HARTFORD FINANCIAL SERVICES GROUP INC

[1]Primarily consists of equity fund investments, overseas deposits, consolidated investment funds, and derivative instruments which are carried at fair value.

December 31, 2023 compared to December 31, 2022

Total investments increased primarily due to an increase in fixed maturities, AFS, at fair value and limited partnerships and other alternative investments, partially offset by a decrease in equity securities, at fair value.

Fixed maturities, AFS, at fair value increased primarily due to net additions of corporate bonds and ABS, partially offset by net reductions to U.S. treasuries and tax-exempt municipal bonds. The increase was also due to higher valuations as a result of tighter credit spreads.

Limited partnerships and other alternative investments increased primarily driven by additional investments.

Equity securities, at fair value decreased primarily due to sales of common stocks. As of December 31, 2023, equity securities, at fair value are comprised of approximately 50% preferred stocks.

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[1]Yields calculated using annualized net investment income divided by the monthly average invested assets at amortized cost, as applicable, excluding derivatives book value.

[2]Includes net investment income on short-term investments.

[3]Primarily includes changes in fair value of certain equity fund investments and income from derivatives that qualify for hedge accounting and are used to hedge fixed maturities.

Total net investment income increased primarily due to the impact of reinvesting at higher rates and a higher yield on variable-rate securities. This increase was partially offset by lower limited partnership and other alternative investment income driven by lower income from sales of underlying real estate properties and valuation declines on real estate funds in 2023 compared to valuation increases in 2022.

Annualized net investment income yield, excluding limited partnerships and other alternative investments, was up primarily due to the impact of reinvesting at higher rates and a higher yield on variable-rate securities.

Average reinvestment rate, on fixed maturities and mortgage loans, excluding certain U.S. Treasury securities, for the year-ended December 31, 2023 was 5.8% which was above the average yield of sales and maturities of 4.4% for the same period. Average reinvestment rate, on fixed maturities and mortgage loans, excluding certain U.S. Treasury securities, for the year-ended December 31, 2022 was 4.4% which was above the average yield of sales and maturities of 3.6% for the same period.

For the 2024 calendar year, we expect the annualized net investment income yield, excluding limited partnerships and other alternative investments, to be above the portfolio yield earned in 2023 due to the higher rate environment. The estimated impact on annualized net investment income yield is subject to variability due to evolving market conditions, active portfolio management, and the level of non-routine income items, such as make-whole payments, prepayment penalties on mortgage loans and yield adjustments on prepayable securities.

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[1]The change in net unrealized gains (losses) on equity securities still held as of the end of the period and included in net realized gains (losses) were $17, $(108), and $155 for the years ended December 31, 2023, 2022, and 2021, respectively.

[2]See Credit Losses on Fixed Maturities, AFS and Intent-to-Sell Impairments within the Investment Portfolio Risks and Risk Management section of the MD&A.

[3]See ACL on Mortgage Loans within the Investment Portfolio Risks and Risk Management section of the MD&A.

[4]Includes gains (losses) on non-qualifying derivatives for the years ended December 31, 2023, 2022, and 2021 of $(108), $46, and $12, respectively, and gains (losses) from transactional foreign currency revaluation of $(15), $28, and $(1), respectively. Also included for year ended December 31, 2021, is a loss of $21 on the sale of the Continental Europe Operations and a gain of $46 on the sale of the Company's previously owned interest in Talcott Resolution.

Year ended December 31, 2023

Gross gains and losses on sales were primarily due to sales of corporate securities and tax-exempt municipals, in addition to sales of U.S. treasuries which were used to manage duration and liquidity, and to fund purchases of higher yielding investments.

Equity securitiesnet gains were primarily driven by sales due to higher equity market levels.

Other, netlosses were primarily driven bylosses of $105 on credit derivatives due to tighter credit spreads and losses of $15 on transactional foreign currency revaluation.

Year ended December 31, 2022

Gross gains and losses on sales were primarily due to sales of U.S. treasuries, which were used to manage duration and liquidity, and to fund purchases of spread product, mortgage loans, and alternative investments. Also included were sales of corporate securities and tax-exempt municipals and tender activity.

Equity securitiesnet losses were primarily driven by a decline in value due to lower equity market levels.

Other, netgains include gains of $28 on transactional foreign currency revaluation and $25 on interest rate derivatives driven by an increase in interest rates. These gains were partially offset by losses of $28 on FVO securities due to credit spread widening.