.1)
(14.9)
0.2
(6.2)
Prior accident year development
3.5
0.6
(0.3)
2.9
0.9
Underlying combined ratio
72.7
75.9
77.0
(3.2)
(1.1)
Net Income (Loss)
$91
$(39)
$208
2022
2023
2024
$-100
$0
$100
$200
$300
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Net income changed to a net gain compared to a net loss for
the prior year, largely driven by improved underwriting results
and an increase in net investment income.
Underwriting Gain (Loss)
$(9)
$(230)
$31
2022
2023
2024
$-300
$-200
$-100
$0
$100
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Underwriting gain changed to a net gain compared to a
net loss for the prior year, driven by a decrease in the underlying
loss and LAE ratio, the effect of an increase in earned premium
due to renewal written price increases, and a change from
unfavorable to favorable prior accident year development,
partially offset by an increase in current accident year
catastrophe losses, and an increase in insurance operating
costs.
Expense ratio increased primarily due to higher direct
marketing costs, higher incentive compensation and benefits
costs, and higher commissions, partially offset by the impact of
higher earned premium.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
73
Earned Premiums
$2,949
$3,087
$3,453
$924
$953
$1,052
$2,025
$2,134
$2,401
Homeowners
Automobile
2022
2023
2024
$0
$1,200
$2,400
$3,600
Written Premiums
$2,961
$3,198
$3,598
$941
$985
$1,142
$2,020
$2,213
$2,456
Homeowners
Automobile
2022
2023
2024
$0
$1,200
$2,400
$3,600
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Earned premiums increased in 2024 due to higher written
premium over the prior twelve months in both automobile and
homeowners.
Written premiums increased in 2024 driven by the effect of
written pricing increases and by an increase in new business
premium in both automobile and homeowners.
Renewal written pricing increases were higher for both
automobile and homeowners in 2024 primarily in response to
recent elevated loss cost trends as well as higher insured values
in homeowners.
Policy count retention decreased for automobile and was
stable for homeowners in 2024, in response to renewal written
pricing increases.
Effective policy count retention decreased both for
automobile and homeowners in 2024, in response to renewal
written pricing increases.
Policies in-force as of the end of 2024 declined since 2023
for automobile and increased for homeowners, reflecting the
level of new business in relation to non-renewed policies.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
74
Underlying Loss and Loss Adjustment Expense
Ratio
66.8
74.1
68.1
2022
2023
2024
0
20
40
60
80
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Underlying loss and LAE ratio decreased in both
automobile and homeowners in 2024. The decrease in
automobile was primarily due to the impact of earned pricing
increases as well as lower physical damage claim frequency,
partially offset by higher automobile claim severities. The auto
physical damage claim severity trend has moderated from the
prior year. The automobile liability severity increases continue to
recognize the inflationary effects and higher attorney
representation rates on bodily injury claims. For homeowners,
the decrease in the underlying loss and LAE ratio was primarily
due to the impact of earned pricing increases and lower claim
frequency, partially offset by higher claim severities. Contributing
to the higher homeowners severity was the effect of higher
rebuilding costs.
Current Accident Year Catastrophes and
Unfavorable (Favorable) Prior Accident Year
Development
$208
$240
$282
$(13)
$11
$(108)
CAY CATs
PYD
2022
2023
2024
$-200
$-100
$0
$100
$200
$300
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Current accident year catastrophe losses
increased in 2024 compared to the prior year. Current accident
year catastrophe losses for 2024 included losses from tornado,
wind and hail events in several regions of the United States, and
to a lesser extent, from hurricanes and tropical storms primarily
in the Southeast region. Current accident year catastrophe
losses for 2023 included tornado, wind and hail events across
several regions of the United States, losses from winter storms
primarily on the East and West coasts, and to a lesser extent,
wildfire events and hurricanes and tropical storms.
Prior accident year development was favorable in
2024, primarily driven by lower estimated severity on automobile
physical damage, automobile liability, and homeowners, as well
as decreases in reserves related to catastrophes. Prior accident
year development was unfavorable for 2023, primarily driven by
automobile physical damage, partially offset by decreases in
reserves related to homeowners and catastrophes.
2025 Outlook
In 2025, the Company expects written premium growth primarily
from strong renewal written pricing increases in both automobile
and homeowners, as well an increase in new business
premium. We expect 2025 annual written pricing increases in
both automobile and homeowners to moderate compared to
2024 results. Retention is expected to improve as written pricing
moderates, while growth in new business will be driven by
increased marketing spend. Loss ratios are expected to
continue to improve in automobile.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
75
| PROPERTY & CASUALTY OTHER OPERATIONS -
RESULTS OF OPERATIONS
Underwriting Summary
2024
2023
2022
Increase
(Decrease)
From 2023 to
2024
Increase
(Decrease)
From 2022 to
2023
Losses and loss adjustment expenses
Prior accident year development [1]
$
219 $
224 $
280
(2%)
(20%)
Total losses and loss adjustment expenses
219
224
280
(2%)
(20%)
Insurance operating costs
9
4
9
125%
(56%)
Underwriting loss
(228)
(228)
(289)
—%
21%
Net investment income [2]
74
69
63
7%
10%
Net realized losses [2]
(4)
(7)
(16)
43%
56%
Other expenses
(4)
—
—
NM
—%
Loss before income taxes
(162)
(166)
(242)
2%
31%
Income tax benefit [3]
(35)
(36)
(52)
3%
31%
Net loss
$
(127) $
(130) $
(190)
2%
32%
[1]For discussion of prior accident year development, see MD&A - Critical Accounting Estimates, Property and Casualty Insurance Product Reserves, Net of
Reinsurance and Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Consolidated Financial Statements.
[2]For discussion of consolidated investment results, see MD&A - Investment Results.
[3]For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
Net Loss
$(190)
$(130)
$(127)
2022
2023
2024
$-250
$-200
$-150
$-100
$-50
$0
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Net loss decreased slightly primarily due to higher net
investment income and lower net realized losses, partially offset
by an increase in other expense relating to a one-time contract
settlement charge on a claims servicing arrangement.
Underwriting loss was unchanged as an increase in
insurance operating costs was offset by a decrease in
unfavorable prior accident year reserve development.
Unfavorable prior accident year reserve development for the
year ended December 31, 2024 was primarily due to a $203
increase in A&E reserves and a $28 increase in related ULAE
reserves. Unfavorable prior accident year reserve development
for the year ended December 31, 2023 was primarily due to a
$194 increase in A&E reserves and a $23 increase in related
ULAE reserves. In 2024, an increase in the deferred gain of $62
was recognized relating to ceding losses to the A&E ADC.
Asbestos reserves prior accident year development in 2024
before NICO reinsurance of $167 was primarily due to higher-
than-expected frequency, higher settlement values for certain
accounts, an increase in the Company’s share of liability due to
insolvencies and cost sharing agreements and an increase in
claim settlement rates.
Environmental reserves prior accident year development in
2024 before NICO reinsurance of $36 was primarily due to
higher severity on recently emerged accounts, higher
environmental site cleanup and monitoring costs, and higher
legal expenses.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
76
|EMPLOYEE BENEFITS - RESULTS OF OPERATIONS
Operating Summary
2024
2023
2022
Increase
(Decrease)
From 2023
to 2024
Increase
(Decrease)
From 2022
to 2023
Premiums and other considerations
$
6,615 $
6,515 $
6,057
2%
8%
Net investment income [1]
475
469
524
1%
(10%)
Net realized losses [1]
(24)
(45)
(122)
47%
63%
Total revenues
7,066
6,939
6,459
2%
7%
Benefits, losses and loss adjustment expenses
4,681
4,683
4,517
—%
4%
Amortization of DAC
34
34
33
—%
3%
Insurance operating costs and other expenses
1,609
1,514
1,467
6%
3%
Amortization of other intangible assets
40
40
40
—%
—%
Total benefits, losses and expenses
6,364
6,271
6,057
1%
4%
Income before income taxes
702
668
402
5%
66%
Income tax expense [2]
141
133
75
6%
77%
Net income
$
561 $
535 $
327
5%
64%
[1]For discussion of consolidated investment results, see MD&A - Investment Results.
[2]For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
Premiums and Other Considerations
2024
2023
2022
Increase
(Decrease)
From 2023
to 2024
Increase
(Decrease)
From 2022
to 2023
Fully insured — ongoing premiums
$
6,392 $
6,290 $
5,858
2%
7%
Buyout premiums
1
8
12
(88%)
(33%)
Fee income
222
217
187
2%
16%
Total premiums and other considerations
$
6,615 $
6,515 $
6,057
2%
8%
Fully insured ongoing sales
$
718 $
839 $
801
(14%)
5%
Ratios, Excluding Buyouts
2024
2023
2022
Increase
(Decrease)
From 2023
to 2024
Increase
(Decrease)
From 2022
to 2023
Group disability loss ratio
68.0 %
67.1 %
68.3 %
0.9
(1.2)
Group life loss ratio
78.7 %
83.5 %
87.4 %
(4.8)
(3.9)
Total loss ratio
70.8 %
71.8 %
74.5 %
(1.0)
(2.7)
Expense ratio [1]
25.4 %
24.3 %
25.3 %
1.1
(1.0)
[1]Integration and transaction costs related to the acquisition of Aetna's U.S. group life and disability business are not included in the expense ratio.
Margin
2024
2023
2022
Increase
(Decrease)
From 2023
to 2024
Increase
(Decrease)
From 2022
to 2023
Net income margin
7.9%
7.7%
5.1%
0.2
2.6
Adjustments to reconcile net income margin to core earnings
margin:
Net realized losses, before tax
0.4%
0.4%
1.8%
0.0
(1.4)
Integration and other non-recurring M&A costs, before tax
—%
0.1%
0.1%
(0.1)
0.0
Income tax expense
(0.1%)
(0.1%)
(0.5%)
0.0
0.4
Core earnings margin
8.2%
8.1%
6.5%
0.1
1.6
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
77
Net Income
$327
$535
$561
2022
2023
2024
$0
$200
$400
$600
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Net income increased primarily due to a lower group life loss
ratio, higher fully insured ongoing premiums and lower realized
losses, partially offset by a higher expense ratio and a higher
loss ratio on group disability and supplemental health products.
Insurance operating costs and other expenses
were higher primarily due to the effect of an increase in fully
insured ongoing premium, higher staffing costs, including higher
incentive compensation and benefits costs, higher commissions
and increased technology investments.
Fully Insured Ongoing Premiums
$5,858
$6,290
$6,392
$3,111
$3,308
$3,353
$2,393
$2,580
$2,617
$354
$402
$422
Group disability
Group life
Other
2022
2023
2024
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Fully insured ongoing premiums increased over prior
year and included an increase in exposure on existing accounts,
new business sales, and persistency in excess of 90%, though
slightly below the prior year.
Fully insured ongoing sales decreased compared to
prior year driven by lower group life and group disability sales.
Ratios
25.3
24.3
25.4
74.5
71.8
70.8
Expense ratio
Loss ratio
2022
2023
2024
0
20
40
60
80
100
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Loss ratio improved 1.0 points in 2024 compared to the prior
year period, driven by a lower group life loss ratio, partially offset
by increased loss ratios in disability and supplemental health
products. The group life loss ratio decreased 4.8 points driven
by a lower level of mortality. The group disability loss ratio
increased 0.9 points driven by higher loss ratio on paid family
and medical leave products, partially offset by favorable long-
term disability claim recoveries and changes in the long-term
disability recovery rate assumption of 0.5 points.
Expense ratio increased primarily due to the impact of
higher staffing costs, including higher incentive compensation
and benefits costs and increased investments in technology.
2025 Outlook
The Company expects growth in fully insured ongoing premiums
in 2025 due to sales and continued strong book persistency.
The level of long-term disability incidence and recoveries will
impact the group disability loss ratio. Although the group life loss
ratio, which had been elevated during the pandemic, improved
in 2024, we expect 2025 mortality to still be above pre-pandemic
levels. We expect the long-term net income margin outlook for
this business to be approximately 6% to 7%.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
78
|HARTFORD FUNDS - RESULTS OF OPERATIONS
Operating Summary
2024
2023
2022
Increase
(Decrease)
From 2023
to 2024
Increase
(Decrease)
From 2022
to 2023
Fee income and other revenue
$
1,035 $
973 $
1,044
6%
(7%)
Net investment income
20
17
9
18%
89%
Net realized gains (losses)
12
10
(24)
20%
NM
Total revenues
1,067
1,000
1,029
7%
(3%)
Operating costs and other expenses
824
781
826
6%
(5%)
Income before income taxes
243
219
203
11%
8%
Income tax expense [1]
51
45
41
13%
10%
Net income
$
192 $
174 $
162
10%
7%
Daily average Hartford Funds AUM
$ 136,477 $ 127,019 $ 135,124
7%
(6%)
ROA [2]
14.1
13.7
12.0
0.4
1.7
Adjustments to reconcile ROA to ROA, core earnings:
Effect of net realized losses (gains), excluded from core earnings,
before tax
(0.8)
(0.8)
1.7
0.0
(2.5)
Effect of income tax expense (benefit)
—
0.1
(0.4)
(0.1)
0.5
ROA, core earnings [2]
13.3
13.0
13.3
0.3
(0.3)
[1] For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
[2] Represents annualized earnings divided by a daily average of assets under management, as measured in basis points.
Hartford Funds Segment AUM
2024
2023
2022
Increase
(Decrease)
From 2023
to 2024
Increase
(Decrease)
From 2022
to 2023
Mutual Fund and ETF AUM - beginning of period
$ 119,316 $ 112,472 $ 142,632
6%
(21%)
Sales - Mutual Fund
24,325
20,960
29,833
16%
(30%)
Redemptions - Mutual Fund
(28,041)
(28,606)
(37,981)
2%
25%
Net flows - ETF
491
619
197
(21%)
NM
Net Flows - Mutual Fund and ETF
(3,225)
(7,027)
(7,951)
54%
12%
Change in market value and other
11,963
13,871
(22,209)
(14%)
NM
Mutual Fund and ETF AUM - end of period
128,054
119,316
112,472
7%
6%
Third-party life and annuity separate account AUM
11,544
11,709
11,635
(1%)
1%
Hartford Funds AUM - end of period
$ 139,598 $ 131,025 $ 124,107
7%
6%
Mutual Fund and ETF AUM by Asset Class
2024
2023
2022
Increase
(Decrease)
From 2023 to
2024
Increase
(Decrease)
From 2022 to
2023
Equity - Mutual Funds
$
84,000 $
79,352 $
73,782
6%
8%
Fixed Income - Mutual Funds
21,059
16,773
15,861
26%
6%
Multi-Strategy Investments - Mutual Funds [1]
18,512
19,292
19,975
(4%)
(3%)
Equity - ETF
1,811
2,141
1,805
(15%)
19%
Fixed Income - ETF
2,672
1,758
1,049
52%
68%
Mutual Fund and ETF AUM
$ 128,054 $ 119,316 $ 112,472
7%
6%
[1]Includes balanced, allocation, and alternative investment products.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
79
Net Income
$162
$174
$192
2022
2023
2024
$0
$50
$100
$150
$200
$250
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Net income increased for the year ended December 31,
2024, primarily due to an increase in fee income net of operating
costs and other expenses driven by higher daily average AUM.
Hartford Funds AUM
$124,107
$131,025
$139,598
12/31/22
12/31/23
12/31/24
$0
$50,000
$100,000
$150,000
December 31, 2024 compared to
December 31, 2023
Hartford Funds AUM increased primarily due to an
increase in market values, partly offset by net outflows over the
previous twelve months. Net outflows were $3.2 billion for the
year ended December 31, 2024 compared to net outflows of
$7.0 billion for the year ended December 31, 2023.
2025 Outlook
Assuming continued growth in equity markets in 2025, the
Company expects net income for Hartford Funds to increase
from 2024 to 2025.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
80
|CORPORATE - RESULTS OF OPERATIONS
Operating Summary
2024
2023
2022
Increase
(Decrease)
From 2023
to 2024
Increase
(Decrease)
From 2022
to 2023
Fee income [1]
$
40 $
39 $
49
3%
(20%)
Net investment income [2]
63
47
26
34%
81%
Net realized gains (losses) [2]
42
26
(45)
62%
NM
Other revenue (loss)
2
2
1
—%
100%
Total revenues
147
114
31
29%
NM
Benefits, losses and loss adjustment expenses [3]
8
7
8
14%
(13%)
Insurance operating costs and other expenses [1]
54
68
61
(21%)
11%
Interest expense [4]
199
199
213
—%
(7%)
Restructuring and other costs
2
6
13
(67%)
(54%)
Total benefits, losses and expenses
263
280
295
(6%)
(5%)
Loss before income taxes
(116)
(166)
(264)
30%
37%
Income tax benefit [5]
(44)
(45)
(69)
2%
35%
Net loss
(72)
(121)
(195)
40%
38%
Preferred stock dividends
21
21
21
—%
—%
Net loss available to common stockholders
$
(93) $
(142) $
(216)
35%
34%
[1]Includes investment management fees and expenses related to managing third-party business.
[2]For discussion of consolidated investment results, see MD&A - Investment Results.
[3]Includes benefits expense on life and annuity business previously underwritten by the Company.
[4]For discussion of debt, see Note 13 - Debt of Notes to Consolidated Financial Statements.
[5]For discussion of income taxes, see Note 16 - Income Taxes of Notes to Consolidated Financial Statements.
Net loss available to common stockholders
$(216)
$(142)
$(93)
2022
2023
2024
$-300
$-200
$-100
$0
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Net loss available to common stockholders for the
year ended December 31, 2024 decreased primarily due to an
increase in net realized gains, higher net investment income, a
$14, before tax, capital-based state tax expense covering
several years in the 2023 period, and lower restructuring costs.
Interest Expense
$213
$199
$199
2022
2023
2024
$0
$100
$200
$300
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Interest expense remained flat for the year ended
December 31, 2024.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
81
ENTERPRISE RISK
MANAGEMENT
The Company’s Board of Directors has ultimate responsibility for
risk oversight, as described more fully in our Proxy Statement,
while management is tasked with the day-to-day management
of the Company’s risks.
The Company manages and monitors risk through risk policies,
controls and limits. At the senior management level, an
Enterprise Risk and Capital Committee ("ERCC") oversees the
risk profile and risk management practices of the Company. As
illustrated below, a number of functional committees sit
underneath the ERCC, providing oversight of specific risk areas
and recommending risk mitigation strategies to the ERCC.
ERCC Members
CEO (Chair)
Chief Financial Officer
Chief Investment Officer
Chief Risk Officer
Chief Underwriting Officer
General Counsel
Others as deemed necessary by the Committee Chair
ERCC
Asset
Liability
Committee
Underwriting
Risk
Committee
Emerging
Risk Steering
Committee
Operational
Risk
Committee
Economic
Capital
Executive
Committee
Model
Oversight
Committee
Executive
Artificial
Intelligence
Governance
Council
The Company's enterprise risk management ("ERM") function
supports the ERCC and functional committees, and is tasked
with, among other things:
•
risk identification and assessment;
•
the development of risk appetites, tolerances, and limits;
•
risk monitoring; and
•
internal and external risk reporting.
The Company categorizes its main risks as insurance risk,
operational risk and financial risk, each of which is described in
more detail below.
|INSURANCE RISK
Insurance risk is the risk of losses of both a catastrophic and
non-catastrophic nature on the P&C and Employee Benefits
products the Company has sold. Catastrophe insurance risk is
the exposure arising from both natural catastrophes (e.g.,
weather, earthquakes, wildfires, pandemics) and man-made
catastrophes (e.g., terrorism, cyber-attacks) that create a
concentration or aggregation of loss across the Company's
insurance or asset portfolios.
Sources of Insurance Risk Non-catastrophe
insurance risks exist within each of the Company's segments
except Hartford Funds and include:
•
Property- Risk of loss to personal or commercial property
from automobile related accidents, weather, explosions,
smoke, shaking, fire, theft, vandalism, inadequate
installation, faulty equipment, collisions and falling objects,
and/or machinery mechanical breakdown resulting in
physical damage, losses from PV&T and other covered
perils.
•
Liability- Risk of loss from automobile related accidents,
uninsured and under-insured drivers, lawsuits from
accidents, defective products, breach of warranty, negligent
acts by professional practitioners, environmental claims,
latent exposures, fraud, coercion, forgery, failure to fulfill
obligations per contract surety, liability from errors and
omissions, losses from credit and political risk insurance
("CPRI") coverages, losses from derivative lawsuits, and
other securities actions and covered perils.
•
Mortality- Risk of loss from unexpected trends in insured
deaths impacting timing of payouts from group life
insurance, personal or commercial automobile related
accidents, and death of employees or executives during the
course of employment, while on disability, or while
collecting workers compensation benefits.
•
Morbidity- Risk of loss to an insured from illness incurred
during the course of employment or illness from other
covered perils.
•
Disability- Risk of loss incurred from personal or
commercial automobile related losses, accidents arising
outside of the workplace, injuries or accidents incurred
during the course of employment, or from equipment, with
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
82
each loss resulting in short-term or long-term disability
payments.
•
Longevity- Risk of loss from increased life expectancy
trends among policyholders receiving long-term benefit
payments.
•
Cyber Insurance- Risk of loss to property, breach of data
and business interruption from various types of cyber-
attacks.
Catastrophe risk primarily arises in the property, automobile,
workers' compensation, casualty, group life, and group disability
lines of business but could also arise from other coverages such
as losses under PV&T and CPRI policies. See the term Current
Accident Year Catastrophe Ratio within the Key Performance
Measures section of MD&A for an explanation of how the
Company defines catastrophe losses in its financial reporting.
Impact Non-catastrophe insurance risk can arise from
unexpected loss experience, underpriced business and/or
underestimation of loss reserves and can have significant
effects on the Company’s earnings. Catastrophe insurance risk
can arise from various unpredictable events and can have
significant effects on the Company's earnings and may result in
losses that could constrain its liquidity.
Management The Company's policies and procedures for
managing these risks include disciplined underwriting protocols,
exposure controls, sophisticated risk-based pricing, risk
modeling, risk transfer, and capital management strategies. The
Company has established underwriting guidelines for both
individual risks, including individual policy limits, and risks in the
aggregate, including aggregate exposure limits by geographic
zone and peril. The Company uses both internal and third-party
models to estimate the potential loss resulting from various
catastrophe events and the potential financial impact those
events would have on the Company's financial position and
results of operations across its businesses.
The Hartford closely monitors scientific literature on climate
change to help identify climate change risks impacting our
business. We use data from the scientific community and other
outside experts including partnerships with third-party
catastrophe modeling firms to inform our risk management
activities and stay abreast of potential implications of climate-
related impacts that we incorporate into our risk assessment.
We regularly study these climate change implications and
incorporate these risks into our catastrophe risk assessment
and management strategy through product pricing, underwriting
and management of aggregate risk to manage implications of
severe weather and climate change in our insurance portfolio.
In addition, certain insurance products offered by The Hartford
provide coverage for losses incurred due to cyber events and
the Company has assessed and modeled how those products
would respond to different events in order to manage its
aggregate exposure to losses incurred under the insurance
policies we sell. The Company models numerous deterministic
scenarios including losses caused by malware, data breach,
distributed denial of service attacks, intrusions of cloud
environments and attacks of power grids.
Among specific risk tolerances set by the Company, risk limits
are set for natural catastrophes, terrorism risk and pandemic
risk.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
83
Risk
Definition
Details and Company Limits
Natural
catastrophe
Exposure arising from natural
phenomena (e.g.,
earthquakes, wildfires, etc.)
that create a concentration or
aggregation of loss across the
Company's insurance or asset
portfolios and the inherent
volatility of weather or climate
pattern changes.
The Company generally limits its estimated before tax loss as a result of natural
catastrophes for property & casualty exposures from a single 250-year event to less
than 30% of the reported capital and surplus of the property and casualty insurance
subsidiaries prior to reinsurance and to less than 15% of the reported capital and
surplus of the property and casualty insurance subsidiaries after reinsurance. The
Company generally limits its estimated before tax loss from an aggregation of multiple
natural catastrophe events for an all-peril annual aggregate 100-year event to less than
18% reported capital and surplus of the property and casualty insurance subsidiaries
after reinsurance. From time to time the estimated loss from natural catastrophes may
fluctuate above or below these limits due to changes in modeled loss estimates,
exposures or statutory surplus. [1]
The table below represents the estimated before tax catastrophe loss exceedance
probabilities, from an aggregate of all catastrophe events occurring in a one-year
timeframe before and after reinsurance and from a single hurricane or earthquake
occurrence.
Modeled Loss Gross and Net of Reinsurance [2]
Probability of Loss Exceedance [3]
Gross of
Reinsurance
Net of
Reinsurance
Aggregate annual all-peril (1-in-100) (1.0%)
$
2,837 $
1,629
Aggregate annual all-peril (1-in-250) (0.4%)
$
3,826 $
2,279
Hurricane single occurrence (1-in-100) (1.0%)
$
1,577 $
628
Hurricane single occurrence (1-in-250) (0.4%)
$
2,447 $
1,224
Earthquake single occurrence (1-in-100) (1.0%)
$
988 $
503
Earthquake single occurrence (1-in-250) (0.4%)
$
1,652 $
720
Terrorism
The risk of losses from
terrorist attacks, including
losses caused by single-site
and multi-site conventional
attacks, as well as the
potential for attacks using
nuclear, biological, chemical
or radiological weapons
(“NBCR”).
Enterprise limits for terrorism apply to aggregations of risk across property & casualty,
employee benefits and specific asset portfolios and are defined based on a
deterministic, single-site conventional terrorism attack scenario. The Company manages
its potential estimated loss from a conventional terrorism loss scenario, up to $2.0 billion
net of reinsurance and $2.5 billion gross of reinsurance, before coverage under
TRIPRA. In addition, the Company monitors exposures monthly and employs both
internally developed and vendor-licensed loss modeling tools as part of its risk
management discipline. Our modeled exposures to conventional terrorist attacks around
landmark locations may fluctuate above and below our stated limits.
Pandemic
The exposure to loss arising
from widespread influenza or
other pathogens or bacterial
infections that create an
aggregation of loss across the
Company's insurance or asset
portfolios.
The Company generally limits its estimated before tax loss from a single 250 year
pandemic event to less than 18% of the aggregate reported capital and surplus of the
property and casualty and employee benefits insurance subsidiaries. In evaluating these
scenarios, the Company assesses the impact on group life, short-term disability, long-
term disability and property & casualty claims. While ERM has a process to track and
manage these limits, from time to time, the estimated loss for pandemics may fluctuate
above or below these limits due to changes in modeled loss estimates, exposures, or
statutory surplus. In addition, the Company assesses losses in the investment portfolio
associated with market declines in the event of a widespread pandemic. [1]
[1]For U.S. insurance subsidiaries, reported capital and surplus is equal to actual U.S. statutory capital and surplus. For Navigators Insurers in non-U.S. jurisdictions,
reported capital and surplus is equal to U.S. GAAP equity of those subsidiaries less certain assets such as goodwill and other intangible assets.
[2]The loss estimates represent total property modeled losses for hurricane single occurrence events, property and workers' compensation modeled losses for
earthquake single occurrence events, and modeled aggregate annual losses for natural catastrophes from all perils (hurricane, flood, earthquake, hail, tornado,
wildfire and winter storms). The net loss estimates provided assume that the Company is able to recover all losses ceded to reinsurers under its reinsurance
programs. The Company also manages natural catastrophe risk for group life and group disability, which in combination with property and workers compensation
loss estimates are subject to separate enterprise risk management net aggregate loss limits as a percent of enterprise surplus.
[3]The modeled probability of loss exceedance represents the likelihood of a loss from single peril occurrence or from an aggregate of catastrophe events from all
perils to exceed the indicated amount in a one-year time frame.
Reinsurance as a Risk Management Strategy
The Company uses reinsurance to transfer certain risks to
reinsurance companies based on specific geographic or risk
concentrations. A variety of traditional reinsurance products are
used as part of the Company's risk management strategy,
including excess of loss occurrence-based products that
reinsure property and workers' compensation exposures, and
individual risk (including facultative reinsurance) or quota share
arrangements, that reinsure losses from specific classes or lines
of business. The Company has no significant finite risk contracts
in place and the statutory surplus benefit from all such prior year
contracts is immaterial. The Hartford also participates in
governmentally administered reinsurance facilities such as the
Florida Hurricane Catastrophe Fund (“FHCF”), the Terrorism
Risk Insurance Program Reauthorization Act ("TRIPRA") and
other reinsurance programs relating to particular risks or specific
lines of business.
Reinsurance for Catastrophes- The Company utilizes various
reinsurance programs to mitigate catastrophe losses including
excess of loss occurrence-based treaties covering property and
workers’ compensation, a catastrophe bond, an aggregate
property catastrophe treaty, and individual risk agreements
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
84
(including facultative reinsurance) that reinsure losses from
specific classes or lines of business. The aggregate property
catastrophe treaty covers the aggregate losses of catastrophe
events (up to $350 per event) designated by the Property Claim
Services office of Verisk and, for international business, net
losses arising from two or more risks involved in the same loss
occurrence totaling at least $500 thousand, in excess of a $750
retention. The occurrence-based property catastrophe treaty
responds in excess of $200 per occurrence for all perils other
than earthquakes and named hurricanes and tropical storms.
For earthquakes and named tropical storms the occurrence
based property treaty responds in excess of $350 per
occurrence. The occurrence property catastrophe treaty and
workers’ compensation catastrophe treaties beginning with the
January 1, 2021 renewal do not cover pandemic losses, as most
industry reinsurance programs exclude communicable disease.
The Company has reinsurance in place to cover individual group
life losses in excess of $1 per person.
Primary Catastrophe Reinsurance Coverages as of January 1, 2025 [1]
Portion of losses
reinsured
Portion of losses
retained by The
Hartford
Per Occurrence Property Catastrophe Treaty from 1/1/2025 to 12/31/2025 [1] [2]
Losses of $0 to $200
None
100% retained
Losses of $200 to $350 for earthquakes and named hurricanes and tropical storms [3]
None
100% retained
Losses of $200 to $350 from one event other than earthquakes and named
hurricanes and tropical storms [3]
40% of $150 in excess
of $200
60% co-participation
Losses of $350 to $500 from one event (all perils)
75% of $150 in
excess of $350
25% co-participation
Losses of $500 to $1.20 billion from one event [4] (all perils)
90% of $700 in
excess of $500
10% co-participation
Per Occurrence Property Catastrophe Bond from 1/1/2025 to 12/31/2026 [5]
Losses of $1.19 billion to $1.49 billion for tropical cyclone and earthquake events [6]
66.67% of $300 in
excess of $1.19 billion
33.33% of $300 in
excess of $1.19 billion
Aggregate Property Catastrophe Treaty for 1/1/2025 to 12/31/2025 [7]
$0 to $750 of aggregate losses
None
100% Retained
$750 to $950 of aggregate losses
100%
None
Workers' Compensation Catastrophe Treaty for 1/1/2025 to 12/31/2025
Losses of $0 to $100 from one event
None
100% Retained
Losses of $100 to $450 from one event [8]
80% of $350 in
excess of $100
20% co-participation
[1]These agreements do not cover the assumed reinsurance business which purchases its own retrocessional coverage.
[2]In addition to the Per Occurrence Property Catastrophe Treaty, for Florida homeowners wind events, The Hartford has purchased the mandatory FHCF
reinsurance for the annual period starting June 1, 2024. Retention and coverage varies by writing company. The writing company with the largest coverage under
FHCF is Hartford Insurance Company of the Midwest, with coverage of $35 in per event losses in excess of a $19 retention (estimates are based on best available
information at this time and are periodically updated as information is made available by Florida).
[3]Named hurricanes and tropical storms are defined as any storm or storm system declared to be a hurricane or tropical storm by the US National Hurricane Center,
US Weather Prediction Center, or their successor organizations (being divisions of the US National Weather Service).
[4]Portions of this layer of coverage extend beyond a traditional one year term.
[5]Refer to "Catastrophe Bond" discussion below for further information.
[6]Tropical cyclones are defined as a storm or storm system that has been declared by National Weather Service or any division or agency thereof (including the
National Hurricane Center or the Weather Prediction Center) or any of their successors to be a hurricane, tropical storm, or tropical depression.
[7]The aggregate treaty is not limited to a single event; rather, it is designed to provide reinsurance protection for the aggregate of all catastrophe events (up to $350
per event), either designated by the Property Claim Services office of Verisk or, for international business, net losses arising from two or more risks involved in the
same loss occurrence totaling at least $500 thousand. All catastrophe losses, except assumed reinsurance business losses, apply toward satisfying the $750
attachment point under the aggregate treaty.
[8]In addition to the limits shown, the workers' compensation reinsurance includes a non-catastrophe, industrial accident layer, providing coverage for 80% of $25 in
per event losses in excess of a $25 retention.
In addition to the property catastrophe reinsurance coverage
described in the above table, the Company has other
reinsurance agreements that cover property catastrophe losses,
some of which provide for reinstatement of limits in the event of
loss with reinstatement provisions varying depending on the
layer of coverage. The Per Occurrence Property Catastrophe
Treaty and Workers' Compensation Catastrophe Treaty include
a provision to reinstate one limit in the event that a catastrophe
loss exhausts limits on one or more layers under the treaties.
Catastrophe Bond- The Company has property catastrophe
protection in the form of catastrophe bonds issued through an
indemnity agreement with Foundation Re IV Ltd. (“Foundation
Re IV”), an independent Bermuda company registered as a
special purpose insurer under the Bermuda Insurance Act 1978
and related rules and regulations. The agreement provides fully
collateralized loss coverage on the Company’s commercial and
personal property and automobile physical damage in all 50
states of the United States of America, the District of Columbia
and Puerto Rico from tropical cyclone and earthquake events.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
85
The reinsurance agreement with Foundation Re IV, which
originally incepted January 1, 2024, provides indemnity per
occurrence excess of loss coverage of 66.67% of $300 in losses
in excess of $1.19 billion for the treaty term effective January 1,
2025, through December 31, 2026. The attachment point and
maximum limit under this agreement are reset annually to adjust
the expected loss of the layer within a predetermined range. The
Company has not incurred any losses that have resulted or are
expected to result in a recovery under the reinsurance
agreement with Foundation Re IV since its inception.
Under the terms of the reinsurance agreement, the Company is
obligated to pay annual reinsurance premiums to Foundation Re
IV for the reinsurance coverage. Amounts payable to the
Company under the reinsurance agreement with respect to any
covered event cannot exceed the Company's actual losses from
such event. The principal amount of the catastrophe bonds will
be reduced by any amounts paid to the Company under the
reinsurance agreement.
The reinsurance agreement meets the requirements to be
accounted for as reinsurance in accordance with the guidance
for reinsurance contracts. In connection with the reinsurance
agreement, Foundation Re IV issued $200 in notes (generally
referred to as “catastrophe bonds”) to investors in amounts
equal to the full coverage provided under the reinsurance
agreement. The proceeds of the issuance were deposited in a
reinsurance trust account.
As with any reinsurance agreement, there is credit risk
associated with collecting amounts due from reinsurers.
Foundation Re IV’s credit risk is mitigated by a reinsurance trust
account that has been funded by Foundation Re IV with money
market funds that invest solely in direct government obligations
and obligations backed by the U.S. government. The money
market funds must have the highest principal stability ratings
from S&P Global Ratings (“S&P”) or Moody’s Investors Service,
Inc. (“Moody’s”) on the issuance date of the bonds and
thereafter must be rated by S&P or Moody’s, as applicable.
Other permissible investments include money market funds
which invest in repurchase and reverse repurchase agreements
collateralized by direct government obligations and obligations
of any agency backed by the U.S. government with terms of no
more than 397 calendar days, and cash.
At the time the agreement was entered into with Foundation Re
IV, the Company evaluated the applicability of the accounting
guidance that addresses variable interest entities (“VIEs”) and
concluded that it was a VIE. However, while Foundation Re IV
was determined to be a VIE, the Company concluded that it did
not have a variable interest in the entity, as the variability in its
results, caused by the reinsurance agreement, is expected to be
absorbed entirely by the investors in the catastrophe bonds
issued by Foundation Re IV and residual amounts earned by it,
if any, are expected to be absorbed by the equity investor (the
Company has neither an equity nor a residual interest in
Foundation Re IV).
Accordingly, the Company is not the primary beneficiary of
Foundation Re IV and does not consolidate that entity in the
Company’s consolidated financial statements. Additionally,
because the Company has no intention to pursue any
transaction that would result in it acquiring interest in and
becoming the primary beneficiary of Foundation Re IV, the
consolidation of that entity in the Company’s consolidated
financial statements in future periods is unlikely.
Reinsurance for Terrorism- For the risk of terrorism, private
sector catastrophe reinsurance capacity is generally limited and
largely unavailable for terrorism losses caused by nuclear,
biological, chemical or radiological attacks. As such, the
Company's principal reinsurance protection against large-scale
terrorist attacks is the coverage currently provided through
TRIPRA to the end of 2027.
TRIPRA provides a backstop for insurance-related losses
resulting from any “act of terrorism”, which is certified by the
Secretary of the Treasury, in consultation with the Secretary of
Homeland Security and the Attorney General, for losses that
exceed a threshold of industry losses of $200. Under the
program, in any one calendar year, the federal government will
pay a percentage of losses incurred from a certified act of
terrorism after an insurer's losses exceed 20% of the
Company's eligible direct commercial earned premiums of the
prior calendar year up to a combined annual aggregate limit for
the federal government and all insurers of $100 billion. The
percentage of losses paid by the federal government is 80% .
The Company's estimated deductible under the program is $2.2
billion for 2025. If an act of terrorism or acts of terrorism result in
covered losses exceeding the $100 billion annual industry
aggregate limit, Congress would be responsible for determining
how additional losses in excess of $100 billion will be paid.
Reinsurance for A&E and Navigators Group Reserve
Development - The Company has two ADC reinsurance
agreements in place, both of which are accounted for as
retroactive reinsurance. One agreement covered substantially
all A&E reserve development for 2016 and prior accident years
(the “A&E ADC”) up to an aggregate limit of $1.5 billion and the
other covered substantially all reserve development of
Navigators Insurance Company ("NIC") and certain of its
affiliates for 2018 and prior accident years (the “Navigators
ADC”) up to an aggregate limit of $300. As the Company has
ceded all of the $300 and $1.5 billion available limits under the
Navigators ADC and the A&E ADC; respectively, there is no
remaining limit available under either agreement as of
December 31, 2024. During 2024, the Company collected
recoveries from NICO under the Navigators ADC and as a result
amortized $145 of the $209 deferred gain within benefits, losses
and loss adjustment expenses in the Consolidated Statements
of Operations. As of December 31, 2024 and December 31,
2023, the deferred gain on the Navigators ADC was $64 and
$209, respectively, and is included in other liabilities on the
Consolidated Balance Sheets. For more information on the A&E
ADC and the Navigators ADC, see Note 1, Basis of Presentation
and Significant Accounting Policies, and Note 10, Reserve for
Unpaid Losses and Loss Adjustment Expenses of Notes to
Consolidated Financial Statements.
Reinsurance Recoverables
Property and Casualty insurance product reinsurance
recoverables represent loss and loss adjustment expense
recoverables from a number of entities, including reinsurers and
pools. A portion of the total gross reinsurance recoverables
balance relates to the Company’s participation in various
mandatory (assigned) and involuntary risk pools and the value
of annuity contracts held under structured settlement
agreements.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
86
Employee Benefits and Corporate reinsurance recoverables
represent reserves for future policy benefits and unpaid loss and
loss adjustment expenses and other policyholder funds and
benefits payable that are recoverable from a number of
reinsurers.
The table below shows the gross and net reinsurance
recoverables reported in the Property and Casualty and
Employee Benefits reportable segments as well as Corporate.
To manage reinsurer credit risk, a reinsurance security review
committee evaluates the credit standing, financial performance,
management and operational quality of each potential reinsurer.
In placing reinsurance, the Company considers the nature of the
risk reinsured, including the expected liability payout duration,
and establishes limits tiered by reinsurer credit rating. Where its
contracts permit, the Company secures future claim obligations
with various forms of collateral or other credit enhancement,
including irrevocable letters of credit, secured trusts, funds held
accounts and group wide offsets. As part of its reinsurance
recoverable review, the Company analyzes recent
developments in commutation activity between reinsurers and
cedants, recent trends in arbitration and litigation outcomes in
disputes between cedants and reinsurers and the overall credit
quality of the Company’s reinsurers. For further discussion on
reinsurance recoverables, including details of recoverables by
AM Best credit rating, see Note 8 – Reinsurance of Notes to
Consolidated Financial Statements.
Annually, the Company completes evaluations of the
reinsurance recoverable asset associated with older, long-term
casualty liabilities reported in the Property & Casualty Other
Operations reportable segment and the allowance for
uncollectible reinsurance reported in the Business Insurance
and Employee Benefits reportable segments as well as the
Corporate category. For a discussion regarding the results of the
evaluation of older, long-term casualty liabilities reported in the
Property & Casualty Other Operations reportable segment, see
MD&A - Critical Accounting Estimates, Property and Casualty
Insurance Product Reserves, Net of Reinsurance. For a
discussion of the allowance for uncollectible reinsurance, see
Note 8 – Reinsurance of Notes to Consolidated Financial
Statements.
Reinsurance Recoverables as of December 31,
Property and
Casualty
Employee
Benefits
Corporate
Total
2024
2023
2024
2023
2024
2023
2024
2023
Paid loss and loss adjustment expenses
$
317 $
273 $
7 $
5 $
— $
— $
324 $
278
Unpaid loss and loss adjustment expenses
6,381
6,429
284
256
226
244
6,891
6,929
Gross reinsurance recoverables
6,698
6,702
291
261
226
244
7,215
7,207
Allowance for uncollectible reinsurance
(72)
(100)
(1)
(1)
(2)
(2)
(75)
(103)
Net reinsurance recoverables
$ 6,626 $ 6,602 $
290 $
260 $
224 $
242 $ 7,140 $ 7,104
Guaranty Funds and Other Insurance-related
Assessments
As part of its risk management strategy, the Company regularly
monitors the financial strength of other insurers and, in
particular, activity by insurance regulators and various state
guaranty associations in the U.S. relating to troubled insurers. In
all states, insurers licensed to transact certain classes of
insurance are required to become members of a guaranty fund.
|OPERATIONAL RISK
Operational risk is the risk of loss resulting from inadequate or
failed internal processes and systems, human error, or from
external events.
Sources of Operational Risk Operational risk is
inherent in the Company's business and functional areas.
Operational risks include: compliance with laws and regulations,
cybersecurity, business disruption, technology failure,
inadequate execution or process management, reliance on
model and data analytics, internal fraud, external fraud, third
party dependency and attraction and retention of talent.
Impact Operational risk can result in financial loss, disruption
of our business, regulatory actions or damage to our reputation.
Management Responsibility for day-to-day management of
operational risk lies within each business unit and functional
area. ERM provides an enterprise-wide view of the Company's
operational risk on an aggregate basis. ERM is responsible for
establishing, maintaining and communicating the framework,
principles and guidelines of the Company's operational risk
management program. Operational risk mitigation strategies
include the following:
•
Establishing policies and monitoring risk tolerances and
exceptions;
•
Conducting business risk assessments and implementing
action plans where necessary;
•
Validating existing crisis management protocols;
•
Identifying and monitoring emerging risks; and
•
Purchasing insurance coverage.
Cybersecurity Risk
For information on the prevention, detection, mitigation and
remediation of cybersecurity incidents, see Part I, Item 1C –
Cybersecurity.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
87
|FINANCIAL RISK
Financial risks include direct and indirect risks to the Company's
financial objectives from events that impact financial market
conditions and the value of financial assets. Some events may
cause correlated movement in multiple risk factors. The primary
sources of financial risks are the Company's invested assets.
Consistent with its risk appetite, the Company establishes
financial risk limits to control potential loss on a U.S. GAAP,
statutory, and economic basis. Exposures are actively monitored
and managed, with risks mitigated where appropriate. The
Company uses various risk management strategies, including
limiting aggregation of risk, portfolio re-balancing and hedging
with OTC and exchange-traded derivatives with counterparties
meeting the appropriate regulatory and due diligence
requirements. Derivatives may be used to achieve the following
Company-approved objectives: (1) hedging risk arising from
interest rate, equity market, commodity market, credit spread
and issuer default, price or currency exchange rate risk or
volatility; (2) managing liquidity; (3) controlling transaction costs;
and (4) engaging in income generation covered call transactions
and synthetic replication transactions. Derivative activities are
monitored and evaluated by the Company’s compliance and risk
management teams and reviewed by senior management. The
Company identifies different categories of financial risk,
including liquidity, credit, interest rate, equity, and foreign
currency exchange.
Liquidity Risk
Liquidity risk is the risk to current or prospective earnings or
capital arising from the Company's inability or perceived inability
to meet its contractual funding obligations as they come due.
Sources of Liquidity Risk Sources of liquidity risk
include funding risk, company-specific liquidity risk and market
liquidity risk resulting from differences in the amount and timing
of sources and uses of cash as well as company-specific and
general market conditions. Stressed market conditions may
impact the ability to sell assets or otherwise transact business
and may result in a significant loss in value of the investment
portfolio.
Impact Inadequate capital resources and liquidity could
negatively affect the Company’s overall financial strength and its
ability to generate cash flows from its businesses, borrow funds
at competitive rates, and raise new capital to meet operating
and growth needs.
Management The Company has defined ongoing
monitoring and reporting requirements to assess liquidity across
the enterprise under both current and stressed market
conditions. The Company measures and manages liquidity risk
exposures and funding needs within prescribed limits across
legal entities, taking into account legal, regulatory and
operational limitations to the transferability of liquid assets
among legal entities. The Company also monitors internal and
external conditions, and identifies material risk changes and
emerging risks that may impact operating cash flows or liquid
assets. The liquidity requirements of The Hartford Insurance
Group, Inc. ("HIG Holding Company") have been and will
continue to be met by the HIG Holding Company's fixed
maturities, short-term investments and cash, and dividends from
its subsidiaries, principally from its insurance operations, as well
as the issuance of common stock, debt or other capital
securities and borrowings from its credit facilities as needed.
The Company maintains multiple sources of contingent liquidity
including a revolving credit facility, an intercompany liquidity
agreement that allows for short-term advances of funds among
the HIG Holding Company and certain affiliates, and access to
collateralized advances from the Federal Home Loan Bank of
Boston ("FHLBB") for certain affiliates. The Company's CFO has
primary responsibility for liquidity risk.
Credit Risk and Counterparty Risk
Credit risk is the risk to earnings or capital due to uncertainty of
an obligor’s or counterparty’s ability or willingness to meet its
obligations in accordance with contractually agreed upon terms.
Credit risk is comprised of three major factors: the risk of
change in credit quality, or credit migration risk; the risk of
default; and the risk of a change in value due to changes in
credit spreads.
Sources of Credit Risk The majority of the Company’s
credit risk is concentrated in its investment holdings and use of
derivatives, but it is also present in the Company’s ceded
reinsurance activities, bond insurance, and certain aspects of
Business Insurance products.
Impact A decline in creditworthiness is typically reflected as
an increase in an investment’s credit spread and an associated
decline in the investment's fair value, potentially resulting in
recording an ACL and an increased probability of a realized loss
upon sale. In certain instances, counterparties may default on
their obligations and the Company may realize a loss on default.
Premiums receivable, including premiums for retrospectively
rated plans, reinsurance recoverable and deductible losses
recoverable are also subject to credit risk based on the
counterparty’s inability to pay.
Management The objective of the Company’s enterprise
credit risk management strategy is to identify, quantify, and
manage credit risk in aggregate and to limit potential losses in
accordance with the Company's credit risk management policy.
The Company manages its credit risk by managing
aggregations of risk, holding a diversified mix of issuers and
counterparties across its investment, reinsurance, and
insurance portfolios, and limiting exposure to any specific
reinsurer or counterparty. Potential credit losses can be
mitigated through diversification (e.g., geographic regions, asset
types, industry sectors), hedging and the use of collateral to
reduce net credit exposure.
The Company manages credit risk through the use of various
surveillance, analyses and governance processes. The
investment and reinsurance areas have formal policies and
procedures for counterparty approvals and authorizations, which
establish criteria defining minimum levels of creditworthiness
and financial stability for eligible counterparties. Potential
investments are subject to underwriting reviews and
management approval. Mitigation strategies vary across the
three sources of credit risk, but may include:
•
Investing in a portfolio of high-quality and diverse securities;
•
Selling investments subject to heightened credit risk;
•
Hedging through use of credit default swaps;
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
88
•
Clearing derivative transactions through central clearing
houses that require daily variation margin;
•
Entering into derivative and reinsurance contracts only with
strong creditworthy institutions;
•
Requiring collateral; and
•
Non-renewing policies/contracts or reinsurance treaties.
The Company has developed credit exposure thresholds which
are based upon counterparty ratings. Aggregate counterparty
credit quality and exposure are monitored on a daily basis
utilizing an enterprise-wide credit exposure information system
that contains data on issuers, ratings, exposures, and credit
limits. Exposures are tracked on a current and potential basis
and aggregated by ultimate parent of the counterparty across
investments, reinsurance receivables, insurance products with
credit risk, and derivatives.
As of December 31, 2024, the Company had no investment
exposure to any credit concentration risk of a single issuer or
counterparty greater than 10% of the Company's stockholders'
equity, other than the U.S. government and certain U.S.
government agencies. For further discussion of concentration of
credit risk in the investment portfolio, see the Concentration of
Credit Risk section in Note 5 - Investments of Notes to
Consolidated Financial Statements.
Assets and Liabilities Subject to Credit Risk
Investments Essentially all of the Company's invested
assets are subject to credit risk. In 2024, there were net credit
losses on fixed maturities, AFS of $2 and a net credit loss
reversal on mortgage loans of $3. In 2023, there were net credit
losses on fixed maturities, AFS and an increase in the ACL on
mortgage loans of $14 and $15, respectively. Refer to the
Investment Portfolio Risk section of Financial Risk Management
under “Credit Losses on Fixed Maturities, AFS and Intent-to-Sell
Impairments" and "ACL on Mortgage Loans”.
Reinsurance recoverables Reinsurance recoverables,
net of an allowance for uncollectible reinsurance, were $7,140
and $7,104 as of December 31, 2024 and 2023 respectively.
Refer to the Enterprise Risk Management section of the MD&A
under “Reinsurance as a Risk Management Strategy”.
Bond insurance The Company collects premiums and
holds reserves for risk exposures within the bond insurance
business where the Company guarantees the completion of our
insured's financial or performance obligations in the event of a
default on their contractual obligations. The Company manages
this risk through underwriting risk assessment, collateral
requirements for insureds, claims management, and
reinsurance.
Premiums receivable and agents' balances
Premiums receivable and agents’ balances, net of an ACL, were
$5,998 and $5,607, as of December 31, 2024 and 2023,
respectively. For a discussion regarding collectibility of these
balances, see Note 7 - Premiums Receivable and Agents'
Balances of Notes to Consolidated Financial Statements.
Credit Risk of Derivatives
The Company uses various derivative counterparties in
executing its derivative transactions. The use of counterparties
creates credit risk that the counterparty may not perform in
accordance with the terms of the derivative transaction.
Downgrades to the credit ratings of the Company’s insurance
operating companies may have adverse implications for its use
of derivatives. In some cases, downgrades may give derivative
counterparties for OTC derivatives and clearing brokers for
OTC-cleared derivatives the right to cancel and settle
outstanding derivative trades or require additional collateral to
be posted. In addition, downgrades may result in counterparties
and clearing brokers becoming unwilling to engage in or clear
additional derivatives or may require additional collateralization
before entering into any new trades.
Managing the Credit Risk of Counterparties to
Derivative Instruments
The Company also has derivative counterparty exposure
policies which limit the Company’s exposure to credit risk. The
Company monitors counterparty exposure on a monthly basis to
ensure compliance with Company policies and statutory
limitations. The Company’s policies with respect to derivative
counterparty exposure establishes market-based credit limits,
favors long-term financial stability and creditworthiness of the
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
89
counterparty and typically requires credit enhancement/credit
risk reducing agreements, which are monitored and evaluated
by the Company’s risk management team and reviewed by
senior management.
The Company minimizes the credit risk of derivative instruments
by entering into transactions with high quality counterparties
primarily rated A or better. The Company also generally requires
that OTC derivative contracts be governed by an International
Swaps and Derivatives Association ("ISDA") Master Agreement,
which is structured by legal entity and by counterparty and
permits right of offset. The Company enters into credit support
annexes in conjunction with the ISDA agreements, which require
daily collateral settlement based upon agreed upon thresholds.
The Company’s credit exposures are generally quantified based
on the prior business day’s net fair value, including income
accruals, of all derivative positions transacted with a single
counterparty for each separate legal entity. The notional amount
of derivative contracts represents the basis upon which pay or
receive amounts are calculated and are not necessarily
reflective of credit risk. The Company enters into collateral
arrangements in connection with its derivatives positions and
collateral is pledged to or held by, or on behalf of, the Company
to the extent the exposure is greater than zero, subject to
minimum transfer thresholds, if applicable. In accordance with
industry standards and the contractual requirements, collateral
is typically settled on the same business day. For further
discussion, see the Derivative Commitments section of Note 14
- Commitments and Contingencies of Notes to Consolidated
Financial Statements.
Use of Credit Derivatives
The Company may also use credit default swaps to manage
credit exposure or to assume credit risk to enhance yield.
Credit Risk Reduced Through Credit Derivatives
The Company uses credit derivatives to purchase credit
protection with respect to a single entity or referenced index.
The Company purchases credit protection through credit default
swaps to economically hedge and manage credit risk of certain
fixed maturity investments across multiple sectors of the
investment portfolio. As of December 31, 2024 and 2023 the
Company did not hold credit derivatives that purchase credit
protection.
Credit Risk Assumed Through Credit Derivatives
The Company may also enter into credit default swaps that
assume credit risk as part of replication transactions. Replication
transactions are used as an economical means to synthetically
replicate the characteristics and performance of assets that are
permissible investments under the Company’s investment
policies. As of December 31, 2024 and 2023, the Company did
not hold credit default swaps that assume credit risk.
For further information on credit derivatives, see Note 6 -
Derivatives of Notes to Consolidated Financial Statements.
Credit Risk of Business Operations
A portion of the Company's Business Insurance business is
written with large deductibles or under retrospectively-rated
plans. Under some commercial insurance contracts with a large
deductible, the Company is obligated to pay the claimant the full
amount of the claim and the Company is subsequently
reimbursed by the policyholder for the deductible amount. As
such, the Company is subject to credit risk until reimbursement
is made. Retrospectively-rated policies are utilized primarily for
workers' compensation coverage, whereby the ultimate
premium is adjusted based on actual losses incurred. Although
the premium adjustment feature of a retrospectively-rated policy
substantially reduces insurance risk for the Company, it
presents credit risk to the Company. The Company’s results of
operations could be adversely affected if a significant portion of
such policyholders failed to reimburse the Company for the
deductible amount or the amount of additional premium owed
under retrospectively-rated policies. The Company manages
these credit risks through credit analysis, collateral
requirements, and oversight. For more information, see Note 7-
Premiums Receivable and Agents' Balances of Notes to
Consolidated Financial Statements.
Interest Rate Risk
Interest rate risk is the risk of financial loss due to adverse
changes in the value of assets and liabilities arising from
movements in interest rates. Interest rate risk encompasses
exposures with respect to changes in the level of interest rates,
the shape of the term structure of rates and the volatility of
interest rates. Interest rate risk does not include exposure to
changes in credit spreads.
Sources of Interest Rate Risk The Company has
exposure to interest rate risk arising from investments in fixed
maturities and commercial mortgage loans, issuances by the
Company of debt securities, preferred stock and similar
securities, discount rate assumptions associated with the
Company’s claim reserves and pension and other
postretirement benefit obligations, and assets that support the
Company's pension and other postretirement benefit plans.
Impact Changes in interest rates from current levels can
have both favorable and unfavorable effects for the Company.
Change
in
Interest
Rates
Favorable Effects
Unfavorable Effects
Ý
•
Additional net
investment income
due to reinvesting
at higher yields and
higher yields on
variable rate
securities
•
Decrease in the fair
value of the fixed
income investment
portfolio
Þ
•
Increase in the fair
value of the fixed
income investment
portfolio
•
Lower net
investment income
due to reinvesting at
lower yields and
lower yields on
variable rate
securities
•
Acceleration in
paydowns and
prepayments or calls
of certain mortgage-
backed and
municipal securities
Management The Company primarily manages its
exposure to interest rate risk by constructing investment
portfolios that seek to protect the Company from the economic
impact associated with changes in interest rates by setting
portfolio duration targets that are aligned with the duration of the
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
90
liabilities that they support. The Company analyzes interest rate
risk using various models including parametric models and cash
flow simulation under various market scenarios of the liabilities
and their supporting investment portfolios. Key metrics that the
Company uses to quantify its exposure to interest rate risk
inherent in its invested assets and the associated liabilities
include duration, convexity and key rate duration.
The Company may also use interest rate swaps and, to a lesser
extent, futures to mitigate interest rate risk associated with its
investment portfolio or liabilities and to manage portfolio
duration. Interest rate swaps are primarily used to convert
interest receipts or payments to a fixed or variable rate. The use
of such swaps enables the Company to customize contract
terms and conditions to desired objectives and manage the
duration profile within established tolerances. As of
December 31, 2024 and 2023, notional amounts pertaining to
derivatives utilized to manage interest rate risk, including
offsetting positions, totaled $4.6 billion and $10.1 billion,
respectively, and primarily relate to hedging invested assets. As
of December 31, 2024 and 2023, the fair value of these
derivatives was $0 and $(6), respectively.
Assets and Liabilities Subject to Interest Rate
Risk
Fixed income investments The fair value of fixed
income investments, which include fixed maturities, commercial
mortgage loans, and short-term investments, was $53.3 billion
and $50.1 billion at December 31, 2024 and 2023, respectively.
As of December 31, 2024 and 2023, the weighted average
duration of the portfolio, including derivative instruments, was
approximately 3.8 for both periods. Changes in the fair value of
fixed maturities due to changes in interest rates are reflected as
a component of AOCI.
Long-term debt obligations The Company's variable
rate debt obligations will generally result in increased interest
expense as a result of higher interest rates; the inverse is true
during a declining interest rate environment. However, as
explained in Note 13 - Debt of Notes to Consolidated Financial
Statements, the Company has entered into an interest-rate
swap agreement to effectively convert variable interest rate
payments on its $500 junior subordinated debentures due 2067
to fixed interest payments. Changes in the value of fixed rate
long-term debt as a result of changes in interest rates will impact
the fair value of these instruments but not the carrying value in
the Company's Consolidated Balance Sheets.
Group life and disability product liabilities The
cash outflows associated with contracts issued by the
Company's Employee Benefits segment, primarily group life and
short and long-term disability policy liabilities, are not interest
rate sensitive but vary based on timing. Though the aggregate
cash flow payment streams are relatively predictable, these
products rely upon actuarial pricing assumptions (including
mortality and morbidity) and have an element of cash flow
uncertainty. As of December 31, 2024 and 2023, the Company
had $8,496 and $8,586, respectively of reserves for group life
and disability contracts. For most Employee Benefits liabilities,
changes in interest rates will impact the fair value but not the
carrying value in the Company's Consolidated Balance Sheets.
For long-duration insurance contracts, including paid-up life and
life conversions, changes in interest rates will impact both the
fair value and the carrying value in the Company's Consolidated
Balance Sheets.
Pension and other postretirement benefit
obligations The Company’s pension and other
postretirement benefit obligations are exposed to interest rate
risk based upon the sensitivity of present value obligations to
changes in liability discount rates as well as the sensitivity of the
fair value of investments in the plan portfolios to changes in
interest rates. The discount rate assumption is based upon an
interest rate yield curve that reflects high-quality fixed income
investments consistent with the maturity profile of the expected
liability cash flows. The Company is exposed to the risk of
having to make additional plan contributions if the plans’
investment returns, including from investments in fixed
maturities, are lower than expected. For further discussion of
discounting pension and other postretirement benefit
obligations, refer to Note 18 - Employee Benefit Plans of Notes
to Consolidated Financial Statements.
Interest Rate Sensitivity
Group Life and Disability Reserves and Invested Assets
Supporting Them
Included in the following table is the before tax change in the net
economic value of contracts issued by the Company’s
Employee Benefits segment, primarily group life and disability,
for which fixed valuation discount rate assumptions are
established based upon investment returns assumed in pricing,
along with the corresponding invested assets. For long-duration
insurance contracts the discount rate is updated quarterly with
an equivalent single rate that is based on a current market
observable, upper-medium grade fixed maturity yield. This has
been interpreted to represent a yield based on single-A credit
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
91
rated fixed maturity instruments with similar duration to the
related liability. Also included in this analysis are the interest rate
sensitive derivatives used by the Company to hedge its
exposure to interest rate risk in the investment portfolios
supporting these contracts. This analysis does not include the
assets and corresponding liabilities of other insurance products
such as automobile, property, workers' compensation and
general liability insurance. Certain financial instruments, such as
limited partnerships and other alternative investments, have
been omitted from the analysis as the interest rate sensitivity of
these investments is generally lower and less predictable than
fixed income investments. The calculation of the estimated
hypothetical change in net economic value below assumes a
100 basis point upward and downward parallel shift in the yield
curve.
The selection of the 100 basis point parallel shift in the yield
curve was made only as an illustration of the potential impact of
such an event and should not be construed as a prediction of
future market events. Actual results could differ materially from
those illustrated below due to the nature of the estimates and
assumptions used in the analysis. The Company’s sensitivity
analysis calculation assumes that the composition of invested
assets and liabilities remain materially consistent throughout the
year and that the current relationship between short-term and
long-term interest rates will remain constant over time. As a
result, these calculations may not fully capture the impact of
portfolio re-allocations, significant product sales or non-parallel
changes in interest rates.
Interest Rate Sensitivity of Employee Benefits
Reserves and Invested Assets Supporting Them
Change in Net Economic Value
as of December 31,
2024
2023
Basis point shift
-100
+100
-100
+100
Increase (decrease) in
economic value, before tax $
69 $
(57) $
64 $
(50)
The carrying value of assets related to supporting Employee
Benefits, primarily long-term disability reserves, was $10.0
billion and $10.3 billion, as of December 31, 2024 and 2023,
respectively, and included fixed maturities, commercial
mortgage loans and short-term investments. The assets are
monitored and managed within set duration guidelines and are
evaluated on a daily basis, as well as annually, using scenario
simulation techniques in compliance with regulatory
requirements.
Invested Assets not Supporting Group Life and Disability
Reserves
The following table provides an analysis showing the estimated
before tax change in the fair value of the Company’s
investments and related derivatives, excluding assets
supporting group life and disability reserves which are included
in the table above, assuming 100 basis point upward and
downward parallel shifts in the yield curve as of December 31,
2024 and 2023. Certain financial instruments, such as limited
partnerships and other alternative investments, have been
omitted from the analysis as the interest rate sensitivity of these
investments is generally lower and less predictable than fixed
income investments.
Interest Rate Sensitivity of Invested Assets
(Excluding Those Supporting Employee Benefits
Reserves)
Change in Fair Value as of
December 31,
2024
2023
Basis point shift
-100
+100
-100
+100
Increase (decrease) in
fair value, before tax
$ 1,758 $ (1,627) $ 1,590 $ (1,466)
The carrying value of fixed maturities, commercial mortgage
loans and short-term investments, excluding those related to
supporting Employee Benefits short and long-term disability
reserves, was $43.3 billion and $39.8 billion as of December 31,
2024 and 2023, respectively.
Long-term Debt
A 100 basis point parallel decrease in the yield curve would
result in an increase in the fair value of long-term debt by $397
and $444 as of December 31, 2024 and 2023, respectively. A
100 basis point parallel increase in the yield curve would result
in a decrease in the fair value of long-term debt by $336 and
$373 as of December 31, 2024 and 2023, respectively. Changes
in the value of long-term debt as a result of changes in interest
rates will not impact the carrying value in the Company's
Consolidated Balance Sheets.
Pension and Other Postretirement Plan Obligations
A 100 basis point parallel decrease in the yield curve would
impact both the value of the underlying pension assets and the
value of the liabilities, resulting in an increase in the unfunded
liabilities (or decrease in asset) for pension and other
postretirement plan obligations of $9 and $12 as of
December 31, 2024 and 2023, respectively. A 100 basis point
parallel increase in the yield curve would have the inverse effect
and result in a decrease in the unfunded liabilities (or increase in
assets) for pension and other postretirement plan obligations of
$3 and $3 as of December 31, 2024 and 2023, respectively.
Gains or losses due to changes in the yield curve on the
pension and postretirement plan obligations are recorded within
AOCI and are amortized into the actuarial loss component of net
periodic benefit cost when they exceed a threshold.
Equity Risk
Equity risk is the risk of financial loss due to changes in the
value of global equities or equity indices.
Sources of Equity Risk The Company has exposure
to equity risk from invested assets, assets that support the
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
92
Company’s pension and other postretirement benefit plans, and
fee income derived from Hartford Funds AUM.
Impact The investment portfolio is exposed to losses from
market declines affecting equity securities and derivatives,
which could negatively impact the Company's reported
earnings. In addition, investments in limited partnerships and
other alternative investments generally have a level of
correlation to domestic equity market levels and can expose the
Company to losses in earnings if valuations decline; however,
earnings impacts are recognized on a lag as results from private
equity investments and other funds are generally reported on a
three-month delay. For assets supporting pension and other
postretirement benefit plans, the Company may be required to
make additional plan contributions if equity investments in the
plan portfolios decline in value. Hartford Funds earnings are
also significantly influenced by the U.S. and other equity
markets. Generally, declines in equity markets will reduce the
value of average daily AUM and the amount of fee income
generated from those assets. Increases in equity markets will
generally have the inverse impact.
Management The Company uses various approaches in
managing its equity exposure, including limits on the proportion
of assets invested in equities, diversification of the equity
portfolio, and, at times, hedging of changes in equity indices.
For assets supporting pension and other postretirement benefit
plans, the asset allocation mix is reviewed on a periodic basis.
In order to minimize risk, the pension plans maintain a listing of
permissible and prohibited investments and impose
concentration limits and investment quality requirements on
permissible investment options.
Assets and Liabilities Subject to Equity Risk
Investment portfolio The investment portfolio is
exposed to losses from market declines affecting equity
securities and derivatives, as well as limited partnerships and
other alternative investments. Generally, declines in equity
markets will reduce the value of these types of investments and
could negatively impact the Company’s earnings while
increases in equity will have the inverse impact. For equity
securities, the changes in fair value are reported in net realized
gains and losses. For limited partnerships and other alternative
investments, the Company's share of earnings for the period is
recorded in net investment income, though typically on a delay
based on the availability of the underlying financial statements.
For a discussion of equity sensitivity, see below.
Assets supporting pension and other
postretirement benefit plans The Company may be
required to make additional plan contributions if equity
investments in the plan portfolios decline in value. For a
discussion of equity sensitivity, see below.
Declines in value are recognized as unrealized losses in AOCI.
Increases in equity markets are recognized as unrealized gains
in AOCI. Unrealized gains and losses in AOCI are amortized into
the actuarial loss component of net periodic benefit cost when
they exceed a threshold. For further discussion of equity risk
associated with the pension plans, see Note 18 - Employee
Benefit Plans of Notes to Consolidated Financial Statements.
Assets under management AUM in Hartford Funds may
decrease in value during equity market declines, which would
result in lower earnings because fee income is earned based
upon the value of AUM.
Equity Sensitivity
Investment portfolio and the assets supporting pension and
other postretirement benefit plans
Included in the following tables are the estimated before tax
change in the economic value of the Company’s invested assets
and assets supporting pension and other postretirement benefit
plans with sensitivity to equity risk. The calculation of the
hypothetical change in economic value below assumes a 20%
upward and downward shock to the Standard & Poor's 500
Composite Price Index ("S&P 500"). For limited partnerships
and other alternative investments, the movement in economic
value is calculated using a beta analysis largely derived from
historical experience relative to the S&P 500.
The selection of the 20% shock to the S&P 500 was made only
as an illustration of the potential impact of such an event and
should not be construed as a prediction of future market events.
Actual results could differ materially from those illustrated below
due to the nature of the estimates and assumptions used in the
analysis. These calculations do not capture the impact of
portfolio re-allocations.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
93
Equity Sensitivity
As of December 31, 2024
As of December 31, 2023
Shock to S&P 500
Shock to S&P 500
(Before tax)
Fair Value
+20%
-20%
Fair Value
+20%
-20%
Investment Portfolio
$
5,645 $
672 $
(636) $
5,649 $
574 $
(574)
Assets supporting pension and other postretirement
benefit plans
$
787 $
93 $
(93) $
833 $
89 $
(89)
Hartford Funds assets under management
Hartford Funds earnings are significantly influenced by the U.S.
and other equity markets. If equity markets were to
hypothetically decline 20% and remain depressed for one year,
the estimated before tax impact on reported Hartford Funds
earnings for that one year period is approximately $70 as of
December 31, 2024. The selection of the 20% shock to the S&P
500 was made only as an illustration of the potential impact of
such an event and should not be construed as a prediction of
future market events. Actual results could differ materially due to
the nature of the estimates and assumptions used in the
analysis.
Foreign Currency Exchange Risk
Foreign currency exchange risk is the risk of financial loss due
to changes in the relative value between currencies.
Sources of Currency Risk The Company has foreign
currency exchange risk in non-U.S. dollar denominated cash,
fixed maturities, equities, and derivative instruments. In addition,
the Company has non-U.S. subsidiaries, some with functional
currencies other than U.S. dollar, and which transact business in
multiple currencies resulting in assets and liabilities
denominated in foreign currencies.
Impact Changes in relative values between currencies can
create variability in cash flows and realized or unrealized gains
and losses on changes in the fair value of assets and liabilities.
The impact on the fair value of fixed maturities, AFS due to
changes in foreign currency exchange rates, in relation to
functional currency, is reported in unrealized gains or losses as
part of other comprehensive income ("OCI"). The realization of
gains or losses resulting from investment sales or from changes
in investments that record changes in fair value through the
income statement due to changes in foreign currency exchange
rates is reflected through net realized gains and losses.
In regard to insurance and reinsurance contracts that the
Company enters into for which we are obligated to pay losses in
a foreign currency, the impact of changes in foreign currency
exchange rates on assets and liabilities related to these
contracts is reflected through net realized gains and losses.
These assets or liabilities include, but are not limited to, cash
and cash equivalents, premiums receivable, reinsurance
recoverables, and unpaid losses and loss adjustment expenses.
Additionally, the Company translates the assets, liabilities, and
income of non-U.S. dollar functional currency legal entities into
U.S. dollars. This translation amount is reported as a component
of other comprehensive income.
Management The Company manages its foreign currency
exchange risk primarily through asset-liability matching and
through the use of derivative instruments. However, legal entity
capital is invested in local currencies in order to satisfy
regulatory requirements and to support local insurance
operations. The foreign currency exposure of non-U.S. dollar
denominated investments will most commonly be reduced
through the sale of the assets or through hedges using foreign
currency swaps and forwards.
Assets and Liabilities Subject to Foreign
Currency Exchange Risk
Investment portfolio The Company is exposed to foreign
exchange risk affecting non-U.S. dollar denominated cash, fixed
maturities, equities, and derivative instruments. Changes in
relative values between currencies can positively or negatively
impact net realized gains and losses or unrealized gains
(losses) as part of other comprehensive income.
Insurance contract related assets and liabilities
The Company has non-U.S. dollar denominated insurance and
reinsurance contracts and associated premiums receivable,
reinsurance recoverables and unpaid losses and loss
adjustment expenses, that are exposed to foreign exchange
risk. For contracts that are within U.S dollar functional currency
legal entities, changes in foreign currency exchange rates can
positively or negatively impact net realized gains and losses. For
contracts within non-U.S. dollar functional currency legal
entities, changes in the functional currency relative to the U.S.
dollar can positively or negatively impact other comprehensive
income.
Foreign Currency Sensitivity
For the Company’s primary currencies that create foreign
exchange risk, the following table provides the estimated impact
of a hypothetical 10% unfavorable change in exchange rates.
Actual results could differ materially due to the nature of the
estimates and assumptions used in the analysis. The amounts
presented are in U.S. dollars and before tax.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
94
Foreign Currency Sensitivity [1]
GBP
CAD
10%
Unfavorable
Change
December 31, 2024
Net assets (liabilities)
$
204 $
191 $
(36)
December 31, 2023
Net assets (liabilities)
$
168 $
170 $
(31)
[1]Table excludes currencies where the value of net assets in U.S. dollar equivalent is less than 1% of total net assets of the Company.
Financial Risk on U.S. Statutory Capital
U.S. Statutory surplus amounts and RBC ratios may increase or
decrease in any period depending upon a variety of factors and
may be compounded in extreme scenarios or if multiple factors
occur at the same time. At times, the impact of changes in
certain market factors or a combination of multiple factors on
RBC ratios can be counterintuitive. Factors include:
•
A decrease in the value of certain fixed-income and equity
securities in our investment portfolio, due in part to credit
spreads widening, an increase in interest rates, or a decline
in equity market levels, may result in a decrease in statutory
surplus and RBC ratios;
•
A decline in investment yields may reduce our net
investment income, which may result in a decrease in
statutory surplus and RBC ratios;
•
Decreases in the value of certain derivative instruments that
do not get hedge accounting, may reduce statutory surplus
and RBC ratios; and
•
Non-market factors can also impact the amount and
volatility of either our actual or potential obligation, as well
as the related statutory surplus and RBC ratios.
Most of these factors are outside of the Company’s control.
Among other factors, rating agencies consider the level of
statutory capital and surplus of our U.S. insurance subsidiaries
as well as the level of GAAP capital held by the Company in
determining the Company’s financial strength and credit ratings.
Rating agencies may implement changes to their internal
models that have the effect of increasing or decreasing the
amount of capital we must hold in order to maintain our current
ratings.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
95
Investment Portfolio Risk
The following table presents the Company’s fixed maturities,
AFS, by credit quality. The credit ratings referenced throughout
this section are based on availability and are generally the
midpoint of the available ratings among Moody’s, S&P, and
Fitch. If no rating is available from a rating agency, then an
internally developed rating is used. Accrued investment income
related to fixed maturities is not included in the amortized cost or
fair value of the fixed maturities. For further information refer to
Note 5 - Investments of Notes to Consolidated Financial
Statements.
Fixed Maturities, AFS by Credit Quality
December 31, 2024
December 31, 2023
Amortized
Cost
Fair Value
Percent of
Total Fair
Value
Amortized
Cost
Fair Value
Percent of
Total Fair
Value
United States Government/Government agencies
$
5,424 $
4,937
11.6 % $
5,174 $
4,776
12.0 %
AAA
7,340
7,166
16.8 %
7,277
7,055
17.7 %
AA
7,762
7,484
17.6 %
7,527
7,270
18.3 %
A
11,422
10,933
25.7 %
10,253
9,828
24.7 %
BBB
10,227
9,722
22.8 %
9,710
9,198
23.1 %
BB & below
2,363
2,325
5.5 %
1,785
1,691
4.2 %
Total fixed maturities, AFS [1]
$
44,538 $
42,567
100.0 % $
41,726 $
39,818
100.0 %
[1] Excludes FVO securities. For further discussion on FVO securities, see Note 4 - Fair Value Measurements of Notes to Consolidated Financial Statements.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
96
Fixed Maturities, AFS by Type
December 31, 2024
December 31, 2023
Amortized
Cost
ACL
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Percent
of Total
Fair
Value
Amortized
Cost
ACL
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Percent
of Total
Fair
Value
ABS
Consumer loans
$
2,554 $ — $
19 $
(11) $ 2,562
6.0 % $
2,414 $ — $
10 $
(18) $ 2,406
6.0 %
Other
1,394 —
9
(28)
1,375
3.3 %
933 —
8
(27)
914
2.3 %
CLOs
3,237 —
13
—
3,250
7.6 %
3,104 —
3
(17)
3,090
7.8 %
CMBS
Agency [1]
1,284 (13)
16
(128)
1,159
2.7 %
1,179 (12)
14
(119)
1,062
2.7 %
Bonds
1,597 —
1
(114)
1,484
3.5 %
2,150 —
—
(219)
1,931
4.8 %
Interest only
95 —
4
(6)
93
0.2 %
137 —
5
(10)
132
0.3 %
Corporate
Basic industry
1,100 —
5
(43)
1,062
2.5 %
967 —
7
(39)
935
2.3 %
Capital goods
1,769 —
14
(69)
1,714
4.0 %
1,630 —
19
(67)
1,582
4.0 %
Consumer
cyclical
1,599 —
9
(63)
1,545
3.6 %
1,331
(4)
20
(55)
1,292
3.2 %
Consumer non-
cyclical
2,641 —
16
(139)
2,518
5.9 %
2,232 —
27
(123)
2,136
5.4 %
Energy
1,395 —
10
(59)
1,346
3.2 %
1,261 —
13
(57)
1,217
3.1 %
Financial
services
6,455 —
28
(245)
6,238
14.7 %
5,434 —
30
(283)
5,181
13.0 %
Tech./comm.
2,848 —
19
(169)
2,698
6.3 %
2,470
(2)
47
(143)
2,372
6.0 %
Transportation
930 —
5
(58)
877
2.1 %
803 —
8
(60)
751
1.9 %
Utilities
2,464
(3)
11
(167)
2,305
5.4 %
2,155
(3)
25
(148)
2,029
5.1 %
Real estate
investment
trusts ("REITs")
354 —
—
(21)
333
0.8 %
408 —
1
(38)
371
0.9 %
Foreign govt./
govt. agencies
500 —
3
(23)
480
1.1 %
583 —
6
(27)
562
1.4 %
Municipal bonds
Taxable
1,384 —
6
(126)
1,264
3.0 %
1,211 —
7
(113)
1,105
2.8 %
Tax-exempt
4,190 —
71
(221)
4,040
9.5 %
4,996 —
124
(186)
4,934
12.4 %
RMBS
Agency
3,002 —
7
(225)
2,784
6.5 %
2,342 —
14
(171)
2,185
5.5 %
Non-agency
2,586 —
6
(168)
2,424
5.7 %
2,293 —
4
(235)
2,062
5.2 %
Sub-prime
22 —
—
—
22
0.1 %
40 —
—
—
40
0.1 %
U.S. Treasuries
1,138 —
—
(144)
994
2.3 %
1,653 —
26
(150)
1,529
3.8 %
Total fixed
maturities, AFS
$ 44,538 $ (16) $
272 $
(2,227) $ 42,567 100.0 % $ 41,726 $ (21) $
418 $
(2,305) $ 39,818 100.0 %
FVO securities
$
308
$
327
[1]Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
The fair value of fixed maturities, AFS increased as compared to
December 31, 2023, primarily due to net additions of corporate
bonds, high-quality RMBS and ABS, partially offset by net
reductions to tax-exempt municipal bonds, U.S. Treasuries, and
CMBS.
Commercial & Residential Real Estate
The following tables present the Company’s exposure to CMBS
and RMBS by credit quality included in the preceding Fixed
Maturities, AFS by Type table.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
97
Exposure to CMBS and RMBS as of December 31, 2024
AAA
AA
A
BBB
BB and Below
Total
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
CMBS
Agency [1]
$
14 $
14 $
1,270 $ 1,145 $
— $
— $
— $
— $
— $
— $
1,284 $ 1,159
Bonds
609
578
407
376
267
240
147
137
167
153
1,597 1,484
Interest Only
53
51
31
31
6
6
5
5
—
—
95
93
Total CMBS
676
643
1,708 1,552
273
246
152
142
167
153
2,976 2,736
RMBS
Agency
—
—
3,002 2,784
—
—
—
—
—
—
3,002 2,784
Non-Agency
1,564 1,467
746
697
203
193
65
61
8
6
2,586 2,424
Sub-Prime
1
1
5
5
2
2
7
7
7
7
22
22
Total RMBS
1,565 1,468
3,753 3,486
205
195
72
68
15
13
5,610 5,230
Total CMBS &
RMBS
$
2,241 $ 2,111 $
5,461 $ 5,038 $
478 $ 441 $
224 $ 210 $
182 $ 166 $
8,586 $ 7,966
Exposure to CMBS and RMBS as of December 31, 2023
AAA
AA
A
BBB
BB and Below
Total
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
CMBS
Agency [1]
$
20 $
19 $
1,159 $ 1,043 $
— $
— $
— $
— $
— $
— $
1,179 $ 1,062
Bonds
852
795
545
485
371
317
147
119
235
215
2,150 1,931
Interest Only
76
72
54
53
—
—
7
7
—
—
137
132
Total CMBS
948
886
1,758 1,581
371
317
154
126
235
215
3,466 3,125
RMBS
Agency
—
—
2,342 2,185
—
—
—
—
—
—
2,342 2,185
Non-Agency
1,263 1,144
526
477
300
260
189
169
15
12
2,293 2,062
Sub-Prime
1
1
12
12
5
5
10
10
12
12
40
40
Total RMBS
1,264 1,145
2,880 2,674
305
265
199
179
27
24
4,675 4,287
Total CMBS &
RMBS
$
2,212 $ 2,031 $
4,638 $ 4,255 $
676 $ 582 $
353 $ 305 $
262 $ 239 $
8,141 $ 7,412
[1]Includes securities with pools of loans issued by the Small Business Administration which are backed by the full faith and credit of the U.S. government.
The Company also has exposure to commercial mortgage
loans. These loans are collateralized by real estate properties
that are diversified both geographically throughout the United
States and by property type. These commercial loans are
originated by the Company as high quality whole loans, and the
Company may sell participation interests in one or more loans to
third parties. A loan participation interest represents a pro-rata
share in interest and principal payments generated by the
participated loan, and the relationship between the Company as
loan originator, lead participant and servicer and the third party
as a participant are governed by a participation agreement.
As of December 31, 2024, mortgage loans had an amortized
cost of $6.4 billion and carrying value of $6.4 billion, with an ACL
of $44. As of December 31, 2023, mortgage loans had an
amortized cost of $6.1 billion and carrying value of $6.1 billion,
with an ACL of $51. The release in the allowance reflects write-
offs, improved economic scenario forecasts and property
specific reductions, partially offset by net additions of new loans.
The Company funded $601 million of commercial mortgage
loans, primarily industrial properties, with a weighted average
loan-to-value (“LTV”) ratio of 58% and a weighted average yield
of 7.1% during the twelve months ended December 31, 2024.
The Company continues to originate commercial mortgage
loans on institutional-quality properties with strong LTV ratios.
There were no mortgage loans held for sale as of December 31,
2024, or December 31, 2023.
Municipal Bonds
The following table presents the Company’s exposure to
municipal bonds by type and weighted average credit quality
included in the preceding Securities by Type table.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
98
Available For Sale Investments in Municipal Bonds
December 31, 2024
December 31, 2023
Amortized
Cost
Fair Value
Weighted
Average
Credit
Quality
Amortized
Cost
Fair Value
Weighted
Average
Credit
Quality
General Obligation
$
1,033 $
1,008
AA
$
807 $
814
AA
Pre-refunded [1]
86
87
AA+
155
158
AA+
Revenue
Transportation
1,134
1,084
A+
1,325
1,298
A+
Health Care
864
789
A+
974
902
A+
Leasing [2]
627
588
AA
761
732
AA-
Education
402
385
AA
527
520
AA
Water & Sewer
308
289
AA
362
347
AA+
Power
281
272
A
275
271
A
Housing
195
185
AA
179
172
AA
Sales Tax
183
183
AA
231
237
AA
Other
461
434
AA-
611
588
A+
Total Revenue
4,455
4,209
AA-
5,245
5,067
AA-
Total Municipal
$
5,574 $
5,304
AA-
$
6,207 $
6,039
AA-
[1]Pre-refunded bonds are bonds for which an irrevocable trust containing sufficient U.S. treasury, agency, or other securities has been established to fund the
remaining payments of principal and interest.
[2]Leasing revenue bonds are generally the obligations of a financing authority established by the municipality that leases facilities back to a municipality. The notes
are typically secured by lease payments made by the municipality that is leasing the facilities financed by the issue. Lease payments may be subject to annual
appropriation by the municipality or the municipality may be obligated to appropriate general tax revenues to make lease payments.
As of December 31, 2024, the largest issuer concentrations
were the State of Illinois, the State of California, and the
Metropolitan Transportation Authority, which each comprised
less than 3% of the municipal bond portfolio and were primarily
comprised of general obligation and revenue bonds. As of
December 31, 2023, the largest issuer concentrations were the
New York City Transitional Finance Authority, the State of
Illinois, and the Metropolitan Transportation Authority, which
each comprised less than 3% of the municipal bond portfolio
and were primarily comprised of general obligation and revenue
bonds. In total, municipal bonds make up 9% of the fair value of
the Company's investment portfolio.
Limited Partnerships and Other Alternative
Investments
The following table presents the Company’s investments in
limited partnerships and other alternative investments which
include real estate joint ventures, real estate funds, private
equity funds, other funds, and other alternative investments.
Private equity funds primarily consist of investments in funds
whose assets typically consist of a diversified pool of
investments in small to mid-sized non-public businesses with
high growth potential and strong owner sponsorship, as well as
limited exposure to public markets.
Income or losses on investments in limited partnerships and
other alternative investments are recognized on a lag as results
from private equity investments and other funds are generally
reported on a three-month delay.
Limited Partnerships and Other Alternative Investments - Net Investment Income
Year Ended December 31,
2024
2023
2022
Amount
Yield [1]
Amount
Yield [1]
Amount
Yield [1]
Real estate joint ventures and funds
$
(67)
(3.4) % $
(10)
(0.5) % $
316
21.9 %
Private equity funds
108
5.9 %
161
9.9 %
186
14.2 %
Other funds
60
11.7 %
29
6.6 %
32
10.5 %
Other alternative investments [2]
47
9.1 %
32
6.6 %
(19)
(3.8) %
Total
$
148
3.0 % $
212
4.8 % $
515
14.4 %
[1]Yields calculated using annualized net investment income divided by the monthly average invested assets.
[2]Consists of an insurer-owned life insurance policy which is primarily invested in private equity funds and fixed income.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
99
Investments in Limited Partnerships and Other Alternative Investments
December 31, 2024
December 31, 2023
Amount
Percent
Amount
Percent
Real estate joint ventures and funds
$
1,907
37.8 % $
1,931
40.4 %
Private equity funds
1,956
38.8 %
1,838
38.4 %
Other funds
623
12.4 %
498
10.4 %
Other alternative investments [1]
556
11.0 %
518
10.8 %
Total
$
5,042
100.0 % $
4,785
100.0 %
[1]Consists of an insurer-owned life insurance policy which is primarily invested in private equity funds and fixed income.
Fixed Maturities, AFS — Unrealized Loss
Aging
The total gross unrealized losses were $2.2 billion as of
December 31, 2024, largely consistent with December 31, 2023.
As of December 31, 2024, $1.7 billion of the gross unrealized
losses were associated with fixed maturities, AFS depressed
less than 20% of amortized cost. The remaining $0.5 billion of
gross unrealized losses were associated with fixed maturities,
AFS depressed greater than 20%. The fixed maturities, AFS
depressed more than 20% primarily related to corporate fixed
maturities, U.S. Treasuries, and municipal bonds, that are
mainly depressed because current interest rates are higher than
at the respective purchase dates.
As part of the Company’s ongoing investment monitoring
process, the Company has reviewed its fixed maturities, AFS in
an unrealized loss position and concluded that these fixed
maturities are temporarily depressed and are expected to
recover in value as the investments approach maturity or as
market spreads tighten. For these fixed maturities in an
unrealized loss position where an ACL has not been recorded,
the Company’s best estimate of expected future cash flows are
sufficient to recover the amortized cost basis of the investment.
Furthermore, the Company neither has an intention to sell nor
does it expect to be required to sell these investments. For
further information regarding the Company’s ACL analysis, see
the Credit Losses on Fixed Maturities, AFS and Intent-to-Sell
Impairments section below.
Unrealized Loss Aging for Fixed Maturities, AFS
December 31, 2024
December 31, 2023
Consecutive Months
Items
Amortized
Cost
ACL
Unrealized
Loss
Fair
Value
Items
Amortized
Cost
ACL
Unrealized
Loss
Fair
Value
Three months or less
1,044 $
9,577 $ — $
(186) $ 9,391
51 $
440 $ — $
(4) $
436
Greater than three to six months
71
678
—
(24)
654
35
143
—
(2)
141
Greater than six to nine months
13
33
—
(1)
32
137
1,117
—
(13)
1,104
Greater than nine to eleven months
44
363
—
(32)
331
97
738
—
(22)
716
Twelve months or more
2,761
18,938 (13)
(1,984) 16,941
3,530
27,448 (14)
(2,264) 25,170
Total
3,933 $
29,589 $ (13) $
(2,227) $ 27,349
3,850 $
29,886 $ (14) $
(2,305) $ 27,567
Unrealized Loss Aging for Fixed Maturities, AFS Continuously Depressed Over 20%
December 31, 2024
December 31, 2023
Consecutive Months
Items
Amortized
Cost
ACL
Unrealized
Loss
Fair
Value
Items
Amortized
Cost
ACL
Unrealized
Loss
Fair
Value
Three months or less
132 $
1,003 $ (3) $
(224) $
776
14 $
56 $ (1) $
(13) $
42
Greater than three to six months
3
3
—
(1)
2
10
19
(2)
(4)
13
Greater than six to nine months
4
24
(1)
(6)
17
31
148
—
(33)
115
Greater than nine to eleven months
4
44
—
(12)
32
22
163
—
(40)
123
Twelve months or more
93
811
(1)
(259)
551
143
1,216
—
(327)
889
Total
236 $
1,885 $ (5) $
(502) $ 1,378
220 $
1,602 $ (3) $
(417) $ 1,182
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
100
Credit Losses on Fixed Maturities,
AFS and Intent-to-Sell Impairments
For the year ended December 31, 2024
The Company recorded net credit losses of $2, primarily
attributable to increases in the ACL of $1 on CMBS and $1 on a
below investment grade corporate issuer. Unrealized losses on
securities with an ACL recognized in OCI were less than $1. For
further information, refer to Note 5 - Investments of Notes to
Consolidated Financial Statements.
There were no intent-to-sell impairments
The Company incorporates its best estimate of future
performance using internal assumptions and judgments that are
informed by economic and industry specific trends, as well as
our expectations with respect to security specific developments.
Future intent-to-sell impairments or credit losses may develop
as the result of changes in our intent to sell specific securities
that are in an unrealized loss position or if modeling
assumptions, such as macroeconomic factors or security
specific developments, change unfavorably from our current
modeling assumptions, resulting in lower cash flow
expectations.
For the year ended December 31, 2023
The Company recorded net credit losses of $14, primarily
attributable to increases in the ACL of $12 related to three below
investment grade corporate issuers and $2 related to a CMBS
that had an ACL in the prior period driven by prepayments.
Unrealized losses on securities with an ACL recognized in other
comprehensive income were $4.
There were no intent-to-sell impairments.
ACL on Mortgage Loans
For the year ended December 31, 2024
The Company reviews mortgage loans on a quarterly basis to
estimate the ACL with changes in the ACL recorded in net
realized gains and losses. Apart from an ACL recorded on
individual mortgage loans where the borrower is experiencing
financial difficulties, the Company records an ACL on the pool of
mortgage loans based on lifetime expected credit losses. For
further information, refer to Note 5 - Investments of Notes to
Consolidated Financial Statements.
The Company recorded a credit loss reversal of $3 primarily
attributable to improved economic scenario forecasts and
property specific improvements, partially offset by net additions
of new loans.
For the year ended December 31, 2023
The Company recorded an increase in the ACL on mortgage
loans of $15. The increase is primarily attributable to revised
economic scenarios, lower property valuations, and overall
weaker real estate fundamentals.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
101
CAPITAL RESOURCES AND LIQUIDITY
The following section discusses the overall financial strength of
The Hartford and its insurance operations including their ability
to generate cash flows from each of their business segments,
borrow funds at competitive rates and raise new capital to meet
operating and growth needs.
|SUMMARY OF CAPITAL
RESOURCES AND LIQUIDITY
Capital available to the holding company as
of December 31, 2024:
•
Approximately $1.3 billion in fixed maturities, short-term
investments, investment sales receivable and cash at the
HIG Holding Company;
•
A senior unsecured revolving credit facility that provides for
borrowing capacity up to $750 of unsecured credit through
October 27, 2026. As of December 31, 2024, there were no
borrowings outstanding; and
•
An intercompany liquidity agreement that allows for short-
term advances of funds among the HIG Holding Company
and certain affiliates of up to $2.0 billion for liquidity and
other general corporate purposes. As of December 31,
2024, $1.9 billion was available, $105 was outstanding
between certain affiliates, and there were no amounts
outstanding at the HIG Holding Company.As of February
20, 2025, $1.85 billion was available, $150 was outstanding
between certain affiliates and there were no amounts
outstanding at the HIG Holding Company.
2025 expected dividends and other sources
of capital:
The future payment of dividends from our subsidiaries is
dependent on several factors including business results, capital
position and liquidity of our subsidiaries.
•
P&C - The Company's property and casualty insurance
subsidiaries have regulatory dividend capacity of $2.0
billion for 2025. The HIG Holding Company expects to
receive approximately $1.7 billion of net dividends in 2025
after considering state deposit and regulatory capital
requirements to support growth in certain entities, dividends
that are expected to be subsequently contributed to P&C
subsidiaries and dividends related to interest on
intercompany notes.
•
Employee Benefits - Hartford Life and Accident Insurance
Company ("HLA") has regulatory dividend capacity of $592
in 2025 with approximately $590 of dividends expected in
2025.
•
Hartford Funds - HIG Holding Company expects to receive
approximately $150 in dividends from Hartford Funds in
2025.
Expected liquidity requirements for the next
twelve months as of December 31, 2024:
•
$194 of interest on debt, net of settlements on a related
interest rate swap. See Note 13 - Debt of Notes to
Consolidated Financial Statements;
•
$21 dividends on preferred stock, subject to the discretion
of the Board of Directors; and
•
$605 of common stockholders' dividends, subject to the
discretion of the Board of Directors and before share
repurchases.
Expected liquidity requirements for beyond
the next twelve months as of December 31,
2024:
•
Interest on and repayments of debt, see Note 13 - Debt of
Notes to Consolidated Financial Statements.
•
Preferred stock and common stock dividends, subject to the
discretion of the Board of Directors.
Equity repurchase program:
In 2024, the Company repurchased 14.4 million common shares
for $1.5 billion under two share repurchase programs authorized
by the Board of Directors. The Company had a $3.0 billion share
repurchase authorization which was effective through December
31, 2024. In addition to this authorization, in July 2024, the
Board of Directors approved a $3.3 billion share repurchase
authorization effective from August 1, 2024 to December 31,
2026. As of December 31, 2024, the Company has $3.15 billion
remaining for equity repurchases under the share repurchase
program effective through 2026. During the period January 1,
2025 through February 20, 2025, the Company repurchased
approximately 2.2 million common shares for $248.
The timing of any repurchases is dependent on several factors,
including the market price of the Company's securities, the
Company's capital position, consideration of the effect of any
repurchases on the Company's financial strength or credit
ratings, the Company's blackout periods, and other
considerations.
|LIQUIDITY REQUIREMENTS AND
SOURCES OF CAPITAL
The Hartford Insurance Group, Inc.
("HIG Holding Company")
The liquidity requirements of the HIG Holding Company will
primarily be met by HIG Holding Company’s fixed maturities;
short-term investments and cash; and dividends from its
subsidiaries, principally its insurance operations. The Company
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
102
maintains sufficient liquidity and has a variety of contingent
liquidity resources to manage liquidity across a range of
economic scenarios.
The HIG Holding Company expects to continue to receive
dividends from its operating subsidiaries in the future and
manages capital in its operating subsidiaries to be sufficient
under significant economic stress scenarios. Dividends from
subsidiaries and other sources of funds at the holding company
may be used to repurchase shares under the authorized share
repurchase program at the discretion of management.
Under significant economic stress scenarios, the Company has
the ability to meet short-term cash requirements, if needed, by
borrowing under its revolving credit facility or by having its
insurance subsidiaries take collateralized advances under a
facility with the FHLBB. The Company could also choose to
have its insurance subsidiaries sell certain highly liquid, high
quality fixed maturities or the Company could issue debt in the
public markets under its shelf registration.
|DIVIDENDS
The Hartford's Board of Directors declared the following
quarterly dividends since October 1, 2024:
Common Stock Dividends
Declared
Record
Payable
Amount
per
share
October 24, 2024 December 2, 2024
January 3, 2025 $
0.520
February 19, 2025
March 3, 2025
April 2, 2025 $
0.520
Preferred Stock Dividends
Declared
Record
Payable
Amount
per
share
December 18, 2024 February 1, 2025
February 18, 2025 $ 375.00
February 19, 2025
May 1, 2025
May 15, 2025 $ 375.00
There are no current restrictions on HIG Holding Company's
ability to pay dividends to its stockholders.
For a discussion of restrictions on dividends to HIG Holding
Company from its insurance subsidiaries, see the following
"Dividends from Subsidiaries" discussion. For a discussion of
potential restrictions on the HIG Holding Company's ability to
pay dividends, see Part I, Item 1A, — Risk Factors for the risk
factor "Our ability to declare and pay dividends is subject to
limitations."
|DIVIDENDS FROM
SUBSIDIARIES
Dividends to HIG Holding Company from its insurance
subsidiaries are restricted by insurance regulation. The
Company’s principal insurance subsidiaries are domiciled in the
United States and the United Kingdom.
The payment of dividends by Connecticut-domiciled insurers is
limited under the insurance holding company laws of
Connecticut. These laws require notice to and approval by the
state insurance commissioner for the declaration or payment of
any dividend, which, together with other dividends or
distributions made within the preceding twelve months, exceeds
the greater of (i) 10% of the insurer’s statutory policyholder
surplus as of December 31 of the preceding year or (ii) net
income (or net gain from operations, if such company is a life
insurance company) for the preceding year, in each case
determined under statutory insurance accounting principles. In
addition, if any dividend of a Connecticut-domiciled insurer
exceeds the insurer’s earned surplus, it requires the prior
approval of the Connecticut Insurance Commissioner.
Property casualty insurers domiciled in New York, including NIC
and Navigators Specialty Insurance Company ("NSIC"),
generally may not, without notice to and approval by the state
insurance commissioner, pay dividends out of earned surplus in
any twelve-month period that exceeds the lesser of (i) 10% of
the insurer’s statutory policyholders’ surplus as of the most
recent financial statement on file, or (ii) 100% of its adjusted net
investment income, as defined, for the same twelve month
period.
The insurance holding company laws of the other jurisdictions in
which The Hartford’s insurance subsidiaries are incorporated (or
deemed commercially domiciled) generally contain similar
(although in certain instances more restrictive) limitations on the
payment of dividends. In addition to statutory limitations on
paying dividends, the Company also takes other items into
consideration when determining dividends from subsidiaries.
These considerations include, but are not limited to, expected
earnings and capitalization, regulatory capital requirements,
liquidity requirements and state deposit requirements of the
individual subsidiary.
Corporate members of Lloyd's syndicates may pay dividends to
its parent to the extent of available profits that have been
distributed from the syndicate in excess of the FAL capital
requirement and subject to restrictions imposed under UK
Company Law. The FAL is determined based on the syndicate's
SCR under the Solvency II capital adequacy model, the current
regulatory framework governing UK domiciled insurers, plus a
Lloyd’s specific economic capital assessment.
Insurers domiciled in the United Kingdom may pay dividends to
their parent out of their statutory profits subject to restrictions
imposed under U.K. Company law and Solvency II.
In 2024, HIG Holding Company received $608 of dividends from
HLA and $136 from Hartford Funds, and $31 from other non-
insurance subsidiaries. In addition, HIG Holding Company
received $1.5 billion of net dividends from P&C subsidiaries in
2024 which excludes $75 of P&C dividends that were
subsequently contributed to P&C subsidiaries and $50 of P&C
dividends related to interest payments on an intercompany note
owed by Hartford Holdings, Inc. ("HHI") to Hartford Fire
Insurance Company. Refer to "2025 expected dividends and
other sources of capital" for expected payments of dividends
from our subsidiaries in 2025.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
103
|OTHER SOURCES OF CAPITAL
FOR THE HIG HOLDING
COMPANY
The Hartford endeavors to maintain a capital structure that
provides financial and operational flexibility to its insurance
subsidiaries, ratings that support its competitive position in the
financial services marketplace (see the "Ratings" section below
for further discussion), and stockholder returns. As a result, the
Company may from time to time raise capital from the issuance
of debt, common equity, preferred stock, equity-related debt or
other capital securities and is continuously evaluating strategic
opportunities. The issuance of debt, common equity, equity-
related debt or other capital securities could result in the dilution
of stockholder interests or reduced net income to common
stockholders due to additional interest expense or preferred
stock dividends.
Shelf Registrations
The Hartford filed an automatic shelf registration statement with
the Securities and Exchange Commission ("the SEC") on
September 23, 2024 that permits it to offer and sell debt and
equity securities during the three-year life of the registration
statement.
For further information regarding shelf registrations, see Note 13
- Debt of Notes to Consolidated Financial Statements.
Revolving Credit Facility
The Hartford has a senior unsecured revolving credit facility (the
"Credit Facility") that provides up to $750 of unsecured credit
through October 27, 2026. As of December 31, 2024, no
borrowings were outstanding and no letters of credit were
issued under the Credit Facility and The Hartford was in
compliance with all financial covenants. For further information
regarding the Credit Facility, see Note 13 – Debt of Notes to
Consolidated Financial Statements.
Intercompany Liquidity Agreements
The Company has $2.0 billion available under an intercompany
liquidity agreement that allows for short-term advances of funds
among the HIG Holding Company and certain affiliates of up to
$2.0 billion for liquidity and other general corporate purposes.
The Connecticut Department of Insurance ("CTDOI") granted
approval for certain affiliated insurance companies that are
parties to the agreement to treat receivables from a parent,
including the HIG Holding Company, as admitted assets for
statutory accounting purposes.
As of December 31, 2024, $1.9 billion was available, $105 was
outstanding between certain affiliates and there were no
amounts outstanding at the HIG Holding Company.As of
February 20, 2025, $1.85 billion was available, $150 was
outstanding between certain affiliates and there were no
amounts outstanding at the HIG Holding Company.
Collateralized Advances with Federal Home Loan
Bank of Boston
The Company’s subsidiaries, Hartford Fire Insurance Company
(“Hartford Fire”) and HLA, are members of the FHLBB.
Membership allows these subsidiaries access to collateralized
advances, which may be short- or long-term with fixed or
variable rates. Advances may be used to support general
corporate purposes, which would be presented as short- or
long-term debt, or to earn incremental investment income, which
would be presented in other liabilities consistent with other
collateralized financing transactions. As of December 31, 2024,
there were no advances outstanding. The CTDOI permits
Hartford Fire and HLA to pledge up to $1.4 billion and $0.6
billion in qualifying assets, respectively, without prior approval,
to secure FHLBB advances in 2025. For further information
regarding the Company's collateralized advances with Federal
Home Loan Bank of Boston, see Note 13 - Debt of Notes to
Consolidated Financial Statements.
Lloyd's Letter of Credit Facility
The Hartford has a committed credit facility agreement with a
syndicate of lenders (the "Lloyd's Facility"). On October 21,
2024, The Hartford amended and restated its Lloyd's Facility
agreement. The amended and restated Lloyd's Facility has two
tranches with one tranche extending a $74 commitment and the
other tranche extending a £79 million ($99 as of December 31,
2024) commitment. As of December 31, 2024, letters of credit
with an aggregate face amount of $74 and £79 million, or $99,
were outstanding under the Lloyd's Facility.
Among other covenants, the Lloyd's Facility contains financial
covenants regarding The Hartford's consolidated net worth and
financial leverage. As of December 31, 2024, The Hartford was
in compliance with all financial covenants of the facility.
For further information regarding the Lloyd's Facility, see Note
13 - Debt of Notes to Consolidated Financial Statements.
|PENSION PLANS AND OTHER
POSTRETIREMENT BENEFITS
While the Company has significant discretion in making
voluntary contributions to the U.S. qualified defined benefit
pension plan, minimum contributions are mandated in certain
circumstances pursuant to the Employee Retirement Income
Security Act of 1974, as amended by the Pension Protection Act
of 2006, the Worker, Retiree, and Employer Recovery Act of
2008, the Preservation of Access to Care for Medicare
Beneficiaries and Pension Relief Act of 2010, the Moving Ahead
for Progress in the 21st Century Act of 2012 (MAP-21) and
Internal Revenue Code regulations. The Company did not make
any contributions to the U.S. qualified defined benefit pension
plan in 2024, 2023 and 2022. In 2023, the Company funded $3
to a rabbi trust that is designated for other defined benefit
pension plans and contributed $1 to the Canadian Pension Plan.
There were no plan contributions in 2024 or 2022 for other
defined benefit pension plans. The Company made direct
benefit payments of $6, $5 and $5 on behalf of the other
postretirement plans in 2024, 2023 and 2022, respectively. No
other contributions were made to the other postretirement plans
in 2024, 2023 and 2022. The Company’s 2024, 2023 and 2022
required minimum funding contributions were immaterial. The
Company does not have a 2025 required minimum funding
contribution for the U.S. qualified defined benefit pension plan
and the funding requirements for all pension plans are expected
to be immaterial. The Company has not determined whether,
and to what extent, contributions may be made to the U.S.
qualified defined benefit pension plan in 2025. The Company
will monitor the funded status of the U.S. qualified defined
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
104
benefit pension plan during 2025 to make this determination. As
of December 31, 2024, the U.S. qualified defined benefit
pension plan is fully funded and in an asset position. For further
discussion of pension and other postretirement benefit
obligations, see Note 18 - Employee Benefit Plans of Notes to
Consolidated Financial Statements.
|DERIVATIVE COMMITMENTS
Certain of the Company’s derivative agreements contain
provisions that are tied to the financial strength ratings, as set by
nationally recognized statistical rating agencies, of the individual
legal entity that entered into the derivative agreement. If the
legal entity’s financial strength were to fall below certain ratings,
the counterparties to the derivative agreements could terminate
agreements and demand immediate settlement of the
outstanding net derivative positions transacted under each
agreement. For further information, refer to Note 14 -
Commitments and Contingencies of Notes to Consolidated
Financial Statements.
As of December 31, 2024, no derivative positions would be
subject to immediate termination in the event of a downgrade of
one level below the current financial strength ratings. This could
change as a result of changes in our hedging activities or to the
extent changes in contractual terms are negotiated.
|INSURANCE OPERATIONS
While subject to variability period to period, underwriting and
investment cash flows continue to provide sufficient liquidity to
meet anticipated demands.
The principal sources of operating funds are premiums, fees
earned from insurance and administrative service agreements,
and investment income, while investing cash flows primarily
originate from maturities and sales of invested assets.
The Company’s insurance operations consist of property and
casualty insurance products (collectively referred to as
“Property & Casualty Operations”) and Employee Benefits
products.
The Company's insurance operations hold fixed maturity
securities, including a significant short-term investment position
(securities with maturities of one year or less at the time of
purchase), to meet liquidity needs. Liquidity requirements that
are unable to be funded by the Company's insurance
operations' short-term investments would be satisfied with
current operating funds, including premiums or investing cash
flows, which includes proceeds received through the sale of
invested assets. A sale of invested assets could result in
significant realized losses.
The following tables represent the fixed maturity holdings,
including the aforementioned cash and short-term investments
available to meet liquidity needs, for each of the Company’s
insurance operations.
Property & Casualty
As of
December 31, 2024
Fixed maturities
$
34,675
Short-term investments
2,075
Cash
148
Less: Derivative collateral
64
Total
$
36,834
Property & Casualty operations invested assets also include
$212 in equity securities, $4.8 billion in mortgage loans and $4.0
billion in limited partnerships and other alternative investments.
Employee Benefits Operations
As of
December 31, 2024
Fixed maturities
$
8,013
Short-term investments
389
Cash
26
Less: Derivative collateral
16
Total
$
8,412
Employee Benefits operations invested assets also include $46
in equity securities, $1.6 billion in mortgage loans and $1.1
billion in limited partnerships and other alternative investments.
The primary uses of funds are to pay claims, claim adjustment
expenses, commissions and other underwriting and insurance
operating costs, to pay taxes, to purchase new investments and
to make dividend payments to the HIG Holding Company.
Property & Casualty reserves for unpaid losses and loss
adjustment expenses as of December 31, 2024 were $36.4
billion and net of reinsurance and other recoverables were $29.7
billion. Reserves for Property & Casualty unpaid losses and loss
adjustment expenses include case reserves and IBNR reserves.
The ultimate amount to be paid to settle both case and IBNR
reserves is an estimate, subject to significant uncertainty. The
actual amount to be paid is not finally determined until the
Company reaches a settlement with the claimant. Final claim
settlements may vary significantly from the present estimates,
particularly since many claims will not be settled until well into
the future. For a discussion of The Hartford’s judgment in
estimating reserves for Property & Casualty see Part II, Item 7,
MD&A - Critical Accounting Estimates, Property & Casualty
Insurance Product Reserves, Net of Reinsurance, and for
historical payments by reserve line net of reinsurance, see Note
10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
of Notes to Consolidated Financial Statements. The timing of
future payments for the next twelve months and for beyond
twelve months could vary materially from historical payment
patterns due to, among other things, changes in claim reporting
and payment patterns and large unanticipated settlements. In
particular, there is significant uncertainty over the claim payment
patterns of asbestos and environmental claims.
Employee Benefits reserves as of December 31, 2024 were
$8.9 billion and net of reinsurance were $8.6 billion. Group life
and disability obligations are estimated using assumptions
based on the Company’s historical experience, modified for
recent observed trends. For a discussion of The Hartford’s
judgment in estimating LTD reserves for Employee Benefits see
Part II, Item 7, MD&A - Critical Accounting Estimates, Employee
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
105
Benefit LTD Reserves, Net of Reinsurance. For additional
information about future policy benefits and other policyholder
funds and benefits payable, see Note 11 - Reserve for Future
Policy Benefits and Note 12 - Other Policyholder Funds and
Benefits Payable of Notes to Consolidated Financial
Statements. For historical payments by reserve line, net of
reinsurance, see Note 10 - Reserve for Unpaid Losses and Loss
Adjustment Expenses of Notes to Consolidated Financial
Statements. Due to the significance of the assumptions used,
payments for the next twelve months and beyond twelve months
could materially differ from historical patterns.
Corporate includes reserves as of December 31, 2024 were
$371, and net of reinsurance were $147. These reserves related
to retained run-off liabilities of its former life and annuity
business. For additional information about future policy benefits
and other policyholder funds and benefits payable, see Note 11
- Reserve for Future Policy Benefits and Note 12 - Other
Policyholder Funds and Benefits Payable of Notes to
Consolidated Financial Statements.
Hartford Funds
Hartford Funds' principal sources of operating funds are fees
earned from basis points on assets under management with
uses primarily for payments to subadvisors and other general
operating expenses. As of December 31, 2024, Hartford Funds
cash and short-term investments were $300.
|PURCHASE AND OTHER
OBLIGATIONS
The Hartford’s unfunded commitments to purchase investments
in limited partnerships and other alternative investments,
mortgage loans, private debt and equity securities, as well as
tax credits are disclosed in Note 14 - Commitments and
Contingencies of Notes to Consolidated Financial Statements. It
is anticipated that these unfunded commitments will be funded
through the Company’s normal operating and investing
activities.
In the normal course of business, the Company enters into
contractual commitments to purchase various goods and
services such as maintenance, human resources, and
information technology. The Company’s operating lease
commitments are disclosed in Note 20 - Leases of Notes to
Consolidated Financial Statements. It is anticipated that these
purchase commitments and operating lease obligations will be
funded through the Company’s normal operating and investing
activities.
|CAPITALIZATION
Capital Structure
December 31,
2024
December 31,
2023
Change
Long-term debt
$
4,366
$
4,362
—%
Total debt
4,366
4,362
—%
Common stockholders' equity, excluding AOCI, net of tax
18,999
17,842
6%
Preferred stock
334
334
—%
AOCI, net of tax
(2,886)
(2,849)
(1)%
Total stockholders’ equity
$
16,447
$
15,327
7%
Total capitalization
$
20,813
$
19,689
6%
Debt to stockholders’ equity
27%
28%
Debt to capitalization
21%
22%
Total capitalization increased $1,124, or 6%, as of December
31, 2024 compared to December 31, 2023 primarily due to net
income in excess of common stockholder dividends in the
period partially offset by share repurchases.
For additional information on AOCI, net of tax, including
unrealized gains (losses) from securities, see Note 17 -
Changes in and Reclassifications From Accumulated Other
Comprehensive Income (Loss) and Note 5 - Investments of
Notes to Consolidated Financial Statements. For additional
information on debt, see Note 13 - Debt of Notes to
Consolidated Financial Statements.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
106
|CASH FLOW
2024
2023
2022
Net cash provided by operating activities
$
5,909 $
4,220 $
4,008
Net cash used for investing activities
$
(3,768) $
(2,431) $
(1,277)
Net cash used for financing activities
$
(2,076) $
(1,947) $
(2,710)
Cash and restricted cash— end of year
$
234 $
189 $
344
Year ended December 31, 2024 compared to
the year ended December 31, 2023
Net cash provided by operating activities increased
in 2024 as compared to the prior year period primarily driven by
an increase in P&C and Employee Benefits premiums received,
a decrease in P&C loss and loss adjustment expenses paid due
to the $787 payment to the Boy Scouts of America in the prior
year, and cash recoveries from NICO under the Navigators
ADC, partially offset by higher operating expenses, including
increased commissions and staffing costs, an increase in
Employee Benefits loss and loss adjustment expenses paid, and
taxes paid.
Cash used for investing activities increased in 2024
as compared to the prior year driven by an increase in net
payments for fixed maturities available for sale, a decrease in
net proceeds from equity securities at fair value, and an
increase in net payments for mortgage loans, partially offset by
a decrease in net payments for partnerships and a change from
net payments for to net proceeds from derivatives.
Cash used for financing activities increased in 2024
as compared to the prior year period primarily driven by an
increase in treasury stock acquired, including excise tax paid,
and an increase in dividends paid on common stock.
Operating cash flows for the year ended December 31,
2024 have been adequate to meet liquidity requirements.
|EQUITY MARKETS
For a discussion of the potential impact of the equity markets on
capital and liquidity, see the Financial Risk on U.S. Statutory
Capital and Liquidity Risk section in this MD&A.
|RATINGS
Ratings are an important factor in establishing a competitive
position in the insurance marketplace and impact the
Company's ability to access financing and its cost of borrowing.
There can be no assurance that the Company’s ratings will
continue for any given period of time, or that they will not be
changed. In the event the Company’s ratings are downgraded,
the Company’s competitive position, ability to access financing,
and its cost of borrowing, may be adversely impacted.
These ratings are not a recommendation to buy, sell or hold any
of The Hartford’s securities and they may be revised or
withdrawn at any time at the discretion of the rating
organization. Each agency’s rating should be evaluated
independently of any other agency’s rating. The system and the
number of rating categories can vary across rating agencies.
Among other factors, rating agencies consider the level of
statutory capital and surplus of our U.S. insurance subsidiaries
as well as the level of GAAP capital held by the Company in
determining the Company's financial strength and credit ratings.
Rating agencies may implement changes to their capital
formulas that have the effect of increasing the amount of capital
we must hold in order to maintain our current ratings. See Part I,
Item 1A. Risk Factors — “Downgrades in our financial strength
or credit ratings may make our products less attractive, increase
our cost of capital and inhibit our ability to refinance our debt.”
Insurance Financial Strength Ratings as of
February 20, 2025
A.M.
Best
Standard
& Poor's
Moody's
Hartford Fire Insurance
Company
A+
A+
A1
Hartford Life and Accident
Insurance Company
A+
A+
A1
Navigators Insurance
Company
A+
A+
Not
Rated
Other Ratings:
The Hartford Insurance
Group, Inc.:
Senior debt
a-
BBB+
Baa1
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
107
|STATUTORY CAPITAL
U.S. Statutory Capital Rollforward for the Company's Insurance Subsidiaries
Property and Casualty
Insurance Subsidiaries [1] [2]
Employee Benefits
Insurance Subsidiary
Total
U.S. statutory capital at January 1, 2024
$
12,549 $
2,748 $
15,297
Statutory income
2,112
576
2,688
Dividends to parent
(1,500)
(608)
(2,108)
Other items
133
(8)
125
Net change to U.S. statutory capital
745
(40)
705
U.S. statutory capital at December 31, 2024
$
13,294 $
2,708 $
16,002
[1]The statutory capital for property and casualty insurance subsidiaries in this table does not include the value of an intercompany note owed by HHI to Hartford Fire
Insurance Company.
[2]Excludes insurance operations in the U.K.
Stat to GAAP Differences
Significant differences between U.S. GAAP stockholders’ equity
and aggregate statutory capital prepared in accordance with
U.S. STAT include the following:
•
U.S. STAT excludes equity of non-insurance and foreign
insurance subsidiaries not held by U.S. insurance
subsidiaries.
•
Costs incurred by the Company to acquire insurance
policies are deferred under U.S. GAAP while those costs
are expensed immediately under U.S. STAT.
•
Temporary differences between the book and tax basis of
an asset or liability which are recorded as deferred tax
assets are evaluated for recoverability under U.S. GAAP
while these amounts are then subject to further admissibility
tests under U.S. STAT.
•
The assumptions used in the determination of Employee
Benefits reserves (i.e., for Employee Benefits contracts) are
prescribed under U.S. STAT, while the assumptions used
under U.S. GAAP are generally the Company’s best
estimates.
•
The difference between the amortized cost and fair value of
fixed maturity and other investments, net of tax, is recorded
as an increase or decrease to the carrying value of the
related asset and to equity under U.S. GAAP, while, under
U.S. STAT, most investments are carried at amortized cost
with only certain securities carried at fair value, such as
equity securities and certain lower rated bonds required by
the NAIC to be recorded at the lower of amortized cost or
fair value.
•
U.S. STAT for life insurance companies like HLA
establishes a formula reserve for realized and unrealized
losses due to default and equity risks associated with
certain invested assets (the Asset Valuation Reserve), while
U.S. GAAP does not. Also, for those realized gains and
losses caused by changes in interest rates, U.S. STAT for
life insurance companies defers and amortizes the gains
and losses into income over the original life to maturity of
the asset sold (the Interest Maintenance Reserve) while
U.S. GAAP does not.
•
Goodwill arising from the acquisition of a business is tested
for recoverability on an annual basis (or more frequently, as
necessary) for U.S. GAAP, while under U.S. STAT goodwill
is amortized over a period not to exceed 10 years and the
amount of goodwill admitted as an asset is limited.
•
The deferred gain on retroactive reinsurance for losses
ceded to the Navigators and A&E ADC agreements is
recognized within a special category of surplus under U.S.
STAT but is recognized within other liabilities under U.S.
GAAP. In addition, the pattern of amortizing the deferred
gain for GAAP and releasing special surplus for STAT is
different. For GAAP the deferred gain is amortized in
proportion of actual recoveries collected to total expected
recoveries, while for STAT special surplus is released dollar
for dollar once recoveries collected exceed the reinsurance
premium.
In addition, certain assets, including a portion of premiums
receivable and fixed assets, are non-admitted (recorded at zero
value and charged against surplus) under U.S. STAT. U.S.
GAAP generally evaluates assets based on their recoverability.
|RISK BASED CAPITAL
The Company's U.S. insurance companies' states of domicile
impose RBC requirements. The requirements provide a means
of measuring the minimum amount of statutory capital
appropriate for an insurance company to support its overall
business operations based on its size and risk profile.
Companies below specific trigger points or ratios are classified
within certain levels, each of which requires specified corrective
action. All of the Company's U.S. operating insurance
subsidiaries had RBC ratios in excess of the minimum levels
required by the applicable insurance regulations.
Similar to the RBC ratios that are employed by U.S. insurance
regulators, regulatory authorities in the international jurisdictions
in which the Company operates generally establish minimum
solvency requirements for insurance companies. All of the
Company's international insurance subsidiaries expect to
maintain capital levels in excess of the minimum levels required
by the applicable regulatory authorities.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
108
|SENSITIVITY
In any particular period, statutory capital amounts and RBC
ratios may increase or decrease depending upon a variety of
factors. The amount of change in the statutory capital or RBC
ratios can vary based on individual factors and may be
compounded in extreme scenarios or if multiple factors occur at
the same time. At times the impact of changes in certain market
factors or a combination of multiple factors on RBC ratios can
be counterintuitive. For further discussion on these factors, see
MD&A - Enterprise Risk Management, Financial Risk on
Statutory Capital.
Statutory capital at the insurance subsidiaries has been
maintained at capital levels commensurate with the Company's
desired RBC ratios and ratings from rating agencies. The
amount of statutory capital can increase or decrease depending
on a number of factors affecting insurance results including,
among other factors, the level of catastrophe claims incurred,
the amount of reserve development, the effect of changes in
interest rates on investment income and the discounting of loss
reserves, and the effect of realized gains and losses on
investments.
|CONTINGENCIES
Legal Proceedings
For a discussion regarding The Hartford’s legal proceedings,
see the information contained in Note 14 - Commitments and
Contingencies of the Notes to Consolidated Financial
Statements which are incorporated herein by reference.
Legislative and Regulatory
Developments
The U.S. Securities and Exchange Commission (“SEC”) has
issued final rules to enhance and standardize climate-related
disclosures for investors. The SEC rules are being challenged in
the courts, and on April 4, 2024 the SEC voluntarily stayed the
rules pending judicial review. If they become operative in their
current form, the rules will require extensive narrative and
quantitative reporting on climate change and decarbonization in
SEC filings and financial statements and pose potential
compliance and regulatory risks to the Company, beginning in
fiscal year 2025. The State of California has enacted laws that
impose similarly extensive compliance burdens on the
Company, entailing like compliance and regulatory risks. Other
jurisdictions may follow suit. However, the California laws are
facing legal challenges as well and the overall state of these
types of climate related disclosure regimes, whether at the state
or federal level, remains uncertain.
Congress may consider a variety of proposals including a
possible increase in the corporate tax rate to offset the cost of
any new spending. Tax proposals and regulatory initiatives that
may be considered by Congress and/or the U.S. Treasury
Department could have a material effect on the Company and
its insurance businesses. The nature and timing of any such
Congressional or regulatory action with respect to any such
efforts is unclear.
Guaranty Fund and Other
Insurance-related Assessments
For a discussion regarding Guaranty Fund and Other Insurance-
related Assessments, see Note 14 - Commitments and
Contingencies of Notes to Consolidated Financial Statements.
IMPACT OF NEW
ACCOUNTING
STANDARDS
For a discussion of accounting standards, see Note 1 - Basis of
Presentation and Significant Accounting Policies of Notes to
Consolidated Financial Statements.
Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
109
Item 9A.
CONTROLS AND PROCEDURES
EVALUATION OF
DISCLOSURE
CONTROLS AND
PROCEDURES
The Company's principal executive officer and its principal
financial officer, based on their evaluation of the Company's
disclosure controls and procedures (as defined in Exchange Act
Rule 13a-15(e)) have concluded that the Company's disclosure
controls and procedures are effective for the purposes set forth
in the definition thereof in Exchange Act Rule 13a-15(e) as of
December 31, 2024.
MANAGEMENT'S
ANNUAL REPORT ON
INTERNAL CONTROL
OVER FINANCIAL
REPORTING
The management of The Hartford Insurance Group, Inc. and its
subsidiaries (“The Hartford”) is responsible for establishing and
maintaining adequate internal control over financial reporting for
The Hartford as defined in Rule 13a-15(f) under the Securities
Exchange Act of 1934.
A company's internal control over financial reporting is a process
designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting
principles generally accepted in the United States. A company's
internal control over financial reporting includes policies and
procedures that (1) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the
United States, and that receipts and expenditures of the
company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
The Hartford's management assessed its internal controls over
financial reporting as of December 31, 2024 in relation to criteria
for effective internal control over financial reporting described in
“Internal Control-Integrated Framework (2013)” issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment under those criteria,
The Hartford's management concluded that its internal control
over financial reporting was effective as of December 31, 2024.
CHANGES IN INTERNAL
CONTROL OVER
FINANCIAL REPORTING
There were no changes in the Company's internal control over
financial reporting that occurred during the Company's fourth
fiscal quarter of 2024 that have materially affected, or are
reasonably likely to materially affect, the Company's internal
control over financial reporting.
ATTESTATION REPORT
OF THE COMPANY'S
REGISTERED PUBLIC
ACCOUNTING FIRM
The Hartford's independent registered public accounting firm,
Deloitte & Touche LLP, has issued their attestation report on the
Company's internal control over financial reporting which is set
forth below.
Part II - Item 9A. Controls and Procedures
110
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
The Hartford Insurance Group, Inc.
Hartford, Connecticut
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of The Hartford Insurance Group, Inc. and its subsidiaries (the “Company”)
(formerly The Hartford Financial Services Group, Inc.) as of December 31, 2024, based on criteria established in Internal Control —
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024,
based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the consolidated financial statements as of and for the year ended December 31, 2024, of the Company and our report dated
February 21, 2025, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on
our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Hartford, Connecticut
February 21, 2025
Part II - Item 9A. Controls and Procedures
111
Item 9B.
OTHER INFORMATION
On November 4, 2024, Christopher J. Swift, Chairman and Chief
Executive Officer, adopted a Rule 10b5-1 trading arrangement
that is intended to satisfy the affirmative defense of Rule
10b5-1(c) for the potential exercise of vested stock options and
associated sale of up to 294,481 shares of the Company's
common stock between March 4, 2025 and February 27, 2026
(or the date on which all shares have been sold), subject to
certain conditions. The options covered by this trading plan were
granted to Mr. Swift in 2016 and are scheduled to expire in
March 2026.
Part II - Item 9B. Other Information
112
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
OF THE HARTFORD
Certain of the information called for by Item 10 will be set forth in
the definitive proxy statement for the 2025 annual meeting of
stockholders (the “Proxy Statement”) to be filed by The Hartford
with the Securities and Exchange Commission within 120 days
after the end of the fiscal year covered by this Annual Report
under the captions and subcaptions “Board and Governance
Matters,” “Stock Ownership Requirements and Restrictions on
Trading,” "Insider Trading Policy," “Director Nominees,” and
“Timing of Equity Grants” and is incorporated herein by
reference.
The Company has adopted a Code of Ethics and Business
Conduct, which is applicable to all employees of the Company,
including the principal executive officer, the principal financial
officer and the principal accounting officer. The Code of Ethics
and Business Conduct is available on the investor relations
section of the Company’s website at: https://ir.thehartford.com.
Any waiver of, or material amendment to, the Code of Ethics
and Business Conduct will be posted promptly to our web site in
accordance with applicable NYSE and SEC rules.
EXECUTIVE OFFICERS
OF THE HARTFORD
Information about the executive officers of The Hartford who are
also nominees for election as directors will be set forth in The
Hartford’s Proxy Statement. Set forth below is information about
the other executive officers of the Company as of February 20,
2025:
Name
Age
Position with The Hartford and Business Experience For the Past Five Years
Beth A. Costello
57
Executive Vice President and Chief Financial Officer (July 2014-present)
Michael Fish
59
Executive Vice President and Head of Employee Benefits (October 2024-present);Chief Operating
Officer, Employee Benefits (June 2021-September 2024); Senior Vice President, Employee Benefits
Operations & Program Delivery (January 2018-May 2021)
Donald C. Hunt
54
Executive Vice President and General Counsel (March 2024-present); Senior Vice President, Deputy
General Counsel and Corporate Secretary (December 2019-February 2024); Vice President, Deputy
General Counsel and Corporate Secretary (April 2013-November 2019)
Allison G. Niderno
45
Senior Vice President and Controller (March 2023-present); Vice President Finance, Head of External
Reporting and Investment Finance (June 2018 - March 2023)
Robert W. Paiano
63
Executive Vice President and Chief Risk Officer (June 2017-present)
Lori A. Rodden
54
Executive Vice President and Chief Human Resources Officer (October 2019-present); and Senior
Vice President and Lead Human Resources Business Partner for Property & Casualty, Employee
Benefits, Claims and Actuarial (April 2016-October 2019)
Deepa Soni
55
Executive Vice President and Chief Information and Operations Officer (March 2024-present);
Executive Vice President, Head of Technology, Data, Analytics & Information Security (August 2021-
February 2024); Chief Information Officer (September 2019-August 2021); U.S. Chief Information
Officer, BMO Financial Group (April 2016-September 2019)
Amy M.
Stepnowski
56
Executive Vice President, Chief Investment Officer and President of Hartford Investment Management
Company (August 2020-present); Managing Director and Head of Public Credit Research, Hartford
Investment Management Company (April 2018-August 2020)
Adin M. Tooker
55
President (February 2025-present); Executive Vice President, Head of Business Insurance (March
2024-January 2025); Executive Vice President, Middle & Large Business, Global Specialty and Sales
and Distribution (November 2022-February 2024); Executive Vice President and Head of Middle &
Large Business (March 2019-October 2022)
Part III - Item 10. Directors, Executive Officers and Corporate Governance of The Hartford
113
THE HARTFORD INSURANCE GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DESCRIPTION
PAGE
Report of Independent Registered Public Accounting Firm [1]
115
FINANCIAL STATEMENTS
Consolidated Statements of Operations — For the Years Ended December 31, 2024, 2023 and 2022
117
Consolidated Statements of Comprehensive Income (Loss) — For the Years Ended December 31, 2024, 2023 and 2022
118
Consolidated Balance Sheets — As of December 31, 2024 and 2023
119
Consolidated Statements of Changes in Stockholders’ Equity — For the Years Ended December 31, 2024, 2023 and 2022
120
Consolidated Statements of Cash Flows — For the Years Ended December 31, 2024, 2023 and 2022
121
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation and Significant Accounting Policies
122
Note 2 - Earnings Per Common Share
129
Note 3 - Segment Information
130
Note 4 - Fair Value Measurements
134
Note 5 - Investments
142
Note 6 - Derivatives
150
Note 7 - Premiums Receivable and Agents' Balances
155
Note 8 - Reinsurance
156
Note 9 - Goodwill & Other Intangible Assets
159
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
160
Note 11 - Reserve for Future Policy Benefits
185
Note 12 - Other Policyholder Funds and Benefits Payable
186
Note 13 - Debt
187
Note 14 - Commitments and Contingencies
189
Note 15 - Equity
191
Note 16 - Income Taxes
193
Note 17 - Changes in and Reclassifications From Accumulated Other Comprehensive Income (Loss)
195
Note 18 - Employee Benefit Plans
197
Note 19 - Stock Compensation Plans
203
Note 20 - Leases
206
Note 21 - Restructuring and Other Costs
207
Note 22 - Subsequent Events
208
[1]Deloitte & Touche LLP (PCAOB ID No. 34) is our principal accountant and an independent registered public accounting firm.
Part IV. Item 15. Exhibits and Financial Statement Schedules
114
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
The Hartford Insurance Group, Inc.
Hartford, Connecticut
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The Hartford Insurance Group, Inc. and its subsidiaries (the
"Company") (formerly The Hartford Financial Services Group, Inc.) as of December 31, 2024 and 2023, the related consolidated
statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows, for each of the three years in the
period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with
accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control —
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 21, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Unpaid Losses and Loss Adjustment Expenses - Refer to Notes 1 and 10 to the financial statements
Critical Audit Matter Description
For property and casualty and group life and disability insurance products, the Company establishes reserves for unpaid losses and loss
adjustment expenses to provide for the estimated costs of paying claims under insurance policies written by the Company. These
reserves include estimates for both claims that have been reported and claims that have been incurred but not reported and include
estimates of all losses and loss adjustment expenses associated with processing and settling these claims. This estimation process is
based significantly on the assumption that past developments are an appropriate predictor of future events and involves a variety of
actuarial techniques that analyze experience, trends and other relevant factors.
Given the subjectivity of estimating the ultimate cost to settle the liabilities for reported and unreported claims due to uncertainties caused
by various factors including frequency and severity of claims as well as changes in the legislative and regulatory environment, performing
audit procedures to evaluate whether unpaid losses and loss adjustment expenses were appropriately recorded as of December 31,
2024, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.
115
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the unpaid losses and loss adjustment expenses included the following, among others:
•
We tested the effectiveness of controls related to the unpaid losses and loss adjustment expenses, including controls over
inputs, methods, and assumptions used in the Company's estimation processes.
•
We tested the underlying data that served as the basis for the Company’s analysis, including historical claims.
•
With the assistance of our actuarial specialists, we evaluated the methods and assumptions used by the Company to estimate
the unpaid losses and loss adjustment expenses by:
–
Assessing the reasonableness of the Company’s analysis and, for selected reserving lines, developing independent
estimates of the unpaid losses and loss adjustment expenses and comparing such estimates to the Company’s
estimates.
–
Comparing the Company’s prior year assumptions of expected development of ultimate loss to actual losses incurred
during the current year to identify potential management bias in the determination of the unpaid losses and loss
adjustment expenses.
Investments in Fixed Maturities Classified as Available-for-Sale - Refer to Notes 1, 4, and 5 to the financial statements
Critical Audit Matter Description
Investments in fixed maturities classified as available-for-sale are reported at fair value in the financial statements. Certain investments
without readily determinable fair values were valued using significant unobservable inputs, such as credit spreads and interest rates
beyond the observable curve, that involved considerable judgment by the Company.
Given the Company used models and unobservable inputs to estimate the fair value of certain investments in fixed maturities classified as
available-for-sale, performing audit procedures to evaluate these inputs required a high degree of auditor judgment and an increased
extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the models and unobservable inputs used by the Company to estimate the fair value of certain
investments in fixed maturities classified as available-for-sale included the following, among others:
•
We tested the effectiveness of controls over the valuation of investments in fixed maturities classified as available-for-sale,
including controls over inputs, methods, and assumptions used in the Company’s estimation processes.
•
On a sample basis, we tested the accuracy and completeness of the investments owned as of December 31, 2024, and the
relevant security attributes used in the determination of their fair values.
•
With the assistance of our fair value specialists, for a sample of investments, we tested the mathematical accuracy of the fair
value calculation and developed independent estimates of the fair value and compared our estimates to the Company’s
estimates. In addition to developing independent estimates, we obtained an understanding of the models and inputs used by the
Company and assessed those models and inputs for reasonableness. Such assessment included comparing inputs to external
sources or developing independent inputs.
/s/ Deloitte & Touche LLP
Hartford, Connecticut
February 21, 2025
We have served as the Company’s auditor since 2002.
116
For the years ended December 31,
(in millions, except for per share data)
2024
2023
2022
Revenues
Earned premiums
$
22,567 $
21,026 $
19,390
Fee income
1,373
1,300
1,349
Net investment income
2,568
2,305
2,177
Net realized losses
(61)
(188)
(627)
Other revenues
88
84
73
Total revenues
26,535
24,527
22,362
Benefits, losses and expenses
Benefits, losses and loss adjustment expenses
14,874
14,238
13,138
Amortization of deferred policy acquisition costs ("DAC")
2,282
2,044
1,824
Insurance operating costs and other expenses
5,258
4,881
4,841
Interest expense
199
199
213
Amortization of other intangible assets
71
71
71
Restructuring and other costs
2
6
13
Total benefits, losses and expenses
22,686
21,439
20,100
Income before income taxes
3,849
3,088
2,262
Income tax expense
738
584
443
Net income
3,111
2,504
1,819
Preferred stock dividends
21
21
21
Net income available to common stockholders
$
3,090 $
2,483 $
1,798
Net income available to common stockholders per common share
Basic
$
10.51 $
8.09 $
5.54
Diluted
$
10.35 $
7.97 $
5.46
See Notes to Consolidated Financial Statements.
THE HARTFORD INSURANCE GROUP, INC.
Consolidated Statements of Operations
117
For the years ended December 31,
(in millions)
2024
2023
2022
Net income
$
3,111 $
2,504 $
1,819
Other comprehensive income (loss) (“OCI”):
Change in net unrealized gain (loss) on fixed maturities, available-for-sale ("AFS")
(57)
1,112
(4,225)
Change in unrealized losses on fixed maturities with an allowance for credit losses
("ACL")
2
(1)
(5)
Change in net gain on cash flow hedging instruments
19
(19)
34
Change in foreign currency translation adjustments
(8)
6
(10)
Change in liability for future policy benefits adjustments
8
(10)
94
Change in pension and other postretirement plan adjustments
(1)
(96)
143
OCI, net of tax
(37)
992
(3,969)
Comprehensive income (loss)
$
3,074 $
3,496 $
(2,150)
See Notes to Consolidated Financial Statements
THE HARTFORD INSURANCE GROUP, INC.
Consolidated Statements of Comprehensive Income (Loss)
118
As of December 31,
(in millions, except for share and per share data)
2024
2023
Assets
Investments:
Fixed maturities, AFS, at fair value (amortized cost of $44,538 and $41,726, and ACL of $16 and $21)
$
42,567 $
39,818
Fixed maturities, at fair value using the fair value option ("FVO Securities")
308
327
Equity securities, at fair value
603
864
Mortgage loans (net of ACL of $44 and $51)
6,396
6,087
Limited partnerships and other alternative investments
5,042
4,785
Other investments
226
191
Short-term investments
4,068
3,850
Total investments
59,210
55,922
Cash
183
126
Restricted cash
51
63
Accrued investment income
450
404
Premiums receivable and agents' balances (net of ACL of $117 and $109)
5,998
5,607
Reinsurance recoverables (net of allowance for uncollectible reinsurance of $75 and $103)
7,140
7,104
Deferred policy acquisition costs
1,239
1,113
Deferred income taxes, net
1,229
1,173
Goodwill
1,911
1,911
Property and equipment, net
888
896
Other intangible assets, net
637
707
Other assets
1,981
1,754
Total assets
$
80,917 $
76,780
Liabilities
Unpaid losses and loss adjustment expenses
$
44,610 $
42,318
Reserve for future policy benefits
448
484
Other policyholder funds and benefits payable
614
638
Unearned premiums
9,408
8,599
Long-term debt
4,366
4,362
Other liabilities
5,024
5,052
Total liabilities
64,470
61,453
Commitments and Contingencies (Note 14)
Stockholders’ Equity
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 13,800 shares issued at December 31,
2024 and December 31, 2023, aggregate liquidation preference of $345
334
334
Common stock, $0.01 par value — 1,500,000,000 shares authorized, 326,960,228 shares issued at
December 31, 2024 and 326,960,228 shares issued at December 31, 2023
3
3
Additional paid-in capital
578
648
Retained earnings
21,531
19,007
Treasury stock, at cost — 39,404,003 and 28,488,130 shares
(3,113)
(1,816)
Accumulated other comprehensive loss, net of tax
(2,886)
(2,849)
Total stockholders' equity
16,447
15,327
Total liabilities and stockholders’ equity
$
80,917 $
76,780
See Notes to Consolidated Financial Statements.
THE HARTFORD INSURANCE GROUP, INC.
Consolidated Balance Sheets
119
For the years ended December 31,
(in millions, except for share and per share data)
2024
2023
2022
Preferred Stock
$
334 $
334 $
334
Common Stock
Common Stock, beginning of period
3
3
4
Treasury stock retired
—
—
(1)
Common Stock, end of period
3
3
3
Additional Paid-in Capital
Additional Paid-in Capital, beginning of period
648
1,895
3,309
Issuance of shares under incentive and stock compensation plans and other
(203)
(153)
(154)
Stock-based compensation plans expense
133
125
131
Treasury stock retired
—
(1,219)
(1,391)
Additional Paid-in Capital, end of period
578
648
1,895
Retained Earnings
Retained Earnings, beginning of period
19,007
17,058
15,770
Net income
3,111
2,504
1,819
Dividends declared on preferred stock
(21)
(21)
(21)
Dividends declared on common stock
(566)
(534)
(510)
Retained Earnings, end of period
21,531
19,007
17,058
Treasury Stock, at cost
Treasury Stock, at cost, beginning of period
(1,816)
(1,773)
(1,740)
Treasury stock acquired
(1,515)
(1,414)
(1,550)
Treasury stock retired
—
1,219
1,392
Issuance of shares under incentive and stock compensation plans from treasury stock and other
305
207
183
Net shares acquired related to employee incentive and stock compensation plans
(87)
(55)
(58)
Treasury Stock, at cost, end of period
(3,113)
(1,816)
(1,773)
Accumulated Other Comprehensive Income (Loss) ("AOCI"), net of tax
Accumulated Other Comprehensive Income (Loss), net of tax, beginning of period
(2,849)
(3,841)
128
Total other comprehensive income (loss)
(37)
992
(3,969)
Accumulated Other Comprehensive Income (Loss), net of tax, end of period
(2,886)
(2,849)
(3,841)
Total Stockholders’ Equity
$
16,447 $
15,327 $
13,676
Preferred Shares Outstanding
13,800
13,800
13,800
Common Shares Outstanding (in thousands)
Common Shares Outstanding, beginning of period
298,472
315,111
334,926
Treasury stock acquired
(14,443)
(19,238)
(22,273)
Issuance of shares under incentive and stock compensation plans and other
4,427
3,299
3,285
Return of shares under incentive and stock compensation plans to treasury stock
(900)
(700)
(827)
Common Shares Outstanding, end of period
287,556
298,472
315,111
Cash dividends declared per common share
$
1.930 $
1.745 $
1.580
Cash dividends declared per preferred share
$ 1,500.00 $ 1,500.00 $ 1,500.00
See Notes to Consolidated Financial Statements.
THE HARTFORD INSURANCE GROUP, INC.
Consolidated Statements of Changes in Stockholders' Equity
120
For the years ended December 31,
(in millions)
2024
2023
2022
Operating Activities
Net income
$
3,111 $
2,504 $
1,819
Adjustments to reconcile net income to net cash provided by operating activities
Net realized losses
61
188
627
Amortization of deferred policy acquisition costs
2,282
2,044
1,824
Additions to deferred policy acquisition costs
(2,408)
(2,159)
(1,939)
Depreciation and amortization
356
510
625
Loss on extinguishment of debt
—
—
9
Other operating activities, net
329
213
109
Change in assets and liabilities:
Increase in reinsurance recoverables
(54)
(155)
(470)
Net change in accrued and deferred income taxes
(100)
(29)
(80)
Increase in insurance liabilities
3,058
1,819
2,192
Net change in premiums receivable and agents' balances
(458)
(708)
(562)
Net change in other assets and other liabilities
(268)
(7)
(146)
Net cash provided by operating activities
5,909
4,220
4,008
Investing Activities
Proceeds from the sale/maturity/prepayment of:
Fixed maturities, AFS
10,808
6,806
14,996
Fixed maturities, FVO
50
2
2
Equity securities at fair value
401
2,173
1,213
Mortgage loans
740
1,036
973
Limited partnerships and other alternative investments
238
295
349
Payments for the purchase of:
Fixed maturities, AFS
(14,023)
(9,105)
(14,255)
Fixed maturities, FVO
(52)
—
(216)
Equity securities at fair value
(44)
(1,183)
(1,371)
Mortgage loans
(1,025)
(1,055)
(1,596)
Limited partnerships and other alternative investments
(664)
(966)
(1,095)
Net proceeds from (payments for) derivatives
35
(129)
54
Net additions to property and equipment
(145)
(215)
(175)
Net payments for short-term investments
(80)
(69)
(160)
Other investing activities, net
(7)
(21)
4
Net cash used for investing activities
(3,768)
(2,431)
(1,277)
Financing Activities
Deposits and other additions to investment and universal life-type contracts
108
96
88
Withdrawals and other deductions from investment and universal life-type contracts
(115)
(100)
(102)
Repayment of debt
—
—
(600)
Net issuance (return) of shares under incentive and stock compensation plans, including related excise tax
benefit
22
6
(19)
Treasury stock acquired, including related excise tax paid
(1,514)
(1,400)
(1,550)
Dividends paid on preferred stock
(21)
(21)
(21)
Dividends paid on common stock
(556)
(528)
(506)
Net cash used for financing activities
(2,076)
(1,947)
(2,710)
Foreign exchange rate effect on cash
(20)
3
(14)
Net increase (decrease) in cash and restricted cash
45
(155)
7
Cash and restricted cash — beginning of period
189
344
337
Cash and restricted cash — end of period
$
234 $
189 $
344
Supplemental Disclosure of Cash Flow Information
Income tax paid
$
812 $
622 $
548
Interest paid
$
211 $
209 $
212
See Notes to Consolidated Financial Statements.
THE HARTFORD INSURANCE GROUP, INC.
Consolidated Statements of Cash Flows
121
1. BASIS OF PRESENTATION AND SIGNIFICANT
ACCOUNTING POLICIES
The Hartford Insurance Group, Inc. ("HIG") is a holding
company for insurance and financial services subsidiaries that
provide property and casualty ("P&C") insurance, employee
group benefits insurance and services and mutual funds and
exchange-traded funds ("ETF") to individual and business
customers in the United States as well as in the United Kingdom
and other international locations (collectively, “The Hartford”, the
“Company”, “we” or “our”). Previously known as The Hartford
Financial Services Group, Inc., the Company changed its name
to The Hartford Insurance Group, Inc. on February 6, 2025.
The Hartford conducts business principally in five reportable
segments including Business Insurance (formerly "Commercial
Lines"), Personal Insurance (formerly "Personal Lines"),
Property & Casualty Other Operations, Employee Benefits
(formerly "Group Benefits") and Hartford Funds, as well as a
Corporate category.
The Consolidated Financial Statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”) which differ materially
from the accounting practices prescribed by various insurance
regulatory authorities.
Consolidation
The Consolidated Financial Statements include the accounts of
The Hartford Insurance Group, Inc., and entities in which the
Company directly or indirectly has a controlling financial interest.
Entities in which the Company has significant influence over the
operating and financing decisions but does not control are
reported using the equity method. Intercompany transactions
and balances between The Hartford and its subsidiaries and
affiliates have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The most significant estimates include those used in
determining property and casualty and group long-term disability
("LTD") insurance product reserves, net of reinsurance;
evaluation of goodwill for impairment; valuation of investments
and derivative instruments; and contingencies relating to
corporate litigation and regulatory matters.
Adoption of New Accounting
Standards
Segment Disclosures
On December 31, 2024, the Company adopted the Financial
Accounting Standards Board’s (“FASB”) new guidance on
Segment Reporting, that was applied on a retrospective basis
for all periods presented. The new guidance requires enhanced
disclosures on an annual and quarterly basis about significant
segment expenses that are regularly provided to the chief
operating decision maker (“CODM”) and included within the
reported measure of segment profit or loss, as well as
disclosure of the title and position of the CODM and a
description of how the reported measure of profit or loss is used
to assess segment performance and allocate resources. The
Company has included the new disclosures in Note 3 - Segment
Information of Notes to Consolidated Financial Statements. The
Company will also provide the quarterly disclosures beginning
with the March 31, 2025 interim condensed consolidated
financial statements. The new guidance did not have an impact
on the consolidated financial position, results of operations, or
cash flows.
Note 1 - Basis of Presentation and Significant Accounting Policies
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in millions, except for per share data, unless otherwise stated)
122
Future Adoption of New Accounting
Standards
Income Tax Disclosures
The FASB issued new disclosure requirements for income taxes
primarily for the income tax rate reconciliation and income taxes
paid. The income tax rate reconciliation within the income taxes
note will present reconciling items based on specified categories
with further disaggregation of items above a prescribed
threshold. Disclosure of income taxes paid (net of refunds
received) in the consolidated statement of cash flows will be
disaggregated by federal (national), state, and foreign taxes with
further disaggregation by individual jurisdictions subject to a
prescribed threshold. The Company is required to provide the
new disclosure annually beginning with the December 31, 2025
consolidated financial statements. Disclosures are required to
be provided on a prospective basis with retrospective
application permitted. The Company is evaluating the disclosure
impact of the new guidance; however, the new guidance will not
have an impact on the consolidated financial position, results of
operations, or cash flows.
Disaggregated Income Statement
Expenses
The FASB issued new guidance on disclosures of
disaggregated income statement expenses. The new guidance
requires footnote disclosures that will disaggregate expenses
included in relevant expense captions into prescribed
categories, as well as narrative disclosures about selling
expenses. The Company is required to provide the new
disclosures beginning with the December 31, 2027 consolidated
financial statements and on a quarterly basis beginning with the
March 31, 2028 interim condensed consolidated financial
statements. The new guidance will be applied on a prospective
basis, with retrospective application or early adoption permitted.
The Company is evaluating the disclosure impact of the new
guidance; however, it will not have an impact on the
consolidated financial position, results of operations, or cash
flows.
Significant Accounting Policies
The Company’s significant accounting policies are as follows:
Revenue Recognition
Premium Revenue from Direct Insurance and
Assumed Reinsurance
Property and casualty premiums are earned on a pro rata basis
over the policy period and include accruals for policies that have
been written by agents but not yet reported to us, as well as
ultimate premium revenue anticipated under auditable and
retrospectively rated policies. We estimate the amount of
premium not yet reported based on current and historical trends
of the business being written. Such estimates are regularly
reviewed and updated and any resulting adjustments are
included in the current year's results. Unearned premiums
represent the premiums applicable to the unexpired terms of
policies in force, or period of risk.
Group life, disability and accident premiums are generally due
from policyholders, and recognized as revenue, on a pro rata
basis over the period of the contracts.
An estimated ACL is recorded on the basis of periodic
evaluations of balances due from insureds and considering
historical credit loss information, adjusted for current economic
conditions as well as reasonable and supportable forecasts
when appropriate. The Company records total credit loss
expenses related to premiums receivable in insurance operating
costs and other expenses. Write-offs of premiums receivable
and agents' balances and any related ACL are recorded in the
period in which the balance is deemed uncollectible. Refer to
Note 7 - Premiums Receivable and Agents' Balances for further
discussion regarding the allowance for doubtful accounts
included in premiums receivable and agents’ balances.
Non-Insurance Revenue from Contracts with
Customers
Installment fees are charged on property and casualty insurance
contracts for billing the insurance customer in installments over
the policy term. These fees are recognized in fee income as
earned on collection.
Insurance servicing revenues within Personal Insurance consist
of up-front commissions earned for collecting premiums and
processing claims on insurance policies for which The Hartford
does not assume underwriting risk, predominantly related to the
National Flood Insurance Plan program. These insurance
servicing revenues are recognized in other revenues over the
period of the flood program's policy terms.
Employee Benefits earns fee income from employers for the
administration of underwriting, implementation and claims
processing for employer self-funded plans and for leave
management services. Fees are recognized as services are
provided and collected monthly.
Hartford Funds provides investment management,
administrative and distribution services to mutual funds and
exchange-traded funds. The Company assesses investment
advisory, distribution and other asset management fees
primarily based on the average daily net asset values from
mutual funds and exchange-traded funds, which are recorded in
the period in which the services are provided and are collected
monthly. Fluctuations in domestic and international markets and
related investment performance, volume and mix of sales and
redemptions of mutual funds or exchange-traded funds, and
other changes to the composition of assets under management
("AUM") are all factors that ultimately have a direct effect on fee
income earned.
Corporate investment management and other fees are primarily
for managing third party invested assets. These fees, calculated
based on the average quarterly net asset values, are recorded
in the period in which the services are provided and are
collected quarterly. Fluctuations in markets and interest rates
and other changes to the composition of assets under
management are all factors that ultimately have a direct effect
on fee income earned.
Note 1 - Basis of Presentation and Significant Accounting Policies
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
123
Dividends to Policyholders
Policyholder dividends are paid to certain property and casualty
policyholders. Policies that receive dividends are referred to as
participating policies. Participating dividends to policyholders are
accrued and reported in insurance operating costs and other
expenses and other liabilities using an estimate of the amount to
be paid based on underlying contractual obligations under
policies and applicable state laws.
Net written premiums for participating property and casualty
insurance policies represented 6%, 6%, and 7% of total net
written premiums for each of the years ended December 31,
2024, 2023 and 2022, respectively. Participating dividends to
property and casualty policyholders were $39, $39 and $29 for
the years ended December 31, 2024, 2023 and 2022,
respectively.
There were no additional amounts of income allocated to
participating policyholders.
Investments
Overview
The Company’s investments in fixed maturities consist of bonds,
including structured securities, and redeemable preferred stock.
Most of these investments are classified as AFS and are carried
at fair value. The after tax difference between fair value and cost
or amortized cost is reflected in stockholders’ equity as a
component of AOCI. Fixed maturities for which the Company
elected the fair value option are classified as FVO and are
carried at fair value with changes in value recorded in net
realized gains and losses. These investments represent certain
investments in residual interests of securitizations and other
securities that contain embedded credit derivatives. Equity
securities are measured at fair value with any changes in
valuation reported in net realized gains and losses. Mortgage
loans are recorded at the outstanding principal balance adjusted
for amortization of premiums or discounts and net of an ACL.
Short-term investments are carried at amortized cost, which
approximates fair value. Limited partnerships and other
alternative investments are reported at their carrying value and
are primarily accounted for under the equity method with the
Company’s share of earnings included in net investment
income. Recognition of income related to limited partnerships
and other alternative investments is delayed due to the
availability of the related financial information, as private equity
and other funds are generally received on a three-month delay.
Accordingly, income for the years ended December 31, 2024,
2023, and 2022 may not include the full impact of current year
changes in valuation of the underlying assets and liabilities of
the funds, which are generally obtained from the limited
partnerships. Other investments primarily consist of equity fund
investments measured at fair value, overseas deposits which
are measured at fair value using the net asset value as a
practical expedient, consolidated investment funds for which the
Company has provided seed money and reports the underlying
investments at fair value with changes in the fair value
recognized in income consistent with accounting requirements
for investment companies, and derivative instruments which are
carried at fair value.
Net Realized Gains and Losses
Net realized gains and losses from investment sales are
reported as a component of revenues and are determined on a
specific identification basis. Net realized gains and losses also
result from fair value changes in equity securities, FVO
securities, and derivatives contracts that do not qualify, or are
not designated, as a hedge for accounting purposes. The
Company records net credit losses on fixed maturities, AFS and
changes in the ACL on mortgage loans as a component of net
realized gains and losses. Future changes in the ACL resulting
from improvements in expected future cash flows are recorded
through net realized gains and losses.
Net Investment Income
Interest income from fixed maturities and mortgage loans is
recognized when earned on the constant effective yield method
based on the estimated timing of cash flows. Most premiums
and discounts on fixed maturities are amortized to the maturity
date. Premiums on callable bonds may be amortized to call
dates based on call prices. For structured financial assets
subject to prepayment risk, yields are recalculated and adjusted
periodically to reflect historical and/or estimated future
prepayments using the retrospective method. For certain other
structured securities, including securities that previously had an
ACL and interest only securities, any yield adjustments are
made using the prospective method. Prepayment fees and
make-whole payments on fixed maturities and mortgage loans
are recorded in net investment income when earned. For equity
securities, dividends are recognized as investment income on
the ex-dividend date. Limited partnerships and other alternative
investments primarily use the equity method of accounting to
recognize the Company’s share of earnings. For fixed maturities
with an ACL, net investment income is recognized at the original
effective rate and accretion of the ACL is recognized through net
realized gains and losses. The Company’s non-income
producing investments were not material for the years ended
December 31, 2024, 2023 and 2022.
Accrued Investment Income
Accrued investment income primarily includes accruals of
interest and dividend income from investments that have been
earned but not yet received.
Derivative Instruments
Overview
The Company utilizes a variety of over-the-counter ("OTC")
derivatives, derivatives cleared through central clearing houses
("OTC-cleared") and exchange traded derivative instruments as
part of its overall risk management strategy as well as to engage
in income generation covered call transactions and replication
transactions. The types of instruments may include swaps,
Note 1 - Basis of Presentation and Significant Accounting Policies
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
124
caps, floors, forwards, futures and options to achieve the
following Company-approved objectives:
•
to hedge risk arising from interest rate, equity market,
commodity market, credit spread and issuer default, price
or currency exchange rates or volatility;
•
to manage liquidity;
•
to control transaction costs; and
•
to enter into income generation covered call transactions
and synthetic replication transactions.
Interest rate and credit default swaps involve the periodic
exchange of cash flows with other parties, at specified intervals,
calculated using agreed upon rates or other financial variables
and notional principal amounts. Generally, little to no cash or
principal payments are exchanged at the inception of the
contract. Typically, at the time a swap is entered into, the cash
flow streams exchanged by the counterparties are equal in
value.
The Company clears certain interest rate swap and credit
default swap derivative transactions through central clearing
houses. OTC-cleared derivatives require initial collateral at the
inception of the trade in the form of cash or highly liquid
securities, such as U.S. Treasuries and government agency
investments. Central clearing houses also require additional
cash as variation margin based on daily market value
movements. For information on collateral, see the Derivative
Collateral Arrangements section in Note 6 - Derivatives. In
addition, OTC-cleared transactions include price alignment
amounts either received or paid on the variation margin, which
is characterized as interest and reflected in net investment
income.
Forward contracts are customized commitments that specify a
rate of interest or currency exchange rate to be paid or received
on an obligation beginning on a future start date and are
typically settled in cash.
Financial futures are standardized commitments to either
purchase or sell designated financial instruments, at a future
date, for a specified price and may be settled in cash or through
delivery of the underlying instrument. Futures contracts trade on
organized exchanges. Margin requirements for futures are met
by pledging securities or cash, and changes in the futures’
contract values are settled daily in cash.
Option contracts grant the purchaser, for a premium payment,
the right to either purchase from or sell to the issuer a financial
instrument at a specified price, within a specified period or on a
stated date. The contracts may reference commodities, which
grant the purchaser the right to either purchase from or sell to
the issuer commodities at a specified price, within a specified
period or on a stated date. Option contracts are typically settled
in cash.
Foreign currency swaps exchange an initial principal amount in
two currencies, agreeing to re-exchange the currencies at a
future date, at an agreed upon exchange rate. There may also
be a periodic exchange of payments at specified intervals
calculated using the agreed upon rates and exchanged principal
amounts.
The Company’s derivative transactions conducted in insurance
company subsidiaries are used in strategies permitted under the
derivative use plans required by the State of Connecticut, the
State of Illinois and the State of New York insurance regulators.
Accounting and Financial Statement
Presentation of Derivative Instruments and
Hedging Activities
Derivative instruments are recognized on the Consolidated
Balance Sheets at fair value and are reported in Other
Investments and Other Liabilities. For balance sheet
presentation purposes, the Company has elected to offset the
fair value amounts, income accruals, and related cash collateral
receivables and payables of OTC derivative instruments
executed in a legal entity and with the same counterparty under
a master netting agreement, which provides the Company with
the legal right of offset.
On the date the derivative contract is entered into, the Company
designates the derivative as (1) a hedge of the fair value of a
recognized asset or liability (“fair value” hedge), (2) a hedge of
the variability in cash flows of a forecasted transaction or of
amounts to be received or paid related to a recognized asset or
liability (“cash flow” hedge), (3) a hedge of a net investment in a
foreign operation (“net investment” hedge) or (4) held for other
investment and/or risk management purposes, which primarily
involve managing asset or liability related risks and do not
qualify for hedge accounting. The Company currently does not
designate any derivatives as fair value or net investment
hedges.
Cash Flow Hedges - Changes in the fair value of a derivative
that is designated and qualifies as a cash flow hedge, including
foreign-currency cash flow hedges, are recorded in AOCI and
are reclassified into earnings when the variability of the cash
flow of the hedged item impacts earnings. Gains and losses on
derivative contracts that are reclassified from AOCI to current
period earnings are included in the line item in the Consolidated
Statements of Operations in which the cash flows of the hedged
item are recorded. Periodic derivative net coupon settlements
are recorded in the line item of the Consolidated Statements of
Operations in which the cash flows of the hedged item are
recorded. Cash flows from cash flow hedges are presented in
the same category as the cash flows from the items being
hedged in the Consolidated Statement of Cash Flows.
Other Investment and/or Risk Management Activities - The
Company’s other investment and/or risk management activities
primarily relate to strategies used to reduce economic risk or
replicate permitted investments and do not receive hedge
accounting treatment. Changes in the fair value, including
periodic derivative net coupon settlements, of derivative
instruments held for other investment and/or risk management
purposes are reported in current period earnings as net realized
gains and losses.
Hedge Documentation and Effectiveness Testing
To qualify for hedge accounting treatment, a derivative must be
highly effective in mitigating the designated changes in fair value
or cash flows of the hedged item. At hedge inception, the
Company formally documents all relationships between hedging
instruments and hedged items, as well as its risk-management
objective and strategy for undertaking each hedge transaction.
The documentation process includes linking derivatives that are
designated as fair value, cash flow, or net investment hedges to
Note 1 - Basis of Presentation and Significant Accounting Policies
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
125
specific assets or liabilities on the balance sheet or to specific
forecasted transactions and defining the effectiveness testing
methods to be used. The Company also formally assesses both
at the hedge’s inception and ongoing on a quarterly basis,
whether the derivatives that are used in hedging transactions
have been and are expected to continue to be highly effective in
offsetting changes in fair values, cash flows or net investment in
foreign operations of hedged items. Hedge effectiveness is
assessed primarily using quantitative methods as well as using
qualitative methods. Quantitative methods include regression or
other statistical analysis of changes in fair value or cash flows
associated with the hedge relationship. Qualitative methods may
include comparison of critical terms of the derivative to the
hedged item.
Discontinuance of Hedge Accounting
The Company discontinues hedge accounting prospectively
when (1) it is determined that the qualifying criteria are no longer
met; (2) the derivative is no longer designated as a hedging
instrument; or (3) the derivative expires or is sold, terminated or
exercised.
When cash flow hedge accounting is discontinued because the
Company becomes aware that it is not probable that the
forecasted transaction will occur, the derivative continues to be
carried on the balance sheet at its fair value, and gains and
losses that were accumulated in AOCI are recognized
immediately in earnings.
In other situations in which hedge accounting is discontinued,
including those where the derivative is sold, terminated or
exercised, amounts previously deferred in AOCI are reclassified
into earnings when earnings are impacted by the hedged item.
Embedded Derivatives
The Company may purchase investments that contain
embedded derivative instruments. When it is determined that
(1) the embedded derivative possesses economic
characteristics that are not clearly and closely related to the
economic characteristics of the host contract and (2) a separate
instrument with the same terms would qualify as a derivative
instrument, the embedded derivative is bifurcated from the host
for measurement purposes. The embedded derivative, which is
reported with the host instrument in the Consolidated Balance
Sheets, is carried at fair value with changes in fair value
reported in net realized gains and losses.
Credit Risk of Derivative Instruments
Credit risk is defined as the risk of financial loss due to
uncertainty of an obligor’s or counterparty’s ability or willingness
to meet its obligations in accordance with agreed upon terms.
Credit exposures are measured using the market value of the
derivatives, resulting in amounts owed to the Company by its
counterparties or potential payment obligations from the
Company to its counterparties. The Company generally requires
that OTC derivative contracts, other than certain forward
contracts, be governed by International Swaps and Derivatives
Association agreements which are structured by legal entity and
by counterparty, and permit right of offset. Some agreements
require daily collateral settlement based upon agreed upon
thresholds. For purposes of daily derivative collateral
maintenance, credit exposures are generally quantified based
on the prior business day’s market value and collateral is
pledged to and held by, or on behalf of, the Company to the
extent the current value of the derivatives is greater than zero,
subject to minimum transfer thresholds, if applicable. The
Company also minimizes the credit risk of derivative instruments
by entering into transactions with high quality counterparties
primarily rated A or better, which are monitored and evaluated
by the Company’s risk management team and reviewed by
senior management. OTC-cleared derivatives are governed by
clearing house rules. Transactions cleared through a central
clearing house reduce risk due to their ability to require daily
variation margin and act as an independent valuation source. In
addition, the Company monitors counterparty credit exposure on
a monthly basis to ensure compliance with Company policies
and statutory limitations.
Cash and Restricted Cash
Cash represents cash on hand and demand deposits with banks
or other financial institutions. Restrictions on cash primarily
relate to funds that are held to support regulatory and
contractual obligations.
Reinsurance
The Company cedes insurance to other insurers in order to limit
its maximum losses, to diversify its exposures and provide
statutory surplus relief. Such arrangements do not relieve the
Company of its primary liability to policyholders. Failure of
reinsurers to honor their obligations could result in losses to the
Company. The Company also assumes reinsurance from other
insurers and is a member of and participates in reinsurance
pools and associations. Assumed reinsurance refers to the
Company’s acceptance of certain insurance risks that other
insurance companies or pools have underwritten.
Reinsurance accounting is followed for ceded and assumed
transactions that provide indemnification against loss or liability
relating to insurance risk (i.e., risk transfer). To meet risk transfer
requirements, a reinsurance agreement must include insurance
risk, consisting of underwriting and timing risk, and a reasonable
possibility of a significant loss to the reinsurer. If the ceded and
assumed transactions do not meet risk transfer requirements,
the Company accounts for these transactions as deposit
transactions. The Company had no deposit liability as of
December 31, 2024 or and 2023 reported in other liabilities.
Premiums, benefits, losses and loss adjustment expenses
reflect the net effects of ceded and assumed reinsurance
transactions. Included in other assets are prepaid reinsurance
premiums, which represent the portion of premiums ceded to
reinsurers applicable to the unexpired terms of the reinsurance
contracts. Reinsurance recoverables are balances due from
reinsurers for ceded paid and unpaid losses and loss
adjustment expenses and are presented net of an allowance for
uncollectible reinsurance. Changes in the allowance for
uncollectible reinsurance are reported in benefits, losses and
loss adjustment expenses in the Company's Consolidated
Statements of Operations.
The Company periodically evaluates the recoverability of its
reinsurance recoverable assets and establishes an allowance
for uncollectible reinsurance. The allowance for uncollectible
reinsurance reflects management’s best estimate of reinsurance
cessions that may be uncollectible in the future due to
reinsurers’ unwillingness or inability to pay. The allowance for
Note 1 - Basis of Presentation and Significant Accounting Policies
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
126
uncollectible reinsurance comprises an ACL and an allowance
for disputed balances. Based on this analysis, the Company
may adjust the allowance for uncollectible reinsurance or charge
off reinsurer balances that are determined to be uncollectible.
The Company records credit losses related to reinsurance
recoverables in benefits, losses and loss adjustment expenses.
Write-offs of reinsurance recoverables and any related ACL are
recorded in the period in which the balance is deemed
uncollectible. Expected recoveries are included in the estimate
of the ACL.
Retroactive reinsurance agreements, including adverse
development covers ("ADC"), are reinsurance agreements
under which our reinsurer agrees to reimburse us as a result of
loss development related to past insurable events. For these
agreements, the consideration paid in excess of the estimated
ultimate losses to be recovered under the agreement at
inception is recognized as a loss on reinsurance transaction.
The benefit of subsequent adverse development ceded up to
the total consideration paid is recognized as ceded losses,
which are a reduction of incurred losses and loss adjustment
expenses. The excess of the estimated amounts ultimately to be
recovered under the agreement over the consideration paid is
recognized as a deferred gain liability and amortized into income
over the period the ceded losses are recovered in cash from the
reinsurer. The amount of the deferred gain liability is
recalculated each period based on cumulative recoveries not yet
collected relative to the latest estimate of ultimate losses to be
recovered. Ceded loss reserves under retroactive agreements
were $1.6 billion and $1.7 billion, and the deferred gain liability
reported in other liabilities was $914 and $997, as of December
31, 2024 and 2023, respectively. In any given period, the
change in deferred gain included in net income includes
amortization of the deferred gain based on the percentage of
ultimate ceded losses collected plus any change in the deferred
gain liability due to changes in the estimated ultimate losses to
be recovered. The effect on income from change in the deferred
gain was a net charge or (benefit) to earnings of $(83), $194
and $229 before tax for the years ended December 31, 2024,
2023, and 2022 respectively.
Deferred Policy Acquisition Costs
DAC represents costs that are directly related to the acquisition
of new and renewal insurance contracts and incremental direct
costs of contract acquisition that are incurred in transactions
with independent third parties or in compensation to employees.
Such costs primarily include commissions, premium taxes, costs
and certain other expenses that are directly related to
successfully issued contracts, including a portion of policy
issuance and underwriting costs.
For P&C insurance products and group life, disability and
accident contracts, costs are deferred and amortized ratably
over the period the related premiums are earned. Deferred
acquisition costs are reviewed to determine if they are
recoverable from future income, and if not, are charged to
expense. Anticipated investment income is considered in the
determination of the recoverability of DAC.
Income Taxes
The Company recognizes taxes payable or refundable for the
current year and deferred taxes for the tax consequences of
temporary differences between the financial reporting and tax
basis of assets and liabilities. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to
taxable income in the years the temporary differences are
expected to reverse. A deferred tax provision is recorded for the
tax effects of temporary differences between the Company's
current taxable income and its income before tax under
generally accepted accounting principles in the Consolidated
Statements of Operations. For deferred tax assets, the
Company records a valuation allowance that is adequate to
reduce the total deferred tax asset to an amount that will more
likely than not be realized.
Goodwill
Goodwill represents the excess of the cost to acquire a business
over the acquisition date fair value of net assets acquired.
Goodwill is not amortized but is reviewed for impairment at least
annually or more frequently if events occur or circumstances
change that would indicate that a triggering event for a potential
impairment has occurred. Goodwill is tested for impairment by
comparing the fair value of a reporting unit to its carrying value.
Goodwill is impaired up to the amount that the carrying value of
the reporting unit exceeds the fair value. A reporting unit is
defined as an operating segment or one level below an
operating segment. The Company’s reporting units, for which
goodwill has been allocated consist of Business Insurance,
Personal Insurance, Employee Benefits, and Hartford Funds.
Management’s determination of the fair value of each reporting
unit incorporates multiple inputs into discounted cash flow
calculations, including assumptions that market participants
would make in valuing the reporting unit. Assumptions include
levels of economic capital required to support the business,
future business growth, earnings projections, the weighted
average cost of capital used for purposes of discounting and, for
the Hartford Funds segment, assets under management.
Decreases in business growth, decreases in earnings
projections and increases in the weighted average cost of
capital will all cause a reporting unit’s fair value to decrease,
increasing the possibility of impairments.
Intangible Assets
Acquired intangible assets on the Consolidated Balance Sheets
include purchased customer relationship and agency or other
distribution rights and licenses measured at fair value at
acquisition. The Company amortizes finite-lived other intangible
assets over their useful lives generally on a straight-line basis
over the period of expected benefit, ranging from 1 to 15 years.
Management revises amortization periods if it believes there has
been a change in the length of time that an intangible asset will
continue to have value. Indefinite-lived intangible assets are not
subject to amortization. Intangible assets are assessed for
impairment generally when events or circumstances indicate a
potential impairment and at least annually for indefinite-lived
intangibles. Finite-lived intangible assets are impaired if the
carrying amount is not recoverable from undiscounted cash
flows. Indefinite-lived intangible assets are impaired if the
Note 1 - Basis of Presentation and Significant Accounting Policies
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
127
carrying amount exceeds fair value. Impaired intangible assets
are written down to fair value.
Property and Equipment
Property and equipment, which includes capitalized software
and right-of-use lease assets, is carried at cost net of
accumulated depreciation. Depreciation is based on the
estimated useful lives of the various classes of property and
equipment and is recognized principally on the straight-line
method. Accumulated depreciation was $2.5 billion and $2.4
billion as of December 31, 2024 and 2023, respectively.
Depreciation expense was $177, $204, and $213 for the years
ended December 31, 2024, 2023 and 2022, respectively, and is
reported in insurance operating costs and other expenses. The
costs to access and develop hosted software arrangements,
where The Hartford has the right to access and use the
software, but not take possession, and the cost of certain
software licenses are reported in other assets on a straight-line
basis over the service period. Amortization of hosted software
and certain software licenses was $108, $85, and $78 for the
years ended December 31, 2024, 2023, and 2022, respectively,
and is reported in insurance operating costs and other
expenses.
Leases
Leases are classified as financing or operating leases. Where
the lease is economically similar to a purchase because The
Hartford obtains control of the underlying asset, the lease is
classified as a financing lease and the Company recognizes
amortization of the right of use asset and interest expense on
the liability. Where the lease is not economically similar to a
purchase as the lease provides The Hartford with only the right
to control the use of the underlying asset over the lease term
and the lease term is greater than one year, the lease is an
operating lease and the lease cost is recognized as rental
expense over the lease term on a straight-line basis. Leases
with a term of one year or less are also expensed over the lease
term but not recognized on the Consolidated Balance Sheets.
Unpaid Losses and Loss
Adjustment Expenses
For property and casualty and group life, disability and accident
insurance and assumed reinsurance products, the Company
establishes reserves for unpaid losses and loss adjustment
expenses to provide for the estimated costs of paying claims
under insurance policies written by the Company. These
reserves include estimates for both claims that have been
reported and those that have not yet been reported, and include
estimates of all losses and loss adjustment expenses
associated with processing and settling these claims. Estimating
the ultimate cost of future losses and loss adjustment expenses
is an uncertain and complex process. This estimation process is
based significantly on the assumption that past developments
are an appropriate predictor of future events, and involves a
variety of actuarial techniques that analyze experience, trends
and other relevant factors. The effects of inflation are implicitly
considered in the reserving process. In addition, a number of
complex factors influence the uncertainties involved with the
reserving process including social and economic trends and
changes in the concepts of legal liability and damage awards.
Accordingly, final claim settlements may vary from the present
estimates, particularly when those payments may not occur until
well into the future. The Company regularly reviews the
adequacy of its estimated losses and loss adjustment expense
reserves by reserve line within the various reportable segments.
Adjustments to previously established reserves are reflected in
the operating results of the period in which the adjustment is
determined to be necessary. Such adjustments could possibly
be significant, reflecting any variety of new and adverse or
favorable trends.
Most of the Company’s property and casualty insurance
products reserves are not discounted. However, the Company
has discounted to present value certain reserves for indemnity
payments that are due to claimants under workers’
compensation policies because the payment pattern and the
ultimate costs are reasonably fixed and determinable on an
individual claim basis. The discount rate is based on the risk
free rate for the expected claim duration as determined in the
year the claims were incurred. The Company also has
discounted liabilities for structured settlement agreements that
provide fixed periodic payments to claimants. These structured
settlements include annuities purchased to fund unpaid losses
for permanently disabled claimants. These structured settlement
liabilities are discounted to present value using the rate implicit
in the purchased annuities and the purchased annuities are
accounted for within reinsurance recoverables.
Group life and disability contracts with long-tail claim liabilities
are discounted because the payment pattern and the ultimate
costs are reasonably fixed and determinable on an individual
claim basis. The discount rates are estimated based on
investment yields expected to be earned on the cash flows net
of investment expenses and expected credit losses. The
Company establishes discount rates for these reserves in the
year the claims are incurred (the incurral year) which is when
the estimated settlement pattern is determined. The discount
rate for life and disability reserves acquired from Aetna's U.S.
group life and disability business were based on interest rates in
effect at the acquisition date of November 1, 2017.
For further information about how unpaid losses and loss
adjustment expenses are established, see Note 10 - Reserve for
Unpaid Losses and Loss Adjustment Expenses.
Reserve for Future Policy Benefits
The Company’s reserves for future policy benefits includes paid-
up life insurance and whole-life policies resulting from
conversion from group life policies included within the Employee
Benefits segment and reserves for run-off structured settlement
and terminal funding agreement liabilities, which are reported in
the Corporate category.
Contracts are grouped into cohorts by contract type and issue
year. The Company establishes reserves for future policy
benefits using the net premium approach, which represents the
present value of future policyholder benefits and related
expenses less the present value of future net premiums. Net
premiums are calculated by multiplying gross premiums for the
contracts in a specific cohort by a net premium ratio. The net
premium ratio is determined for the lifetime of a given cohort as
the present value of net benefits divided by the present value of
gross premiums. Related expenses include termination and
settlement costs and exclude acquisition costs and non-claim
related costs, such as costs relating to investments, general
administration, policy maintenance, product development,
Note 1 - Basis of Presentation and Significant Accounting Policies
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
128
market research and general overhead or any other costs,
which are expensed as incurred.
The Company estimates premiums, benefits and related
expense cash flows using methods that include assumptions,
such as estimates of mortality, lapse, and claim-related
expenses, and the possible impact of inflation on those
expenses. Benefits include all guaranteed cash flows to be paid
to the policyholder.
The reserve for future policy benefits is adjusted for differences
between actual and expected experience. Each quarter, the
Company updates its estimates of cash flows expected over the
life of a group of contracts using actual historical experience.
These updated cash flows are used to calculate the revised net
premiums and net premium ratio, which are used to derive an
updated reserve for future policy benefits. In subsequent
periods, the revised net premiums are used to measure the
reserve for future policy benefits, subject to future revisions.
Future cash flow assumptions, including mortality, lapse and
expense are reviewed and, if a change is indicated, updated at
least annually in the third quarter.
The difference between the newly calculated reserve balance
and the reserve balance before updating for actual experience
and/or future cash flow assumptions is the remeasurement gain
or loss, which is immaterial for each of the years ended
December 31, 2024, 2023 and 2022, and is presented in
benefits losses and loss adjustments expense in the
Consolidated Statements of Operations. Changes to the reserve
due to updates to cash flow assumptions, discounted at the
discount rate used when each annual cohort was established,
are recognized on a catch-up basis in the Consolidated
Statement of Operations.
The discount rate assumption is an equivalent single rate that is
based on a current market observable, upper-medium grade
fixed maturity yield. This has been interpreted to represent a
yield based on single-A credit rated fixed maturity instruments
with similar duration to the liability. The Company uses the yield
of a market observable index of single-A credit rated fixed
maturities as the basis for setting the discount rate. The
discount rate assumption is updated quarterly and the change in
the reserve estimate resulting from updating the discount rate
assumption is recognized in other comprehensive income.
Treasury Stock
Treasury stock is the cost of common stock repurchased, which
includes the purchase price of shares acquired and direct costs
to acquire shares, including commissions and excise taxes.
Issuance and retirement of treasury stock is recognized at the
average cost of shares held in treasury.
Foreign Currency
Foreign currency translation gains and losses are reflected in
stockholders’ equity as a component of AOCI. The Company’s
foreign subsidiaries’ balance sheet accounts are translated at
the exchange rates in effect at each year end and income
statement accounts are translated at the average rates of
exchange prevailing during the year. The national currencies of
the international operations are generally their functional
currencies; however, the U.S. dollar is the functional currency of
Lloyd's Syndicate 1221 ("Lloyd's Syndicate"), for which the
Company is the sole corporate member. Gains and losses
resulting from the remeasurement of foreign currency
transactions are reflected in earnings in net realized gains
(losses) in the period in which they occur.
2. EARNINGS PER COMMON SHARE
Computation of Basic and Diluted Earnings per Common Share
For the years ended December 31,
(In millions, except for per share data)
2024
2023
2022
Earnings
Net income
$
3,111 $
2,504 $
1,819
Less: Preferred stock dividends
21
21
21
Net income available to common stockholders
$
3,090 $
2,483 $
1,798
Shares
Weighted average common shares outstanding, basic
293.9
307.1
324.8
Dilutive effect of stock-based awards under compensation plans
4.7
4.4
4.7
Weighted average common shares outstanding and dilutive potential common
shares [1]
298.6
311.5
329.5
Net income available to common stockholders per common share
Basic
$
10.51 $
8.09 $
5.54
Diluted
$
10.35 $
7.97 $
5.46
[1]For additional information, see Note 15 - Equity and Note 19 - Stock Compensation Plans.
Basic earnings per common share is computed based on the
weighted average number of common shares outstanding
during the year. Diluted earnings per common share includes
the dilutive effect of stock-based awards under compensation
plans.
Under the treasury stock method, for stock-based awards,
shares are assumed to be issued and then reduced for the
number of shares repurchasable with theoretical proceeds at the
average market price for the period. Contingently issuable
shares are included for the number of shares issuable assuming
the end of the reporting period was the end of the contingency
period, if dilutive.
Note 1 - Basis of Presentation and Significant Accounting Policies
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
129
3. SEGMENT INFORMATION
The Company currently conducts business principally in five
reportable segments including Business Insurance, Personal
Insurance, Property & Casualty Other Operations, Employee
Benefits and Hartford Funds, as well as a Corporate category.
The reportable segments are described below and align with the
Company’s key product and service offerings. Over 95% of the
Company’s revenues are generated in the United States
(“U.S.”). The remaining revenues are generated in the U.K. and
other international locations.
We report our results of operations consistent with the manner
in which our CODM reviews the business, assesses
performance, and makes operating decisions on the allocation
of resources to each reportable segment. The CODM considers
actual results and budget-to-actual variances when assessing
segment performance and making decisions on the allocation of
resources to each segment. The Company’s CODM is the
Chairman and Chief Executive Officer.
The accounting policies of the segments are the same as those
described in Note 1 - Basis of Presentation and Significant
Accounting Policies of the Notes to Consolidated Financial
Statements. The Company has identified GAAP net income as
the reported measure of segment profit or loss.
The Company’s reportable segments, as well as the Corporate
category, are as follows:
Business Insurance
Business Insurance provides a variety of insurance products
and risk management services in the U.S. and internationally to
commercial enterprises of varying sizes, with insurance
coverages including workers’ compensation, property,
automobile, general liability, umbrella, package business,
professional liability, bond, marine, livestock, accident and
health, and assumed reinsurance.
Personal Insurance
Personal Insurance provides standard automobile, homeowners
and personal umbrella coverages to individuals across the U.S.,
including a special program designed exclusively for members
of AARP through an agreement that is in place through
December 31, 2032.
Property & Casualty Other
Operations
P&C Other Operations includes certain property and casualty
operations, managed by the Company, that have discontinued
writing new business and includes substantially all of the
Company’s asbestos and environmental ("A&E") exposures.
Employee Benefits
Employee Benefits provides employers and associations with
group life, accident and disability coverage, along with other
products and services, including voluntary benefits, and group
retiree health.
Hartford Funds
Hartford Funds offers investment products for retail and
retirement accounts and provides investment management,
distribution and administrative services such as product design,
implementation and oversight. This business also manages a
portion of the mutual funds which support third-party life and
annuity separate accounts.
Corporate
The Company includes in the Corporate category capital raising
activities (including equity financing, debt financing and related
interest expense), purchase accounting adjustments related to
goodwill, reserves for run-off structured settlement and terminal
funding agreement liabilities, restructuring costs, transaction
expenses incurred in connection with an acquisition, certain
M&A costs, and other expenses not allocated to the reportable
segments. Interest expense of $199, $199 and $213, on debt for
the years ended December 31, 2024, 2023 and 2022,
respectively, is included in the Corporate category. Corporate
also includes investment management fees and expenses
related to managing third party assets.
Financial Measures and Other
Segment Information
Certain transactions between segments occur during the year
that primarily relate to tax settlements, insurance coverage,
expense reimbursements, services provided, investment
transfers and capital contributions. In addition, certain inter-
segment transactions occur that relate to interest income on
allocated surplus. Consolidated net income is unaffected by
such transactions.
Note 3 - Segment Information
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
130
Segment Revenues
For the years ended December 31,
2024
2023
2022
Business Insurance
Workers’ compensation
$
3,691 $
3,670 $
3,499
General liability
2,218
1,977
1,836
Marine
278
256
235
Package business
2,331
2,076
1,844
Commercial property
1,258
1,053
845
Professional Liability
824
787
737
Bond
327
321
303
Assumed reinsurance
758
615
467
Commercial automobile
1,079
927
844
Business Insurance earned premium and fee income
12,764
11,682
10,610
Net investment income
1,714
1,532
1,415
Net realized losses
(73)
(156)
(385)
Other revenue [1]
1
1
(1)
Total Business Insurance
14,406
13,059
11,639
Personal Insurance
Personal automobile
2,425
2,156
2,047
Homeowners
1,061
961
932
Personal Insurance earned premium and fee income [2]
3,486
3,117
2,979
Net investment income
222
171
140
Net realized losses
(14)
(16)
(35)
Other revenue
85
81
73
Total Personal Insurance
3,779
3,353
3,157
P&C Other Operations
Net investment income
74
69
63
Net realized losses
(4)
(7)
(16)
Total P&C Other Operations
70
62
47
Employee Benefits
Group disability
3,576
3,530
3,310
Group life
2,617
2,583
2,393
Other
422
402
354
Employee Benefits premium and other considerations
6,615
6,515
6,057
Net investment income
475
469
524
Net realized losses
(24)
(45)
(122)
Total Employee Benefits
7,066
6,939
6,459
Hartford Funds
Mutual fund and ETF
960
900
964
Third-party life and annuity separate accounts [3]
75
73
80
Hartford Funds fee income
1,035
973
1,044
Net investment income
20
17
9
Net realized gains (losses)
12
10
(24)
Total Hartford Funds
1,067
1,000
1,029
Total segment revenues
$
26,388 $
24,413 $
22,331
[1]Other revenues for Business Insurance includes revenues from equity method investments that are not considered revenues from contracts with customers in the
table below.
[2]For 2024, 2023 and 2022, AARP members accounted for earned premiums of $3.2 billion, $2.9 billion and $2.7 billion, respectively.
[3]Represents revenues earned for investment advisory services on third party life and annuity separate account AUM by the Company's Hartford Funds segment.
Note 3 - Segment Information
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
131
Significant Segment Expenses
For the years ended December 31,
2024
2023
2022
Business Insurance
Current accident year losses and loss adjustment expenses ("LAE") before catastrophes
$
7,186 $
6,575 $
5,959
Current accident year catastrophe losses and LAE
486
436
441
Prior accident year development of losses and LAE
(231)
(225)
(231)
Amortization of DAC
1,993
1,779
1,563
Insurance operating costs
1,973
1,837
1,788
Amortization of other intangible assets
29
29
29
Dividends to policyholders
39
39
29
Total Business Insurance
11,475
10,470
9,578
Personal Insurance
Current accident year losses and LAE before catastrophes
2,351
2,287
1,969
Current accident year catastrophe losses and LAE
282
240
208
Prior accident year development of losses and LAE
(108)
11
(13)
Amortization of DAC
255
231
228
Insurance operating costs
673
576
594
Amortization of other intangible assets
2
2
2
Total Personal Insurance
3,455
3,347
2,988
P&C Other Operations
Prior accident year development of losses and LAE
219
224
280
Insurance operating costs
9
4
9
Total P&C Other Operations
228
228
289
Employee Benefits
Group disability losses
2,432
2,370
2,263
Group life losses
2,060
2,157
2,091
Group losses - other
189
156
163
Amortization of DAC
34
34
33
Insurance operating costs and other expenses
1,609
1,514
1,467
Amortization of other intangible assets
40
40
40
Total Employee Benefits
6,364
6,271
6,057
Hartford Funds
Sub-advisory expense
289
265
282
Employee compensation and benefits
131
121
123
Distribution and service
299
289
315
General, administrative and other
105
106
106
Total Hartford Funds
824
781
826
Total significant segment expenses
$
22,346 $
21,097 $
19,738
Note 3 - Segment Information
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
132
Segment/Category Summary For the Year Ended December 31, 2024
Reportable Segments
Business
Insurance
Personal
Insurance
P&C Other
Operations
Employee
Benefits
Hartford
Funds
Total
Reportable
Segments
Corporate
Consolidated
Earned premium and fee
income from external
customers
$
12,764 $
3,486 $
— $
6,615 $
1,035 $
23,900 $
40 $
23,940
Net investment income
1,714
222
74
475
20
2,505
63
2,568
Net realized gains/(losses)
(73)
(14)
(4)
(24)
12
(103)
42
(61)
Other revenue [1]
1
85
—
—
—
86
2
88
Total Revenues
14,406
3,779
70
7,066
1,067
26,388
147
26,535
Significant segment expenses
11,475
3,455
228
6,364
824
22,346
22,346
Other segment expenses [2]
6
67
4
—
—
77
77
Corporate expenses
263
263
Income tax expense/(benefit)
576
49
(35)
141
51
782
(44)
738
Net income (loss)
$
2,349 $
208 $
(127) $
561 $
192 $
3,183 $
(72) $
3,111
Other segment disclosures:
Amortization of DAC
$
1,993 $
255 $
— $
34 $
— $
2,282 $
— $
2,282
Amortization of other
intangibles
$
29 $
2 $
— $
40 $
— $
71 $
— $
71
Total Assets
$
53,296 $
6,034 $
4,312 $
13,502 $
761 $
77,905 $
3,012 $
80,917
Segment/Category Summary For the Year Ended December 31, 2023
Reportable Segments
Business
Insurance
Personal
Insurance
P&C Other
Operations
Employee
Benefits
Hartford
Funds
Total
Reportable
Segments
Corporate
Consolidated
Earned premium and fee
income from external
customers
$
11,682 $
3,117 $
— $
6,515 $
973 $
22,287 $
39 $
22,326
Net investment income
1,532
171
69
469
17
2,258
47
2,305
Net realized gains/(losses)
(156)
(16)
(7)
(45)
10
(214)
26
(188)
Other revenue [1]
1
81
—
—
—
82
2
84
Total Revenues
13,059
3,353
62
6,939
1,000
24,413
114
24,527
Significant segment expenses
10,470
3,347
228
6,271
781
21,097
21,097
Other segment expenses [2]
2
60
—
—
—
62
62
Corporate expenses
280
280
Income tax expense/(benefit)
502
(15)
(36)
133
45
629
(45)
584
Net income (loss)
$
2,085 $
(39) $
(130) $
535 $
174 $
2,625 $
(121) $
2,504
Other segment disclosures:
Amortization of DAC
$
1,779 $
231 $
— $
34 $
— $
2,044 $
— $
2,044
Amortization of other
intangibles
$
29 $
2 $
— $
40 $
— $
71 $
— $
71
Total Assets
$
49,711 $
5,579 $
4,235 $
13,697 $
684 $
73,906 $
2,874 $
76,780
Note 3 - Segment Information
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
133
Segment/Category Summary For the Year Ended December 31, 2022
Reportable Segments
Business
Insurance
Personal
Insurance
P&C Other
Operations
Employee
Benefits
Hartford
Funds
Total
Reportable
Segments
Corporate
Consolidated
Earned premium and fee
income from external
customers
$
10,610 $
2,979 $
— $
6,057 $
1,044 $
20,690 $
49 $
20,739
Net investment income
1,415
140
63
524
9
2,151
26
2,177
Net realized losses
(385)
(35)
(16)
(122)
(24)
(582)
(45)
(627)
Other revenue/(loss) [1]
(1)
73
—
—
—
72
1
73
Total Revenues
11,639
3,157
47
6,459
1,029
22,331
31
22,362
Significant segment expenses
9,578
2,988
289
6,057
826
19,738
19,738
Other segment expenses [2]
11
56
—
—
—
67
67
Corporate expenses
295
295
Income tax expense/(benefit)
426
22
(52)
75
41
512
(69)
443
Net income (loss)
$
1,624 $
91 $
(190) $
327 $
162 $
2,014 $
(195) $
1,819
Other segment disclosures:
Amortization of DAC
$
1,563 $
228 $
— $
33 $
— $
1,824 $
— $
1,824
Amortization of other
intangibles
$
29 $
2 $
— $
40 $
— $
71 $
— $
71
[1] Other revenues for Business Insurance and Corporate includes revenues from equity method investments that are not considered revenues from contracts with
customers in the table below.
[2] Other segment expenses primarily consists of integration costs associated with the 2019 acquisition of Navigators Group for Business Insurance and servicing
expenses for Personal Insurance.
Non-Insurance Revenue from Contracts with Customers
For the years ended December 31,
Revenue Line Item
2024
2023
2022
Business Insurance
Installment billing fees
Fee income
$
43 $
41 $
39
Personal Insurance
Installment billing fees
Fee income
33
30
30
Insurance servicing revenues
Other revenues
85
81
73
Employee Benefits
Administrative services
Fee income
222
217
187
Hartford Funds
Advisory, servicing and distribution fees
Fee income
1,035
973
1,044
Corporate
Investment management and other fees
Fee income
40
39
49
Other
Other revenues
—
1
1
Total non-insurance revenues with customers
$
1,458 $
1,382 $
1,423
4. FAIR VALUE MEASUREMENTS
The Company carries certain financial assets and liabilities at
estimated fair value. Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in the
principal or most advantageous market in an orderly transaction
between market participants. Our fair value framework includes
a hierarchy that gives the highest priority to the use of quoted
prices in active markets, followed by the use of market
observable inputs, followed by the use of unobservable inputs.
The fair value hierarchy levels are as follows:
Level 1
Fair values based on unadjusted quoted prices for
identical assets or liabilities, in active markets that
the Company has the ability to access at the
measurement date.
Note 3 - Segment Information
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
134
Level 2
Fair values primarily based on observable inputs,
other than quoted prices included in Level 1, or
based on prices for similar assets and liabilities.
Level 3
Fair values derived when one or more of the
significant inputs are unobservable (including
assumptions about risk). With little or no
observable market, the determination of fair values
uses considerable judgment and represents the
Company’s best estimate of an amount that could
be realized in a market exchange for the asset or
liability. Also included are securities that are traded
within illiquid markets and/or priced by
independent brokers.
The Company will classify the financial asset or liability by level
based upon the lowest level input that is significant to the
determination of the fair value. In most cases, both observable
inputs (e.g., changes in interest rates) and unobservable inputs
(e.g., changes in risk assumptions) are used to determine fair
values that the Company has classified within Level 3.
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 2024
Total
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets accounted for at fair value on a recurring basis
Fixed maturities, AFS
Asset-backed securities ("ABS")
$
3,937 $
— $
3,915 $
22
Collateralized loan obligations ("CLOs")
3,250
—
3,134
116
Commercial mortgage-backed securities ("CMBS")
2,736
—
2,569
167
Corporate
20,636
—
18,355
2,281
Foreign government/government agencies
480
—
480
—
Municipal
5,304
—
5,304
—
Residential mortgage-backed securities ("RMBS")
5,230
—
5,206
24
U.S. Treasuries
994
57
937
—
Total fixed maturities, AFS
42,567
57
39,900
2,610
FVO securities
308
—
111
197
Equity securities, at fair value [1]
603
372
144
87
Derivative assets
Credit derivatives
30
—
30
—
Equity derivatives
4
—
4
—
Foreign exchange derivatives
23
—
23
—
Total derivative assets [2]
57
—
57
—
Short-term investments
4,068
1,271
2,699
98
Total assets accounted for at fair value on a recurring basis
$
47,603 $
1,700 $
42,911 $
2,992
Liabilities accounted for at fair value on a recurring basis
Derivative liabilities
Credit derivatives
$
(30) $
— $
(30) $
—
Foreign exchange derivatives
18
—
18
—
Total derivative liabilities [3]
(12)
—
(12)
—
Total liabilities accounted for at fair value on a recurring basis
$
(12) $
— $
(12) $
—
Note 4 - Fair Value Measurements
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
135
Assets and (Liabilities) Carried at Fair Value by Hierarchy Level as of December 31, 2023
Total
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets accounted for at fair value on a recurring basis
Fixed maturities, AFS
ABS
$
3,320 $
— $
3,320 $
—
CLOs
3,090
—
2,977
113
CMBS
3,125
—
2,898
227
Corporate
17,866
—
16,005
1,861
Foreign government/government agencies
562
—
562
—
Municipal
6,039
—
6,039
—
RMBS
4,287
—
4,251
36
U.S. Treasuries
1,529
18
1,511
—
Total fixed maturities, AFS
39,818
18
37,563
2,237
FVO securities
327
—
160
167
Equity securities, at fair value [1]
864
333
473
58
Derivative assets
Credit derivatives
(10)
—
(10)
—
Foreign exchange derivatives
9
—
9
—
Total derivative assets [2]
(1)
—
(1)
—
Short-term investments
3,850
1,400
2,425
25
Total assets accounted for at fair value on a recurring basis
$
44,858 $
1,751 $
40,620 $
2,487
Liabilities accounted for at fair value on a recurring basis
Derivative liabilities
Credit derivatives
$
10 $
— $
10 $
—
Foreign exchange derivatives
4
—
4
—
Interest rate derivatives
(6)
—
(6)
—
Total derivative liabilities [3]
8
—
8
—
Total liabilities accounted for at fair value on a recurring basis
$
8 $
— $
8 $
—
[1]Level 3 includes investments that have contractual sales restrictions that require consent to sell and are in place for the duration that the securities are held by the
Company.
[2]Includes derivative instruments in a net positive fair value position after consideration of the accrued interest and impact of collateral posting requirements which
may be imposed by agreements and applicable law. See footnote 3 to this table for derivative liabilities.
[3]Includes derivative instruments in a net negative fair value position (derivative liability) after consideration of the accrued interest and impact of collateral posting
requirements which may be imposed by agreements and applicable law.
The Company has overseas deposits included in other
investments of $61 and $75 as of December 31, 2024 and
December 31, 2023, respectively, which are measured at fair
value using the net asset value as a practical expedient.
Fixed Maturities, Equity Securities,
Short-term Investments, and
Derivatives
Valuation Techniques
The Company generally determines fair values using valuation
techniques that use prices, rates, and other relevant information
evident from market transactions involving identical or similar
instruments. Valuation techniques also include, where
appropriate, estimates of future cash flows that are converted
into a single discounted amount using current market
expectations. The Company uses a "waterfall" approach
comprised of the following pricing sources and techniques,
which are listed in priority order:
•
Quoted prices, unadjusted, for identical assets or liabilities
in active markets, which are classified as Level 1.
•
Prices from third-party pricing services, which primarily
utilize a combination of techniques. These services utilize
recently reported trades of identical, similar, or benchmark
securities making adjustments for market observable inputs
Note 4 - Fair Value Measurements
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
136
available through the reporting date. If there are no recently
reported trades, they may use a discounted cash flow
technique to develop a price using expected cash flows
based upon the anticipated future performance of the
underlying collateral discounted at an estimated market
rate. Both techniques develop prices that consider the time
value of future cash flows and provide a margin for risk,
including liquidity and credit risk. Most prices provided by
third-party pricing services are classified as Level 2
because the inputs used in pricing the securities are
observable. However, some securities that are less liquid or
trade less actively are classified as Level 3. Additionally,
certain long-dated securities include benchmark interest
rate or credit spread assumptions that are not observable in
the marketplace and are thus classified as Level 3.
•
Internal matrix pricing is a valuation process internally
developed for private placement securities for which the
Company is unable to obtain a price from a third-party
pricing service. Internal pricing matrices determine credit
spreads that, when combined with risk-free rates, are
applied to contractual cash flows to develop a price. The
Company develops credit spreads using market based data
for public securities adjusted for credit spread differentials
between public and private securities, which are obtained
from a survey of multiple private placement brokers. The
market-based reference credit spread considers the
issuer’s sector, financial strength, and term to maturity,
using an independent public security index, while the credit
spread differential considers the non-public nature of the
security. Securities priced using internal matrix pricing are
classified as Level 2 because the significant inputs are
observable or can be corroborated with observable data.
•
Independent broker quotes, which are typically non-binding,
use inputs that can be difficult to corroborate with
observable market based data. Brokers may use present
value techniques using assumptions specific to the security
types, or they may use recent transactions of similar
securities. Due to the lack of transparency in the process
that brokers use to develop prices, valuations that are
based on independent broker quotes are classified as Level
3.
The fair value of derivative instruments is determined primarily
using a discounted cash flow model or option model technique
and incorporates counterparty credit risk. In some cases, quoted
market prices for exchange-traded and OTC cleared derivatives
may be used and in other cases independent broker quotes may
be used. The pricing valuation models primarily use inputs that
are observable in the market or can be corroborated by
observable market data. The valuation of certain derivatives
may include significant inputs that are unobservable, such as
volatility levels, and reflect the Company’s view of what other
market participants would use when pricing such instruments.
Valuation Controls
The process for determining the fair value of investments is
monitored by the Valuation Committee, which is a cross-
functional group of senior management within the Company.
The purpose of the Valuation Committee is to provide oversight
of the pricing policy, procedures and controls, including approval
of valuation methodologies and pricing sources. The Valuation
Committee reviews market data trends, pricing statistics and
trading statistics to ensure that prices are reasonable and
consistent with our fair value framework. Controls and
procedures used to assess third-party pricing services are
reviewed by the Valuation Committee, including the results of
annual due-diligence reviews. Controls include, but are not
limited to, reviewing daily and monthly price changes, stale
prices, and missing prices and comparing new trade prices to
third-party pricing services, weekly price changes to published
bond index prices, and daily OTC derivative market valuations
to counterparty valuations. The Company has a dedicated
pricing group that works with trading and investment
professionals to challenge prices received by a third party
pricing source if the Company believes that the valuation
received does not accurately reflect the fair value. New
valuation models and changes to current models require
approval by the Valuation Committee. In addition, the
Company’s enterprise-wide Operational Risk Management
function provides an independent review of the suitability and
reliability of model inputs, as well as an analysis of significant
changes to current models.
Valuation Inputs
Quoted prices for identical assets in active markets are
considered Level 1 and consist of on-the-run U.S. Treasuries,
money market funds, exchange-traded equity securities, open-
ended mutual funds, certain short-term investments, and
exchange traded derivative instruments.
Note 4 - Fair Value Measurements
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
137
Valuation Inputs Used in Levels 2 and 3 Measurements for Securities and Derivatives
Level 2
Primary Observable Inputs
Level 3
Primary Unobservable Inputs
Fixed Maturity Investments
Structured securities (includes ABS, CLOs, CMBS and RMBS)
• Benchmark yields and spreads
• Monthly payment information
• Collateral performance, which varies by vintage year and includes
delinquency rates, loss severity rates and refinancing assumptions
• Credit default swap indices
Other inputs for ABS, CLOs, and RMBS:
• Estimate of future principal prepayments, derived from the
characteristics of the underlying structure
• Prepayment speeds previously experienced at the interest rate
levels projected for the collateral
• Independent broker quotes
• Credit spreads beyond observable curve
• Interest rates beyond observable curve
Other inputs for less liquid securities or those that trade less
actively, including subprime RMBS:
• Estimated cash flows
• Credit spreads, which include illiquidity premium
• Constant prepayment rates
• Constant default rates
• Loss severity
Corporates
• Benchmark yields and spreads
• Reported trades, bids, offers of the same or similar securities
• Issuer spreads and credit default swap curves
Other inputs for investment grade privately placed securities that
utilize internal matrix pricing:
• Credit spreads for public securities of similar quality, maturity, and
sector, adjusted for non-public nature
• Independent broker quotes
• Credit spreads beyond observable curve
• Interest rates beyond observable curve
Other inputs for below investment grade privately placed
securities and private bank loans:
• Credit spreads for public securities of similar quality, maturity,
and sector, adjusted for non-public nature
U.S. Treasuries, Municipals, and Foreign government/government agencies
• Benchmark yields and spreads
• Issuer credit default swap curves
• Political events in emerging market economies
• Municipal Securities Rulemaking Board reported trades and
material event notices
• Issuer financial statements
• Credit spreads beyond observable curve
• Interest rates beyond observable curve
Equity Securities
• Quoted prices in markets that are not active
• For privately traded equity securities, internal discounted cash
flow models utilizing earnings multiples or other cash flow
assumptions that are not observable
Short-term Investments
• Benchmark yields and spreads
• Reported trades, bids, offers
• Issuer spreads and credit default swap curves
• Material event notices and new issue money market rates
• Independent broker quotes
• For privately traded investments, credit spreads for public
securities of similar quality, maturity, and sector, adjusted for
non-public nature
Derivatives
Credit derivatives
• Swap yield curve
• Credit default swap curves
• Not applicable
Foreign exchange derivatives
• Swap yield curve
• Currency spot and forward rates
• Cross currency basis curves
• Not applicable
Interest rate derivatives
• Swap yield curve
• Not applicable
Equity derivatives
• Equity index levels
• Not applicable
Note 4 - Fair Value Measurements
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
138
Significant Unobservable Inputs for Level 3 - Securities
Assets accounted for at
fair value on a recurring
basis
Fair
Value
Predominant
Valuation
Technique
Significant Unobservable Input
Minimum Maximum
Weighted
Average
[1]
Impact of
Increase in
Input on
Fair Value
[2]
As of December 31, 2024
CMBS [3]
$ 166
Discounted
cash flows
Spread (encompasses prepayment,
default risk and loss severity)
200 bps
1,221 bps
418 bps
Decrease
Corporate [4]
$ 2,166
Discounted
cash flows
Spread
81 bps
794 bps
286 bps
Decrease
RMBS [3]
$
19
Discounted
cash flows
Spread [6]
100 bps
372 bps
181 bps
Decrease
Constant prepayment rate [6]
1%
6%
4%
Decrease [5]
Constant default rate [6]
1%
4%
2%
Decrease
Loss severity [6]
30%
50%
41%
Decrease
Short-term investments
$
98
Discounted
cash flows
Spread
266 bps
266 bps
266 bps
Decrease
As of December 31, 2023
CLOs [3]
$
98
Discounted
cash flows
Spread
268 bps
270 bps
269 bps
Decrease
CMBS [3]
$ 226
Discounted
cash flows
Spread (encompasses prepayment,
default risk and loss severity)
365 bps
1,315 bps
509 bps
Decrease
Corporate [4]
$ 1,741
Discounted
cash flows
Spread
49 bps
743 bps
323 bps
Decrease
RMBS
$
36
Discounted
cash flows
Spread [6]
32 bps
298 bps
161 bps
Decrease
Constant prepayment rate [6]
1%
5%
4%
Decrease [5]
Constant default rate [6]
1%
5%
2%
Decrease
Loss severity [6]
10%
70%
41%
Decrease
Short-term investments [3] $
15
Discounted
cash flows
Spread
579 bps
1,254 bps 1,225 bps
Decrease
[1]The weighted average is determined based on the fair value of the securities.
[2]Conversely, the impact of a decrease in input would have the opposite impact to the fair value as that presented in the table.
[3]Excludes securities for which the Company bases fair value on broker quotations.
[4]Excludes securities for which the Company bases fair value on broker quotations; however, included are broker priced lower-rated private placement securities for
which the Company receives spread and yield information to corroborate the fair value.
[5]Decrease for above market rate coupons and increase for below market rate coupons.
[6]Generally, a change in the assumption used for the constant default rate would have been accompanied by a directionally similar change in the assumption used
for the loss severity and a directionally opposite change in the assumption used for constant prepayment rate and would have resulted in wider spreads.
As of December 31, 2024 and 2023, the fair values of the
Company's level 3 derivatives were less than $1 for both
periods.
The table above excludes certain securities for which fair values
are predominately based on independent broker quotes. While
the Company does not have access to the significant
unobservable inputs that independent brokers may use in their
pricing process, the Company believes brokers likely use inputs
similar to those used by the Company and third-party pricing
services to price similar instruments. As such, in their pricing
models, brokers likely use estimated loss severity rates,
prepayment rates, constant default rates and credit spreads.
Therefore, similar to non-broker priced securities, increases in
these inputs would generally cause fair values to decrease. As
of December 31, 2024, no significant adjustments were made by
the Company to broker prices received.
Level 3 Assets and Liabilities
Measured at Fair Value on a
Recurring Basis Using Significant
Unobservable Inputs
The Company uses derivative instruments to manage the risk
associated with certain assets and liabilities. However, the
derivative instrument may not be classified within the same fair
value hierarchy level as the associated asset or liability.
Note 4 - Fair Value Measurements
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
139
Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the
Year Ended December 31, 2024
Total realized/
unrealized gains
(losses)
Fair value
as of
January 1,
2024
Included
in net
income [1]
Included
in OCI [2]
Purchases
Settlements
Sales
Transfers
into Level
3 [3]
Transfers
out of
Level 3 [3]
Fair value
as of
December
31, 2024
Assets
Fixed maturities, AFS
ABS
$
— $
— $
— $
70 $
— $
— $
— $
(48) $
22
CLOs
113
—
—
919
(64)
—
—
(852)
116
CMBS
227
(6)
18
—
(10)
(67)
39
(34)
167
Corporate
1,861
—
(23)
876
(316)
(126)
9
—
2,281
RMBS
36
—
—
90
(17)
—
—
(85)
24
Total fixed maturities, AFS
2,237
(6)
(5)
1,955
(407)
(193)
48
(1,019)
2,610
FVO securities
167
(7)
—
52
(15)
—
—
—
197
Equity securities, at fair value
58
3
—
49
(20)
(3)
—
—
87
Short-term investments
25
—
—
145
(72)
—
—
—
98
Total Assets
$
2,487 $
(10) $
(5) $
2,201 $
(514) $
(196) $
48 $ (1,019) $
2,992
Fair Value Rollforwards for Financial Instruments Classified as Level 3 for the
Year Ended December 31, 2023
Total realized/
unrealized gains
(losses)
Fair value
as of
January 1,
2023
Included
in net
income [1]
Included
in OCI [2]
Purchases
Settlements
Sales
Transfers
into Level
3 [3]
Transfers
out of
Level 3 [3]
Fair value
as of
December
31, 2023
Assets
Fixed maturities, AFS
ABS
$
30 $
— $
— $
82 $
— $
— $
— $
(112) $
—
CLOs
115
—
—
102
(49)
—
—
(55)
113
CMBS
222
(2)
3
6
(18)
(5)
21
—
227
Corporate
1,589
(5)
71
458
(196)
(11)
50
(95)
1,861
RMBS
95
—
—
40
(29)
—
—
(70)
36
Total fixed maturities, AFS
2,051
(7)
74
688
(292)
(16)
71
(332)
2,237
FVO securities
178
(1)
—
—
(10)
—
—
—
167
Equity securities, at fair value
61
(1)
—
1
(3)
—
—
—
58
Short-term investments
193
—
—
48
(216)
—
—
—
25
Total Assets
$
2,483 $
(9) $
74 $
737 $
(521) $
(16) $
71 $
(332) $
2,487
[1]Amounts in these columns are generally reported in net realized gains (losses). All amounts are before income taxes.
[2]All amounts are before income taxes.
[3]Transfers into and/or (out of) Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of
pricing inputs.
Note 4 - Fair Value Measurements
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
140
Changes in Unrealized Gains (Losses) for Financial Instruments Classified as Level 3 Still Held at
Year End
December 31, 2024
December 31, 2023
Changes in
Unrealized Gain/
(Loss) included in
Net Income [1] [2]
Changes in
Unrealized Gain/
(Loss) included in
OCI [3]
Changes in
Unrealized Gain/
(Loss) included in
Net Income [1] [2]
Changes in
Unrealized Gain/
(Loss) included in
OCI [3]
Assets
Fixed maturities, AFS
CLOs
$
— $
—
$
— $
1
CMBS
—
10
—
2
Corporate
—
(26)
(6)
71
Total fixed maturities, AFS
—
(16)
(6)
74
FVO securities
(7)
—
(1)
—
Equity securities, at fair value
—
—
(1)
—
Total Assets
$
(7) $
(16) $
(8) $
74
[1]All amounts in these rows are reported in net realized gains (losses). All amounts are before income taxes.
[2]Amounts presented are for Level 3 only and therefore may not agree to other disclosures included herein.
[3]Changes in unrealized gains (losses) on fixed maturities, AFS are reported in changes in net unrealized gain (loss) on fixed maturities in the Consolidated
Statements of Comprehensive Income (Loss).
Fair Value Option
The Company has elected the fair value option for certain
investments in residual interests of securitizations and other
securities that contain embedded credit derivatives with
underlying credit risk related to residential real estate in order to
reflect changes in fair value in earnings. These instruments are
included within FVO securities on the Consolidated Balance
Sheets and changes in the fair value of these investments are
reported in net realized gains and losses.
As of December 31, 2024 and 2023, the fair value of assets
using the fair value option was $308 and $327, respectively, of
which $197 and $167, respectively, were residual interests of
securitizations.
For the years ended December 31, 2024, 2023, and 2022, net
realized gains (losses) related to the change in fair value of
assets using the fair value option were $(5), $5, and $(28),
respectively.
Financial Instruments Not Carried at Fair Value
Financial Assets and Liabilities Not Carried at Fair Value
December 31, 2024
December 31, 2023
Fair Value
Hierarchy
Level
Carrying
Amount [1] Fair Value
Fair Value
Hierarchy
Level
Carrying
Amount [1] Fair Value
Assets
Mortgage loans
Level 3 $
6,396 $
5,901
Level 3 $
6,087 $
5,584
Liabilities
Other policyholder funds and benefits payable
Level 3 $
614 $
614
Level 3 $
638 $
639
Senior notes [2]
Level 2 $
3,867 $
3,406
Level 2 $
3,863 $
3,533
Junior subordinated debentures [2]
Level 2 $
499 $
460
Level 2 $
499 $
429
[1]As of December 31, 2024 and December 31, 2023, the carrying amount of mortgage loans is net of ACL of $44 and $51, respectively
[2]Included in long-term debt in the Consolidated Balance Sheets, except for any current maturities, which are included in short-term debt when applicable.
Note 4 - Fair Value Measurements
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
141
5. INVESTMENTS
Net Investment Income
For the years ended December 31,
(Before tax)
2024
2023
2022
Fixed maturities [1]
$
2,204 $
1,895 $
1,469
Equity securities
35
45
57
Mortgage loans
266
235
211
Limited partnerships and other alternative investments
148
212
515
Other investments [2]
14
9
5
Gross investment income
$
2,667 $
2,396 $
2,257
Investment expenses
(99)
(91)
(80)
Total net investment income
$
2,568 $
2,305 $
2,177
[1]Includes net investment income on short-term investments.
[2]Primarily includes changes in fair value of certain equity fund investments and income from derivatives that qualify for hedge accounting and are used to hedge
fixed maturities.
Net Realized Gains (Losses)
For the years ended December 31,
(Before tax)
2024
2023
2022
Gross gains on sales of fixed maturities
$
31 $
30 $
57
Gross losses on sales of fixed maturities
(198)
(149)
(315)
Equity securities [1]
Net realized gains (losses) on sales of equity securities
(11)
100
(83)
Change in net unrealized gains (losses) of equity securities
84
(22)
(266)
Net realized and unrealized gains (losses) on equity securities
73
78
(349)
Net credit losses on fixed maturities, AFS
(2)
(14)
(18)
Change in ACL on mortgage loans
3
(15)
(7)
Intent-to-sell impairments
—
—
(6)
Other, net [2]
32
(118)
11
Net realized (losses)
$
(61) $
(188) $
(627)
[1]The change in net unrealized gains (losses) on equity securities still held as of the end of the period and included in net realized gains (losses) were $68, $17, and
$(108) for the years ended December 31, 2024, 2023, and 2022, respectively.
[2]Includes gains (losses) on non-qualifying derivatives for the years ended December 31, 2024, 2023, and 2022 of $13, $(108), and $46, respectively, and gains
(losses) from transactional foreign currency revaluation of $20, $(15), and $28, respectively.
Proceeds from the sales of fixed maturities, AFS totaled $5.7
billion, $3.8 billion, and $11.4 billion for the years ended
December 31, 2024, 2023, and 2022, respectively. Sales of
fixed maturities, AFS in 2024 were primarily a result of tactical
changes to the portfolio driven by changing market conditions, in
addition to duration and liquidity management. Non-cash
investing activities for the year ended December 31, 2024,
included $18 related to the exchange of short-term investments
for equity securities. Non-cash investing activities for the year
ended December 31, 2023, included $80, related to the
exchange of short-term investments for mortgage loans.
Accrued Investment Income on
Fixed Maturities, AFS and
Mortgage Loans
As of December 31, 2024 and December 31, 2023, the
Company reported accrued investment income related to fixed
maturities, AFS of $412 and $371, respectively, and accrued
investment income related to mortgage loans of $22 and $20,
respectively. These amounts are not included in the carrying
value of the fixed maturities or mortgage loans. Investment
income on fixed maturities and mortgage loans is accrued
unless it is past due over 90 days or management deems the
interest uncollectible. The Company does not include the current
accrued investment income balance when estimating the ACL.
The Company has a policy to write-off accrued investment
income balances that are more than 90 days past due. Write-
Note 5 - Investments
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
142
offs of accrued investment income are recorded as a credit loss
component of net realized gains and losses.
Recognition and Presentation of
Intent-to-Sell Impairments and
ACL on Fixed Maturities, AFS
The Company will record an "intent-to-sell impairment" as a
reduction to the amortized cost of fixed maturities, AFS in an
unrealized loss position if the Company intends to sell or it is
more likely than not that the Company will be required to sell the
fixed maturity before a recovery in value. A corresponding
charge is recorded in net realized losses equal to the difference
between the fair value on the impairment date and the
amortized cost basis of the fixed maturity before recognizing the
impairment.
For fixed maturities where a credit loss has been identified and
no intent-to-sell impairment has been recorded, the Company
will record an ACL for the portion of the unrealized loss related
to the credit loss. Any remaining unrealized loss on a fixed
maturity after recording an ACL is the non-credit amount and is
recorded in OCI. The ACL is the excess of the amortized cost
over the greater of the Company's best estimate of the present
value of expected future cash flows or the security's fair value.
Cash flows are discounted at the effective yield that is used to
record interest income. The ACL cannot exceed the unrealized
loss and, therefore, it may fluctuate with changes in the fair
value of the fixed maturity if the fair value is greater than the
Company's best estimate of the present value of expected
future cash flows. The initial ACL and any subsequent changes
are recorded in net realized gains and losses. The ACL is written
off against the amortized cost in the period in which all or a
portion of the related fixed maturity is determined to be
uncollectible.
Developing the Company’s best estimate of expected future
cash flows is a quantitative and qualitative process that
incorporates information received from third-party sources along
with certain internal assumptions regarding the future
performance. The Company's considerations include, but are
not limited to, (a) changes in the financial condition of the issuer
and/or the underlying collateral, (b) whether the issuer is current
on contractually obligated interest and principal payments, (c)
credit ratings, (d) payment structure of the security and (e) the
extent to which the fair value has been less than the amortized
cost of the security.
For non-structured securities, assumptions include, but are not
limited to, economic and industry-specific trends and
fundamentals, instrument-specific developments including
changes in credit ratings, industry earnings multiples and the
issuer’s ability to restructure, access capital markets, and
execute asset sales.
For structured securities, assumptions include, but are not
limited to, various performance indicators such as historical and
projected default and recovery rates, credit ratings, current and
projected delinquency rates, loan-to-value ("LTV") ratios,
average cumulative collateral loss rates that vary by vintage
year, prepayment speeds, and property value declines. These
assumptions require the use of significant management
judgment and include the probability of issuer default and
estimates regarding timing and amount of expected recoveries
which may include estimating the underlying collateral value.
For the years ended December 31,
2024
2023
2022
(Before tax)
CMBS
Corporate
Total
CMBS
Corporate
Total
CMBS
Corporate
Foreign
govt./
govt.
agencies
Total
Balance as of beginning of
period
$
12 $
9 $
21 $
10 $
2 $
12 $
— $
1 $
— $
1
Credit losses on fixed maturities
where an allowance was not
previously recorded
1
—
1
—
9
9
7
10
3
20
Reduction due to sales
—
(3)
(3)
—
(5)
(5)
—
(3)
(1)
(4)
Reduction due to intent to sell
—
—
—
—
—
—
—
—
(3)
(3)
Net increases (decreases) on
fixed maturities where an
allowance was previously
recorded
—
1
1
2
3
5
3
(3)
1
1
Write-offs charged against the
allowance
—
(4)
(4)
—
—
—
—
(3)
—
(3)
Balance as of end of period
$
13 $
3 $
16 $
12 $
9 $
21 $
10 $
2 $
— $
12
ACL on Fixed Maturities, AFS by Type
Note 5 - Investments
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
143
Fixed Maturities, AFS
Fixed Maturities, AFS, by Type
December 31, 2024
December 31, 2023
Amortized
Cost
ACL
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized
Cost
ACL
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
ABS
$
3,948 $ — $
28 $
(39) $ 3,937 $
3,347 $ — $
18 $
(45) $ 3,320
CLOs
3,237
—
13
—
3,250
3,104
—
3
(17)
3,090
CMBS
2,976
(13)
21
(248)
2,736
3,466
(12)
19
(348)
3,125
Corporate
21,555
(3)
117
(1,033) 20,636
18,691
(9)
197
(1,013) 17,866
Foreign govt./govt.
agencies
500
—
3
(23)
480
583
—
6
(27)
562
Municipal
5,574
—
77
(347)
5,304
6,207
—
131
(299)
6,039
RMBS
5,610
—
13
(393)
5,230
4,675
—
18
(406)
4,287
U.S. Treasuries
1,138
—
—
(144)
994
1,653
—
26
(150)
1,529
Total fixed maturities,
AFS
$
44,538 $ (16) $
272 $
(2,227) $ 42,567 $
41,726 $ (21) $
418 $
(2,305) $ 39,818
Fixed Maturities, AFS, by Contractual Maturity Year
December 31, 2024
December 31, 2023
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
One year or less
$
1,308 $
1,298
$
1,526 $
1,501
Over one year through five years
9,564
9,414
9,670
9,433
Over five years through ten years
7,687
7,334
6,568
6,211
Over ten years
10,208
9,368
9,370
8,851
Subtotal
28,767
27,414
27,134
25,996
Mortgage-backed and asset-backed securities
15,771
15,153
14,592
13,822
Total fixed maturities, AFS
$
44,538 $
42,567
$
41,726 $
39,818
Estimated maturities may differ from contractual maturities due
to call or prepayment provisions. Due to the potential for
variability in payment speeds (i.e., prepayments or extensions),
mortgage-backed and asset-backed securities are not
categorized by contractual maturity.
Concentration of Credit Risk
The Company aims to maintain a diversified investment portfolio
including issuer, sector and geographic stratification, where
applicable, and has established certain exposure limits,
diversification standards and review procedures to mitigate
credit risk. The Company had no investment exposure to any
credit concentration risk of a single issuer greater than 10% of
the Company's stockholders' equity as of December 31, 2024,
or December 31, 2023, other than U.S. government securities
and certain U.S. government agencies.
As of December 31, 2024, other than U.S. government
securities and certain U.S. government agencies, the
Company’s three largest exposures by issuer were NextEra
Energy Inc., Morgan Stanley, and the Government of Canada,
each of which comprised less than 1% of total invested assets.
As of December 31, 2023, other than U.S. government
securities and certain U.S. government agencies, the
Company’s three largest exposures by issuer were NextEra
Energy Inc., the Government of Canada, and Morgan Stanley,
each of which comprised less than 1% of total invested assets.
The Company’s three largest exposures by sector as of
December 31, 2024, were the financial services sector, the
municipal sector, and the RMBS sector, which comprised
approximately 11%, 9%, and 9%, respectively, of total invested
assets. The Company’s three largest exposures by sector as of
December 31, 2023, were the municipal sector, the financial
services sector, and the RMBS sector, which comprised
approximately 11%, 9%, and 8%, respectively, of total invested
assets.
Note 5 - Investments
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
144
Unrealized Losses on Fixed Maturities, AFS
Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of December 31, 2024
Less Than 12 Months
12 Months or More
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
ABS
$
1,088 $
(14) $
407 $
(25) $
1,495 $
(39)
CLOs
78
—
—
—
78
—
CMBS
228
(4)
2,299
(244)
2,527
(248)
Corporate
5,883
(138)
8,212
(895)
14,095
(1,033)
Foreign govt./govt. agencies
165
(5)
178
(18)
343
(23)
Municipal
1,263
(27)
2,712
(320)
3,975
(347)
RMBS
1,297
(29)
2,672
(364)
3,969
(393)
U.S. Treasuries
406
(26)
461
(118)
867
(144)
Total fixed maturities, AFS in an
unrealized loss position
$
10,408 $
(243) $
16,941 $
(1,984) $
27,349 $
(2,227)
Unrealized Loss Aging for Fixed Maturities, AFS by Type and Length of Time as of December 31, 2023
Less Than 12 Months
12 Months or More
Total
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
ABS
$
604 $
(6) $
1,043 $
(39) $
1,647 $
(45)
CLOs
209
(1)
2,249
(16)
2,458
(17)
CMBS
117
(7)
2,837
(341)
2,954
(348)
Corporate
810
(10)
11,149
(1,003)
11,959
(1,013)
Foreign govt./govt. agencies
27
—
368
(27)
395
(27)
Municipal
329
(3)
3,196
(296)
3,525
(299)
RMBS
181
(3)
3,207
(403)
3,388
(406)
U.S. Treasuries
120
(11)
1,121
(139)
1,241
(150)
Total fixed maturities, AFS in an
unrealized loss position
$
2,397 $
(41) $
25,170 $
(2,264) $
27,567 $
(2,305)
As of December 31, 2024, fixed maturities, AFS in an unrealized
loss position consisted of 3,933 instruments and were primarily
depressed due to higher interest rates and/or wider credit
spreads since the purchase date. As of December 31, 2024,
94% of these fixed maturities were depressed less than 20% of
cost or amortized cost. The total gross unrealized losses as of
December 31, 2024 are largely consistent with year-end 2023.
Most of the fixed maturities depressed for twelve months or
more relate to the corporate sector, RMBS, municipal bonds,
and CMBS, which were primarily depressed because current
rates are higher and/or market spreads are wider than at the
respective purchase dates. The Company neither has an
intention to sell nor does it expect to be required to sell the fixed
maturities outlined in the preceding discussion. The decision to
record credit losses on fixed maturities, AFS in the form of an
ACL requires us to make qualitative and quantitative estimates
of expected future cash flows.
Note 5 - Investments
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
145
Mortgage Loans
ACL on Mortgage Loans
The Company reviews mortgage loans on a quarterly basis to
estimate the ACL with changes in the ACL recorded in net
realized gains and losses. Apart from an ACL recorded on
individual mortgage loans where the borrower is experiencing
financial difficulties, the Company records an ACL on the pool of
mortgage loans based on lifetime expected credit losses. The
Company utilizes a third-party forecasting model to estimate
lifetime expected credit losses at a loan level under multiple
economic scenarios. The scenarios use macroeconomic data
provided by an internationally recognized economics firm that
generates forecasts of varying economic factors such as GDP
growth, unemployment and interest rates. The economic
scenarios are projected over 10 years. The first two to four
years of the 10-year period assume a specific modeled
economic scenario (including moderate upside, moderate
recession and severe recession scenarios) and then revert to
historical long-term assumptions over the remaining period.
Using these economic scenarios, the forecasting model projects
property-specific operating income and capitalization rates used
to estimate the value of a future operating income stream. The
operating income and the property valuations derived from
capitalization rates are compared to loan payment and principal
amounts to create debt service coverage ratios ("DSCRs") and
LTVs over the forecast period. The Company's process also
considers qualitative factors. The model overlays historical data
about mortgage loan performance based on DSCRs and LTVs
and projects the probability of default, amount of loss given a
default and resulting expected loss through maturity for each
loan under each economic scenario. Economic scenarios are
probability-weighted based on a statistical analysis of the
forecasted economic factors and qualitative analysis. The
Company records the change in the ACL on mortgage loans
based on the weighted-average expected credit losses across
the selected economic scenarios.
When a borrower is experiencing financial difficulty, including
when foreclosure is probable, the Company measures an ACL
on individual mortgage loans. The ACL is established for any
shortfall between the amortized cost of the loan and the fair
value of the collateral less costs to sell. Estimates of collectibility
from an individual borrower require the use of significant
management judgment and include the probability and timing of
borrower default and loss severity estimates. In addition, cash
flow projections may change based upon new information about
the borrower's ability to pay and/or the value of underlying
collateral such as changes in projected property value
estimates. During the period in which all or a portion of the
mortgage loan is determined to be uncollectible, the ACL is
written off against the amortized cost.
There were no mortgage loans held-for-sale as of December 31,
2024 or December 31, 2023. For the year ended December 31,
2024, one office property mortgage loan with an amortized cost
of $9 was granted a term extension of three years at the original
rate, which is a below-market rate, with a borrower experiencing
financial difficulties. The modified loan represents less than 1%
of the mortgage loan portfolio and is current and performing in
conjunction with the modified terms. For the year ended
December 31, 2023, the Company had no mortgage loans that
have had extensions or restructurings other than what is
allowable under the original terms of the contract or with
borrowers experiencing financial difficulties.
ACL on Mortgage Loans
For the years ended
December 31,
2024
2023
2022
ACL as of beginning of period
$
51 $
36 $
29
Current period provision (release)
(3)
15
7
Current period gross write-offs
(4)
—
—
ACL as of December 31,
$
44 $
51 $
36
The weighted-average LTV ratio of the Company’s mortgage
loan portfolio was 56% as of December 31, 2024, while the
weighted-average LTV ratio at origination of these loans was
59%. LTV ratios compare the loan amount to the value of the
underlying property collateralizing the loan with property values
based on appraisals updated no less than annually. Factors
considered in estimating property values include, among other
things, actual and expected property cash flows, geographic
market data and the ratio of the property's net operating income
to its value. DSCR compares a property’s net operating income
to the borrower’s principal and interest payments and are
updated no less than annually through reviews of underlying
properties.
Mortgage Loans LTV & DSCR by Origination Year as of December 31, 2024
2024
2023
2022
2021
2020
2019 & Prior
Total
Loan-to-value
Amortized
Cost
Avg.
DSCR
Amortized
Cost
Avg.
DSCR
Amortized
Cost
Avg.
DSCR
Amortized
Cost
Avg.
DSCR
Amortized
Cost
Avg.
DSCR
Amortized
Cost
Avg.
DSCR
Amortized
Cost [1]
Avg.
DSCR
Greater than
80%
$
25 0.63x $
—
—x $
16 1.05x $
37 1.03x $
—
—x $
110 1.68x $
188 1.34x
65% - 80%
89 1.42x
7 1.35x
204 1.89x
421 2.55x
100 3.60x
439 2.01x
1,260 2.26x
Less than 65%
357 1.62x
489 1.39x
696 2.85x
1,108 2.93x
518 2.67x
1,824 2.71x
4,992 2.57x
Total
mortgage
loans
$
471 1.52x $
496 1.39x $
916 2.61x $ 1,566 2.79x $
618 2.82x $ 2,373 2.53x $ 6,440 2.47x
[1]Amortized cost of mortgage loans excludes ACL of $44.
Note 5 - Investments
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
146
Mortgage Loans LTV & DSCR by Origination Year as of December 31, 2023
2023
2022
2021
2020
2019
2018 & Prior
Total
Loan-to-value
Amortized
Cost
Avg.
DSCR
Amortized
Cost
Avg.
DSCR
Amortized
Cost
Avg.
DSCR
Amortized
Cost
Avg.
DSCR
Amortized
Cost
Avg.
DSCR
Amortized
Cost
Avg.
DSCR
Amortized
Cost [1]
Avg.
DSCR
Greater than
80%
$
—
—x $
16 1.09x $
38 1.05x $
—
—x $
—
—x $
105 1.41x $
159 1.29x
65% - 80%
—
—x
189 2.13x
457 2.42x
95 3.47x
98 1.77x
252 1.77x
1,091 2.25x
Less than 65%
400 1.47x
724 2.75x
1,105 2.99x
527 2.92x
679 2.90x
1,453 2.67x
4,888 2.72x
Total
mortgage
loans
$
400 1.47x $
929 2.60x $ 1,600 2.78x $
622 3.00x $
777 2.76x $ 1,810 2.47x $ 6,138 2.60x
[1]Amortized cost of mortgage loans excludes ACL of $51.
Mortgage Loans by Region
December 31,
2024
December 31,
2023
Amortized
Cost
Percent
of Total
Amortized
Cost
Percent
of Total
East North Central
$
362
5.6 % $
368
6.0 %
Middle Atlantic
259
4.0 %
238
3.9 %
Mountain
764
11.9 %
699
11.4 %
New England
356
5.5 %
351
5.7 %
Pacific
1,400
21.8 %
1,326
21.6 %
South Atlantic
1,821
28.3 %
1,776
28.9 %
West North Central
97
1.5 %
103
1.7 %
West South Central
588
9.1 %
445
7.2 %
Other [1]
793
12.3 %
832
13.6 %
Total mortgage
loans
6,440 100.0 %
6,138 100.0 %
ACL
(44)
(51)
Total mortgage
loans, net of ACL
$
6,396
$
6,087
[1]Primarily represents loans collateralized by multiple properties in various
regions.
Mortgage Loans by Property Type
December 31,
2024
December 31,
2023
Amortized
Cost
Percent
of Total
Amortized
Cost
Percent
of Total
Commercial
Industrial
$
2,737
42.5 % $
2,363
38.5 %
Multifamily
2,161
33.5 %
2,200
35.9 %
Office
507
7.9 %
578
9.4 %
Retail [1]
957
14.9 %
917
14.9 %
Single Family
78
1.2 %
80
1.3 %
Total mortgage
loans
6,440 100.0 %
6,138 100.0 %
ACL
(44)
(51)
Total mortgage
loans, net of ACL
$
6,396
$
6,087
[1]Primarily comprised of grocery-anchored retail centers, with no exposure
to regional shopping malls.
Past-Due Mortgage Loans
Mortgage loans are considered past due if a payment of
principal or interest is not received according to the contractual
terms of the loan agreement, which typically includes a grace
period. As of December 31, 2024 and December 31, 2023, the
Company held no mortgage loans considered past due.
Mortgage Servicing
The Company originates, sells, and services commercial
mortgage loans on behalf of third parties and recognizes
servicing fee income over the period that services are
performed. As of December 31, 2024, under this program, the
Company serviced mortgage loans with a total outstanding
principal of $10.0 billion, of which $4.8 billion was serviced on
behalf of third parties and $5.2 billion was retained and reported
in total investments on the Company's Consolidated Balance
Sheets. As of December 31, 2023, the Company serviced
mortgage loans with a total outstanding principal balance of $9.4
billion, of which $4.4 billion was serviced on behalf of third
parties and $5.0 billion was retained and reported in total
investments on the Company's Consolidated Balance Sheets.
Servicing rights are carried at the lower of cost or fair value and
were $0 as of December 31, 2024 and December 31, 2023,
because servicing fees were market-level fees at origination and
remain adequate to compensate the Company for servicing the
loans.
Variable Interest Entities
The Company is engaged with various special purpose entities
and other entities that are deemed to be VIEs primarily as an
investor through normal investment activities or, at times, as an
investment manager.
A VIE is an entity that either has investors that lack certain
essential characteristics of a controlling financial interest, such
as simple majority kick-out rights, or lacks sufficient funds to
finance its own activities without financial support provided by
other entities. The Company performs ongoing qualitative
assessments of its VIEs to determine whether the Company has
a controlling financial interest in the VIE and therefore is the
primary beneficiary. The Company is deemed to have a
controlling financial interest when it has both the ability to direct
the activities that most significantly impact the economic
performance of the VIE and the obligation to absorb losses or
right to receive benefits from the VIE that could potentially be
significant to the VIE. Based on the Company’s assessment, if it
Note 5 - Investments
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
147
determines it is the primary beneficiary, the Company
consolidates the VIE in the Company’s Consolidated Financial
Statements.
Consolidated VIEs
As of December 31, 2024 and 2023, the Company did not hold
any securities for which it is the primary beneficiary.
Non-Consolidated VIEs
The Company, through normal investment activities, makes
passive investments in limited partnerships and other alternative
investments. For these non-consolidated VIEs, the Company
has determined it is not the primary beneficiary as it has no
ability to direct activities that could significantly affect the
economic performance of the investments. The Company’s
maximum exposure to loss as of December 31, 2024 and 2023
is limited to the total carrying value of $3.2 billion and $3.0
billion, respectively, which are a portion of the investments in
limited partnerships and other alternative investments in the
Company's Consolidated Balance Sheets that are primarily
recorded using the equity method of accounting. As of
December 31, 2024 and 2023, the Company has outstanding
commitments totaling $2.0 billion and $1.7 billion, respectively,
whereby the Company is committed to fund these investments
and may be called by the partnership during the commitment
period to fund the purchase of new investments and partnership
expenses. These investments are generally of a passive nature
in that the Company does not take an active role in
management.
Furthermore, the Company makes investments in entities that
sponsor affordable housing projects. Similarly, for these non-
consolidated VIEs, the Company has determined it is not the
primary beneficiary as it has no ability to direct activities that
could significantly affect the economic performance of the
investments. The Company applies the proportional
amortization method to subsequently measure its investments in
such qualified affordable housing projects, where costs are
amortized over the period in which the investor expects to
receive tax credits and the resulting amortization is recognized
as a component of income tax expense on the Company's
Consolidated Statements of Operations. For the years ended
December 31, 2024, 2023, and 2022, the Company recognized
amortization of $2, $1, and $0 respectively, and related tax
benefits of $8, $1, and $0, respectively. The income tax credits
and other income tax benefits are recognized in operating
activities in the Consolidated Statement of Cash Flows. The
carrying value of these investments, which are reported in other
assets on the Company’s Consolidated Balance Sheets was
$51 and $20 as of December 31, 2024, and December 31,
2023, respectively. As of December 31, 2024 and December 31,
2023, the Company has outstanding commitments related to
affordable housing projects of $267 and $180, respectively, that
are contingent on various conditions precedent to funding.
In addition, the Company makes passive investments in
structured securities issued by VIEs for which the Company is
not the manager. These investments are included in ABS,
CLOs, CMBS, and RMBS and are reported in fixed maturities,
AFS, and FVO securities, on the Company's Consolidated
Balance Sheets. The Company has not provided financial or
other support with respect to these investments other than its
original investment. For these investments, the Company
determined it is not the primary beneficiary due to the relative
size of the Company’s investment in comparison to the principal
amount of the structured securities issued by the VIEs, the
Company’s inability to direct the activities that most significantly
impact the economic performance of the VIEs, and, where
applicable, the level of credit subordination which reduces the
Company’s obligation to absorb losses or right to receive
benefits. The Company’s maximum exposure to loss on these
investments is limited to the amount of the Company’s
investment.
For the year ended December 31, 2024, the Company sold $86
of fixed maturities, AFS for a net realized loss of less than $1 to
a CLO issued by a VIE. The Company then purchased $24 of
fixed maturities, AFS and $50 of FVO securities from the VIE
issuer. These investments are valued based on unobservable
inputs and are classified within Level 3 of the fair value
hierarchy. In addition, the Company is committed to fund an
additional $426 of fixed maturities, AFS in this CLO. The
Company has determined it is not the primary beneficiary of the
VIE issuer as it has no ability to direct the activities that could
significantly affect the economic performance of the
securitization.
Reverse Repurchase Agreements,
Other Collateral Transactions and
Restricted Investments
Reverse Repurchase Agreements
From time to time, the Company enters into reverse repurchase
agreements where the Company purchases securities and
simultaneously agrees to resell the same or substantially the
same securities. The maturity of these transactions is generally
within one year. The agreements require additional collateral to
be transferred to the Company under specified conditions and
the Company has the right to sell or re-pledge the securities
received. The Company accounts for reverse repurchase
agreements as collateralized financing. As of December 31,
2024 and December 31, 2023, the Company reported $0 and
$10, respectively, within short-term investments on the
Consolidated Balance Sheets representing a receivable for the
amount of cash transferred to purchase the securities.
Other Collateral Transactions
As of December 31, 2024 and December 31, 2023, the
Company pledged collateral of $1 and $7, respectively, of U.S.
government securities or cash primarily related to certain bank
loan participations committed to through a limited partnership
agreement.
For disclosure of collateral in support of derivative transactions,
refer to the Derivative Collateral Arrangements section in Note 6
- Derivatives of Notes to Consolidated Financial Statements.
Other Restricted Investments
The Company is required by law to deposit securities with
government agencies in certain states in which it conducts
business. In addition, the Company is required to hold fixed
maturities and short-term investments in trust for the benefit of
Note 5 - Investments
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
148
syndicate policyholders, hold fixed maturities in a Lloyd's of
London ("Lloyd's") trust account to provide a portion of the
required capital, and maintain other investments primarily
consisting of overseas deposits in various countries with Lloyd's
to support underwriting activities in those countries. Lloyd's is an
insurance market-place operating worldwide. Lloyd's does not
underwrite risks. The Company accepts risks as the sole
member of Lloyd's Syndicate 1221 ("Lloyd's Syndicate").
The following table presents the components of the Company’s
exposure to other restricted investments.
December
31, 2024
December
31, 2023
Fair Value
Fair Value
Securities on deposit with government
agencies
$
2,362 $
2,339
Fixed maturities in trust for benefit of
Lloyd's Syndicate policyholders
1,056
890
Short-term investments in trust for
benefit of Lloyd's Syndicate
policyholders
25
30
Fixed maturities in Lloyd's trust
account
—
154
Other investments
61
75
Total Other Restricted Investments
$
3,504 $
3,488
Equity Method Investments
The majority of the Company's investments in limited
partnerships and other alternative investments, including real
estate joint ventures, real estate funds, private equity funds, and
other funds (collectively, “limited partnerships”), are accounted
for under the equity method of accounting. The remainder of
investments in limited partnerships and other alternative
investments consists of investments in insurer-owned life
insurance accounted for at cash surrender value.
Equity method income is reported in net investment income,
except amounts related to strategic investments classified in
other assets which are reported in other revenues. For
investments accounted for under the equity method, the
Company’s maximum exposure to loss as of December 31,
2024 is limited to the total carrying value of $4.6 billion. In
addition, the Company has outstanding commitments totaling
$2.1 billion to fund limited partnership investments as of
December 31, 2024. The Company’s investments accounted for
under the equity method are generally of a passive nature in
that the Company does not take an active role in the
management.
For the period ended December 31, 2024, aggregate investment
income from investments accounted for under the equity method
did not exceed 10% of the Company’s before tax consolidated
net income. For the periods ended December 31, 2023 and
2022, aggregate investment income from investments
accounted for under the equity method exceeded 10% of the
Company’s before tax consolidated net income. Accordingly, the
Company is disclosing aggregated, summarized financial data
for the Company’s investments accounted for under the equity
method based on the most recently available information. This
aggregated, summarized financial data does not represent the
Company’s proportionate share of investees' assets or earnings.
Aggregated summarized financial information
of the Company’s equity method investees:
As of December 31,
2024
2023
Balance sheet:
Total assets
$ 356,430 $ 308,259
Total liabilities
$
57,017 $
44,950
The Company's carrying value
$
4,552 $
4,328
For the years ended
December 31,
2024
2023
2022
Operating results:
Net investment income (loss)
$ (1,002) $ (1,240) $ 1,604
Net income excluding net
investment income
$ 14,778 $ 13,000 $ 11,885
The Company's share of equity
method income
$
103 $
181 $
533
Note 5 - Investments
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
149
6. DERIVATIVES
The Company utilizes a variety of OTC, OTC-cleared and
exchange traded derivative instruments as a part of its overall
risk management strategy as well as to enter into replication
transactions or income generation covered call transactions.
Derivative instruments are used to manage risk associated with
interest rate, equity market, commodity market, credit spread,
issuer default, price, and currency exchange rate or volatility.
Replication transactions are used as an economical means to
synthetically replicate the characteristics and performance of
assets that are permissible investments under the Company’s
investment policies.
Strategies that Qualify for Hedge
Accounting
Some of the Company's derivatives satisfy hedge accounting
requirements as outlined in Note 1 - Basis of Presentation and
Significant Accounting Policies. Typically, these hedging
instruments include interest rate swaps and, to a lesser extent,
foreign currency swaps where the terms or expected cash flows
of the hedged item closely match the terms of the swap.
Cash Flow Hedges
Interest rate swaps are predominantly used to manage portfolio
duration and better match cash receipts from assets with cash
disbursements required to fund liabilities. These derivatives
primarily convert interest receipts on variable-rate fixed maturity
securities to fixed rates. The Company has also entered into
interest rate swaps to convert the variable interest payments on
the $500 junior subordinated debentures due 2067 to fixed
interest payments. For further information, see the Junior
Subordinated Debentures section within Note 13 - Debt.
Foreign currency swaps are used to convert foreign currency-
denominated cash flows related to certain investment receipts to
U.S. dollars in order to reduce cash flow fluctuations due to
changes in currency rates.
Non-qualifying Strategies
Derivative relationships that do not qualify for hedge accounting
(“non-qualifying strategies”) primarily include hedges of interest
rate, foreign currency, equity, and commodity risk of certain fixed
maturities and equities. In addition, hedging and replication
strategies that utilize credit default swaps do not qualify for
hedge accounting. The non-qualifying strategies include:
Credit Contracts
Credit default swaps are used to purchase credit protection on
an individual entity or referenced index to economically hedge
against default risk and credit-related changes in the value of
fixed maturity securities. Credit default swaps are also used to
assume credit risk related to an individual entity or referenced
index as a part of replication transactions. These contracts
require the Company to pay or receive a periodic fee in
exchange for compensation from the counterparty or the
Company should the referenced security issuers experience a
credit event, as defined in the contract. The Company also
enters into credit default swaps to terminate existing credit
default swaps, thereby offsetting the changes in value of the
original swap going forward.
Interest Rate Swaps and Futures
The Company uses interest rate swaps and, to a lesser extent,
futures to manage interest rate duration between assets and
liabilities. In addition, the Company enters into interest rate
swaps to terminate existing swaps, thereby offsetting the
changes in value of the original swap going forward. As of
December 31, 2024 and December 31, 2023, the notional
amount of interest rate swaps in offsetting relationships was
$344 and $6.6 billion, respectively.
Foreign Currency Swaps and
Forwards
The Company enters into foreign currency swaps to convert the
foreign currency exposures of certain foreign currency-
denominated fixed maturity investments to U.S. dollars.
Equity Index Options
The Company enters into equity index options to hedge the
impact of a decline in the equity markets on the investment
portfolio.
Commodity Options
The Company previously purchased call option contracts on oil
futures in order to partially offset potential changes in value
related to certain fixed maturity securities that could arise if oil
prices increased substantially.
Derivative Balance Sheet
Classification
For reporting purposes, the Company has elected to offset within
assets or liabilities based upon the net of the fair value amounts,
income accruals, and related cash collateral receivables and
payables of OTC derivative instruments executed in a legal
entity and with the same counterparty under a master netting
agreement, which provides the Company with the legal right of
offset. The following fair value amounts do not include income
accruals or related cash collateral receivables and payables,
which are netted with derivative fair value amounts to determine
balance sheet presentation. The Company’s derivative
instruments are held for risk management purposes, unless
otherwise noted in the following table. The notional amount of
derivative contracts represents the basis upon which pay or
receive amounts are calculated and is presented in the table to
quantify the volume of the Company’s derivative activity. Notional
amounts are not necessarily reflective of credit risk.
Note 6 - Derivatives
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
150
Derivative Balance Sheet Presentation
Net Derivatives
Asset
Derivatives
Liability
Derivatives
Notional Amount
Fair Value
Fair Value
Fair Value
Hedge Designation/ Derivative Type
Dec 31,
2024
Dec 31,
2023
Dec 31,
2024
Dec 31,
2023
Dec 31,
2024
Dec 31,
2023
Dec 31,
2024
Dec 31,
2023
Cash flow hedges
Interest rate swaps
$ 4,225 $ 3,450 $
— $
(1) $
— $
1 $
— $
(2)
Foreign currency swaps
646
644
41
13
52
29
(11)
(16)
Total cash flow hedges
4,871
4,094
41
12
52
30
(11)
(18)
Non-qualifying strategies
Interest rate contracts
Interest rate swaps and futures
344
6,626
—
(5)
1
—
(1)
(5)
Foreign exchange contracts
Foreign currency swaps and forwards
647
645
—
—
—
—
—
—
Credit contracts
Credit derivatives in offsetting positions
986
998
—
—
31
27
(31)
(27)
Equity contracts
Equity index options
233
—
4
—
4
—
—
—
Total non-qualifying strategies
2,210
8,269
4
(5)
36
27
(32)
(32)
Total cash flow hedges and non-qualifying
strategies
$ 7,081 $ 12,363 $
45 $
7 $
88 $
57 $
(43) $
(50)
Balance Sheet Location
Fixed maturities, AFS
$
647 $
645 $
— $
— $
— $
— $
— $
—
Other investments
3,011
1,662
57
(1)
66
18
(9)
(19)
Other liabilities
3,423 10,056
(12)
8
22
39
(34)
(31)
Total derivatives
$ 7,081 $ 12,363 $
45 $
7 $
88 $
57 $
(43) $
(50)
.
Note 6 - Derivatives
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
151
Offsetting of Derivative Assets/
Liabilities
The following tables present the gross fair value amounts, the
amounts offset, and net position of derivative instruments eligible
for offset in the Company's Consolidated Balance Sheets.
Offsetting amounts include fair value amounts, income accruals
and related cash collateral receivables and payables associated
with derivative instruments that are traded under a common
master netting agreement, as described in the preceding
discussion. Also included in the tables are financial collateral
receivables and payables, which are contractually permitted to
be offset upon an event of default, although are disallowed for
offsetting under U.S. GAAP.
Offsetting Derivative Assets and Liabilities
(i)
(ii)
(iii) = (i) - (ii)
(iv)
(v) = (iii) - (iv)
Net Amounts Presented in
the Statement of Financial
Position
Collateral
Disallowed for
Offset in the
Statement of
Financial Position
Gross
Amounts of
Recognized
Assets
(Liabilities)
Gross Amounts
Offset in the
Statement of
Financial
Position
Derivative
Assets [1]
(Liabilities)
[2]
Accrued
Interest and
Cash
Collateral
(Received) [3]
Pledged [2]
Financial
Collateral
(Received)
Pledged [4]
Net Amount
As of December 31, 2024
Other investments
$
88 $
86 $
57 $
(55) $
— $
2
Other liabilities
$
(43) $
(42) $
(12) $
11 $
(1) $
—
As of December 31, 2023
Other investments
$
57 $
55 $
(1) $
3 $
— $
2
Other liabilities
$
(50) $
(36) $
8 $
(22) $
(13) $
(1)
[1]Included in other investments in the Company's Consolidated Balance Sheets.
[2]Included in other liabilities in the Company's Consolidated Balance Sheets and is limited to the net derivative payable associated with each counterparty.
[3]Included in other investments in the Company's Consolidated Balance Sheets and is limited to the net derivative receivable associated with each counterparty.
[4]Excludes collateral associated with exchange-traded derivative instruments.
Cash Flow Hedges
For derivative instruments that are designated and qualify as
cash flow hedges, the gain or loss on the derivative is reported
as a component of OCI and reclassified into earnings in the
same period or periods during which the hedged transaction
affects earnings. All components of each derivative’s gain or loss
were included in the assessment of hedge effectiveness.
Gain (Loss) Recognized in OCI
Year Ended December 31,
2024
2023
2022
Interest rate swaps
$
(14) $
6 $
—
Foreign currency swaps
41
(31)
56
Total
$
27 $
(25) $
56
Gain (Loss) Reclassified from AOCI into Income
Year Ended December 31,
2024
2023
2022
Net
Investment
Income
Interest
Expense
Net
Investment
Income
Interest
Expense
Net
Investment
Income
Interest
Expense
Interest rate swaps
$
(25) $
16
$
(26) $
15
$
6 $
(2)
Foreign currency swaps
12
—
10
—
9
—
Total
$
(13) $
16
$
(16) $
15
$
15 $
(2)
Total amounts presented on the Consolidated Statement of
Operations
$
2,568 $
199
$
2,305 $
199
$
2,177 $
213
Note 6 - Derivatives
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
152
As of December 31, 2024, the before tax deferred net gains on
derivative instruments recorded in AOCI that are expected to be
reclassified to earnings during the next twelve months are $40.
This expectation is based on the anticipated interest payments
on hedged investments in fixed maturity securities and long-term
debt that will occur over the next twelve months. Over that time,
the Company will recognize the deferred net gains (losses) as an
adjustment to net investment income or interest expense, as
applicable, over the term of the hedged instrument cash flows.
During the years ended December 31, 2024, 2023, and 2022,
the Company had no net reclassifications from AOCI to earnings
resulting from the discontinuance of cash-flow hedges due to
forecasted transactions that were no longer probable of
occurring.
Non-qualifying Strategies
For non-qualifying strategies, including embedded derivatives
that are required to be bifurcated from their host contracts and
accounted for as derivatives, the gain or loss on the derivative is
recognized currently in earnings within net realized gains
(losses).
Non-Qualifying Strategies Recognized within Net Realized Gains (Losses)
For the Year Ended December 31,
2024
2023
2022
Foreign exchange contracts
Foreign currency swaps and forwards
$
— $
— $
5
Interest rate contracts
Interest rate swaps and futures
8
(3)
25
Credit contracts
Credit derivatives that purchase credit protection
—
(105)
4
Equity contracts
Equity index options
5
—
(2)
Commodity contracts
Commodity options
—
—
14
Total [1]
$
13 $
(108) $
46
[1]Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair
Value Option section in Note 4 - Fair Value Measurements.
Credit Risk Assumed through
Credit Derivatives
The Company enters into credit default swaps that assume
credit risk of a single entity or referenced index in order to
synthetically replicate investment transactions that are
permissible under the Company's investment policies. The
Company will receive periodic payments based on an agreed
upon rate and notional amount and will only make a payment if
there is a credit event. A credit event payment will typically be
equal to the notional value of the swap contract less the value of
the referenced security issuer’s debt obligation after the
occurrence of the credit event. A credit event is generally defined
as a default on contractually obligated interest or principal
payments or bankruptcy of the referenced entity. The credit
default swaps in which the Company assumes credit risk may
reference investment grade single corporate issuers and
baskets, which include standard diversified portfolios of
corporate and CMBS issuers.
Note 6 - Derivatives
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
153
Credit Risk Assumed Derivatives by Type
Underlying Referenced
Credit Obligation(s) [1]
Notional
Amount
[2]
Fair
Value
Weighted
Average
Years to
Maturity
Type
Average
Credit
Rating
Offsetting
Notional
Amount
[3]
Offsetting
Fair Value
[3]
As of December 31, 2024
Basket credit default swaps [4]
Investment grade risk exposure
$
100 $
—
4 years
CMBS Credit
AAA
$
100 $
—
Below investment grade risk
exposure
392
30
3 years
Corporate Credit
B+
392
(30)
Below investment grade risk
exposure
1
(1)
Less than
1 year
CMBS Credit
CCC
1
1
Total [5]
$
493 $
29
$
493 $
(29)
As of December 31, 2023
Basket credit default swaps [4]
Investment grade risk exposure
$
101 $
(1) 5 years
CMBS Credit
AAA
$
101 $
1
Below investment grade risk
exposure
396
24
4 years
Corporate Credit
B+
396
(24)
Below investment grade risk
exposure
2
(1)
Less than
1 year
CMBS Credit
CCC-
2
1
Total [5]
$
499 $
22
$
499 $
(22)
[1]The average credit ratings are based on availability and are generally the midpoint of the available ratings among Moody’s, S&P, and Fitch. If no rating is available
from a rating agency, then an internally developed rating is used.
[2]Notional amount is equal to the maximum potential future loss amount. These derivatives are governed by agreements and applicable law which include collateral
posting requirements. There is no additional specific collateral related to these contracts or recourse provisions included in the contracts to offset losses.
[3]The Company has entered into offsetting credit default swaps to terminate certain existing credit default swaps, thereby offsetting the future changes in value of, or
losses paid related to, the original swap.
[4]Comprised of swaps of standard market indices of diversified portfolios of corporate and CMBS issuers referenced through credit default swaps. These swaps are
subsequently valued based upon the observable standard market index.
[5]Excludes investments that contain an embedded credit derivative for which the Company has elected the fair value option. For further discussion, see the Fair
Value Option section in Note 4 - Fair Value Measurements.
Derivative Collateral Arrangements
The Company enters into various collateral arrangements in
connection with its derivative instruments, which require both the
pledging and accepting of collateral. As of December 31, 2024
and 2023, the Company has pledged cash collateral associated
with derivative instruments of $31 and $25, respectively. In
general, collateral receivable is recorded in other assets or other
liabilities on the Company's Consolidated Balance Sheets as
determined by the Company's election to offset on the balance
sheet. As of December 31, 2024 and 2023, the Company
pledged securities collateral associated with derivative
instruments with a fair value of $1 and $14, respectively, which
have been included in fixed maturities on the Consolidated
Balance Sheets. The counterparties have the right to sell or re-
pledge these securities.
In addition, as of December 31, 2024 and 2023, the Company
has pledged initial margin of cash related to OTC-cleared and
exchange traded derivatives with a fair value of $10 and $16
respectively, which is recorded in other investments or other
assets on the Company's Consolidated Balance Sheets. As of
December 31, 2024 and 2023, the Company has pledged initial
margin of securities related to OTC-cleared and exchange
traded derivatives with a fair value of $103 and $112,
respectively, which are included within fixed maturities on the
Company's Consolidated Balance Sheets.
As of December 31, 2024 and 2023, the Company accepted
cash collateral associated with derivative instruments of $78 and
$49, respectively, which was invested and recorded in the
Consolidated Balance Sheets in fixed maturities and short-term
investments with corresponding amounts recorded in other
investments or other liabilities as determined by the Company's
election to offset on the balance sheet. Also as of December 31,
2024 and 2023, the Company did not hold securities collateral.
Note 6 - Derivatives
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
154
7. PREMIUMS RECEIVABLE AND AGENTS' BALANCES
Premiums Receivable and Agents' Balances
As of December 31,
2024
2023
Premiums receivable, excluding
receivables for losses within a
deductible and retrospectively-
rated policy premiums ("loss
sensitive business")
$
5,624 $
5,303
Receivables for loss sensitive
business, by credit quality:
AA
97
94
A
57
54
BBB
193
136
BB
94
84
Below BB
50
45
Total receivables for loss
sensitive business
491
413
Total Premiums Receivable
and Agents' Balances, Gross
6,115
5,716
ACL
(117)
(109)
Total Premiums Receivable
and Agents' Balances, Net of
ACL
$
5,998 $
5,607
ACL on Premiums Receivable and
Agents' Balances
Premiums receivable and agents' balances, excluding
receivables for loss sensitive business, are primarily comprised
of premiums due from policyholders, which are typically
collectible within one year or less. For these balances, the ACL
is estimated based on an aging of receivables and recent
historical credit loss and collection experience, adjusted for
current economic conditions and reasonable and supportable
forecasts, when appropriate. Balances are considered past due
when amounts that have been billed are not collected within
contractually stipulated time periods.
A portion of the Company's Business Insurance business is
written with large deductibles or under retrospectively-rated
plans (referred to as "loss sensitive business"). Under some
commercial insurance contracts with a large deductible, the
Company is obligated to pay the claimant the full amount of the
claim and the Company is subsequently reimbursed by the
policyholder for the deductible amount. As such, the Company is
subject to credit risk until reimbursement is made.
Retrospectively-rated policies are utilized primarily for workers'
compensation coverage, whereby the ultimate premium is
adjusted based on actual losses incurred. Although the premium
adjustment feature of a retrospectively-rated policy substantially
reduces insurance risk for the Company, it presents credit risk to
the Company. The Company’s results of operations could be
adversely affected if a significant portion of such policyholders
failed to reimburse the Company for the deductible amount or
the amount of additional premium owed under retrospectively-
rated policies. The Company manages these credit risks
through credit analysis, collateral requirements, and oversight.
The ACL for receivables for loss sensitive business is estimated
as the amount of the receivable exposed to loss multiplied by
estimated factors for probability of default and the amount of
loss given a default. The probability of default is assigned based
on each policyholder's credit rating, or a rating is estimated if no
external rating is available. Credit ratings are reviewed and
updated at least annually. The exposure amount is estimated
net of collateral and other credit enhancement, considering the
nature of the collateral, potential future changes in collateral
values, and historical loss information for the type of collateral
obtained. The probability of default factors are historical
corporate defaults for receivables with similar durations
estimated through multiple economic cycles. Credit ratings are
forward-looking and consider a variety of economic outcomes.
The loss given default factors are based on a study of historical
recovery rates for general creditors through multiple economic
cycles. The Company's evaluation of the required ACL for
receivables for loss sensitive business considers the current
economic environment as well as the probability-weighted
macroeconomic scenarios similar to the approach used for
estimating the ACL for mortgage loans. See Note 5 -
Investments.
Rollforward of ACL on Premiums Receivable and Agents' Balances for the Year Ended
December 31, 2024
December 31, 2023
December 31, 2022
Receivables
Excluding
Receivables for
Loss Sensitive
Business
Receivables
for Loss
Sensitive
Business
Total
Receivables
Excluding
Receivables for
Loss Sensitive
Business
Receivables
for Loss
Sensitive
Business
Total
Receivables
Excluding
Receivables for
Loss Sensitive
Business
Receivables
for Loss
Sensitive
Business
Total
Beginning ACL
$
89 $
20 $ 109 $
85 $
24 $ 109 $
83 $
22 $ 105
Current period provision
(release)
64
1
65
52
(2)
50
48
3
51
Current period gross
write-offs
(62)
(1)
(63)
(55)
(2)
(57)
(56)
(1) (57)
Current period gross
recoveries
6
—
6
7
—
7
10
—
10
Ending ACL
$
97 $
20 $ 117 $
89 $
20 $ 109 $
85 $
24 $ 109
Note 7 - Premiums Receivable and Agents' Balances
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
155
8. REINSURANCE
The Company cedes insurance risk to reinsurers to enable the
Company to manage capital and risk exposure. Such
arrangements do not relieve the Company of its primary liability
to policyholders. Failure of reinsurers to honor their obligations
could result in losses to the Company. The Company's
procedures include carefully selecting its reinsurers, structuring
agreements to provide collateral funds where necessary, and
regularly monitoring the financial condition and ratings of its
reinsurers.
The Company has two ADC reinsurance agreements in place,
both of which are accounted for as retroactive reinsurance and
have exhausted their treaty limit. One agreement covered
substantially all A&E reserve development for 2016 and prior
accident years ("A&E ADC") up to an aggregate limit of
$1.5 billion and the other covered substantially all reserve
development of Navigators Insurance Company ("NIC") and
certain of its affiliates for 2018 and prior accident years (the
"Navigators ADC") up to an aggregate limit of $300. As the
Company has ceded all of the $300 and $1.5 billion available
limits under the Navigators ADC and the A&E ADC, respectively,
there is no remaining limit available under either agreement as
of December 31, 2024. For more information on ADC
agreements, see Note 1 - Basis of Presentation and Significant
Accounting Policies, and Note 10 - Reserve for Unpaid Losses
and Loss Adjustment Expenses.
Property and Casualty ceded losses, which reduce losses and
loss adjustment expenses incurred, were $1,241, $1,043 and
$1,338 for the years ended December 31, 2024, 2023 and 2022,
respectively.
Employee Benefits ceded losses, which reduce losses and loss
adjustment expenses incurred, were $120, $93 and $81 for the
years ended December 31, 2024, 2023 and 2022, respectively.
Reinsurance Recoverables
Reinsurance recoverables include balances due from
reinsurance companies and are presented net of an allowance
for uncollectible reinsurance. Reinsurance recoverables include
an estimate of the amount of gross losses and loss adjustment
expense reserves that may be ceded under the terms of the
reinsurance agreements, including incurred but not reported
("IBNR") unpaid losses. The Company’s estimate of losses and
loss adjustment expense reserves ceded to reinsurers is based
on assumptions that are consistent with those used in
establishing the gross reserves for amounts the Company owes
to its claimants. The Company estimates its ceded reinsurance
recoverables based on the terms of any applicable facultative
and treaty reinsurance, including an estimate of how IBNR
unpaid losses will ultimately be ceded under reinsurance
agreements. Accordingly, the Company’s estimate of
reinsurance recoverables is subject to similar risks and
uncertainties as the estimate of the gross reserve for unpaid
losses and loss adjustment expenses.
Reinsurance Recoverables by Credit Quality Indicator
As of December 31, 2024
As of December 31, 2023
P&C
Employee
Benefits Corporate
Total
P&C
Employee
Benefits Corporate
Total
AM Best Financial Strength
Rating
A++
$
2,271 $
— $
— $
2,271 $
2,398 $
— $
— $
2,398
A+
2,169
281
224
2,674
2,030
251
241
2,522
A
829
1
—
830
810
1
—
811
A-
622
4
—
626
653
5
—
658
B++
2
—
2
4
2
—
3
5
Below B++
22
—
—
22
22
—
—
22
Total Rated by AM Best
5,915
286
226
6,427
5,915
257
244
6,416
Mandatory (Assigned) and
Voluntary Risk Pools
205
—
—
205
208
—
—
208
Captives
402
—
—
402
353
—
—
353
Other not rated companies
176
5
—
181
226
4
—
230
Gross Reinsurance Recoverables
6,698
291
226
7,215
6,702
261
244
7,207
Allowance for uncollectible
reinsurance
(72)
(1)
(2)
(75)
(100)
(1)
(2)
(103)
Net Reinsurance Recoverables
$
6,626 $
290 $
224 $
7,140 $
6,602 $
260 $
242 $
7,104
Balances are considered past due when amounts that have
been billed are not collected within contractually stipulated time
periods, generally 30, 60 or 90 days. To manage reinsurer credit
risk, a reinsurance security review committee evaluates the
credit standing, financial performance, management and
operational quality of each potential reinsurer. In placing
reinsurance, the Company considers the nature of the risk
reinsured, including the expected liability payout duration, and
establishes limits tiered by reinsurer credit rating.
Where its contracts permit, the Company secures future claim
obligations with various forms of collateral or other credit
enhancement, including irrevocable letters of credit, secured
Note 8 - Reinsurance
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
156
trusts, funds held accounts and group wide offsets. As part of its
reinsurance recoverable review, the Company analyzes recent
developments in commutation activity between reinsurers and
cedants, recent trends in arbitration and litigation outcomes in
disputes between cedants and reinsurers and the overall credit
quality of the Company’s reinsurers.
Due to the inherent uncertainties as to collection and the length
of time before reinsurance recoverables become due, it is
possible that future adjustments to the Company’s reinsurance
recoverables, net of the allowance, could be required, which
could have a material adverse effect on the Company’s
consolidated results of operations or cash flows in a particular
quarter or annual period.
The allowance for uncollectible reinsurance comprises an ACL
and an allowance for disputed balances. The ACL is estimated
as the amount of reinsurance recoverables exposed to loss
multiplied by estimated factors for the probability of default and
the amount of loss given a default. The probability of default is
assigned based on each reinsurer's credit rating, or a rating is
estimated if no external rating is available. Credit ratings are
reviewed on a quarterly basis and any significant changes are
reflected in an updated estimate. The probability of default
factors are historical insurer and reinsurer defaults for liabilities
with similar durations to the reinsured liabilities as estimated
through multiple economic cycles. Credit ratings are forward-
looking and consider a variety of economic outcomes. The loss
given default factors are based on a study of historical recovery
rates for general creditors of corporations through multiple
economic cycles or, in the case of purchased annuities funding
structured settlements accounted for as reinsurance, historical
recovery rates for annuity contract holders.
As shown in the table above, a portion of the total gross
reinsurance recoverable balance relates to the Company’s
participation in various mandatory (assigned) and voluntary risk
pools. Reinsurance recoverables due from pools are backed by
the financial position of all insurance companies participating in
the pools and the credit backing the reinsurance recoverable is
not limited to the financial strength of each pool. The mandatory
pools generally are funded through policy assessments or
surcharges and if any participant in the pool defaults, remaining
liabilities are apportioned among the other members.
The Company's evaluation of the required ACL for reinsurance
recoverables considers the current economic environment as
well as macroeconomic scenarios similar to the approach used
to estimate the ACL for mortgage loans. See Note 5 -
Investments. Insurance companies, including reinsurers, are
regulated and hold risk-based capital ("RBC") to mitigate the risk
of loss due to economic factors and other risks. Non-U.S.
reinsurers are either subject to a capital regime substantively
equivalent to domestic insurers or we hold collateral to support
collection of reinsurance recoverables. As a result, there is
limited history of losses from insurer defaults. In 2024, the ACL
was reduced due to a decrease in a previously established
reserve for an A&E reinsurer that entered liquidation
proceedings.
Allowance for Uncollectible Reinsurance
As of December 31, 2024
As of December 31, 2023
As of December 31, 2022
P&C beginning allowance for uncollectible
reinsurance
$
100 $
102 $
96
Beginning allowance for disputed amounts
57
60
54
P&C beginning ACL
43
42
42
Current period provision
(6)
3
—
Current period gross write-offs
(13)
(2)
—
P&C ending ACL
24
43
42
Ending allowance for disputed amounts
48
57
60
P&C ending allowance for uncollectible
reinsurance
72
100
102
Employee Benefits allowance for uncollectible
reinsurance
1
1
1
Corporate allowance for uncollectible
reinsurance
2
2
2
Total allowance for uncollectible reinsurance
$
75 $
103 $
105
Note 8 - Reinsurance
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
157
Insurance Revenues
Property and Casualty Insurance Revenue
For the years ended December 31,
Premiums Written
2024
2023
2022
Direct
$
17,622 $
16,144 $
14,891
Assumed
1,102
975
718
Ceded
(1,775)
(1,642)
(1,490)
Net
$
16,949 $
15,477 $
14,119
Premiums Earned
Direct
$
16,915 $
15,514 $
14,328
Assumed
1,001
826
654
Ceded
(1,742)
(1,612)
(1,462)
Net
$
16,174 $
14,728 $
13,520
Employee Benefits Revenue
For the years ended December 31,
2024
2023
2022
Gross earned premiums, fees and other considerations
$
6,576 $
6,445 $
5,988
Reinsurance assumed
166
174
175
Reinsurance ceded
(127)
(104)
(106)
Net earned premiums, fees and other considerations
$
6,615 $
6,515 $
6,057
For its Employee Benefits products, the Company reinsures
certain of its risks to other reinsurers under yearly renewable
term and coinsurance arrangements and variations thereto.
Yearly renewable term and coinsurance arrangements result in
passing a portion of the risk to the reinsurer. Generally, the
reinsurer receives a proportionate amount of the premiums less
an allowance for commissions and expenses and is liable for a
corresponding proportionate amount of all benefit payments.
Note 8 - Reinsurance
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
158
9. GOODWILL & OTHER INTANGIBLE ASSETS
The carrying value of goodwill allocated to reportable segments and the corporate category as of both December 31, 2024 and 2023 was
as follows:
Carrying Value
Business Insurance
$
659
Personal Insurance
119
Hartford Funds
180
Employee Benefits
723
Corporate [1]
230
Total
$
1,911
[1]The Corporate category includes goodwill that was acquired at a holding company level and not pushed down to a subsidiary within a reportable segment.
Carrying value of goodwill within Corporate as of December 31, 2024 and 2023 includes $138 and $92 for the Employee Benefits and Hartford Funds reporting
units, respectively.
The annual goodwill assessment for The Hartford's reporting
units was completed as of October 31, 2024 and 2023; all
reporting units passed their annual impairment test with a
significant margin and as a result there were no write-downs of
goodwill.
Other Intangible Assets
As of December 31, 2024
As of December 31, 2023
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Amortized Intangible Assets:
Customer relationships
$
636 $
(313) $
323
$
636 $
(269) $
367
Marketing agreement with Aetna
16
(7)
9
16
(7)
9
Distribution Agreement
79
(75)
4
79
(72)
7
Distribution and Agency relationships &
Other
340
(134)
206
340
(111)
229
Total Finite Life Intangibles
1,071
(529)
542
1,071
(459)
612
Total Indefinite Life Intangible Assets
95
95
95
95
Total Other Intangible Assets
$
1,166 $
(529) $
637
$
1,166 $
(459) $
707
Expected Before Tax Amortization Expense for
Acquired Intangibles as of December 31, 2024
Other Intangible Assets
2025
$
71
2026
$
70
2027
$
68
2028
$
64
2029
$
62
Note 9 - Goodwill & Other Intangible Assets
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
159
10. RESERVE FOR UNPAID LOSSES AND LOSS
ADJUSTMENT EXPENSES
|PROPERTY & CASUALTY INSURANCE PRODUCT RESERVES, NET OF
REINSURANCE
Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses
For the years ended December 31,
2024
2023
2022
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
$
34,044 $
33,083 $
31,449
Reinsurance and other recoverables
6,696
6,465
6,081
Beginning liabilities for unpaid losses and loss adjustment expenses, net
27,348
26,618
25,368
Provision for unpaid losses and loss adjustment expenses
Current accident year
10,305
9,538
8,577
Prior accident year development [1]
(120)
10
36
Total provision for unpaid losses and loss adjustment expenses
10,185
9,548
8,613
Change in deferred gain on retroactive reinsurance included in other liabilities [1]
83
(194)
(229)
Payments
Current accident year
(2,765)
(2,716)
(2,424)
Prior accident years
(5,175)
(5,926)
(4,678)
Total payments
(7,940)
(8,642)
(7,102)
Foreign currency adjustment
(25)
18
(32)
Ending liabilities for unpaid losses and loss adjustment expenses, net
29,651
27,348
26,618
Reinsurance and other recoverables
6,753
6,696
6,465
Ending liabilities for unpaid losses and loss adjustment expenses, gross
$
36,404 $
34,044 $
33,083
[1] Prior accident year development for the year ended December 31, 2024 includes a $145 benefit for amortization of a deferred gain under retroactive reinsurance
accounting related to the Navigator's ADC as the Company began collecting recoveries of the ceded losses from National Indemnity Company ("NICO"), a
subsidiary of Berkshire Hathaway Inc, during the period. Prior accident year development does not include the benefit of a portion of losses ceded under the A&E
ADC, which, under retroactive reinsurance accounting, is deferred and is recognized over the period the ceded losses are recovered in cash from NICO. For
additional information regarding the two adverse development cover reinsurance agreements, refer to Adverse Development Covers discussion below.
Property and Casualty Insurance Products Reserves, Net of Reinsurance, that are Discounted
For the years ended December 31,
2024
2023
2022
Liability for unpaid losses and loss adjustment expenses, at undiscounted
amounts
$
1,184
$
1,255
$
1,343
Amount of discount
333
339
347
Carrying value of liability for unpaid losses and loss adjustment expenses $
851
$
916
$
996
Discount accretion included in losses and loss adjustment expenses
$
44
$
42
$
36
Weighted average discount rate
2.80 %
2.74 %
2.71 %
Range of discount rates
0.83 %- 14.03 %
0.83 % - 14.03 %
0.83 % - 14.03 %
Reserves are discounted at rates in effect at the time claims
were incurred, ranging from 0.83% for accident year 2020 to
14.03% for accident year 1981.
The reserves recorded for the Company’s property and casualty
insurance products at December 31, 2024 represent the
Company’s best estimate of its ultimate liability for losses and
loss adjustment expenses related to losses covered by policies
written by the Company. However, because of the significant
uncertainties surrounding reserves it is possible that
management’s estimate of the ultimate liabilities for these claims
may change and that the required adjustment to recorded
reserves could exceed the currently recorded reserves by an
amount that could be material to the Company’s results of
operations or cash flows.
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
160
Losses and loss adjustment expenses are also impacted by
trends including frequency and severity as well as changes in
the legislative and regulatory environment. In the case of the
reserves for asbestos exposures, factors contributing to the high
degree of uncertainty in the ultimate settlement of the liabilities
gross of reinsurance include inadequate loss development
patterns, plaintiffs’ expanding theories of liability, the risks
inherent in major litigation, and inconsistent emerging legal
doctrines. In the case of the reserves for environmental
exposures before reinsurance, factors contributing to the high
degree of uncertainty in gross reserves include expanding
theories of liabilities and damages, the risks inherent in major
litigation, inconsistent decisions concerning the existence and
scope of coverage for environmental claims, and uncertainty as
to the monetary amount being sought by the claimant from the
insured.
(Favorable) Unfavorable Prior Accident Year
Development
For the years
ended December
31,
2024
2023
2022
Workers’ compensation
$ (258) $ (236) $ (204)
Workers’ compensation discount
accretion
44
42
36
General liability
211
41
56
Marine
(1)
(2)
2
Package business
(6) (24) (39)
Commercial property
(7)
(7) (11)
Professional liability
(27)
(2) (11)
Bond
(56) (27) (32)
Assumed reinsurance
24
34
19
Commercial automobile liability
47
20
38
Personal automobile liability
(30)
— (14)
Homeowners
(28)
(6)
(1)
Net asbestos and environmental
reserves
141
—
—
Catastrophes
(87) (87) (62)
Uncollectible reinsurance
(19)
13
3
Other reserve re-estimates, net
15
57
27
Prior accident year development,
including full benefit for the ADC
cession
(37) (184) (193)
Change in deferred gain on retroactive
reinsurance included in other liabilities [1]
(83) 194 229
Total prior accident year development
$ (120) $ 10 $ 36
[1] The change in deferred gain on retroactive reinsurance for the year ended
December 31, 2024, included a benefit for amortization of the Navigators
ADC deferred gain of $145. The change in deferred gain for the years
ended December 31, 2024, 2023 and 2022 also included $62, $194 and
$229, respectively of adverse development on A&E reserves in excess of
ceded premium paid.
2024 re-estimates of prior accident year
reserves
Workers’ compensation reserves were decreased
within the 2016 to 2020 accident years primarily in small
business (formerly "small commercial"), driven by lower than
anticipated claim severity. In addition, the 2020 accident year
includes a $48 reduction of COVID-19 related reserves driven
by favorable claim count emergence.
General liability reserves were increased primarily in
response to a higher frequency of large losses in the 2015 to
2019 accident years. In addition, the incurred but not reported
reserves for more recent accident years were increased as
management has observed an increase in severity on reported
claims above expectations and anticipates a higher claim
severity trend on unreported claims. Reserves for sexual
molestation and sexual abuse claims were increased for older
accident years. Lastly, reserves for extra contractual liability
claims and other miscellaneous run-off lines were reduced in
response to recent favorable loss activity.
Professional liability reserves decreased due to
favorable development on directors and officers ("D&O") claims
driven by the 2020 to 2022 accident years combined with
favorable errors and omissions experience in the 2018 accident
year, partially offset by deterioration in older accident years.
Bond reserves decreased due to favorable development on
commercial and contract surety and fidelity bonds, driven by
accident years 2019 and prior.
Assumed reinsurance reserves were increased due to
higher reserve estimates in the Latin America surety and Latin
America P&C businesses related to the 2020 to 2023 accident
years.
Commercial automobile liability reserves increased
primarily due to adverse loss development within accident years
2022 and 2023, driven by higher severity than estimated.
Personal automobile liability reserves were
decreased primarily in response to better than anticipated
accident years 2021 to 2023 severity for bodily injury liability
claims and property damage liability.
Homeowners reserves were decreased primarily due to
favorable severity impacting accident years 2022 and 2023.
Asbestos and environmental reserves were
reviewed in fourth quarter 2024 resulting in a $203 increase in
reserves before ADC reinsurance, including $167 for asbestos
and $36 for environmental. The Company ceded to the A&E
ADC $62, which is accounted for as a deferred gain on
retroactive reinsurance, representing the amount of losses
ceded to the ADC in excess of ceded premium paid. For
additional information related to the adverse development cover
with NICO, see the Adverse Development Covers section below
and Note 14 - Commitments and Contingencies.
Catastrophes reserves were decreased primarily within
Business Insurance driven by a reduction in reserves in accident
years 2020 to 2022 related to favorable emergence related to
various hail events, as well as favorable development in both
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
161
Business Insurance and Personal Insurance in accident year
2022 related to Hurricane Ian.
Uncollectible reinsurance was decreased due to a
reduction in a previously established reserve for an A&E
reinsurer that entered into liquidation proceedings.
Other reserve re-estimates, net, were increased
primarily due to an increase in unallocated loss adjustment
expenses ("ULAE") reserves within P&C Other Operations
driven by an increase in gross asbestos and environmental
reserves and an increase in reserves related to unfavorable
development from participation in involuntary market pools
environmental reserves, partially offset by a decrease in
reserves due to lower severity than expected on personal
automobile physical damage for accident year 2023.
2023 re-estimates of prior accident year
reserves
Workers’ compensation reserves were decreased
within the 2014 to 2020 accident years primarily in small
business, driven by lower than previously estimated claim
severity. In addition, the majority of the 2020 accident year
relates to a $38 reduction of COVID-19 related reserves.
General liability reserves were increased driven by
higher frequency and estimated cost to settle large individual
claims for the 2016 to 2019 accident years, partially offset by a
decrease in reserves for the 2020 accident year due to
favorable experience. In addition, reserves for sexual
molestation and sexual abuse claims were increased for older
accident years. Also included was a decrease in reserves for
extra contractual liability claims and other miscellaneous run-off
lines.
Package business reserves decreased primarily due to
lower than previously estimated property severity for accident
year 2019 and 2021. Package liability is flat overall with reserve
increases related to higher severity across multiple accident
years offset by improvement in accident year 2020 due to
favorable claim count emergence.
Commercial property reserves decreased primarily
due to favorable development for accident years 2018 and
2021. In accident year 2022, unfavorable development in middle
& large business (formerly "middle & large commercial") was
offset by favorable development in global specialty.
Professional liability reserves decreased modestly due
to favorable development on directors and officers claims driven
by the 2020 and 2021 accident years, partially offset by
deterioration in 2019 and prior accident years experience across
errors and omissions and other claims.
Bond reserves decreased primarily due to improvement in
fidelity in 2013 and prior accident years, as well as improvement
in contract surety in 2019 and prior accident years, partially
offset by unfavorable development for 2013 and prior accident
years related to customs bonds.
Assumed reinsurance reserves were increased due to
higher reserve estimates in the Latin America casualty and
surety business.
Commercial automobile liability reserves increased
primarily due to adverse loss development from elevated large
loss frequency and severity pressures within middle & large
business for accident year 2022, as well as unfavorable
experience in accident year 2019, partly offset by favorable
development in accident years 2020 and 2021.
Personal automobile liability reserves were flat as
increases for accident year 2022 from higher estimated severity
and increasing attorney representation rates were fully offset by
decreases, primarily within accident years 2019 to 2021, due to
lower estimated severity.
Asbestos and environmental reserves were
reviewed in fourth quarter 2023 resulting in a $194 increase in
reserves before ADC reinsurance, including $156 for asbestos
and $38 for environmental. The Company recognized a $194
deferred gain on retroactive reinsurance, representing the
amount of losses ceded to the ADC in excess of ceded premium
paid. For additional information related to the adverse
development cover with NICO, see the Adverse Development
Covers section below and Note 14 - Commitments and
Contingencies.
Catastrophes reserves were decreased primarily within
Business Insurance driven by a reduction in reserves in accident
year 2022 for Hurricane Ian and accident year 2021 for
Hurricane Ida.
Uncollectible reinsurance was increased primarily in
Business Insurance related to a captive reinsurer and, to a
lesser extent, an increase in reserves for potential collection
disputes and credit concerns.
Other reserve re-estimates, net, were increased
primarily due to an increase in ULAE reserves within P&C Other
Operations driven by an increase in gross asbestos and
environmental reserves, as well as unfavorable development
from participation in involuntary market pools, and increased
automobile physical damage severity.
2022 re-estimates of prior accident year
reserves
Workers’ compensation reserves were decreased for
the 2014 through 2018 accident years, predominately within
small business, and to a lesser extent in middle & large
business, driven by lower than previously estimated claim
severity and, to a lesser extent, a $14 reduction of COVID-19
related claims from 2020.
General liability reserves were increased, driven by an
increase in the estimated cost to settle large individual claims in
middle & large business for the 2016 to 2019 accident years, an
increase in excess casualty and environmental in recent
accident years, and increases in primary construction on older
accident years, partially offset by a decrease in reserves for
other mass torts.
Package business reserves decreased due to lower
estimated severity and lower estimated loss adjustment
expenses for accident years 2018 and prior, and a reduction in
property reserves for the 2020 and 2021 accident years.
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
162
Commercial property reserves were decreased
primarily due to favorable development for the 2020 accident
year in middle & large business related to COVID-19 claims.
Professional liability reserves were decreased
primarily due to favorable development on D&O claims for the
2018 to 2020 accident years and on errors and omissions
claims for the 2013 to 2017 accident years, partially offset by
large losses related to 2018 and prior accident years for primary
and excess D&O claims.
Bond reserves were decreased primarily in contract surety
due to favorable development on older accident years.
Assumed reinsurance reserves were increased
primarily due to higher reserve estimates for syndicate property
claims, including higher expected COVID-19 property losses in
the 2020 accident year and increased reserves for international
agriculture related to drought claims. Also contributing were
reserve increases for Latin America P&C and specialty casualty
business in recent accident years.
Automobile liability reserves were decreased in
Personal Insurance principally due to lower estimated severity
on AARP Direct claims, primarily within accident years 2015 to
2020 and were increased in Business Insurance principally due
to a higher number of large claims in accident years 2017 to
2019, along with decreasing settlement rates and increasing
attorney rep rates.
Asbestos and environmental reserves were
reviewed in fourth quarter 2022 resulting in a $229 increase in
reserves before ADC reinsurance, including $162 for asbestos
and $67 for environmental. The Company recognized a $229
deferred gain on retroactive reinsurance, representing the
amount of losses ceded to the ADC in excess of ceded premium
paid. For additional information related to the adverse
development cover with NICO, see the Adverse Development
Covers section below and Note 14 - Commitments and
Contingencies.
Catastrophes reserves were decreased in both Business
Insurance and Personal Insurance with the largest reduction
related to 2019 and 2020 wind and hail events.
Other reserve re-estimates, net, were increased
primarily due to an increase in ULAE reserves within P&C Other
Operations driven by an increase in gross asbestos and
environmental reserves, as well as unfavorable development
from participation in involuntary market pools, and increased
automobile physical damage severity.
Settlement Agreement with Boy
Scouts of America
On February 14, 2022, the Company executed a final settlement
agreement (the “Settlement”) with the Boy Scouts of America
("BSA"), the Local Councils, and the attorneys representing a
majority of the alleged victims, pursuant to which The Hartford
agreed to pay $787 for sexual molestation and sexual abuse
claims associated with liability policies issued by various
Hartford Writing Companies in the 1970s and early 1980s. In
exchange for its payment, the Company receives a complete
release of its policies issued to BSA and the Local Councils, as
well as an injunction against further abuse claims involving BSA.
All conditions precedent to the Settlement have been satisfied,
including approval by the bankruptcy court and the district court,
and on April 20, 2023, The Hartford paid the Settlement amount
of $787. Certain objecting parties have appealed the district
court’s ruling and that appeal is pending before the Third Circuit.
If the court approvals for the BSA’s plan of reorganization are
not affirmed on appeal, it is possible that adverse outcomes, if
any, could have a material adverse effect on the Company’s
operating results.
Adverse Development Covers
The Company has an adverse development cover reinsurance
agreement with NICO, a subsidiary of Berkshire Hathaway Inc.,
to reinsure loss development after 2016 on substantially all of
the Company’s asbestos and environmental reserves (the “A&E
ADC”). Under the A&E ADC, the Company paid a reinsurance
premium of $650 for NICO to assume adverse net loss reserve
development up to $1.5 billion above the Company’s existing
net A&E reserves as of December 31, 2016 of approximately
$1.7 billion including reserves for A&E exposure for accident
years prior to 1986 that are reported in Property & Casualty
Other Operations ("Run-off A&E") and reserves for A&E
exposure for accident years 1986 and subsequent from policies
underwritten prior to 2016 that are reported in ongoing Business
Insurance and Personal Insurance. The $650 reinsurance
premium was placed into a collateral trust account as security
for NICO’s claim payment obligations to the Company. The
Company has retained the risk of collection on amounts due
from other third-party reinsurers and continues to be responsible
for claims handling and other administrative services, subject to
certain conditions. The A&E ADC covered substantially all the
Company’s A&E reserve development up to the reinsurance
limit.
Under retroactive reinsurance accounting, net adverse A&E
reserve development after December 31, 2016 results in an
offsetting reinsurance recoverable up to the $1.5 billion
limit. Cumulative ceded losses up to the $650 reinsurance
premium paid have been recognized as a dollar-for-dollar offset
to direct losses incurred. Cumulative ceded losses exceeding
the $650 reinsurance premium paid result in a deferred gain. As
of December 31, 2024, the Company has incurred $1.5 billion in
cumulative adverse development on asbestos and
environmental reserves that have been ceded under the A&E
ADC treaty with NICO with no available limit remaining. As such,
no remaining coverage is available for any future adverse net
reserve development, which may be significant. The Company
has recorded a $850 deferred gain within other liabilities,
representing the difference between the reinsurance
recoverable of $1.5 billion and ceded premium paid of $650.
Recoveries from NICO will be collected once the Company has
paid cumulative losses in excess of the $1.7 billion attachment
point. The deferred gain will be recognized over the claim
settlement period in the proportion of the amount of cumulative
ceded losses collected from the reinsurer to the estimated
ultimate reinsurance recoveries.
Immediately after closing on the acquisition of Navigators
Group, effective May 23, 2019, the Company purchased the
Navigators ADC, an aggregate excess of loss reinsurance
agreement covering adverse reserve development, from NICO
on behalf of Navigators Insurance Company and certain of its
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
163
affiliates (collectively, “Navigators Insurers"). Under the
Navigators ADC, the Navigators Insurers paid NICO a
reinsurance premium of $91 in exchange for reinsurance
coverage of $300 of adverse net loss reserve development that
attaches $100 above the Navigators Insurers' existing net loss
and allocated loss adjustment reserves as of December 31,
2018 subject to the treaty of $1.816 billion for accidents and
losses prior to December 31, 2018.
As of December 31, 2024, the Company has recorded a
reinsurance recoverable under the Navigators ADC of $91 as
estimated cumulative loss development on the 2018 and prior
accident year reserves has exhausted the treaty limit. While the
reinsurance recoverable is $91, the Company previously
recorded a $209 cumulative deferred gain within other liabilities
since, under retroactive reinsurance accounting, ceded losses in
excess of the $91 of ceded premium paid must be recognized
as a deferred gain. During 2024, the Company collected
recoveries from NICO under the Navigators ADC and as a result
amortized $145 of the $209 deferred gain within benefits, losses
and loss adjustment expenses in the Consolidated Statements
of Operations. As there were no collected recoveries during the
years ended December 31, 2023, and December 31, 2022,
there were no changes to the deferred gain in those years. As of
December 31, 2024, and December 31, 2023, the deferred gain
on the Navigators ADC was $64 and $209, respectively, and is
included in other liabilities on the Consolidated Balance Sheets.
Reconciliation of Loss Development to Liability for Unpaid Losses and Loss Adjustment Expenses As of
December 31, 2024
Losses and Allocated Loss Adjustment
Expenses, Net of Reinsurance
Subtotal
Reserve Line
Cumulative
Incurred for
Accident
Years
Displayed in
Triangles
Cumulative
Paid for
Accident
Years
Displayed in
Triangles
Unpaid for
Accident
Years not
Displayed in
Triangles
Unpaid
Unallocated
Loss
Adjustment
Expenses,
Net of
Reinsurance Discount
Unpaid
Losses and
Loss
Adjustment
Expenses,
Net of
Reinsurance
Reinsurance
and Other
Recoverables
Liability for
Unpaid
Losses and
Loss
Adjustment
Expenses
Workers' compensation
$
18,389 $
(9,665) $
3,836 $
419 $
(319) $
12,660 $
1,721 $
14,381
General liability
9,416
(4,177)
494
202
—
5,935
1,230
7,165
Marine
1,427
(1,114)
15
15
—
343
244
587
Package business
8,630
(6,279)
109
130
—
2,590
31
2,621
Commercial property
4,244
(3,676)
13
31
—
612
299
911
Commercial automobile liability
4,606
(3,106)
16
38
—
1,554
113
1,667
Commercial automobile
physical damage
239
(213)
4
1
—
31
—
31
Professional liability
3,042
(1,567)
55
47
—
1,577
611
2,188
Bond
667
(276)
19
33
—
443
14
457
Assumed Reinsurance
2,107
(1,356)
—
7
—
758
30
788
Personal automobile liability
10,862
(9,240)
31
74
—
1,727
18
1,745
Personal automobile physical
damage
1,640
(1,574)
7
5
—
78
—
78
Homeowners
5,876
(5,521)
6
42
—
403
5
408
Other ongoing business
168
7
(14)
161
356
517
Asbestos and environmental
[1]
315
—
—
315
2,038
2,353
Other operations [1]
293
171
—
464
43
507
Total P&C
$
71,145 $
(47,764) $
5,381 $
1,222 $
(333) $
29,651 $
6,753 $
36,404
[1]Asbestos and environmental and other operations include asbestos, environmental and other latent exposures not foreseen when coverages were written,
including, but not limited to, potential liability for pharmaceutical products, silica, talcum powder, head injuries, lead paint, construction defects, sexual molestation
and sexual abuse and other long-tail liabilities. These reserve lines do not have significant paid or incurred loss development for the most recent ten accident years
and therefore do not have loss development displayed in triangles.
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
164
The reserve lines in the above table and the loss triangles that
follow represent the significant lines of business for which the
Company regularly reviews the appropriateness of reserve
levels. These reserve lines differ from the reserve lines reported
on a statutory basis, as prescribed by the National Association
of Insurance Commissioners ("NAIC"). The cumulative incurred
losses displayed in the above table include the full reinsurance
benefit of ceding $300 of losses to the Navigators ADC even
though $64 of that benefit has been recorded as a deferred gain
within other liabilities. The $300 of Navigators Insurers losses
ceded to the Navigators ADC and reflected in the following
triangles include $95 for professional liability, $105 for general
liability, $38 for marine, $27 for assumed reinsurance, $14 for
commercial automobile, $3 for commercial property, and $1 for
bond. The triangles do not include $17 of losses ceded to the
Navigators ADC related to older accident years and lines of
business not in the triangles.
The following loss triangles present historical loss development
for incurred and paid claims by accident year, including loss
development on Navigators Insurers reserves prior to and after
the May 23, 2019 acquisition date. Because the loss triangles
include pre-acquisition date changes in ultimate incurred loss
estimates for Navigators Insurers’ reserves, changes in reserve
development evident in the incurred loss triangles may differ
from prior accident year development ("PYD") recorded by the
Company as shown in the (Favorable) Unfavorable Prior
Accident Year Development table above as that only includes
changes in Navigators Insurers’ reserves post acquisition. In
addition, the incurred loss triangles include reserve development
on both catastrophe and non-catastrophe claims whereas the
(Favorable) Unfavorable Prior Accident Year Development table
above shows the total amount of catastrophe reserve
development across all lines of business on a single line.
Triangles are limited to the number of years for which claims
incurred typically remain outstanding, not exceeding ten years.
Short-tail lines, which represent claims generally expected to be
paid within a few years, have three years of claim development
displayed. IBNR reserves shown in loss triangles include
reserves for incurred but not reported claims as well as reserves
for expected development on reported claims. Incurred and
cumulative paid losses in currencies other than the U.S. dollar
have been converted into U.S. dollars using the exchange rates
as of December 31, 2024.
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
165
Workers' Compensation
Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves
Claims
Reported
2015 $ 1,873 $ 1,835 $ 1,801 $ 1,724 $ 1,714 $ 1,699 $ 1,667 $ 1,645 $ 1,625 $ 1,625 $
329
114,700
2016
1,772 1,772 1,780 1,767 1,748 1,708 1,670 1,634 1,621
331
112,747
2017
1,862 1,869 1,840 1,822 1,757 1,665 1,635 1,597
392
112,274
2018
1,916 1,917 1,915 1,904 1,870 1,836 1,798
464
120,076
2019
1,937 1,935 1,934 1,934 1,899 1,864
528
121,158
2020
1,865 1,864 1,849 1,808 1,712
601
92,347
2021
1,831 1,832 1,831 1,831
675
103,229
2022
2,000 2,001 2,001
819
114,189
2023
2,166 2,166
1,171
117,297
2024
2,174
1,536
109,521
Total
$ 18,389
Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of
Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
261 $
576 $
778 $
909 $ 1,004 $ 1,068 $ 1,117 $ 1,151 $ 1,179 $ 1,200
2016
255
579
779
908 1,003 1,064 1,110 1,145 1,173
2017
261
575
778
900
977 1,035 1,087 1,118
2018
283
624
837
983 1,090 1,170 1,215
2019
291
637
856 1,007 1,129 1,204
2020
223
507
695
850
939
2021
254
562
780
920
2022
293
649
910
2023
286
677
2024
309
Total
$ 9,665
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
166
General Liability
Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves
Claims
Reported
2015 $
556 $
560 $
554 $
594 $
633 $
647 $
637 $
647 $
641 $
656 $
60
16,903
2016
613
583
607
632
632
620
636
670
692
68
17,989
2017
626
614
613
615
613
615
657
690
82
17,581
2018
692
669
697
703
728
751
816
167
19,019
2019
822
826
821
839
859
876
190
18,871
2020
938
922
922
873
857
363
14,574
2021
1,002
991
983 1,000
493
12,839
2022
1,116 1,110 1,167
746
12,673
2023
1,219 1,230
989
10,854
2024
1,432
1,366
7,290
Total
$ 9,416
Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of
Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
10 $
55 $
156 $
278 $
409 $
477 $
524 $
547 $
564 $
569
2016
12
52
131
283
368
446
513
564
596
2017
15
67
156
255
344
441
506
553
2018
21
83
177
288
409
512
595
2019
29
100
192
339
501
613
2020
45
110
202
308
432
2021
34
115
209
394
2022
26
134
281
2023
17
128
2024
16
Total
$ 4,177
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
167
Marine
Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves
[1]
Claims
Reported
2015 $
158 $
146 $
146 $
148 $
133 $
138 $
139 $
142 $
140 $
139 $
1
10,559
2016
139
142
137
147
149
146
148
158
157
—
13,811
2017
153
173
160
159
165
167
174
172
—
16,235
2018
131
146
141
146
152
156
155
(5)
10,812
2019
139
135
134
129
127
127
(3)
7,261
2020
145
137
134
137
142
7
5,261
2021
127
127
119
127
15
5,357
2022
140
132
130
22
5,306
2023
134
129
39
4,674
2024
149
83
3,735
Total
$ 1,427
[1]Contributing to the negative IBNR reserves for some accident years is a lag in the timing of expected reinsurance recoveries under the Navigators ADC with NICO.
Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of
Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
40 $
85 $
116 $
125 $
133 $
139 $
140 $
142 $
142 $
141
2016
35
80
105
122
131
140
143
146
141
2017
47
106
133
143
150
161
170
167
2018
33
94
126
135
142
159
151
2019
34
80
96
105
115
120
2020
31
68
90
99
114
2021
25
63
87
101
2022
27
72
89
2023
22
58
2024
32
Total
$ 1,114
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
168
Package Business
Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves
Claims
Reported
2015 $
582 $
588 $
585 $
583 $
588 $
581 $
567 $
564 $
564 $
570 $
17
42,479
2016
655
638
632
625
611
595
591
590
582
24
44,381
2017
695
702
692
657
644
637
640
638
33
46,958
2018
719
724
688
667
655
654
671
46
45,361
2019
813
769
749
744
747
761
72
43,955
2020
915
893
877
837
828
101
62,964
2021
946
954
958
958
150
47,755
2022
1,038 1,039 1,043
215
47,134
2023
1,250 1,223
378
46,364
2024
1,356
750
42,172
Total
$ 8,630
Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of
Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
212 $
332 $
383 $
445 $
486 $
505 $
513 $
530 $
542 $
549
2016
225
353
410
465
500
521
540
545
549
2017
235
372
447
496
534
561
578
593
2018
237
402
451
498
537
571
609
2019
254
413
488
571
626
666
2020
326
493
573
648
699
2021
368
556
650
746
2022
319
633
728
2023
453
725
2024
415
Total
$ 6,279
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
169
Commercial Property
Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves
Claims
Reported
2015 $
298 $
301 $
302 $
301 $
305 $
304 $
301 $
301 $
301 $
299 $
—
20,977
2016
405
419
399
406
408
408
405
405
405
—
23,927
2017
577
516
456
438
440
438
439
438
2
24,627
2018
450
436
423
403
400
393
393
2
21,821
2019
480
439
418
420
421
420
(1)
20,981
2020
501
469
440
438
437
49
20,529
2021
531
500
463
434
15
18,283
2022
497
481
475
48
17,446
2023
448
424
86
17,003
2024
519
164
15,209
Total
$ 4,244
Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of
Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
179 $
257 $
284 $
296 $
301 $
303 $
302 $
302 $
301 $
300
2016
215
342
378
395
401
406
406
407
406
2017
229
378
411
427
432
438
440
441
2018
188
344
378
385
394
394
394
2019
215
351
383
405
407
410
2020
221
336
355
367
373
2021
241
383
403
412
2022
180
369
412
2023
199
300
2024
228
Total
$ 3,676
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
170
Commercial Automobile Liability
Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves
Claims
Reported
2015 $
308 $
358 $
372 $
356 $
356 $
359 $
360 $
358 $
360 $
358 $
5
28,750
2016
385
393
390
391
391
395
395
396
395
5
29,266
2017
372
383
379
383
381
394
398
398
2
26,420
2018
349
396
405
406
424
433
435
18
24,816
2019
425
439
450
460
471
479
20
28,627
2020
428
424
419
397
388
44
22,272
2021
440
443
429
410
86
20,222
2022
468
500
547
158
20,891
2023
527
555
279
20,649
2024
641
501
19,954
Total
$ 4,606
Cumulative Paid Losses & Allocated Loss Adjustment Expense, Net of
Reinsurance
For the years ended December 31
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
62 $
142 $
207 $
267 $
314 $
335 $
344 $
348 $
350 $
351
2016
65
147
232
303
339
357
379
385
388
2017
60
134
211
285
328
368
386
389
2018
62
153
238
305
360
387
406
2019
67
160
247
327
393
428
2020
55
119
200
264
317
2021
55
127
212
282
2022
64
171
294
2023
69
174
2024
77
Total
$ 3,106
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
171
Commercial Automobile Physical Damage
Incurred Losses & Allocated Loss Adjustment
Expenses, Net of Reinsurance
For the years ended
December 31,
(Unaudited)
Accident
Year
2022
2023
2024
IBNR
Reserves
Claims
Reported
2022 $
70 $
74 $
74 $
2
16,771
2023
80
81
6
16,832
2024
84
8
15,533
Total
$
239
Cumulative Paid Losses &
Allocated Loss Adjustment
Expenses, Net of Reinsurance
For the years ended
December 31,
(Unaudited)
Accident
Year
2022
2023
2024
2022 $
59 $
73 $
72
2023
61
74
2024
67
Total
$
213
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
172
Professional Liability
Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Claims
Made
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves
Claims
Reported
2015 $ 164 $ 174 $ 179 $ 190 $ 213 $ 206 $ 198 $ 196 $ 197 $ 192 $
1
7,279
2016
183
176
203
196
194
195
193
191
202
20
8,462
2017
205
203
231
225
239
242
217
227
14
9,555
2018
243
274
270
271
265
324
312
18
9,910
2019
295
313
330
347
354
385
81
9,972
2020
369
363
336
324
298
106
8,034
2021
339
343
327
306
149
6,761
2022
349
355
338
214
7,177
2023
384
388
260
8,049
2024
394
337
7,546
Total
$ 3,042
Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of
Reinsurance
For the years ended December 31,
(Unaudited)
Claims
Made
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
9 $
40 $
85 $
107 $
124 $
140 $
163 $
175 $
185 $
181
2016
8
51
88
111
124
147
166
176
175
2017
11
48
87
121
149
179
190
189
2018
15
71
127
161
194
232
260
2019
21
77
147
197
241
265
2020
19
71
117
147
171
2021
15
55
95
127
2022
18
64
95
2023
20
76
2024
28
Total
$ 1,567
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
173
Bond
Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves
Claims
Reported
2015 $
67 $
67 $
63 $
60 $
54 $
48 $
47 $
42 $
37 $
29 $
4
1,413
2016
61
61
61
55
51
45
37
34
28
8
1,348
2017
63
90
101
94
79
70
68
65
22
1,799
2018
68
68
72
71
70
63
54
24
1,750
2019
72
73
74
73
70
61
44
1,925
2020
83
84
79
83
80
51
2,294
2021
85
85
88
84
55
2,989
2022
85
93
93
29
2,571
2023
81
83
63
1,647
2024
90
78
975
Total
$
667
Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of
Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
9 $
20 $
24 $
31 $
34 $
32 $
30 $
25 $
25 $
25
2016
2
12
15
20
22
22
22
20
20
2017
5
46
55
54
42
43
43
43
2018
6
16
23
24
29
30
29
2019
3
13
15
16
16
17
2020
4
12
21
26
27
2021
8
21
23
29
2022
11
42
59
2023
8
17
2024
10
Total
$
276
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
174
Assumed Reinsurance
Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves [1]
Claims
Reported
2015 $ 102 $
92 $
94 $
94 $
95 $
96 $
96 $
96 $
96 $
96 $
—
1,737
2016
88
91
98
100
102
101
102
104
104
(1)
1,996
2017
129
153
161
157
153
155
155
155
—
2,596
2018
128
127
129
134
135
132
132
(6)
3,078
2019
181
189
186
190
208
208
11
3,843
2020
183
180
186
178
181
11
3,374
2021
191
195
203
204
22
2,698
2022
266
274
290
84
2,501
2023
329
327
112
2,354
2024
410
297
1,049
Total
$ 2,107
[1]Contributing to the negative IBNR reserves for some accident years is a lag in the timing of expected reinsurance recoveries under the Navigators ADC with NICO.
Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of
Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
42 $
64 $
77 $
83 $
91 $
94 $
95 $
95 $
96 $
96
2016
36
66
84
90
95
97
99
101
101
2017
44
116
135
145
147
149
151
150
2018
25
111
133
139
141
144
133
2019
62
132
153
159
176
185
2020
49
89
113
132
151
2021
46
102
132
157
2022
60
128
173
2023
63
149
2024
61
Total
$ 1,356
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
175
Personal Automobile Liability
Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves
Claims
Reported
2015 $ 1,195 $ 1,340 $ 1,338 $ 1,330 $ 1,331 $ 1,328 $ 1,324 $ 1,320 $ 1,319 $ 1,319 $
2
216,911
2016
1,407 1,402 1,393 1,397 1,395 1,386 1,384 1,384 1,388
6
215,877
2017
1,277 1,275 1,228 1,214 1,200 1,198 1,197 1,198
6
187,564
2018
1,108 1,104 1,072 1,058 1,056 1,055 1,054
18
156,295
2019
1,018 1,010
991
986
971
967
10
139,762
2020
805
782
775
741
740
23
96,731
2021
881
886
852
846
57
102,129
2022
928 1,018 1,009
132
107,911
2023
1,138 1,129
270
107,253
2024
1,212
622
94,233
Total
$ 10,862
Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of
Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
475 $
935 $ 1,142 $ 1,243 $ 1,292 $ 1,304 $ 1,310 $ 1,313 $ 1,314 $ 1,315
2016
505
968 1,188 1,308 1,345 1,363 1,373 1,377 1,380
2017
441
836 1,033 1,123 1,161 1,180 1,187 1,189
2018
359
710
888
965 1,011 1,028 1,033
2019
323
654
816
897
933
949
2020
238
486
615
679
709
2021
247
553
691
760
2022
301
662
813
2023
329
731
2024
361
Total
$ 9,240
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
176
Personal Automobile Physical Damage
Incurred Losses & Allocated Loss Adjustment
Expenses, Net of Reinsurance
For the years ended
December 31,
(Unaudited)
Accident
Year
2022
2023
2024
IBNR
Reserves
Claims
Reported
2022 $
533 $
549 $
539 $
3
239,634
2023
574
544
3
234,247
2024
557
28
199,915
Total
$ 1,640
Cumulative Paid Losses &
Allocated Loss Adjustment
Expenses, Net of Reinsurance
For the years ended
December 31,
(Unaudited)
Accident
Year
2022
2023
2024
2022 $
498 $
538 $
536
2023
513
541
2024
497
Total
$ 1,574
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
177
Homeowners
Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves
Claims
Reported
2015 $
690 $
703 $
690 $
684 $
684 $
684 $
684 $
684 $
682 $
682 $
—
120,023
2016
669
673
663
658
658
658
658
658
658
—
119,818
2017
866
889
884
783
775
774
771
769
4
124,780
2018
903
910
673
642
639
645
642
8
102,924
2019
501
475
470
468
467
465
1
84,810
2020
525
512
513
505
499
5
88,546
2021
502
501
491
485
5
77,320
2022
499
507
498
9
64,118
2023
584
573
28
68,405
2024
605
158
58,223
Total
$ 5,876
Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of
Reinsurance
For the years ended December 31,
(Unaudited)
Accident
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
487 $
645 $
665 $
674 $
680 $
681 $
681 $
682 $
682 $
682
2016
481
621
640
649
653
655
656
657
658
2017
538
747
795
757
761
762
761
763
2018
484
712
616
619
627
626
628
2019
318
425
445
458
460
463
2020
335
454
478
486
490
2021
305
440
464
473
2022
298
453
476
2023
390
521
2024
367
Total
$ 5,521
Property and casualty reserves, including IBNR
The Company estimates ultimate losses and allocated loss
adjustment expenses ("ALAE") by accident year. IBNR
represents the excess of estimated ultimate loss reserves over
case reserves. The process to estimate ultimate losses and loss
adjustment expenses is an integral part of the Company's
reserve setting. Reserves for ALAE and ULAE are generally
established separate from the reserves for losses.
Reserves for losses are set by line of business within the
reportable segments. Case reserves are established by a claims
handler on each individual claim and are adjusted as new
information becomes known during the course of handling the
claim. Lines of business for which reported losses emerge over
a long period of time are referred to as long-tail lines of
business. Lines of business for which reported losses emerge
more quickly are referred to as short-tail lines of business. The
Company’s shortest tail lines of business are homeowners,
commercial property and automobile physical damage. The
longest tail lines of business include workers’ compensation,
general liability and professional liability. For short-tail lines of
business, emergence of paid loss and case reserves is credible
and likely indicative of ultimate losses. For long-tail lines of
business, emergence of paid losses and case reserves is less
credible in the early periods after a given accident year and,
accordingly, may not be indicative of ultimate losses.
The Company’s reserving actuaries regularly review reserves
for both current and prior accident years using the most current
claim data. A variety of actuarial methods and judgments are
used for most lines of business to arrive at selections of
estimated ultimate losses and loss adjustment expenses. The
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
178
reserve selections incorporate input, as appropriate, from claims
personnel, pricing actuaries and operating management about
reported loss cost trends and other factors that could affect the
reserve estimates.
For both short-tail and long-tail lines of business, an expected
loss ratio ("ELR") is used to record initial reserves. This ELR is
determined by starting with the average loss ratio of recent prior
accident years and adjusting that ratio for the effect of expected
changes to earned pricing, loss frequency and severity, mix of
business, ceded reinsurance and other factors. For short-tail
lines, IBNR for the current accident year ("CAY") gives weight to
both the initial ELR multiplied by earned premium approach as
well as a loss development approach, given early reported
losses are more credible than in long-tailed lines. For long-tailed
lines, IBNR reserves for the current accident year are initially
recorded as the product of the ELR for the period and the
earned premium for the period, less reported losses for the
period. For certain short-tailed lines of business, including
commercial property, homeowners, and automobile physical
damage, IBNR amounts in the above loss development triangles
are negative in certain accident years due to anticipated salvage
and subrogation recoveries on paid losses.
As losses for a given accident year emerge or develop in
subsequent periods, reserving actuaries use other methods to
estimate ultimate unpaid losses in addition to the ELR method.
These primarily include paid and reported loss development
methods, frequency/severity techniques and the Bornhuetter-
Ferguson method (a combination of the ELR and paid
development or reported development method). Within any one
line of business, the methods that are given more weight vary
based primarily on the maturity of the accident year, the mix of
business and the particular internal and external influences
impacting the claims experience or the methods. The output of
the reserve reviews are reserve estimates that are referred to as
actuarial indications.
Paid development and reported development techniques are
used for most lines of business though more weight is given to
the reported development method for some of the long-tailed
lines like general liability. In addition, for long-tailed lines of
business, the Company relies on the ELR method for immature
accident years. Frequency/severity techniques are used
predominantly for professional liability and are also used for
automobile liability. The Berquist-Sherman technique is also
used for automobile liability, marine and assumed reinsurance.
For most lines, reserves for ALAE, or those expenses related to
specific claims, are analyzed using paid development
techniques and an analysis of the relationship between ALAE
and loss payments. For most of the lines acquired through the
Navigators Group book of business, loss and ALAE are
reviewed on a combined basis. Reserves for ULAE are
determined using the expected cost per claim year and the
anticipated claim closure pattern as well as the ratio of paid
ULAE to paid losses.
The recorded reserve for losses and loss adjustment expenses
represents the Company's best estimate of the ultimate
settlement amount of unpaid losses and loss adjustment
expenses. In applying judgment, the best estimate is selected
after considering the estimates derived from a number of
actuarial methods, giving more weight to those methods
deemed more predictive of ultimate unpaid losses and loss
adjustment expenses. The Company does not produce a
statistical range or confidence interval of reserve estimates and,
since reserving methods with more credibility are given greater
weight, the selected best estimate may differ from the mid-point
of the various estimates produced by the actuarial methods
used.
Cumulative number of reported claims
For most property and casualty lines, claim counts represent the
number of claim features on a reported claim where a claim
feature is each separate coverage for each claimant affected by
the claim event. For example, one car accident that results in
two bodily injury claims and one automobile damage liability
claim would be counted as three claims within the personal
automobile liability triangle. Similarly, a fire that impacts one
commercial building may result in multiple claim features due to
the potential for claims related to business interruption,
structural damage, and loss of the physical contents of the
building. Claim features that result in no paid losses are
included in the reported claim counts. For some property and
casualty lines, such as marine and assumed reinsurance, a
claim count represents each reported claim regardless of the
number of features. For assumed bordereau business and
business written on binders, one claim count is posted for each
bordereau received, which could account for multiple claims.
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
179
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance [1]
(Unaudited)
Reserve Line
1st
Year
2nd
Year
3rd
Year
4th
Year
5th
Year
6th
Year
7th
Year
8th
Year
9th
Year
10th
Year
Workers' compensation
14.8%
18.4%
12.1%
8.1%
5.7%
4.0%
2.9%
2.1%
1.7%
1.3%
General liability
2.5%
7.8%
11.8%
16.6%
15.5%
12.3%
9.1%
5.9%
3.7%
0.6%
Marine
22.8%
32.0%
16.8%
7.5%
6.7%
6.2%
0.8%
0.4%
(1.5%)
(0.7%)
Package business
35.8%
22.4%
9.6%
9.3%
6.4%
4.3%
3.3%
2.1%
1.4%
1.2%
Commercial property
49.9%
31.9%
7.5%
3.3%
1.5%
0.8%
—%
0.2%
(0.2%)
(0.5%)
Commercial automobile liability
14.1%
19.4%
20.1%
17.0%
12.2%
6.8%
4.2%
1.2%
0.7%
—%
Commercial automobile physical damage
78.2%
17.3%
(0.2%)
Professional liability
5.3%
16.1%
16.5%
11.8%
9.6%
10.3%
8.9%
3.4%
2.4%
(1.9%)
Bond
11.1%
26.4%
11.0%
8.6%
1.2%
(1.1%)
(1.6%)
(7.8%)
(0.3%)
(0.3%)
Assumed Reinsurance
26.1%
33.0%
14.2%
6.8%
5.9%
2.4%
(1.0%)
0.8%
0.1%
(0.4%)
Personal automobile liability
32.7%
34.4%
16.3%
8.0%
3.6%
1.4%
0.6%
0.2%
0.2%
0.1%
Personal automobile physical damage
91.9%
6.3%
(0.4%)
Homeowners
67.7%
26.2%
2.0%
0.6%
0.8%
0.2%
0.1%
0.1%
0.1%
—%
[1]Negative percentages are generally due to salvage, subrogation or other recoveries.
|GROUP LIFE, DISABILITY AND ACCIDENT PRODUCTS
Rollforward of Liabilities for Unpaid Losses and Loss Adjustment Expenses
For the years ended December 31,
2024
2023
2022
Beginning liabilities for unpaid losses and loss adjustment expenses, gross
$
8,274 $
8,160 $
8,210
Reinsurance recoverables
254
245
245
Beginning liabilities for unpaid losses and loss adjustment expenses, net
8,020
7,915
7,965
Provision for unpaid losses and loss adjustment expenses
Current incurral year
5,195
5,145
4,853
Prior year's discount accretion
194
193
202
Prior incurral year development [1]
(561)
(502)
(381)
Total provision for unpaid losses and loss adjustment expenses [2]
4,828
4,836
4,674
Payments
Current incurral year
(2,735)
(2,575)
(2,456)
Prior incurral years
(2,189)
(2,156)
(2,268)
Total payments
(4,924)
(4,731)
(4,724)
Ending liabilities for unpaid losses and loss adjustment expenses, net
7,924
8,020
7,915
Reinsurance recoverables
282
254
245
Ending liabilities for unpaid losses and loss adjustment expenses, gross
$
8,206 $
8,274 $
8,160
[1]Prior incurral year development represents the change in estimated ultimate incurred losses and loss adjustment expenses for prior incurral years on a discounted
basis.
[2]Includes unallocated loss adjustment expenses of $175, $182 and $185 for the years ended December 31, 2024, 2023 and 2022, respectively, that are recorded in
insurance operating costs and other expenses in the Consolidated Statements of Operations.
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
180
Group Life, Disability and Accident Products Reserves, Net of Reinsurance, that are Discounted
For the years ended December 31,
2024
2023
2022
Liability for unpaid losses and loss adjustment expenses, at undiscounted amounts
$
8,111
$
8,150
$
8,124
Amount of discount
(1,196)
(1,166)
(1,205)
Carrying value of liability for unpaid losses and loss adjustment expenses
$
6,915
$
6,984
$
6,919
Weighted average discount rate
3.3 %
3.2 %
3.2 %
Range of discount rate
2.1 % -
8.0 % 2.1 % -
8.0 % 2.1 % -
8.0 %
Reserves are discounted at rates in effect at the time claims
were incurred, ranging from 2.1% for life and disability reserves
acquired from Aetna based on interest rates in effect at the
acquisition date of November 1, 2017, to 8.0% for the
Company’s pre-acquisition reserves for incurral year 1990, and
vary by product. Prior year's discount accretion has been
calculated as the average reserve balance of discounted
reserves for the year times the weighted average discount rate.
2024 re-estimates of prior incurral year
reserves
Group disability- Prior period reserve estimates decreased
by approximately $483 largely driven by long-term disability
claim incidence lower than prior assumptions and favorable
recoveries on prior incurral year claims, as well as a favorable
change in the recovery rate assumption.
Group life and accident (including group life
premium waiver)- Prior period reserve estimates
decreased by approximately $80 largely driven by favorable
mortality emergence and continued low incidence in group life
premium waiver.
2023 re-estimates of prior incurral year
reserves
Group disability- Prior period reserve estimates decreased
by approximately $457 largely driven by group long-term
disability claim incidence lower than prior assumptions and
strong recoveries on prior incurral year claims.
Group life and accident (including group life
premium waiver)- Prior period reserve estimates
decreased by approximately $36 largely driven by continued low
incidence in group life premium waiver.
Supplemental Accident & Health- Prior period reserve
estimates decreased by approximately $9 driven by lower than
previously expected claim incidence.
2022 re-estimates of prior incurral year
reserves
Group disability- Prior period reserve estimates decreased
by approximately $325 largely driven by group long-term
disability claim incidence lower than prior assumptions, strong
recoveries on prior incurral year claims and higher estimated
claim termination rates.
Group life and accident (including group life
premium waiver)- Prior period reserve estimates
decreased by approximately $50 largely driven by continued low
incidence in group life premium waiver as well as a reduction in
the estimation of high level of mortality losses incurred in fourth
quarter 2021.
Supplemental Accident & Health- Prior period reserve
estimates decreased by approximately $6 driven by lower than
previously expected claim incidence.
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
181
Reconciliation of Loss Development to Liability for Unpaid Losses and Loss Adjustment Expenses as of
December 31, 2024
Losses and Allocated Loss
Adjustment Expenses, Net of
Reinsurance
Subtotal
Reserve Line
Cumulative
Incurred for
Incurral
Years
Displayed
in Triangles
Cumulative
Paid for
Incurral
Years
Displayed
in Triangles
Unpaid for
Incurral
Years not
Displayed
in Triangles
Unpaid
Unallocated
Loss
Adjustment
Expenses,
Net of
Reinsurance
Discount
Unpaid
Losses and
Loss
Adjustment
Expenses,
Net of
Reinsurance
Reinsurance
and Other
Recoverables
Liability for
Unpaid
Losses and
Loss
Adjustment
Expenses
Group long-term disability
$
14,365 $
(8,243) $
1,400 $
193 $ (1,121) $
6,594 $
270 $
6,864
Group life and accident,
excluding premium waiver
6,213
(5,669)
145
5
(12)
682
4
686
Group short-term disability
173
10
—
183
—
183
Group life premium waiver
485
9
(63)
431
3
434
Group supplemental health
34
—
—
34
5
39
Total Employee Benefits
$
20,578 $
(13,912) $
2,237 $
217 $ (1,196) $
7,924 $
282 $
8,206
The following loss triangles present historical loss development
for incurred and paid claims by the year the insured claim
occurred, referred to as the incurral year. Triangles are limited to
the number of years for which claims incurred typically remain
outstanding, not exceeding ten years. Short-tail lines, which
represent claims generally expected to be paid within a few
years, have three years of claim development displayed.
Changes in reserve development evident in the incurred loss
triangles differ from prior accident year development recorded
by the Company as shown in the reserve rollforward above as
the triangles are presented on an undiscounted basis and
exclude ULAE.
Group Long-Term Disability
Undiscounted Incurred Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Incurral
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
IBNR
Reserves
Claims
Reported
2015 $ 1,595 $ 1,442 $ 1,422 $ 1,420 $ 1,401 $ 1,385 $ 1,380 $ 1,380 $ 1,380 $ 1,385 $
—
32,589
2016
1,651
1,481
1,468
1,437
1,417
1,409
1,401
1,400
1,407
—
33,307
2017
1,597
1,413
1,358
1,316
1,304
1,296
1,289
1,294
—
30,929
2018
1,647
1,387
1,309
1,277
1,276
1,271
1,279
—
28,428
2019
1,650
1,424
1,327
1,284
1,287
1,277
—
27,467
2020
1,686
1,407
1,323
1,282
1,260
—
25,862
2021
1,768
1,521
1,417
1,351
1
27,156
2022
1,842
1,566
1,452
6
25,952
2023
1,988
1,700
44
28,026
2024
1,960
970
18,035
Total
$ 14,365
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
182
Cumulative Paid Losses & Allocated Loss Adjustment Expenses, Net of Reinsurance
For the years ended December 31,
(Unaudited)
Incurral
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2015 $
108 $
460 $
687 $
806 $
891 $
962 $
1,025 $
1,078 $
1,125 $
1,164
2016
112
479
705
819
907
981
1,043
1,100
1,144
2017
109
452
658
757
842
911
970
1,017
2018
105
447
639
743
827
897
954
2019
101
454
650
751
832
895
2020
100
458
663
767
839
2021
101
493
720
820
2022
101
496
719
2023
116
562
2024
129
Total
$
8,243
Group Life and Accident,
excluding Premium Waiver
Undiscounted Incurred Losses & Allocated
Loss Adjustment Expenses, Net of Reinsurance
For the years ended
December 31,
(Unaudited)
Incurral
Year
2022
2023
2024
IBNR
Reserves
Claims
Reported
2022 $ 2,061 $ 2,053 $ 2,056 $
12
72,225
2023
2,108
2,092
25
74,958
2024
2,065
380
59,084
Total
$ 6,213
Cumulative Paid Losses &
Allocated Loss Adjustment
Expenses, Net of Reinsurance
For the years ended
December 31,
(Unaudited)
Incurral
Year
2022
2023
2024
2022 $ 1,562 $ 2,018 $ 2,040
2023
1,572
2,053
2024
1,576
Total
$ 5,669
Group life, disability and accident reserves,
including IBNR
The majority of Employee Benefits’ reserves are for LTD
claimants who are known to be disabled and are currently
receiving benefits. A Disabled Life Reserve ("DLR") is calculated
for each LTD claim. The DLR for each claim is the expected
present value of all estimated future benefit payments and
includes estimates of claim recovery, investment yield, and
offsets from other income, including offsets from Social Security
benefits and workers’ compensation. Estimated future benefit
payments represent the monthly income benefit that is paid until
recovery, death or expiration of benefits. Claim recoveries are
estimated based on claim characteristics such as age and
diagnosis and represent an estimate of benefits that will
terminate, generally as a result of the claimant returning to work
or being deemed able to return to work. The DLR also includes
a liability for payments to claimants who have not yet been
approved for LTD. In these cases, the present value of future
benefits is reduced for the likelihood of claim denial based on
Company experience. For claims recently closed due to
recovery, a portion of the DLR is retained for the possibility that
the claim reopens upon further evidence of disability. In addition,
a reserve for estimated unpaid claim expenses is included in the
DLR.
For incurral years with IBNR claims, estimates of ultimate losses
are made by applying completion factors to the dollar amount of
claims reported or expected depending on the market segment.
IBNR represents estimated ultimate losses less both DLR and
cumulative paid amounts for all reported claims. Completion
factors are derived using standard actuarial techniques using
triangles that display historical claim count emergence by
incurral month. These estimates are reviewed for
reasonableness and are adjusted for current trends and other
factors expected to cause a change in claim emergence. The
IBNR includes an estimate of unpaid claim expenses, including
a provision for the cost of initial set-up of the claim once
reported.
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
183
For all products, including LTD, there is a period generally
ranging from two to twelve months, depending on the product
and market segment, where emerged claim information for an
incurral year is not yet credible enough to be a basis for an
IBNR projection. In these cases, the ultimate losses and
allocated loss adjustment expenses are estimated using earned
premium multiplied by an expected loss ratio.
The Company also records reserves for future death benefits
under group term life policies that provide for premiums to be
waived in the event the insured is unable to work due to
disability and has satisfied an elimination period, which is
typically nine months (premium waiver reserves). The death
benefit reserve for these group life premium waiver claims is
estimated for a known disabled claimant equal to the present
value of expected future cash outflows (typically a lump sum
face amount payable at death plus claim expenses) with
separate estimates for claimant recovery (when no death benefit
is payable) and for death before recovery or benefit expiry
(when death benefit is payable). The IBNR for premium waiver
death benefits is estimated with standard actuarial development
methods.
In addition, the Company also records reserves for group term
life, accidental loss of life and severe injury, short-term disability,
and other group products that have short claim payout periods.
For these products, reserves are determined using paid or
reported actuarial development methods. The resulting claim
triangles produce a completion pattern and estimate of ultimate
loss. IBNR for these lines of business equals the estimated
ultimate losses and loss adjustment expenses less the amount
of paid or reported claims depending on whether the paid or
reported development method was used. Estimates are
reviewed for reasonableness and are adjusted for current trends
or other factors that affect the development pattern.
Cumulative number of reported claims
For group life, disability and accident coverages, claim counts
include claims that are approved, pending approval and
terminated and exclude denied claims. Due to the nature of the
claims, one claimant represents one event.
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
(Unaudited)
1st
Year
2nd
Year
3rd
Year
4th
Year
5th
Year
6th
Year
7th
Year
8th
Year
9th
Year
10th
Year
Group long-term disability
7.6 %
27.0 %
15.9 %
8.0 %
6.3 %
5.2 %
4.5 %
3.8 %
3.3 %
2.8 %
Group life and accident, excluding
premium waiver
75.8 %
22.6 %
1.1 %
Note 10 - Reserve for Unpaid Losses and Loss Adjustment Expenses
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
184
11. RESERVE FOR FUTURE POLICY BENEFITS
Rollforward of Reserve for Future Policy Benefits
For the year ended December 31,
2024
2023
2022
Payout
Annuities
Life
Conversions
Paid-up
Life
Payout
Annuities
Life
Conversions
Paid-up
Life
Payout
Annuities
Life
Conversions
Paid-up
Life
Present Value of Expected Net
Premiums
Balance, beginning of the period
$
49
$
47
$
58
Balance, ending of the period
$
45
$
49
$
47
Present Value of Expected
Future Policy Benefits
Beginning balance at single-A
rate
$
137 $
113 $
185 $
140 $
112 $
192 $
188 $
152 $
262
Beginning adjustment for
changes in single-A rate
7
(11)
(32)
4
(14)
(39)
47
19
14
Beginning balance at original
discount rate
130
124
217
136
126
231
141
133
248
Effect of changes in cash flow
assumptions
2
2
—
(2)
—
—
—
—
—
Effect of actual variances from
expected experience
1
3
(1)
1
7
(1)
—
5
—
Adjusted beginning balance
133
129
216
135
133
230
141
138
248
Interest accrual and other
7
20
7
7
20
8
8
17
7
Benefit Payments
(12)
(28)
(22)
(12)
(29)
(21)
(13)
(29)
(24)
Ending balance at original
discount rate
128
121
201
130
124
217
136
126
231
Ending adjustment for changes
in single-A rate
—
(15)
(33)
7
(11)
(32)
4
(14)
(39)
Ending balance at single-A rate
$
128 $
106 $
168 $
137 $
113 $
185 $
140 $
112 $
192
Net reserve for future policy
benefits
$
128 $
61 $
168 $
137 $
64 $
185 $
140 $
65 $
192
Weighted-average duration of
the reserve for future policy
benefits (years)
9.2
11.0
6.3
9.0
12.2
6.4
9.2
11.4
6.4
Net Reserve for Future Policy Benefits
As of December 31,
2024
2023
2022
Payout Annuities
$
128 $
137 $
140
Life Conversions
61
64
65
Paid-up Life
168
185
192
Deferred Profit Liability
17
20
19
Other
74
78
86
Total
$
448 $
484 $
502
Note 11 - Reserve for Future Policy Benefits
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
185
Undiscounted Expected Future Gross Premiums and Benefit Payments
As of December 31,
2024
2023
2022
Payout Annuities [1]
Expected future benefit payments
$
256 $
257 $
272
Life Conversions
Expected future gross premiums
$
106 $
114 $
120
Expected future benefit payments
$
198 $
204 $
212
Paid-up Life [1]
Expected future benefit payments
$
260 $
281 $
300
[1]Payout Annuities and Paid-up Life have no expected future gross premiums.
Weighted-Average Interest Rates
As of December 31,
2024
2023
2022
Payout Annuities
Interest accretion rate
5.6 %
5.6 %
5.6 %
Current discount rate
5.5 %
5.0 %
5.3 %
Life Conversions
Interest accretion rate
4.3 %
4.2 %
4.1 %
Current discount rate
5.6 %
5.1 %
5.3 %
Paid-up Life
Interest accretion rate
2.9 %
2.9 %
2.9 %
Current discount rate
5.3 %
5.0 %
5.2 %
The Company completed a review of cash flow assumptions in
the third quarter 2024 and 2023, resulting in immaterial changes
to the reserve for future policy benefits. For payout annuities,
the net effect of updating cash flow assumptions was offset by a
corresponding impact to the deferred profit liability. Gross
premiums and interest accretion recognized on long-duration
insurance policies for the years ended December 31, 2024,
2023 and 2022 were immaterial.
12. OTHER POLICYHOLDER FUNDS AND BENEFITS
PAYABLE
Other policyholder funds and benefits payable of $614, $638
and $658 as of December 31, 2024, 2023 and 2022,
respectively, included universal life long-duration contacts of
$206, $223 and $232 as well as policyholder balances related to
short-duration contracts of $408, $415 and $426. The universal
life long-duration contacts presented in the table below were
economically ceded to Prudential as part of the sale of the
Company's former individual life business, which closed in 2013.
Universal Life Long Duration Contracts Rollforward
For the year ended December 31,
2024
2023
2022
Balance, beginning of year
$
223
$
232
$
253
Premiums Received
13
14
15
Policy Charges
(23)
(21)
(23)
Surrenders and Withdrawals
(5)
(6)
(4)
Benefit Payments
(9)
(6)
(20)
Interest Credited
7
10
11
Balance, End of Year
$
206
$
223
$
232
Weighted-average crediting rate
4.3 %
4.2 %
4.2 %
Net Amount at Risk [1]
$
824
$
917
$
987
Cash Surrender Value
$
205
$
221
$
229
[1] Net amount at risk is defined as the current death benefit in excess of the current account value as of the balance sheet date.
Note 11 - Reserve for Future Policy Benefits
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
186
As of December 31, 2024, 2023 and 2022, universal life
contracts of $205, $222 and $230, respectively, had crediting
rates at their guaranteed minimums ranging from 4%-5%.
13. DEBT
The Company’s long-term debt securities are issued by Hartford
Insurance Group, Inc. ("HIG Holding Company"), are unsecured
obligations of HIG Holding Company, and rank on a parity with
all other unsecured and unsubordinated indebtedness of HIG
Holding Company.
Debt is carried net of discount and issuance cost.
Long-term Debt by Issuance
As of December 31,
2024
2023
Revolving Credit Facilities
$
— $
—
Senior Notes and Debentures
2.8% Notes, due 2029
600
600
5.95% Notes, due 2036
300
300
6.625% Notes, due 2040
295
295
6.1% Notes, due 2041
409
409
6.625% Notes, due 2042
178
178
4.3% Notes, due 2043
300
300
4.4% Notes, due 2048
500
500
3.6% Notes, due 2049
800
800
2.9% Notes, due 2051
600
600
Junior Subordinated Debentures
3-Month term SOFR + 0.26161% +
2.125% Notes, due 2067 [1]
500
500
Total Notes and Debentures
4,482
4,482
Unamortized discount and debt
issuance cost [2]
(116)
(120)
Total Debt
4,366
4,362
Less: Current maturities
—
—
Long-Term Debt
$
4,366 $
4,362
[1]The Company has an interest rate swap agreement expiring February 15,
2027 to effectively convert the variable interest payments based on 3-
month term Secured Overnight Financing Rate (“SOFR”) plus a spread
adjustment of 0.26161% plus 2.125 for this debenture.
[2]This amount includes unamortized discount of $68 and $70 as of
December 31, 2024 and 2023, respectively, on the 6.1% Notes, due 2041.
The effective interest rate on the 6.1% senior notes due 2041 is
7.9%. The effective interest rate on the remaining notes does
not differ materially from the stated rate.
Shelf Registrations
On September 23, 2024, the Company filed with the Securities
and Exchange Commission an automatic shelf registration
statement (Registration No. 333-282288) for the potential
offering and sale of debt and equity securities. The registration
statement allows for the following types of securities to be
offered: debt securities, junior subordinated debt securities,
guarantees, preferred stock, common stock, depositary shares,
warrants, stock purchase contracts, and stock purchase units.
Because The Hartford is a well-known seasoned issuer, as
defined in Rule 405 under the Securities Act of 1933, the
registration statement became effective immediately upon filing
and The Hartford may offer and sell an unlimited amount of
securities under the registration statement during the three-year
life of the registration statement.
Junior Subordinated Debentures
As of December 31, 2024 and 2023, the Company has
outstanding $500 of callable junior subordinated debentures
with a final maturity on February 12, 2067. Interest is payable
quarterly in arrears at a variable rate that resets quarterly.
The $500 junior subordinated debentures due 2067 are
unsecured, subordinated and junior in right of payment and
upon liquidation to all of the Company’s existing and future
senior indebtedness. In addition, the debentures are effectively
subordinated to all of the Company’s subsidiaries’ existing and
future indebtedness and other liabilities, including obligations to
policyholders. The debentures do not limit the Company’s or the
Company’s subsidiaries’ ability to incur additional debt, including
debt that ranks senior in right of payment and upon liquidation to
the debentures.
The Company has the right to defer interest payments for up to
a consecutive ten years without giving rise to an event of
default. Deferred interest will continue to accrue and will accrue
additional interest at the then applicable interest rate. If the
Company defers interest payments, the Company generally may
not make payments on or redeem or purchase any shares of its
capital stock or any of its debt securities or guarantees that rank
upon liquidation, dissolution or winding up equally with or junior
to the debentures, subject to certain limited exceptions.
The Company may elect to redeem the $500 junior
subordinated debentures due 2067 in whole or in part for the
principal amount being redeemed plus accrued and unpaid
interest to the date of redemption.
In connection with the offering of this debenture, the Company
entered into a Replacement Capital Covenant ("RCC") for the
benefit of holders of one or more designated series of the
Company's indebtedness, initially the Company's 4.3% notes
due 2043. Under the terms of the RCC, if the Company
redeems the debenture any time prior to February 12, 2047 (or
such earlier date on which the RCC terminates by its terms) it
can only do so with the proceeds from the sale of certain
qualifying replacement securities.
Note 12 - Other Policyholder Funds and Benefits Payable
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
187
Long-Term Debt
Long-term Debt Maturities (at par value) as of
December 31, 2024
2024 - Current maturities
$
—
2026
$
—
2027
$
—
2028
$
—
2029
$
600
Thereafter
$
3,882
Revolving Credit Facility
The Hartford has a $750 senior unsecured revolving credit
facility, including $100 available to support letters of credit (the
"Credit Facility"), with an expiration date of October 27, 2026.
Under the Credit Facility:
•
Revolving loans may be in multiple currencies.
•
U.S. dollar loans will bear interest at a floating rate
equivalent to an indexed rate that varies depending on
the type of borrowing plus a basis point spread based
on The Hartford's credit rating and will mature no later
than October 27, 2026.
•
Letters of credit bear a fee based on The Hartford's
credit rating and expire no later than October 27, 2027.
The Credit Facility requires the Company to maintain a minimum
consolidated net worth financial covenant to $11.25 billion,
excluding AOCI, limits the ratio of senior debt to capitalization,
excluding AOCI, at 35% and includes other customary
covenants. The Credit Facility is for general corporate purposes.
As of December 31, 2024 and 2023, no borrowings were
outstanding, no letters of credit were issued under the Credit
Facility and the Company was in compliance with all financial
covenants.
Lloyd's Letter of Credit Facility
The Hartford has a committed credit facility agreement with a
syndicate of lenders (the"Lloyd's Facility"). On October 21,
2024, The Hartford amended and restated the Lloyd's Facility.
The purpose of this facility is to issue letters of credit that may
be treated as Funds at Lloyd's to support underwriting capacity
provided by The Hartford Corporate Underwriters Limited to the
Lloyd's syndicate 1221 for the 2025 and 2026 underwriting
years of account (and prior open years). The amended and
restated Lloyd's Facility has two tranches, with one tranche
extending a $74 commitment and the other tranche extending a
£79 million ($99 as December 31, 2024). The term of the facility
is two years. As of December 31, 2024, letters of credit with an
aggregate face amount of $74 and £79 million, or $99, were
outstanding under the Lloyd's Facility. As of December 31, 2023,
letters of credit with an aggregate face amount of $74 and £79
million, or $101, were outstanding under the Lloyd's Facility.
Among other covenants, the Lloyd's Facility contains financial
covenants regarding The Hartford’s consolidated net worth and
financial leverage. As of December 31, 2024, The Hartford was
in compliance with all financial covenants of the facility.
Collateralized Advances with
Federal Home Loan Bank of Boston
The Company’s subsidiaries, Hartford Fire Insurance Company
(“Hartford Fire”) and Hartford Life and Accident Insurance
Company ("HLA"), are members of the Federal Home Loan
Bank of Boston ("FHLBB"). Membership allows these
subsidiaries access to collateralized advances, which may be
short- or long-term with fixed or variable rates. FHLBB
membership required the purchase of member stock and
requires additional member stock ownership of 3% or 4% of any
amount borrowed. The amount of advances that can be taken is
limited to a percentage of the fair value of the assets considered
eligible collateral, for example, 96% for U.S. government-backed
fixed maturities maturing within 3 years and 75% for AA-rated
commercial mortgage-backed fixed maturities maturing in 5
years or more. In its consolidated balance sheets, The Hartford
presents the liability for advances taken based on use of the
funds with advances for general corporate purposes presented
in short- or long-term debt and advances to earn incremental
investment income presented in other liabilities, consistent with
other collateralized financing transactions such as securities
lending and repurchase agreements. The Connecticut
Department of Insurance permits Hartford Fire and HLA to
pledge up to $1.4 billion and $0.6 billion in qualifying assets,
respectively, without prior approval, to secure FHLBB advances
in 2024. The pledge limit is determined quarterly based on
statutory admitted assets and capital and surplus of Hartford
Fire and HLA, respectively.
As of December 31, 2024 and 2023, there were no advances
outstanding under the FHLBB facility.
Note 13 - Debt
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
188
14. COMMITMENTS AND CONTINGENCIES
Management evaluates each contingent matter separately. A
loss is recorded if probable and reasonably estimable.
Management establishes liabilities for these contingencies at its
“best estimate,” or, if no one number within the range of possible
losses is more probable than any other, the Company records
an estimated liability at the low end of the range of losses.
Litigation
The Hartford is involved in claims litigation arising in the ordinary
course of business, both as a liability insurer defending or
providing indemnity for third-party claims brought against
insureds and as an insurer defending coverage claims brought
against it. The Hartford accounts for such activity through the
establishment of unpaid loss and loss adjustment expense
reserves. Subject to the uncertainties related to sexual
molestation and sexual abuse claims, including those discussed
in Note 10, Reserve for Unpaid Losses and Loss Adjustment
Expenses, and in the following discussion under the caption
“Run-off Asbestos and Environmental Claims,” management
expects that the ultimate liability, if any, with respect to such
ordinary-course claims litigation, after consideration of
provisions made for potential losses and costs of defense, will
not be material to the consolidated financial condition, results of
operations or cash flows of The Hartford.
The Hartford is also involved in other kinds of legal actions,
some of which assert claims for substantial amounts. In addition
to the matter described below, these actions include putative
class actions seeking certification of a state or national class.
Such putative class actions have alleged, for example,
underpayment of claims or improper sales or underwriting
practices in connection with various kinds of insurance policies,
such as personal and commercial automobile and property. The
Hartford also is involved in individual actions in which punitive
damages are sought, such as claims alleging bad faith in the
handling of insurance claims or other allegedly unfair or
improper business practices. Management expects that the
ultimate liability, if any, with respect to such lawsuits, after
consideration of provisions made for estimated losses, will not
be material to the consolidated financial condition of The
Hartford. Nonetheless, given the large or indeterminate amounts
sought in certain of these actions, and the inherent
unpredictability of litigation, the outcome in certain matters
could, from time to time, have a material adverse effect on the
Company’s results of operations or cash flows in particular
quarterly or annual periods.
Run-off Asbestos and
Environmental Claims
The Company continues to receive A&E claims. Asbestos claims
relate primarily to bodily injuries asserted by people who came
in contact with asbestos or products containing asbestos.
Environmental claims relate primarily to pollution and related
clean-up costs.
The vast majority of the Company's exposure to A&E relates to
accident years prior to 1986 that are reported in Property &
Casualty Other Operations ("Run-off A&E"). In addition, since
1986, the Company has written asbestos and environmental
exposures under general liability policies and pollution liability
under homeowners policies, which are reported in the Business
Insurance and Personal Insurance segments, respectively.
Prior to 1986, the Company wrote several different categories of
insurance contracts that may cover A&E claims. First, the
Company wrote primary policies providing the first layer of
coverage in an insured’s liability program. Second, the
Company wrote excess and umbrella policies providing higher
layers of coverage for losses that exhaust the limits of
underlying coverage. Third, the Company acted as a reinsurer
assuming a portion of those risks assumed by other insurers
writing primary, excess, umbrella and reinsurance coverages.
Significant uncertainty limits the ability of insurers and reinsurers
to estimate the ultimate reserves necessary for unpaid gross
losses and expenses related to environmental and asbestos
claims. The degree of variability of gross reserve estimates for
these exposures is significantly greater than for other more
traditional exposures.
In the case of the reserves for asbestos exposures, factors
contributing to the high degree of uncertainty include inadequate
loss development patterns, plaintiffs’ expanding theories of
liability, the risks inherent in major litigation, and inconsistent
and emerging legal doctrines with respect to the underlying
claims and with respect to the Company's coverage obligations.
Furthermore, over time, insurers, including the Company, have
experienced significant changes in the rate at which asbestos
claims are brought, the claims experience of particular insureds,
and the value of claims, making predictions of future exposure
from past experience uncertain. Plaintiffs and insureds also
have sought to use bankruptcy proceedings, including “pre-
packaged” bankruptcies, to accelerate and increase loss
payments by insurers. In addition, some policyholders have
asserted new classes of claims for coverages to which an
aggregate limit of liability may not apply. Further uncertainties
include insolvencies of other carriers, insolvencies of insureds
and unanticipated developments pertaining to the Company’s
ability to recover reinsurance for A&E claims. Management
believes these issues are not likely to be resolved in the near
future.
In the case of the reserves for environmental exposures, factors
contributing to the high degree of uncertainty include expanding
theories of liability and damages against insureds, emerging
risks from products and substances alleged to cause damage,
such as per-and polyfluoroalkyl substances ("PFAS"), the risks
inherent in major litigation, inconsistent and emerging legal
doctrines concerning the existence and scope of coverage for
environmental claims, and the scope and level of complexity of
the remediation required by regulators.
The reporting pattern for assumed reinsurance claims, including
those related to A&E claims, is much longer than for direct
claims. In many instances, it takes months or years to determine
Note 14 - Commitments and Contingencies
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
189
that the policyholder’s own obligations have been met and how
the reinsurance in question may apply to such claims. The delay
in reporting reinsurance claims and exposures adds to the
uncertainty of estimating the related reserves.
It is also not possible to predict changes in the legal and
legislative environment and their effect on the future
development of A&E claims.
Given the factors described above, the Company believes the
actuarial tools and other techniques it employs to estimate the
ultimate cost of claims for more traditional kinds of insurance
exposure are less precise in estimating reserves for A&E
exposures. For this reason, the Company principally relies on
exposure-based analysis to estimate the ultimate costs of these
claims, both gross and net of reinsurance, and regularly
evaluates new account information in assessing its potential
A&E exposures. The Company supplements this exposure-
based analysis with evaluations of the Company’s historical
direct net loss and expense paid and reported experience, and
net loss and expense paid and reported experience by calendar
and/or report year, to assess any emerging trends, fluctuations
or characteristics suggested by the aggregate paid and reported
activity.
For its Run-off A&E claims, as of December 31, 2024, the
Company reported $224 of net asbestos and environmental
reserves, including the benefit of losses ceded to the A&E ADC
with NICO. In addition, the Company has recorded $850,
including $62 in 2024, of a deferred gain within other liabilities
for losses economically ceded to NICO but for which the benefit
is not recognized in earnings until later periods. While the
Company believes that its current Run-off A&E reserves are
appropriate, significant uncertainties limit our ability to estimate
the ultimate reserves necessary for unpaid losses and related
expenses. The ultimate liabilities, thus, could exceed the
currently recorded reserves, and any such additional liability,
while not reasonably estimable now, could be material to The
Hartford's consolidated operating results or liquidity.
The Company’s A&E ADC reinsurance agreement reinsures
substantially all A&E reserve development for 2016 and prior
accident years, including Run-off A&E and A&E reserves
included in Business Insurance and Personal Insurance. The
A&E ADC has a coverage limit of $1.5 billion above the
Company’s existing net A&E reserves as of December 31, 2016
of approximately $1.7 billion. As of December 31, 2024, the
Company has incurred $1.5 billion in cumulative adverse
development on A&E reserves that have been ceded under the
A&E ADC treaty, leaving no remaining coverage available for
future adverse net reserve development, if any. Cumulative
adverse development of A&E claims for accident years 2016
and prior in excess of the treaty limit, including $141 recognized
in 2024, are absorbed as a charge to earnings by the Company.
The effect of future charges could be material to the Company’s
consolidated operating results or liquidity. For more information
on the A&E ADC, refer to Note 10, Reserve for Unpaid Losses
and Loss Adjustment Expenses.
Unfunded Commitments
As of December 31, 2024, the Company has outstanding
commitments totaling $3.8 billion, of which $2.1 billion is
committed to fund limited partnerships and other alternative
investments, which may be called by the partnership during the
commitment period to fund the purchase of new investments
and partnership expenses. The funding of purchase investments
in limited partnerships and other alternative investments are at
the discretion of the general partner or manager and may be
called at any time. Additionally, $1.0 billion of the outstanding
commitments relate to various funding obligations associated
with private debt and equity securities, as well as tax credits.
The remaining outstanding commitments of $636 relate to
mortgage loans. Of the $3.8 billion in total outstanding
commitments, $53 are related to mortgage loan commitments
which the Company can cancel unconditionally.
Guaranty Funds and Other
Insurance-related Assessments
In all states, insurers licensed to transact certain classes of
insurance are required to become members of a guaranty fund.
In most states, in the event of the insolvency of an insurer
writing any such class of insurance in the state, a guaranty fund
may assess its members to pay covered claims of the insolvent
insurers. Assessments are based on each member's
proportionate share of written premiums in the state for the
classes of insurance in which the insolvent insurer was
engaged. Assessments are generally limited for any year to one
or two percent of the premiums written per year depending on
the state. Some states permit member insurers to recover
assessments paid through surcharges on policyholders or
through full or partial premium tax offsets, while other states
permit recovery of assessments through the rate filing process.
Liabilities for guaranty fund and other insurance-related
assessments are accrued when an assessment is probable,
when it can be reasonably estimated, and when the event
obligating the Company to pay an imposed or probable
assessment has occurred. Liabilities for guaranty funds and
other insurance-related assessments are not discounted and
are included as part of other liabilities in the Consolidated
Balance Sheets. As of December 31, 2024 and 2023 the liability
balance was $70 and $77, respectively. As of December 31,
2024 and 2023, there were $0 of premium tax offsets related to
guaranty fund or other insurance-related assessments for both
periods.
Derivative Commitments
Certain of the Company’s derivative agreements contain
provisions that are tied to the financial strength ratings, as set by
nationally recognized statistical agencies, of the individual legal
entity that entered into the derivative agreement. If the legal
entity’s financial strength were to fall below certain ratings, the
counterparties to the derivative agreements could, in certain
instances, terminate the agreements and demand immediate
settlement of all outstanding derivative positions traded under
each impacted bilateral agreement.
Note 14 - Commitments and Contingencies
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
190
The settlement amount is determined by netting the derivative
positions transacted under each agreement. If the termination
rights were to be exercised by the counterparties, it could impact
the legal entity’s ability to conduct hedging activities by
increasing the associated costs and decreasing the willingness
of counterparties to transact with the legal entity. The aggregate
fair value of all derivative instruments with credit-risk-related
contingent features that are in a net liability position as of
December 31, 2024 was $33 for which the legal entities have
posted collateral of $31 in the normal course of business. Based
on derivative contractual terms as of December 31, 2024, a
downgrade of the current financial strength ratings by either
Moody's or S&P would not require additional assets to be
posted as collateral. This requirement could change as a result
of changes in our hedging activities or to the extent changes in
contractual terms are negotiated. The nature of the additional
collateral that we would post, if required, would be primarily in
the form of U.S. Treasury bills, U.S. Treasury notes and
government agency securities.
Guarantees
In the ordinary course of selling businesses or entities to third
parties, the Company has agreed to indemnify purchasers for
losses arising subsequent to the closing due to breaches of
representations and warranties with respect to the business or
entity being sold or with respect to covenants and obligations of
the Company and/or its subsidiaries. These obligations are
typically subject to various time limitations, defined by the
contract or by operation of law, such as statutes of limitation. In
some cases, the maximum potential obligation is subject to
contractual limitations, while in other cases such limitations are
not specified or applicable. The Company does not expect to
make any material payments on these guarantees and is not
carrying any material liabilities associated with these
guarantees.
The Hartford has guaranteed the timely payment of contractual
claims under certain life, accident and health and annuity
contracts issued by its former life and annuity business with
most of the guaranteed contracts issued between 1990 and
1997 (the "Talcott Guarantees"). Upon the sale of the life and
annuity business in May 2018, the purchaser indemnified the
Company for any liability arising under the guarantees. The
Talcott Guarantees cover contractual obligations only but
otherwise have no limitation as to maximum potential future
payments.
The liability for credit losses ("LCL") for Talcott Guarantees is
calculated for the estimated amount payable under guaranteed
contracts multiplied by the probability of default and the amount
of loss given a default. The probability of default is assigned by
credit rating of the applicable insurance company that issued the
contract and is based on historical insurance industry defaults
for liabilities with similar durations estimated through multiple
economic cycles. Credit ratings are current and forward-looking
and consider a variety of economic outcomes. Because
annuities represent the majority of the contracts issued, the loss
given default factors are based on a historical study of annuity
policyholder recoveries from insolvent estate assets. The
Company's exposure is expected to run off over a period that
will include more than one economic cycle.
The Company's evaluation of the required LCL for the Talcott
Guarantees considers the current economic environment as well
as macroeconomic scenarios similar to the approach used to
estimate the ACL for mortgage loans. See Note 5 - Investments.
In 2022, the LCL decreased from $25 to $22 primarily reflecting
a decrease in the estimated amount payable under guaranteed
contracts. In 2023, the LCL decreased to $9 primarily due to an
upgrade of Talcott's credit rating, as well as a decrease in the
estimated amount payable under guaranteed contracts. During
2024, the LCL decreased to $7 primarily due to an improvement
of Talcott's assumed liquidation rate, as well as a decrease in
the estimated amount payable under guaranteed contracts. The
Company has never experienced a loss on financial guarantees
similar to the Talcott Guarantees and we believe the risk of loss
is remote.
15. EQUITY
Equity Repurchase Program
In July, 2024, the Board of Directors approved a share
repurchase authorization for up to $3.3 billion effective from
August 1, 2024 to December 31, 2026. As of December 31,
2024, the Company has $3.15 billion remaining for equity
repurchases under this share repurchase program.
The Hartford's $3.0 billion equity repurchase program
authorized by its Board of Directors in August 2022, expired on
December 31, 2024. The Hartford's previous $3.0 billion equity
repurchase program authorized by its Board of Directors in
December 2020 expired on December 31, 2022.
During the year ended December 31, 2024, 2023, and 2022 the
Company repurchased $1.5 billion (14.4 million shares),
$1.4 billion (19.2 million shares) and $1.6 billion (22.3 million
shares), respectively, of common stock under these repurchase
programs.
During the period from January 1, 2025 through February 20,
2025, the Company repurchased $248 (2.2 million shares)
under the $3.3 billion repurchase program effective from August
1, 2024 to December 31, 2026.
The timing of any repurchases of shares is dependent on
several factors, including the market price of the Company's
securities, the Company's capital position, consideration of the
effect of any repurchases on the Company's financial strength or
credit ratings, the Company's blackout periods, and other
considerations.
The Company accrued $12 in excise taxes on share
repurchases as of December 31, 2024 and 2023, partially
reduced by share issuances, which are reported in other
liabilities on the Company's Consolidated Balance Sheets.
Preferred Stock
The Company has outstanding 13.8 million depositary shares
each representing 1/1000th interest in a share of the Company’s
Note 14 - Commitments and Contingencies
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
191
6.0% Series G non-cumulative perpetual preferred stock
(“Preferred Stock”) with a liquidation preference of $25,000 per
share (equivalent to $25.00 per depositary share). The
Preferred Stock is perpetual and has no maturity date.
Dividends are recorded when declared. Dividends are payable,
if declared, quarterly in arrears on the 15th day of February,
May, August and November of each year. If a dividend is not
declared and paid or made payable on all outstanding shares of
the Preferred Stock for the latest completed dividend period, no
dividends may be paid or declared on The Hartford’s common
stock and The Hartford may not purchase, redeem, or otherwise
acquire its common stock.
The Preferred Stock is redeemable at the Company’s option in
whole or in part, at a redemption price of $25,000 per share,
plus unpaid dividends attributable to the current dividend period.
Statutory Results
The U.S. domestic insurance subsidiaries of The Hartford
prepare their statutory financial statements in conformity with
statutory accounting practices prescribed or permitted by the
applicable state insurance department, which vary materially
from U.S. GAAP. Prescribed statutory accounting practices
include publications of the NAIC, as well as state laws,
regulations and general administrative rules. The differences
between statutory financial statements and financial statements
prepared in accordance with U.S. GAAP vary between domestic
and foreign jurisdictions. The principal differences are that
statutory financial statements do not reflect deferred policy
acquisition costs and limit deferred income taxes, recognize a
deferred gain on retroactive reinsurance within a special surplus
account rather than as other liabilities, predominately use
interest rate and mortality assumptions prescribed by the NAIC
for life benefit reserves, generally carry investments in bonds at
amortized cost, and present insurance assets and liabilities net
of reinsurance. For reporting purposes, statutory capital and
surplus is referred to collectively as "statutory capital".
U.S. Statutory Net Income
For the years ended
December 31,
2024
2023
2022
Employee Benefits Insurance
Subsidiary
$
576 $
592 $
378
Property and Casualty
Insurance Subsidiaries
2,112
1,887
1,514
Total
$ 2,688 $ 2,479 $ 1,892
U.S. Statutory Capital
As of December 31,
2024
2023
Employee Benefits Insurance
Subsidiary
$
2,708 $
2,748
Property and Casualty Insurance
Subsidiaries
13,294
12,549
Total
$
16,002 $
15,297
Regulatory Capital Requirements
The Company's U.S. insurance companies' states of domicile
impose RBC requirements. The requirements provide a means
of measuring the minimum amount of statutory capital
appropriate for an insurance company to support its overall
business operations based on its size and risk profile.
Companies below specific trigger points or ratios are classified
within certain levels, each of which requires specified corrective
action. All of the Company's operating insurance subsidiaries
had RBC ratios in excess of the minimum levels required by the
applicable insurance regulations.
Similar to the RBC ratios that are employed by U.S. insurance
regulators, regulatory authorities in the international jurisdictions
in which the Company operates generally establish minimum
solvency requirements for insurance companies. All of the
Company's international insurance subsidiaries expect to
maintain capital levels in excess of the minimum levels required
by the applicable regulatory authorities.
Dividend Restrictions
Dividends to HIG Holding Company from its insurance
subsidiaries are restricted by insurance regulation. The
Company’s principal insurance subsidiaries are domiciled in the
United States and the United Kingdom.
The payment of dividends by Connecticut-domiciled insurers is
limited under the insurance holding company laws of
Connecticut. These laws require notice to and approval by the
state insurance commissioner for the declaration or payment of
any dividend, which, together with other dividends or
distributions made within the preceding twelve months, exceeds
the greater of (i) 10% of the insurer’s statutory policyholder
surplus as of December 31 of the preceding year or (ii) net
income (or net gain from operations, if such company is a life
insurance company) for the preceding year, in each case
determined under statutory insurance accounting principles. In
addition, if any dividend of a Connecticut-domiciled insurer
exceeds the insurer’s earned surplus, it requires the prior
approval of the Connecticut Insurance Commissioner.
Property casualty insurers domiciled in New York, including NIC
and Navigators Specialty Insurance Company ("NSIC"),
generally may not, without notice to and approval by the state
insurance commissioner, pay dividends out of earned surplus in
any twelve-month period that exceeds the lesser of (i) 10% of
the insurer’s statutory policyholders’ surplus as of the most
recent financial statement on file, or (ii) 100% of its adjusted net
investment income, as defined, for the same twelve month
period.
Corporate members of Lloyd's Syndicates may pay dividends to
its parent to the extent of available profits that have been
distributed from the syndicate in excess of the Funds at Lloyd's
("FAL") capital requirement and subject to restrictions imposed
under UK Company Law. The FAL is determined based on the
syndicate’s solvency capital requirement ("SCR") of the
syndicate under the Solvency II capital adequacy model, the
current regulatory framework governing UK domiciled insurers,
plus a Lloyd’s specific economic capital assessment. Insurers
domiciled in the United Kingdom may pay dividends to its parent
out of its statutory profits subject to restrictions imposed under
U.K. Company law and Solvency II.
Note 15 - Equity
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
192
The insurance holding company laws of the other jurisdictions in
which The Hartford’s insurance subsidiaries are incorporated (or
deemed commercially domiciled) generally contain similar
(although in certain instances more restrictive) limitations on the
payment of dividends. In addition to statutory limitations on
paying dividends, the Company also takes other items into
consideration when determining dividends from subsidiaries.
These considerations include, but are not limited to, expected
earnings and capitalization of the subsidiaries, regulatory capital
requirements, liquidity requirements and state deposit
requirements of the individual operating company.
In 2024, HIG Holding Company received $608 of dividends from
HLA, $136 from Hartford Funds and $31 from other non-
insurance subsidiaries. In addition, HIG Holding Company
received $1.5 billion of net dividends from P&C subsidiaries in
2024, which excludes $75 of P&C dividends that were
subsequently contributed to P&C subsidiaries and $50 of P&C
dividends related to interest payments on an intercompany note
owed by Hartford Holdings, Inc. ("HHI") to Hartford Fire
Insurance Company.
The Company’s property and casualty insurance subsidiaries
have regulatory dividend capacity of $2.0 billion for 2025. The
HIG Holding Company expects to receive approximately
$1.7 billion of net dividends after considering state deposit and
regulatory capital requirements to support growth in certain
entities, dividends that are expected to be subsequently
contributed to P&C subsidiaries and dividends related to interest
on intercompany notes.
HLA has regulatory dividend capacity of $592 in 2025 with
approximately $590 of dividends expected in 2025.
There are no current restrictions on HIG Holding Company's
ability to pay dividends to its stockholders.
Restricted Net Assets
As of December 31, 2024, the Company's insurance
subsidiaries had net assets of $15.1 billion, determined in
accordance with U.S. GAAP, that were restricted from payment
to the HIG Holding Company, without prior regulatory approval.
16. INCOME TAXES
Income Tax Expense
The Company and its subsidiaries file income tax returns in the
U.S. federal jurisdiction, and various state and foreign
jurisdictions, as applicable. Income before income taxes
included income from domestic operations of $3,758, $3,042
and $2,260 for the years ended December 31, 2024, 2023 and
2022, and income (losses) from foreign operations of $91, $46
and $2 for the years ended December 31, 2024, 2023 and 2022.
Income Tax Expense
For the years ended
December 31,
2024
2023
2022
Income tax expense (benefit)
Current - U.S. federal
$ 783 $ 582 $ 550
Foreign
2
—
(1)
Total current
785
582
549
Deferred - U.S. federal
(57)
6 (124)
Foreign
10
(4)
18
Total deferred
(47)
2 (106)
Total income tax expense
$ 738 $ 584 $ 443
Income Tax Rate Reconciliation
For the years ended
December 31,
2024
2023
2022
Tax provision at U.S. federal
statutory rate
$
808 $
648 $
474
Nontaxable net investment
income
(40)
(41)
(29)
Other
(30)
(23)
(2)
Provision for income taxes
$
738 $
584 $
443
The current income tax receivable of $12 as of December 31,
2024 is included in other assets in the Consolidated Balance
Sheets. The current income tax payable of $18 as of December
31, 2023, is included in other liabilities in the Consolidated
Balance Sheets.
Deferred Taxes
Deferred tax assets and liabilities on the consolidated balance
sheets represent the tax consequences of differences between
the financial reporting and tax basis of assets and liabilities.
The Company predominantly pays non-income state taxes as a
percentage of premiums written which are accounted for as
policy acquisition costs. State income taxes were $4, $3 and $4
for the years ended December 31, 2024, 2023 and 2022,
respectively, and are included in other expenses. The Hartford
has not recorded state deferred taxes, including net deferred tax
assets from state operating loss carryforwards, because the
Company does not expect to earn state taxable income to utilize
such state tax benefits.
Note 15 - Equity
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
193
Deferred Tax Assets (Liabilities)
As of December 31,
2024
2023
Deferred tax assets
Loss reserves and tax discount
$
550 $
517
Unearned premium reserve and
other underwriting related
reserves
517
483
Employee benefits
181
172
Net unrealized losses on
investments
394
387
Net operating loss carryover
41
45
Other
—
1
Total deferred tax assets
1,683
1,605
Valuation allowance
—
(12)
Deferred tax assets, net of
valuation allowance
1,683
1,593
Deferred tax liabilities
Deferred acquisition costs
(183)
(163)
Investment-related items
(167)
(110)
Other depreciable and
amortizable assets
(91)
(147)
Other
(13)
—
Total deferred tax liabilities
(454)
(420)
Net deferred tax asset
$
1,229 $
1,173
Management has assessed the need for a valuation allowance
against its deferred tax assets based on tax character and
jurisdiction, and as part of this assessment, the Company
reduced the valuation allowance related to the deferred tax
asset for foreign net operating losses from $12 as of December
31, 2023 to $0 as of December 31, 2024. In making the
assessment, management considered future taxable temporary
difference reversals, future taxable income exclusive of
reversing temporary differences, the ability to hold assets to
recovery, and carryovers, taxable income in open carry back
years and other tax planning strategies which management
views as prudent and feasible.
Uncertain Tax Positions
Rollforward of Unrecognized Tax Benefits
For the years ended
December 31,
2024
2023
2022
Balance, beginning of period
$
26 $
22 $
16
Gross increases - tax positions
in current period
3
5
6
Gross decreases - tax positions
in current period
(1)
—
—
Lapse of statute of limitations
(4)
(1)
—
Balance, end of period
$
24 $
26 $
22
The entire amount of unrecognized tax benefits, if recognized,
would affect the effective tax rate in the period of the release.
The Company believes it is reasonably possible approximately
$14 of its currently unrecognized tax benefits may be
recognized by the end of 2025 as a result of a lapse of the
applicable statute of limitations.
Other Tax Matters
The federal statute of limitations for the Company is closed
through the 2020 tax year with the exception of NOL
carryforwards utilized in open tax years and the Navigators pre-
acquisition 2019 tax period. Management believes that
adequate provision has been made in the Company's
Consolidated Financial Statements for any potential adjustments
that may result from tax examinations and other tax-related
matters for all open tax years.
The Company classifies interest and penalties (if applicable) as
income tax expense in the Consolidated Financial Statements.
The Company recognized net interest expenses of $1, $2 and
$1 for the years ended December 31, 2024, 2023 and 2022.
The Company does not believe it would be subject to any
penalties in any open tax years and, therefore, has not recorded
any accrual for penalties.
Note 16 - Income Taxes
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
194
17. CHANGES IN AND RECLASSIFICATIONS FROM
ACCUMULATED OTHER COMPREHENSIVE INCOME
(LOSS)
Changes in AOCI, Net of Tax for the Year Ended December 31, 2024
Changes in
Net Unrealized
Gain (Loss) on
Fixed
Maturities, AFS
Unrealized
Losses on
Fixed
Maturities,
AFS with
ACL
Net Gain
(Loss) on
Cash Flow
Hedging
Instruments
Foreign
Currency
Translation
Adjustments
Liability for
Future Policy
Benefits
Adjustments
Pension and
Other
Postretirement
Plan
Adjustments
AOCI,
net of tax
Beginning balance
$
(1,482) $
(8) $
21 $
37 $
25 $
(1,442) $
(2,849)
OCI before reclassifications
(241)
2
27
(10)
10
(34)
(246)
Amounts reclassified from AOCI
169
1
(3)
—
—
32
199
OCI, before tax
(72)
3
24
(10)
10
(2)
(47)
Income tax benefit (expense)
15
(1)
(5)
2
(2)
1
10
OCI, net of tax
(57)
2
19
(8)
8
(1)
(37)
Ending balance
$
(1,539) $
(6) $
40 $
29 $
33 $
(1,443) $
(2,886)
Changes in AOCI, Net of Tax for the Year Ended December 31, 2023
Changes in
Net Unrealized
Gain (Loss) on
Fixed
Maturities, AFS
Unrealized
Losses on
Fixed
Maturities,
AFS with
ACL
Net Gain
(Loss) on
Cash Flow
Hedging
Instruments
Foreign
Currency
Translation
Adjustments
Liability for
Future Policy
Benefits
Adjustments
Pension and
Other
Postretirement
Plan
Adjustments
AOCI,
net of tax
Beginning balance
$
(2,594) $
(7) $
40 $
31 $
35 $
(1,346) $
(3,841)
OCI before reclassifications
1,275
(5)
(25)
8
(13)
(148)
1,092
Amounts reclassified from AOCI
133
4
1
—
—
27
165
OCI, before tax
1,408
(1)
(24)
8
(13)
(121)
1,257
Income tax benefit (expense)
(296)
—
5
(2)
3
25
(265)
OCI, net of tax
1,112
(1)
(19)
6
(10)
(96)
992
Ending balance
$
(1,482) $
(8) $
21 $
37 $
25 $
(1,442) $
(2,849)
Changes in AOCI, Net of Tax for the Year ended December 31, 2022
Changes in
Net Unrealized
Gain (Loss) on
Fixed
Maturities, AFS
Unrealized
Losses on
Fixed
Maturities,
AFS with
ACL
Net Gain
(Loss) on
Cash Flow
Hedging
Instruments
Foreign
Currency
Translation
Adjustments
Liability for
Future Policy
Benefits
Adjustments
Pension and
Other
Postretirement
Plan
Adjustments
AOCI,
net of tax
Beginning balance
$
1,631 $
(2) $
6 $
41 $
(59) $
(1,489) $
128
OCI before reclassifications
(5,630)
(6)
56
(13)
119
119
(5,355)
Amounts reclassified from AOCI
282
—
(13)
—
—
62
331
OCI, before tax
(5,348)
(6)
43
(13)
119
181
(5,024)
Income tax benefit (expense)
1,123
1
(9)
3
(25)
(38)
1,055
OCI, net of tax
(4,225)
(5)
34
(10)
94
143
(3,969)
Ending balance
$
(2,594) $
(7) $
40 $
31 $
35 $
(1,346) $
(3,841)
Note 17 - Accumulated Other Comprehensive Income (Loss)
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
195
Reclassifications from AOCI
AOCI
Amount Reclassified from AOCI
Affected Line Item in the
Consolidated Statement of
Operations
For the year
ended
December
31, 2024
For the year
ended
December
31, 2023
For the year
ended
December
31, 2022
Net Unrealized Gain (Loss) on Fixed
Maturities, AFS
Fixed maturities, AFS
$
(169) $
(133) $
(282) Net realized gains (losses)
(169)
(133)
(282) Total before tax
(35)
(28)
(59) Income tax expense
$
(134) $
(105) $
(223) Net income
Unrealized Loss on Fixed Maturities, AFS with
ACL
Fixed maturities, AFS
$
(1) $
(4) $
— Net realized gains (losses)
(1)
(4)
— Total before tax
—
(1)
— Income tax expense
$
(1) $
(3) $
— Net income
Net Gain (Loss) on Cash Flow Hedging
Instruments
Interest rate swaps
$
(25) $
(26) $
6 Net investment income
Interest rate swaps
16
15
(2) Interest expense
Foreign currency swaps
12
10
9 Net investment income
3
(1)
13 Total before tax
1
—
3 Income tax expense
$
2 $
(1) $
10 Net income
Pension and Other Postretirement Plan
Adjustments
Amortization of prior service credit
$
7 $
7 $
7
Insurance operating costs and other
expenses
Amortization of actuarial loss
(39)
(34)
(69)
Insurance operating costs and other
expenses
(32)
(27)
(62) Total before tax
(7)
—
(13) Income tax expense
(25)
(27)
(49) Net income
Total amounts reclassified from AOCI
$
(158) $
(136) $
(262) Net income
Note 17 - Accumulated Other Comprehensive Income (Loss)
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
196
18. EMPLOYEE BENEFIT PLANS
Investment and Savings Plan
Substantially all U.S. employees of the Company are eligible to
participate in The Hartford Investment and Savings Plan under
which designated contributions may be invested in a variety of
investments, including up to 10% in a fund consisting largely of
common stock of The Hartford. The Company's contributions
include a non-elective contribution of 2.0% of eligible
compensation and a dollar-for-dollar matching contribution of up
to 6.0% of eligible compensation contributed by the employee.
The Company also maintains a non-qualified savings plan, The
Hartford Excess Savings Plan, with the dollar-for-dollar
matching contributions related to employee compensation in
excess of the amount of eligible compensation that can be
contributed under the tax-qualified Investment and Savings
Plan. An employee's eligible compensation includes overtime
and bonuses but for the Investment and Savings Plan and
Excess Savings Plan combined, is limited to $1 annually. The
total cost to The Hartford for these plans was approximately
$193, $163 and $142 for the years ended December 31, 2024,
2023 and 2022, respectively.
Additionally, The Hartford has established defined contribution
pension plans for certain employees of the Company’s
international subsidiaries. The cost to The Hartford for each of
the years ended December 31, 2024, 2023 and 2022 for these
plans was $3.
Postretirement Benefit Plans
Defined Benefit Pension Plan- The Company maintains The
Hartford Retirement Plan for U.S. Employees, a U.S. qualified
defined benefit pension plan (“U.S. Pension Plan”) that covers
substantially all U.S. employees hired prior to January 1, 2013.
The Company also maintains non-qualified pension plans to
provide retirement benefits previously accrued that are in
excess of Internal Revenue Code limitations, as well as a
Canadian defined benefit pension plan. Together, the non-
qualified and Canadian defined benefit plan are referred to as
"Other Pension Plans".
The U.S. Pension Plan includes two benefit formulas, both of
which are frozen: a final average pay formula (for which all
accruals ceased as of December 31, 2008) and a cash balance
formula (for which benefit accruals ceased as of December 31,
2012, although interest will continue to accrue to existing cash
balance formula account balances). Employees who were
participants as of December 31, 2012 continue to earn vesting
credit with respect to their frozen accrued benefits if they
continue to work. The interest crediting rate on the cash balance
plan is the greater of the average annual yield on 10-year U.S.
Treasury Securities published in December of the prior calendar
year or 3.3%. The Hartford Excess Pension Plan I and The
Hartford Excess Pension Plan II, the Company's non-qualified
excess pension benefit plans for certain highly compensated
employees, are also frozen.
Group Retiree Health Plan- The Company provides certain
health care and life insurance benefits for eligible retired
employees. The Company’s contribution for health care benefits
are a function of the retiree’s date of retirement and years of
service. In addition, the plan has a defined dollar cap for certain
retirees which limits average Company contributions. The
Hartford has prefunded a portion of the health care obligations
where such prefunding can be accomplished on a tax effective
basis. Beginning January 1, 2017, for retirees 65 and older who
were participating in the Retiree PPO Medical Plan, the
Company funds the cost of medical and dental health care
benefits through contributions to a Health Reimbursement
Account and covered individuals can access a variety of
insurance plans from a health care exchange. Effective
January 1, 2002, Company-subsidized retiree medical, retiree
dental and retiree life insurance benefits were eliminated for
employees with original hire dates with the Company on or after
January 1, 2002. The Company also amended its postretirement
medical, dental and life insurance coverage plans to no longer
provide subsidized coverage for employees who retired on or
after January 1, 2014.
Assumptions
Pursuant to accounting principles related to the Company’s
pension and other postretirement obligations to employees
under its various benefit plans, the Company is required to
make a significant number of assumptions in order to calculate
the related liabilities and expenses each period. The two
economic assumptions that have the most impact on pension
and other postretirement expense under the defined benefit
pension plans and group retiree health plan are the discount
rate and the expected long-term rate of return on plan assets.
The yield curve used to determine the discount rate is based on
yields of high-quality fixed income investments grouped by
duration, using the above mean average for each duration
group. Based on all available market and industry information, it
was determined that 5.65% and 5.56% were the appropriate
discount rates as of December 31, 2024 to calculate the
Company’s U.S. Pension Plan and other postretirement
obligations, respectively.
The expected long-term rate of return considers both current
market yields and forecasted investment returns expected to be
achieved by the plan’s investment strategy over the remaining
life of the plan. The Company also considers the plan's funded
status, the investment volatility, duration and total returns for
various time periods related to the characteristics of the pension
obligation, which are influenced by the Company's workforce
demographics. For the pension plan, the Company has
assumed an allocation of approximately 81% in fixed income
securities and 19% in non-fixed income securities (global
equities and limited partnerships) in its assumed expected long-
term rate of return for the years ended December 31, 2024 and
2023. For the other postretirement plans, the Company has
assumed an allocation of 100% in fixed income securities in its
assumptions for the years ended December 31, 2024 and 2023.
Based upon these analyses, management determined the long-
term rate of return assumption to be 5.90% and 4.50% for the
Company's U.S. Pension Plan and other postretirement
obligations, respectively, for the year ended December 31, 2024
and 6.10% and 4.50% for the Company's U.S. Pension Plan
and other postretirement obligations, respectively, for the year
Note 18 - Employee Benefit Plans
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
197
ended December 31, 2023. To determine the Company's 2025
expense, the Company has assumed an allocation of 81% in
fixed income securities and 19% in non-fixed income securities
for the pension plan and an allocation of 100% in fixed income
securities for the postretirement plans, contributing to an
expected long-term rate of return on plan assets of 6.40% and
4.80% for the Company's U.S. Pension Plan and other
postretirement obligations, respectively.
Assumptions Used in Calculating the Benefit Obligations and the Net Amount Recognized
For the years ended December 31,
2024
2023
2022
Weighted Average Assumptions used to determine benefit obligations
Discount rate:
U.S. Pension Plan
5.65 %
5.15 %
5.43 %
Other Pension Plans
5.59 %
5.14 %
5.40 %
Other postretirement benefits
5.56 %
5.13 %
5.39 %
Interest crediting rate on cash balance plan
4.30 %
4.36 %
3.89 %
Weighted Average Assumptions used to determine net periodic benefit costs:
Discount rate:
U.S. Pension Plan
5.15 %
5.43 %
2.91 %
Other Pension Plans
5.13 %
5.40 %
2.83 %
Other postretirement benefits
5.13 %
5.39 %
2.72 %
Expected long-term rate of return on plan assets:
U.S. Pension Plan
5.90 %
6.10 %
5.10 %
Other Pension Plans
4.00 %
4.40 %
3.30 %
Other postretirement benefits
4.50 %
4.50 %
4.80 %
Assumed Health Care Cost Trend Rates
Pre-65 health care cost trend rate
6.50 %
8.00 %
7.00 %
Post-65 health care cost trend rate
N/A
N/A
N/A
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
4.00 %
4.50 %
4.50 %
Year that the rate reaches the ultimate trend rate
2045
2038
2032
Obligations and Funded Status
The following tables set forth a reconciliation of beginning and
ending balances of the benefit obligation and fair value of plan
assets, as well as the funded status of the Company's defined
benefit pension and postretirement health care and life
insurance benefit plans. Information is presented for the
qualified U.S. Pension Plan, Other Pension Plans (including
non-qualified plans and the Canadian pension plan) and other
postretirement benefits.
Note 18 - Employee Benefit Plans
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
198
U.S. Pension
Plan
Other Pension
Plans
Total Pension
Plans
Other
Postretirement
Benefits
For the years ended December 31,
2024
2023
2024
2023
2024
2023
2024
2023
Change in Benefit Obligation
Benefit obligation — beginning of year
$ 3,269 $ 3,156 $
334 $
334 $ 3,603 $ 3,490 $
138 $
143
Service cost
2
3
—
—
2
3
—
—
Interest cost
160
163
16
17
176
180
7
7
Plan participants’ contributions
—
—
—
—
—
—
7
8
Actuarial loss (gain)
(9)
38
2
2
(7)
40
(3)
3
Changes in assumptions
(146)
100
(12)
8
(158)
108
(4)
3
Benefits paid [1]
(201)
(191)
(27)
(27)
(228)
(218)
(23)
(26)
Benefit obligation — end of year [2]
$ 3,075 $ 3,269 $
313 $
334 $ 3,388 $ 3,603 $
122 $
138
Change in Plan Assets
Fair value of plan assets — beginning of year
$ 3,562 $ 3,513 $
11 $
11 $ 3,573 $ 3,524 $
18 $
30
Actual return on plan assets
34
254
—
—
34
254
—
1
Employer contributions [3]
—
—
—
1
—
1
6
5
Plan participants' contributions [3]
—
—
—
—
—
—
7
8
Benefits paid [1]
(201)
(191)
(1)
(1)
(202)
(192)
(23)
(26)
Expenses paid
(8)
(14)
—
—
(8)
(14)
—
—
Foreign exchange adjustment
—
—
(1)
—
(1)
—
—
—
Fair value of plan assets — end of year
$ 3,387 $ 3,562 $
9 $
11 $ 3,396 $ 3,573 $
8 $
18
Funded status — end of year
$
312 $
293 $
(304) $
(323) $
8 $
(30) $
(114) $
(120)
Amounts Recognized in the Consolidated Balance Sheets
Other assets
$
312 $
293 $
— $
— $
312 $
293 $
— $
—
Other liabilities
$
— $
— $
(304) $
(323) $
(304) $
(323) $
(114) $
(120)
[1]Other postretirement benefits paid represent payments from plan assets for non-key employee postretirement medical benefits, Company assets and plan
participants' contributions.
[2]As of December 31, 2024 and 2023, the Accumulated Benefit Obligation is equal to the Projected Benefit Obligation.
[3]Employer and plan participants' contributions for the Other Postretirement Benefits represent funding from Company and plan participant assets.
Changes in assumptions for the U.S. Pension Plan in 2024
primarily included a $145 decrease in the benefit obligation for
pension benefits as a result of an increase in the discount rate
from 5.15% as of the December 31, 2023 valuation to 5.65% as
of the December 31, 2024 valuation. Changes in assumptions in
2023 included an $88 increase in the benefit obligation for
pension benefits as a result of a decrease in the discount rate
from 5.43% as of the December 31, 2022 valuation to 5.15% as
of the December 31, 2023 valuation.
Changes in assumptions for the Other Pension Plans in 2024
primarily included a $12 decrease in the benefit obligation for
pension benefits as a result of an increase in the discount rate
from 5.14% as of the December 31, 2023 valuation to 5.59% as
of the December 31, 2024 valuation. Changes in assumptions in
2023 included a $7 increase in the benefit obligation for pension
benefits as a result of a decrease in the discount rate from
5.40% as of the December 31, 2022 valuation to 5.14% as of
the December 31, 2023 valuation.
Included in the benefit obligation for the U.S. Pension Plan in
the table above, the cash balance plan pension benefit
obligation was $332 and $357 as of December 31, 2024 and
2023, respectively.
The fair value of assets for total pension plans, and hence the
funded status, presented in the table above excludes assets of
$245 and $198 as of December 31, 2024 and 2023,
respectively, held in rabbi trusts and designated for the Other
Pension Plans. The Company made no contribution in 2024, but
contributed $3 to the rabbi trusts in 2023. The assets do not
qualify as plan assets; however, the assets are available to pay
benefits for certain retired, terminated and active participants.
Such assets are available to the Company’s general creditors in
the event of insolvency. The rabbi trusts' assets consist of equity
and fixed income investments. To the extent the fair value of
these rabbi trusts were included in the table above, total pension
plan assets would have been $3,641 and $3,771 as of
December 31, 2024 and 2023, respectively, and the funded
status of total pension plans would have been $253 and $168 as
of December 31, 2024 and 2023, respectively.
The tables below present an aggregate view of net periodic cost
(benefit) and components of other comprehensive income and
AOCI for pension plans that includes both the U.S. Pension Plan
and Other Pension Plans. Net periodic cost (benefit) is
recognized in insurance operating costs and other expenses in
the Consolidated Statement of Operations.
Note 18 - Employee Benefit Plans
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
199
Net Periodic Cost (Benefit)
Pension Benefits
Other Postretirement Benefits
For the years ended December 31,
2024
2023
2022
2024
2023
2022
Service cost
$
2 $
3 $
4 $
— $
— $
—
Interest cost
176
180
111
7
7
4
Expected return on plan assets
(230)
(235)
(202)
(1)
(1)
(2)
Amortization of prior service credit
—
—
—
(7)
(7)
(7)
Amortization of actuarial loss
34
29
62
5
5
7
Net periodic cost (benefit)
$
(18) $
(23) $
(25) $
4 $
4 $
2
Amounts Recognized in Other Comprehensive Income (Loss)
Pension Benefits
Other Postretirement Benefits
For the years ended December 31,
2024
2023
2022
2024
2023
2022
Amortization of actuarial loss
$
34 $
29 $
62 $
5 $
5 $
7
Amortization of prior service credit
—
—
—
(7)
(7)
(7)
Net actuarial gain (loss)
(41)
(142)
89
7
(6)
30
Prior service cost (credit)
—
—
—
—
—
—
Total
$
(7) $
(113) $
151 $
5 $
(8) $
30
Amounts in Accumulated Other Comprehensive Income (Loss), Before Tax, not yet Recognized as
Components of Net Periodic Benefit Cost
Pension Benefits
Other Postretirement Benefits
As of December 31,
2024
2023
2022
2024
2023
2022
Net loss
$
(1,784) $
(1,777) $
(1,664) $
(76) $
(88) $
(87)
Prior service credit
—
—
—
33
40
47
Total
$
(1,784) $
(1,777) $
(1,664) $
(43) $
(48) $
(40)
Actuarial net losses in AOCI that exceed 10% of the greater of
the benefit obligation or the market-related value of plan assets
are amortized to expense over the average future life
expectancy of plan participants.
Pension Plan Assets
Investment Strategy and Target Allocation
The overall investment strategy of the U.S. Pension Plan is to
produce total investment returns that provide sufficient funding
for present and anticipated future benefit obligations within the
constraints of a prudent level of portfolio risk and diversification.
With respect to asset management, the oversight responsibility
of the U.S. Pension Plan rests with The Hartford’s Pension
Investment Committee composed of individuals whose
responsibilities include establishing overall objectives and the
setting of investment policy; selecting appropriate investment
options and ranges; selecting qualified service providers such
as investment managers and investment consultants; reviewing
the asset allocation mix and asset allocation targets on a regular
basis; and monitoring performance to determine whether or not
the rate of return objectives are being met and that policy and
guidelines are being followed. The Pension Investment
Committee has adopted a de-risking glide path that reduces the
target allocation to equity securities and limited partnerships and
increases the allocation to fixed income securities over time in
response to improvement in the funded status of the U.S.
Pension Plan. The Company believes that the asset allocation
decision will be the single most important factor determining the
long-term performance of the U.S. Pension Plan.
Target Asset Allocation Ranges
Pension Plans
Other
Postretirement
Plans
Minimum
Maximum
Minimum
Maximum
Equity securities
— %
20 %
— %
— %
Fixed income
securities
75 %
95 %
100 %
100 %
Limited
partnerships
— %
25 %
— %
— %
Divergent market performance among different asset classes
and changes in the context of the glide path may, from time to
Note 18 - Employee Benefit Plans
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
200
time, cause the asset allocation to deviate from the desired
asset allocation ranges. The asset allocation mix is reviewed on
a periodic basis. If it is determined that an asset allocation mix
rebalancing is required, future portfolio additions and
withdrawals will be used first, as necessary, to bring the
allocation within tactical ranges, before shifting assets across
portfolios.
The U.S. Pension Plan invests in multiple asset classes
reflecting the current needs, investment preferences, risk
tolerances and the desired degree of diversification of the U.S.
Pension Plan. These asset classes include publicly traded fixed
income securities and equities, private fixed income securities,
commercial mortgage loans and limited partnerships.
Investment portfolios are primarily managed by affiliated
managers.
In addition, the Company uses U.S. Treasury bond futures
contracts and U.S. Treasury STRIPS, in addition to certain other
investments, in a duration overlay program to adjust the duration
of U.S. Pension Plan assets to better match the duration of the
benefit obligation.
Pension Plan Assets at Fair Value
As of December 31, 2024
As of December 31, 2023
Asset Category
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Short-term investments:
$
164 $
— $
— $
164
$
187 $
— $
— $
187
Fixed Income Securities:
Corporate
—
1,586
33
1,619
—
1,643
36
1,679
RMBS
—
105
—
105
—
111
—
111
U.S. Treasuries
8
278
—
286
—
271
—
271
Foreign government
—
9
9
18
—
11
10
21
CMBS
—
28
1
29
—
49
1
50
Other fixed income [1]
—
162
—
162
—
160
—
160
Mortgage Loans
—
—
131
131
—
—
143
143
Equity Securities:
Domestic
14
4
—
18
11
23
—
34
International
—
37
—
37
—
45
—
45
Total pension plan
assets at fair value, in
the fair value hierarchy
[2]
186
2,209
174
2,569
198
2,313
190
2,701
Other Investments, at net
asset value [3]:
Limited partnerships
778
826
Total pension plan assets
at fair value
$
186 $
2,209 $
174 $
3,347
$
198 $
2,313 $
190 $
3,527
[1]Includes ABS, municipal bonds and CLOs.
[2]Excludes $49 and $46 as of December 31, 2024 and 2023, respectively, of investment receivables net of investment payables that are excluded from this
disclosure requirement because they are trade receivables in the ordinary course of business where the carrying amount approximates fair value.
[3]Investments that are measured at net asset value per share or an equivalent and have not been classified in the fair value hierarchy.
The tables below provide fair value level 3 roll forwards for the
U.S. Pension Plan Assets for which significant unobservable
inputs ("Level 3") are used in the fair value measurement on a
recurring basis. The U.S. Pension Plan classifies the fair value
of financial instruments within Level 3 if there are no observable
markets for the instruments or, in the absence of active markets,
if one or more of the significant inputs used to determine fair
value are based on the U.S. Pension Plan’s own assumptions.
Therefore, the gains and losses in the tables below include
changes in fair value due to both observable and unobservable
factors.
Note 18 - Employee Benefit Plans
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
201
Pension Plan Asset Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Assets
Corporate
Foreign
government
Mortgage
loans
Other [1]
Totals
Fair Value as of January 1, 2024
$
36 $
10 $
143 $
1 $
190
Realized gains, net
—
—
—
—
—
Changes in unrealized gains (losses), net
—
(1)
1
—
—
Purchases
5
—
—
—
5
Sales
(8)
—
(13)
—
(21)
Transfers into Level 3 [2]
—
—
—
—
—
Transfers out of Level 3 [2]
—
—
—
—
—
Fair Value as of December 31, 2024
$
33 $
9 $
131 $
1 $
174
Fair Value as of January 1, 2023
$
31 $
1 $
165 $
1 $
198
Realized gains (losses), net
—
—
(3)
—
(3)
Changes in unrealized gains (losses), net
2
(1)
8
—
9
Purchases
—
10
3
—
13
Sales
—
—
(30)
—
(30)
Transfers into Level 3 [2]
5
—
—
—
5
Transfers out of Level 3 [2]
(2)
—
—
—
(2)
Fair Value as of December 31, 2023
$
36 $
10 $
143 $
1 $
190
[1]"Other" includes CMBS.
[2]Transfers into and/or (out of) Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of
pricing.
There was less than $1 in Company common stock included in
the U.S. Pension Plan’s assets as of December 31, 2024 and
2023 as part of a passive indexing strategy.
Other Postretirement Plan Assets at Fair Value
As of December 31, 2024
As of December 31, 2023
Asset Category
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Short-term investments
$
8 $
— $
— $
8
$
16 $
— $
— $
16
Fixed Income Securities:
U.S. Treasuries
—
—
—
—
—
2
—
2
Total other postretirement
plan assets at fair value
$
8 $
— $
— $
8
$
16 $
2 $
— $
18
There was no Company common stock included in the other
postretirement benefit plan assets as of December 31, 2024 and
2023.
Concentration of Risk
In order to minimize risk, the Pension Plan maintains a listing of
permissible and prohibited investments. In addition, the Pension
Plan has certain concentration limits and investment quality
requirements imposed on permissible investment options.
Permissible investments include U.S. equity, international equity,
limited partnership and fixed income investments including
derivative instruments. Permissible derivative instruments
include futures contracts, options, swaps, currency forwards,
caps or floors and may be used to control risk or enhance return
but will not be used for leverage purposes.
Securities specifically prohibited from purchase include, but are
not limited to: shares or fixed income instruments issued by The
Hartford (other than equity securities purchased on the open
market as part of a passively managed strategy), short sales of
any type within long-only portfolios, non-derivative securities
involving the use of margin, leveraged floaters and inverse
floaters, including money market obligations, natural resource
real properties such as oil, gas or timber and precious metals.
Other than U.S. government and certain U.S. government
agencies backed by the full faith and credit of the U.S.
government, the Pension Plan does not have any material
exposure to any concentration risk of a single issuer.
Note 18 - Employee Benefit Plans
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
202
Expected Employer Contributions
The Company does not have a 2025 required minimum funding
contribution for the U.S. qualified defined benefit pension plan.
The Company has not determined whether, and to what extent,
contributions may be made to the U.S. qualified defined benefit
pension plan in 2025. The Company will monitor the funded
status of the U.S. qualified defined benefit pension plan during
2025 to make this determination.
Benefit Payments
Amounts of Benefits Expected to be Paid over
the next Ten Years from Pension and other
Postretirement Plans as of December 31, 2024
Pension
Benefits
Other
Postretirement
Benefits
2025
$
249 $
15
2026
256
13
2027
261
12
2028
267
11
2029
262
11
2030 - 2034
1,304
46
Total
$
2,599 $
108
19. STOCK COMPENSATION PLANS
The Company's stock-based compensation plans are described
below. Shares issued in satisfaction of stock-based
compensation may be made available from authorized but
unissued shares, shares held by the Company in treasury or
from shares purchased in the open market. In 2024, 2023 and
2022, the Company issued shares from treasury in satisfaction
of stock-based compensation.
The Hartford measures stock compensation at the grant date
based on the estimated fair value of the award and recognizes
expense on a straight-line basis, net of estimated forfeitures,
over the requisite service period. Stock-based compensation
expense, included in insurance operating costs and other
expenses in the consolidated statement of operations, was as
follows:
Stock-Based Compensation Expense
For the years ended
December 31,
2024
2023
2022
Stock-based compensation
plans expense
$
133 $
125 $
131
Income tax benefit
(21)
(22)
(22)
Excess tax benefit on awards
vested, exercised and expired
(21)
(12)
(12)
Total stock-based
compensation plans expense,
net of tax
$
91 $
91 $
97
The Company did not capitalize any cost of stock-based
compensation. As of December 31, 2024, the total
compensation cost related to non-vested awards not yet
recognized was $75, which is expected to be recognized over a
weighted average period of 2 years.
Stock Plan
Future stock-based awards may be granted under The
Hartford's 2020 Stock Incentive Plan (the "Stock Incentive
Plan") other than the Subsidiary Stock Plan and the Employee
Stock Purchase Plan described below. The Stock Incentive Plan
provides for awards to be granted in the form of non-qualified or
incentive stock options qualifying under Section 422 of the
Internal Revenue Code, stock appreciation rights, performance
shares, restricted stock or restricted stock units, or any other
form of stock-based award. The maximum number of shares,
subject to adjustments set forth in the 2020 Stock Plan, that may
be issued to Company employees and third-party service
providers during the 10-year duration of the Stock Incentive Plan
is the sum of 11,250,000 shares, any shares forfeited
subsequent to February 29, 2020, plus any shares used for tax
withholding purposes. If any award under an earlier incentive
stock plan is forfeited, terminated, surrendered, exchanged,
expires unexercised, or is settled in cash in lieu of stock
(including to effect tax withholding) or for the net issuance of a
lesser number of shares than the number subject to the award,
the shares of stock subject to such award (or the relevant
portion thereof) shall be available for awards under the Stock
Incentive Plan and such shares shall be added to the maximum
limit. As of December 31, 2024, there were 6,253,061 shares
available for future issuance.
The fair values of awards granted under the Stock Incentive
Plan are measured as of the grant date and expensed ratably
over the awards’ vesting periods, generally three years. For
stock awards to retirement-eligible employees, the Company
recognizes the expense over a period shorter than the stated
vesting period because the employees receive accelerated
vesting upon retirement and, therefore, the vesting period is
considered non-substantive.
Note 18 - Employee Benefit Plans
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
203
Stock Option Awards
Under the Stock Incentive Plan, options granted have an
exercise price at least equal to the closing stock price on the
New York Stock Exchange for the Company’s common stock on
the date of grant, and an option’s maximum term is not to
exceed 10 years. Options generally become exercisable over a
period of three years commencing one year from the date of
grant.
The Company uses a hybrid lattice/Monte-Carlo based option
valuation model (the “Plan Valuation Model”) that incorporates
the possibility of early exercise of options into the valuation. The
Plan Valuation Model also incorporates the Company’s historical
termination and exercise experience to determine the option
value.
The Plan Valuation Model incorporates ranges of assumptions
for inputs, and those ranges are disclosed below. The term
structure of volatility is generally constructed utilizing implied
volatilities from exchange-traded options, historical volatility of
the Company’s stock and other factors. The Company uses
historical data to estimate option exercise and employee
termination within the Plan Valuation Model, and accommodates
variations in employee preference and risk-tolerance by
segregating the grantee pool into a series of behavioral cohorts
and conducting a fair valuation for each cohort individually. The
expected term of options granted is derived from the output of
the option Plan Valuation Model and represents, in a
mathematical sense, the period of time that options are
expected to be outstanding. The risk-free rate for periods within
the contractual life of the option is based on the U.S. Constant
Maturity Treasury yield curve in effect at the time of grant.
Stock Options Valuation Assumptions
For the years ended December 31,
2024
2023
2022
Expected dividend yield
1.8%
2.0%
2.3%
Expected annualized spot volatility
19.2 % - 22.7%
24.5 % - 26.0%
28.3 % - 29.6%
Weighted average annualized volatility
21.7%
25.4%
28.8%
Risk-free spot rate
4.3 % - 5.5%
3.8 % - 5.1%
(0.04) % - 2.0%
Expected term
7.4 years
6.7 years
6.4 years
Non-qualified Stock Option Activity Under the Stock Incentive Plan
Number of
Options
(in
thousands)
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
For the year ended December 31, 2024
Outstanding at beginning of year
6,071 $
55.92
Granted
270 $
95.74
Exercised
(1,823) $
50.45
Forfeited
— $
—
Expired
— $
—
Outstanding at end of year
4,518 $
60.51
5.4 $
221
Outstanding, fully vested and expected to vest
4,494 $
60.40
5.4 $
221
Exercisable at end of year
3,711 $
55.85
4.8 $
199
Aggregate intrinsic value represents the value of the Company's
closing stock price on the last trading day of the period in
excess of the exercise price multiplied by the number of options
outstanding or exercisable. The aggregate intrinsic value
excludes the effect of stock options that have a zero or negative
intrinsic value. The weighted average grant-date fair value per
share of options granted during the years ended December 31,
2024, 2023, and 2022 was $25.77, $21.09 and $16.56,
respectively. For the years ended December 31, 2024, 2023,
and 2022, The Hartford received $92, $47, and $26,
respectively, in cash from exercised stock options. The Hartford
recognized tax benefits of $4, $3, and $3 on stock options
exercised for the years ended December 31, 2024, 2023, and
2022, respectively. The total intrinsic value of options exercised
during the years ended December 31, 2024, 2023 and 2022
was $99, $35, and $24, respectively.
Share Awards
Share awards granted under the Stock Incentive Plan and
outstanding include restricted stock units and performance
shares. Performance shares become payable within a range of
0% to 200% of the number of shares initially granted based
upon the attainment of specific performance goals achieved at
the end of a performance period of three years. For the 2021
grant year only, the grant was subject to a modifier that
increased final performance by 10% based upon results against
predetermined year-end 2023 representation goals for women
and people of color in executive level roles.
Note 19 - Stock Compensation Plans
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
204
Performance share awards that are not dependent on market
conditions are valued equal to the closing stock price on the
New York Stock Exchange for the Company’s common stock on
the date of grant. Stock compensation expense for these
performance share awards without market conditions is based
on a current estimate of the number of awards expected to vest
based on the performance level achieved and, therefore, may
change during the performance period as new estimates of
performance are available.
Other performance share awards or portions thereof have a
market condition based upon the Company's total stockholder
return relative to a pre-determined group of peer companies as
of December 31 at the end of the three year performance
period. Stock compensation expense for these performance
share awards is based on the number of awards expected to
vest as estimated at the grant date and, therefore, does not
change for changes in estimated performance. The Company
uses a risk neutral Monte-Carlo Plan Valuation Model that
incorporates time to maturity, implied volatilities of the Company
and the peer companies, and correlations between the
Company and the peer companies and interest rates.
Assumptions for Total Stockholder Return Performance Shares
For the years ended December 31,
2024
2023
2022
Volatility of common stock
21.7%
33.0%
35.9%
Average volatility of peer companies
20.0 % - 33.0%
26.0 % - 41.0%
27.0 % - 46.0%
Average correlation coefficient of peer companies
42.0%
52.0%
68.0%
Risk-free spot rate
4.4%
4.4%
1.8%
Term
3.0 years
3.0 years
3.0 years
Total Share Awards
Non-vested Share Award Activity Under the Stock Incentive Plan
Restricted Stock Units
Performance Shares
Number of
Shares
(in
thousands)
Weighted-
Average
Grant-Date
Fair Value
Number of
Shares
(in
thousands)
Weighted-
Average
Grant date
Fair Value
Non-vested shares
For the year ended December 31, 2024
Non-vested at beginning of year
3,259 $
65.44
583 $
77.97
Granted
837 $
96.34
338 $
103.08
Performance based adjustment, net
252 $
71.00
Vested
(1,281) $
53.09
(567) $
71.30
Forfeited
(137) $
77.97
(12) $
88.19
Non-vested at end of year
2,678 $
80.36
594 $
95.49
In addition to the non-vested shares presented in the above
table, there are related non-vested dividend equivalent shares.
The number of non-vested dividend equivalent shares related to
restricted stock units was 107 thousand and 155 thousand as of
December 31, 2024 and 2023, respectively, and the number of
non-vested dividend equivalent shares related to performance
shares was 14 thousand and 18 thousand as of December 31,
2024 and 2023, respectively. The dividend equivalent shares
are subject to the same vesting terms as the restricted stock
units and performance shares.
The weighted average grant-date fair value per share of
restricted stock units granted during the years ended
December 31, 2024, 2023, and 2022 was $96.34, $77.72 and
$69.32, respectively. The weighted average grant-date fair value
per share of performance shares granted during the years
ended December 31, 2024, 2023, and 2022 was $103.08,
$85.69 and $71.54, respectively.
The total fair value of shares vested during the years ended
December 31, 2024, 2023 and 2022 was $186, $154 and $134,
respectively, based on actual or estimated performance factors.
The Company did not make cash payments in settlement of
stock compensation during the years ended December 31,
2024, 2023 and 2022.
Subsidiary Stock Plan
The Hartford has a subsidiary stock-based compensation plan
similar to the Stock Incentive Plan, except that it awards non-
public subsidiary stock as compensation. The Company
recognized stock-based compensation plan expense of $12,
$12 and $13 in the years ended December 31, 2024, 2023 and
2022, respectively, for the subsidiary stock plan. Upon employee
vesting of subsidiary stock, the Company recognizes a
noncontrolling equity interest. Employees are restricted from
selling vested subsidiary stock to anyone other than the
Company and the Company has discretion on the amount of
stock to repurchase. Therefore, the subsidiary stock is classified
Note 19 - Stock Compensation Plans
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
205
as equity because it is not mandatorily redeemable. For the
years ended December 31, 2024, 2023 and 2022, the Company
repurchased $10, $11 and $10, respectively, in subsidiary stock.
Employee Stock Purchase Plan
The Company sponsors The Hartford Employee Stock Purchase
Plan ("ESPP"). Under this plan, eligible employees of The
Hartford purchase common stock of the Company at a discount
rate of 5% of the market price per share on the last trading day
of the offering period. Accordingly, the plan is a non-
compensatory plan. Employees purchase a variable number of
shares of stock through payroll deductions elected as of the
beginning of the offering period. The Company may sell up to
15,400,000 shares of stock to eligible employees under the
ESPP. As of December 31, 2024, there were 3,014,109 shares
available for future issuance. During the years ended
December 31, 2024, 2023 and 2022, 141,500 shares, 194,561
shares, and 194,504 shares were sold, respectively. For the
years ended December 31, 2024, 2023 and 2022, The Hartford
received $14, $13 and $13, respectively, in cash from sales
under this plan.
20. LEASES
The Hartford has operating leases for real estate and
equipment. The right-of-use asset as of December 31, 2024 and
2023 was $140 and $141, respectively, and is included in
property and equipment, net, in the Consolidated Balance
Sheets. The lease liability as of December 31, 2024 and 2023
was $145 and $144, respectively, and is included in other
liabilities in the Consolidated Balance Sheets. Variable lease
costs include changes in interest rates on variable rate leases
primarily for automobiles. During the years ended December 31,
2024, 2023 and 2022, variable lease costs of $0, $0 and $6,
respectively, were reported in restructuring and other costs for
lease terminations under Hartford Next (see Note 21 -
Restructuring and Other Costs for more information), and were
excluded from components of lease expense.
Components of Lease Expense
For the years ended December 31,
2024
2023
2022
Operating lease cost
$
35 $
36 $
40
Short-term lease cost
1
—
—
Variable lease cost
1
(2)
—
Sublease income
(3)
(4)
(4)
Total lease costs
included in insurance
operating costs and
other expenses
$
34 $
30 $
36
Supplemental Operating Lease Information
For the years ended December 31,
2024
2023
2022
Operating cash flows
for operating leases (for
the twelve months
ended)
$
33
$
37
$
56
Right-of-use asset
obtained in exchange
for new operating lease
liabilities
25
40
6
Weighted-average
remaining lease term in
years for operating
leases
6 years
7 years
6 years
Weighted-average
discount rate for
operating leases
4.3 %
4.0 %
3.0 %
Maturities of Operating Lease Liabilities as of
December 31, 2024
Operating
Leases
2025
$
31
2026
29
2027
27
2028
23
2029
19
Thereafter
40
Total lease payments
169
Less: Discount on lease payments to present
value
24
Total lease liability
$
145
Note 19 - Stock Compensation Plans
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
206
21. RESTRUCTURING AND OTHER COSTS
In recognition of the need to become more cost efficient and
competitive along with enhancing the experience we provide to
agents and customers, on July 30, 2020 the Company
announced an operational transformation and cost reduction
plan it refers to as Hartford Next. Hartford Next is intended to
reduce annual insurance operating costs and other expenses
through reduction of the Company's headcount, investment in
information technology ("IT") to further enhance our capabilities,
and other activities.
Termination benefits related to workforce reductions and
professional fees are included within restructuring and other
costs in the Consolidated Statement of Operations and unpaid
restructuring costs are included in other liabilities in the
Company's Consolidated Balance Sheets. For the years ended
December 31, 2023 and December 31, 2022, the severance
benefits accrual was reduced by $6, and $7 respectively, due to
more recent experience of higher than expected voluntary
attrition.
As of December 31, 2024, the program is substantially
complete, though the Company may incur additional costs
related to real estate that has been temporarily idled as part of
Hartford Next. Any other remaining costs, including amortization
of right of use assets, other lease exit costs, IT costs to retire
applications and other expenses are expected to be
immaterial.Total restructuring and other costs, excluding any
additional costs related to temporarily idled real estate, are
expected to be approximately $127, before tax, and have been
recognized in the Corporate category for segment reporting.
Restructuring and Other Costs, Before Tax
Incurred in the
Year Ended
December 31, 2022
Incurred in the
Year Ended
December 31, 2023
Incurred in the
Year Ended
December 31, 2024
Cumulative
Incurred in the
Year Ended
December 31, 2024
Total Amount
Expected to be
Incurred
Severance benefits
$
(7) $
(6) $
— $
35 $
35
IT costs
8
5
—
25
25
Professional fees and other
expenses
12
7
2
67
67
Total restructuring and
other costs, before tax
$
13 $
6 $
2 $
127 $
127
Accrued Restructuring and Other Costs
Year Ended December 31, 2024
Severance
Benefits and
Related Costs
IT Costs
Professional
Fees and
Other
Total
Restructuring
and Other
Costs Liability
Balance, beginning of period
$
— $
— $
— $
—
Incurred
—
—
2
2
Payments
—
—
(2)
(2)
Balance, end of period
$
— $
— $
— $
—
Accrued Restructuring and Other Costs
Year Ended December 31, 2023
Severance
Benefits and
Related Costs
IT Costs
Professional
Fees and
Other
Total
Restructuring
and Other
Costs Liability
Balance, beginning of period
$
7 $
— $
— $
7
Incurred
(6)
5
7
6
Payments
(1)
(5)
(7)
(13)
Balance, end of period
$
— $
— $
— $
—
Note 21 - Restructuring and Other Costs
THE HARTFORD INSURANCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
207
22. SUBSEQUENT EVENTS
Losses from California Wildfires
Beginning January 7, 2025, a series of destructive wildfires
affected the Los Angeles County area in California. Based on
claims reported and other available information, the Company's
preliminary loss estimate from these wildfires for the first quarter
of 2025, including potential assessments from the California
FAIR Plan, is a range of $300 to $350, net of reinsurance and
before tax. The estimate is subject to variability due to the timing
of reported claims, the extent of damage to personal and
commercial property and automobiles, uncertainty of the
availability for recoveries, including potential subrogation, and
other factors that may not yet be known to the Company. Given
these uncertainties, the wildfire losses may deviate from our
estimate.
Note 22 - Subsequent Events
208
Corporate Information
Corporate Headquarters
The Hartford Insurance Group, Inc.
One Hartford Plaza
Hartford, CT 06155
Internet Address
www.thehartford.com
Investor Relations
The Hartford Insurance Group, Inc.
Investor Relations
One Hartford Plaza (TA1-1)
Hartford, CT 06155
860-547-2537
E-mail: investorrelations@thehartford.com
Transfer Agent/Shareholder Record
Shareholder correspondence should be mailed to:
Computershare Trust Company, N.A.
P.O. Box 505000
Louisville, KY 40233
Overnight correspondence should be mailed to:
Computershare Trust Company, N.A.
462 South 4th Street, Suite 1600
Louisville, KY, 40202
Shareholder website:
www.computershare.com/investor
Shareholder Services:
Toll-free 877-272-7740
Annual Report on Form 10-K
Shareholders may receive without charge a copy of The Hartford’s Annual Report on Form 10-K as filed with the
U.S. Securities and Exchange Commission upon request to:
Terence Shields
Corporate Secretary
The Hartford Insurance Group, Inc.
One Hartford Plaza
Hartford, CT 06155
Our new, refreshed brand is a direct reflection of our ambitious growth-and-innovation strategy centered on our
customers and their changing needs.
It features a bold, contemporary look for our iconic stag and an updated color palette and typography. The new
brand elements honor our rich history while demonstrating our modern, visionary spirit with our sights set clearly
on the future. It represents who we are as an insurance leader and how we show up for our customers through our
actions, prioritizing their needs and upholding our commitments.
This modernized brand celebrates our strength and resiliency, built on the centuries of trust that people put in
us every day.
We work to earn people’s trust every day.
We’ve devoted ourselves to our customers and the risk and reward they face each and every day. We make it
our mission to understand what they need not just today, but tomorrow – and to stay ahead of it all for them.
The Hartford is finding new ways to fuel lives and livelihoods. We’re making homes safer and more resilient for
mature customers. We’re helping small business owners sustain and grow their ambitions. And to support American
workers getting back to active, productive work following an injury or illness.
Because showing up for people isn’t just what we do. It’s who we are – for more than 200 years. This is no small
responsibility. And the trust people have in us, we do not take for granted. It’s why we take nothing we do –
and no decision we make – lightly.
Doing more to innovate for our customers, communities
and employees – today and every day.
The Hartford Insurance Group, Inc., (NYSE: HIG) operates through its subsidiaries, including underwriting company Hartford Life and Accident Insurance Company, under the brand name,
The Hartford®, and is headquartered at One Hartford Plaza, Hartford, CT 06155. For additional details, please read The Hartford’s legal notice at www.TheHartford.com.
24-BD-2735239 © April 2025 The Hartford
How we’re showing up today.
We’re delivering industry-leading products and award-winning digital tools
to over a million small business owners.
We’re creating unique risk solutions for unique midsize and large businesses
with innovative technology leading the way.
We’re bringing people and technology together to help 20 million working
Americans protect themselves, their families and their income.
We’re helping mature drivers and homeowners get quality coverage that
meets their needs.
We’re giving small businesses access to affordable commercial real estate
by helping revitalize historic main streets across the country.
We’re addressing mental health stigma in the workplace by helping provide
resources and support for the next generation of workers.