HARTFORD FINANCIAL SERVICES GROUP INC

Previous wording

The Company considers the measures and ratios in the following discussion to be key performance indicators for its businesses. Management believes that these ratios and measures are useful in understanding the underlying trends in The Hartford’s businesses. However, these key performance indicators should only be used in conjunction with, and not in lieu of, the results presented in the segment discussions that follow in this MD&A. These ratios and measures may not be comparable to other performance measures used by the Company’s competitors.

Current wording

The Company considers the measures and ratios in the following discussion to be key performance indicators for its businesses. Management believes that these ratios and measures are useful in understanding the underlying trends in The Hartford’s businesses. However, these key performance indicators should only be used in conjunction with, and not in lieu of, the results presented in the reportable segment and corporate operating summaries that follow in this MD&A. These ratios and measures may not be comparable to other performance measures used by the Company’s competitors.

Previous wording

[1]During 2024, the Company collected recoveries from National Indemnity Company ("NICO”), a subsidiary of Berkshire Hathaway Inc. related to the Navigators adverse development cover ("Navigators ADC") and as a result amortized $37 and $61 of the deferred gain within benefits, losses and loss adjustment expenses in the three and six month periods, respectively. For additional information regarding the ADC reinsurance agreement, refer to Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements.

Current wording

[1]During 2024, the Company collected recoveries from National Indemnity Company ("NICO”), a subsidiary of Berkshire Hathaway Inc. related to the Navigators adverse development cover ("Navigators ADC") and as a result amortized $26 and $87 of the deferred gain within benefits, losses and loss adjustment expenses in the three and nine month periods, respectively. For additional information regarding the ADC reinsurance agreement, refer to Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements.

Previous wording

[2]Primarily represents the federal income tax benefit related to before tax items not included in core earnings.

Current wording

[2]Primarily represents the federal income tax expense (benefit) related to before tax items not included in core earnings.

Previous wording

The Hartford conducts business principally in five reporting segments including Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits and Hartford Funds, as well as a Corporate category. The Company includes in the Corporate category reserves for run-off structured settlement and terminal funding agreement liabilities, restructuring costs, capital raising activities (including equity financing, debt financing and related interest expense), transaction expenses incurred in connection with an acquisition, certain M&A costs, purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments. Corporate also includes investment management fees and expenses related to managing third-party assets.

Current wording

The Hartford conducts business principally in five reportable segments including Commercial Lines, Personal Lines, Property & Casualty Other Operations, Group Benefits and Hartford Funds, as well as a Corporate category. The Company includes in the Corporate category reserves for run-off structured settlement and terminal funding agreement liabilities, restructuring costs, capital raising activities (including equity financing, debt financing and related interest expense), transaction expenses incurred in connection with an acquisition, certain M&A costs, purchase accounting adjustments related to goodwill and other expenses not allocated to the reportable segments. Corporate also includes investment management fees and expenses related to managing third-party assets.

Previous wording

The investment return, or yield, on invested assets is an important element of the Company’s earnings since insurance products are priced with the assumption that premiums received can be invested for a period of time before benefits, losses and loss adjustment expenses are paid. Due to the need to maintain sufficient liquidity to satisfy claim obligations, the majority of the Company’s invested assets have been held in available-for-sale ("AFS") securities, including, among other asset classes, corporate bonds, municipal bonds, government debt, short-term debt, mortgage-backed securities, asset-backed securities ("ABS") and collateralized loan obligations ("CLO"). The Company also invests in commercial mortgage loans as well as limited partnerships and alternative investments, which are private investments that are less liquid, but have the potential to generate higher returns. The primary investment objective for the Company is to maximize economic value, consistent with acceptable risk parameters, including the management of credit risk and interest rate sensitivity of invested assets, while generating sufficient net of tax income to meet policyholder and corporate obligations. Investment strategies are developed based on a variety of factors including business needs, regulatory requirements and tax considerations.

Current wording

The investment return, or yield, on invested assets is an important element of the Company’s earnings since insurance products are priced with the assumption that premiums received can be invested for a period of time before benefits, losses and loss adjustment expenses are paid. Due to the need to maintain sufficient liquidity to satisfy claim obligations, the majority of the Company’s invested assets have been held in available-for-sale ("AFS") securities, including, among other asset classes, corporate bonds, municipal bonds, government debt, short-term debt, mortgage-backed securities, asset-backed securities ("ABS") and collateralized loan obligations ("CLOs"). The Company also invests in commercial mortgage loans as well as limited partnerships and alternative investments, which are private investments that are less liquid, but have the potential to generate higher returns. The primary investment objective for the Company is to maximize economic value, consistent with acceptable risk parameters, including the management of credit risk and interest rate sensitivity of invested assets, while generating sufficient net of tax income to meet policyholder and corporate obligations. Investment strategies are developed based on a variety of factors including business needs, regulatory requirements and tax considerations.

Previous wording

The Consolidated Results of Operations should be read in conjunction with the Company's Condensed Consolidated Financial Statements and the related Notes as well as with the segment operating results sections of MD&A.

Current wording

The Consolidated Results of Operations should be read in conjunction with the Company's Condensed Consolidated Financial Statements and the related Notes as well as with the reportable segment and corporate operating summaries within the MD&A.

Previous wording

Net income available to common stockholders increased by $191, primarily driven by:

Current wording

Net income available to common stockholders increased by $116, primarily driven by:

Previous wording

•Higher net investment income of $62, before tax, primarily driven by a higher level of invested assets and a higher yield on fixed maturities, partially offset by lower income from limited partnerships and other alternative investments; and

Current wording

•Higher net investment income of $62, before tax, primarily driven by a higher yield on fixed maturities and a higher level of invested assets, partially offset by lower income from limited partnerships and other alternative investments and;

Previous wording

•An increase in P&C underwriting gain of $245, before tax, driven by the effect of earned premium growth, including a lower expense ratio, a higher level of favorable prior accident year reserve development, and lower CAY loss and LAE ratio before catastrophes in both Personal Lines and Commercial Lines, partially offset by higher current accident year catastrophe losses;

Current wording

•A slight increase in the P&C underwriting gain of $5, before tax, driven by the effect of earned premium growth, a lower CAY loss and LAE ratio before catastrophes in Personal Lines and a higher level of favorable prior accident year reserve development, partially offset by higher CAY catastrophe losses, a higher CAY loss and LAE ratio before catastrophes in Commercial Lines, and a higher expense ratio.

Previous wording

For a discussion of the Company's operating results by segment, see MD&A - Segment Operating Summaries.

Current wording

For a discussion of the Company's operating results by segment, see MD&A - Reportable Segment and Corporate Operating Summaries.

Previous wording

•An increase in P&C reflecting a 8% increase in Commercial Lines and an 12% increase in Personal Lines.

Current wording

•An increase in P&C reflecting a 10% increase in Commercial Lines and a 13% increase in Personal Lines.

Previous wording

–Contributing to the increase in Commercial Lines was the effect of an increase in new business across all lines of business, earned pricing increases, and higher insured exposures, principally in workers’ compensation and property lines.

Current wording

–Contributing to the increase in Commercial Lines was the effect of an increase in new business across most lines of business, earned pricing increases, and higher insured exposures, principally in workers’ compensation and property lines.

Previous wording

Fee income increased, primarily due to an $18 increase in Hartford Funds driven by higher daily average assets resulting from an increase in equity market levels, partially offset by net outflows over the preceding twelve months.

Current wording

Fee income increased primarily driven by higher daily average assets within Hartford Funds resulting from an increase in equity market levels, partially offset by net outflows over the preceding twelve months.

Previous wording

Net realized losses improved primarily due to no losses on credit derivatives in the 2024 period compared to the 2023 period and gains on transaction foreign currency revaluation in the 2024 period compared to losses in the 2023 period. These increases were partially offset by higher net losses on sales of fixed maturities in the 2024 period compared to the 2023 period.

Current wording

Net realized losses improved primarily due to:

Previous wording

Net realized losses improved slightly primarily due to no losses on credit derivatives in the 2024 period compared to losses in the 2023 period and gains on transactional foreign currency revaluation in the 2024 period compared to losses in the 2023 period. These increases were mostly offset by higher net losses on sales of fixed maturities in the 2024 period compared to the 2023 period.

Current wording

•Higher net losses on sales of fixed maturities; and

Previous wording

•An increase in Property & Casualty of $109 which was attributable to:

Current wording

•An increase in Property & Casualty of $265 which was attributable to:

Previous wording

–An increase in P&C CAY loss and loss adjustment expenses before catastrophes of $346, before tax, primarily due to the effect of higher earned premiums, partially offset by a lower CAY loss and LAE ratio, in Commercial Lines and Personal Lines; and

Current wording

–An increase in P&C CAY loss and loss adjustment expenses before catastrophes of $209, before tax, primarily due to the effect of higher earned premiums and a slightly higher CAY loss and LAE ratio before catastrophes in Commercial Lines, partially offset by a lower CAY loss and LAE ratio before catastrophes in Personal Lines.

Previous wording

–An increase in current accident year catastrophe losses of $54, before tax. Catastrophe losses in the 2024 period included losses from tornado, wind and hail events across several regions, but concentrated in the South and Midwest regions. Catastrophe losses in the 2023 period included losses from tornado, wind and hail events across several regions of the United States, mainly in the South, Midwest and Mountain West.

Current wording

–An increase in CAY catastrophe losses of $63, before tax. Catastrophe losses in the 2024 period included losses from hurricanes, including a loss of $104 from Hurricane Helene, and tropical storms primarily in the Southeast and South regions, and to a lesser extent, tornado, wind and hail events primarily in the Midwest, Northeast and Mountain West regions. Catastrophe losses in the 2023 period included losses from tornado, wind and hail events across several regions of the United States and, to a lesser extent, losses from hurricanes and tropical storms in the Southeast and West Coast.

Previous wording

–Net favorable prior accident year reserve development of $171, before tax, in P&C compared to net favorable prior accident year reserve development in the 2023 period of $39. Favorable prior year reserve development in the 2024 period was primarily driven by decreases in reserves related to workers' compensation, catastrophes, bond, Personal Lines automobile liability, and homeowners, partially offset by increases in reserves for general liability, assumed reinsurance, and Commercial Lines automobile liability. The 2024 period also included a benefit of $61 related to amortization of the Navigators ADC deferred gain. Favorable prior year reserve development in the 2023 period was primarily driven by decreases in reserves related to workers' compensation and catastrophes, offset by increases in reserves for general liability, Personal Lines automobile physical damage, assumed reinsurance, bond, and uncollectible reinsurance. For further discussion, see Note 9 - Reserve for Unpaid Losses and Loss Adjustment Expenses of Notes to Condensed Consolidated Financial Statements.

Current wording

–Net favorable prior accident year reserve development of $50, before tax, in P&C compared to $43 in the prior year period. Favorable prior year reserve development in the 2024 period was primarily driven by decreases in reserves related to workers' compensation and Personal Lines automobile physical damage, partially offset by increases in reserves for general liability and Commercial Lines automobile liability. The 2024 period also included a benefit of $26 related to amortization of the Navigators ADC deferred gain. Prior accident year reserve development in the 2023 period was a net favorable $43, before tax, primarily driven by decreases in reserves related to workers’

Previous wording

•Increased expense from higher staffing costs, including higher incentive compensation, and commissions in Commercial Lines and Group Benefits, partly in response to increased business volume; and

Current wording

•Increased expense from higher staffing costs, including higher incentive compensation and benefits costs, partly in response to increased business volume; and

Previous wording

Net income available to common stockholders increased by $409 primarily driven by:

Current wording

Net income available to common stockholders increased by $525 primarily driven by:

Previous wording

•An increase in P&C underwriting gain of $117, before tax, driven by the effect of earned premium growth, a higher level of favorable prior accident year reserve development, and a lower CAY loss and LAE ratio before catastrophes in both Personal Lines and Commercial Lines, partially offset by higher current accident year catastrophes;

Current wording

•An increase in P&C underwriting gain of $250, before tax, driven by the effect of earned premium growth, a higher level of favorable prior accident year reserve development, and lower CAY loss and LAE ratio before catastrophes in Personal Lines, partially offset by higher CAY catastrophe losses;

Previous wording

•Higher net investment income of $140, before tax, primarily driven by a higher level of invested assets and a higher yield on fixed maturities, partially offset by lower income from limited partnerships and other alternative investments;

Current wording

•Higher net investment income of $202, before tax, primarily driven by a higher yield on fixed maturities and a higher level of invested assets, partially offset by lower income from limited partnerships and other alternative investments;

Previous wording

•Lower net realized losses of $40, before tax; and

Current wording

•Lower net realized losses of $117, before tax; and

Previous wording

•In Group Benefits, a lower group life loss ratio and the effect of higher fully insured ongoing premiums, partially offset by a higher expense ratio.

Current wording

•In Group Benefits, a lower group life loss ratio and the effect of higher fully insured ongoing premiums, partially offset by a higher expense ratio, a higher loss ratio on supplemental health products, and a higher group disability loss ratio.

Previous wording

For a discussion of the Company's operating results by segment, see MD&A - Segment Operating Summaries.

Current wording

For a discussion of the Company's operating results by segment, see MD&A - Reportable Segment and Corporate Operating Summaries.

Previous wording

Earned premiums increased by $741, or 7%, primarily due to:

Current wording

Earned premiums increased by $1,165, or 7%, primarily due to:

Previous wording

•An increase in P&C reflecting a 9% increase in Commercial Lines and a 11% increase in Personal Lines.

Current wording

•An increase in P&C reflecting a 9% increase in Commercial Lines and a 12% increase in Personal Lines.

Previous wording

–Contributing to the increase in Commercial Lines was the effect of an increase in new business across all lines of business, earned pricing increases, and higher insured exposures, principally in workers’ compensation and property lines.

Current wording

–Contributing to the increase in Commercial Lines was the effect of an increase in new business across most lines of business, earned pricing increases, and higher insured exposures, principally in workers’ compensation and property lines.

Previous wording

Fee income increased primarily due to a $9 increase in Hartford Funds driven by higher daily average assets resulting from an increase in equity market levels, partially offset by net outflows over the preceding twelve months.

Current wording

Fee income increased, primarily due to a $33 increase in Hartford Funds driven by higher daily average assets resulting from an increase in equity market levels, partially offset by net outflows over the preceding twelve months.

Previous wording

•An increase in Property & Casualty of $244, which was attributable to:

Current wording

•An increase in Property & Casualty of $509, which was attributable to:

Previous wording

–An increase in P&C CAY loss and loss adjustment expenses before catastrophes of $131, before tax, primarily due to the effect of higher earned premiums, partially offset by a lower CAY loss and LAE ratio in both Commercial Lines and Personal Lines;

Current wording

–An increase in P&C CAY loss and loss adjustment expenses before catastrophes of $555, before tax, primarily due to the effect of higher earned premiums, partially offset by a lower CAY loss and LAE ratio in Personal Lines; and

Previous wording

–An increase in current accident year catastrophe losses of $30, before tax. Catastrophe losses in the 2024 period included losses from tornado, wind and hail events across several regions, but concentrated in the South and Midwest regions, and, to a lesser extent, from winter storms, mainly in the Northeast, Pacific and South regions. Catastrophe losses in the 2023 period included losses from tornado, wind and hail events across several regions of the United States, and losses from winter storms along the East and West Coasts.

Current wording

–An increase in CAY catastrophe losses of $93, before tax. Catastrophe losses in the 2024 period included losses from tornado, wind and hail events across several regions of the United States, as well as losses from hurricanes and tropical storms mainly in the Southeast and South regions, and, to a lesser extent, from winter storms, mainly in the Pacific, Northeast, and South regions. Catastrophe losses in the 2023 period included losses from tornado, wind and hail events across several regions of the United States, and losses from winter storms along the East and West Coasts.

Previous wording

–Net favorable prior accident year reserve development of $115, before tax, in P&C compared $39 in the prior year period. Favorable prior year reserve development in the 2024 period was primarily driven by decreases in reserves related to workers' compensation, catastrophes, bond, Personal Lines automobile liability, and homeowners, partially offset by increases in reserves for general liability, assumed reinsurance, and Commercial Lines automobile liability. The 2024 period also included a benefit of $37 related to amortization of the Navigators ADC deferred gain. Prior accident year reserve development for the 2023 period was primarily driven by decreases in reserves related to catastrophes and workers’ compensation, partly offset by increases in reserves for general liability, assumed reinsurance, and bond.

Current wording

–Net favorable prior accident year reserve development of $221, before tax, in P&C compared to net favorable prior accident year reserve development in the 2023 period of $82. Favorable prior year reserve development in the 2024 period was primarily driven by decreases in reserves related to workers' compensation, catastrophes, bond, Personal Lines automobile physical damage, homeowners, and Personal Lines automobile liability, partially offset by increases in reserves for general liability, Commercial Lines automobile liability, and assumed reinsurance. The 2024 period also included a benefit of $87 related to amortization of the Navigators ADC deferred gain. Prior accident year reserve development in the 2023 period was a net favorable $82, before tax, primarily driven by decreases in reserves related to workers' compensation and catastrophes, offset by increases in reserves for general liability, Personal Lines automobile physical damage, assumed reinsurance and bond.

Previous wording

•A decrease in Group Benefits of $34, before tax, primarily driven by the impact of a lower group life loss ratio, favorable long-term disability claim recoveries and incidence, and a higher New York paid family leave risk adjustment benefit, partially offset by the effect of higher earned premiums and a higher loss ratio on paid family and medical leave products.

Current wording

•A decrease in Group Benefits of $19, before tax, primarily driven by lower group life mortality, favorable long-term disability claim recoveries and incidence, and a favorable change in the long-term disability recovery rate assumption, partially offset by the effect of higher earned premiums and a higher loss ratio on paid family and medical leave products.

Previous wording

•Increased expense from higher staffing costs, including higher incentive compensation, and commissions in Commercial Lines and Group Benefits, partly in response to increased business volume; and

Current wording

•Increased expense from higher staffing costs, including higher incentive compensation and benefits costs, and commissions in Group Benefits, partly in response to increased business volume; and

Previous wording

Fixed maturities, AFS, at fair value increased primarily due to net additions of corporate bonds and securitized products, partially offset by net reductions to tax-exempt municipal bonds and U.S. treasuries, as well as an overall decrease in valuations due to higher interest rates.

Current wording

Fixed maturities, AFS, at fair value increased primarily due to net additions of corporate bonds, high-quality residential mortgage-backed securities ("RMBS") and CLOs, partially offset by net reductions to U.S. treasuries, tax-exempt municipal bonds, and commercial mortgage-backed securities ("CMBS"). The increase was also due to higher valuations as a result of lower interest rates and tighter credit spreads.

Previous wording

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.

Current wording

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

Previous wording

the three and six months ended June 30, 2024 were 6.4% and 6.2%, respectively, which were above the average yield of sales and maturities of 4.9% and 4.9%, respectively. Average reinvestment rates for the three and six months ended June 30, 2023, were 5.3% and 5.6%, respectively, which were above the average yield of sales and maturities of 4.1% and 4.1%, respectively.

Current wording

the three and nine months ended September 30, 2024, were 5.5% and 6.0%, respectively, which were above the average yield of sales and maturities of 4.4% and 4.7%, respectively. Average reinvestment rates for the three and nine months ended September 30, 2023, were 6.0% and 5.7%, respectively, which were above the average yield of sales and maturities of 4.5% and 4.2%, respectively.

Previous wording

[1]The change in net unrealized gains (losses) on equity securities still held as of June 30, 2024 and included in net realized gains (losses) were $15 and $44 for the three and six months ended June 30, 2024, respectively. The change in net unrealized gains (losses) on equity securities still held as of June 30, 2023 and included in net realized gains (losses) were $7 and $7 for the three and six months ended June 30, 2023, respectively.

Current wording

[1]The change in net unrealized gains (losses) on equity securities still held as of September 30, 2024 and included in net realized gains (losses) were $27 and $71 for the three and nine months ended September 30, 2024, respectively. The change in net unrealized gains (losses) on equity securities still held as of September 30, 2023 and included in net realized gains (losses) were $(14) and $(5) for the three and nine months ended September 30, 2023, respectively.