Form 8-K HARTFORD FINANCIAL SERVI For: Oct 25
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 25, 2018
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-13958 | 13-3317783 | |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |
The Hartford Financial Services Group, Inc. One Hartford Plaza Hartford, Connecticut | 06155 | ||
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (860) 547-5000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
[ ] Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02 | Results of Operations and Financial Condition |
On October 25, 2018, The Hartford Financial Services Group, Inc. (the "Company") issued (i) a press release announcing its financial results for the quarterly period ended September 30, 2018, and (ii) its Investor Financial Supplement (“IFS”) relating to its financial results for the quarterly period ended September 30, 2018. Copies of the press release and the IFS are furnished herewith as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference.
The information furnished pursuant to this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.
Item 9.01 | Financial Statements and Exhibits |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: | October 25, 2018 | By: | /s/ Scott R. Lewis |
Name: | Scott R. Lewis | ||
Title: | Senior Vice President and Controller |
NEWS RELEASE
The Hartford Reports Third Quarter 2018 Income From Continuing Operations, After Tax, Of $1.17 Per Diluted Share And Core Earnings Of $1.15 Per Diluted Share
• | Income from continuing operations, after tax, totaled $427 million compared with third quarter 2017 income from continuing operations, after tax, of $145 million ($0.40 per diluted share) |
• | Core earnings* were $418 million, up from $130 million ($0.35 per diluted share*) in third quarter 2017, due to higher income from the Commercial Lines, Personal Lines, Group Benefits and Mutual Funds segments, including the favorable impact of a lower U.S. corporate tax rate, and a lower Corporate core loss |
• | Property and casualty (P&C) combined ratio of 97.3 decreased 9.8 points from third quarter 2017 due to lower current accident year catastrophe losses, higher favorable prior year development (PYD) and a better underlying combined ratio*; P&C underlying combined ratio of 93.2 improved 0.7 point from third quarter 2017 due to stronger Personal Lines margins |
• | Group Benefits net income of $77 million and core earnings of $102 million rose 8% and 55%, respectively, from third quarter 2017 due to premium growth and increased net investment income, both in large part due to the fourth quarter 2017 acquisition, and a lower effective tax rate |
• | Book value per diluted share of $34.95 declined 6% from Dec. 31, 2017 due to lower net unrealized capital gains from higher interest rates and the impact of the removal of accumulated other comprehensive income (AOCI) related to the sale of Talcott Resolution; book value per diluted share (excluding AOCI)* was $39.12, up 11% due to net income in excess of common stock dividends |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP); definitions of non-GAAP measures and reconciliations to their closest GAAP measures can be found in this news release under the heading Discussion of Non-GAAP Financial Measures
HARTFORD, Conn., October 25, 2018 – The Hartford (NYSE: HIG) reported third quarter 2018 income from continuing operations, after tax, of $427 million compared with $145 million in third quarter 2017. The $282 million increase was due to higher Commercial Lines, Personal Lines, Group Benefits and Mutual Funds income, including the benefit of a lower U.S. corporate tax rate, and a
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lower Corporate core loss. Income from continuing operations, after tax, per diluted share rose to $1.17 from $0.40 in third quarter 2017.
Core earnings of $418 million, or $1.15 per diluted share, in third quarter 2018 increased from $130 million, or $0.35 per diluted share, in third quarter 2017. In addition to the benefit of a lower U.S. corporate tax rate in 2018, core earnings rose from third quarter 2017 primarily due to better P&C underwriting results driven by lower current accident year catastrophe losses and higher favorable PYD. Other items that contributed to the increase in core earnings included growth in the Group Benefits business, primarily due to the contribution from the fourth quarter 2017 acquisition, and increased Mutual Funds assets under management.
“Third quarter financial results were excellent, with increased earnings in P&C, Group Benefits and Mutual Funds, including higher net investment income,” stated The Hartford’s Chairman and CEO Christopher Swift. “Core earnings increased to $418 million, and book value per diluted share, excluding AOCI, is up 11% in 2018. Year-to-date, our net income and core earnings return on equity were 16.4% and 12.7% annualized, reflecting strong operating results, the benefit of the sale of Talcott, and the lower U.S. corporate tax rate.”
The Hartford’s President Doug Elliot said, “Combined property and casualty underwriting results were strong, reflecting lower catastrophes, favorable prior year development and continued progress in Personal Lines. Catastrophe losses from 19 distinct events were above our budget for the quarter, but down significantly from last year which included losses from three hurricanes. Commercial Lines results remain strong, with exceptional results in Small Commercial, where the combined ratio improved to 87.6. Group Benefits earnings were again excellent, driven both by strong margins and the contribution from our 2017 acquisition, and the integration continues to go well. We’re very pleased with our sales and persistency results for the year, as well as with the excellent teamwork and focus of the combined organizations.”
Swift continued, “We're excited about the Navigators acquisition, which we announced in August, and its potential to accelerate our growth strategies in Middle Market and Specialty Commercial. Looking forward, we see continued opportunities to build on the momentum created in 2018. With an expanded talent base, broader product breadth and improved capabilities, we are well-positioned for the future.”
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FINANCIAL RESULTS SUMMARY
($ in millions except per share data) | Three Months Ended | ||
Sep 30 2018 | Sep 30 2017 | Change¹ | |
Net income (loss) by segment: | |||
Commercial Lines | $289 | $90 | NM |
Personal Lines | 51 | 8 | NM |
P&C Other Operations | 9 | 18 | (50%) |
Property & Casualty | 349 | 116 | NM |
Group Benefits | 77 | 71 | 8% |
Mutual Funds | 41 | 26 | 58% |
Sub-total | 467 | 213 | 119% |
Corporate | (35) | 21 | NM |
Net income (loss) | $432 | $234 | 85% |
Less: Income from discontinued operations, after tax | 5 | 89 | (94%) |
Income (loss) from continuing operations, after tax | $427 | $145 | 194% |
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 37 | 25 | 48% |
Less: Integration and transaction costs associated with acquired business, before tax | (12) | — | (100)% |
Less: Income tax benefit (expense), including amounts related to before tax items excluded from core earnings | (16) | (10) | (60)% |
Core earnings | $418 | $130 | NM |
Weighted average diluted common shares outstanding | 364.1 | 367.0 | (1%) |
Income (loss) from continuing operations per diluted share2 | $1.17 | $0.40 | 193% |
Net income (loss) per diluted share2 | $1.19 | $0.64 | 86% |
Core earnings per diluted share2 | $1.15 | $0.35 | NM |
Select financial measures: | |||
Common shares outstanding and dilutive potential common shares | 364.2 | 364.1 | —% |
Book value per diluted share | $34.95 | $47.33 | (26%) |
Book value per diluted share (excluding AOCI) | $39.12 | $45.72 | (14%) |
Net income (loss) ROE3, last 12-months | (14.0)% | 2.7% | (16.7) |
Core earnings ROE3, last 12-months* | 10.3% | 5.9% | 4.4 |
Select operating data: | |||
Net investment income | $444 | $404 | 10% |
Annualized investment yield, before tax, excluding limited partnerships and other alternative investments (LPs)* | 3.7% | 3.8% | (0.1) |
Annualized LP yield, before tax | 10.6% | 12.8% | (2.2) |
P&C net investment income | $311 | $303 | 3% |
P&C annualized investment yield, before tax, excluding LPs* | 3.8% | 3.7% | 0.1 |
Group Benefits net investment income | $117 | $95 | 23% |
Group Benefits annualized investment yield, before tax, excluding LPs* | 3.9% | 4.3% | (0.4) |
[1] | 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 |
[2] | Includes dilutive potential common shares |
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[3] Return on equity (ROE) is calculated based on last 12-months net income and core earnings, respectively; for net income ROE, the denominator is stockholders’ equity including AOCI; for core earnings ROE, the denominator is stockholders’ equity excluding AOCI
Third quarter 2018 consolidated net investment income increased 10% to $444 million, before tax, from $404 million, before tax, in third quarter 2017 primarily as a result of a higher level of invested assets due to the fourth quarter 2017 Group Benefits acquisition. Investment income from LPs of $45 million, before tax (10.6% annualized investment yield) was down slightly from $48 million (12.8% annualized investment yield) in third quarter 2017. Reflecting a generally benign credit environment, impairment losses in the quarter totaled $1 million, level with third quarter 2017.
The annualized investment yield, before tax, excluding LPs, was 3.7% in third quarter 2018, down modestly from 3.8% in third quarter 2017 primarily due to the impact of the acquired investment portfolio in Group Benefits. P&C investment yield, before tax, excluding LPs, was 3.8% in third quarter 2018, up from 3.7% in third quarter 2017 due, in part, to the impact of higher interest rates.
Book value per diluted share of $34.95 as of Sept. 30, 2018 decreased 6% from $37.11 as of Dec. 31, 2017, principally due to the impact of higher interest rates on unrealized capital gains (losses), as well as the removal of AOCI related to Talcott Resolution upon the closing of the sale of that business in second quarter 2018. Book value per diluted share (excluding AOCI) of $39.12 as of Sept. 30, 2018 increased 11% from $35.29 as of Dec. 31, 2017 due to net income in excess of common stock dividends year-to-date.
ROE, which is calculated on a 12-month trailing basis, was a net loss ROE of 14.0% in third quarter 2018 compared with net income ROE of 2.7% in third quarter 2017. The third quarter 2018 ROE calculation includes the fourth quarter 2017 loss on sale of Talcott Resolution and the fourth quarter 2017 charge related to U.S. corporate tax reform, while third quarter 2017 ROE includes the fourth quarter 2016 charge for the asbestos and environmental loss reserve development cover and the second quarter 2017 pension settlement charge.
Core earnings ROE was 10.3% in third quarter 2018, up 4.4 points from 5.9% in third quarter 2017 due to higher core earnings and lower average stockholders' equity, excluding AOCI.
THIRD QUARTER SEGMENT FINANCIAL RESULTS SUMMARY
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Three Months Ended | |||
($ in millions) | Sep 30 2018 | Sep 30 2017 | Change¹ |
Core earnings (losses) | |||
P&C segments: | |||
Commercial Lines | $265 | $81 | NM |
Personal Lines | 47 | 7 | NM |
P&C Other Operations | 8 | 18 | (56)% |
Property & Casualty | 320 | 106 | NM |
Group Benefits | 102 | 66 | 55% |
Mutual Funds | 41 | 26 | 58% |
Sub-total | 463 | 198 | 134% |
Corporate | (45) | (68) | 34% |
Total | $418 | $130 | NM |
Select operating data: | |||
Commercial Lines | |||
Combined ratio | 96.1 | 108.6 | (12.5) |
Impact of catastrophes and PYD on combined ratio | 2.3 | 15.5 | (13.2) |
Underlying combined ratio | 93.7 | 93.2 | 0.5 |
Personal Lines | |||
Combined ratio | 98.4 | 104.0 | (5.6) |
Impact of catastrophes and PYD on combined ratio | 6.6 | 9.1 | (2.5) |
Underlying combined ratio | 91.8 | 94.9 | (3.1) |
Group Benefits | |||
Loss ratio | 75.5% | 74.7% | 0.8 |
Expense ratio | 23.9% | 25.8% | (1.9) |
Net income margin | 5.1% | 7.7% | (2.6) |
Core earnings margin* | 6.7% | 7.2% | (0.5) |
Mutual Funds | |||
Mutual fund and exchange-traded products (ETP) net flows | $245 | $827 | (70)% |
Total Mutual Funds segment assets under management | $121,076 | $111,724 | 8% |
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Commercial Lines
• | Commercial Lines net income of $289 million and core earnings of $265 million increased from $90 million and $81 million, respectively, in third quarter 2017 primarily due to lower current accident year catastrophe losses, higher favorable PYD and the effect of a lower U.S. corporate tax rate |
• | As a result of lower current accident year catastrophes and higher favorable PYD, the underwriting gain of $70 million reversed from an underwriting loss of $149 million in third quarter 2017. The combined ratio of 96.1 improved 12.5 points from 108.6 in third quarter 2017 |
◦ | Current accident year catastrophe losses were $95 million, before tax, (5.3 points on the combined ratio) due primarily to Hurricane Florence and multiple wind, hail and wildfire events, down from $270 million, before tax, (15.7 points on the combined ratio) in third quarter 2017, which included losses from hurricanes Harvey, Irma and Maria |
◦ | Net favorable PYD was $53 million, before tax, (3.0 points on the combined ratio) compared with $3 million, before tax (0.2 points on the combined ratio) of net favorable PYD in third quarter 2017 and was primarily due to favorable workers' compensation frequency and medical severity for accident years 2015 and prior, as well as reserve decreases for professional liability and 2017 catastrophe losses |
• | The underlying underwriting gain* of $112 million declined 5% from third quarter 2017 and the underlying combined ratio of 93.7 was 0.5 point higher than in third quarter 2017 principally due to increased claim frequency in Middle Market workers' compensation and higher non-catastrophe property losses in Small Commercial, partially offset by better general liability and commercial auto results |
◦ | Small Commercial improved 0.5 point to 88.7 primarily due to lower general liability and auto liability losses, partially offset by higher non-catastrophe property losses |
◦ | Middle Market increased 3.2 points to 100.2 principally due to higher current accident year workers' compensation frequency trends |
◦ | Specialty Commercial improved 2.6 points to 96.0 primarily due to lower expenses compared with third quarter 2017 and higher premiums on retrospectively rated accounts, partially offset by margin compression in workers' compensation due to lower pricing, and in professional liability |
• | Commercial Lines written premiums of $1.8 billion were up 3% from third quarter 2017 due to Small Commercial and Middle Market |
◦ | Small Commercial written premiums grew 1% from third quarter 2017 due to 9% growth in new business and stable retention, mostly offset by lower renewal written premium in workers' compensation and auto. New business growth was due to the renewal rights agreement with Farmers Group to acquire its Foremost-branded small commercial business |
◦ | Middle Market grew 7% over third quarter 2017 due to a 21% increase in new business premium and a 2 point improvement in policy count retention |
◦ | Specialty Commercial written premiums were flat with third quarter 2017, as increases in bond and financial products were offset by decreases in national accounts and captives |
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Personal Lines
• | Personal Lines net income of $51 million and core earnings of $47 million increased from $8 million and $7 million, respectively, in third quarter 2017 due to an improved auto underlying underwriting gain, a change to net favorable PYD, lower current accident year catastrophe losses, and the effect of a lower U.S. corporate tax rate |
• | The underwriting gain of $14 million reversed from an underwriting loss of $37 million in third quarter 2017 and the combined ratio of 98.4 improved 5.6 points from 104.0 in third quarter 2017 primarily due to a 5.5 point improvement in the current accident year loss ratio before catastrophes, a 2.3 point favorable change in PYD, and a 0.2 point decrease in current accident year catastrophe losses, partially offset by a 2.3 point increase in the expense ratio |
◦ | Current accident year catastrophe losses were primarily related to wind, hail and wildfire events and totaled $74 million, before tax (8.7 points on the combined ratio), down from $82 million, before tax (8.9 points on the combined ratio), in third quarter 2017 |
◦ | PYD included net favorable PYD on both auto liability and homeowners for a total of $18 million, before tax (2.1 points on the combined ratio), a reversal from net unfavorable PYD of $2 million, before tax (0.2 points on the combined ratio), in third quarter 2017 |
• | The underlying underwriting gain rose to $70 million from $47 million in third quarter 2017 and the underlying combined ratio of 91.8 was 3.1 points better than third quarter 2017 due to better current accident year results before catastrophes, principally due to earned pricing increases in both auto and homeowners and lower non-catastrophe weather losses in homeowners. The 5.5 point improvement in the current accident year loss ratio before catastrophes was partially offset by a 2.3 point increase in the expense ratio largely due to higher marketing spending during 2018 in order to generate higher levels of new business, as well as the effect of lower earned premium than in third quarter 2017 |
• | The auto combined ratio improved 7.4 points to 98.9 from 106.3 in third quarter 2017 due to a lower current accident year loss ratio before catastrophes, lower current accident year catastrophe losses, and higher net favorable PYD, partially offset by a higher expense ratio. The auto underlying combined ratio of 98.5 was 3.1 points better than in third quarter 2017 due to earned pricing increases in excess of loss costs, partially offset by higher expenses |
• | The homeowners combined ratio improved to 96.9 from 97.9 in third quarter 2017 due to a lower current accident year loss ratio before catastrophes and change to net favorable PYD, partially offset by higher current accident year catastrophe losses. The underlying combined ratio was 76.3, a 2.6 point improvement over third quarter 2017 due to lower non-catastrophe weather losses, partially offset by higher expenses |
• | Personal Lines written premiums of $854 million declined 8% from third quarter 2017 largely due to the effect of pricing actions over the past year on retention in the period. In third quarter 2018, new business premium increased by $11 million, or 23%, over third quarter 2017, reflecting the impact of the company's increased marketing spending on new business |
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◦ | Auto new business premium of $47 million was up 27% from $37 million in third quarter 2017; Homeowners new business premium of $12 million was up 9% from $11 million in third quarter 2017 |
◦ | Auto policy count retention of 83% increased 3 points from third quarter 2017 and 1 point from second quarter 2018 as renewal written pricing increases moderated |
◦ | Homeowners policy count retention of 83% was level with third quarter 2017 and declined 1 point from second quarter 2018 |
Group Benefits
• | Group Benefits net income of $77 million increased from $71 million in third quarter 2017 as a result of higher premiums and net investment income, largely from the fourth quarter 2017 acquisition, and a lower U.S. corporate tax rate, partially offset by integration costs and amortization of intangible assets. The net income margin declined to 5.1% from 7.7% in third quarter 2017 in large part due to third quarter 2018 integration costs of $9 million, after tax, and amortization of intangible assets of $12 million, after tax, both of which were related to the fourth quarter 2017 acquisition, as well as net realized capital losses in third quarter 2018 compared with net realized capital gains in third quarter 2017 |
• | Core earnings, which include the amortization of intangible assets related to the acquisition, were $102 million, up 55% from $66 million in third quarter 2017 primarily due to the acquisition and a lower U.S. corporate tax rate. The core earnings margin of 6.7% declined from 7.2% in third quarter 2017 largely due to the impact of the amortization of intangible assets in third quarter 2018, which did not occur in third quarter 2017 |
• | Fully insured ongoing premiums, excluding buyouts, of $1,353 million increased 68% from $803 million in third quarter 2017 primarily due to the acquisition, but also from strong sales and persistency in 2018. Fully insured ongoing sales, excluding buyouts, of $104 million increased 53% from $68 million in third quarter 2017 |
• | The total loss ratio of 75.5% increased 0.8 point from third quarter 2017 as a lower group life loss ratio was more than offset by a higher group disability loss ratio |
◦ | The 2.9 point increase in the group disability loss ratio was largely due to a decline in recoveries compared with very favorable levels in third quarter 2017 |
◦ | The 1.1 point decrease in the group life loss ratio compared with third quarter 2017 reflects better mortality, partially offset by higher loss ratios of the acquired book due to its greater proportion of national accounts business |
• | The expense ratio of 23.9% decreased 1.9 points from third quarter 2017 due to increased scale and a lower average commission rate due to the acquisition |
Mutual Funds
• | Mutual Funds net income and core earnings of $41 million increased from $26 million in third quarter 2017 primarily due to growth in Mutual Funds segment assets under management (AUM), as well as the lower U.S. corporate tax rate |
• | Mutual Funds segment AUM rose 8% compared with third quarter 2017 to $121 billion due to market appreciation and positive net flows over the last twelve months |
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• | Mutual fund and ETP net flows totaled $0.2 billion in third quarter 2018, down from $0.8 billion in third quarter 2017. Over the past four quarters, mutual fund and ETP net flows totaled $1.3 billion, contributing to the growth in AUM |
Corporate
• | Corporate net loss was $35 million compared with net income of $21 million in third quarter 2017. Third quarter 2018 results included income from discontinued operations of $5 million, down from $89 million in third quarter 2017, due to the May 2018 sale of Talcott Resolution and the effect of tax true-ups on third quarter 2018 results |
• | Core losses, which do not include income from discontinued operations, were $45 million compared with core losses of $68 million in third quarter 2017 primarily due to higher net investment income and lower interest expense, partially offset by a lower tax benefit due to the lower U.S. corporate tax rate |
◦ | Net investment income of $15 million, before tax, increased significantly from $5 million, before tax in third quarter 2017 as a result of higher average invested assets at the holding company due to the reinvestment of the proceeds from the May 2018 sale of Talcott Resolution, as well as higher short-term interest rates |
◦ | Corporate core losses included $9 million, before tax, of expenses formerly allocated to Talcott Resolution compared with $15 million, before tax, of such expenses in third quarter 2017. The company continues to expect that these costs will be eliminated over the next 15 months. |
CONFERENCE CALL
The Hartford will discuss its third quarter 2018 financial results on a webcast at 9 a.m. EDT on Friday, October 26, 2018. The call can be accessed via a live listen-only webcast or as a replay through the Investor Relations section of The Hartford's website at https://ir.thehartford.com. The replay will be accessible approximately one hour after the conclusion of the call and be available along with a transcript of the event for at least one year.
More detailed financial information can be found in The Hartford's Investor Financial Supplement for Sept. 30, 2018, and the Third Quarter 2018 Financial Results Presentation, both of which are available at https://ir.thehartford.com.
ABOUT THE HARTFORD
The Hartford is a leader in property and casualty insurance, group benefits and mutual funds. With more than 200 years of expertise, The Hartford is widely recognized for its service excellence, sustainability practices, trust and integrity. More information on the company and its financial performance is available at https://www.thehartford.com. Follow us on Twitter at www.twitter.com/TheHartford_PR.
The Hartford Financial Services Group, Inc., (NYSE: HIG) operates through its subsidiaries under the brand name, The Hartford, and is headquartered in Hartford, Conn. For additional details, please read The Hartford’s legal notice at https://www.thehartford.com/legal-notice.
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From time to time, The Hartford may use its website to disseminate material company information. Financial and other important information regarding The Hartford is routinely accessible through and posted on our website at https://ir.thehartford.com. In addition, you may automatically receive email alerts and other information about The Hartford when you enroll your email address by visiting the “Email Alerts” section at https://ir.thehartford.com.
Media Contacts | Investor Contacts | |
Michelle Loxton | Sabra Purtill, CFA | |
860-547-7413 | 860-547-8691 | |
Matthew Sturdevant | Sean Rourke | |
860-547-8664 | 860-547-5688 | |
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THE HARTFORD FINANCIAL SERVICES GROUP, INC. | ||||||||||||||||||||||
CONSOLIDATING INCOME STATEMENTS | ||||||||||||||||||||||
Three Months Ended September 30, 2018 | ||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||
Commercial Lines | Personal Lines | P&C Other Ops | Group Benefits | Mutual Funds | Corporate | Consolidated | ||||||||||||||||
Earned premiums | $ | 1,785 | $ | 849 | $ | — | $ | 1,353 | $ | — | $ | — | $ | 3,987 | ||||||||
Fee income | 9 | 10 | — | 43 | 267 | 15 | 344 | |||||||||||||||
Net investment income | 250 | 39 | 22 | 117 | 1 | 15 | 444 | |||||||||||||||
Other revenues | (1 | ) | 24 | — | — | — | 6 | 29 | ||||||||||||||
Net realized capital gains (losses) | 29 | 5 | 3 | (3 | ) | — | 4 | 38 | ||||||||||||||
Total revenues | 2,072 | 927 | 25 | 1,510 | 268 | 40 | 4,842 | |||||||||||||||
Benefits, losses, and loss adjustment expenses | 1,097 | 621 | 11 | 1,054 | — | 3 | 2,786 | |||||||||||||||
Amortization of DAC | 264 | 68 | — | 12 | 4 | — | 348 | |||||||||||||||
Insurance operating costs and other expenses | 359 | 173 | 3 | 319 | 212 | 25 | 1,091 | |||||||||||||||
Interest expense | — | — | — | — | — | 69 | 69 | |||||||||||||||
Amortization of other intangible assets | 2 | 1 | — | 15 | — | — | 18 | |||||||||||||||
Total benefits and expenses | 1,722 | 863 | 14 | 1,400 | 216 | 97 | 4,312 | |||||||||||||||
Income (loss) before income taxes | 350 | 64 | 11 | 110 | 52 | (57 | ) | 530 | ||||||||||||||
Income tax expense (benefit) | 61 | 13 | 2 | 33 | 11 | (17 | ) | 103 | ||||||||||||||
Income (loss) from continuing operations, after-tax | 289 | 51 | 9 | 77 | 41 | (40 | ) | 427 | ||||||||||||||
Income from discontinued operations, after-tax | — | — | — | — | — | 5 | 5 | |||||||||||||||
Net income (loss) | 289 | 51 | 9 | 77 | 41 | (35 | ) | 432 | ||||||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 28 | 5 | 3 | (3 | ) | — | 4 | 37 | ||||||||||||||
Less: Integration and transaction costs associated with acquired business, before tax | — | — | — | (12 | ) | — | — | (12 | ) | |||||||||||||
Less: Income tax benefit (expense) | (4 | ) | (1 | ) | (2 | ) | (10 | ) | — | 1 | (16 | ) | ||||||||||
Less: Income from discontinued operations, after-tax | — | — | — | — | — | 5 | 5 | |||||||||||||||
Core earnings (losses) | $ | 265 | $ | 47 | $ | 8 | $ | 102 | $ | 41 | $ | (45 | ) | $ | 418 |
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THE HARTFORD FINANCIAL SERVICES GROUP, INC. | ||||||||||||||||||||||
CONSOLIDATING INCOME STATEMENTS | ||||||||||||||||||||||
Three Months Ended September 30, 2017 | ||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||
Commercial Lines | Personal Lines | P&C Other Ops | Group Benefits | Mutual Funds | Corporate | Consolidated | ||||||||||||||||
Earned premiums | $ | 1,723 | $ | 921 | $ | — | $ | 803 | $ | — | $ | — | $ | 3,447 | ||||||||
Fee income | 9 | 11 | — | 19 | 251 | 1 | 291 | |||||||||||||||
Net investment income | 241 | 36 | 26 | 95 | 1 | 5 | 404 | |||||||||||||||
Other revenues | — | 24 | — | — | — | — | 24 | |||||||||||||||
Net realized capital gains (losses) | 13 | 2 | 1 | 9 | — | 1 | 26 | |||||||||||||||
Total revenues | 1,986 | 994 | 27 | 926 | 252 | 7 | 4,192 | |||||||||||||||
Benefits, losses, and loss adjustment expenses | 1,276 | 747 | — | 614 | — | 1 | 2,638 | |||||||||||||||
Amortization of DAC | 253 | 76 | — | 8 | 5 | (1 | ) | 341 | ||||||||||||||
Insurance operating costs and other expenses | 352 | 162 | 1 | 204 | 207 | 26 | 952 | |||||||||||||||
Interest expense | — | — | — | — | — | 79 | 79 | |||||||||||||||
Amortization of other intangible assets | — | 1 | — | — | — | — | 1 | |||||||||||||||
Total benefits and expenses | 1,881 | 986 | 1 | 826 | 212 | 105 | 4,011 | |||||||||||||||
Income (loss) before income taxes | 105 | 8 | 26 | 100 | 40 | (98 | ) | 181 | ||||||||||||||
Income tax expense (benefit) | 15 | — | 8 | 29 | 14 | (30 | ) | 36 | ||||||||||||||
Income (loss) from continuing operations, after-tax | 90 | 8 | 18 | 71 | 26 | (68 | ) | 145 | ||||||||||||||
Income from discontinued operations, after-tax | — | — | — | — | — | 89 | 89 | |||||||||||||||
Net income (loss) | 90 | 8 | 18 | 71 | 26 | 21 | 234 | |||||||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 12 | 2 | 2 | 7 | — | 2 | 25 | |||||||||||||||
Less: Income tax benefit (expense) | (3 | ) | (1 | ) | (2 | ) | (2 | ) | — | (2 | ) | (10 | ) | |||||||||
Less: Income from discontinued operations, after-tax | — | — | — | — | — | 89 | 89 | |||||||||||||||
Core earnings (losses) | $ | 81 | $ | 7 | $ | 18 | $ | 66 | $ | 26 | $ | (68 | ) | $ | 130 |
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DISCUSSION OF NON-GAAP FINANCIAL MEASURES
The Hartford uses non-GAAP financial measures in this press release to assist investors in analyzing the company's operating performance for the periods presented herein. Because The Hartford's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing The Hartford's non-GAAP financial measures to those of other companies. Definitions and calculations of other financial measures used in this press release can be found below and in The Hartford's Investor Financial Supplement for third quarter 2018, which is available on The Hartford's website, https://ir.thehartford.com.
Annualized investment yield, excluding limited partnerships and other alternative investments is the annualized net investment income on a Consolidated, P&C or Group Benefits level excluding limited partnerships and other alternative investments divided by such monthly average invested assets at amortized cost, excluding repurchase agreement and securities lending collateral, derivatives book value, and limited partnerships and other alternative investments. The company believes that annualized net investment income, excluding limited partnerships, 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.
Three Months Ended | ||||||||||||
Sep 30 2018 | Sep 30 2017 | Sep 30 2018 | Sep 30 2017 | Sep 30 2018 | Sep 30 2017 | |||||||
Consolidated | P&C | Group Benefits | ||||||||||
Annualized investment yield | 4.0 | % | 4.1 | % | 4.1 | % | 4.0 | % | 4.1 | % | 4.9 | % |
Less: Impact on annualized investment yield of limited partnerships and other alternative investments | (0.3 | )% | (0.3 | )% | (0.3 | )% | (0.3 | )% | (0.2 | )% | (0.6 | )% |
Annualized investment yield excluding limited partnerships and other alternative investments | 3.7 | % | 3.8 | % | 3.8 | % | 3.7 | % | 3.9 | % | 4.3 | % |
Book value per diluted share (excluding AOCI): Book value per diluted share (excluding AOCI) is calculated based upon non-GAAP financial measures. It is calculated by dividing (a) total stockholders' equity, excluding AOCI, after tax, by (b) common shares outstanding or 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 it 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 measures. A reconciliation of book value per diluted share, including AOCI to book value per diluted share (excluding AOCI) is set forth below.
13
As of | |||
Sep 30 2018 | Dec 31 2017 | Change | |
Book value per diluted share | $34.95 | $37.11 | (6%) |
Less: Per diluted share impact of AOCI | $(4.17) | $1.82 | NM |
Book value per diluted share (excluding AOCI) | $39.12 | $35.29 | 11% |
Core Earnings: The Hartford uses the non-GAAP measure core earnings as an important measure of the company’s operating performance. The Hartford believes that the measure core earnings provides investors with a valuable measure of the performance of the company’s ongoing businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain realized capital gains and losses, certain restructuring and other costs, integration and transaction costs in connection with an acquired business, pension settlements, loss on extinguishment of debt, gains and losses on reinsurance transactions, income tax benefit from reduction in deferred income tax valuation allowance, impact of tax reform on net deferred tax assets, and results of discontinued operations. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business.
Accordingly, core earnings excludes the effect of all realized gains and losses (net of tax and the effects of DAC) that tend to be highly variable from period to period based on capital market conditions.
The Hartford believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. Results from discontinued operations are excluded from core earnings for businesses held for sale because such results could obscure trends in our ongoing businesses that are valuable to our investors' ability to assess the company's financial performance.
Net income (loss) and income from continuing operations (during periods when the company reports significant discontinued operations) are the most directly comparable U.S. GAAP measures to core earnings. Income from continuing operations is net income, excluding the income (loss) from discontinued operations. Core earnings should not be considered as a substitute for net income (loss) or income (loss) from continuing operations 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), income (loss) from continuing operations and core earnings when reviewing the company’s performance.
A reconciliation of net income (loss) to income from continuing operations to core earnings for the quarterly periods ended Sept. 30, 2018 and 2017, is included in this press release. A reconciliation of net income (loss) to core earnings for individual reporting segments can be found in this press release under the heading "The Hartford Financial Services Group, Inc. Consolidating Income Statements" and in The Hartford's Investor Financial Supplement for the quarter ended Sept. 30, 2018.
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Core earnings margin: The Hartford uses the non-GAAP measure core earnings margin to evaluate, and believes it is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues, excluding buyouts and realized gains (losses). Net income margin is the most directly comparable U.S. GAAP measure. The company believes that core earnings margin provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and realized gains (losses). Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance. A reconciliation of net income margin to core earnings margin for the quarterly periods ended Sept. 30, 2018 and 2017, is set forth below.
Three Months Ended | |||
Margin | Sep 30 2018 | Sep 30 2017 | Change |
Net income margin | 5.1% | 7.7% | (2.6) |
Less: Net realized capital gains (losses) excluded from core earnings, after tax | (0.1)% | 0.5% | (0.6) |
Less: Effect of integration and transaction costs, net of tax, on after tax margin | (0.6)% | —% | (0.6) |
Less: Impact of lower tax rate on net deferred tax assets from filing of the 2017 tax return and finalization of opening balance sheet for the Aetna acquisition | (0.9)% | —% | (0.9) |
Core earnings margin | 6.7% | 7.2% | (0.5) |
Core earnings per diluted share: Core earnings per diluted share is calculated based on the non-GAAP financial measure core earnings. It is calculated by dividing (a) core earnings, by (b) diluted common shares outstanding. The Hartford believes that the measure core earnings per diluted share provides investors with a valuable measure of the company's operating performance for the same reasons applicable to its underlying measure, core earnings. Net income (loss) per diluted common share is the most directly comparable GAAP measure. Core earnings per diluted share should not be considered as a substitute for net income (loss) per diluted share and does not reflect the overall profitability of the company's business.
Therefore, The Hartford believes that it is useful for investors to evaluate both net income (loss) per diluted share and core earnings per diluted share when reviewing the company's performance. A reconciliation of net income (loss) per diluted common share to core earnings per diluted share for the quarterly periods ended Sept. 30, 2018 and 2017 is provided in the table below.
15
Three Months Ended | |||
Sep 30 2018 | Sep 30 2017 | Change | |
PER SHARE DATA | |||
Diluted earnings (losses) per common share: | |||
Net income (loss) per share1 | $1.19 | $0.64 | 86% |
Less: income from discontinued operations, after tax | 0.02 | 0.24 | (92%) |
Income from continuing operations | $1.17 | $0.40 | 193% |
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 0.10 | 0.07 | 43% |
Less: Integration and transaction costs associated with an acquired business | (0.03) | — | NM |
Less: Income tax (expense) benefit on items excluded from core earnings | (0.05) | (0.02) | (150%) |
Core earnings per share1 | $1.15 | $0.35 | NM |
[1] Includes dilutive potential common shares
Net investment income, excluding limited partnerships and other alternative investments: is the amount of net investment income, on a Consolidated, P&C or Group Benefits level earned from such 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, 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.
Three Months Ended | ||||||||||||||||||
Sep 30 2018 | Sep 30 2017 | Sep 30 2018 | Sep 30 2017 | Sep 30 2018 | Sep 30 2017 | |||||||||||||
Consolidated | P&C | Group Benefits | ||||||||||||||||
Total net investment income | $ | 444 | $ | 404 | $ | 311 | $ | 303 | $ | 117 | $ | 95 | ||||||
Less: Income from limited partnerships and other alternative assets | 45 | 48 | 35 | 34 | 10 | 14 | ||||||||||||
Net investment income excluding limited partnerships and other alternative investments | $ | 399 | $ | 356 | $ | 276 | $ | 269 | $ | 107 | $ | 81 |
Core Earnings Return on Equity: The company provides different measures of the return on stockholders' equity (“ROE”). Net income ROE is calculated by dividing (a) net income for the prior four fiscal quarters by (b) average common stockholders' equity, including AOCI. Core earnings ROE is calculated based on non-GAAP financial measures. Core earnings ROE is calculated by dividing (a) core earnings for the prior four fiscal quarters by (b) average common stockholders' equity, excluding AOCI. Net income 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 measures for the reasons set forth in the related discussion above.
16
A reconciliation of Consolidated Net income ROE to Consolidated Core earnings ROE is set forth below.
Last Twelve Months Ended | ||
Sep 30 2018 | Sep 30 2017 | |
Net income (loss) ROE | (14)% | 2.7% |
Less: Net realized capital gains (losses) excluded from core earnings, before tax | 0.8 | (0.2) |
Less: Loss on reinsurance transactions, before tax | — | (3.6) |
Less: Pension settlement, before tax | — | (4.2) |
Less: Integration and transaction costs associated with an acquired business | (0.3) | — |
Less: Income tax (expense) benefit on items not included in core earnings | (6.1) | 3.2 |
Less: Income (loss) from discontinued operations, after tax | (18.8) | 1.8 |
Less: Impact of AOCI, excluded from core earnings ROE | 0.1 | (0.2) |
Core earnings ROE | 10.3% | 5.9% |
Underlying combined ratio: Represents the combined ratio before catastrophes and prior accident year development (PYD) and is a non-GAAP financial measure. Combined ratio is the most directly comparable GAAP measure. The combined ratio is the sum of the loss and loss adjustment expense ratio (also known as a loss ratio), the expense ratio and the policyholder dividend ratio. This ratio measures the cost of losses and expenses for every $100 of earned premiums. A combined ratio below 100 demonstrates a positive underwriting result. A combined ratio above 100 indicates a negative underwriting result. The underlying combined ratio represents the combined ratio for the current accident year, excluding the impact of current accident year catastrophes. The company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve. A reconciliation of the combined ratio to the underlying combined ratio for individual reporting segments can be found in this press release under the heading "Third Quarter 2018 Segment Financial Results Summary."
Underwriting gain (loss): The Hartford's management evaluates profitability of the Commercial and Personal Lines segments primarily on the basis of underwriting gain or loss. Underwriting gain (loss) is a before tax measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses. Net income (loss) is the most directly comparable GAAP measure. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of The Hartford's pricing. Underwriting profitability over time is also greatly influenced by The Hartford's underwriting discipline, as management strives to manage exposure to loss through favorable risk selection and diversification, effective management of claims, use of reinsurance and its ability to manage its expenses. The Hartford believes that the measure underwriting gain (loss) provides investors with a valuable measure of profitability, before tax, derived from underwriting activities, which are managed separately from the company's investing activities. A reconciliation of underwriting results to net income for the quarterly periods ended Sept. 30, 2018 and 2017, is set forth in the Investor Financial Supplement for quarter ended Sept. 30, 2018, which is available on The Hartford's website, https://ir.thehartford.com.
17
SAFE HARBOR STATEMENT
Some of the statements in this release should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects” and similar references to the future. Examples of forward-looking statements include, but are not limited to, statements the company makes regarding future results of operations. The Hartford cautions investors that these forward-looking statements are not guarantees of future performance, and actual results may differ materially. Investors should consider the important risks and uncertainties that may cause actual results to differ. These important risks and uncertainties include the risks and uncertainties identified below, as well as factors described in such forward-looking statements or in The Hartford's 2017 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings The Hartford makes 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; financial risk related to the continued reinvestment of our investment portfolios; market risks associated with our business, including changes in credit spreads, equity prices, interest rates, inflation rate, market volatility and foreign exchange rates; the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;
Insurance Industry and Product-Related Risks: the possibility of unfavorable loss development including with respect to long-tailed exposures; the possibility of a pandemic, earthquake, or other natural or man-made disaster that may adversely affect our businesses; weather and other natural physical events, including the severity and frequency of storms, hail, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns; the 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 property and casualty 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, such as usage-based methods of determining premiums, advancements in automotive safety features, the development of autonomous vehicles, and platforms that facilitate ride sharing, which may alter demand for the company's products, impact the frequency or severity of losses, and/or impact the way the company markets, distributes and underwrites its products; the 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;
Financial Strength, Credit and Counterparty Risks: the impact on our statutory capital of various factors, including many that are outside the company’s control, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results; risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments; losses due to nonperformance or defaults by others, including credit risk with counterparties associated with
18
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 us against losses; 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: risk associated with the use of analytical models in making decisions in key areas such as underwriting, capital management, hedging, reserving, 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 other-than-temporary impairments on available-for-sale securities; the potential for further impairments of our goodwill or the potential for changes in valuation allowances against deferred tax assets; the significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental claims;
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 or other information security incident or other unanticipated event; failure to complete our proposed acquisition of The Navigators Group, Inc. may cause volatility in our securities; the risks, challenges and uncertainties associated with capital management plans, expense reduction initiatives and other actions, which may include acquisitions, divestitures or restructurings; the potential for difficulties arising from outsourcing and similar third-party relationships; the company’s ability to protect its intellectual property and defend against claims of infringement;
Regulatory and Legal Risks: the cost and other potential effects of increased 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 other legal developments; the impact of changes in federal or state tax laws; regulatory requirements that could delay, deter or prevent a takeover attempt that shareholders 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 release speaks only as of the date of this release. Factors or events that could cause the company's actual results to differ may emerge from time to time, and it is not possible for the company to predict all of them. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.
19
INVESTOR FINANCIAL SUPPLEMENT
September 30, 2018
On December 3, 2017, The Hartford entered into an agreement to sell its life and annuity run-off business (formerly known as Talcott Resolution). The transaction closed on May 31, 2018. The assets and liabilities of this business had been accounted for as held for sale until closing and operating results of the life and annuity business are included in discontinued operations for all periods prior to the closing date.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
As of October 23, 2018 | ||||||||
Address: | ||||||||
One Hartford Plaza | A.M. Best | Standard & Poor’s | Moody’s | |||||
Hartford, CT 06155 | Insurance Financial Strength Ratings: | |||||||
Hartford Fire Insurance Company | A+ | A+ | A1 | |||||
Hartford Life and Accident Insurance Company | A | A | A2 | |||||
Maxum Casualty Insurance Company | A+ | NR | NR | |||||
Maxum Indemnity Company | A+ | NR | NR | |||||
- Hartford Fire Insurance Company ratings are on stable outlook at A.M. Best, Moody’s, and Standard and Poor’s | ||||||||
- Hartford Life and Accident Insurance Company ratings are on stable outlook at A.M. Best, Moody’s, and Standard and Poor’s | ||||||||
Internet address: | - Maxum Casualty Insurance Company ratings are on stable outlook at A.M. Best | |||||||
http://www.thehartford.com | - Maxum Indemnity Company ratings are on stable outlook at A.M. Best | |||||||
Other Ratings: | ||||||||
The Hartford Financial Services Group, Inc.: | ||||||||
Senior debt | a- | BBB+ | Baa1 | |||||
Contacts: | Commercial paper | AMB-1 | A-2 | P-2 | ||||
Sabra Purtill | Junior subordinated debentures | bbb | BBB- | Baa2 | ||||
Senior Vice President | ||||||||
Investor Relations & Treasurer | - Hartford Financial Services Group, Inc. senior debt and junior subordinated debentures are on stable outlook at A.M. Best, Standard and Poor’s, and Moody's. | |||||||
Phone (860) 547-8691 | ||||||||
Sean Rourke | TRANSFER AGENT | |||||||
Assistant Vice President | Shareholder correspondence should be mailed to: | Overnight correspondence should be mailed to: | ||||||
Investor Relations | Computershare | Computershare | ||||||
Phone (860) 547-5688 | P.O. Box 505000 | 462 South 4th Street, Suite 1600 | ||||||
Louisville, KY 40233 | Louisville, KY 40202 | |||||||
COMMON STOCK
Common stock and warrants of The Hartford Financial Services Group, Inc. are traded on the New York Stock Exchange under the symbols “HIG” and "HIG/WS", respectively.
This report is for information purposes only. It should be read in conjunction with documents filed by The Hartford Financial Services Group, Inc. with the U.S. Securities and Exchange
Commission, including, without limitation, the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTOR FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
CONSOLIDATED | Consolidated Financial Results | 1 |
Consolidated Statements of Operations | 2 | |
Operating Results by Segment | 3 | |
Consolidating Balance Sheets | 4 | |
Capital Structure | 5 | |
Statutory Capital to GAAP Stockholders’ Equity Reconciliation | 6 | |
Accumulated Other Comprehensive Income (Loss) | 7 | |
PROPERTY & CASUALTY | Property & Casualty Income Statements | 8 |
Property & Casualty Underwriting Ratios and Results | 9 | |
Commercial Lines Income Statements | 10 | |
Commercial Lines Underwriting Ratios | 12 | |
Commercial Lines Supplemental Data | 13 | |
Personal Lines Income Statements | 14 | |
Personal Lines Underwriting Ratios | 16 | |
Personal Lines Supplemental Data | 17 | |
P&C Other Operations Income Statements | 19 | |
GROUP BENEFITS | Income Statements | 20 |
Supplemental Data | 21 | |
MUTUAL FUNDS | Income Statements | 22 |
Asset Value Rollforward - Assets Under Management By Asset Class | 23 | |
CORPORATE | Income Statements | 24 |
INVESTMENTS | Investment Earnings Before Tax - Consolidated | 25 |
Investment Earnings Before Tax - Property & Casualty | 26 | |
Investment Earnings Before Tax - Group Benefits | 27 | |
Net Investment Income | 28 | |
Components of Net Realized Capital Gains (Losses) | 29 | |
Composition of Invested Assets | 30 | |
Invested Asset Exposures | 31 | |
APPENDIX | Basis of Presentation and Definitions | 32 |
Discussion of Non-GAAP and Other Financial Measures | 33 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
HIGHLIGHTS | ||||||||||||||||||||||||||||
Net income (loss) | $ | 432 | $ | 582 | $ | 597 | $ | (3,703 | ) | $ | 234 | $ | (40 | ) | $ | 378 | $ | 1,611 | $ | 572 | ||||||||
Core earnings * | $ | 418 | $ | 412 | $ | 461 | $ | 293 | $ | 130 | $ | 303 | $ | 288 | $ | 1,291 | $ | 721 | ||||||||||
Total revenues | $ | 4,842 | $ | 4,789 | $ | 4,691 | $ | 4,587 | $ | 4,192 | $ | 4,214 | $ | 4,169 | $ | 14,322 | $ | 12,575 | ||||||||||
Total assets | $61,437 | $60,775 | $216,666 | $225,260 | $224,901 | $226,562 | $226,094 | |||||||||||||||||||||
PER SHARE AND SHARES DATA | ||||||||||||||||||||||||||||
Basic earnings per common share | ||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 1.19 | $ | 1.21 | $ | 1.20 | $ | (1.56 | ) | $ | 0.40 | $ | (0.42 | ) | $ | 0.82 | $ | 3.60 | $ | 0.81 | ||||||||
Net income (loss) | $ | 1.20 | $ | 1.62 | $ | 1.67 | $ | (10.37 | ) | $ | 0.65 | $ | (0.11 | ) | $ | 1.02 | $ | 4.50 | $ | 1.56 | ||||||||
Core earnings * | $ | 1.17 | $ | 1.15 | $ | 1.29 | $ | 0.82 | $ | 0.36 | $ | 0.83 | $ | 0.78 | $ | 3.61 | $ | 1.97 | ||||||||||
Diluted earnings per common share | ||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 1.17 | $ | 1.19 | $ | 1.18 | $ | (1.56 | ) | $ | 0.40 | $ | (0.42 | ) | $ | 0.80 | $ | 3.54 | $ | 0.79 | ||||||||
Net income (loss) | $ | 1.19 | $ | 1.60 | $ | 1.64 | $ | (10.37 | ) | $ | 0.64 | $ | (0.11 | ) | $ | 1.00 | $ | 4.42 | $ | 1.54 | ||||||||
Core earnings * | $ | 1.15 | $ | 1.13 | $ | 1.27 | $ | 0.81 | $ | 0.35 | $ | 0.81 | $ | 0.76 | $ | 3.55 | $ | 1.94 | ||||||||||
Weighted average common shares outstanding (basic) | 358.6 | 358.3 | 357.5 | 357.0 | 360.2 | 366.0 | 371.4 | 358.1 | 365.9 | |||||||||||||||||||
Dilutive effect of stock compensation | 3.6 | 4.0 | 4.4 | 4.8 | 4.5 | 3.8 | 4.2 | 4.0 | 4.1 | |||||||||||||||||||
Dilutive effect of warrants | 1.9 | 1.9 | 2.0 | 2.1 | 2.3 | 2.5 | 3.0 | 2.0 | 2.6 | |||||||||||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted) | 364.1 | 364.2 | 363.9 | 363.9 | 367.0 | 372.3 | 378.6 | 364.1 | 372.6 | |||||||||||||||||||
Common shares outstanding | 358.7 | 358.4 | 358.1 | 356.8 | 357.5 | 362.8 | 369.2 | |||||||||||||||||||||
Book value per common share | $ | 35.49 | $ | 35.01 | $ | 36.70 | $ | 37.82 | $ | 48.20 | $ | 47.65 | $ | 46.07 | ||||||||||||||
Per common share impact of accumulated other comprehensive income [1] | $ | (4.23 | ) | $ | (3.77 | ) | $ | (0.67 | ) | $ | 1.86 | $ | 1.63 | $ | 1.36 | $ | (0.56 | ) | ||||||||||
Book value per common share (excluding AOCI) * | $ | 39.72 | $ | 38.78 | $ | 37.37 | $ | 35.96 | $ | 46.57 | $ | 46.29 | $ | 46.63 | ||||||||||||||
Book value per diluted share | $ | 34.95 | $ | 34.44 | $ | 36.06 | $ | 37.11 | $ | 47.33 | $ | 46.84 | $ | 45.25 | ||||||||||||||
Per diluted share impact of AOCI | $ | (4.17 | ) | $ | (3.71 | ) | $ | (0.65 | ) | $ | 1.82 | $ | 1.61 | $ | 1.34 | $ | (0.55 | ) | ||||||||||
Book value per diluted share (excluding AOCI) * | $ | 39.12 | $ | 38.15 | $ | 36.71 | $ | 35.29 | $ | 45.72 | $ | 45.50 | $ | 45.80 | ||||||||||||||
Common shares outstanding and dilutive potential common shares | 364.2 | 364.3 | 364.5 | 363.6 | 364.1 | 369.1 | 375.9 | |||||||||||||||||||||
RETURN ON EQUITY ("ROE") [2] | ||||||||||||||||||||||||||||
Net income (loss) ROE | (14.0 | %) | (15.4 | %) | (19.3 | %) | (20.6 | %) | 2.7 | % | 3.9 | % | 5.4 | % | ||||||||||||||
Core earnings ROE * | 10.3 | % | 8.4 | % | 7.8 | % | 6.7 | % | 5.9 | % | 6.9 | % | 5.1 | % |
[1] | Accumulated other comprehensive income ("AOCI") represents after tax unrealized gain (loss) on available-for-sale securities, other than temporary impairment losses recognized in AOCI, net gain (loss) on cash-flow hedging instruments, foreign currency translation adjustments and pension and other postretirement adjustments. |
[2] | For reconciliations of net income (loss) ROE to core earnings ROE, see Appendix, page 33. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Earned premiums | $ | 3,987 | $ | 3,958 | $ | 3,927 | $ | 3,801 | $ | 3,447 | $ | 3,455 | $ | 3,438 | $ | 11,872 | $ | 10,340 | ||||||||||
Fee income | 344 | 327 | 323 | 313 | 291 | 286 | 278 | 994 | 855 | |||||||||||||||||||
Net investment income | 444 | 428 | 451 | 394 | 404 | 395 | 410 | 1,323 | 1,209 | |||||||||||||||||||
Realized capital gains (losses): | ||||||||||||||||||||||||||||
Total other-than-temporary impairment (“OTTI”) losses | (4 | ) | — | (2 | ) | (4 | ) | (4 | ) | (4 | ) | (3 | ) | (6 | ) | (11 | ) | |||||||||||
OTTI losses recognized in other comprehensive income | 3 | — | 2 | — | 3 | 2 | 2 | 5 | 7 | |||||||||||||||||||
Net OTTI losses recognized in earnings | (1 | ) | — | — | (4 | ) | (1 | ) | (2 | ) | (1 | ) | (1 | ) | (4 | ) | ||||||||||||
Other net realized capital gains (losses) | 39 | 52 | (30 | ) | 64 | 27 | 57 | 25 | 61 | 109 | ||||||||||||||||||
Total net realized capital gains (losses) | 38 | 52 | (30 | ) | 60 | 26 | 55 | 24 | 60 | 105 | ||||||||||||||||||
Other revenues | 29 | 24 | 20 | 19 | 24 | 23 | 19 | 73 | 66 | |||||||||||||||||||
Total revenues | 4,842 | 4,789 | 4,691 | 4,587 | 4,192 | 4,214 | 4,169 | 14,322 | 12,575 | |||||||||||||||||||
Benefits, losses and loss adjustment expenses | 2,786 | 2,738 | 2,695 | 2,692 | 2,638 | 2,420 | 2,424 | 8,219 | 7,482 | |||||||||||||||||||
Amortization of deferred acquisition costs ("DAC") | 348 | 344 | 342 | 342 | 341 | 345 | 344 | 1,034 | 1,030 | |||||||||||||||||||
Insurance operating costs and other expenses | 1,091 | 1,067 | 1,037 | 1,042 | 952 | 1,650 | 919 | 3,195 | 3,521 | |||||||||||||||||||
Loss on extinguishment of debt | — | 6 | — | — | — | — | — | 6 | — | |||||||||||||||||||
Interest expense | 69 | 79 | 80 | 78 | 79 | 79 | 80 | 228 | 238 | |||||||||||||||||||
Amortization of other intangible assets | 18 | 18 | 18 | 11 | 1 | 1 | 1 | 54 | 3 | |||||||||||||||||||
Total benefits, losses and expenses | 4,312 | 4,252 | 4,172 | 4,165 | 4,011 | 4,495 | 3,768 | 12,736 | 12,274 | |||||||||||||||||||
Income (loss) before income taxes | 530 | 537 | 519 | 422 | 181 | (281 | ) | 401 | 1,586 | 301 | ||||||||||||||||||
Income tax expense (benefit) | 103 | 103 | 91 | 980 | 36 | (129 | ) | 98 | 297 | 5 | ||||||||||||||||||
Income (loss) from continuing operations, after tax | 427 | 434 | 428 | (558 | ) | 145 | (152 | ) | 303 | 1,289 | 296 | |||||||||||||||||
Income (loss) from discontinued operations, after tax [1] | 5 | 148 | 169 | (3,145 | ) | 89 | 112 | 75 | 322 | 276 | ||||||||||||||||||
Net income (loss) | 432 | 582 | 597 | (3,703 | ) | 234 | (40 | ) | 378 | 1,611 | 572 | |||||||||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 37 | 50 | (30 | ) | 59 | 25 | 53 | 23 | 57 | 101 | ||||||||||||||||||
Less: Loss on extinguishment of debt, before tax | — | (6 | ) | — | — | — | — | — | (6 | ) | — | |||||||||||||||||
Less: Pension settlement, before tax | — | — | — | — | — | (750 | ) | — | — | (750 | ) | |||||||||||||||||
Less: Integration and transaction costs associated with acquired business, before tax | (12 | ) | (11 | ) | (12 | ) | (17 | ) | — | — | — | (35 | ) | — | ||||||||||||||
Less: Income tax benefit (expense) [2] | (16 | ) | (11 | ) | 9 | (893 | ) | (10 | ) | 242 | (8 | ) | (18 | ) | 224 | |||||||||||||
Less: Income (loss) from discontinued operations, after tax [1] | 5 | 148 | 169 | (3,145 | ) | 89 | 112 | 75 | 322 | 276 | ||||||||||||||||||
Core earnings | $ | 418 | $ | 412 | $ | 461 | $ | 293 | $ | 130 | $ | 303 | $ | 288 | $ | 1,291 | $ | 721 |
[1] | The three months ended December 31, 2017 included an estimated loss on sale of $3.3 billion related to the sale of Talcott Resolution, the Company's life and annuity run-off business that was sold in May, 2018. The three months ended June 30, 2018 and March 31, 2018, included a reduction in loss on sale of $151 and $62, respectively. |
[2] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Net income (loss): | ||||||||||||||||||||||||||||
Commercial Lines | $ | 289 | $ | 372 | $ | 298 | $ | 286 | $ | 90 | $ | 258 | $ | 231 | $ | 959 | $ | 579 | ||||||||||
Personal Lines | 51 | 6 | 89 | (74 | ) | 8 | 24 | 33 | 146 | 65 | ||||||||||||||||||
P&C Other Operations | 9 | 5 | 17 | 7 | 18 | 20 | 24 | 31 | 62 | |||||||||||||||||||
Property & Casualty ("P&C") | 349 | 383 | 404 | 219 | 116 | 302 | 288 | 1,136 | 706 | |||||||||||||||||||
Group Benefits | 77 | 96 | 54 | 109 | 71 | 69 | 45 | 227 | 185 | |||||||||||||||||||
Mutual Funds | 41 | 37 | 34 | 33 | 26 | 24 | 23 | 112 | 73 | |||||||||||||||||||
Sub-total | 467 | 516 | 492 | 361 | 213 | 395 | 356 | 1,475 | 964 | |||||||||||||||||||
Corporate [1] | (35 | ) | 66 | 105 | (4,064 | ) | 21 | (435 | ) | 22 | 136 | (392 | ) | |||||||||||||||
Net income (loss) | $ | 432 | $ | 582 | $ | 597 | $ | (3,703 | ) | $ | 234 | $ | (40 | ) | $ | 378 | $ | 1,611 | $ | 572 | ||||||||
Core earnings (losses): | ||||||||||||||||||||||||||||
Commercial Lines | $ | 265 | $ | 341 | $ | 302 | $ | 282 | $ | 81 | $ | 238 | $ | 224 | $ | 908 | $ | 543 | ||||||||||
Personal Lines | 47 | 2 | 89 | (46 | ) | 7 | 20 | 32 | 138 | 59 | ||||||||||||||||||
P&C Other Operations | 8 | 3 | 17 | 4 | 18 | 18 | 21 | 28 | 57 | |||||||||||||||||||
P&C | 320 | 346 | 408 | 240 | 106 | 276 | 277 | 1,074 | 659 | |||||||||||||||||||
Group Benefits | 102 | 104 | 85 | 67 | 66 | 61 | 40 | 291 | 167 | |||||||||||||||||||
Mutual Funds | 41 | 38 | 34 | 37 | 26 | 24 | 23 | 113 | 73 | |||||||||||||||||||
Sub-total | 463 | 488 | 527 | 344 | 198 | 361 | 340 | 1,478 | 899 | |||||||||||||||||||
Corporate | (45 | ) | (76 | ) | (66 | ) | (51 | ) | (68 | ) | (58 | ) | (52 | ) | (187 | ) | (178 | ) | ||||||||||
Core earnings | $ | 418 | $ | 412 | $ | 461 | $ | 293 | $ | 130 | $ | 303 | $ | 288 | $ | 1,291 | $ | 721 |
[1] | Includes income (loss) from discontinued operations from the Talcott Resolution life and annuity run-off business sold in May 2018. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
PROPERTY & CASUALTY | GROUP BENEFITS | MUTUAL FUNDS | CORPORATE | CONSOLIDATED | ||||||||||||||||||||||||||||||
Sept 30 2018 | Dec 31 2017 | Sept 30 2018 | Dec 31 2017 | Sept 30 2018 | Dec 31 2017 | Sept 30 2018 | Dec 31 2017 | Sept 30 2018 | Dec 31 2017 | |||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value | $ | 25,429 | $ | 25,571 | $ | 9,891 | $ | 10,489 | $ | 34 | $ | 49 | $ | 812 | $ | 855 | $ | 36,166 | $ | 36,964 | ||||||||||||||
Fixed maturities, at fair value using the fair value option | 17 | 30 | 7 | 11 | — | — | — | — | 24 | 41 | ||||||||||||||||||||||||
Equity securities, at fair value | 750 | — | 71 | — | 54 | — | 160 | — | 1,035 | — | ||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value | — | 749 | — | 79 | — | 27 | — | 157 | — | 1,012 | ||||||||||||||||||||||||
Mortgage loans | 2,521 | 2,315 | 1,037 | 860 | — | — | 1 | — | 3,559 | 3,175 | ||||||||||||||||||||||||
Limited partnerships and other alternative investments | 1,454 | 1,375 | 258 | 213 | — | — | — | — | 1,712 | 1,588 | ||||||||||||||||||||||||
Other investments | 89 | 85 | 9 | 11 | 1 | — | (1 | ) | — | 98 | 96 | |||||||||||||||||||||||
Short-term investments | 1,340 | 1,268 | 500 | 398 | 185 | 146 | 1,515 | 458 | 3,540 | 2,270 | ||||||||||||||||||||||||
Total investments [1] | 31,600 | 31,393 | 11,773 | 12,061 | 274 | 222 | 2,487 | 1,470 | 46,134 | 45,146 | ||||||||||||||||||||||||
Cash [1] | 70 | 156 | 11 | 12 | 16 | 8 | 5 | 4 | 102 | 180 | ||||||||||||||||||||||||
Premiums receivable and agents’ balances | 3,584 | 3,511 | 441 | 399 | — | — | — | — | 4,025 | 3,910 | ||||||||||||||||||||||||
Reinsurance recoverables | 3,335 | 3,476 | 256 | 236 | — | — | 340 | 349 | 3,931 | 4,061 | ||||||||||||||||||||||||
DAC | 609 | 594 | 53 | 47 | 7 | 9 | 1 | — | 670 | 650 | ||||||||||||||||||||||||
Deferred income taxes | 141 | 51 | (29 | ) | (103 | ) | 6 | 6 | 1,126 | 1,210 | 1,244 | 1,164 | ||||||||||||||||||||||
Goodwill | 157 | 157 | 723 | 723 | 180 | 180 | 230 | 230 | 1,290 | 1,290 | ||||||||||||||||||||||||
Property and equipment, net | 813 | 837 | 105 | 118 | — | — | 79 | 79 | 997 | 1,034 | ||||||||||||||||||||||||
Other intangible assets | 69 | 28 | 571 | 620 | 11 | 11 | — | — | 651 | 659 | ||||||||||||||||||||||||
Other assets | 1,016 | 897 | 279 | 365 | 106 | 111 | 992 | 857 | 2,393 | 2,230 | ||||||||||||||||||||||||
Assets held for sale | — | — | — | — | — | — | — | 164,936 | — | 164,936 | ||||||||||||||||||||||||
Total assets | $ | 41,394 | $ | 41,100 | $ | 14,183 | $ | 14,478 | $ | 600 | $ | 547 | $ | 5,260 | $ | 169,135 | $ | 61,437 | $ | 225,260 | ||||||||||||||
Unpaid losses and loss adjustment expenses | $ | 23,797 | $ | 23,775 | $ | 8,500 | $ | 8,512 | $ | — | $ | — | $ | — | $ | — | $ | 32,297 | $ | 32,287 | ||||||||||||||
Reserves for future policy benefits | — | — | 429 | 441 | — | — | 227 | 272 | 656 | 713 | ||||||||||||||||||||||||
Other policyholder funds and benefits payable | — | — | 462 | 492 | — | — | 313 | 324 | 775 | 816 | ||||||||||||||||||||||||
Unearned premiums | 5,345 | 5,282 | 43 | 40 | — | — | — | — | 5,388 | 5,322 | ||||||||||||||||||||||||
Debt | — | — | — | — | — | — | 4,676 | 4,998 | 4,676 | 4,998 | ||||||||||||||||||||||||
Other liabilities | 1,902 | 2,061 | 616 | 774 | 220 | 197 | 2,178 | 2,156 | 4,916 | 5,188 | ||||||||||||||||||||||||
Liabilities held for sale | — | — | — | — | — | — | — | 162,442 | — | 162,442 | ||||||||||||||||||||||||
Total liabilities | $ | 31,044 | $ | 31,118 | $ | 10,050 | $ | 10,259 | $ | 220 | $ | 197 | $ | 7,394 | $ | 170,192 | $ | 48,708 | $ | 211,766 | ||||||||||||||
Common stockholders' equity, excluding AOCI | 10,292 | 9,267 | 4,191 | 3,998 | 380 | 350 | (615 | ) | (784 | ) | 14,248 | 12,831 | ||||||||||||||||||||||
AOCI, after tax | 58 | 715 | (58 | ) | 221 | — | — | (1,519 | ) | (273 | ) | (1,519 | ) | 663 | ||||||||||||||||||||
Total stockholders' equity | $ | 10,350 | 9,982 | $ | 4,133 | 4,219 | $ | 380 | 350 | $ | (2,134 | ) | (1,057 | ) | $ | 12,729 | 13,494 | |||||||||||||||||
Total liabilities and equity | $ | 41,394 | $ | 41,100 | $ | 14,183 | $ | 14,478 | $ | 600 | $ | 547 | $ | 5,260 | $ | 169,135 | $ | 61,437 | $ | 225,260 |
[1] | Includes investments classified as part of Corporate that are not fixed maturities or short-term investments held by the holding company of The Hartford Financial Services Group, Inc. ("HFSG Holding Company") which are principally assets held by Hartford Life and Accident Insurance Company (HLA) that support reserves for run-off structured settlement and terminal funding agreement liabilities. Fixed maturities, cash, investment sales receivable and short-term investments held by the HFSG Holding Company were $2.3 billion and $1.1 billion as of September 30, 2018 and December 31, 2017, respectively. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||||||
DEBT | |||||||||||||||||||||
Short-term debt | $ | 413 | $ | 413 | $ | 413 | $ | 320 | $ | 320 | $ | 320 | $ | 320 | |||||||
Senior notes | 3,174 | 3,173 | 3,172 | 3,096 | 3,093 | 3,092 | 3,091 | ||||||||||||||
Junior subordinated debentures | 1,089 | 1,089 | 1,583 | 1,582 | 1,582 | 1,582 | 1,583 | ||||||||||||||
Total debt | $ | 4,676 | $ | 4,675 | $ | 5,168 | $ | 4,998 | $ | 4,995 | $ | 4,994 | $ | 4,994 | |||||||
STOCKHOLDERS’ EQUITY | |||||||||||||||||||||
Common stockholders' equity, excluding AOCI | $ | 14,248 | $ | 13,899 | $ | 13,382 | $ | 12,831 | $ | 16,648 | $ | 16,794 | $ | 17,216 | |||||||
AOCI | (1,519 | ) | (1,353 | ) | (239 | ) | 663 | 585 | 494 | (207 | ) | ||||||||||
Total stockholders’ equity | $ | 12,729 | $ | 12,546 | $ | 13,143 | $ | 13,494 | $ | 17,233 | $ | 17,288 | $ | 17,009 | |||||||
CAPITALIZATION | |||||||||||||||||||||
Total capitalization, including AOCI, after tax | $ | 17,405 | $ | 17,221 | $ | 18,311 | $ | 18,492 | $ | 22,228 | $ | 22,282 | $ | 22,003 | |||||||
Total capitalization, excluding AOCI, after tax | $ | 18,924 | $ | 18,574 | $ | 18,550 | $ | 17,829 | $ | 21,643 | $ | 21,788 | $ | 22,210 | |||||||
DEBT TO CAPITALIZATION RATIOS | |||||||||||||||||||||
Total debt to capitalization, including AOCI | 26.9 | % | 27.1 | % | 28.2 | % | 27.0 | % | 22.5 | % | 22.4 | % | 22.7 | % | |||||||
Total debt to capitalization, excluding AOCI | 24.7 | % | 25.2 | % | 27.9 | % | 28.0 | % | 23.1 | % | 22.9 | % | 22.5 | % | |||||||
Total rating agency adjusted debt to capitalization [1] [2] | 29.4 | % | 29.7 | % | 29.9 | % | 28.8 | % | 24.3 | % | 25.2 | % | 25.0 | % | |||||||
FIXED CHARGE COVERAGE RATIOS | |||||||||||||||||||||
Total earnings to total fixed charges [3] | 7.6:1 | 7.4:1 | 7.1:1 | 3.1:1 | 2.2:1 | 1.7:1 | 5.7:1 |
[1] | The leverage calculation reflects adjustments related to the Company’s defined benefit plans' unfunded pension liability and the Company's rental expense on operating leases for a total adjustment of $1.0 billion for both the three months ended September 30, 2018 and 2017. |
[2] | Reflects 25% equity credit for the Company's outstanding junior subordinated debentures. |
[3] | Calculated as year to date total earnings divided by year to date total fixed charges. Total earnings represent income from continuing operations before income taxes and total fixed charges, less undistributed earnings from limited partnerships and other alternative investments. Total fixed charges include interest expense, rent expense, capitalized interest and amortization of debt issuance costs. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY CAPITAL TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
September 30, 2018
P&C | GROUP BENEFITS | |||||
U.S. statutory net income [1] | $ | 1,028 | $ | 247 | ||
U.S. statutory capital [2] | $ | 8,343 | $ | 2,268 | ||
U.S. GAAP adjustments: | ||||||
DAC | 609 | 53 | ||||
Non-admitted deferred tax assets [3] | 158 | 164 | ||||
Deferred taxes [4] | (537 | ) | (363 | ) | ||
Goodwill | 113 | 723 | ||||
Other Intangible Assets | 69 | 571 | ||||
Non-admitted assets other than deferred taxes | 645 | 155 | ||||
Asset valuation and interest maintenance reserve | — | 243 | ||||
Benefit reserves | (50 | ) | 46 | |||
Unrealized gains on investments | 122 | (43 | ) | |||
Other, net | 878 | 316 | ||||
U.S. GAAP stockholders’ equity | $ | 10,350 | $ | 4,133 |
[1] | Statutory net income is for the nine months ended September 30, 2018. |
[2] | For reporting purposes, statutory capital and surplus is referred to collectively as "statutory capital". |
[3] | Represents the limitations on the recognition of deferred tax assets under U.S. statutory accounting principles ("U.S. STAT"). |
[4] | Represents the tax timing differences between U.S. GAAP and U.S. STAT. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
AS OF | |||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||||||
Fixed maturities net unrealized gain | $ | 40 | $ | 211 | $ | 1,349 | $ | 1,837 | $ | 1,774 | $ | 1,696 | $ | 1,355 | |||||||
Equities net unrealized gain | — | — | — | 94 | 66 | 59 | 58 | ||||||||||||||
OTTI losses recognized in AOCI | (4 | ) | (3 | ) | (5 | ) | (3 | ) | (4 | ) | (3 | ) | (4 | ) | |||||||
Net gains on cash flow hedging instruments | (17 | ) | (12 | ) | (24 | ) | 18 | 43 | 57 | 58 | |||||||||||
Total net unrealized gain | $ | 19 | $ | 196 | $ | 1,320 | $ | 1,946 | $ | 1,879 | $ | 1,809 | $ | 1,467 | |||||||
Foreign currency translation adjustments | 34 | 33 | 32 | 34 | 27 | 13 | 8 | ||||||||||||||
Pension and other postretirement plan adjustments | (1,572 | ) | (1,582 | ) | (1,591 | ) | (1,317 | ) | (1,321 | ) | (1,328 | ) | (1,682 | ) | |||||||
Total AOCI [1] | $ | (1,519 | ) | $ | (1,353 | ) | $ | (239 | ) | $ | 663 | $ | 585 | $ | 494 | $ | (207 | ) |
[1] | The reduction in AOCI from March 31, 2018 to June 30, 2018 included the effect of removing $758 of Talcott Resolution AOCI from the balance sheet when the business was sold effective May 31, 2018. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Written premiums | $ | 2,605 | $ | 2,591 | $ | 2,658 | $ | 2,550 | $ | 2,626 | $ | 2,631 | $ | 2,710 | $ | 7,854 | $ | 7,967 | ||||||||||
Change in unearned premium reserve | (29 | ) | (10 | ) | 88 | (89 | ) | (18 | ) | (19 | ) | 88 | 49 | 51 | ||||||||||||||
Earned premiums | 2,634 | 2,601 | 2,570 | 2,639 | 2,644 | 2,650 | 2,622 | 7,805 | 7,916 | |||||||||||||||||||
Fee income | 19 | 18 | 19 | 20 | 20 | 20 | 21 | 56 | 61 | |||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Current accident year before catastrophes | 1,620 | 1,534 | 1,537 | 1,615 | 1,672 | 1,646 | 1,612 | 4,691 | 4,930 | |||||||||||||||||||
Current accident year catastrophes | 169 | 188 | 103 | 179 | 352 | 155 | 150 | 460 | 657 | |||||||||||||||||||
Prior accident year development | (60 | ) | (47 | ) | (32 | ) | (42 | ) | (1 | ) | (10 | ) | 12 | (139 | ) | 1 | ||||||||||||
Total losses and loss adjustment expenses | 1,729 | 1,675 | 1,608 | 1,752 | 2,023 | 1,791 | 1,774 | 5,012 | 5,588 | |||||||||||||||||||
Amortization of DAC | 332 | 329 | 328 | 328 | 329 | 331 | 330 | 989 | 990 | |||||||||||||||||||
Underwriting expenses | 511 | 495 | 470 | 510 | 496 | 467 | 465 | 1,476 | 1,428 | |||||||||||||||||||
Amortization of other intangible assets | 3 | 2 | 1 | 2 | 1 | 1 | 1 | 6 | 3 | |||||||||||||||||||
Dividends to policyholders | 8 | 6 | 4 | 24 | 4 | 3 | 4 | 18 | 11 | |||||||||||||||||||
Underwriting gain (loss)* | 70 | 112 | 178 | 43 | (189 | ) | 77 | 69 | 360 | (43 | ) | |||||||||||||||||
Net investment income | 311 | 301 | 322 | 281 | 303 | 302 | 310 | 934 | 915 | |||||||||||||||||||
Net realized capital gains (losses) | 37 | 50 | (9 | ) | 57 | 16 | 42 | 17 | 78 | 75 | ||||||||||||||||||
Net servicing and other income | 7 | 3 | 5 | 6 | 9 | 4 | 5 | 15 | 18 | |||||||||||||||||||
Income before income taxes | 425 | 466 | 496 | 387 | 139 | 425 | 401 | 1,387 | 965 | |||||||||||||||||||
Income tax expense | 76 | 83 | 92 | 168 | 23 | 123 | 113 | 251 | 259 | |||||||||||||||||||
Net income | 349 | 383 | 404 | 219 | 116 | 302 | 288 | 1,136 | 706 | |||||||||||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 36 | 49 | (8 | ) | 56 | 16 | 41 | 17 | 77 | 74 | ||||||||||||||||||
Less: Income tax benefit (expense) [2] | (7 | ) | (12 | ) | 4 | (77 | ) | (6 | ) | (15 | ) | (6 | ) | (15 | ) | (27 | ) | |||||||||||
Core earnings | $ | 320 | $ | 346 | $ | 408 | $ | 240 | $ | 106 | $ | 276 | $ | 277 | $ | 1,074 | $ | 659 | ||||||||||
ROE | ||||||||||||||||||||||||||||
Net income [1] | 15.5 | % | 12.7 | % | 11.9 | % | 10.7 | % | 5.0 | % | 7.5 | % | 4.5 | % | ||||||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 1.7 | % | 1.4 | % | 1.4 | % | 1.7 | % | 0.3 | % | 0.1 | % | — | % | ||||||||||||||
Less: Loss on reinsurance transaction, before tax | — | % | — | % | — | % | — | % | (7.5 | %) | (7.5 | %) | (7.7 | )% | ||||||||||||||
Less: Income tax benefit (expense) [2] | (1.2 | %) | (1.2 | %) | (1.2 | %) | (1.4 | %) | 2.5 | % | 3.1 | % | 3.2 | % | ||||||||||||||
Less: Impact of AOCI, excluded from core earnings ROE | (0.5 | %) | (0.5 | %) | (0.6 | %) | (0.7 | %) | (1.0 | %) | (1.2 | %) | (0.6 | )% | ||||||||||||||
Core earnings [1] | 15.5 | % | 13.0 | % | 12.3 | % | 11.1 | % | 10.7 | % | 13.0 | % | 9.6 | % |
[1] | Net income ROE and core earnings ROE for Property & Casualty assumes a portion of debt and interest expense accounted for within Corporate is allocated to Property & Casualty. For further information, see Appendix, page 33. |
[2] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNDERWRITING RATIOS AND RESULTS
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | |||||||||||
UNDERWRITING GAIN (LOSS) | 70 | 112 | 178 | 43 | (189 | ) | 77 | 69 | 360 | (43 | ) | ||||||||
UNDERWRITING RATIOS | |||||||||||||||||||
Losses and loss adjustment expenses | |||||||||||||||||||
Current accident year before catastrophes | 61.5 | 59.0 | 59.8 | 61.2 | 63.2 | 62.1 | 61.5 | 60.1 | 62.3 | ||||||||||
Current accident year catastrophes | 6.4 | 7.2 | 4.0 | 6.8 | 13.3 | 5.8 | 5.7 | 5.9 | 8.3 | ||||||||||
Prior accident year development [1] | (2.3 | ) | (1.8 | ) | (1.2 | ) | (1.6 | ) | — | (0.4 | ) | 0.5 | (1.8 | ) | — | ||||
Total losses and loss adjustment expenses | 65.6 | 64.4 | 62.6 | 66.4 | 76.5 | 67.6 | 67.7 | 64.2 | 70.6 | ||||||||||
Expenses | 31.4 | 31.1 | 30.4 | 31.1 | 30.5 | 29.4 | 29.6 | 30.9 | 29.8 | ||||||||||
Policyholder dividends | 0.3 | 0.2 | 0.2 | 0.9 | 0.2 | 0.1 | 0.2 | 0.2 | 0.1 | ||||||||||
Combined ratio | 97.3 | 95.7 | 93.1 | 98.4 | 107.1 | 97.1 | 97.4 | 95.4 | 100.5 | ||||||||||
Current accident year catastrophes and prior accident year development | 4.1 | 5.4 | 2.8 | 5.2 | 13.3 | 5.4 | 6.2 | 4.1 | 8.3 | ||||||||||
Underlying combined ratio * | 93.2 | 90.3 | 90.3 | 93.2 | 93.9 | 91.6 | 91.2 | 91.3 | 92.2 |
[1] | The following table summarizes unfavorable (favorable) prior accident year development. |
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Auto liability - Commercial Lines | $ | (5 | ) | $ | (5 | ) | $ | (5 | ) | $ | (3 | ) | $ | — | $ | — | $ | 20 | $ | (15 | ) | $ | 20 | |||||
Auto liability - Personal Lines | (10 | ) | — | — | — | — | — | — | (10 | ) | — | |||||||||||||||||
Homeowners | (7 | ) | (1 | ) | (12 | ) | (14 | ) | — | — | — | (20 | ) | — | ||||||||||||||
Professional and general liability | (16 | ) | 26 | 10 | 2 | — | — | 10 | 20 | 10 | ||||||||||||||||||
Package business | (9 | ) | (15 | ) | 8 | (3 | ) | (22 | ) | — | — | (16 | ) | (22 | ) | |||||||||||||
Bond | — | — | — | 22 | 20 | — | (10 | ) | — | 10 | ||||||||||||||||||
Commercial property | 2 | 1 | (13 | ) | (3 | ) | 1 | (7 | ) | 1 | (10 | ) | (5 | ) | ||||||||||||||
Workers’ compensation | (24 | ) | (48 | ) | (25 | ) | (50 | ) | (9 | ) | — | (20 | ) | (97 | ) | (29 | ) | |||||||||||
Workers' compensation discount accretion | 10 | 10 | 10 | 7 | 5 | 8 | 8 | 30 | 21 | |||||||||||||||||||
Catastrophes | (13 | ) | (31 | ) | (3 | ) | (4 | ) | 1 | (10 | ) | (3 | ) | (47 | ) | (12 | ) | |||||||||||
Uncollectible reinsurance | 11 | 11 | — | (15 | ) | — | — | — | 22 | — | ||||||||||||||||||
Other reserve re-estimates | 1 | 5 | (2 | ) | 19 | 3 | (1 | ) | 6 | 4 | 8 | |||||||||||||||||
Total prior accident year development | $ | (60 | ) | $ | (47 | ) | $ | (32 | ) | $ | (42 | ) | $ | (1 | ) | $ | (10 | ) | $ | 12 | $ | (139 | ) | $ | 1 |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Written premiums | $ | 1,751 | $ | 1,734 | $ | 1,851 | $ | 1,727 | $ | 1,702 | $ | 1,706 | $ | 1,821 | $ | 5,336 | $ | 5,229 | ||||||||||
Change in unearned premium reserve | (34 | ) | (11 | ) | 140 | (7 | ) | (21 | ) | (14 | ) | 133 | 95 | 98 | ||||||||||||||
Earned premiums | 1,785 | 1,745 | 1,711 | 1,734 | 1,723 | 1,720 | 1,688 | 5,241 | 5,131 | |||||||||||||||||||
Fee income | 9 | 8 | 9 | 9 | 9 | 9 | 10 | 26 | 28 | |||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Current accident year before catastrophes | 1,055 | 977 | 971 | 990 | 1,009 | 994 | 968 | 3,003 | 2,971 | |||||||||||||||||||
Current accident year catastrophes | 95 | 74 | 69 | (21 | ) | 270 | 63 | 71 | 238 | 404 | ||||||||||||||||||
Prior accident year development [1] | (53 | ) | (73 | ) | (19 | ) | (34 | ) | (3 | ) | — | 15 | (145 | ) | 12 | |||||||||||||
Total losses and loss adjustment expenses | 1,097 | 978 | 1,021 | 935 | 1,276 | 1,057 | 1,054 | 3,096 | 3,387 | |||||||||||||||||||
Amortization of DAC | 264 | 259 | 257 | 255 | 253 | 252 | 249 | 780 | 754 | |||||||||||||||||||
Underwriting expenses | 353 | 336 | 324 | 352 | 348 | 324 | 323 | 1,013 | 995 | |||||||||||||||||||
Amortization of other intangible assets | 2 | 1 | — | 1 | — | — | — | 3 | — | |||||||||||||||||||
Dividends to policyholders | 8 | 6 | 4 | 24 | 4 | 3 | 4 | 18 | 11 | |||||||||||||||||||
Underwriting gain (loss) | 70 | 173 | 114 | 176 | (149 | ) | 93 | 68 | 357 | 12 | ||||||||||||||||||
Net servicing income (loss) | (1 | ) | 1 | — | (1 | ) | 1 | 1 | — | — | 2 | |||||||||||||||||
Net investment income | 250 | 242 | 258 | 225 | 241 | 240 | 243 | 750 | 724 | |||||||||||||||||||
Net realized capital gains (losses) | 29 | 42 | (8 | ) | 47 | 13 | 32 | 11 | 63 | 56 | ||||||||||||||||||
Other income (expenses) | 2 | (3 | ) | 2 | 1 | (1 | ) | — | 1 | 1 | — | |||||||||||||||||
Income before income taxes | 350 | 455 | 366 | 448 | 105 | 366 | 323 | 1,171 | 794 | |||||||||||||||||||
Income tax expense | 61 | 83 | 68 | 162 | 15 | 108 | 92 | 212 | 215 | |||||||||||||||||||
Net income | 289 | 372 | 298 | 286 | 90 | 258 | 231 | 959 | 579 | |||||||||||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 28 | 40 | (6 | ) | 45 | 12 | 32 | 11 | 62 | 55 | ||||||||||||||||||
Less: Income tax benefit (expense) [2] | (4 | ) | (9 | ) | 2 | (41 | ) | (3 | ) | (12 | ) | (4 | ) | (11 | ) | (19 | ) | |||||||||||
Core earnings | $ | 265 | $ | 341 | $ | 302 | $ | 282 | $ | 81 | $ | 238 | $ | 224 | $ | 908 | $ | 543 |
[1] | For further information, see Commercial Lines Income Statements (continued), page 11. |
[2] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS (CONTINUED)
Prior accident year development included the following unfavorable (favorable) reserve development:
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Auto liability | $ | (5 | ) | $ | (5 | ) | $ | (5 | ) | $ | (3 | ) | $ | — | $ | — | $ | 20 | $ | (15 | ) | $ | 20 | |||||
Professional liability | (20 | ) | 6 | 2 | 1 | — | — | — | (12 | ) | — | |||||||||||||||||
Package business | (9 | ) | (15 | ) | 8 | (3 | ) | (22 | ) | — | — | (16 | ) | (22 | ) | |||||||||||||
General liability | 4 | 20 | 8 | 1 | — | — | 10 | 32 | 10 | |||||||||||||||||||
Bond | — | — | — | 22 | 20 | — | (10 | ) | — | 10 | ||||||||||||||||||
Commercial property | 2 | 1 | (13 | ) | (3 | ) | 1 | (7 | ) | 1 | (10 | ) | (5 | ) | ||||||||||||||
Workers’ compensation | (24 | ) | (48 | ) | (25 | ) | (50 | ) | (9 | ) | — | (20 | ) | (97 | ) | (29 | ) | |||||||||||
Workers' compensation discount accretion | 10 | 10 | 10 | 7 | 5 | 8 | 8 | 30 | 21 | |||||||||||||||||||
Catastrophes | (11 | ) | (44 | ) | (8 | ) | 1 | 1 | (2 | ) | — | (63 | ) | (1 | ) | |||||||||||||
Uncollectible reinsurance | — | — | — | (15 | ) | — | — | — | — | — | ||||||||||||||||||
Other reserve re-estimates | — | 2 | 4 | 8 | 1 | 1 | 6 | 6 | 8 | |||||||||||||||||||
Total prior accident year development | $ | (53 | ) | $ | (73 | ) | $ | (19 | ) | $ | (34 | ) | $ | (3 | ) | $ | — | $ | 15 | $ | (145 | ) | $ | 12 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
UNDERWRITING RATIOS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
UNDERWRITING GAIN (LOSS) | $ | 70 | $ | 173 | $ | 114 | $ | 176 | $ | (149 | ) | $ | 93 | $ | 68 | $ | 357 | $ | 12 | |||||||||
UNDERWRITING RATIOS | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Current accident year before catastrophes | 59.1 | 56.0 | 56.8 | 57.1 | 58.6 | 57.8 | 57.3 | 57.3 | 57.9 | |||||||||||||||||||
Current accident year catastrophes | 5.3 | 4.2 | 4.0 | (1.2 | ) | 15.7 | 3.7 | 4.2 | 4.5 | 7.9 | ||||||||||||||||||
Prior accident year development | (3.0 | ) | (4.2 | ) | (1.1 | ) | (2.0 | ) | (0.2 | ) | — | 0.9 | (2.8 | ) | 0.2 | |||||||||||||
Total losses and loss adjustment expenses | 61.5 | 56.0 | 59.7 | 53.9 | 74.1 | 61.5 | 62.4 | 59.1 | 66.0 | |||||||||||||||||||
Expenses | 34.2 | 33.7 | 33.4 | 34.5 | 34.4 | 33.0 | 33.3 | 33.8 | 33.5 | |||||||||||||||||||
Policyholder dividends | 0.4 | 0.3 | 0.2 | 1.4 | 0.2 | 0.2 | 0.2 | 0.3 | 0.2 | |||||||||||||||||||
Combined ratio | 96.1 | 90.1 | 93.3 | 89.9 | 108.6 | 94.6 | 96.0 | 93.2 | 99.8 | |||||||||||||||||||
Current accident year catastrophes and prior accident year development | 2.3 | — | 2.9 | (3.2 | ) | 15.5 | 3.7 | 5.1 | 1.7 | 8.1 | ||||||||||||||||||
Underlying combined ratio | 93.7 | 90.0 | 90.4 | 93.0 | 93.2 | 90.9 | 90.9 | 91.4 | 91.7 | |||||||||||||||||||
COMBINED RATIOS BY LINE OF BUSINESS | ||||||||||||||||||||||||||||
SMALL COMMERCIAL | ||||||||||||||||||||||||||||
Combined ratio | 87.6 | 86.6 | 89.0 | 83.9 | 101.5 | 90.4 | 91.7 | 87.7 | 94.6 | |||||||||||||||||||
Current accident year catastrophes | 2.7 | 5.5 | 3.4 | (1.2 | ) | 15.9 | 3.2 | 4.7 | 3.9 | 8.0 | ||||||||||||||||||
Prior accident year development | (3.9 | ) | (4.4 | ) | (1.8 | ) | (2.7 | ) | (3.5 | ) | — | (0.3 | ) | (3.4 | ) | (1.3 | ) | |||||||||||
Underlying combined ratio | 88.7 | 85.6 | 87.5 | 87.8 | 89.2 | 87.2 | 87.3 | 87.3 | 87.9 | |||||||||||||||||||
MIDDLE MARKET | ||||||||||||||||||||||||||||
Combined ratio | 111.8 | 94.6 | 98.1 | 94.2 | 119.7 | 99.8 | 100.4 | 101.6 | 106.6 | |||||||||||||||||||
Current accident year catastrophes | 11.5 | 3.7 | 6.6 | (1.5 | ) | 21.1 | 5.5 | 5.2 | 7.3 | 10.6 | ||||||||||||||||||
Prior accident year development | 0.1 | (3.2 | ) | (0.8 | ) | (3.2 | ) | 1.5 | (0.5 | ) | 1.4 | (1.3 | ) | 0.8 | ||||||||||||||
Underlying combined ratio | 100.2 | 94.1 | 92.2 | 98.9 | 97.0 | 94.9 | 93.8 | 95.6 | 95.2 | |||||||||||||||||||
SPECIALTY COMMERCIAL | ||||||||||||||||||||||||||||
Combined ratio | 88.0 | 99.6 | 98.2 | 100.5 | 99.4 | 97.6 | 101.3 | 95.1 | 99.4 | |||||||||||||||||||
Current accident year catastrophes | — | 0.1 | — | — | — | 0.2 | — | — | 0.1 | |||||||||||||||||||
Prior accident year development | (8.0 | ) | 1.0 | 0.7 | 0.9 | 0.8 | 1.5 | 3.9 | (2.2 | ) | 2.0 | |||||||||||||||||
Underlying combined ratio | 96.0 | 98.5 | 97.5 | 99.6 | 98.6 | 95.9 | 97.5 | 97.3 | 97.3 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
SUPPLEMENTAL DATA
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
WRITTEN PREMIUMS | ||||||||||||||||||||||||||||
Small Commercial | $ | 916 | $ | 928 | $ | 996 | $ | 882 | $ | 905 | $ | 936 | $ | 986 | $ | 2,840 | $ | 2,827 | ||||||||||
Middle Market | 622 | 586 | 616 | 628 | 584 | 566 | 592 | 1,824 | 1,742 | |||||||||||||||||||
Specialty Commercial | 201 | 210 | 227 | 206 | 201 | 192 | 232 | 638 | 625 | |||||||||||||||||||
National Accounts | 77 | 72 | 97 | 87 | 84 | 71 | 99 | 246 | 254 | |||||||||||||||||||
Financial Products | 66 | 62 | 63 | 61 | 59 | 58 | 61 | 191 | 178 | |||||||||||||||||||
Bond | 54 | 60 | 48 | 51 | 51 | 52 | 53 | 162 | 156 | |||||||||||||||||||
Other Specialty | 4 | 16 | 19 | 7 | 7 | 11 | 19 | 39 | 37 | |||||||||||||||||||
Other | 12 | 10 | 12 | 11 | 12 | 12 | 11 | 34 | 35 | |||||||||||||||||||
Total | $ | 1,751 | $ | 1,734 | $ | 1,851 | $ | 1,727 | $ | 1,702 | $ | 1,706 | $ | 1,821 | $ | 5,336 | $ | 5,229 | ||||||||||
EARNED PREMIUMS | ||||||||||||||||||||||||||||
Small Commercial | $ | 940 | $ | 927 | $ | 914 | $ | 923 | $ | 919 | $ | 914 | $ | 890 | $ | 2,781 | $ | 2,723 | ||||||||||
Middle Market | 614 | 598 | 581 | 594 | 585 | 587 | 583 | 1,793 | 1,755 | |||||||||||||||||||
Specialty Commercial | 219 | 209 | 204 | 206 | 208 | 207 | 203 | 632 | 618 | |||||||||||||||||||
National Accounts | 94 | 82 | 84 | 85 | 84 | 85 | 86 | 260 | 255 | |||||||||||||||||||
Financial Products | 62 | 60 | 59 | 60 | 62 | 60 | 60 | 181 | 182 | |||||||||||||||||||
Bond | 53 | 54 | 50 | 51 | 51 | 51 | 47 | 157 | 149 | |||||||||||||||||||
Other Specialty | 10 | 13 | 11 | 10 | 11 | 11 | 10 | 34 | 32 | |||||||||||||||||||
Other | 12 | 11 | 12 | 11 | 11 | 12 | 12 | 35 | 35 | |||||||||||||||||||
Total | $ | 1,785 | $ | 1,745 | $ | 1,711 | $ | 1,734 | $ | 1,723 | $ | 1,720 | $ | 1,688 | $ | 5,241 | $ | 5,131 | ||||||||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | ||||||||||||||||||||||||||||
New Business Premium | ||||||||||||||||||||||||||||
Small Commercial | $ | 152 | $ | 154 | $ | 166 | $ | 155 | $ | 140 | $ | 147 | $ | 154 | $ | 472 | $ | 441 | ||||||||||
Middle Market | $ | 135 | $ | 138 | $ | 141 | $ | 137 | $ | 112 | $ | 107 | $ | 128 | $ | 414 | $ | 347 | ||||||||||
Renewal Price Increases [1] | ||||||||||||||||||||||||||||
Standard Commercial Lines - Written | 1.7 | % | 3.0 | % | 2.4 | % | 2.6 | % | 3.4 | % | 3.4 | % | 3.2 | % | 2.4 | % | 3.3 | % | ||||||||||
Standard Commercial Lines - Earned | 2.9 | % | 3.2 | % | 3.2 | % | 3.3 | % | 3.0 | % | 2.6 | % | 2.4 | % | 3.1 | % | 2.7 | % | ||||||||||
Policy Count Retention | ||||||||||||||||||||||||||||
Small Commercial | 83 | % | 82 | % | 82 | % | 83 | % | 83 | % | 83 | % | 85 | % | 82 | % | 84 | % | ||||||||||
Middle Market | 78 | % | 77 | % | 78 | % | 79 | % | 76 | % | 75 | % | 80 | % | 78 | % | 77 | % | ||||||||||
Policies in Force (in thousands) | ||||||||||||||||||||||||||||
Small Commercial | 1,269 | 1,265 | 1,263 | 1,272 | 1,274 | 1,278 | 1,281 | |||||||||||||||||||||
Middle Market | 64 | 65 | 66 | 66 | 67 | 66 | 66 |
[1] | Excludes Maxum, higher hazard general liability in middle market and livestock lines of business. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Written premiums | $ | 854 | $ | 857 | $ | 807 | $ | 823 | $ | 924 | $ | 925 | $ | 889 | $ | 2,518 | $ | 2,738 | ||||||||||
Change in unearned premium reserve | 5 | 1 | (52 | ) | (82 | ) | 3 | (5 | ) | (45 | ) | (46 | ) | (47 | ) | |||||||||||||
Earned premiums | 849 | 856 | 859 | 905 | 921 | 930 | 934 | 2,564 | 2,785 | |||||||||||||||||||
Fee income | 10 | 10 | 10 | 11 | 11 | 11 | 11 | 30 | 33 | |||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Current accident year before catastrophes | 565 | 557 | 566 | 625 | 663 | 652 | 644 | 1,688 | 1,959 | |||||||||||||||||||
Current accident year catastrophes | 74 | 114 | 34 | 200 | 82 | 92 | 79 | 222 | 253 | |||||||||||||||||||
Prior accident year development [1] | (18 | ) | 10 | (13 | ) | (25 | ) | 2 | (10 | ) | (4 | ) | (21 | ) | (12 | ) | ||||||||||||
Total losses and loss adjustment expenses | 621 | 681 | 587 | 800 | 747 | 734 | 719 | 1,889 | 2,200 | |||||||||||||||||||
Amortization of DAC | 68 | 70 | 71 | 73 | 76 | 79 | 81 | 209 | 236 | |||||||||||||||||||
Underwriting expenses | 155 | 156 | 143 | 155 | 145 | 140 | 137 | 454 | 422 | |||||||||||||||||||
Amortization of other intangible assets | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 3 | 3 | |||||||||||||||||||
Underwriting gain (loss) | 14 | (42 | ) | 67 | (113 | ) | (37 | ) | (13 | ) | 7 | 39 | (43 | ) | ||||||||||||||
Net servicing income | 5 | 4 | 4 | 5 | 4 | 4 | 3 | 13 | 11 | |||||||||||||||||||
Net investment income | 39 | 37 | 40 | 34 | 36 | 35 | 36 | 116 | 107 | |||||||||||||||||||
Net realized capital gains | 5 | 5 | — | 6 | 2 | 5 | 2 | 10 | 9 | |||||||||||||||||||
Other income (expense) | 1 | 1 | (1 | ) | — | 3 | (1 | ) | (1 | ) | 1 | 1 | ||||||||||||||||
Income (loss) before income taxes | 64 | 5 | 110 | (68 | ) | 8 | 30 | 47 | 179 | 85 | ||||||||||||||||||
Income tax expense (benefit) | 13 | (1 | ) | 21 | 6 | — | 6 | 14 | 33 | 20 | ||||||||||||||||||
Net income (loss) | 51 | 6 | 89 | (74 | ) | 8 | 24 | 33 | 146 | 65 | ||||||||||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 5 | 6 | (1 | ) | 7 | 2 | 5 | 2 | 10 | 9 | ||||||||||||||||||
Less: Income tax benefit (expense) [2] | (1 | ) | (2 | ) | 1 | (35 | ) | (1 | ) | (1 | ) | (1 | ) | (2 | ) | (3 | ) | |||||||||||
Core earnings (losses) | $ | 47 | $ | 2 | $ | 89 | $ | (46 | ) | $ | 7 | $ | 20 | $ | 32 | $ | 138 | $ | 59 |
[1] | For further information, see Personal Lines Income Statements (continued), page 15. |
[2] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS (CONTINUED)
Prior accident year development included the following unfavorable (favorable) reserve development:
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Auto liability | $ | (10 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (10 | ) | $ | — | ||||||||
Homeowners | (7 | ) | (1 | ) | (12 | ) | (14 | ) | — | — | — | (20 | ) | — | ||||||||||||||
Catastrophes | (2 | ) | 13 | 5 | (5 | ) | — | (8 | ) | (3 | ) | 16 | (11 | ) | ||||||||||||||
Other reserve re-estimates, net | 1 | (2 | ) | (6 | ) | (6 | ) | 2 | (2 | ) | (1 | ) | (7 | ) | (1 | ) | ||||||||||||
Total prior accident year development | $ | (18 | ) | $ | 10 | $ | (13 | ) | $ | (25 | ) | $ | 2 | $ | (10 | ) | $ | (4 | ) | $ | (21 | ) | $ | (12 | ) |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
UNDERWRITING RATIOS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
UNDERWRITING GAIN (LOSS) | $ | 14 | $ | (42 | ) | $ | 67 | $ | (113 | ) | $ | (37 | ) | $ | (13 | ) | $ | 7 | $ | 39 | $ | (43 | ) | |||||
UNDERWRITING RATIOS | ||||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Current accident year before catastrophes | 66.5 | 65.1 | 65.9 | 69.1 | 72.0 | 70.1 | 69.0 | 65.8 | 70.3 | |||||||||||||||||||
Current accident year catastrophes | 8.7 | 13.3 | 4.0 | 22.1 | 8.9 | 9.9 | 8.5 | 8.7 | 9.1 | |||||||||||||||||||
Prior accident year development | (2.1 | ) | 1.2 | (1.5 | ) | (2.8 | ) | 0.2 | (1.1 | ) | (0.4 | ) | (0.8 | ) | (0.4 | ) | ||||||||||||
Total losses and loss adjustment expenses | 73.1 | 79.6 | 68.3 | 88.4 | 81.1 | 78.9 | 77.0 | 73.7 | 79.0 | |||||||||||||||||||
Expenses | 25.2 | 25.4 | 23.9 | 24.1 | 22.9 | 22.5 | 22.3 | 24.8 | 22.5 | |||||||||||||||||||
Combined ratio | 98.4 | 104.9 | 92.2 | 112.5 | 104.0 | 101.4 | 99.3 | 98.5 | 101.5 | |||||||||||||||||||
Current accident year catastrophes and prior accident year development | 6.6 | 14.5 | 2.5 | 19.3 | 9.1 | 8.8 | 8.1 | 7.9 | 8.7 | |||||||||||||||||||
Underlying combined ratio | 91.8 | 90.4 | 89.8 | 93.1 | 94.9 | 92.6 | 91.2 | 90.6 | 92.9 | |||||||||||||||||||
PRODUCT | ||||||||||||||||||||||||||||
Automobile | ||||||||||||||||||||||||||||
Combined ratio | 98.9 | 99.7 | 93.1 | 101.7 | 106.3 | 100.8 | 97.5 | 97.2 | 101.5 | |||||||||||||||||||
Current accident year catastrophes | 2.0 | 3.4 | 0.5 | 0.7 | 4.8 | 2.3 | 1.4 | 2.0 | 2.8 | |||||||||||||||||||
Prior accident year development | (1.7 | ) | (0.2 | ) | (1.6 | ) | (0.7 | ) | — | (0.6 | ) | (0.4 | ) | (1.2 | ) | (0.3 | ) | |||||||||||
Underlying combined ratio | 98.5 | 96.5 | 94.2 | 101.7 | 101.6 | 99.1 | 96.6 | 96.4 | 99.1 | |||||||||||||||||||
Homeowners | ||||||||||||||||||||||||||||
Combined ratio | 96.9 | 117.8 | 89.8 | 137.4 | 97.9 | 103.4 | 103.4 | 101.5 | 101.6 | |||||||||||||||||||
Current accident year catastrophes | 23.6 | 36.4 | 12.0 | 71.9 | 18.6 | 28.0 | 24.9 | 24.0 | 23.8 | |||||||||||||||||||
Prior accident year development | (3.0 | ) | 5.0 | (1.1 | ) | (7.3 | ) | 0.4 | (2.1 | ) | (0.4 | ) | 0.3 | (0.7 | ) | |||||||||||||
Underlying combined ratio | 76.3 | 76.4 | 78.9 | 72.8 | 78.9 | 77.6 | 78.9 | 77.2 | 78.4 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
DISTRIBUTION | ||||||||||||||||||||||||||||
WRITTEN PREMIUMS | ||||||||||||||||||||||||||||
AARP Direct | $ | 706 | $ | 704 | $ | 654 | $ | 644 | $ | 735 | $ | 729 | $ | 687 | $ | 2,064 | $ | 2,151 | ||||||||||
AARP Agency | 64 | 67 | 67 | 79 | 79 | 80 | 86 | 198 | 245 | |||||||||||||||||||
Other Agency | 73 | 77 | 77 | 90 | 100 | 104 | 105 | 227 | 309 | |||||||||||||||||||
Other | 11 | 9 | 9 | 10 | 10 | 12 | 11 | 29 | 33 | |||||||||||||||||||
Total | $ | 854 | $ | 857 | $ | 807 | $ | 823 | $ | 924 | $ | 925 | $ | 889 | $ | 2,518 | $ | 2,738 | ||||||||||
EARNED PREMIUMS | ||||||||||||||||||||||||||||
AARP Direct | $ | 687 | $ | 684 | $ | 681 | $ | 709 | $ | 713 | $ | 711 | $ | 708 | $ | 2,052 | $ | 2,132 | ||||||||||
AARP Agency | 71 | 74 | 77 | 83 | 88 | 89 | 92 | 222 | 269 | |||||||||||||||||||
Other Agency | 83 | 86 | 92 | 102 | 108 | 117 | 123 | 261 | 348 | |||||||||||||||||||
Other | 8 | 12 | 9 | 11 | 12 | 13 | 11 | 29 | 36 | |||||||||||||||||||
Total | $ | 849 | $ | 856 | $ | 859 | $ | 905 | $ | 921 | $ | 930 | $ | 934 | $ | 2,564 | $ | 2,785 | ||||||||||
PRODUCT LINE | ||||||||||||||||||||||||||||
WRITTEN PREMIUMS | ||||||||||||||||||||||||||||
Automobile | $ | 583 | $ | 586 | $ | 581 | $ | 578 | $ | 636 | $ | 638 | $ | 645 | $ | 1,750 | $ | 1,919 | ||||||||||
Homeowners | 271 | 271 | 226 | 245 | 288 | 287 | 244 | 768 | 819 | |||||||||||||||||||
Total | $ | 854 | $ | 857 | $ | 807 | $ | 823 | $ | 924 | $ | 925 | $ | 889 | $ | 2,518 | $ | 2,738 | ||||||||||
EARNED PREMIUMS | ||||||||||||||||||||||||||||
Automobile | $ | 591 | $ | 596 | $ | 600 | $ | 634 | $ | 644 | $ | 652 | $ | 654 | $ | 1,787 | $ | 1,950 | ||||||||||
Homeowners | 258 | 260 | 259 | 271 | 277 | 278 | 280 | 777 | 835 | |||||||||||||||||||
Total | $ | 849 | $ | 856 | $ | 859 | $ | 905 | $ | 921 | $ | 930 | $ | 934 | $ | 2,564 | $ | 2,785 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA (CONTINUED)
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | ||||||||||||||||||||||||||||
New Business Premium | ||||||||||||||||||||||||||||
Automobile | $ | 47 | $ | 42 | $ | 37 | $ | 35 | $ | 37 | $ | 38 | $ | 42 | $ | 126 | $ | 117 | ||||||||||
Homeowners | $ | 12 | $ | 11 | $ | 9 | $ | 9 | $ | 11 | $ | 12 | $ | 12 | $ | 32 | $ | 35 | ||||||||||
Renewal Written Price Increases | ||||||||||||||||||||||||||||
Automobile | 6.1 | % | 8.1 | % | 9.5 | % | 11.1 | % | 11.8 | % | 10.4 | % | 10.3 | % | 7.9 | % | 10.8 | % | ||||||||||
Homeowners | 10.0 | % | 10.4 | % | 9.5 | % | 9.0 | % | 8.5 | % | 9.1 | % | 8.9 | % | 10.0 | % | 8.8 | % | ||||||||||
Renewal Earned Price Increases | ||||||||||||||||||||||||||||
Automobile | 9.3 | % | 10.4 | % | 10.7 | % | 10.8 | % | 10.1 | % | 9.1 | % | 8.2 | % | 10.1 | % | 9.1 | % | ||||||||||
Homeowners | 9.6 | % | 9.2 | % | 8.9 | % | 8.8 | % | 8.7 | % | 8.5 | % | 8.2 | % | 9.2 | % | 8.4 | % | ||||||||||
Policy Count Retention | ||||||||||||||||||||||||||||
Automobile | 83 | % | 82 | % | 80 | % | 80 | % | 80 | % | 81 | % | 82 | % | 82 | % | 81 | % | ||||||||||
Homeowners | 83 | % | 84 | % | 82 | % | 83 | % | 83 | % | 83 | % | 82 | % | 83 | % | 82 | % | ||||||||||
Premium Retention | ||||||||||||||||||||||||||||
Automobile | 85 | % | 86 | % | 85 | % | 87 | % | 87 | % | 88 | % | 88 | % | 85 | % | 88 | % | ||||||||||
Homeowners | 90 | % | 91 | % | 89 | % | 89 | % | 89 | % | 90 | % | 88 | % | 90 | % | 89 | % | ||||||||||
Policies in Force (in thousands) | ||||||||||||||||||||||||||||
Automobile | 1,547 | 1,589 | 1,641 | 1,702 | 1,768 | 1,839 | 1,905 | |||||||||||||||||||||
Homeowners | 948 | 978 | 1,008 | 1,038 | 1,071 | 1,109 | 1,144 |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C OTHER OPERATIONS
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||||
Prior accident year development [1] | $ | 11 | $ | 16 | $ | — | $ | 17 | $ | — | — | 1 | 27 | 1 | ||||||||||||||
Total losses and loss adjustment expenses | 11 | 16 | — | 17 | — | — | 1 | 27 | 1 | |||||||||||||||||||
Underwriting expenses | 3 | 3 | 3 | 3 | 3 | 3 | 5 | 9 | 11 | |||||||||||||||||||
Underwriting loss | (14 | ) | (19 | ) | (3 | ) | (20 | ) | (3 | ) | (3 | ) | (6 | ) | (36 | ) | (12 | ) | ||||||||||
Net investment income | 22 | 22 | 24 | 22 | 26 | 27 | 31 | 68 | 84 | |||||||||||||||||||
Net realized capital gains (losses) | 3 | 3 | (1 | ) | 4 | 1 | 5 | 4 | 5 | 10 | ||||||||||||||||||
Other income | — | — | — | 1 | 2 | — | 2 | — | 4 | |||||||||||||||||||
Income before income taxes | 11 | 6 | 20 | 7 | 26 | 29 | 31 | 37 | 86 | |||||||||||||||||||
Income tax expense | 2 | 1 | 3 | — | 8 | 9 | 7 | 6 | 24 | |||||||||||||||||||
Net income | 9 | 5 | 17 | 7 | 18 | 20 | 24 | 31 | 62 | |||||||||||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 3 | 3 | (1 | ) | 4 | 2 | 4 | 4 | 5 | 10 | ||||||||||||||||||
Less: Income tax benefit (expense) [2] | (2 | ) | (1 | ) | 1 | (1 | ) | (2 | ) | (2 | ) | (1 | ) | (2 | ) | (5 | ) | |||||||||||
Core earnings | $ | 8 | $ | 3 | $ | 17 | $ | 4 | $ | 18 | $ | 18 | $ | 21 | $ | 28 | $ | 57 |
[1] The three months ended September 30, 2018 include reserve increases for the allowance for uncollectible reinsurance. The three months ended June 30, 2018 included reserve increases for the allowance for uncollectible reinsurance and certain mass torts.
[2] Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Earned premiums | $ | 1,353 | $ | 1,357 | $ | 1,357 | $ | 1,162 | $ | 803 | $ | 805 | $ | 816 | $ | 4,067 | $ | 2,424 | ||||||||||
Fee income | 43 | 44 | 44 | 34 | 19 | 19 | 19 | 131 | 57 | |||||||||||||||||||
Net investment income | 117 | 115 | 121 | 103 | 95 | 88 | 95 | 353 | 278 | |||||||||||||||||||
Net realized capital gains (losses) | (3 | ) | 2 | (25 | ) | 4 | 9 | 13 | 8 | (26 | ) | 30 | ||||||||||||||||
Total revenues | 1,510 | 1,518 | 1,497 | 1,303 | 926 | 925 | 938 | 4,525 | 2,789 | |||||||||||||||||||
Benefits, losses and loss adjustment expenses | 1,054 | 1,059 | 1,085 | 910 | 614 | 628 | 651 | 3,198 | 1,893 | |||||||||||||||||||
Amortization of DAC | 12 | 11 | 10 | 9 | 8 | 8 | 8 | 33 | 24 | |||||||||||||||||||
Insurance operating costs and other expenses | 319 | 317 | 321 | 298 | 204 | 193 | 220 | 957 | 617 | |||||||||||||||||||
Amortization of other intangible assets | 15 | 16 | 17 | 9 | — | — | — | 48 | — | |||||||||||||||||||
Total benefits, losses and expenses | 1,400 | 1,403 | 1,433 | 1,226 | 826 | 829 | 879 | 4,236 | 2,534 | |||||||||||||||||||
Income before income taxes | 110 | 115 | 64 | 77 | 100 | 96 | 59 | 289 | 255 | |||||||||||||||||||
Income tax expense (benefit) | 33 | 19 | 10 | (32 | ) | 29 | 27 | 14 | 62 | 70 | ||||||||||||||||||
Net income | 77 | 96 | 54 | 109 | 71 | 69 | 45 | 227 | 185 | |||||||||||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | (3 | ) | — | (26 | ) | 4 | 7 | 13 | 7 | (29 | ) | 27 | ||||||||||||||||
Less: Integration and transaction costs associated with acquired business, before tax | (12 | ) | (11 | ) | (12 | ) | (17 | ) | — | — | — | (35 | ) | — | ||||||||||||||
Less: Income tax benefit (expense) [1] | (10 | ) | 3 | 7 | 55 | (2 | ) | (5 | ) | (2 | ) | — | (9 | ) | ||||||||||||||
Core earnings | $ | 102 | $ | 104 | $ | 85 | $ | 67 | $ | 66 | $ | 61 | $ | 40 | $ | 291 | $ | 167 | ||||||||||
Margin | ||||||||||||||||||||||||||||
Net income margin | 5.1 | % | 6.3 | % | 3.6 | % | 8.4 | % | 7.7 | % | 7.5 | % | 4.9 | % | 5.0 | % | 6.7 | % | ||||||||||
Core earnings margin* | 6.7 | % | 6.9 | % | 5.6 | % | 5.2 | % | 7.2 | % | 6.7 | % | 4.3 | % | 6.4 | % | 6.1 | % | ||||||||||
ROE | ||||||||||||||||||||||||||||
Net income [2] | 12.0 | % | 11.9 | % | 10.9 | % | 10.5 | % | 11.6 | % | 11.0 | % | 10.7 | % | ||||||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | (1.0 | %) | (0.6 | %) | (0.1 | %) | 1.2 | % | 1.7 | % | 2.2 | % | 2.4 | % | ||||||||||||||
Less: Integration costs | (2.1 | %) | (1.6 | %) | (1.2 | %) | (0.7 | %) | — | % | — | % | — | % | ||||||||||||||
Less: Income tax benefit (expense) [1] | 2.2 | % | 2.6 | % | 2.3 | % | 1.8 | % | (0.6 | %) | (0.8 | %) | (0.9 | )% | ||||||||||||||
Less: Impact of AOCI, excluded from core earnings ROE | (0.2 | %) | (0.4 | %) | (0.4 | %) | (0.4 | %) | (1.5 | %) | (1.5 | %) | (1.0 | )% | ||||||||||||||
Core earnings [2] | 13.1 | % | 11.9 | % | 10.3 | % | 8.6 | % | 12.0 | % | 11.1 | % | 10.2 | % |
[1] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings,though for the three and nine months ended September 30, 2018, also included $14 of income tax expense that was primarily driven by the effect of the lower corporate income tax rate on deferred taxes due to the filing of the Company's 2017 federal income tax return and completion of the Aetna group benefits acquisition. |
[2] | Net income ROE and core earnings ROE for Group Benefits assumes a portion of debt and interest expense accounted for within Corporate is allocated to Group Benefits. For further information, see Appendix, page 33. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
SUPPLEMENTAL DATA
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
PREMIUMS | ||||||||||||||||||||||||||||
Fully insured ongoing premiums | ||||||||||||||||||||||||||||
Group disability | $ | 641 | $ | 642 | $ | 633 | $ | 539 | $ | 368 | $ | 360 | $ | 364 | $ | 1,916 | $ | 1,092 | ||||||||||
Group life | 652 | 651 | 664 | 567 | 382 | 391 | 386 | 1,967 | 1,159 | |||||||||||||||||||
Other | 60 | 59 | 60 | 55 | 53 | 51 | 55 | 179 | 159 | |||||||||||||||||||
Total fully insured ongoing premiums | 1,353 | 1,352 | 1,357 | 1,161 | 803 | 802 | 805 | 4,062 | 2,410 | |||||||||||||||||||
Total buyouts [1] | — | 5 | — | 1 | — | 3 | 11 | 5 | 14 | |||||||||||||||||||
Total premiums | $ | 1,353 | $ | 1,357 | $ | 1,357 | $ | 1,162 | $ | 803 | $ | 805 | $ | 816 | $ | 4,067 | $ | 2,424 | ||||||||||
SALES (GROSS ANNUALIZED NEW PREMIUMS) | ||||||||||||||||||||||||||||
Fully insured ongoing sales | ||||||||||||||||||||||||||||
Group disability | $ | 48 | $ | 47 | $ | 260 | $ | 77 | $ | 43 | $ | 32 | $ | 87 | $ | 355 | $ | 162 | ||||||||||
Group life | 47 | 34 | 160 | 22 | 20 | 33 | 115 | 241 | 168 | |||||||||||||||||||
Other | 9 | 4 | 34 | 4 | 5 | 2 | 9 | 47 | 16 | |||||||||||||||||||
Total fully insured ongoing sales | 104 | 85 | 454 | 103 | 68 | 67 | 211 | 643 | 346 | |||||||||||||||||||
Total buyouts [1] | — | 5 | — | 1 | — | 3 | 11 | 5 | 14 | |||||||||||||||||||
Total sales | $ | 104 | $ | 90 | $ | 454 | $ | 104 | $ | 68 | $ | 70 | $ | 222 | $ | 648 | $ | 360 | ||||||||||
RATIOS, EXCLUDING BUYOUTS | ||||||||||||||||||||||||||||
Group disability loss ratio | 75.9 | % | 74.3 | % | 74.9 | % | 72.9 | % | 73.0 | % | 78.9 | % | 82.9 | % | 75.0 | % | 78.3 | % | ||||||||||
Group life loss ratio | 76.6 | % | 77.4 | % | 80.9 | % | 80.2 | % | 77.7 | % | 74.2 | % | 73.1 | % | 78.3 | % | 75.0 | % | ||||||||||
Total loss ratio | 75.5 | % | 75.5 | % | 77.4 | % | 76.1 | % | 74.7 | % | 76.1 | % | 77.7 | % | 76.2 | % | 76.2 | % | ||||||||||
Expense ratio | 23.9 | % | 23.9 | % | 24.0 | % | 25.0 | % | 25.8 | % | 24.5 | % | 27.7 | % | 23.9 | % | 26.0 | % |
[1] | Takeover of open claim liabilities and other non-recurring premium amounts. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Investment management fees | $ | 188 | $ | 182 | $ | 181 | $ | 179 | $ | 172 | $ | 162 | $ | 155 | $ | 551 | $ | 489 | ||||||||||
Shareholder servicing fees | 23 | 22 | 21 | 21 | 24 | 27 | 24 | 66 | 75 | |||||||||||||||||||
Other revenue | 57 | 58 | 57 | 58 | 56 | 58 | 59 | 172 | 173 | |||||||||||||||||||
Net realized capital losses | — | (1 | ) | — | — | — | — | — | (1 | ) | — | |||||||||||||||||
Total revenues | 268 | 261 | 259 | 258 | 252 | 247 | 238 | 788 | 737 | |||||||||||||||||||
Sub-advisory expense | 69 | 66 | 66 | 65 | 63 | 60 | 56 | 201 | 179 | |||||||||||||||||||
Employee compensation and benefits | 28 | 27 | 29 | 27 | 28 | 28 | 28 | 84 | 84 | |||||||||||||||||||
Distribution and service | 91 | 91 | 91 | 91 | 90 | 90 | 89 | 273 | 269 | |||||||||||||||||||
General, administrative and other | 28 | 31 | 30 | 19 | 31 | 31 | 30 | 89 | 92 | |||||||||||||||||||
Total expenses | 216 | 215 | 216 | 202 | 212 | 209 | 203 | 647 | 624 | |||||||||||||||||||
Income before income taxes | 52 | 46 | 43 | 56 | 40 | 38 | 35 | 141 | 113 | |||||||||||||||||||
Income tax expense | 11 | 9 | 9 | 23 | 14 | 14 | 12 | 29 | 40 | |||||||||||||||||||
Net income | $ | 41 | $ | 37 | $ | 34 | $ | 33 | $ | 26 | $ | 24 | $ | 23 | $ | 112 | $ | 73 | ||||||||||
Less: Net realized capital losses, excluded from core earnings, before tax | — | (1 | ) | — | — | — | — | — | (1 | ) | — | |||||||||||||||||
Less: Income tax expense | — | — | — | (4 | ) | — | — | — | — | — | ||||||||||||||||||
Core earnings | $ | 41 | $ | 38 | $ | 34 | $ | 37 | $ | 26 | $ | 24 | $ | 23 | $ | 113 | $ | 73 | ||||||||||
Daily average total Mutual Funds segment AUM | $119,897 | $117,070 | $117,301 | $113,830 | $109,640 | $105,625 | $101,114 | $ | 118,098 | $ | 105,491 | |||||||||||||||||
Return on assets (bps, after tax) [1] | ||||||||||||||||||||||||||||
Net income | 13.6 | 12.6 | 11.9 | 11.5 | 9.5 | 9.2 | 9.2 | 12.7 | 9.3 | |||||||||||||||||||
Core earnings* | 13.6 | 12.8 | 11.9 | 12.8 | 9.5 | 9.2 | 9.2 | 12.8 | 9.3 | |||||||||||||||||||
ROE | ||||||||||||||||||||||||||||
Net income [2] | 51.8 | % | 47.9 | % | 44.3 | % | 40.9 | % | 34.3 | % | 33.0 | % | 32.0 | % | ||||||||||||||
Less: Net realized capital losses excluded from core earnings, before tax | (0.4 | %) | (0.4 | %) | — | % | — | % | — | % | — | % | — | % | ||||||||||||||
Less: Income tax expense | (1.5 | %) | (1.5 | %) | (1.6 | %) | (1.6 | %) | — | % | — | % | — | % | ||||||||||||||
Less: Impact of AOCI, excluded from core earnings ROE | 0.4 | % | 0.3 | % | 0.2 | % | (0.1 | %) | (0.3 | %) | (0.3 | %) | — | % | ||||||||||||||
Core earnings [2] | 53.3 | % | 49.5 | % | 45.7 | % | 42.6 | % | 34.6 | % | 33.3 | % | 32.0 | % |
[1] | Represents annualized earnings divided by daily average assets under management, as measured in basis points ("bps") which represents one hundredth of one percent. |
[2] | Net income ROE and core earnings ROE for Mutual Funds assumes a portion of debt and interest expense accounted for within Corporate is allocated to Mutual Funds. For further information, see Appendix, page 33. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
ASSET VALUE ROLLFORWARD
ASSETS UNDER MANAGEMENT BY ASSET CLASS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Equity Funds | ||||||||||||||||||||||||||||
Beginning balance | $ | 66,285 | $ | 64,702 | $ | 63,740 | $ | 61,163 | $ | 58,047 | $ | 54,683 | $ | 50,826 | $ | 63,740 | $ | 50,826 | ||||||||||
Sales | 3,672 | 3,452 | 4,175 | 3,060 | 3,630 | 4,076 | 3,987 | 11,299 | 11,693 | |||||||||||||||||||
Redemptions | (3,449 | ) | (3,116 | ) | (3,749 | ) | (3,276 | ) | (2,944 | ) | (3,269 | ) | (3,587 | ) | (10,314 | ) | (9,800 | ) | ||||||||||
Net flows | 223 | 336 | 426 | (216 | ) | 686 | 807 | 400 | 985 | 1,893 | ||||||||||||||||||
Change in market value and other | 2,955 | 1,247 | 536 | 2,793 | 2,430 | 2,557 | 3,457 | 4,738 | 8,444 | |||||||||||||||||||
Ending balance | $ | 69,463 | $ | 66,285 | $ | 64,702 | $ | 63,740 | $ | 61,163 | $ | 58,047 | $ | 54,683 | $ | 69,463 | $ | 61,163 | ||||||||||
Fixed Income Funds | ||||||||||||||||||||||||||||
Beginning balance | $ | 14,556 | $ | 14,378 | $ | 14,401 | $ | 14,454 | $ | 14,286 | $ | 13,973 | $ | 13,301 | $ | 14,401 | $ | 13,301 | ||||||||||
Sales | 946 | 1,119 | 1,002 | 771 | 866 | 1,079 | 1,930 | 3,067 | 3,875 | |||||||||||||||||||
Redemptions | (772 | ) | (960 | ) | (1,030 | ) | (966 | ) | (861 | ) | (900 | ) | (1,406 | ) | (2,762 | ) | (3,167 | ) | ||||||||||
Net flows | 174 | 159 | (28 | ) | (195 | ) | 5 | 179 | 524 | 305 | 708 | |||||||||||||||||
Change in market value and other | 101 | 19 | 5 | 142 | 163 | 134 | 148 | 125 | 445 | |||||||||||||||||||
Ending balance | $ | 14,831 | $ | 14,556 | $ | 14,378 | $ | 14,401 | $ | 14,454 | $ | 14,286 | $ | 13,973 | $ | 14,831 | $ | 14,454 | ||||||||||
Multi-Strategy Investments Funds [1] | ||||||||||||||||||||||||||||
Beginning balance | $ | 19,894 | $ | 20,137 | $ | 20,469 | $ | 19,571 | $ | 18,923 | $ | 18,142 | $ | 17,171 | $ | 20,469 | $ | 17,171 | ||||||||||
Sales | 558 | 681 | 1,000 | 993 | 868 | 1,093 | 1,301 | 2,239 | 3,262 | |||||||||||||||||||
Redemptions | (971 | ) | (931 | ) | (914 | ) | (751 | ) | (792 | ) | (765 | ) | (892 | ) | (2,816 | ) | (2,449 | ) | ||||||||||
Net flows | (413 | ) | (250 | ) | 86 | 242 | 76 | 328 | 409 | (577 | ) | 813 | ||||||||||||||||
Change in market value and other | 581 | 7 | (418 | ) | 656 | 572 | 453 | 562 | 170 | 1,587 | ||||||||||||||||||
Ending balance | $ | 20,062 | $ | 19,894 | $ | 20,137 | $ | 20,469 | $ | 19,571 | $ | 18,923 | $ | 18,142 | $ | 20,062 | $ | 19,571 | ||||||||||
Exchange-traded Products ("ETP") AUM | ||||||||||||||||||||||||||||
Beginning balance | $ | 930 | $ | 666 | $ | 480 | $ | 409 | $ | 325 | 278 | 209 | 480 | 209 | ||||||||||||||
Net flows | 261 | 228 | 194 | 42 | 60 | 33 | 22 | 683 | 115 | |||||||||||||||||||
Change in market value and other | (14 | ) | 36 | (8 | ) | 29 | 24 | 14 | 47 | 14 | 85 | |||||||||||||||||
Ending balance | $ | 1,177 | $ | 930 | $ | 666 | $ | 480 | $ | 409 | 325 | 278 | 1,177 | 409 | ||||||||||||||
Mutual Fund and ETP AUM | ||||||||||||||||||||||||||||
Beginning balance | $ | 101,665 | $ | 99,883 | $ | 99,090 | $ | 95,597 | $ | 91,581 | $ | 87,076 | $ | 81,507 | $ | 99,090 | $ | 81,507 | ||||||||||
Sales - mutual fund | 5,176 | 5,252 | 6,177 | 4,824 | 5,364 | 6,248 | 7,218 | 16,605 | 18,830 | |||||||||||||||||||
Redemptions - mutual fund | (5,192 | ) | (5,007 | ) | (5,693 | ) | (4,993 | ) | (4,597 | ) | (4,934 | ) | (5,885 | ) | (15,892 | ) | (15,416 | ) | ||||||||||
Net flows - ETP | 261 | 228 | 194 | 42 | 60 | 33 | 22 | 683 | 115 | |||||||||||||||||||
Net flows - mutual fund and ETP | 245 | 473 | 678 | (127 | ) | 827 | 1,347 | 1,355 | 1,396 | 3,529 | ||||||||||||||||||
Change in market value and other | 3,623 | 1,309 | 115 | 3,620 | 3,189 | 3,158 | 4,214 | 5,047 | 10,561 | |||||||||||||||||||
Ending balance | 105,533 | 101,665 | 99,883 | 99,090 | 95,597 | 91,581 | 87,076 | 105,533 | 95,597 | |||||||||||||||||||
Talcott Resolution life and annuity separate account AUM [2] | 15,543 | 15,376 | 15,614 | 16,260 | 16,127 | 16,098 | 16,123 | 15,543 | 16,127 | |||||||||||||||||||
Total Mutual Funds segment AUM | $ | 121,076 | $ | 117,041 | $ | 115,497 | $ | 115,350 | $ | 111,724 | $ | 107,679 | $ | 103,199 | $ | 121,076 | $ | 111,724 |
[1] | Includes balanced, allocation, and alternative investment products. |
[2] | Represents AUM of the Talcott Resolution life and annuity business sold in May, 2018 that is still managed by the Company's Mutual Funds segment. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Fee income [1] | $ | 15 | $ | 4 | $ | 2 | $ | 2 | $ | 1 | $ | — | $ | 1 | $ | 21 | $ | 2 | ||||||||||
Other revenue | 6 | 2 | — | — | — | — | 8 | — | ||||||||||||||||||||
Net investment income | 15 | 11 | 7 | 9 | 5 | 5 | 4 | 33 | 14 | |||||||||||||||||||
Net realized capital gains (losses) | 4 | 1 | 4 | (1 | ) | 1 | — | (1 | ) | 9 | — | |||||||||||||||||
Total revenues | 40 | 18 | 13 | 10 | 7 | 5 | 4 | 71 | 16 | |||||||||||||||||||
Benefits, losses and loss adjustment expenses [2] | 3 | 4 | 2 | 31 | — | — | — | 9 | — | |||||||||||||||||||
Insurance operating costs and other expenses | 25 | 19 | 15 | (1 | ) | 26 | 16 | 18 | 59 | 60 | ||||||||||||||||||
Pension settlement | — | — | — | — | — | 750 | — | — | 750 | |||||||||||||||||||
Loss on extinguishment of debt | — | 6 | — | — | — | — | — | 6 | — | |||||||||||||||||||
Interest expense | 69 | 79 | 80 | 78 | 79 | 79 | 80 | 228 | 238 | |||||||||||||||||||
Total expenses | 97 | 108 | 97 | 108 | 105 | 845 | 98 | 302 | 1,048 | |||||||||||||||||||
Loss from continuing operations before income taxes | (57 | ) | (90 | ) | (84 | ) | (98 | ) | (98 | ) | (840 | ) | (94 | ) | (231 | ) | (1,032 | ) | ||||||||||
Income tax expense (benefit) [3] | (17 | ) | (8 | ) | (20 | ) | 821 | (30 | ) | (293 | ) | (41 | ) | (45 | ) | (364 | ) | |||||||||||
Loss from continuing operations, net of tax | (40 | ) | (82 | ) | (64 | ) | (919 | ) | (68 | ) | (547 | ) | (53 | ) | (186 | ) | (668 | ) | ||||||||||
Income (loss) from discontinued operations, net of tax [4] | 5 | 148 | 169 | (3,145 | ) | 89 | 112 | 75 | 322 | 276 | ||||||||||||||||||
Net income (loss) | (35 | ) | 66 | 105 | (4,064 | ) | 21 | (435 | ) | 22 | 136 | (392 | ) | |||||||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 4 | 2 | 4 | (1 | ) | 2 | (1 | ) | (1 | ) | 10 | — | ||||||||||||||||
Less: Loss on extinguishment of debt, before tax | — | (6 | ) | — | — | — | — | — | (6 | ) | — | |||||||||||||||||
Less: Pension settlement, before tax | — | — | — | — | — | (750 | ) | — | — | (750 | ) | |||||||||||||||||
Less: Income tax benefit (expense) [3] [5] | 1 | (2 | ) | (2 | ) | (867 | ) | (2 | ) | 262 | — | (3 | ) | 260 | ||||||||||||||
Less: Income (loss) from discontinued operations, after tax [4] | 5 | 148 | 169 | (3,145 | ) | 89 | 112 | 75 | 322 | 276 | ||||||||||||||||||
Core losses | $ | (45 | ) | $ | (76 | ) | $ | (66 | ) | $ | (51 | ) | $ | (68 | ) | $ | (58 | ) | $ | (52 | ) | $ | (187 | ) | $ | (178 | ) |
[1] | Beginning in June, 2018, includes fee income from managing invested assets of Talcott Resolution. |
[2] | Benefits incurred relates to life and annuity business retained by the Company. |
[3] | The three months and year ended December 31, 2017 include $867 of income tax expense primarily from reducing net deferred tax assets due to the reduction in the corporate Federal income tax rate from 35% to 21%. |
[4] | The three months ended December 31, 2017 included an estimated loss on sale of $3.3 billion related to the sale of Talcott Resolution, the Company's life and annuity run-off business that was sold in May, 2018. The three months ended June 30, 2018 and March 31, 2018, included a reduction in loss on sale of $151 and $62, respectively. |
[5] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
CONSOLIDATED
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||||||
Fixed maturities [1] | ||||||||||||||||||||||||||||
Taxable | $ | 269 | $ | 252 | $ | 238 | $ | 226 | $ | 224 | $ | 224 | $ | 221 | $ | 759 | $ | 669 | ||||||||||
Tax-exempt | 101 | 106 | 111 | 105 | 103 | 102 | 98 | 318 | 303 | |||||||||||||||||||
Total fixed maturities | 370 | 358 | 349 | 331 | 327 | 326 | 319 | 1,077 | 972 | |||||||||||||||||||
Equity securities | 6 | 6 | 6 | 10 | 4 | 5 | 5 | 18 | 14 | |||||||||||||||||||
Mortgage loans | 35 | 34 | 33 | 33 | 31 | 30 | 30 | 102 | 91 | |||||||||||||||||||
Limited partnerships and other alternative investments [2] | 45 | 39 | 73 | 29 | 48 | 39 | 58 | 157 | 145 | |||||||||||||||||||
Other [3] | 10 | 9 | 8 | 10 | 13 | 11 | 15 | 27 | 39 | |||||||||||||||||||
Subtotal | 466 | 446 | 469 | 413 | 423 | 411 | 427 | 1,381 | 1,261 | |||||||||||||||||||
Investment expense | (22 | ) | (18 | ) | (18 | ) | (19 | ) | (19 | ) | (16 | ) | (17 | ) | (58 | ) | (52 | ) | ||||||||||
Total net investment income | $ | 444 | $ | 428 | $ | 451 | $ | 394 | $ | 404 | $ | 395 | $ | 410 | $ | 1,323 | $ | 1,209 | ||||||||||
Annualized investment yield, before tax [4] | 4.0 | % | 3.9 | % | 4.2 | % | 3.8 | % | 4.1 | % | 4.1 | % | 4.2 | % | 4.0 | % | 4.1 | % | ||||||||||
Annualized limited partnerships and other alternative investment yield, before tax [4] | 10.6 | % | 9.5 | % | 18.6 | % | 7.3 | % | 12.8 | % | 10.1 | % | 15.5 | % | 13.3 | % | 13.2 | % | ||||||||||
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] * | 3.7 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.8 | % | 3.8 | % | 3.8 | % | 3.7 | % | 3.8 | % | ||||||||||
Annualized investment yield, after tax [4] | 3.3 | % | 3.3 | % | 3.5 | % | 2.8 | % | 3.0 | % | 3.0 | % | 3.1 | % | 3.4 | % | 3.0 | % | ||||||||||
Average reinvestment rate [5] | 4.0 | % | 4.0 | % | 3.8 | % | 3.3 | % | 3.4 | % | 3.5 | % | 3.5 | % | 4.0 | % | 3.5 | % | ||||||||||
Average sales/maturities yield [6] | 3.8 | % | 3.7 | % | 3.3 | % | 3.3 | % | 4.1 | % | 3.7 | % | 3.6 | % | 3.6 | % | 3.8 | % | ||||||||||
Portfolio duration (in years) [7] | 4.9 | 4.9 | 5.1 | 5.2 | 5.0 | 5.0 | 5.1 | 4.9 | 5.0 |
[1] | Includes income on short-term bonds. |
[2] | Other alternative investments include an insurer-owned life insurance policy which is invested in hedge funds and other investments. |
[3] | Primarily represents income from derivatives that qualify for hedge accounting and are used to hedge fixed maturities. |
[4] | Represents annualized net investment income divided by the monthly average invested assets at amortized cost as applicable, excluding repurchase agreement and securities lending collateral, if any, and derivatives book value. |
[5] | Represents the annualized yield on fixed maturities and mortgage loans that were purchased during the respective period. Excludes U.S. Treasury securities, cash equivalent securities, and repurchase agreement and securities lending collateral, if any. |
[6] | Represents the annualized yield on fixed maturities and mortgage loans that were sold, matured, or redeemed, including calls and pay-downs, during the respective period. Excludes U.S. Treasury securities, cash equivalent securities, and repurchase agreement and securities lending collateral, if any. |
[7] | Excludes certain short-term securities. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
PROPERTY & CASUALTY
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||||||
Fixed maturities [1] | ||||||||||||||||||||||||||||
Taxable | $ | 178 | $ | 168 | $ | 163 | $ | 158 | $ | 169 | $ | 169 | $ | 168 | $ | 509 | $ | 506 | ||||||||||
Tax-exempt | 77 | 79 | 82 | 81 | 81 | 81 | 78 | 238 | 240 | |||||||||||||||||||
Total fixed maturities | 255 | 247 | 245 | 239 | 250 | 250 | 246 | 747 | 746 | |||||||||||||||||||
Equity securities | 5 | 5 | 4 | 4 | 4 | 4 | 4 | 14 | 12 | |||||||||||||||||||
Mortgage loans | 24 | 23 | 24 | 24 | 22 | 21 | 21 | 71 | 64 | |||||||||||||||||||
Limited partnerships and other alternative investments [2] | 35 | 33 | 58 | 23 | 34 | 32 | 45 | 126 | 111 | |||||||||||||||||||
Other [3] | 8 | 6 | 4 | 6 | 7 | 8 | 8 | 18 | 23 | |||||||||||||||||||
Subtotal | 327 | 314 | 335 | 296 | 317 | 315 | 324 | 976 | 956 | |||||||||||||||||||
Investment expense | (16 | ) | (13 | ) | (13 | ) | (15 | ) | (14 | ) | (13 | ) | (14 | ) | (42 | ) | (41 | ) | ||||||||||
Total net investment income | $ | 311 | $ | 301 | $ | 322 | $ | 281 | $ | 303 | $ | 302 | $ | 310 | $ | 934 | $ | 915 | ||||||||||
Annualized investment yield, before tax [4] | 4.1 | % | 4.0 | % | 4.3 | % | 3.8 | % | 4.0 | % | 4.1 | % | 4.2 | % | 4.1 | % | 4.1 | % | ||||||||||
Annualized limited partnerships and other alternative investment yield, before tax [4] | 9.8 | % | 9.3 | % | 17.0 | % | 6.5 | % | 10.4 | % | 9.6 | % | 13.6 | % | 12.4 | % | 11.6 | % | ||||||||||
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] | 3.8 | % | 3.8 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.8 | % | 3.7 | % | 3.7 | % | 3.8 | % | ||||||||||
Annualized investment yield, after tax [4] | 3.4 | % | 3.4 | % | 3.5 | % | 2.8 | % | 2.9 | % | 3.0 | % | 3.1 | % | 3.4 | % | 3.0 | % | ||||||||||
Average reinvestment rate [5] | 3.9 | % | 4.0 | % | 3.7 | % | 3.2 | % | 3.4 | % | 3.5 | % | 3.7 | % | 3.9 | % | 3.5 | % | ||||||||||
Average sales/maturities yield [6] | 3.8 | % | 3.9 | % | 3.7 | % | 3.6 | % | 4.1 | % | 3.8 | % | 3.8 | % | 3.8 | % | 3.9 | % | ||||||||||
Portfolio duration (in years) [7] | 4.9 | 4.9 | 4.9 | 5.0 | 5.0 | 5.0 | 5.0 | 4.9 | 5.0 |
Footnotes [1] through [7] are explained on page 25.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
GROUP BENEFITS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||||||
Fixed maturities [1] | ||||||||||||||||||||||||||||
Taxable | $ | 77 | $ | 75 | $ | 70 | $ | 63 | $ | 50 | $ | 50 | $ | 49 | $ | 222 | $ | 149 | ||||||||||
Tax-exempt | 23 | 25 | 27 | 24 | 21 | 21 | 20 | 75 | 62 | |||||||||||||||||||
Total fixed maturities | 100 | 100 | 97 | 87 | 71 | 71 | 69 | 297 | 211 | |||||||||||||||||||
Equity securities | — | — | 1 | 1 | — | — | — | 1 | — | |||||||||||||||||||
Mortgage loans | 11 | 11 | 9 | 9 | 9 | 9 | 10 | 31 | 28 | |||||||||||||||||||
Limited partnerships and other alternative investments [2] | 10 | 6 | 15 | 6 | 14 | 7 | 13 | 31 | 34 | |||||||||||||||||||
Other [3] | 2 | 3 | 4 | 4 | 5 | 4 | 6 | 9 | 15 | |||||||||||||||||||
Subtotal | 123 | 120 | 126 | 107 | 99 | 91 | 98 | 369 | 288 | |||||||||||||||||||
Investment expense | (6 | ) | (5 | ) | (5 | ) | (4 | ) | (4 | ) | (3 | ) | (3 | ) | (16 | ) | (10 | ) | ||||||||||
Total net investment income | $ | 117 | $ | 115 | $ | 121 | $ | 103 | $ | 95 | $ | 88 | $ | 95 | $ | 353 | $ | 278 | ||||||||||
Annualized investment yield, before tax [4] | 4.1 | % | 4.1 | % | 4.3 | % | 3.8 | % | 4.9 | % | 4.5 | % | 4.8 | % | 4.2 | % | 4.8 | % | ||||||||||
Annualized limited partnerships and other alternative investment yield, before tax [4] | 15.4 | % | 10.6 | % | 28.3 | % | 12.2 | % | 29.4 | % | 13.3 | % | 28.9 | % | 18.8 | % | 25.2 | % | ||||||||||
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] [8] | 3.9 | % | 3.9 | % | 3.8 | % | 3.7 | % | 4.3 | % | 4.3 | % | 4.3 | % | 3.9 | % | 4.3 | % | ||||||||||
Annualized investment yield, after tax [4] | 3.4 | % | 3.4 | % | 3.5 | % | 2.8 | % | 3.5 | % | 3.3 | % | 3.5 | % | 3.4 | % | 3.4 | % | ||||||||||
Average reinvestment rate [5] | 4.1 | % | 4.2 | % | 3.9 | % | 3.4 | % | 3.6 | % | 3.6 | % | 3.6 | % | 4.1 | % | 3.6 | % | ||||||||||
Average sales/maturities yield [6] | 3.6 | % | 3.8 | % | 3.0 | % | 2.9 | % | 4.3 | % | 3.9 | % | 4.0 | % | 3.4 | % | 4.1 | % | ||||||||||
Portfolio duration (in years) [7] | 6.1 | 6.0 | 6.1 | 6.3 | 6.0 | 6.0 | 5.9 | 6.1 | 6.0 |
Footnotes [1] through [7] are explained on page 25.
[8] | Beginning in the fourth quarter of 2017, the average yield reflects the fact that invested assets acquired as part of the acquisition of Aetna's U.S. group life and disability business on November 1, 2017 were recorded at the then current yields, which are lower than the yields of the remainder of the Group Benefits segment invested assets. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET INVESTMENT INCOME
CONSOLIDATED
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||||||||||||
Net Investment Income by Segment | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Net Investment Income | |||||||||||||||||||||||||||||
Commercial Lines | $ | 250 | $ | 242 | $ | 258 | $ | 225 | $ | 241 | $ | 240 | $ | 243 | $ | 750 | $ | 724 | |||||||||||
Personal Lines | 39 | 37 | 40 | 34 | 36 | 35 | 36 | 116 | 107 | ||||||||||||||||||||
P&C Other Operations | 22 | 22 | 24 | 22 | 26 | 27 | 31 | 68 | 84 | ||||||||||||||||||||
Total Property & Casualty | $ | 311 | $ | 301 | $ | 322 | $ | 281 | $ | 303 | $ | 302 | $ | 310 | $ | 934 | $ | 915 | |||||||||||
Group Benefits | 117 | 115 | 121 | 103 | 95 | 88 | 95 | 353 | 278 | ||||||||||||||||||||
Mutual Funds | 1 | 1 | 1 | 1 | 1 | — | 1 | 3 | 2 | ||||||||||||||||||||
Corporate | 15 | 11 | 7 | 9 | 5 | 5 | 4 | 33 | 14 | ||||||||||||||||||||
Total net investment income by segment | $ | 444 | $ | 428 | $ | 451 | $ | 394 | $ | 404 | $ | 395 | $ | 410 | $ | 1,323 | $ | 1,209 | |||||||||||
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||||||||||||
Net Investment Income From Limited Partnerships and Other Alternative Investments | Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Total Property & Casualty | $ | 35 | $ | 33 | $ | 58 | $ | 23 | $ | 34 | $ | 32 | $ | 45 | $ | 126 | $ | 111 | |||||||||||
Group Benefits | 10 | 6 | 15 | 6 | 14 | 7 | 13 | 31 | 34 | ||||||||||||||||||||
Total net investment income from limited partnerships and other alternative investments [1] | $ | 45 | $ | 39 | $ | 73 | $ | 29 | $ | 48 | $ | 39 | $ | 58 | $ | 157 | $ | 145 |
[1] | Amounts are included above in total net investment income by segment. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
CONSOLIDATED
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Net Realized Capital Gains (Losses) | ||||||||||||||||||||||||||||
Gross gains on sales | $ | 26 | $ | 46 | $ | 19 | $ | 91 | $ | 46 | $ | 77 | $ | 61 | $ | 91 | $ | 184 | ||||||||||
Gross losses on sales | (41 | ) | (31 | ) | (57 | ) | (29 | ) | (16 | ) | (22 | ) | (46 | ) | (129 | ) | (84 | ) | ||||||||||
Equity securities [1] | 46 | 26 | 16 | — | — | — | — | 88 | — | |||||||||||||||||||
Net impairment losses | (1 | ) | — | — | (4 | ) | (1 | ) | (2 | ) | (1 | ) | (1 | ) | (4 | ) | ||||||||||||
Valuation allowances on mortgage loans | — | — | — | (1 | ) | — | — | — | — | — | ||||||||||||||||||
Transactional foreign currency revaluation | — | — | 1 | — | — | 8 | 6 | 1 | 14 | |||||||||||||||||||
Non-qualifying foreign currency derivatives | 1 | 4 | (3 | ) | — | — | (7 | ) | (7 | ) | 2 | (14 | ) | |||||||||||||||
Other net gains (losses) [2] [3] | 7 | 7 | (6 | ) | 3 | (3 | ) | 1 | 11 | 8 | 9 | |||||||||||||||||
Total net realized capital gains (losses) | $ | 38 | $ | 52 | $ | (30 | ) | $ | 60 | $ | 26 | $ | 55 | $ | 24 | $ | 60 | $ | 105 | |||||||||
Less: Net realized capital gains, included in core earnings, before tax | 1 | 2 | — | 1 | 1 | 2 | 1 | 3 | 4 | |||||||||||||||||||
Total net realized capital gains (losses) excluded from core earnings, before tax | 37 | 50 | (30 | ) | 59 | 25 | 53 | 23 | 57 | 101 | ||||||||||||||||||
Less: Impacts of tax | 8 | 10 | (5 | ) | 22 | 10 | 20 | 8 | 13 | 38 | ||||||||||||||||||
Total net realized capital gains (losses) excluded from core earnings | $ | 29 | $ | 40 | $ | (25 | ) | $ | 37 | $ | 15 | $ | 33 | $ | 15 | $ | 44 | $ | 63 |
[1] | Effective January 1, 2018, with adoption of new accounting guidance for equity securities at fair value, includes all changes in fair value and trading gains and losses for equity securities. |
[2] | Includes changes in value of non-qualifying derivatives, including credit derivatives and interest rate derivatives used to manage duration. |
[3] | Includes periodic net coupon settlements on credit derivatives which are included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | |||||||||||||||||||||
Amount [1] | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount [1] | Percent | ||||||||||||||||
Total investments | $ | 46,134 | 100.0 | % | $ | 45,648 | 100.0 | % | $ | 44,432 | 100.0 | % | $ | 45,146 | 100.0 | % | $ | 42,246 | 100.0 | % | |||||
Asset-backed securities | $ | 1,191 | 3.3 | % | $ | 994 | 2.7 | % | $ | 911 | 2.5 | % | $ | 1,126 | 3.0 | % | $ | 1,350 | 4.0 | % | |||||
Collateralized debt obligations | 1,326 | 3.7 | % | 1,089 | 3.0 | % | 1,144 | 3.2 | % | 1,260 | 3.4 | % | 1,402 | 4.1 | % | ||||||||||
Commercial mortgage-backed securities | 3,657 | 10.2 | % | 3,494 | 9.7 | % | 3,311 | 9.2 | % | 3,336 | 8.9 | % | 2,969 | 8.7 | % | ||||||||||
Corporate | 13,492 | 37.3 | % | 13,349 | 36.9 | % | 12,634 | 35.2 | % | 12,804 | 34.7 | % | 11,372 | 33.4 | % | ||||||||||
Foreign government/government agencies | 952 | 2.6 | % | 1,133 | 3.1 | % | 1,082 | 3.0 | % | 1,110 | 3.0 | % | 984 | 2.9 | % | ||||||||||
Municipal [2] | 10,602 | 29.3 | % | 11,142 | 30.8 | % | 11,544 | 32.1 | % | 12,485 | 33.8 | % | 11,203 | 32.9 | % | ||||||||||
Residential mortgage-backed securities | 3,118 | 8.5 | % | 3,207 | 8.9 | % | 3,086 | 8.6 | % | 3,044 | 8.3 | % | 2,590 | 7.7 | % | ||||||||||
U.S. Treasuries | 1,828 | 5.1 | % | 1,786 | 4.9 | % | 2,212 | 6.2 | % | 1,799 | 4.9 | % | 2,156 | 6.3 | % | ||||||||||
Total fixed maturities, available-for-sale | $ | 36,166 | 100.0 | % | $ | 36,194 | 100.0 | % | $ | 35,924 | 100.0 | % | $ | 36,964 | 100.0 | % | $ | 34,026 | 100.0 | % | |||||
U.S. government/government agencies | $ | 4,735 | 13.1 | % | $ | 4,722 | 13.0 | % | $ | 4,972 | 13.8 | % | $ | 4,536 | 12.3 | % | $ | 4,324 | 12.7 | % | |||||
AAA | 6,379 | 17.6 | % | 6,027 | 16.7 | % | 5,812 | 16.2 | % | 6,072 | 16.4 | % | 5,535 | 16.3 | % | ||||||||||
AA | 7,085 | 19.6 | % | 7,096 | 19.6 | % | 6,942 | 19.3 | % | 7,810 | 21.1 | % | 7,211 | 21.2 | % | ||||||||||
A | 8,543 | 23.6 | % | 8,846 | 24.4 | % | 8,873 | 24.7 | % | 8,919 | 24.1 | % | 7,906 | 23.2 | % | ||||||||||
BBB | 8,232 | 22.8 | % | 8,157 | 22.5 | % | 7,839 | 21.8 | % | 7,931 | 21.5 | % | 7,350 | 21.6 | % | ||||||||||
BB | 721 | 2.0 | % | 822 | 2.3 | % | 890 | 2.5 | % | 1,005 | 2.7 | % | 959 | 2.8 | % | ||||||||||
B | 446 | 1.2 | % | 498 | 1.4 | % | 529 | 1.5 | % | 618 | 1.7 | % | 595 | 1.7 | % | ||||||||||
CCC | 23 | 0.1 | % | 23 | 0.1 | % | 64 | 0.2 | % | 69 | 0.2 | % | 139 | 0.4 | % | ||||||||||
CC & below | 2 | — | % | 3 | — | % | 3 | — | % | 4 | — | % | 7 | 0.1 | % | ||||||||||
Total fixed maturities, available-for-sale | $ | 36,166 | 100.0 | % | $ | 36,194 | 100.0 | % | $ | 35,924 | 100.0 | % | $ | 36,964 | 100.0 | % | $ | 34,026 | 100.0 | % |
[1] | Amount represents the value at which the assets are presented in the Consolidating Balance Sheets (page 4). |
[2] | Primarily comprised of $7.9 billion in Property & Casualty, $2.5 billion in Group Benefits, and $178 in Corporate as of September 30, 2018. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
SEPTEMBER 30, 2018
Cost or Amortized Cost | Fair Value | Percent of Total Invested Assets | ||||||
Top Ten Corporate Fixed Maturity and Equity Exposures by Sector, Available-for-sale | ||||||||
Financial services | $ | 3,578 | $ | 3,523 | 7.6 | % | ||
Utilities | 2,180 | 2,155 | 4.7 | % | ||||
Consumer non-cyclical | 2,018 | 1,982 | 4.3 | % | ||||
Technology and communications | 1,722 | 1,726 | 3.7 | % | ||||
Energy [1] | 1,164 | 1,163 | 2.5 | % | ||||
Capital goods | 1,157 | 1,145 | 2.5 | % | ||||
Consumer cyclical | 1,005 | 996 | 2.2 | % | ||||
Basic industry | 622 | 622 | 1.4 | % | ||||
Transportation | 571 | 565 | 1.2 | % | ||||
Other | 658 | 650 | 1.4 | % | ||||
Total | $ | 14,675 | $ | 14,527 | 31.5 | % | ||
Top Ten Exposures by Issuer [2] | ||||||||
New York City Transitional Finance Authority | $ | 284 | $ | 292 | 0.6 | % | ||
New York State Dormitory Authority | 278 | 286 | 0.6 | % | ||||
Commonwealth of Massachusetts | 213 | 221 | 0.5 | % | ||||
State of California | 203 | 212 | 0.5 | % | ||||
Wells Fargo & Company | 190 | 189 | 0.4 | % | ||||
Goldman Sachs Group Inc. | 194 | 187 | 0.4 | % | ||||
New York City Municipal Water Finance Authority | 173 | 181 | 0.4 | % | ||||
Massachusetts St. Development Finance Agency | 174 | 176 | 0.4 | % | ||||
JP Morgan Chase & Co. | 177 | 174 | 0.4 | % | ||||
Morgan Stanley | 168 | 165 | 0.3 | % | ||||
Total | $ | 2,054 | $ | 2,083 | 4.5 | % |
[1] | Excludes investments in foreign government, government agency securities or other fixed maturities that are correlated to energy exposure but are not direct obligations of or exposures to energy-related companies. |
[2] | Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, and exposures resulting from derivative transactions. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
APPENDIX
BASIS OF PRESENTATION AND DEFINITIONS
All amounts are in millions, except for per share and ratio information unless otherwise stated. Amounts presented throughout this document have been rounded for presentation purposes.
The Hartford Financial Services Group, Inc. (the "Company", "we", or "our") currently conducts business principally in five reporting segments: Commercial Lines, Personal Lines, Property & Casualty Other Operations ("P&C Other Operations"), Group Benefits, and Mutual Funds, as well as a Corporate category.
Property & Casualty ("P&C") businesses consist of three reporting segments: Commercial Lines, Personal Lines and P&C Other Operations. Commercial Lines provides businesses with workers' compensation, property, automobile, liability, umbrella, marine and livestock coverages under several different products, primarily throughout the United States (“U.S.”), within its standard commercial lines, which consists of the Company's small commercial and middle market lines of business. Additionally, within Commercial Lines, a variety of customized insurance products and risk management services including workers' compensation, automobile, general liability, professional liability, bond, and specialty casualty coverages are offered through the segment's specialty commercial lines. Personal Lines provides automobile, homeowners and personal umbrella coverages to individuals across the U.S., including a special program designed exclusively for members of AARP. P&C Other Operations includes certain property and casualty operations, managed by the Company, that have discontinued writing new business and substantially all of the Company's asbestos and environmental exposures.
Group Benefits provides group life, accident and disability coverage, group retiree health and voluntary benefits to individual members of employer groups and associations. Group Benefits offers disability underwriting, administration, claims processing and reinsurance to other insurers and self-funded employer plans. On November 1, 2017, Hartford Life and Accident Insurance Company (HLA), a wholly owned subsidiary of the Company, completed the acquisition of Aetna's U.S. group life and disability insurance business through a reinsurance transaction. Aetna's group life and disability revenue and earnings since the acquisition date are included in the operating results of the Company's Group Benefits reporting segment.
Mutual Funds provides investment management, administration, distribution and related services to investors through investment products in both domestic and international markets. Mutual fund and exchange-traded products are sold primarily through retail, bank trust and registered investment advisor channels.
The Company includes in the Corporate category investment management fees and expenses related to managing third party business, including management of the invested assets of the Talcott Resolution life and annuity run-off business sold in the second quarter of 2018, discontinued operations related to the sale of Talcott Resolution, reserves for run-off structured settlement and terminal funding agreement liabilities, capital raising activities (including debt financing and related interest expense), purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments. In addition, Corporate includes investment earnings from a 9.7% ownership interest in the limited partnership that acquired Talcott Resolution.
Certain operating and statistical measures have been incorporated herein to provide supplemental data that indicate current trends in the Company's business. These measures include sales, redemptions, net flows, account value, policies in-force, premium retention, renewal earned and written price increases and policy count retention. Premium retention is defined as renewal premium written in the current period divided by total premium written in the prior period. Renewal earned price increases represent the portions of the prior and current period renewal written price increases that have been earned based on the period of time the underlying renewal policies have been in effect. Renewal written price increases for Commercial Lines represent the combined effect of rate changes, amount of insurance and individual risk pricing decisions per unit of exposure since the prior year on policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Lines, renewal written price increases represent the total change in premium per policy since the prior year on those policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Lines, other changes in exposure include, but are not limited to, the effect of changes in number of drivers, vehicles and incidents, as well as changes in customer policy elections, such as deductibles and limits.
Policy count retention represents the ratio of the number of policies renewed during the period divided by the number of policies from the previous policy term period.
The Company, along with others in the property and casualty insurance industry, uses underwriting ratios as measures of performance. The loss and loss adjustment expense ratio is the ratio of losses and loss adjustment expenses to earned premiums. The expense ratio is the ratio of underwriting expenses (amortization of deferred policy acquisition costs and insurance operating costs and expenses, including certain centralized services and bad debt expense) less fee income to earned premiums. The policyholder dividend ratio is the ratio of policyholder dividends to earned premiums. The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. These ratios are relative measurements that describe the related cost of losses, expenses and policyholder dividends for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses. The catastrophe ratio (a component of the loss ratio) represents the ratio of catastrophe losses to earned premiums. The prior accident year loss and loss adjustment expense ratio (a component of the loss ratio) represents the increase (decrease) in the estimated cost of settling catastrophe and non-catastrophe claims incurred in prior accident years as recorded in the current calendar year divided by earned premiums.
The Company, along with others in the insurance industry, uses underwriting ratios as measures of the Group Benefits segment's performance. The loss ratio is the ratio of benefits, losses and loss adjustment expenses to premiums and other considerations, excluding buyout premiums. The expense ratio is the ratio of insurance operating costs and other expenses to premiums and other considerations, excluding buyout premiums. Buyout premiums represent takeover of open claim liabilities and other non-recurring premium amounts.
A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, earthquake, windstorm, explosion, terrorist attack and similar events. Each catastrophe has unique characteristics and the events are unpredictable as to timing or loss amount. Catastrophe losses are not included in earnings or losses and loss adjustment expense reserves prior to occurrence of the catastrophe event. The Company believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings.
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES
The Company uses non-GAAP and other financial measures in this Investor Financial Supplement to assist investors in analyzing the Company's operating performance. Because the Company's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing the Company's non-GAAP and other financial measures to those of other companies. Non-GAAP measures are indicated with an asterisk the first time they appear in this document.
The Company uses the non-GAAP financial measure core earnings as an important measure of the Company's operating performance. The Company believes that core earnings provides investors with a valuable measure of the underlying performance of the Company’s businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain realized capital gains and losses, certain restructuring and other costs, integration and transaction costs in connection with an acquired business, pension settlements, loss on extinguishment of debt, gains and losses on reinsurance transactions, income tax benefit from reduction in deferred income tax valuation allowance, impact of tax reform on net deferred tax assets, and results of discontinued operations. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses (net of tax) that tend to be highly variable from period to period based on capital market conditions. The Company believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. Results from discontinued operations are excluded from core earnings for businesses held for sale because such results could obscure trends in our ongoing businesses that are valuable to our investors' ability to assess the Company's financial performance. Net income (loss) and income from continuing operations (during periods when the Company reports significant discontinued operations) are the most directly comparable U.S. GAAP measures to core earnings. Income from continuing operations is net income, excluding the income (loss) from discontinued operations. Core earnings should not be considered as a substitute for net income (loss) or income (loss) from continuing operations 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), income (loss) from continuing operations and core earnings when reviewing the Company’s performance. A reconciliation of net income to core earnings is set forth on page 2.
Core earnings per share is calculated based on the non-GAAP financial measure core earnings. The Company believes that the measure core earnings per share provides investors with a valuable measure of the Company's operating performance for many of the same reasons applicable to its underlying measure, core earnings. Net income (loss) per share and income (loss) from continuing operations per share are the most directly comparable U.S. GAAP measures. Core earnings per share should not be considered as a substitute for net income (loss) per share or income (loss) from continuing operations per share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate net income (loss) per share, income (loss) from continuing operations per share and core earnings per share when reviewing our performance.
Book value per diluted share is a U.S. GAAP financial measure that represents a per share assessment of the value of a company's equity. It is calculated by dividing (a) common stockholders' equity by (b) common shares outstanding and dilutive potential common shares. The Company provides book value per diluted share to enable investors to assess the value of the Company’s equity. Reconciliations of book value per common share and book value per diluted share to book value per common share, excluding AOCI and book value per diluted share, excluding AOCI, are set forth on page 1.
The Company provides different measures of the return on stockholders' equity (“ROE”). Core earnings ROE is calculated based on non-GAAP financial measures. Core earnings ROE is calculated by dividing (a) core earnings for the prior four fiscal quarters by (b) average common stockholders' equity, excluding AOCI. Net income ROE is the most directly comparable U.S. GAAP measure. Net income ROE is calculated by dividing (a) net income for the prior four fiscal quarters by (b) average common stockholders' equity, including AOCI. ROEs at the segment level and for consolidated, represent a levered view of ROE as debt financing and related interest expense are attributed to the businesses consistent with the overall average debt to capitalization ratios of the consolidated entity. The Company excludes AOCI in the calculation of core earnings ROE to provide investors with a measure of how effectively the Company is investing the portion of the Company's net worth that is primarily attributable to the Company's business operations. The Company provides investors with return-on-equity measures based on its non-GAAP core earnings financial measures for the reasons set forth in the related discussion above.
A reconciliation of Net income ROE to Core earnings ROE is set forth below:
LAST TWELVE MONTHS ENDED | ||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | ||||||||
Net income (loss) ROE | (14.0 | %) | (15.4 | %) | (19.3 | %) | (20.6 | %) | 2.7 | % | 3.9 | % | 5.4 | % |
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 0.8 | % | 0.7 | % | 0.7 | % | 1.1 | % | (0.2 | %) | (0.2 | %) | (0.3 | )% |
Less: Loss on reinsurance transactions, before tax | — | % | — | % | — | % | — | % | (3.6 | %) | (3.6 | %) | (3.7 | )% |
Less: Pension settlement, before tax | — | % | — | % | (5.0 | %) | (4.9 | %) | (4.2 | %) | (4.2 | %) | — | % |
Less: Integration and transaction costs associated with an acquired business | (0.3 | %) | (0.3 | %) | (0.2 | %) | (0.1 | %) | — | % | — | % | — | % |
Less: Income tax benefit (expense) on items not included in core earnings | (6.1 | %) | (6.1 | %) | (4.3 | %) | (4.4 | %) | 3.2 | % | 3.5 | % | 2.4 | % |
Less: Income (loss) from discontinued operations, after tax | (18.8 | %) | (18.4 | %) | (18.4 | %) | (18.9 | %) | 1.8 | % | 1.8 | % | 1.9 | % |
Less: Impact of AOCI, excluded from denominator of core earnings ROE | 0.1 | % | 0.3 | % | 0.1 | % | (0.1 | %) | (0.2 | %) | (0.3 | %) | — | % |
Core earnings ROE | 10.3 | % | 8.4 | % | 7.8 | % | 6.7 | % | 5.9 | % | 6.9 | % | 5.1 | % |
The Company evaluates profitability of the individual P&C businesses primarily on the basis of underwriting gain (loss). Underwriting gain (loss) is a before tax measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses and policyholder dividends. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of the Company's pricing. Underwriting profitability over time is also greatly influenced by the Company's pricing and underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance and its ability to manage its expense ratio, which it accomplishes through its management of acquisition costs and other underwriting expenses. Net income (loss) is the most directly comparable U.S. GAAP measure. The Company believes that underwriting gain (loss) provides investors with a valuable measure of before tax profitability derived from underwriting activities, which are managed separately from the Company's investing activities. Reconciliations of underwriting gain (loss) to net income (loss) for the Company's P&C businesses are set forth on pages 8, 10, 14 and 19.
Underlying underwriting gain (loss) represents underwriting gain (loss) before current accident year ("CAY") catastrophes and prior accident year development ("PYD"). The most directly comparable GAAP measure is net income (loss). The Company believes underlying underwriting gain (loss) is important to understand the Company’s periodic earnings because the volatile and unpredictable nature (i.e., the timing and amount) of catastrophes and prior accident year reserve development could obscure underwriting trends. A reconciliation of net income (loss) to underlying underwriting gain (loss) for individual reporting segments is set forth below.
COMMERCIAL LINES
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Net income | $ | 289 | $ | 372 | $ | 298 | $ | 286 | $ | 90 | $ | 258 | $ | 231 | $ | 959 | $ | 579 | ||||||||||
Less: Net investment income | 250 | 242 | 258 | 225 | 241 | 240 | 243 | 750 | 724 | |||||||||||||||||||
Less: Other | 30 | 40 | (6 | ) | 47 | 13 | 33 | 12 | 64 | 58 | ||||||||||||||||||
Add back: Income tax expense | 61 | 83 | 68 | 162 | 15 | 108 | 92 | 212 | 215 | |||||||||||||||||||
Underwriting gain (loss) | 70 | 173 | 114 | 176 | (149 | ) | 93 | 68 | 357 | 12 | ||||||||||||||||||
Add back: Unfavorable (favorable) PYD | (53 | ) | (73 | ) | (19 | ) | (34 | ) | (3 | ) | — | 15 | (145 | ) | 12 | |||||||||||||
Add back: Loss and LAE related to CAY catastrophes | 95 | 74 | 69 | (21 | ) | 270 | 63 | 71 | 238 | 404 | ||||||||||||||||||
Underlying underwriting gain (loss) | $ | 112 | $ | 174 | $ | 164 | $ | 121 | $ | 118 | $ | 156 | $ | 154 | $ | 450 | $ | 428 |
PERSONAL LINES
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Net income (loss) | $ | 51 | $ | 6 | $ | 89 | $ | (74 | ) | $ | 8 | $ | 24 | $ | 33 | $ | 146 | $ | 65 | |||||||||
Less: Net investment income | 39 | 37 | 40 | 34 | 36 | 35 | 36 | 116 | 107 | |||||||||||||||||||
Less: Other | 11 | 10 | 3 | 11 | 9 | 8 | 4 | 24 | 21 | |||||||||||||||||||
Add back: Income tax expense (benefit) | 13 | (1 | ) | 21 | 6 | — | 6 | 14 | 33 | 20 | ||||||||||||||||||
Underwriting gain (loss) | 14 | (42 | ) | 67 | (113 | ) | (37 | ) | (13 | ) | 7 | 39 | (43 | ) | ||||||||||||||
Add back: Unfavorable (favorable) PYD | (18 | ) | 10 | (13 | ) | (25 | ) | 2 | (10 | ) | (4 | ) | (21 | ) | (12 | ) | ||||||||||||
Add back: Loss and LAE related to CAY catastrophes | 74 | 114 | 34 | 200 | 82 | 92 | 79 | 222 | 253 | |||||||||||||||||||
Underlying underwriting gain (loss) | $ | 70 | $ | 82 | $ | 88 | $ | 62 | $ | 47 | $ | 69 | $ | 82 | $ | 240 | $ | 198 |
Underlying combined ratio is a non-GAAP financial measure. Combined ratio is the most directly comparable GAAP measure. Underlying combined ratio represents the combined ratio before catastrophes and prior accident year development. 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. A reconciliation of the combined ratio to the underlying combined ratio for Property & Casualty, Commercial Lines, and Personal Lines is set forth on pages 9, 12 and 16, respectively.
Core earnings margin is a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues excluding buyouts and realized gains (losses). Net income margin is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and realized gains (losses). Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance.
Return on Assets ("ROA"), core earnings, is a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of the Mutual Funds segment’s operating performance. ROA is the most directly comparable U.S. GAAP measure. The Company believes that ROA, core earnings, provides investors with a valuable measure of the performance of the Mutual Funds segment because it reveals trends in our businesses that may be obscured by the effect of realized gains (losses). ROA, core earnings, should not be considered as a substitute for ROA and does not reflect the overall profitability of our Mutual Funds business. Therefore, the Company believes it is important for investors to evaluate both ROA, core earnings, and ROA when reviewing the Mutual Funds segment performance. ROA, core earnings is calculated by dividing core earnings by a daily average AUM.
Net investment income, excluding limited partnerships is the amount of net investment income earned from invested assets excluding the net investment income related to limited partnerships and other alternative investments. The company believes that net investment income, excluding limited partnerships, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments.
CONSOLIDATED
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Total net investment income | $ | 444 | $ | 428 | $ | 451 | $ | 394 | $ | 404 | $ | 395 | $ | 410 | $ | 1,323 | $ | 1,209 | ||||||||||
Limited partnerships and other alternative investments ("Limited Partnerships") | 45 | 39 | 73 | 29 | 48 | 39 | 58 | 157 | 145 | |||||||||||||||||||
Net investment income excluding limited partnerships | $ | 399 | $ | 389 | $ | 378 | $ | 365 | $ | 356 | $ | 356 | $ | 352 | $ | 1,166 | $ | 1,064 |
PROPERTY & CASUALTY
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Total net investment income | $ | 311 | $ | 301 | $ | 322 | $ | 281 | $ | 303 | $ | 302 | $ | 310 | $ | 934 | $ | 915 | ||||||||||
Limited partnerships and other alternative investments | 35 | 33 | 58 | 23 | 34 | 32 | 45 | 126 | 111 | |||||||||||||||||||
Net investment income excluding limited partnerships | $ | 276 | $ | 268 | $ | 264 | $ | 258 | $ | 269 | $ | 270 | $ | 265 | $ | 808 | $ | 804 |
GROUP BENEFITS
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | ||||||||||||||||||||
Total net investment income | $ | 117 | $ | 115 | $ | 121 | $ | 103 | $ | 95 | $ | 88 | $ | 95 | $ | 353 | $ | 278 | ||||||||||
Limited partnerships and other alternative investments | 10 | 6 | 15 | 6 | 14 | 7 | 13 | 31 | 34 | |||||||||||||||||||
Net investment income excluding limited partnerships | $ | 107 | $ | 109 | $ | 106 | $ | 97 | $ | 81 | $ | 81 | $ | 82 | $ | 322 | $ | 244 |
Annualized investment yield, excluding limited partnerships is the annualized net investment income excluding limited partnerships and other alternative investments divided by the monthly average invested assets at amortized cost, excluding repurchase agreement and securities lending collateral, derivatives book value, and limited partnership and other alternative invested assets. The company believes that annualized net investment income, excluding limited partnerships, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments.
CONSOLIDATED
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | |||||||||||
Annualized investment yield | 4.0 | % | 3.9 | % | 4.2 | % | 3.8 | % | 4.1 | % | 4.1 | % | 4.2 | % | 4.0 | % | 4.1 | % | |
Impact on annualized investment yield of limited partnerships and other alternative investments | (0.3 | )% | (0.2 | )% | (0.5 | )% | (0.1 | )% | (0.3 | )% | (0.3 | )% | (0.4 | )% | (0.3 | )% | (0.3 | )% | |
Annualized investment yield excluding limited partnerships and other alternative investments | 3.7 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.8 | % | 3.8 | % | 3.8 | % | 3.7 | % | 3.8 | % |
PROPERTY & CASUALTY
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | |||||||||||
Annualized investment yield | 4.1 | % | 4.0 | % | 4.3 | % | 3.8 | % | 4.0 | % | 4.1 | % | 4.2 | % | 4.1 | % | 4.1 | % | |
Impact on annualized investment yield of limited partnerships and other alternative investments | (0.3 | )% | (0.2 | )% | (0.6 | )% | (0.1 | )% | (0.3 | )% | (0.3 | )% | (0.5 | )% | (0.4 | )% | (0.3 | )% | |
Annualized investment yield excluding limited partnerships and other alternative investments | 3.8 | % | 3.8 | % | 3.7 | % | 3.7 | % | 3.7 | % | 3.8 | % | 3.7 | % | 3.7 | % | 3.8 | % |
GROUP BENEFITS
THREE MONTHS ENDED | NINE MONTHS ENDED | ||||||||||||||||||
Sept 30 2018 | Jun 30 2018 | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | Sept 30 2018 | Sept 30 2017 | |||||||||||
Annualized investment yield | 4.1 | % | 4.1 | % | 4.3 | % | 3.8 | % | 4.9 | % | 4.5 | % | 4.8 | % | 4.2 | % | 4.8 | % | |
Impact on annualized investment yield of limited partnerships and other alternative investments | (0.2 | )% | (0.2 | )% | (0.5 | )% | (0.1 | )% | (0.6 | )% | (0.2 | )% | (0.5 | )% | (0.3 | )% | (0.5 | )% | |
Annualized investment yield excluding limited partnerships and other alternative investments | 3.9 | % | 3.9 | % | 3.8 | % | 3.7 | % | 4.3 | % | 4.3 | % | 4.3 | % | 3.9 | % | 4.3 | % |