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): February 8, 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 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 February 8, 2018, The Hartford Financial Services Group, Inc. (the "Company") issued (i) a press release announcing its financial results for the quarterly period ended December 31, 2017, and (ii) its Investor Financial Supplement (“IFS”) relating to its financial results for the quarterly period ended December 31, 2017. 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
Exhibit No.
  
 
 
 
 
99.1

 
 
 
 
99.2

 




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:
February 8, 2018
By:
/s/ Scott R. Lewis
 
 
Name:
Scott R. Lewis
 
 
Title:
Senior Vice President and Controller



Exhibit


        
    thehartfordlogorgb.jpg
NEWS RELEASE


The Hartford Reports Fourth Quarter And Full Year 2017 Financial Results And Announces 2018 Outlook For Selected Business Metrics

•
Fourth quarter 2017 net loss of $3.7 billion, or $10.37 per share, primarily due to a $3.1 billion loss on discontinued operations related to the agreement in December to sell Talcott Resolution and an $877 million charge due to the reduction in the U.S. corporate tax rate

•
Fourth quarter 2017 core earnings* of $293 million, or $0.81 per diluted share*, including current accident year catastrophe losses of $179 million, before tax, or $116 million, after tax ($0.32 per diluted share), primarily due to wildfires in California

•
Property & Casualty (P&C) combined ratio of 98.4 in fourth quarter 2017, including 6.8 points of current accident year catastrophe losses; P&C underlying combined ratio* of 93.2, reflecting continued improvement in personal auto profitability offset by a higher expense ratio and a higher Commercial Lines loss ratio

•
Group Benefits fourth quarter 2017 net income of $109 million, including a benefit from the reduction in the U.S. corporate tax rate; core earnings of $67 million

•
The Hartford announces its 2018 outlook for selected business metrics, including improved combined ratios in Commercial Lines and Personal Lines, a slight decrease in Group Benefits net income and modestly lower P&C net investment income

HARTFORD, Conn., Feb. 8, 2018 – The Hartford (NYSE: HIG) reported a fourth quarter 2017 net loss of $3.7 billion compared with a net loss of $81 million in fourth quarter 2016. The fourth quarter 2017 net loss resulted from a $3.1 billion loss on discontinued operations related to the previously-announced agreement to sell Talcott Resolution, the company's life and annuity run-off business, and an $877 million charge due to the reduction in the U.S. corporate tax rate that was effective Jan. 1, 2018. Fourth quarter 2017 net loss per share was $10.37 compared with a net loss per share of $0.22 in fourth quarter 2016.

* 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


1


Fourth quarter 2017 core earnings were $293 million, essentially flat compared with $294 million in fourth quarter 2016, as favorable prior accident year development (PYD) compared with unfavorable PYD in fourth quarter 2016, improved current accident year Personal Lines results before catastrophes and higher Group Benefits and Mutual Funds core earnings offset significantly higher current accident year catastrophe losses and lower current accident year Commercial Lines results before catastrophes. Current accident year catastrophe losses rose from $61 million, before tax ($40 million, after tax), in fourth quarter 2016 to $179 million, before tax ($116 million, after tax) in fourth quarter 2017. Core earnings per diluted share were $0.81, a 5% increase from $0.77 per diluted share in fourth quarter 2016 due to the 5% reduction in weighted average diluted shares outstanding during the period.

“In the face of record catastrophe losses for the industry, 2017 was an outstanding year at The Hartford, with several major accomplishments and very strong business results,” said The Hartford’s Chairman and CEO Christopher Swift. "These accomplishments included the announcement to sell Talcott Resolution and the acquisition of Aetna’s U.S. group life and disability business, along with improved profitability in personal auto, excellent results from Group Benefits and Mutual Funds and very good investment returns. Although we posted a net loss for the year due to our strategic actions and the impact of U.S. corporate tax reform, full year core earnings per diluted share were up 19 percent.”
The Hartford’s President Doug Elliot said, “Our P&C results were very strong in 2017, and we are pleased with our performance in a year with record catastrophes affecting the industry, reflecting the benefit of underwriting and pricing actions we have taken over the last several years. Personal Lines' turnaround continued, with the auto line returning to underwriting profitability on an underlying basis and additional progress underway in 2018. In Commercial Lines, Small Commercial continued its track record of strong margins and top line growth. Group Benefits delivered premium growth and excellent earnings in 2017, and we are intently focused on the integration in order to utilize expanded capabilities across the platform.”
Swift concluded, “I am proud of our employees and all that they achieved over the past year. Our goals and strategy remain unchanged going forward: generate sustainable long-term profitable growth by investing in our businesses to be a broader and deeper risk player and develop the talent, systems, data and analytical tools and capabilities that make us a more customer-centric company. In 2018, we expect stronger earnings growth and a much higher return on equity, and I am confident that we will build on our strengths and add to our successes to create long-term shareholder value.”
The full year 2017 net loss of $3.1 billion included a $2.9 billion loss on discontinued operations, an $877 million charge due to the reduction in the U.S. corporate tax rate, and a second quarter 2017 $488 million, after tax, pension settlement charge. Core earnings, which do not include these three items, were $1.0 billion, an 11% increase from 2016.
Core earnings increased in 2017 despite a significant increase in catastrophe losses due to a change to favorable PYD in 2017 from unfavorable PYD in 2016. Current accident year catastrophe losses, before tax, increased from $416 million, before tax, in 2016 to $836 million, before tax, in 2017 while PYD changed from unfavorable PYD of $457 million, before tax, in 2016 to favorable PYD of $41 million, before tax, in 2017. The unfavorable PYD in 2016 included $268 million, before tax ($174 million, after tax), for asbestos and environmental (A&E) liabilities and $160 million, before tax ($104 million, after tax), for personal auto liability. In 2017, as a result of the company's aggregate excess of loss reinsurance agreement covering A&E exposures, there was no charge for unfavorable PYD on A&E. In addition, there was no net unfavorable PYD on personal auto liability in 2017. Excluding current accident year catastrophes and PYD, core earnings were up 3% in 2017 due to improved personal auto underwriting results and higher Mutual Funds and Group Benefits core earnings, largely offset by deterioration in Commercial Lines underwriting margins.

2


2018 KEY BUSINESS METRICS OUTLOOK

The Hartford also announced its outlook for several 2018 key business metrics. The company does not provide an outlook for consolidated net income or core earnings. The key business metrics shown below are management estimates based on business, competitive, capital market, catastrophe and other assumptions. The metrics are subject to change for many reasons, including unusual or unpredictable items such as weather or catastrophe losses, change in loss frequency and severity, regulatory changes or assessments, PYD, capital markets or investment results and other factors that are not within management's control. The company has frequently experienced unusual or unpredictable changes in revenues, expenses or other items that were not anticipated in prior outlooks. The table below presents the 2018 key business metrics compared with 2017 actual results, including the impact of higher catastrophe losses in 2017.

2018 Key Business Metrics Outlook
($ in millions)
2017 Actual
2018 Outlook Range
Key Business Metrics:
 
 
Commercial Lines combined ratio [1][2]
97.3
93.0 - 95.5
Personal Lines combined ratio [1][2]
104.2
96.0 - 98.0
P&C current accident year catastrophe loss ratio [1]
7.9
~3.6
P&C net investment income, before tax [3]
$1,196
$1,125 - $1,175
Group Benefits net income [4]
$294
$275 - $295
[1] 2018 combined ratio metrics include an estimated consolidated P&C current accident year catastrophe loss ratio of 3.6 points, comprised of 2.6 points in Commercial Lines and 5.6 points in Personal Lines; actual 2018 catastrophes are likely to be different and will fluctuate quarterly due to seasonal variations
[2] Commercial Lines combined ratio range includes an estimated 0.5 points for accretion of discount on workers' compensation reserves as PYD. For Commercial Lines, the estimated underlying combined ratio range is 90.0 to 92.5. For Personal Lines, which does not include any estimated PYD, the estimated underlying combined ratio range is 90.5 to 92.5
[3] Includes an estimated 6% annualized yield on limited partnerships and other alternative investments (LPs) compared with 11% in 2017; actual results are likely to be different and will fluctuate quarterly
[4] 2018 outlook includes amortization of intangibles of $45 million to $50 million, after tax, and an estimated Group Benefits core earnings range of $310 million to $330 million

Subject to the cautionary language in the immediately preceding paragraph, The Hartford's business metrics for 2018 reflect improved Commercial Lines and Personal Lines combined ratios due to lower projected catastrophe losses and expected improvement in underlying combined ratios at both segments. The Commercial Lines underlying 2018 combined ratio is projected to be in a range of 90.0 to 92.5 compared with 92.0 in 2017 driven by higher expected pricing in certain product lines and continued disciplined underwriting and risk selection. The Personal Lines underlying 2018 combined ratio is anticipated to improve to a range of 90.5 to 92.5 from 93.0 in 2017 largely due to expected continued improvement in auto results, offset in part by higher marketing costs.


3


Group Benefits 2018 net income is projected to be in a range of $275 million to $295 million, which includes integration and transaction costs associated with the acquisition of Aetna's U.S. group life and disability business. This compares with $294 million in 2017, which included a $52 million tax benefit from the reduction in the U.S. corporate tax rate and strong LP returns. Group Benefits core earnings, which do not include integration and transaction costs, are expected to increase to a range of $310 million to $330 million in 2018, including $45 million to $50 million, after tax, of amortization of intangibles due to the acquisition. This compares with 2017 core earnings of $234 million, with the increase largely due to the acquisition.
  
P&C net investment income is expected to decline modestly in 2018 compared with 2017 principally due to an estimated 6% annualized investment yield on LPs compared with a much higher yield of 11% in 2017.

4


FINANCIAL RESULTS SUMMARY
($ in millions except per share data)
Three Months Ended
Year Ended
Dec 31 2017
Dec 31 2016
Change¹
Dec 31 2017
Dec 31 2016
Change¹
Net income (loss) by segment:
 
 
 
 
 
 
Commercial Lines
$286
$264
8%
$865
$994
(13)%
Personal Lines
(74)
(15)
NM
(9)
(9)
—%
P&C Other Operations
7
(423)
NM
69
(529)
NM
Property & Casualty
219
(174)
NM
925
456
103%
Group Benefits
109
63
73%
294
230
28%
Mutual Funds
33
17
94%
106
78
36%
Sub-total
361
$(94)
NM
1,325
764
73%
Corporate
(4,064)
13
NM
(4,456)
132
NM
Net income (loss)
$(3,703)
$(81)
NM
$(3,131)
$896
NM
Less: Net realized capital gains (losses), excluded from core earnings, before tax
59
(134)
NM
160
(112)
NM
Less: Loss on reinsurance transactions, before tax
—
(650)
100%
—
(650)
(100)%
Less: Pension settlement, before tax
—
—
—%
(750)
—
NM
Less: Integration and transaction costs associated with acquired business, before tax
(17)
—
NM
(17)
—
NM
Less: Income tax benefit (expense), including amounts related to before tax items excluded from core earnings
(893)
355
NM
(669)
463
NM
Less: Income (loss) from discontinued operations, after-tax
(3,145)
54
NM
(2,869)
283
NM
Core earnings
$293
$294
—%
$1,014
$912
11%
Weighted average diluted common shares outstanding
363.9
383.8
(5)%
370.5
394.8
(6)%
Net income (loss) per diluted share2 3
$(10.37)
$(0.22)
NM
$(8.61)
$2.27
NM
Core earnings per diluted share2 3
$0.81
$0.77
5%
$2.74
$2.31
19%
Select financial measures:
 
 
 
 
 
 
Common shares outstanding and dilutive potential common shares
363.6
381.1
(5)%
363.6
381.1
(5)%
Book value per diluted share
$37.11
$44.35
(16)%
$37.11
$44.35
(16)%
Book value per diluted share (ex. AOCI)*
$35.29
$45.24
(22)%
$35.29
$45.24
(22)%
ROE - Net income4
(20.6)%
5.2%
(25.8)
(20.6)%
5.2%
(25.8)
ROE - Core earnings*4
6.7%
5.2%
1.5
6.7%
5.2%
1.5
Select operating data:
 
 
 
Net investment income
$394
$412
(4)%
$1,603
$1,577
2%
Annualized investment yield, before tax, excluding LPs*
3.7%
4.0%
(0.3)
3.7%
3.8%
(0.1)
P&C net investment income
$281
$310
(9)%
$1,196
$1,179
1%

5


P&C annualized investment yield, before tax, excluding LPs*
3.7%
3.9%
(0.2)
3.8%
3.8%
—
Group Benefits net investment income
$103
$95
8%
$381
$366
4%
Group Benefits annualized investment yield, before tax, excluding LPs*
3.7%
4.5%
(0.8)
4.0%
4.4%
(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
[3]
For the three months ended Dec. 31, 2017, weighted average shares outstanding used in calculating net loss per share excludes the effect of dilutive securities of 6.8 million shares. The calculation of core earnings per share includes the effect of dilutive securities in all periods presented. In periods where a net loss before discontinued operations or a core loss is recognized, inclusion of incremental dilution is antidilutive
[4] Return on equity (ROE) calculated based on last 12-months net income and core earnings, respectively; for ROE - Net Income, the denominator is stockholders’ equity including accumulated other comprehensive income (AOCI); for ROE - Core Earnings, the denominator is stockholders’ equity excluding AOCI

Fourth quarter 2017 consolidated net investment income declined 4% to $394 million, before tax, from $412 million, before tax, in fourth quarter 2016 primarily as a result of lower, but still strong, investment income on LPs due to lower returns on real estate investments in 2017. Investment income from LPs was $29 million, before tax ($18 million, after tax), in fourth quarter 2017 for an annualized investment yield of 7.3%, compared with $46 million, before tax ($30 million, after tax), for an annualized investment yield of 12.2%, in fourth quarter 2016. The credit performance of the investment portfolio continues to be very strong, with net impairment losses, including mortgage loan valuation allowances, of $5 million, before tax, down slightly from $7 million, before tax, in fourth quarter 2016.

The annualized investment yield, excluding LPs, was 3.7% in fourth quarter 2017 down from 4.0% in fourth quarter 2016 due to a lower level of favorable non-routine investment items in 2017 and the impact on the yield due to the Aetna group benefits investment portfolio being recorded at market yields, as required by purchase accounting.

During fourth quarter 2017, the company repurchased 0.9 million common shares for approximately $53 million. As a result of the decision to acquire Aetna's U.S. group life and disability business, the company suspended, effective Oct. 13, 2017, its share repurchase program, which subsequently expired on Dec. 31, 2017. During fourth quarter 2017, $83 million of common dividends were paid to shareholders for a total return of capital to shareholders of $136 million during the quarter. For full year 2017, share repurchases totaled $1.0 billion and common dividends paid were $341 million, for a total return to shareholders of $1.4 billion.
Dec. 31, 2017 book value per diluted share of $37.11 declined from $44.35 as of Dec. 31, 2016 due to the 20% decrease in stockholders' equity over the period, partially offset by a 5% decrease in common shares outstanding and dilutive potential common shares. The decrease in stockholders' equity was due to the 2017 net loss, share repurchases and common stockholder dividends paid in 2017, partially offset by an increase in AOCI. The reduction in shares outstanding was due to 2017 share repurchases. Excluding AOCI, book value per diluted share of $35.29 as of Dec. 31, 2017 declined from $45.24 at Dec. 31, 2016.

Return on equity (ROE) - net loss was 20.6% for full year 2017 compared with ROE - net income of 5.2% for full year 2016. ROE - core earnings for 2017 rose to 6.7% from 5.2% in full year 2016 due to an 11% increase in core earnings and a 15% decrease in average stockholders' equity, excluding AOCI.

6


FOURTH QUARTER 2017 SEGMENT FINANCIAL RESULTS SUMMARY

 
Three Months Ended
Year Ended
($ in millions)
Dec 31 2017
Dec 31 2016
Change¹
Dec 31 2017
Dec 31 2016
Change¹
Core earnings (losses)
 
 
 
 
 
 
P&C segments:
 
 
 
 
 
 
   Commercial Lines
$282
$274
3%
$825
$984
(16)%
   Personal Lines
(46)
(14)
NM
13
(11)
NM
   P&C Other Operations
4
15
(73)%
61
(101)
NM
Property & Casualty
240
275
(13)%
899
872
3%
Group Benefits
67
59
14%
234
204
15%
Mutual Funds
37
17
118%
110
78
41%
   Sub-total
344
351
(2)%
1,243
1,154
8%
Corporate
(51)
(57)
11%
(229)
(242)
5%
Total
$293
$294
—%
$1,014
$912
11%
Select operating data:
 
 
 
 
 
 
Commercial Lines
 
 
 
 
 
 
Combined ratio
89.9
91.3
(1.4)
97.3
92.8
4.5
Impact of catastrophes and PYD on combined ratio
(3.2)
3.1
(6.3)
5.3
3.4
1.9
Underlying combined ratio
93.0
88.2
4.8
92.0
89.4
2.6
Personal Lines
 
 
 
 
 
 
Combined ratio
112.5
106.7
5.8
104.2
104.8
(0.6)
Impact of catastrophes and PYD on combined ratio
19.3
5.0
14.3
11.3
9.4
1.9
Underlying combined ratio
93.1
101.8
(8.7)
93.0
95.4
(2.4)
Group Benefits
 
 
 
 
 
 
      Loss ratio
76.1%
76.7%
(0.6)
76.1%
78.0%
(1.9)
      Expense ratio
25.0%
25.2%
(0.2)
25.7%
25.1%
0.6
      Net income margin
8.4%
6.9%
1.5
7.2%
6.3%
0.9
      Core earnings margin*
5.2%
6.5%
(1.3)
5.8%
5.7%
0.1
Mutual Funds
 
 
 
 
 
 
      Mutual Fund net flows
$(169)
$(509)
67%
$3,245
$(920)
NM
Total Mutual Funds segment assets under management
$115,350
$97,517
18%
$115,350
$97,517
18%






7


Commercial Lines

•
Commercial Lines net income of $286 million increased from $264 million in fourth quarter 2016 due largely to net realized capital gains of $31 million, after tax, compared with net realized capital losses of $12 million, after tax, in fourth quarter 2016, partially offset by a $25 million income tax expense in fourth quarter 2017 related to the reduction in the U.S. corporate tax rate

•
Core earnings of $282 million rose 3% from $274 million in fourth quarter 2016 due to lower current accident year catastrophe losses and a change to favorable PYD, partially offset by higher expenses, higher current accident year losses before catastrophes and lower net investment income compared with fourth quarter 2016

•
Current accident year catastrophes had a net positive $21 million, before tax, impact on fourth quarter 2017 results (1.2 points on the combined ratio) as the impact of wildfires was more than offset by reinsurance recoveries and favorable prior quarter current accident year development on third quarter 2017 catastrophes. Fourth quarter 2016 current accident year catastrophe losses were $33 million, before tax, (1.9 points on the combined ratio)

•
Net favorable PYD was $34 million, before tax, including $43 million related to workers' compensation due to lower estimated claims frequency in recent accident years, partially offset by unfavorable PYD on bonds, compared with fourth quarter 2016 net unfavorable PYD of $20 million, before tax

•
Commercial Lines combined ratio of 89.9 improved 1.4 points from 91.3 in fourth quarter 2016 due to a 3.1 point improvement in current accident year catastrophes losses and a 3.2 point favorable change in PYD, largely offset by a 4.8 point increase in the underlying combined ratio

•
The underlying Commercial Lines combined ratio of 93.0 rose 4.8 points from fourth quarter 2016 due to several factors, including: a 2.1 point increase in the expense ratio for higher variable compensation and technology costs; a 1.5 point increase in the current accident year loss ratio before catastrophes largely due to higher workers' compensation and general liability losses; a 1.2 point increase in policyholder dividends due to favorable workers’ compensation loss experience in recent accident years, offset in part by an improvement in the commercial auto loss ratio

•
Commercial Lines written premiums of $1.7 billion increased 4% compared with fourth quarter 2016, including growth of 4% in the Small Commercial, 3% in Middle Market and 3% in Specialty Commercial. Small Commercial and Middle Market new business premium grew 7% and 3%, respectively



8



Personal Lines

•
Personal Lines net loss of $74 million increased from a net loss of $15 million in fourth quarter 2016 due to a significant increase in catastrophe losses and a $33 million income tax expense related to the reduction in the U.S. corporate tax rate, partially offset by improved current accident year results before catastrophes and a change to favorable PYD in fourth quarter 2017

•
Current accident year catastrophe losses totaled $200 million, before tax (22.1 points on the combined ratio), largely from the California wildfires, compared with fourth quarter 2016 current accident year catastrophe losses of $28 million, before tax (2.9 points on the combined ratio)

•
Core losses of $46 million increased from core losses of $14 million in fourth quarter 2016 due to higher catastrophe losses, partially offset by improved current accident year auto results before catastrophes, as well as net favorable PYD of $25 million (2.8 points on the combined ratio) in fourth quarter 2017. The favorable PYD was principally from homeowners, compared with unfavorable PYD of $20 million, before tax (2.1 points on the combined ratio), in fourth quarter 2016, primarily from auto

•
The Personal Lines combined ratio of 112.5 increased 5.8 points from 106.7 in fourth quarter 2016 due to a 19.2 point increase in current accident year catastrophe losses, partially offset by a favorable 4.9 point change in PYD and an 8.7 improvement in underlying combined ratio to 93.1

•
The underlying combined ratio improved 8.7 points due a 10.3 point decline in the current accident year loss ratio before catastrophes. The decrease reflects improvements of 13.1 points in auto and 3.9 points in homeowners, partially offset by a 1.8 point increase in the expense ratio

•
The auto combined ratio decreased 16.4 points to 101.7 from 118.1 in fourth quarter 2016 due to improved current accident year loss results as a result of the multiple profitability initiatives implemented over the past two years and moderating loss trends, as well as no auto liability PYD compared with unfavorable PYD in fourth quarter 2016

•
The underlying auto combined ratio of 101.7 included favorable development on accident year 2017 that occurred in fourth quarter 2017, while the fourth quarter 2016 underlying combined ratio of 113.6 included unfavorable development on accident year 2016 that occurred in fourth quarter 2016. Excluding these items, the underlying auto combined ratio improved 3.8 points compared with fourth quarter 2016

•
The homeowners combined ratio rose significantly to 137.4 from 80.9 in fourth quarter 2016 due to higher current accident year catastrophe losses, which were 71.9 points on the combined ratio compared with 8.1 points in fourth quarter 2016; the underlying combined ratio improved to 72.8 from 74.7 in fourth quarter 2016 primarily due to lower weather and non-weather water losses


9


Group Benefits

•
Group Benefits net income of $109 million rose 73% from $63 million in fourth quarter 2016 due to a $52 million income tax benefit in fourth quarter 2017 from the reduction in the U.S. corporate tax rate, offset in part by integration and transaction costs from the acquisition of Aetna's U.S. group life and disability business. The net income margin rose to 8.4% from 6.9% in fourth quarter 2016 due to higher net income

•
Core earnings of $67 million rose 14% from $59 million in fourth quarter 2016 due to better group disability results, partially offset by higher group life losses and an increase in variable compensation expenses. The core earnings margin of 5.2% declined from 6.5% in fourth quarter 2016 due to premiums rising 47% as a result of the acquisition while core earnings were up 14%

•
The total loss ratio of 76.1% decreased 0.6 points compared with fourth quarter 2016 reflecting an 11.1 point improvement in the group disability loss ratio due to better incidence trends in both short and long term disability, continued strong recoveries and modest price increases, mostly offset by a 9.6 point increase in the group life loss ratio largely due to a fourth quarter 2016 favorable change in reserve estimates

•
Fully insured ongoing premiums of $1,161 million increased 47% compared with fourth quarter 2016 due to the acquisition which closed on Nov. 1, 2017


Mutual Funds

•
Mutual Funds net income of $33 million and core earnings of $37 million each increased from $17 million in fourth quarter 2016 primarily due to a $7 million state tax benefit in fourth quarter 2017 and higher fee income due to the 19% increase in the total daily average Mutual Funds segment assets under management (AUM) since Dec. 31, 2016

•
Mutual Funds segment AUM, excluding AUM from the life and annuity run-off business, increased 22% to $99.1 billion, primarily due to market appreciation

•
Sales totaled $4.8 billion with net outflows of $0.2 billion in fourth quarter 2017 compared with sales of $5.5 billion and net outflows of $0.5 billion in fourth quarter 2016

•
Investment performance remains strong with 60%, 63% and 68% of funds outperforming peers on a 1-, 3- and 5-year basis, respectively, as measured by Morningstar


Corporate

•
On Dec. 4, 2017, The Hartford announced a definitive agreement to sell Talcott Resolution, its life and annuity run-off business, which it expects to close by June 30, 2018

•
Effective in fourth quarter 2017 and for all periods presented in The Hartford's financial statements, Talcott Resolution is reported as discontinued operations in the Corporate segment and its results are included in net income, but not in core earnings


10


•
Corporate segment net loss was $4.1 billion primarily due to the $3.1 billion loss on discontinued operations associated with Talcott Resolution and an $867 million income tax expense due to the change in the U.S. corporate tax rate, compared with net income of $13 million in fourth quarter 2016

•
Core losses of $51 million improved slightly from core losses of $57 million in fourth quarter 2016 primarily due to a state tax benefit of $5 million

CONFERENCE CALL
The Hartford will discuss its fourth quarter 2017 financial results on a webcast at 9 a.m. EST on Friday, Feb. 9, 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 Dec. 31, 2017, and the Fourth Quarter 2017 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.

HIG-F

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
michelle.loxton@thehartford.com
 
sabra.purtill@thehartford.com
 
 
 
Matthew Sturdevant
 
Sean Rourke
860-547-8664
 
860-547-5688
matthew.sturdevant@thehartford.com
 
sean.rourke@thehartford.com



11


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING INCOME STATEMENTS
Three Months Ended December 31, 2017
($ in millions)
 
Commercial Lines
Personal Lines
P&C
Other Ops
Group Benefits
Mutual Funds
Corporate
 
Consolidated
Earned premiums
$
1,734

$
905

$
—

$
1,162

$
—

$
—

 
$
3,801

Fee income
9

11

—

34

209

2

 
265

Net investment income
225

34

22

103

1

9

 
394

Other revenues
—

19

—

—

—

—

 
19

Net realized capital gains (losses)
47

6

4

4

—

(1
)
 
60

Total revenues
2,015

975

26

1,303

210

10

 
4,539

Benefits, losses, and loss adjustment expenses
935

800

17

919

—

31

 
2,702

Amortization of DAC
255

73

—

9

5

—

 
342

Insurance operating costs and other expenses
377

170

2

298

149

(1
)
 
995

Interest expense
—

—

—

—

—

78

 
78

Total benefits and expenses
1,567

1,043

19

1,226

154

108

 
4,117

Income (loss) before income taxes
448

(68
)
7

77

56

(98
)
 
422

Income tax expense (benefit)
162

6

—

(32
)
23

821

 
980

Income (loss) from continuing operations, after-tax
286

(74
)
7

109

33

(919
)
 
(558
)
Loss from discontinued operations, after-tax
—

—

—

—

—

(3,145
)
 
(3,145
)
Net income (loss)
286

(74
)
7

109

33

(4,064
)
 
(3,703
)
Less: Net realized capital gains (losses), excluded from core earnings, before tax
45

7

4

4

—

(1
)
 
59

Less: Integration and transaction costs associated with acquired business, before tax
—

—

—

(17
)
—

—

 
(17
)
Less: Income tax benefit (expense)
(41
)
(35
)
(1
)
55

(4
)
(867
)
 
(893
)
Less: Loss from discontinued operations, after-tax
—

—

—

—

—

(3,145
)
 
(3,145
)
Core earnings (losses)
$
282

$
(46
)
$
4

$
67

$
37

$
(51
)
 
$
293


12


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING INCOME STATEMENTS
Three Months Ended December 31, 2016
($ in millions)
 
Commercial Lines
Personal Lines
P&C
Other Ops
Group Benefits
Mutual Funds
Corporate
 
Consolidated
Earned premiums
$
1,701

$
967

$
—

$
788

$
—

$
—

 
$
3,456

Fee income
10

10

—

20

184

—

 
224

Net investment income
243

36

31

95

—

7

 
412

Other revenues
—

19

—

—

—

—

 
19

Net realized capital gains (losses)
(18
)
(2
)
(26
)
8

—

(95
)
 
(133
)
Total revenues
1,936

1,030

5

911

184

(88
)
 
3,978

Benefits, losses, and loss adjustment expenses
999

816

8

620

—

—

 
2,443

Amortization of DAC
246

84

—

8

7

—

 
345

Insurance operating costs and other expenses
317

158

(3
)
196

150

19

 
837

Interest expense
—

—

—

—

—

79

 
79

Loss on reinsurance transactions
—

—

650

—

—

—

 
650

Total benefits and expenses
1,562

1,058

655

824

157

98

 
4,354

Income (loss) before income taxes
374

(28
)
(650
)
87

27

(186
)
 
(376
)
Income tax expense (benefit)
110

(13
)
(227
)
24

10

(145
)
 
(241
)
Income (loss) from continuing operations, after-tax
264

(15
)
(423
)
63

17

(41
)
 
(135
)
Income from discontinued operations, after-tax
—

—

—

—

—

54

 
54

Net income (loss)
264

(15
)
(423
)
63

17

13

 
(81
)
Less: Net realized capital gains (losses), excluded from core earnings, before tax
(17
)
(2
)
(26
)
7

—

(96
)
 
(134
)
Less: Loss on reinsurance transactions, before tax
—

—

(650
)
—

—

—

 
(650
)
Less: Income tax benefit (expense)
7

1

238

(3
)
—

112

 
355

Less: Income from discontinued operations, after-tax
—

—

—

—

—

54

 
54

Core earnings (losses)
$
274

$
(14
)
$
15

$
59

$
17

$
(57
)
 
$
294





13


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING INCOME STATEMENTS
Year Ended December 31, 2017
($ in millions)
 
Commercial Lines
Personal Lines
P&C
Other Ops
Group Benefits
Mutual Funds
Corporate
 
Consolidated
Earned premiums
$
6,865

$
3,690

$
—

$
3,586

$
—

$
—

 
$
14,141

Fee income
37

44

—

91

804

4

 
980

Net investment income
949

141

106

381

3

23

 
1,603

Other revenues
—

85

—

—

—

—

 
85

Net realized capital gains (losses)
103

15

14

34

—

(1
)
 
165

Total revenues
7,954

3,975

120

4,092

807

26

 
16,974

Benefits, losses, and loss adjustment expenses
4,322

3,000

18

2,803

—

31

 
10,174

Amortization of DAC
1,009

309

—

33

21

—

 
1,372

Insurance operating costs and other expenses
1,381

649

9

924

617

59

 
3,639

Pension settlements
—

—

—

—

—

750

 
750

Interest expense
—

—

—

—

—

316

 
316

Total benefits and expenses
6,712

3,958

27

3,760

638

1,156

 
16,251

Income (loss) before income taxes
1,242

17

93

332

169

(1,130
)
 
723

Income tax expense
377

26

24

38

63

457

 
985

Income (loss) from continuing operations, after-tax
865

(9
)
69

294

106

(1,587
)
 
(262
)
Loss from discontinued operations, after-tax
—

—

—

—

—

(2,869
)
 
(2,869
)
Net income (loss)
865

(9
)
69

294

106

(4,456
)
 
(3,131
)
Less: Net realized capital gains (losses), excluded from core earnings, before tax
100

16

14

31

—

(1
)
 
160

Less: Integration and transaction costs associated with acquired business, before tax
—

—

—

(17
)
—

—

 
(17
)
Less: Pension settlement, before tax
—

—

—

—

—

(750
)
 
(750
)
Less: Income tax benefit (expense)
(60
)
(38
)
(6
)
46

(4
)
(607
)
 
(669
)
Less: Loss from discontinued operations, after-tax
—

—

—

—

—

(2,869
)
 
(2,869
)
Core earnings (losses)
$
825

$
13

$
61

$
234

$
110

$
(229
)
 
$
1,014



14


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING INCOME STATEMENTS
Year Ended December 31, 2016
($ in millions)
 
Commercial Lines
Personal Lines
P&C
Other Ops
Group Benefits
Mutual Funds
Corporate
 
Consolidated
Earned premiums
$
6,651

$
3,898

$
—

$
3,148

$
—

$
—

 
$
13,697

Fee income
39

39

—

75

701

3

 
857

Net investment income
917

135

127

366

1

31

 
1,577

Other revenues
—

86

—

—

—

—

 
86

Net realized capital gains (losses)
13

2

(70
)
45

—

(100
)
 
(110
)
Total revenues
7,620

4,160

57

3,634

702

(66
)
 
16,107

Benefits, losses, and loss adjustment expenses
3,994

3,175

278

2,514

—

—

 
9,961

Amortization of DAC
973

348

—

31

24

—

 
1,376

Insurance operating costs and other expenses
1,244

669

13

776

557

87

 
3,346

Interest expense
—

—

—

—

—

327

 
327

Loss on reinsurance transactions
—

—

650

—

—

—

 
650

Total benefits and expenses
6,211

4,192

941

3,321

581

414

 
15,660

Income (loss) before income taxes
1,409

(32
)
(884
)
313

121

(480
)
 
447

Income tax expense (benefit)
415

(23
)
(355
)
83

43

(329
)
 
(166
)
Income (loss) from continuing operations, after-tax
994

(9
)
(529
)
230

78

(151
)
 
613

Income from discontinued operations, after-tax
—

—

—

—

—

283

 
283

Net income (loss)
994

(9
)
(529
)
230

78

132

 
896

Less: Net realized capital gains (losses), excluded from core earnings, before tax
15

2

(70
)
41

—

(100
)
 
(112
)
Less: Loss on reinsurance transactions, before tax
—

—

(650
)
—

—

—

 
(650
)
Less: Income tax benefit (expense)
(5
)
—

292

(15
)
—

191

 
463

Less: Income from discontinued operations, after-tax
—

—

—

—

—

283

 
283

Core earnings (losses)
$
984

$
(11
)
$
(101
)
$
204

$
78

$
(242
)
 
$
912



15


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 fourth quarter 2017, which is available on The Hartford's website, https://ir.thehartford.com.

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 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
 
Dec 31 2017
Dec 31 2016
Dec 31 2017
Dec 31 2016
Dec 31 2017
Dec 31 2016
 
Consolidated
P&C
Group Benefits
Annualized investment yield
3.8
%
4.3
%
3.8
%
4.2
%
3.8
%
4.8
%
Annualized investment yield on limited partnerships and other alternative investments
7.3
%
12.2
%
6.5
%
11.0
%
12.2
%
20.1
%
Annualized investment yield excluding limited partnerships and other alternative investments
3.7
%
4
%
3.7
%
3.9
%
3.7
%
4.5
%

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.
 
As of
 
Dec 31 2017
Dec 31 2016
Change
Book value per diluted share, including AOCI
$37.11
$44.35
(16)%
Less: Per diluted share impact of AOCI
$1.82
$(0.89)
NM
Book value per diluted share, excluding AOCI
$35.29
$45.24
(22)%

16


 
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. Net income (loss) is the most directly comparable U.S. GAAP measure. Core earnings should not be considered as a substitute for net income (loss) and does not reflect the overall profitability of the company’s business. Therefore, The Hartford believes that it is useful for investors to evaluate both net income (loss) and core earnings when reviewing the company’s performance.
A reconciliation of net income (loss) to core earnings for the quarterly periods ended Dec. 31, 2017 and 2016, 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 Dec. 31, 2017.

17


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 Dec. 31, 2017 and 2016, is set forth below.
 
Three Months Ended
Margin
Dec 31 2017
Dec 31 2016
Change
Net income margin
8.4%
6.9%
1.5
Less: Effect of net realized capital gains (losses), net of tax, on after tax margin
0.1%
0.4%
(0.3)
Less: Effect of integration and transaction costs, net of tax, on after tax margin
(0.9)%
—%
(0.9)
Less: Impact of tax reform
4.0%
—%
4.0
Core earnings margin
5.2%
6.5%
(1.3)

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 Dec. 31, 2017 and 2016 is provided in the table below.

18


 
Three Months Ended
 
Dec 31 2017
Dec 31 2016
Change
PER SHARE DATA
 
 
 
Diluted earnings (losses) per common share:
 
 
 
Net income (loss) per share1 2
$(10.37)
$(0.22)
NM
Less: Net realized capital gains (losses), excluded from core earnings, before tax
0.16
(0.35)
NM
Less: Loss on reinsurance transactions, before tax
—
(1.69)
(100)%
Less: Integration and transaction costs associated with an acquired business

(0.05)
—
NM
Less: Income tax (expense) benefit on items excluded from core earnings
(2.46)
0.92
NM
Less: (Loss) income from discontinued operations, after-tax
(8.64)
0.14
NM
Less: Use of weighted average shares in denominator1
(0.19)
(0.01)
NM
Core earnings per share1 2
$0.81
$0.77
5%
[1] Includes dilutive potential common shares
[2] For the three months ended Dec. 31, 2017, weighted average shares outstanding used in calculating net loss per share excludes the effect of dilutive securities of 6.8 million shares. The calculation of core earnings per share includes the effect of dilutive securities in all periods presented. In periods where a net loss before discontinued operations or a core loss is recognized, inclusion of incremental dilution is antidilutive.
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.
 
Three Months Ended
 
Dec 31 2017
Dec 31 2016
Dec 31 2017
Dec 31 2016
Dec 31 2017
Dec 31 2016
 
Consolidated
P&C
Group Benefits
Total net investment income
$
394

$
412

$
281

$
310

$
103

$
95

Limited partnerships and other alternative assets
29

46

23

36

6

10

Net investment income excluding limited partnerships
$
365

$
366

$
258

$
274

$
97

$
85



19


Return on Equity - Core Earnings: The company provides different measures of the return on stockholders' equity (“ROE”). ROE - Net income is calculated by dividing (a) net income for the prior four fiscal quarters by (b) average common stockholders' equity, including AOCI. ROE - Core earnings is calculated based on non-GAAP financial measures. ROE - Core earnings is calculated by dividing (a) core earnings for the prior four fiscal quarters by (b) average common stockholders' equity, excluding AOCI. ROE - Net income is the most directly comparable U.S. GAAP measure. The company excludes AOCI in the calculation of ROE - Core earnings 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.
A reconciliation of Consolidated ROE - Net income to Consolidated ROE - Core earnings is set forth below.
 
Last Twelve Months Ended
 
Dec 31 2017
Dec 31 2016
ROE - Net income
(20.6)%
5.2%
Less: Net realized capital gains (losses), excluded from core earnings, before tax
1.1
(0.6)
Less: Loss on reinsurance transactions, before tax
—
(3.8)
Less: Pension settlement, before tax
(4.9)
—
Less: Integration and transaction costs associated with an acquired business
(0.1)
—
Less: Income tax (expense) benefit on items not included in core earnings
(4.4)
2.7
Less: (Loss) income from discontinued operations, after-tax
(18.9)
1.6
Less: Impact of AOCI, excluded from Core ROE
(0.1)
0.1
ROE - Core earnings
6.7%
5.2%

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 "Fourth Quarter 2017 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

20


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 Dec. 31, 2017 and 2016, is set forth in the Investor Financial Supplement for quarter ended Dec. 31, 2017, which is available on The Hartford's website, https://ir.thehartford.com.
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 2016 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 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

21


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 sourcing partners, derivative counterparties and other third parties; the potential for losses due to our reinsurers' unwillingness or inability to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect us against losses; 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 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; 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; 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;
Risks Related to the Company's Life and Annuity Business in Discontinued Operations: the risks related to political, economic and global economic conditions including interest rate, equity and credit spread risks; the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy; risks related to negative rating actions or downgrades in the financial strength and credit ratings of Hartford Life Insurance Company or Hartford Life and Annuity Insurance Company or negative rating actions or downgrades relating to our investments; the volatility in our statutory and United States ("U.S.") Generally Accepted Accounting Principles ("GAAP")  earnings and potential material changes to our results resulting from our risk management program to emphasize protection of economic value; the potential for losses due to our reinsurers’ unwillingness or inability to meet their obligations under reinsurance contracts; the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the fair value estimates for investments and the evaluation of other-than-temporary impairments on available for sale securities; the potential for further acceleration of deferred policy acquisition cost amortization and an increase in reserve for certain guaranteed benefits in our variable annuities; changes in federal or state tax laws that would impact the tax-favored status of life and annuity contracts; and changes in

22


accounting and financial reporting of the liability for future policy benefits, including how the life and annuity businesses account for deferred acquisition costs, market risk benefits on variable annuity contracts and the discounting of life contingent fixed annuities.
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.

23
Exhibit


INVESTOR FINANCIAL SUPPLEMENT
December 31, 2017


ifshartfordlogoa02a02a01a02.jpg

On December 3, 2017, The Hartford entered into an agreement to sell its life and annuity run-off business (formerly known as Talcott Resolution). As a result, the assets and liabilities of this business have been accounted for as held for sale and operating results of the life and annuity business are now included in discontinued operations for all periods presented. The change has the effect of reducing previously reported core earnings.





THE HARTFORD FINANCIAL SERVICES GROUP, INC.
        
 
 
 
 
 
 
 
 
 
 
 
As of February 2, 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+
  
Baa2
Contacts:
 
Commercial paper
  
AMB-1
  
A-2
  
P-2
Sabra Purtill
 
Junior subordinated debentures
 
bbb
 
BBB-
 
Baa3
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 under review for upgrade at 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
 
P&C Reserves
8
 
 
 
PROPERTY & CASUALTY
Property & Casualty Income Statements
9
 
Property & Casualty Underwriting Ratios and Results
10
 
Commercial Lines Income Statements
11
 
Commercial Lines Underwriting Ratios
13
 
Commercial Lines Supplemental Data
14
 
Personal Lines Income Statements
15
 
Personal Lines Underwriting Ratios
17
 
Personal Lines Supplemental Data
18
 
P&C Other Operations Income Statements
21
 
 
 
GROUP BENEFITS
Income Statements
22
 
Supplemental Data
23
 
 
 
MUTUAL FUNDS
Income Statements
24
 
Asset Value Rollforward - Assets Under Management By Asset Class
25
 
 
 
 
 
 
CORPORATE
Income Statements
26
 
 
 
INVESTMENTS
Investment Earnings Before Tax - Consolidated
27
 
Investment Earnings Before Tax - Property & Casualty
28
 
Investment Earnings Before Tax - Group Benefits
29
 
Net Investment Income
30
 
Components of Net Realized Capital Gains (Losses)
31
 
Composition of Invested Assets
32
 
Invested Asset Exposures
33
 
 
 
APPENDIX
Basis of Presentation and Definitions
34
 
Discussion of Non-GAAP and Other Financial Measures
35




THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
HIGHLIGHTS
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
$
(3,703
)
$
234

$
(40
)
$
378

$
(81
)
$
438

$
216

$
323

 
$
(3,131
)
$
896

Core earnings *
$
293

$
130

$
303

$
288

$
294

$
300

$
20

$
298

 
$
1,014

$
912

Total revenues
$
4,539

$
4,144

$
4,168

$
4,123

$
3,978

$
4,114

$
4,085

$
3,930

 
$
16,974

$
16,107

Total assets
$225,260
$224,211
$225,863
$225,388
$224,576
$229,142
$228,328
$228,205
 
 
 
PER SHARE AND SHARES DATA
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
$
(10.37
)
$
0.65

$
(0.11
)
$
1.02

$
(0.22
)
$
1.14

$
0.55

$
0.81

 
$
(8.61
)
$
2.31

Core earnings *
$
0.82

$
0.36

$
0.83

$
0.78

$
0.78

$
0.78

$
0.05

$
0.75

 
$
2.79

$
2.35

Diluted earnings per common share
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) [3]
$
(10.37
)
$
0.64

$
(0.11
)
$
1.00

$
(0.22
)
$
1.12

$
0.54

$
0.79

 
$
(8.61
)
$
2.27

Core earnings [3] *
$
0.81

$
0.35

$
0.81

$
0.76

$
0.77

$
0.77

$
0.05

$
0.73

 
$
2.74

$
2.31

Weighted average common shares outstanding (basic)
357.0

360.2

366.0

371.4

376.6

383.8

391.8

398.5

 
363.7

387.7

Dilutive effect of stock compensation
4.8

4.5

3.8

4.2

3.7

3.2

3.2

4.2

 
4.3

3.5

Dilutive effect of warrants
2.1

2.3

2.5

3.0

3.5

3.5

3.6

3.6

 
2.5

3.6

Weighted average common shares outstanding and dilutive potential common shares (diluted)
363.9

367.0

372.3

378.6

383.8

390.5

398.6

406.3

 
370.5

394.8

Common shares outstanding
356.8

357.5

362.8

369.2

373.9

379.6

387.9

395.6

 
 
 
Book value per common share
$
37.82

$
48.20

$
47.65

$
46.07

$
45.21

$
49.15

$
47.84

$
45.78

 
 
 
Per common share impact of accumulated other comprehensive income [1]
$
1.86

$
1.63

$
1.36

$
(0.56
)
$
(0.90
)
$
2.60

$
2.32

$
0.64

 
 
 
Book value per common share (excluding AOCI) *
$
35.96

$
46.57

$
46.29

$
46.63

$
46.11

$
46.55

$
45.52

$
45.14

 
 
 
Book value per diluted share
$
37.11

$
47.33

$
46.84

$
45.25

$
44.35

$
48.30

$
47.02

$
44.90

 
 
 
Per diluted share impact of AOCI
$
1.82

$
1.61

$
1.34

$
(0.55
)
$
(0.89
)
$
2.56

$
2.28

$
0.63

 
 
 
Book value per diluted share (excluding AOCI) *
$
35.29

$
45.72

$
45.50

$
45.80

$
45.24

$
45.74

$
44.74

$
44.27

 
 
 
Common shares outstanding and dilutive potential common shares
363.6

364.1

369.1

375.9

381.1

386.3

394.7

403.4

 
 
 
RETURN ON EQUITY ("ROE") [2]
 
 
 
 
 
 
 
 
 
 
 
ROE - Net income (net income last 12 months to stockholders' equity including AOCI)
(20.6
)%
2.7
%
3.9
%
5.4
%
5.2
%
7.6
%
7.3
%
8.3
%
 
 
 
ROE - Core earnings (core earnings last 12 months to stockholders' equity excluding AOCI) *
6.7
 %
5.9
%
6.9
%
5.1
%
5.2
%
5.4
%
5.1
%
6.2
%
 
 
 
[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 ROE - Net income to ROE - Core earnings, see Appendix, page 35.
[3]
For the three months ended December 31, 2017, weighted average shares outstanding used in calculating net loss per share excludes the effect of dilutive securities of 6.8 million shares. The calculation of core earnings per share includes the effect of dilutive securities in all periods presented. In periods where a net loss before discontinued operations or a core loss is recognized, inclusion of incremental dilution is antidilutive.
    
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).

1


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Earned premiums
$
3,801

$
3,447

$
3,455

$
3,438

$
3,456

$
3,449

$
3,416

$
3,376

 
$
14,141

$
13,697

Fee income
265

243

240

232

224

220

209

204

 
980

857

Net investment income
394

404

395

410

412

407

387

371

 
1,603

1,577

Realized capital gains (losses):
 
 
 
 
 
 
 
 
 
 
 
Total other-than-temporary impairment (“OTTI”) losses
(4
)
(4
)
(4
)
(3
)
(9
)
(3
)
(6
)
(17
)
 
(15
)
(35
)
OTTI losses recognized in other comprehensive income
—

3

2

2

2

1

1

4

 
7

8

Net OTTI losses recognized in earnings
(4
)
(1
)
(2
)
(1
)
(7
)
(2
)
(5
)
(13
)
 
(8
)
(27
)
Other net realized capital gains (losses)
64

27

57

25

(126
)
16

55

(28
)
 
173

(83
)
Total net realized capital gains (losses)
60

26

55

24

(133
)
14

50

(41
)
 
165

(110
)
Other revenues
19

24

23

19

19

24

23

20

 
85

86

Total revenues
4,539

4,144

4,168

4,123

3,978

4,114

4,085

3,930

 
16,974

16,107

Benefits, losses and loss adjustment expenses
2,692

2,638

2,420

2,424

2,442

2,436

2,796

2,287

 
10,174

9,961

Amortization of deferred acquisition costs ("DAC")
342

341

345

344

344

345

343

345

 
1,372

1,377

Insurance operating costs and other expenses
994

904

1,604

873

838

825

838

840

 
4,375

3,341

Loss on reinsurance transaction
—

—

—

—

650

—

—

—

 
—

650

Interest expense
78

79

79

80

79

83

82

83

 
316

327

Amortization of other intangible assets
11

1

1

1

1

1

1

1

 
14

4

Total benefits, losses and expenses
4,117

3,963

4,449

3,722

4,354

3,690

4,060

3,556

 
16,251

15,660

Income (loss) before income taxes
422

181

(281
)
401

(376
)
424

25

374

 
723

447

Income tax expense (benefit) [3]
980

36

(129
)
98

(241
)
73

(74
)
76

 
985

(166
)
(Loss) Income from continuing operations, after-tax
(558
)
145

(152
)
303

(135
)
351

99

298

 
(262
)
613

(Loss) income from discontinued operations, after-tax
(3,145
)
89

112

75

54

87

117

25

 
(2,869
)
283

Net (loss) income
(3,703
)
234

(40
)
378

(81
)
438

216

323

 
(3,131
)
896

Less: Net realized capital gains (losses), excluded from core earnings, before tax
59

25

53

23

(134
)
15

48

(41
)
 
160

(112
)
Less: Loss on reinsurance transaction, before tax
—

—

—

—

(650
)
—

—

—

 
—

(650
)
Less: Pension settlement, before tax
—

—

(750
)
—

—

—

—

—


(750
)
—

Less: Integration and transaction costs associated with acquired business, before tax [1]
(17
)
—

—

—

—

—

—

—

 
(17
)
—

Less: Income tax benefit (expense) [2] [3]
(893
)
(10
)
242

(8
)
355

36

31

41

 
(669
)
463

Less: (Loss) income from discontinued operations, after-tax [4]
(3,145
)
89

112

75

54

87

117

25

 
(2,869
)
283

Core earnings
$
293

$
130

$
303

$
288

$
294

$
300

$
20

$
298

 
$
1,014

$
912

[1]
Integration and transaction costs relate to the Company's acquisition of Aetna's U.S. group life and disability business.
[2]
Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings.
[3]
The three months and year ended December 31, 2017 included income tax expense of $877 resulting primarily from reducing net deferred tax assets due to a reduction in corporate Federal income tax rates from 35% to 21%. The year ended December 31, 2016 included a $65 tax benefit recognized related to the sale of the Company's U.K. property and casualty run-off subsidiaries, federal income tax benefits of $78 from the reduction of the deferred tax valuation allowance on capital loss carryovers, a benefit of $113 associated with investments in solar energy partnerships, and income tax expense of $47 associated with IRS audit adjustments.
[4]
The three months and year ended December 31, 2017, included an estimated loss on sale of $3.3 billion related to the pending sale of the Company's life and annuity run-off business.

2


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Net income (loss):


 
 
 
 
 
 
 
 
 
 
Commercial Lines
$
286

$
90

$
258

$
231

$
264

$
268

$
237

$
225

 
$
865

$
994

Personal Lines
(74
)
8

24

33

(15
)
33

(50
)
23

 
(9
)
(9
)
P&C Other Operations
7

18

20

24

(423
)
31

(154
)
17

 
69

(529
)
Property & Casualty ("P&C")
219

116

302

288

(174
)
332

33

265

 
925

456

Group Benefits
109

71

69

45

63

62

55

50

 
294

230

Mutual Funds
33

26

24

23

17

21

20

20

 
106

78

Sub-total
361

213

395

356

(94
)
415

108

335

 
1,325

764

Corporate
(4,064
)
21

(435
)
22

13

23

108

(12
)
 
(4,456
)
132

Net (loss) income
$
(3,703
)
$
234

$
(40
)
$
378

$
(81
)
$
438

$
216

$
323

 
$
(3,131
)
$
896

 
 
 
 
 
 
 
 
 
 
 
 
Core earnings (losses):
 
 
 
 
 
 
 
 
 
 
 
Commercial Lines
$
282

$
81

$
238

$
224

$
274

$
243

$
221

$
246

 
$
825

$
984

Personal Lines
(46
)
7

20

32

(14
)
29

(52
)
26

 
13

(11
)
P&C Other Operations
4

18

18

21

15

19

(154
)
19

 
61

(101
)
P&C
240

106

276

277

275

291

15

291

 
899

872

Group Benefits
67

66

61

40

59

51

46

48

 
234

204

Mutual Funds
37

26

24

23

17

21

20

20

 
110

78

Sub-total
344

198

361

340

351

363

81

359

 
1,243

1,154

Corporate
(51
)
(68
)
(58
)
(52
)
(57
)
(63
)
(61
)
(61
)
 
(229
)
(242
)
Core earnings
$
293

$
130

$
303

$
288

$
294

$
300

$
20

$
298

 
$
1,014

$
912



3


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS

    
 
PROPERTY & CASUALTY
 
GROUP BENEFITS
 
MUTUAL
FUNDS
 
CORPORATE [1]
 
CONSOLIDATED
 
Dec 31 2017
Dec 31 2016
 
Dec 31 2017
Dec 31 2016
 
Dec 31 2017
Dec 31 2016
 
Dec 31 2017
Dec 31 2016
 
Dec 31 2017
Dec 31 2016
Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities, available-for-sale, at fair value
$
25,571

$
24,386

 
$
10,489

$
6,731

 
$
49

$
21

 
$
855

$
1,044

 
$
36,964

$
32,182

Fixed maturities, at fair value using the fair value option
30

102

 
11

109

 
—

—

 
—

—

 
41

211

Equity securities, available-for-sale, at fair value
749

794

 
79

10

 
27

—

 
157

141

 
1,012

945

Mortgage loans
2,315

2,015

 
860

871

 
—

—

 
—

—

 
3,175

2,886

Limited partnerships and other alternative investments
1,375

1,337

 
213

190

 
—

—

 
—

—

 
1,588

1,527

Other investments
85

103

 
11

5

 
—

—

 
—

3

 
96

111

Short-term investments
1,268

1,162

 
398

226

 
146

162

 
458

345

 
2,270

1,895

Total investments
31,393

29,899

 
12,061

8,142

 
222

183

 
1,470

1,533

 
45,146

39,757

Cash
156

298

 
12

25

 
8

5

 
4

—

 
180

328

Premiums receivable and agents’ balances
3,511

3,388

 
399

342

 
—

—

 
—

—

 
3,910

3,730

Reinsurance recoverables [3] [4]
3,476

3,085

 
236

208

 
—

—

 
349

366

 
4,061

3,659

DAC
594

591

 
47

42

 
9

12

 
—

—

 
650

645

Deferred income taxes [2]
51

517

 
(103
)
(124
)
 
6

6

 
1,210

2,600

 
1,164

2,999

Goodwill
157

157

 
723

—

 
180

180

 
230

230

 
1,290

567

Property and equipment, net
837

859

 
118

54

 
—

—

 
79

78

 
1,034

991

Other intangible assets
28

33

 
620

—

 
11

11

 
—

—

 
659

44

Other assets
897

971

 
365

136

 
111

83

 
857

1,646

 
2,230

2,836

Assets held for sale
—

870

 
—

—

 
—

—

 
164,936

168,150

 
164,936

169,020

Total assets
$
41,100

$
40,668

 
$
14,478

$
8,825

 
$
547

$
480

 
$
169,135

$
174,603

 
$
225,260

$
224,576

Unpaid losses and loss adjustment expenses [3]
$
23,775

$
22,545

 
$
8,512

$
5,772

 
$
—

$
—

 
$
—

$
—

 
$
32,287

$
28,317

Reserves for future policy benefits [4]
—

—

 
441

82

 
—

—

 
272

240

 
713

322

Other policyholder funds and benefits payable [4]
—

—

 
492

265

 
—

—

 
324

337

 
816

602

Unearned premiums
5,282

5,350

 
40

42

 
—

—

 
—

—

 
5,322

5,392

Debt
—

—

 
—

—

 
—

—

 
4,998

4,910

 
4,998

4,910

Other liabilities
2,061

1,723

 
774

278

 
197

165

 
2,156

2,430

 
5,188

4,596

Liabilities held for sale
—

611

 
—

—

 
—

—

 
162,442

162,923

 
162,442

163,534

Total liabilities
$
31,118

$
30,229

 
$
10,259

$
6,439

 
$
197

$
165

 
$
170,192

$
170,840

 
$
211,766

$
207,673

Common stockholders' equity, excluding AOCI
9,267

9,977

 
3,998

2,227

 
350

315

 
(784
)
4,721

 
12,831

17,240

AOCI, after-tax
715

462

 
221

159

 
—

—

 
(273
)
(958
)
 
663

(337
)
Total stockholders' equity
9,982

10,439

 
4,219

2,386

 
350

315

 
(1,057
)
3,763

 
13,494

16,903

Total liabilities and equity
$
41,100

$
40,668

 
$
14,478

$
8,825

 
$
547

$
480

 
$
169,135

$
174,603

 
$
225,260

$
224,576

[1]
Includes discontinued operations from the Company's life and annuity run-off business accounted for as held for sale.
[2]
The decrease in net deferred tax assets from year end 2016 to year end 2017 is mainly due to an $877 reduction of net deferred tax assets primarily due to the effect of a lower corporate Federal income tax rate under tax reform and the reclassification of $790 of alternative minimum tax ("AMT") credits as an income tax receivable, reported in other assets, given that AMT credits are refundable by no later than 2022.
[3]
Property & Casualty reflects the addition of $688 and $712 of gross reserves and reinsurance recoverables for 2017 and 2016, respectively, for structured settlements reserves and recoverables due from the Company's life and annuity run-off business now classified as held for sale. These amounts were previously eliminated in consolidation.
[4]
Corporate includes reserves and reinsurance recoverables for life and annuity business retained by the Company.


4


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
DEBT
 
 
 
 
 
 
 
 
Short-term debt
$
320

$
320

$
320

$
320

$
416

$
690

$
690

$
690

Senior notes
3,096

3,093

3,092

3,091

3,410

3,409

3,408

3,407

Junior subordinated debentures
1,582

1,582

1,582

1,583

1,083

1,083

1,083

1,083

Total debt
$
4,998

$
4,995

$
4,994

$
4,994

$
4,909

$
5,182

$
5,181

$
5,180

STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
Common stockholders' equity, excluding AOCI
$
12,831

$
16,648

$
16,794

$
17,216

$
17,240

$
17,671

$
17,659

$
17,858

AOCI
663

585

494

(207
)
(337
)
987

900

254

Total stockholders’ equity
$
13,494

$
17,233

$
17,288

$
17,009

$
16,903

$
18,658

$
18,559

$
18,112

CAPITALIZATION
 
 
 
 
 
 
 
 
Total capitalization, including AOCI, after-tax
$
18,492

$
22,228

$
22,282

$
22,003

$
21,812

$
23,840

$
23,740

$
23,292

Total capitalization, excluding AOCI, after-tax
$
17,829

$
21,643

$
21,788

$
22,210

$
22,149

$
22,853

$
22,840

$
23,038

DEBT TO CAPITALIZATION RATIOS
 
 
 
 
 
 
 
 
Total debt to capitalization, including AOCI
27.0
%
22.5
%
22.4
%
22.7
%
22.5
%
21.7
%
21.8
%
22.2
%
Total debt to capitalization, excluding AOCI
28.0
%
23.1
%
22.9
%
22.5
%
22.2
%
22.7
%
22.7
%
22.5
%
Total rating agency adjusted debt to capitalization [1] [2]
28.8
%
24.3
%
25.2
%
25.0
%
25.3
%
25.4
%
25.5
%
25.9
%
FIXED CHARGE COVERAGE RATIOS
 
 
 
 
 
 
 
 
Total earnings to total fixed charges [3]
3.1:1

2.2:1

1.7:1

5.7:1

2.3:1

4.1:1

3.3:1

5.2:1

[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 total adjustments of $1.0 billion, $1.0 billion, $1.4 billion, $1.2 billion, $1.2 billion, $1.5 billion, $1.5 billion and $1.5 billion, as of December 31, 2017, September 31, 2017, June 30, 2017, March 31, 2017, December 31, 2016, September 30, 2016, June 30, 2016 and March 31, 2016, respectively.
[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.

5


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY CAPITAL TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
December 31, 2017


 
P&C
GROUP BENEFITS
U.S. statutory net income (loss) [1] [2]
$
950

$
(1,066
)
U.S. statutory capital [3]
$
7,396

$
2,029

U.S. GAAP adjustments:
 
 
DAC
594

47

Non-admitted deferred tax assets [4]
112

159

Deferred taxes [5]
(661
)
(462
)
Goodwill
109

723

Other Intangible Assets
29

620

Non-admitted assets other than deferred taxes
630

160

Asset valuation and interest maintenance reserve
—

288

Benefit reserves
(47
)
71

Unrealized gains on investments
1,005

339

Other, net
815

245

U.S. GAAP stockholders’ equity
$
9,982

$
4,219

[1]
Statutory net income is for the year ended December 31, 2017.
[2]
Group Benefits statutory loss includes the effect of a ceding commission paid to acquire Aetna's U.S. group life and disability business.
[3]
For reporting purposes, statutory capital and surplus is referred to collectively as "statutory capital".
[4]
Represents the limitations on the recognition of deferred tax assets under U.S. statutory accounting principles ("U.S. STAT").
[5]
Represents the tax timing differences between U.S. GAAP and U.S. STAT.
 

6


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
 
 
AS OF
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
Fixed maturities net unrealized gain
$
2,121

$
1,774

$
1,696

$
1,355

$
1,226

$
2,418

$
2,406

$
1,780

Equities net unrealized gain
94

66

59

58

50

41

31

21

OTTI losses recognized in AOCI
(3
)
(4
)
(3
)
(4
)
(3
)
(5
)
(10
)
(15
)
Net gain on cash flow hedging instruments
18

43

57

58

76

172

200

184

Total net unrealized gain
$
2,230

$
1,879

$
1,809

$
1,467

$
1,349

$
2,626

$
2,627

$
1,970

Foreign currency translation adjustments
34

27

13

8

6

10

(68
)
(49
)
Pension and other postretirement adjustment
(1,601
)
(1,321
)
(1,328
)
(1,682
)
(1,692
)
(1,649
)
(1,659
)
(1,667
)
Total AOCI [1]
$
663

$
585

$
494

$
(207
)
$
(337
)
$
987

$
900

$
254

[1]
AOCI includes AOCI balances related to the life and annuity run-off business held for sale which totaled $1.0 billion as of December 31, 2017. At closing of the sale, the Company's shareholders’ equity will be reduced by the amount of AOCI of the life and annuity run-off business.

7


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES RESERVE ROLLFORWARD

 
THREE MONTHS ENDED DEC 31, 2017
 
Commercial
Lines
Personal
Lines
P&C Other Operations
Total P&C
Beginning liabilities for unpaid losses and loss adjustment expenses, gross [1]
$
18,102

$
2,175

$
2,272

$
22,549

Reinsurance and other recoverables [1]
2,404

24

389

2,817

Beginning liabilities for unpaid losses and loss adjustment expenses, net
15,698

2,151

1,883

19,732

Provision for unpaid losses and loss adjustment expenses
 
 
 
 
Current accident year before catastrophes
990

625

—

1,615

Current accident year catastrophes
(21
)
200

—

179

Prior accident year development
(34
)
(25
)
17

(42
)
Total provision for unpaid losses and loss adjustment expenses
935

800

17

1,752

Less: payments
887

728

51

1,666

Ending liabilities for unpaid losses and loss adjustment expenses, net
15,746

2,223

1,849

19,818

Reinsurance and other recoverables [1] [2]
3,147

71

739

3,957

Ending liabilities for unpaid losses and loss adjustment expenses, gross [1]
$
18,893

$
2,294

$
2,588

$
23,775

 
YEAR ENDED DEC 31, 2017
 
Commercial
Lines
Personal
Lines
P&C Other Operations
Total P&C
Beginning liabilities for unpaid losses and loss adjustment expenses, gross [1]
$
17,950

$
2,094

$
2,501

$
22,545

Reinsurance and other recoverables [1]
3,037

25

426

3,488

Beginning liabilities for unpaid losses and loss adjustment expenses, net [3]
14,913

2,069

2,075

19,057

Provision for unpaid losses and loss adjustment expenses
 
 
 
 
Current accident year before catastrophes
3,961

2,584

—

6,545

Current accident year catastrophes
383

453

—

836

Prior accident year development
(22
)
(37
)
18

(41
)
Total provision for unpaid losses and loss adjustment expenses
4,322

3,000

18

7,340

Less: payments
3,489

2,846

244

6,579

Ending liabilities for unpaid losses and loss adjustment expenses, net [3]
15,746

2,223

1,849

19,818

Reinsurance and other recoverables [1] [2]
3,147

71

739

3,957

Ending liabilities for unpaid losses and loss adjustment expenses, gross [1]
$
18,893

$
2,294

$
2,588

$
23,775

[1]
Commercial Lines reflects the addition of $712 to the beginning gross reserves and reinsurance recoverables and $688 to the ending gross reserves and reinsurance recoverables for structured settlements reserves and recoverables due from the Company's life and annuity run-off business now classified as held for sale. These amounts were previously eliminated in consolidation.
[2]
Includes $285 of reinsurance recoverable from National Indemnity Company ("NICO"), a subsidiary of Berkshire Hathaway Inc., for asbestos and environmental reserve development incurred by the Company in the three months and year ended December 31, 2017 that was ceded to NICO.
[3]
As of December 31, 2017 and 2016, net reserves for unpaid loss and loss adjustment expenses, excluding asbestos and environmental reserves, were approximately 4.7% and 4.2%, respectively, above the actuarial indication.



8


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Written premiums
$
2,550

$
2,626

$
2,631

$
2,710

$
2,555

$
2,673

$
2,661

$
2,679

 
$
10,517

$
10,568

Change in unearned premium reserve
(89
)
(18
)
(19
)
88

(113
)
16

35

81

 
(38
)
19

Earned premiums
2,639

2,644

2,650

2,622

2,668

2,657

2,626

2,598

 
10,555

10,549

Fee income
20

20

20

21

20

20

19

19

 
81

78

Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
 
 
Current accident year before catastrophes
1,615

1,672

1,646

1,612

1,714

1,688

1,627

1,545

 
6,545

6,574

Current accident year catastrophes [1] [2]
179

352

155

150

61

80

184

91

 
836

416

Prior accident year development
(42
)
(1
)
(10
)
12

48

25

351

33

 
(41
)
457

Total losses and loss adjustment expenses
1,752

2,023

1,791

1,774

1,823

1,793

2,162

1,669

 
7,340

7,447

Amortization of DAC
328

329

331

330

330

329

331

331

 
1,318

1,321

Underwriting expenses
512

497

468

466

456

457

464

475

 
1,943

1,852

Dividends to policyholders [3]
24

4

3

4

3

4

4

4

 
35

15

Underwriting gain (loss) *
43

(189
)
77

69

76

94

(316
)
138

 
—

(8
)
Net investment income
281

303

302

310

310

305

292

272

 
1,196

1,179

Net realized capital gains (losses)
57

16

42

17

(46
)
(3
)
35

(41
)
 
132

(55
)
Loss on reinsurance transaction
—

—

—

—

650

—

—

—

 
—

650

Net servicing and other income
6

9

4

5

6

9

5

7

 
24

27

Income (loss) before income taxes
387

139

425

401

(304
)
405

16

376

 
1,352

493

Income tax expense (benefit) [4]
168

23

123

113

(130
)
73

(17
)
111

 
427

37

Net income (loss)
219

116

302

288

(174
)
332

33

265

 
925

456

Less: Net realized capital gains (losses), excluded from core earnings, before tax
56

16

41

17

(45
)
(3
)
35

(40
)
 
130

(53
)
Less: Loss on reinsurance transaction, before tax
—

—

—

—

(650
)
—

—

—

 
—

(650
)
Less: Income tax benefit (expense) [4] [6]
(77
)
(6
)
(15
)
(6
)
246

44

(17
)
14

 
(104
)
287

Core earnings
$
240

$
106

$
276

$
277

$
275

$
291

$
15

$
291

 
$
899

$
872

ROE
 
 
 
 
 
 
 
 
 
 
 
Net income (net income last 12 months to stockholders' equity including AOCI) [5]
10.7
 %
5.0
 %
7.5
 %
4.5
 %
4.3
 %
10.4
 %
9.3
 %
11.1
 %
 
 
 
Less: Net realized capital gains (losses), excluded from core earnings, before tax
1.7
 %
0.3
 %
0.1
 %
—
 %
(0.6
)%
—
 %
(0.2
)%
(0.6
)%
 
 
 
Less: Loss on reinsurance transaction, before tax

—
 %
(7.5
)%
(7.5
)%
(7.7
)%
(7.9
)%
—
 %
—
 %
—
 %
 
 
 
Less: Income tax benefit (expense) [4] [6]
(1.4
)%
2.5
 %
3.1
 %
3.2
 %
3.5
 %
0.5
 %
—
 %
0.2
 %
 
 
 
Less: Income from discontinued operations, after-tax
—
 %
—
 %
—
 %
—
 %
—
 %
—
 %
0.1
 %
0.1
 %
 
 
 
Less: Impact of AOCI, excluded from Core ROE
(0.7
)%
(1.0
)%
(1.2
)%
(0.6
)%
(0.5
)%
(1.1
)%
(0.9
)%
(1.2
)%
 
 
 
Core earnings (core earnings last 12 months to stockholders' equity excluding AOCI) [5]
11.1
 %
10.7
 %
13.0
 %
9.6
 %
9.8
 %
11.0
 %
10.3
 %
12.6
 %
 
 
 
[1] The three months ended September 30, 2017, includes catastrophe losses from Hurricane Harvey and Hurricane Irma of $175 and $157, respectively.
[2] Catastrophe losses for the three months ended December 31, 2017 included losses from California wildfires totaling $304 and an estimated reinsurance recoverable of $90 on the Company's property catastrophe aggregate treaty. Catastrophe loss estimates for hurricanes Harvey and Irma were reduced by a total of $40 in the three month period ended December 31, 2017.
[3] The three months ended December 31, 2017 included a $21 increase in policyholder dividends given the emergence of favorable workers' compensation loss experience that has increased the profitability of certain customer accounts.
[4] The three months and year ended December 31, 2017 includes $58 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%.
[5] ROE - Net income and ROE - Core earnings 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 35.
[6] 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).

9


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNDERWRITING RATIOS AND RESULTS
 
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
UNDERWRITING GAIN (LOSS)
$
43

$
(189
)
$
77

$
69

$
76

$
94

$
(316
)
$
138

 
$
—

$
(8
)
UNDERWRITING RATIOS
 
 
 
 
 
 
 
 
 
 
 
Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
 
 
Current accident year before catastrophes
61.2

63.2

62.1

61.5

64.2

63.5

62.0

59.5

 
62.0

62.3

Current accident year catastrophes
6.8

13.3

5.8

5.7

2.3

3.0

7.0

3.5

 
7.9

3.9

Prior accident year development [1]
(1.6
)
—

(0.4
)
0.5

1.8

0.9

13.4

1.3

 
(0.4
)
4.3

Total losses and loss adjustment expenses
66.4

76.5

67.6

67.7

68.3

67.5

82.3

64.2

 
69.5

70.6

Expenses
31.1

30.5

29.4

29.6

28.7

28.8

29.6

30.3

 
30.1

29.3

Policyholder dividends
0.9

0.2

0.1

0.2

0.1

0.2

0.2

0.2

 
0.3

0.1

Combined ratio
98.4

107.1

97.1

97.4

97.2

96.5

112.0

94.7

 
100.0

100.1

Current accident year catastrophes and prior accident year development
5.2

13.3

5.4

6.2

4.1

3.9

20.4

4.8

 
7.5

8.2

Underlying combined ratio *
93.2

93.9

91.6

91.2

93.1

92.5

91.7

89.9

 
92.5

91.8

[1]
The following table summarizes unfavorable (favorable) prior accident year development.
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Auto liability - Commercial Lines
$
(3
)
$
—

$
—

$
20

$
38

$
18

$
(8
)
$
9

 
$
17

$
57

Auto liability - Personal Lines
—

—

—

—

20

—

75

65

 
—

160

Homeowners
(14
)
—

—

—

(6
)
1

1

(6
)
 
(14
)
(10
)
Professional and general liability
2

—

—

10

(4
)
(1
)
34

(1
)
 
12

28

Package business
(3
)
(22
)
—

—

15

(2
)
7

45

 
(25
)
65

Bond
22

20

—

(10
)
(2
)
—

—

(6
)
 
32

(8
)
Net asbestos reserves
—

—

—

—

—

—

197

—

 
—

197

Net environmental reserves
—

—

—

—

—

—

71

—

 
—

71

Workers’ compensation
(50
)
(9
)
—

(20
)
(32
)
(4
)
(4
)
(79
)
 
(79
)
(119
)
Workers' compensation discount accretion
7

5

8

8

7

7

7

7

 
28

28

Catastrophes
(4
)
1

(10
)
(3
)
—

(2
)
2

(7
)
 
(16
)
(7
)
Uncollectible reinsurance
(15
)
—

—

—

—

—

(30
)
—

 
(15
)
(30
)
Other reserve re-estimates, net
16

4

(8
)
7

12

8

(1
)
6

 
19

25

Total prior accident year development
$
(42
)
$
(1
)
$
(10
)
$
12

$
48

$
25

$
351

$
33

 
$
(41
)
$
457

* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).


10


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS

 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Written premiums
$
1,727

$
1,702

$
1,706

$
1,821

$
1,664

$
1,673

$
1,669

$
1,726

 
$
6,956

$
6,732

Change in unearned premium reserve
(7
)
(21
)
(14
)
133

(37
)
(4
)
19

103

 
91

81

Earned premiums
1,734

1,723

1,720

1,688

1,701

1,677

1,650

1,623

 
6,865

6,651

Fee income
9

9

9

10

10

10

9

10

 
37

39

Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
 
 
Current accident year before catastrophes
990

1,009

994

968

946

969

938

913

 
3,961

3,766

Current accident year catastrophes [5]
(21
)
270

63

71

33

43

80

44

 
383

200

Prior accident year development [1]
(34
)
(3
)
—

15

20

22

6

(20
)
 
(22
)
28

Total losses and loss adjustment expenses
935

1,276

1,057

1,054

999

1,034

1,024

937

 
4,322

3,994

Amortization of DAC
255

253

252

249

246

243

242

242

 
1,009

973

Underwriting expenses
353

348

324

323

315

303

307

305

 
1,348

1,230

Dividends to policyholders [2]
24

4

3

4

3

4

4

4

 
35

15

Underwriting gain (loss)
176

(149
)
93

68

148

103

82

145

 
188

478

Net servicing income (loss)
(1
)
1

1

—

—

2

—

—

 
1

2

Net investment income
225

241

240

243

243

239

226

209

 
949

917

Net realized capital gains (losses)
47

13

32

11

(18
)
39

25

(33
)
 
103

13

Other income (expenses)
1

(1
)
—

1

1

(3
)
—

1

 
1

(1
)
Income before income taxes
448

105

366

323

374

380

333

322

 
1,242

1,409

Income tax expense [3]
162

15

108

92

110

112

96

97

 
377

415

Net income
286

90

258

231

264

268

237

225

 
865

994

Less: Net realized capital gains (losses), excluded from core earnings, before tax
45

12

32

11

(17
)
39

25

(32
)
 
100

15

Less: Income tax (expense) benefit [3] [4]
(41
)
(3
)
(12
)
(4
)
7

(14
)
(9
)
11

 
(60
)
(5
)
Core earnings
$
282

$
81

$
238

$
224

$
274

$
243

$
221

$
246

 
$
825

$
984

[1]
For further information, see Commercial Lines Income Statements (continued), page 12.
[2]
The three months ended December 31, 2017 included a $21 increase in policyholder dividends given the emergence of favorable workers' compensation loss experience that has increased the profitability of certain customer accounts.
[3]
The three months and year ended December 31, 2017 includes $25 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]
Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings.
[5]
Current accident year catastrophe losses of ($21) in the three months ended December 31, 2017 were primarily due to reducing the estimate of incurred losses for Hurricane Irma.

11


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
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Auto liability
$
(3
)
$
—

$
—

$
20

$
38

$
18

$
(8
)
$
9

 
$
17

$
57

Professional liability
1

—

—

—

(2
)
(2
)
—

(33
)
 
1

(37
)
Package business
(3
)
(22
)
—

—

15

(2
)
7

45

 
(25
)
65

General liability
1

—

—

10

(2
)
1

34

32

 
11

65

Bond
22

20

—

(10
)
(2
)
—

—

(6
)
 
32

(8
)
Workers’ compensation
(50
)
(9
)
—

(20
)
(32
)
(4
)
(4
)
(79
)
 
(79
)
(119
)
Workers' compensation discount accretion
7

5

8

8

7

7

7

7

 
28

28

Catastrophes
1

1

(2
)
—

—

(3
)
1

(2
)
 
—

(4
)
Uncollectible reinsurance
(15
)
—

—

—

—

—

(30
)
—

 
(15
)
(30
)
Other reserve re-estimates, net
5

2

(6
)
7

(2
)
7

(1
)
7

 
8

11

Total prior accident year development
$
(34
)
$
(3
)
$
—

$
15

$
20

$
22

$
6

$
(20
)
 
$
(22
)
$
28




12


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
UNDERWRITING RATIOS 
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
UNDERWRITING GAIN (LOSS)
$
176

$
(149
)
$
93

$
68

$
148

$
103

$
82

$
145

 
$
188

$
478

UNDERWRITING RATIOS
 
 
 
 
 
 
 
 
 
 
 
Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
 
 
Current accident year before catastrophes
57.1

58.6

57.8

57.3

55.6

57.8

56.8

56.3

 
57.7

56.6

Current accident year catastrophes
(1.2
)
15.7

3.7

4.2

1.9

2.6

4.8

2.7

 
5.6

3.0

Prior accident year development
(2.0
)
(0.2
)
—

0.9

1.2

1.3

0.4

(1.2
)
 
(0.3
)
0.4

Total losses and loss adjustment expenses
53.9

74.1

61.5

62.4

58.7

61.7

62.1

57.7

 
63.0

60.1

Expenses
34.5

34.4

33.0

33.3

32.4

32.0

32.7

33.1

 
33.8

32.5

Policyholder dividends
1.4

0.2

0.2

0.2

0.2

0.2

0.2

0.2

 
0.5

0.2

Combined ratio
89.9

108.6

94.6

96.0

91.3

93.9

95.0

91.1

 
97.3

92.8

Current accident year catastrophes and prior accident year development
(3.2
)
15.5

3.7

5.1

3.1

3.9

5.2

1.5

 
5.3

3.4

Underlying combined ratio
93.0

93.2

90.9

90.9

88.2

90.0

89.8

89.6

 
92.0

89.4

 
 
 
 
 
 
 
 
 
 
 
 
COMBINED RATIOS BY LINE OF BUSINESS
 
 
 
 
 
 
 
 
 
 
 
SMALL COMMERCIAL
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
83.9

101.5

90.4

91.7

90.5

89.0

92.2

89.4

 
91.9

90.3

Current accident year catastrophes
(1.2
)
15.9

3.2

4.7

1.8

1.4

5.0

3.2

 
5.7

2.8

Prior accident year development
(2.7
)
(3.5
)
—

(0.3
)
2.8

0.9

0.3

(0.5
)
 
(1.6
)
0.9

Underlying combined ratio
87.8

89.2

87.2

87.3

86.0

86.8

86.9

86.7

 
87.8

86.6

MIDDLE MARKET
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
94.2

119.7

99.8

100.4

92.0

99.4

99.8

98.3

 
103.5

97.4

Current accident year catastrophes
(1.5
)
21.1

5.5

5.2

3.0

5.2

6.4

3.0

 
7.5

4.4

Prior accident year development
(3.2
)
1.5

(0.5
)
1.4

0.1

1.0

1.5

3.4

 
(0.2
)
1.5

Underlying combined ratio
98.9

97.0

94.9

93.8

88.9

93.1

91.9

92.0

 
96.2

91.5

SPECIALTY COMMERCIAL
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
100.5

99.4

97.6

101.3

88.8

94.0

92.8

76.4

 
99.7

88.0

Current accident year catastrophes
—

—

0.2

—

—

0.5

0.1

—

 
0.1

0.2

Prior accident year development
0.9

0.8

1.5

3.9

(6.0
)
(0.1
)
(2.7
)
(17.8
)
 
1.8

(6.7
)
Underlying combined ratio
99.6

98.6

95.9

97.5

94.8

93.7

95.4

94.3

 
97.8

94.5




13


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
SUPPLEMENTAL DATA

 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
WRITTEN PREMIUMS
 
 
 
 
 
 
 
 
 
 
 
Small Commercial
$
882

$
905

$
936

$
986

$
846

$
866

$
883

$
926

 
$
3,709

$
3,521

Middle Market
628

584

566

592

607

590

578

568

 
2,370

2,343

Specialty Commercial
206

201

192

232

200

207

197

222

 
831

826

National Accounts
87

84

71

99

81

89

79

101

 
341

350

Financial Products
61

59

58

61

62

62

59

60

 
239

243

Bond
51

51

52

53

50

51

48

44

 
207

193

Other Specialty
7

7

11

19

7

5

11

17

 
44

40

Other
11

12

12

11

11

10

11

10

 
46

42

Total
$
1,727

$
1,702

$
1,706

$
1,821

$
1,664

$
1,673

$
1,669

$
1,726

 
$
6,956

$
6,732

EARNED PREMIUMS
 
 
 
 
 
 
 
 
 
 
 
Small Commercial
$
923

$
919

$
914

$
890

$
894

$
880

$
854

$
839

 
$
3,646

$
3,467

Middle Market
594

585

587

583

590

586

584

574

 
2,349

2,334

Specialty Commercial
206

208

207

203

207

201

201

199

 
824

808

National Accounts
85

84

85

86

87

82

85

85

 
340

339

Financial Products
60

62

60

60

61

60

62

61

 
242

244

Bond
51

51

51

47

48

49

46

45

 
200

188

Other Specialty
10

11

11

10

11

10

8

8

 
42

37

Other
11

11

12

12

10

10

11

11

 
46

42

Total
$
1,734

$
1,723

$
1,720

$
1,688

$
1,701

$
1,677

$
1,650

$
1,623

 
$
6,865

$
6,651

 
 
 
 
 
 
 
 
 
 
 
 
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR)
 
 
 
 
 
 
 
 
 
 
 
New Business Premium
 
 
 
 
 
 
 
 
 
 
 
Small Commercial
$
155

$
140

$
147

$
154

$
145

$
146

$
139

$
146

 
$
596

$
576

Middle Market
$
137

$
112

$
107

$
128

$
133

$
99

$
124

$
103

 
$
484

$
459

Renewal Price Increases [1]
 
 
 
 
 
 
 
 
 
 
 
Standard Commercial Lines - Written
2.9
%
3.3
%
3.5
%
3.2
%
2.2
%
2.0
%
2.2
%
2.2
%
 
3.2
%
2.2
%
Standard Commercial Lines - Earned
3.3
%
3.1
%
2.7
%
2.4
%
2.3
%
2.2
%
2.4
%
2.5
%
 
2.9
%
2.3
%
Policy Count Retention [1]
 
 
 
 
 
 
 
 
 
 
 
Small Commercial [2]
83
%
83
%
83
%
85
%
85
%
85
%
84
%
84
%
 
84
%
84
%
Middle Market
79
%
76
%
75
%
80
%
76
%
76
%
75
%
74
%
 
78
%
75
%
Middle Market - normalized [2]
 



80
%
80
%
79
%
79
%
 
 
 
Policies in Force (in thousands)
 
 
 
 
 
 
 
 
 
 
 
Small Commercial
1,272

1,274

1,278

1,281

1,280

1,279

1,253

1,245

 
 
 
Middle Market
66

67

66

66

66

66

67

69

 
 
 
[1]
Excludes Maxum, Middle Market specialty programs and livestock lines of business.
[2]
Normalized 2016 retention rate for the effect of including certain low premium policies transferred from Middle Market to Small Commercial. The transfer did not have a significant impact on policy count retention in Small Commercial.

14


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Written premiums
$
823

$
924

$
925

$
889

$
892

$
1,000

$
992

$
953

 
$
3,561

$
3,837

Change in unearned premium reserve
(82
)
3

(5
)
(45
)
(75
)
20

16

(22
)
 
(129
)
(61
)
Earned premiums
905

921

930

934

967

980

976

975

 
3,690

3,898

Fee income
11

11

11

11

10

10

10

9

 
44

39

Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
 
 
Current accident year before catastrophes
625

663

652

644

768

719

689

632

 
2,584

2,808

Current accident year catastrophes [4]
200

82

92

79

28

37

104

47

 
453

216

Prior accident year development [1]
(25
)
2

(10
)
(4
)
20

3

76

52

 
(37
)
151

Total losses and loss adjustment expenses
800

747

734

719

816

759

869

731

 
3,000

3,175

Amortization of DAC
73

76

79

81

84

86

89

89

 
309

348

Underwriting expenses
156

146

141

138

142

147

151

163

 
581

603

Underwriting gain (loss)
(113
)
(37
)
(13
)
7

(65
)
(2
)
(123
)
1

 
(156
)
(189
)
Net servicing income
5

4

4

3

5

6

5

4

 
16

20

Net investment income
34

36

35

36

36

35

33

31

 
141

135

Net realized capital gains (losses)
6

2

5

2

(2
)
5

4

(5
)
 
15

2

Other income (expense)
—

3

(1
)
(1
)
(2
)
2

—

—

 
1

—

Income (loss) before income taxes
(68
)
8

30

47

(28
)
46

(81
)
31

 
17

(32
)
Income tax expense (benefit) [2]
6

—

6

14

(13
)
13

(31
)
8

 
26

(23
)
Net income (loss)
(74
)
8

24

33

(15
)
33

(50
)
23

 
(9
)
(9
)
Less: Net realized capital gains (losses), excluded from core earnings, before tax
7

2

5

2

(2
)
5

4

(5
)
 
16

2

Less: Income tax (expense) benefit [2] [3]
(35
)
(1
)
(1
)
(1
)
1

(1
)
(2
)
2

 
(38
)
—

Core earnings (losses)
$
(46
)
$
7

$
20

$
32

$
(14
)
$
29

$
(52
)
$
26

 
$
13

$
(11
)
[1] For further information, see Personal Lines Income Statements (continued), page 16.
[2] The three months and year ended December 31, 2017 includes $33 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%.
[3] Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings.
[4] Catastrophe losses for the three months ended December 31. 2017 included losses from California wildfires of $253 and an estimated reinsurance recoverable of $47 on the Company's property catastrophe aggregate treaty.


15


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
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Auto liability
$
—

$
—

$
—

$
—

$
20

$
—

$
75

$
65

 
$
—

$
160

Homeowners
(14
)
—

—

—

(6
)
1

1

(6
)
 
(14
)
(10
)
Catastrophes
(5
)
—

(8
)
(3
)
—

1

1

(5
)
 
(16
)
(3
)
Other reserve re-estimates, net
(6
)
2

(2
)
(1
)
6

1

(1
)
(2
)
 
(7
)
4

Total prior accident year development
$
(25
)
$
2

$
(10
)
$
(4
)
$
20

$
3

$
76

$
52

 
$
(37
)
$
151




16


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
UNDERWRITING RATIOS

 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
UNDERWRITING GAIN (LOSS)
$
(113
)
$
(37
)
$
(13
)
$
7

$
(65
)
$
(2
)
$
(123
)
$
1

 
$
(156
)
$
(189
)
UNDERWRITING RATIOS
 
 
 
 
 
 
 
 
 
 
 
Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
 
 
Current accident year before catastrophes
69.1

72.0

70.1

69.0

79.4

73.4

70.6

64.8

 
70.0

72.0

Current accident year catastrophes
22.1

8.9

9.9

8.5

2.9

3.8

10.7

4.8

 
12.3

5.5

Prior accident year development
(2.8
)
0.2

(1.1
)
(0.4
)
2.1

0.3

7.8

5.3

 
(1.0
)
3.9

Total losses and loss adjustment expenses
88.4

81.1

78.9

77.0

84.4

77.4

89.0

75.0

 
81.3

81.5

Expenses
24.1

22.9

22.5

22.3

22.3

22.8

23.6

24.9

 
22.9

23.4

Combined ratio
112.5

104.0

101.4

99.3

106.7

100.2

112.6

99.9

 
104.2

104.8

Current accident year catastrophes and prior accident year development
19.3

9.1

8.8

8.1

5.0

4.1

18.5

10.1

 
11.3

9.4

Underlying combined ratio
93.1

94.9

92.6

91.2

101.8

96.1

94.2

89.7

 
93.0

95.4

PRODUCT
 
 
 
 
 
 
 
 
 
 
 
Automobile
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
101.7

106.3

100.8

97.5

118.1

104.8

117.0

106.6

 
101.6

111.6

Current accident year catastrophes
0.7

4.8

2.3

1.4

0.6

1.8

3.5

1.2

 
2.3

1.8

Prior accident year development
(0.7
)
—

(0.6
)
(0.4
)
3.8

(0.1
)
10.8

9.3

 
(0.4
)
5.9

Underlying combined ratio
101.7

101.6

99.1

96.6

113.6

103.1

102.7

96.2

 
99.7

103.9

Homeowners
 
 
 
 
 
 
 
 
 
 
 
Combined ratio
137.4

97.9

103.4

103.4

80.9

89.2

102.4

84.7

 
110.4

89.3

Current accident year catastrophes
71.9

18.6

28.0

24.9

8.1

8.3

27.4

13.1

 
35.6

14.2

Prior accident year development
(7.3
)
0.4

(2.1
)
(0.4
)
(1.9
)
1.2

0.8

(3.5
)
 
(2.3
)
(0.8
)
Underlying combined ratio
72.8

78.9

77.6

78.9

74.7

79.6

74.2

75.1

 
77.1

75.9


    


17


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA

 
THREE MONTHS ENDED

YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016

Dec 31 2017
Dec 31 2016
DISTRIBUTION











WRITTEN PREMIUMS











AARP Direct
$
644

$
735

$
729

$
687

$
665

$
762

$
752

$
711


$
2,795

$
2,890

AARP Agency
79

79

80

86

95

95

92

92


324

374

Other Agency
90

100

104

105

121

131

135

136


399

523

Other
10

10

12

11

11

12

13

14


43

50

Total
$
823

$
924

$
925

$
889

$
892

$
1,000

$
992

$
953


$
3,561

$
3,837

EARNED PREMIUMS











AARP Direct
$
709

$
713

$
711

$
708

$
728

$
731

$
723

$
715


$
2,841

$
2,897

AARP Agency
83

88

89

92

95

94

94

92


352

375

Other Agency
102

108

117

123

133

140

147

153


450

573

Other
11

12

13

11

11

15

12

15


47

53

Total
$
905

$
921

$
930

$
934

$
967

$
980

$
976

$
975


$
3,690

$
3,898

PRODUCT LINE











WRITTEN PREMIUMS











Automobile
$
578

$
636

$
638

$
645

$
627

$
691

$
686

$
690


$
2,497

$
2,694

Homeowners
245

288

287

244

265

309

306

263


1,064

1,143

Total
$
823

$
924

$
925

$
889

$
892

$
1,000

$
992

$
953


$
3,561

$
3,837

EARNED PREMIUMS











Automobile
$
634

$
644

$
652

$
654

$
676

$
686

$
680

$
678


$
2,584

$
2,720

Homeowners
271

277

278

280

291

294

296

297


1,106

1,178

Total
$
905

$
921

$
930

$
934

$
967

$
980

$
976

$
975

 
$
3,690

$
3,898



18


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA (CONTINUED)

 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR)
 
 
 
 
New Business Premium
 
 
 
 
 
 
 
 
 
 
 
Automobile
$
35

$
37

$
38

$
42

$
48

$
70

$
83

$
110

 
$
152

$
311

Homeowners
$
9

$
11

$
12

$
12

$
12

$
18

$
21

$
23

 
$
44

$
74

Renewal Written Price Increases
 
 
 
 
 
 
 
 
 
 
 
Automobile
11.3
%
11.8
%
10.4
%
10.3
%
9.6
%
8.0
%
6.9
%
6.1
%
 
11.0
%
7.6
%
Homeowners
9.0
%
8.5
%
9.1
%
8.9
%
8.5
%
8.3
%
7.3
%
8.1
%
 
8.9
%
8.0
%
Renewal Earned Price Increases
 
 
 
 
 
 
 
 
 
 
 
Automobile
10.8
%
10.1
%
9.1
%
8.2
%
7.1
%
6.4
%
5.9
%
5.7
%
 
9.6
%
6.3
%
Homeowners
8.8
%
8.7
%
8.5
%
8.2
%
8.0
%
7.8
%
7.5
%
7.2
%
 
8.5
%
7.6
%
Policy Count Retention
 
 
 
 
 
 
 
 
 
 
 
Automobile
80
%
80
%
81
%
82
%
83
%
84
%
84
%
84
%
 
81
%
84
%
Homeowners
83
%
83
%
83
%
82
%
83
%
84
%
84
%
84
%
 
83
%
84
%
Premium Retention
 
 
 
 
 
 
 
 
 
 
 
Automobile
87
%
87
%
88
%
88
%
89
%
88
%
88
%
87
%
 
88
%
88
%
Homeowners
89
%
89
%
90
%
88
%
90
%
89
%
89
%
90
%
 
89
%
89
%
Policies in Force (in thousands)
 
 
 
 
 
 
 
 
 
 
 
Automobile
1,702

1,768

1,839

1,905

1,965

2,016

2,053

2,073

 
 
 
Homeowners
1,038

1,071

1,109

1,144

1,176

1,208

1,239

1,262

 
 
 


19


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA - AUTOMOBILE

 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR)
 
 
 
 
New Business Premium by Distribution
 
 
 
 
 
 
 
 
 
 
 
AARP Direct
$
31

$
33

$
32

$
33

$
35

$
52

$
62

$
84

 
$
129

$
233

AARP Agency
3

3

4

6

9

12

14

17

 
16

52

Other Agency
1

1

2

3

4

6

6

8

 
7

24

Other
—

—

—

—

—

—

1

1

 
—

2

Total
$
35

$
37

$
38

$
42

$
48

$
70

$
83

$
110

 
$
152

$
311

Policy Count Retention by Distribution
 
 
 
 
 
 
 
 
 
 
 
AARP Direct
82
%
82
%
84
%
83
%
85
%
86
%
86
%
86
%
 
83
%
86
%
AARP Agency
67
%
66
%
70
%
74
%
79
%
78
%
78
%
78
%
 
69
%
78
%
Other Agency [1]
73
%
73
%
75
%
76
%
79
%
78
%
78
%
80
%
 
74
%
79
%
Total
80
%
80
%
81
%
82
%
83
%
84
%
84
%
84
%
 
81
%
84
%
[1]
Includes policies that are available to renew on either a six or twelve month policy term. The policy retention represents the percentage of policies that renewed since the last policy term and is not annualized.


20


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C OTHER OPERATIONS
INCOME STATEMENTS
 
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Written premiums
$
—

$
—

$
—

$
—

$
(1
)
$
—

$
—

$
—

 
$
—

$
(1
)
Change in unearned premium reserve
—

—

—

—

(1
)
—

—

—

 
—

(1
)
Earned premiums
—

—

—

—

—

—

—

—

 
—

—

Losses and loss adjustment expenses
 
 
 
 
 
 
 
 
 
 
 
Prior accident year development
17

—

—

1

8

—

269

1

 
18

278

Total losses and loss adjustment expenses
17

—

—

1

8

—

269

1

 
18

278

Underwriting expenses
3

3

3

5

(1
)
7

6

7

 
14

19

Underwriting loss
(20
)
(3
)
(3
)
(6
)
(7
)
(7
)
(275
)
(8
)
 
(32
)
(297
)
Net investment income
22

26

27

31

31

31

33

32

 
106

127

Net realized capital gains (losses)
4

1

5

4

(26
)
(47
)
6

(3
)
 
14

(70
)
Loss on reinsurance transaction
—

—

—

—

650

—

—

—

 
—

650

Other income
1

2

—

2

2

2

—

2

 
5

6

Income (loss) before income taxes
7

26

29

31

(650
)
(21
)
(236
)
23

 
93

(884
)
Income tax expense (benefit)
—

8

9

7

(227
)
(52
)
(82
)
6

 
24

(355
)
Net income (loss)
7

18

20

24

(423
)
31

(154
)
17

 
69

(529
)
Less: Net realized capital gains (losses), excluded from core earnings, before tax
4

2

4

4

(26
)
(47
)
6

(3
)
 
14

(70
)
Less: Loss on reinsurance transaction, before tax
—

—

—

—

(650
)
—

—

—

 
—

(650
)
Less: Income tax (expense) benefit [1]
(1
)
(2
)
(2
)
(1
)
238

59

(6
)
1

 
(6
)
292

 Core earnings (losses)
$
4

$
18

$
18

$
21

$
15

$
19

$
(154
)
$
19

 
$
61

$
(101
)
[1]
Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings.
    



21


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
INCOME STATEMENTS
 
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Earned premiums
$
1,162

$
803

$
805

$
816

$
788

$
792

$
790

$
778

 
$
3,586

$
3,148

Fee income
34

19

19

19

20

20

18

17

 
91

75

Net investment income
103

95

88

95

95

95

88

88

 
381

366

Net realized capital gains
4

9

13

8

8

19

16

2

 
34

45

Total revenues
1,303

926

925

938

911

926

912

885

 
4,092

3,634

Benefits, losses and loss adjustment expenses
910

614

628

651

620

642

634

618

 
2,803

2,514

Amortization of DAC
9

8

8

8

8

8

7

8

 
33

31

Insurance operating costs and other expenses
298

204

193

220

196

190

196

194

 
915

776

Amortization of other intangible assets
9

—

—

—

—

—

—

—

 
9

—

Total benefits, losses and expenses
1,226

826

829

879

824

840

837

820

 
3,760

3,321

Income before income taxes
77

100

96

59

87

86

75

65

 
332

313

Income tax (benefit) expense [1]
(32
)
29

27

14

24

24

20

15

 
38

83

Net income [2]
109

71

69

45

63

62

55

50

 
294

230

Less: Net realized capital gains excluded from core earnings, before tax
4

7

13

7

7

17

15

2

 
31

41

Less: Integration and transaction costs associated with acquired business, before tax
(17
)
—

—

—

—

—

—

—

 
(17
)
—

Less: Income tax benefit (expense) [1] [3]
55

(2
)
(5
)
(2
)
(3
)
(6
)
(6
)
—

 
46

(15
)
Core earnings [2]
$
67

$
66

$
61

$
40

$
59

$
51

$
46

$
48

 
$
234

$
204

Margin
 
 
 
 
 
 
 
 
 
 
 
Net income margin
8.4
%
7.7
%
7.5
%
4.9
%
6.9
%
6.7
%
6.0
%
5.7
%
 
7.2
%
6.3
%
Core earnings margin *
5.2
 %
7.2
 %
6.7
 %
4.3
 %
6.5
 %
5.6
 %
5.1
 %
5.5
 %
 
5.8
%
5.7
%
ROE
 
 
 
 
 
 
 
 
 
 
 
Net income (net income last 12 months to stockholders' equity including AOCI) [4]
10.5
%
11.6
%
11.0
%
10.7
%
11.1
%
9.3
%
8.2
%
8.3
%
 
 
 
Less: Net realized capital gains (losses) excluded from core earnings, before tax
1.2
 %
1.7
 %
2.2
 %
2.4
 %
2.2
 %
1.5
 %
0.3
 %
(0.5
)%
 
 
 
Less: Integration costs
(0.7
)%
—
 %
—
 %
—
 %
—
 %
—
 %
—
 %
—
 %
 
 
 
Less: Income tax benefit (expense) [1] [3]
1.8
 %
(0.6
)%
(0.8
)%
(0.9
)%
(0.8
)%
(0.5
)%
(0.1
)%
0.2
 %
 
 
 
Less: Impact of AOCI, excluded from Core ROE
(0.4
)%
(1.5
)%
(1.5
)%
(1.0
)%
(0.9
)%
(1.4
)%
(1.4
)%
(1.6
)%
 
 
 
Core earnings (core earnings last 12 months to stockholders' equity excluding AOCI) [4]
8.6
%
12.0
%
11.1
%
10.2
%
10.6
%
9.7
%
9.4
%
10.2
%
 
 
 
[1]
Three months and year ended December 31, 2017 includes $52 of income tax benefit primarily from reducing net deferred tax liabilities due to the reduction in the corporate Federal income tax rate from 35% to 21%.
[2]
The three months and year ended December 31, 2017 include two months of results from Aetna's U.S. group life and disability business due to the acquisition that occurred on November 1, 2017.
[3]
Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings.
[4]
ROE - Net income and ROE - Core earnings 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 35.
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).

22


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
SUPPLEMENTAL DATA
 
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
PREMIUMS [2]
 
 
 
 
 
 
 
 
 
 
 
Fully insured ongoing premiums
 
 
 
 
 
 
 
 
 
 
 
Group disability
$
539

$
368

$
360

$
364

$
359

$
360

$
363

$
352

 
$
1,631

$
1,434

Group life
567

382

391

386

377

381

376

369

 
1,726

1,503

Other
55

53

51

55

52

51

51

51

 
214

205

Total fully insured ongoing premiums
1,161

803

802

805

788

792

790

772

 
3,571

3,142

Total buyouts [1]
1

—

3

11

—

—

—

6

 
15

6

Total premiums
$
1,162

$
803

$
805

$
816

$
788

$
792

$
790

$
778

 
$
3,586

$
3,148

SALES (GROSS ANNUALIZED NEW PREMIUMS) [2]
 
 
 
 
 
 
 
 
 
 
 
Fully insured ongoing sales
 
 
 
 
 
 
 
 
 
 
 
Group disability
$
77

$
43

$
32

$
87

$
25

$
30

$
45

$
84

 
$
239

$
184

Group life
22

20

33

115

15

26

31

149

 
190

221

Other
4

5

2

9

3

5

4

33

 
20

45

Total fully insured ongoing sales
103

68

67

211

43

61

80

266

 
449

450

Total buyouts [1]
1

—

3

11

—

—

—

6

 
15

6

Total sales
$
104

$
68

$
70

$
222

$
43

$
61

$
80

$
272

 
$
464

$
456

RATIOS, EXCLUDING BUYOUTS [2]
 
 
 
 
 
 
 
 
 
 
 
Group disability loss ratio
72.9
%
73.0
%
78.9
%
82.9
%
84.0
%
79.4
%
79.9
%
82.4
%
 
76.5
%
81.4
%
Group life loss ratio
80.2
%
77.7
%
74.2
%
73.1
%
70.6
%
80.0
%
78.1
%
73.8
%
 
76.7
%
75.7
%
Total loss ratio
76.1
%
74.7
%
76.1
%
77.7
%
76.7
%
79.1
%
78.5
%
77.6
%
 
76.1
%
78.0
%
Expense ratio [3]
25.0
%
25.8
%
24.5
%
27.7
%
25.2
%
24.4
%
25.1
%
25.6
%
 
25.7
%
25.1
%
[1]
Takeover of open claim liabilities and other non-recurring premium amounts.
[2]
The three months and year ended December 31, 2017 include two months of results from Aetna's U.S. group life and disability business due to the acquisition that occurred on November 1, 2017.
[3]
Integration and transaction costs related to the acquisition of Aetna's U.S. group life and disability business are not included in the expense ratio.




23


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
INCOME STATEMENTS
 
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Investment management fees
$
179

$
172

$
162

$
155

$
150

$
145

$
140

$
135

 
$
668

$
570

Shareholder servicing fees
20

22

25

23

22

20

20

20

 
90

82

Other revenue
11

10

14

14

12

13

13

12

 
49

50

Total revenues
210

204

201

192

184

178

173

167

 
807

702

Sub-advisory
65

63

60

56

54

52

50

48

 
244

204

Employee compensation and benefits
27

28

28

28

27

26

24

24

 
111

101

Distribution and service
43

42

44

43

42

40

39

39

 
172

160

General, administrative and other [3]
19

31

31

30

34

29

28

25

 
111

116

Total expenses
154

164

163

157

157

147

141

136

 
638

581

Income before income taxes
56

40

38

35

27

31

32

31

 
169

121

Income tax expense [2]
23

14

14

12

10

10

12

11

 
63

43

Net income
$
33

$
26

$
24

$
23

$
17

$
21

$
20

$
20

 
$
106

$
78

Less: Income tax expense [2]
(4
)
—

—

—

—

—

—

—

 
(4
)
—

Core earnings
$
37

$
26

$
24

$
23

$
17

$
21

$
20

$
20

 
$
110

$
78

Daily Average Total Mutual Funds segment AUM
$113,830
$109,640
$105,625
$101,114
$95,935
$93,753
$91,289
$87,192
 
$
107,593

$
92,042

Return on assets (bps, after-tax) [1]
 
 
 
 
 
 
 
 
 
 
 
Net income
11.5

9.5

9.2

9.2

7.4

8.5

8.9

9.3

 
9.9

8.5

Core earnings
12.8

9.5

9.2

9.2

7.4

8.5

8.9

9.3

 
10.2

8.5

ROE
 
 
 
 
 
 
 
 
 
 
 
Net income (net income last 12 months to stockholders' equity including AOCI) [4]
40.9
 %
34.3
 %
33.0
 %
32.0
%
31.5
%
33.1
 %
34.1
 %
35.4
 %
 
 
 
Less: Income tax expense [2]
(1.6
)%
—
 %
—
 %
—
%
—
%
—
 %
—
 %
—
 %
 
 
 
Less: Impact of AOCI, excluded from Core ROE
(0.1
)%
(0.3
)%
(0.3
)%
—
%
0.1
%
(0.2
)%
(0.2
)%
(0.2
)%
 
 
 
Core earnings (core earnings last 12 months to stockholders' equity excluding AOCI) [4]
42.6
 %
34.6
 %
33.3
 %
32.0
%
31.4
%
33.3
 %
34.3
 %
35.6
 %
 
 
 
[1]
Represents annualized earnings divided by daily average assets under management, as measured in basis points.
[2]
Three months and year ended December 31, 2017 includes $4 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%.
[3]
The three months and year ended December 31, 2017 include a state tax benefit of $11.
[4]
ROE - Net income and ROE - Core earnings 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 35.


24


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
ASSET VALUE ROLL FORWARD
ASSETS UNDER MANAGEMENT BY ASSET CLASS
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Equity
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
61,163

$
58,047

$
54,683

$
50,826

$
48,476

$
46,808

$
46,455

$
47,369

 
$
50,826

$
47,369

Sales
3,060

3,630

4,076

3,987

2,970

2,722

2,324

3,069

 
14,753

11,085

Redemptions
(3,276
)
(2,944
)
(3,269
)
(3,587
)
(3,959
)
(3,138
)
(2,974
)
(2,853
)
 
(13,076
)
(12,924
)
Net flows
(216
)
686

807

400

(989
)
(416
)
(650
)
216

 
1,677

(1,839
)
Change in market value and other
2,793

2,430

2,557

3,457

3,339

2,084

1,003

(1,130
)
 
11,237

5,296

Ending balance
$
63,740

$
61,163

$
58,047

$
54,683

$
50,826

$
48,476

$
46,808

$
46,455

 
$
63,740

$
50,826

Fixed Income
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
14,454

$
14,286

$
13,973

$
13,301

$
12,864

$
12,491

$
12,389

$
12,625

 
$
13,301

$
12,625

Sales
771

866

1,079

1,930

1,204

1,027

843

918

 
4,646

3,992

Redemptions
(966
)
(861
)
(900
)
(1,406
)
(1,121
)
(888
)
(1,012
)
(1,432
)
 
(4,133
)
(4,453
)
Net flows
(195
)
5

179

524

83

139

(169
)
(514
)
 
513

(461
)
Change in market value and other
142

163

134

148

354

234

271

278

 
587

1,137

Ending balance
$
14,401

$
14,454

$
14,286

$
13,973

$
13,301

$
12,864

$
12,491

$
12,389

 
$
14,401

$
13,301

Multi-Strategy Investments [1]
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
19,571

$
18,923

$
18,142

$
17,171

$
16,564

$
15,642

$
14,775

$
14,419

 
$
17,171

$
14,419

Sales
993

868

1,093

1,301

1,279

1,147

920

712

 
4,255

4,058

Redemptions
(751
)
(792
)
(765
)
(892
)
(882
)
(676
)
(520
)
(600
)
 
(3,200
)
(2,678
)
Net flows
242

76

328

409

397

471

400

112

 
1,055

1,380

Change in market value and other
656

572

453

562

210

451

467

244

 
2,243

1,372

Ending balance
$
20,469

$
19,571

$
18,923

$
18,142

$
17,171

$
16,564

$
15,642

$
14,775

 
$
20,469

$
17,171

Mutual Fund AUM
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
95,188

$
91,256

$
86,798

$
81,298

$
77,904

$
74,941

$
73,619

$
74,413

 
$
81,298

$
74,413

Sales
4,824

5,364

6,248

7,218

5,453

4,896

4,087

4,699

 
23,654

19,135

Redemptions
(4,993
)
(4,597
)
(4,934
)
(5,885
)
(5,962
)
(4,702
)
(4,506
)
(4,885
)
 
(20,409
)
(20,055
)
Net flows
(169
)
767

1,314

1,333

(509
)
194

(419
)
(186
)
 
3,245

(920
)
Change in market value and other
3,591

3,165

3,144

4,167

3,903

2,769

1,741

(608
)
 
14,067

7,805

Ending balance
98,610

95,188

91,256

86,798

81,298

77,904

74,941

73,619

 
98,610

81,298

Exchange-Traded Products ("ETP") AUM
480

409

325

278

209

210

 
 
 
480

209

Mutual Funds segment AUM before life and annuity run-off business held for sale
99,090

95,597

91,581

87,076

81,507

78,114

74,941

73,619

 
99,090

81,507

Life and annuity run-off business held for sale
16,260

16,127

16,098

16,123

16,010

16,387

16,482

16,795

 
16,260

16,010

Total Mutual Funds segment AUM
$
115,350

$
111,724

$
107,679

$
103,199

$
97,517

$
94,501

$
91,423

$
90,414

 
$
115,350

$
97,517

[1] Includes balanced, allocation, and alternative investment products.


25


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
 
 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Fee income
$
2

$
1

$
—

$
1

$
—

$
2

$
—

$
1

 
$
4

$
3

Net investment income
9

5

5

4

7

7

6

11

 
23

31

Net realized capital gains (losses)
(1
)
1

—

(1
)
(95
)
(2
)
(1
)
(2
)
 
(1
)
(100
)
Total revenues
10

7

5

4

(88
)
7

5

10

 
26

(66
)
Benefits, losses and loss adjustment expenses [1]

31

—

—

—

—

—

—

—

 
31

—

Insurance operating costs and other expenses [2]
(1
)
26

16

18

19

22

21

25


59

87

Pension settlement
—

—

750

—

—

—

—

—

 
750

—

Interest expense
78

79

79

80

79

83

82

83

 
316

327

Total expenses
108

105

845

98

98

105

103

108

 
1,156

414

Loss from continuing operations before income taxes
(98
)
(98
)
(840
)
(94
)
(186
)
(98
)
(98
)
(98
)
 
(1,130
)
(480
)
Income tax expense (benefit) [3]
821

(30
)
(293
)
(41
)
(145
)
(34
)
(89
)
(61
)
 
457

(329
)
Loss from continuing operations, net of tax
(919
)
(68
)
(547
)
(53
)
(41
)
(64
)
(9
)
(37
)
 
(1,587
)
(151
)
(Loss) income from discontinued operations,net of tax [4]
(3,145
)
89

112

75

54

87

117

25

 
(2,869
)
283

Net (loss) income
(4,064
)
21

(435
)
22

13

23

108

(12
)
 
(4,456
)
132

Less: Net realized capital gains (losses) excluded from core losses, before tax
(1
)
2

(1
)
(1
)
(96
)
1

(2
)
(3
)
 
(1
)
(100
)
Less: Pension settlement, before tax
—

—

(750
)
—

—

—

—

—

 
(750
)
—

Less: Income tax (expense) benefit [3]
(867
)
(2
)
262

—

112

(2
)
54

27


(607
)
191

Less: (Loss) income from discontinued operations, after-tax [4]
(3,145
)
89

112

75

54

87

117

25

 
(2,869
)
283

Core losses
$
(51
)
$
(68
)
$
(58
)
$
(52
)
$
(57
)
$
(63
)
$
(61
)
$
(61
)
 
$
(229
)
$
(242
)
[1]
Benefits incurred relates to life and annuity business retained by the Company.
[2]
The three months and year ended December 31, 2017 include a state tax benefit of $8.
[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 and year ended December 31, 2017 include an estimated loss on sale of $3.3 billion related to the pending sale of the Company's life and annuity run-off business.



26


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
CONSOLIDATED

 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Net Investment Income
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities [1]
 
 
 
 
 
 
 
 
 
 
 
Taxable
$
226

$
224

$
224

$
221

$
231

$
224

$
224

$
227

 
$
895

$
906

Tax-exempt
105

103

102

98

101

104

103

105

 
408

413

Total fixed maturities
331

327

326

319

332

328

327

332

 
1,303

1,319

Equity securities, available-for-sale
10

4

5

5

6

4

4

8

 
24

22

Mortgage loans
33

31

30

30

32

28

28

28

 
124

116

Limited partnerships and other alternative investments [2]
29

48

39

58

46

46

27

9

 
174

128

Other [3]
10

13

11

15

11

15

16

9

 
49

51

Subtotal
413

423

411

427

427

421

402

386

 
1,674

1,636

Investment expense
(19
)
(19
)
(16
)
(17
)
(15
)
(14
)
(15
)
(15
)
 
(71
)
(59
)
Total net investment income
$
394

$
404

$
395

$
410

$
412

$
407

$
387

$
371

 
$
1,603

$
1,577

Annualized investment yield, before tax [4]
3.8
%
4.1
%
4.1
%
4.2
%
4.3
%
4.1
%
3.9
%
3.7
%
 
4.0
%
4.0
%
Annualized limited partnerships and other alternative investment yield, before tax [4]
7.3
%
12.8
%
10.1
%
15.5
%
12.2
%
12.7
%
7.1
%
2.3
%
 
12.0
%
8.6
%
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] *
3.7
%
3.8
%
3.8
%
3.8
%
4.0
%
3.8
%
3.8
%
3.8
%
 
3.7
%
3.8
%
Annualized investment yield, after-tax [4]
2.8
%
3.0
%
3.0
%
3.1
%
3.1
%
3.0
%
2.9
%
2.7
%
 
3.0
%
2.9
%
Average reinvestment rate [5]
3.3
%
3.4
%
3.5
%
3.5
%
3.7
%
3.2
%
3.1
%
3.8
%
 
3.5
%
3.5
%
Average sales/maturities yield [6]
3.3
%
4.1
%
3.7
%
3.6
%
3.6
%
3.9
%
3.8
%
4.4
%
 
3.7
%
3.9
%
Portfolio duration (in years) [7]
5.2

5.0

5.0

5.1

5.0

5.0

5.1

5.2

 
5.2

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 amortized cost.
[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).


27


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
PROPERTY & CASUALTY

 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Net Investment Income
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities [1]
 
 
 
 
 
 
 
 
 
 
 
Taxable
$
158

$
169

$
169

$
168

$
176

$
166

$
168

$
169

 
$
664

$
679

Tax-exempt
81

81

81

78

81

82

82

84

 
321

329

Total fixed maturities
239

250

250

246

257

248

250

253

 
985

1,008

Equity securities, available-for-sale
4

4

4

4

4

3

3

4

 
16

14

Mortgage loans
24

22

21

21

20

20

19

19

 
88

78

Limited partnerships and other alternative investments [2]
23

34

32

45

36

36

23

6

 
134

101

Other [3]
6

7

8

8

6

9

9

2

 
29

26

Subtotal
296

317

315

324

323

316

304

284

 
1,252

1,227

Investment expense
(15
)
(14
)
(13
)
(14
)
(13
)
(11
)
(12
)
(12
)
 
(56
)
(48
)
Total net investment income
$
281

$
303

$
302

$
310

$
310

$
305

$
292

$
272

 
$
1,196

$
1,179

Annualized investment yield, before tax [4]
3.8
%
4.0
%
4.1
%
4.2
%
4.2
%
4.1
%
3.9
%
3.7
%
 
4.1
%
4.0
%
Annualized limited partnerships and other alternative investment yield, before tax [4]
6.5
%
10.4
%
9.6
%
13.6
%
11.0
%
11.4
%
6.9
%
1.7
%
 
10.5
%
7.7
%
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4]
3.7
%
3.7
%
3.8
%
3.7
%
3.9
%
3.8
%
3.8
%
3.8
%
 
3.8
%
3.8
%
Annualized investment yield, after-tax [4]
2.8
%
2.9
%
3.0
%
3.1
%
3.1
%
3.0
%
2.9
%
2.7
%
 
3.0
%
2.9
%
Average reinvestment rate [5]
3.2
%
3.4
%
3.5
%
3.7
%
3.6
%
3.1
%
3.1
%
3.8
%
 
3.5
%
3.4
%
Average sales/maturities yield [6]
3.6
%
4.1
%
3.8
%
3.8
%
3.8
%
4.0
%
3.9
%
4.5
%
 
3.8
%
4.0
%
Portfolio duration (in years) [7]
5.0

5.0

5.0

5.0

4.9

5.0

5.1

5.2

 
5.0

4.9

Footnotes [1] through [7] are explained on page 27.
    


28



THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
GROUP BENEFITS

 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Net Investment Income
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities [1]
 
 
 
 
 
 
 
 
 
 
 
Taxable
$
63

$
50

$
50

$
49

$
50

$
51

$
51

$
51

 
$
212

$
203

Tax-exempt
24

21

21

20

21

22

21

21

 
86

85

Total fixed maturities
87

71

71

69

71

73

72

72

 
298

288

Equity securities, available-for-sale
1

—

—

—

—

—

—

—

 
1

—

Mortgage loans
9

9

9

10

12

9

9

9

 
37

39

Limited partnerships and other alternative investments [2]
6

14

7

13

10

10

4

3

 
40

27

Other [3]
4

5

4

6

5

6

6

7

 
19

24

Subtotal
107

99

91

98

98

98

91

91

 
395

378

Investment expense
(4
)
(4
)
(3
)
(3
)
(3
)
(3
)
(3
)
(3
)
 
(14
)
(12
)
Total net investment income
$
103

$
95

$
88

$
95

$
95

$
95

$
88

$
88

 
$
381

$
366

Annualized investment yield, before tax [4] [8]
3.8
%
4.9
%
4.5
%
4.8
%
4.8
%
4.8
%
4.4
%
4.4
%
 
4.4
%
4.6
%
Annualized limited partnerships and other alternative investment yield, before tax [4]
12.2
%
29.4
%
13.3
%
28.9
%
20.1
%
21.5
%
8.6
%
6.8
%
 
22.7
%
14.8
%
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] [8]
3.7
%
4.3
%
4.3
%
4.3
%
4.5
%
4.4
%
4.3
%
4.3
%
 
4.0
%
4.4
%
Annualized investment yield, after-tax [4]
2.8
%
3.5
%
3.3
%
3.5
%
3.5
%
3.4
%
3.2
%
3.2
%
 
3.1
%
3.3
%
Average reinvestment rate [5]
3.4
%
3.6
%
3.6
%
3.6
%
3.7
%
3.3
%
3.3
%
4.0
%
 
3.5
%
3.6
%
Average sales/maturities yield [6] [9]
2.9
%
4.3
%
3.9
%
4.0
%
3.5
%
4.4
%
3.8
%
4.1
%
 
3.4
%
3.9
%
Portfolio duration (in years) [7]
6.3

6.0

6.0

5.9

5.9

6.1

6.2

6.2

 
6.3

5.9

Footnotes [1] through [7] are explained on page 27.
[8]
For the three months ended December 31, 2017, the decline in annualized investment yield is reflective of the acquisition of Aetna's U.S. group life and disability benefits business on November 1, 2017, which included the transfer in of fixed maturities, AFS at their prevailing market yields, consistent with GAAP purchase accounting requirements.
[9]
For the period ended December 31, 2017, the decline in average sales/maturities yield is reflective of a higher level of bond sales related to the rebalancing of the investment portfolio acquired as part of the purchase of Aetna's U.S. group life and disability benefits business on November 1, 2017.





29


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET INVESTMENT INCOME
CONSOLIDATED

 
THREE MONTHS ENDED
 
 
 
YEAR ENDED
Net Investment Income by Segment
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Net Investment Income
 
 
 
 
 
 
 
 
 
 
 
Commercial Lines
$
225

$
241

$
240

$
243

$
243

$
239

$
226

$
209

 
$
949

$
917

Personal Lines
34

36

35

36

36

35

33

31

 
141

135

P&C Other Operations
22

26

27

31

31

31

33

32

 
106

127

Total Property & Casualty
$
281

$
303

$
302

$
310

$
310

$
305

$
292

$
272

 
$
1,196

$
1,179

Group Benefits
103

95

88

95

95

95

88

88

 
381

366

Mutual Funds
1

1

—

1

—

—

1

—

 
3

1

Corporate
9

5

5

4

7

7

6

11

 
23

31

Total net investment income by segment
$
394

$
404

$
395

$
410

$
412

$
407

$
387

$
371

 
$
1,603

$
1,577

 
THREE MONTHS ENDED
 
 
 
YEAR ENDED
Net Investment Income From Limited Partnerships and Other Alternative Investments
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Total Property & Casualty
$
23

$
34

$
32

$
45

$
36

$
36

$
23

$
6

 
$
134

$
101

Group Benefits
6

14

7

13

10

10

4

3

 
40

27

Total net investment income from limited partnerships and other alternative investments [1]
$
29

$
48

$
39

$
58

$
46

$
46

$
27

$
9

 
$
174

$
128

[1] Amounts are included above in total net investment income by segment.


30


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
CONSOLIDATED

 
THREE MONTHS ENDED
 
YEAR ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Net Realized Capital Gains (Losses)
 
 
 
 
 
 
 
 
 
 
 
Gross gains on sales
$
91

$
46

$
77

$
61

$
37

$
66

$
63

$
56

 
$
275

$
222

Gross losses on sales
(29
)
(16
)
(22
)
(46
)
(68
)
(17
)
(12
)
(62
)
 
(113
)
(159
)
Net impairment losses
(4
)
(1
)
(2
)
(1
)
(7
)
(2
)
(5
)
(13
)
 
(8
)
(27
)
Valuation allowances on mortgage loans
(1
)
—

—

—

—

—

—

—

 
(1
)
—

Transactional foreign currency revaluation
—

—

8

6

(50
)
(5
)
(23
)
—

 
14

(78
)
Non-qualifying foreign currency derivatives
—

—

(7
)
(7
)
53

5

20

5

 
(14
)
83

Other net gains (losses) [1] [2]
3

(3
)
1

11

(98
)
(33
)
7

(27
)
 
12

(151
)
Total net realized capital gains (losses)
$
60

$
26

$
55

$
24

$
(133
)
$
14

$
50

$
(41
)
 
$
165

$
(110
)
Less: Realized gains, included in core earnings, before tax
1

1

2

1

1

(1
)
2

—

 
5

2

Total net realized capital gains (losses) excluded from core earnings, before tax
59

25

53

23

(134
)
15

48

(41
)
 
160

(112
)
Less: Impacts of tax
22

10

20

8

(128
)
(36
)
20

(15
)
 
60

(159
)
Total net realized capital gains (losses), net of tax, excluded from core earnings
$
37

$
15

$
33

$
15

$
(6
)
$
51

$
28

$
(26
)
 
$
100

$
47

[1]
Includes changes in value of non-qualifying derivatives, including credit derivatives and interest rate derivatives used to manage duration.
[2]
Includes periodic net coupon settlements on credit derivatives which are included in core earnings.
 



31


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
 
Amount [1]
Percent
Amount
Percent
Amount
Percent
Amount
Percent
Amount [1]
Percent
Total investments
$
45,146

100.0
%
$
42,246

100.0
%
$
42,085

100.0
%
$
40,864

100.0
%
$
39,757

100.0
%
Asset-backed securities
$
1,126

3.0
%
$
1,350

4.0
%
$
1,339

4.0
%
$
1,325

4.1
%
$
1,389

4.3
%
Collateralized debt obligations
1,260

3.4
%
1,402

4.1
%
1,446

4.3
%
1,262

3.9
%
976

3.0
%
Commercial mortgage-backed securities
3,336

8.9
%
2,969

8.7
%
2,907

8.7
%
2,814

8.7
%
2,790

8.7
%
Corporate
12,804

34.7
%
11,372

33.4
%
11,265

33.4
%
11,075

34.3
%
10,973

34.1
%
Foreign government/government agencies
1,110

3.0
%
984

2.9
%
922

2.7
%
845

2.6
%
826

2.6
%
Municipal [2]
12,485

33.8
%
11,203

32.9
%
11,074

32.8
%
10,608

32.9
%
10,297

32.0
%
Residential mortgage-backed securities
3,044

8.3
%
2,590

7.7
%
2,577

7.6
%
2,418

7.5
%
3,006

9.3
%
U.S. Treasuries
1,799

4.9
%
2,156

6.3
%
2,190

6.5
%
1,931

6.0
%
1,925

6.0
%
Total fixed maturities, available-for-sale
$
36,964

100.0
%
$
34,026

100.0
%
$
33,720

100.0
%
$
32,278

100.0
%
$
32,182

100.0
%
U.S. government/government agencies
$
4,536

12.3
%
$
4,324

12.7
%
$
4,231

12.5
%
$
3,830

11.9
%
$
4,351

13.5
%
AAA
6,072

16.4
%
5,535

16.3
%
5,525

16.4
%
5,333

16.5
%
5,319

16.5
%
AA
7,810

21.1
%
7,211

21.2
%
7,355

21.8
%
6,966

21.6
%
6,621

20.6
%
A
8,919

24.1
%
7,906

23.2
%
7,610

22.6
%
7,227

22.4
%
7,138

22.2
%
BBB
7,931

21.5
%
7,350

21.6
%
7,172

21.2
%
7,010

21.6
%
6,894

21.4
%
BB
1,005

2.7
%
959

2.8
%
1,085

3.2
%
1,152

3.6
%
1,089

3.4
%
B
618

1.7
%
595

1.7
%
602

1.8
%
607

1.9
%
620

1.9
%
CCC
69

0.2
%
139

0.4
%
132

0.4
%
143

0.4
%
146

0.5
%
CC & below
4

—
%
7

0.1
%
8

0.1
%
10

0.1
%
4

—
%
Total fixed maturities, available-for-sale
$
36,964

100.0
%
$
34,026

100.0
%
$
33,720

100.0
%
$
32,278

100.0
%
$
32,182

100.0
%
[1]
Amount represents the value at which the assets are presented in the Consolidating Balance Sheets (page 4).
[2]
Primarily comprised of $8.9 billion in Property & Casualty and $3.4 billion in Group Benefits as of December 31, 2017.

32


THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
DECEMBER 31, 2017

 
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
$
2,837

$
2,923

6.5
%
Utilities
2,117

2,210

4.9
%
Technology and communications
1,719

1,817

4.0
%
Consumer non-cyclical
1,745

1,792

4.0
%
Energy [1]
1,089

1,130

2.5
%
Capital goods
1,081

1,126

2.5
%
Consumer cyclical
956

999

2.2
%
Basic industry
566

598

1.3
%
Transportation
560

578

1.3
%
Other
607

643

1.4
%
Total
$
13,277

$
13,816

30.6
%
Top Ten Exposures by Issuer [2]
 
 
 
New York State Dormitory Authority
$
306

$
325

0.7
%
New York City Transitional Finance Authority
270

287

0.6
%
Commonwealth of Massachusetts
229

247

0.6
%
State of California
220

237

0.5
%
Goldman Sachs Group Inc.
197

200

0.4
%
New York City Municipal Water Finance Authority
181

195

0.4
%
Morgan Stanley
169

174

0.4
%
JP Morgan Chase & Co.
167

173

0.4
%
Apple Inc.
155

167

0.4
%
Massachusetts St. Development Finance Agency
157

166

0.4
%
Total
$
2,051

$
2,171

4.8
%
[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.


33



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. On July 29, 2016, the Company acquired Maxum Specialty Insurance Group ("Maxum") adding excess and surplus lines capability. Maxum's revenues and earnings since the acquisition date are included in the results of operations of the Company's Commercial Lines operating segment. 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. On July 29, 2016, the Company acquired Lattice Strategies LLC ("Lattice"), an investment management firm and provider of strategic beta exchange-traded products. Lattice's revenues and earnings since the acquisition date are included in the results of operations of the Company's Mutual Funds operating segment.
Corporate includes discontinued operations from the Company's life and annuity run-off business accounted for as held for sale, reserves for structured settlement and terminal funding agreement liabilities retained, 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.
Certain operating and statistical measures have been incorporated herein to provide supplemental data that indicate current trends in the Company's business. These measures include sales, deposits, net flows, account value, insurance in-force, premium retention, renewal written and earned price increases and policy count retention. Premium retention is defined as renewal premium written in the current period divided by total premium written in the prior period. Renewal written price increases 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.

34


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. Net income (loss) is the most directly comparable U.S. GAAP measure. Core earnings should not be considered as a substitute for net income (loss) and does not reflect the overall profitability of the Company’s business. Therefore, the Company believes that it is useful for investors to evaluate both net income (loss) and core earnings when reviewing the Company’s performance. A reconciliation of 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 per share is the most directly comparable U.S. GAAP measure. Core earnings per share should not be considered as a substitute for net income per share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate both net income per share and core earnings per share when reviewing our performance.
Book Value per Diluted Share 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”). ROE - Core earnings is calculated based on non-GAAP financial measures. ROE - Core earnings is calculated by dividing (a) core earnings for the prior four fiscal quarters by (b) average common stockholders' equity, excluding AOCI. ROE - Net income is the most directly comparable U.S. GAAP measure. ROE - Net income 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 ROE - core earnings 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 ROE - Net income to ROE - Core earnings is set forth below:
 
LAST TWELVE MONTHS ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
ROE - Net income
(20.6
)%
2.7
 %
3.9
 %
5.4
 %
5.2
 %
7.6
 %
7.3
 %
8.3
 %
Less: Net realized capital gains (losses) excluded from core earnings, before tax
1.1
 %
(0.2
)%
(0.2
)%
(0.3
)%
(0.6
)%
0.1
 %
(0.1
)%
(0.4
)%
Less: Restructuring and other costs, before tax
—
 %
—
 %
—
 %
—
 %
—
 %
—
 %
—
 %
(0.1
)%
Less: Loss on extinguishment of debt, before tax
—
 %
—
 %
—
 %
—
 %
—
 %
—
 %
—
 %
(0.1
)%
Less: Loss on reinsurance transactions, before tax
—
 %
(3.6
)%
(3.6
)%
(3.7
)%
(3.8
)%
—
 %
—
 %
—
 %
Less: Pension settlement, before tax
(4.9
)%
(4.2
)%
(4.2
)%
—
 %
—
 %
—
 %
—
 %
—
 %
Less: Integration and transaction costs associated with an acquired business
(0.1
)%
—
 %
—
 %
—
 %
—
 %
—
 %
—
 %
—
 %
Less: Income tax (expense) benefit on items not included in core earnings
(4.4
)%
3.2
 %
3.5
 %
2.4
 %
2.7
 %
0.8
 %
1.0
 %
0.9
 %
Less: (Loss) Income from discontinued operations, after-tax
(18.9
)%
1.8
 %
1.8
 %
1.9
 %
1.6
 %
1.5
 %
1.4
 %
2.0
 %
Less: Impact of AOCI, excluded from denominator of Core ROE
(0.1
)%
(0.2
)%
(0.3
)%
—
 %
0.1
 %
(0.2
)%
(0.1
)%
(0.2
)%
ROE - Core earnings
6.7
 %
5.9
 %
6.9
 %
5.1
 %
5.2
 %
5.4
 %
5.1
 %
6.2
 %
    
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 9, 11, 15 and 21.

35


A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, earthquake, windstorm, explosion, terrorist attack and similar events. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance, and therefore their effects are not included in earnings or losses and loss adjustment expense reserves prior to occurrence. The Company believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings.
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 10, 13 and 17, 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 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.
CONSOLIDATED
 
THREE MONTHS ENDED
 
TWELVE MONTHS ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Total net investment income
$
394

$
404

$
395

$
410

$
412

$
407

$
387

$
371

 
$
1,603

$
1,577

Limited partnerships and other alternative investments
29

48

39

58

46

46

27

9

 
174

128

Net Investment Income excluding limited partnerships
$
365

$
356

$
356

$
352

$
366

$
361

$
360

$
362

 
$
1,429

$
1,449


PROPERTY & CASUALTY
 
THREE MONTHS ENDED
 
TWELVE MONTHS ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Total net investment income
$
281

$
303

$
302

$
310

$
310

$
305

$
292

$
272

 
$
1,196

$
1,179

Limited partnerships and other alternative investments
23

34

32

45

36

36

23

6

 
134

101

Net Investment Income excluding limited partnerships
$
258

$
269

$
270

$
265

$
274

$
269

$
269

$
266

 
$
1,062

$
1,078



36


GROUP BENEFITS
 
THREE MONTHS ENDED
 
TWELVE MONTHS ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Total net investment income
$
103

$
95

$
88

$
95

$
95

$
95

$
88

$
88

 
$
381

$
366

Limited partnerships and other alternative investments
6

14

7

13

10

10

4

3

 
40

27

Net Investment Income excluding limited partnerships
$
97

$
81

$
81

$
82

$
85

$
85

$
84

$
85


$
341

$
339


Annualized investment yield, excluding limited partnerships is the annualized net investment income excluding limited partnerships divided by the monthly average invested assets at amortized cost, excluding repurchase agreement and securities lending collateral, derivatives book value, and limited partnerships 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.
CONSOLIDATED
 
THREE MONTHS ENDED
 
TWELVE MONTHS ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Annualized investment yield
3.8
%
4.1
%
4.1
%
4.2
%
4.3
%
4.1
%
3.9
%
3.7
%
 
4.0
%
4.0
%
Annualized investment yield on limited partnerships and other alternative investments
7.3
%
12.8
%
10.1
%
15.5
%
12.2
%
12.7
%
7.1
%
2.3
%
 
12.0
%
8.6
%
Annualized investment yield excluding limited partnerships and other alternative investments
3.7
%
3.8
%
3.8
%
3.8
%
4.0
%
3.8
%
3.8
%
3.8
%
 
3.7
%
3.8
%

PROPERTY & CASUALTY
 
THREE MONTHS ENDED
 
TWELVE MONTHS ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Annualized investment yield
3.8
%
4.0
%
4.1
%
4.2
%
4.2
%
4.1
%
3.9
%
3.7
%
 
4.1
%
4.0
%
Annualized investment yield on limited partnerships and other alternative investments
6.5
%
10.4
%
9.6
%
13.6
%
11.0
%
11.4
%
6.9
%
1.7
%
 
10.5
%
7.7
%
Annualized investment yield excluding limited partnerships and other alternative investments
3.7
%
3.7
%
3.8
%
3.7
%
3.9
%
3.8
%
3.8
%
3.8
%
 
3.8
%
3.8
%

GROUP BENEFITS
 
THREE MONTHS ENDED
 
TWELVE MONTHS ENDED
 
Dec 31 2017
Sept 30 2017
Jun 30 2017
Mar 31 2017
Dec 31 2016
Sept 30 2016
Jun 30 2016
Mar 31 2016
 
Dec 31 2017
Dec 31 2016
Annualized investment yield
3.8
%
4.9
%
4.5
%
4.8
%
4.8
%
4.8
%
4.4
%
4.4
%
 
4.4
%
4.6
%
Annualized investment yield on limited partnerships and other alternative investments
12.2
%
29.4
%
13.3
%
28.9
%
20.1
%
21.5
%
8.6
%
6.8
%
 
22.7
%
14.8
%
Annualized investment yield excluding limited partnerships and other alternative investments
3.7
%
4.3
%
4.3
%
4.3
%
4.5
%
4.4
%
4.3
%
4.3
%
 
4.0
%
4.4
%

37