DEF 14A 1 hartfordproxy2020.htm DEF 14A Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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The Hartford Financial Services Group, Inc.
 
 
hartfordlogocolor.jpg
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NOTICE OF 2020 ANNUAL MEETING
OF SHAREHOLDERS
 
Date and Time
Wednesday, May 20, 2020
12:30 p.m. EDT
Location*
One Hartford Plaza
Hartford, CT 06155
On behalf of the Board of Directors, I am pleased to invite you to attend the Annual Meeting of Shareholders of The Hartford Financial Services Group, Inc. to be held in the Wallace Stevens Theater at our Home Office at 12:30 p.m. EDT.
Voting Items
Shareholders will vote of the following items of business:
 
VOTING
 
 
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By internet
www.proxyvote.com
 
 
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By toll-free telephone 
1-800-690-6903
 
 
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By mail
Follow instructions on your proxy card
 
 
Board
Recommendation
Page Reference
in_person.jpg
In person
At the Annual Meeting
 
1. Elect a Board of Directors for the coming year;
FOR
13
 
 
 
 
2. Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020;
FOR
34

IMPORTANT INFORMATION IF YOU PLAN TO ATTEND THE MEETING IN PERSON: 
Please remember to bring your ticket and government issued ID! Shareholders can obtain an admission ticket and directions to the meeting by contacting our Investor Relations Department:
Email: InvestorRelations@TheHartford.com
Telephone: (860) 547-2537
Mail: The Hartford
Attn: Investor Relations
One Hartford Plaza (TA1-1)
Hartford, CT 06155
If you hold your shares of The Hartford through a brokerage account (in “street name”), your request for an admission ticket must include a copy of a brokerage statement reflecting stock ownership as of the record date of March 23, 2020.
You can also join our meeting webcast at http://ir.thehartford.com.**
 
3. Consider and approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement
FOR
36
 
4. Consider and act on the company’s 2020 Stock Incentive Plan; and
FOR
70
 
5. Act upon any other business that may properly come before the Annual Meeting or any adjournment thereof.
 
 
 
Record Date
You may vote if you were a shareholder of record at the close of business on March 23, 2020. The Hartford’s proxy materials are available via the internet, which allows us to reduce printing and delivery costs and lessen adverse environmental impacts.
We hope that you will participate in the Annual Meeting, either by attending and voting in person or by voting through other means. For instructions on voting, please refer to page 75 under “How do I vote my shares?”
We urge you to review the proxy statement carefully and exercise your right to vote.
Dated: April 9, 2020
By order of the Board of Directors
 
 
 
 
 
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Donald C. Hunt
 
 
 
Corporate Secretary
 
 
 
* As a precaution due to the outbreak of novel coronavirus, or COVID-19, we are planning for the possibility that the annual meeting may be held only through remote communication. If we take this step, we will announce our decision and post additional details on how to participate on our Investors Relations website at http://ir.thehartford.com. Please check this website in advance of the Annual Meeting date if you are planning to attend in person.
 
**References in this proxy statement to our website address are provided only as a convenience and do not constitute, and should not be viewed as, an incorporation by reference of the information contained on, or available through, the website. Therefore, such information should not be considered part of this this proxy statement.

 
2020 Proxy Statement
1


LETTER FROM OUR CHAIRMAN & CEO AND LEAD DIRECTOR


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Dear fellow shareholders:

2019 was an excellent year for The Hartford. The company delivered strong financial results, continued to invest in its businesses, created significant value for shareholders and deepened its commitment to sustainability. As the 2020 Annual Meeting of Shareholders approaches, we are in the midst of a global health crisis caused by the novel coronavirus, or COVID-19, that is creating uncertainty throughout society, the economy and financial markets. While the purpose of this letter is to share some details on the Board’s activities in 2019, we also wanted to assure you that we are taking steps to protect our employees, policyholders, shareholders and partners. In the past few weeks, The Hartford moved seamlessly to an almost completely remote work environment while continuing to provide best-in-class service to policyholders and partners. Now more than ever, we remain committed to our purpose of underwriting human achievement and helping our policyholders prevail in times of crisis.

Strategic Progress
The Hartford’s strategy for creating long-term shareholder value is focused on realizing the full potential of our product capabilities and underwriting expertise, becoming an easier company to do business with, and attracting, retaining and developing the talent needed for long-term success. The Board not only oversees this strategy and its clear articulation, but works closely with management to ensure that long-term goals are well formulated and subsequently met. In 2019, The Hartford made significant progress on its strategy through continued organic and inorganic investments in our businesses and employees. We closed on the acquisition of The Navigators Group, Inc., a global specialty insurance company; increased the speed and ease of our interactions with distribution partners and customers; and materially improved our business processes through significant investments in data and digital technology, including expanded use of robotics, and continued enhancements to our underwriting and quoting platforms. We also made significant investments in programs to help our employees develop their skills and capabilities, and announced a new student loan repayment program to help them pay down student debt. At the same time, The Hartford returned over $630 million to shareholders in the form of dividends and share repurchases and delivered a total shareholder return ("TSR") of 39.7%, outperforming both the S&P 500 and our insurance industry peers. While, to date, TSR has declined in 2020 due to the sharp decline in markets caused by COVID-19, The Hartford takes a long-term view of shareholder value. We have built a world class risk management program, and, as a 210-year-old company, we have navigated through many global crises, including multiple recessions, two world wars and the 1918 influenza pandemic. As we have always done, we will continue to use our experience and expertise to deliver on our promises to customers.

Sustainability
Sustainability is of critical importance to The Hartford. The Board is directly responsible for oversight of the company’s progress on environmental, social and governance matters, which in 2019 included the following highlights:
Adopting a policy to reduce investments in, and underwriting of, coal and tar sands;
Introducing the U.N. Sustainability Development Goals into our sustainability reporting;
Signing on to the Paradigm for Parity, with the ultimate goal of achieving full gender parity by 2030, with a near-term goal of women holding at least 30% of senior roles; and
Driving toward our published 2022 sustainability goals to ensure equal pay for equal work and achieve top quartile industry representation in leadership roles for women and people of color, reduce greenhouse gas emissions by at least 2.1% each year, and positively impact the lives of 10 million people through our philanthropic programs.
The Board is proud that The Hartford’s sustainability efforts have been recognized externally. We were named one of the “World’s Most Ethical Companies” by the Ethisphere Institute for the twelfth time, listed as the highest ranked U.S. insurance company on the Dow Jones Sustainability North America Index, included on Forbes’ and JUST Capital’s list of America’s Most “JUST” Companies, and recognized as the highest ranked property-casualty insurance company in Forbes’ annual list of America’s Best Employers for Diversity. As the company continues to evolve its sustainability practices and disclosures - particularly given our new global footprint - we remain committed to maintaining The Hartford’s sustainability leadership.


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Board Refreshment
While the Nominating & Corporate Governance Committee (the “Nominating Committee”) reviews Board composition on an ongoing basis, the departure of two directors in the spring of 2019 presented an opportunity to identify new director candidates that would best complement the skills and attributes of the existing directors, and better position the Board to challenge and oversee the Company’s long-term strategy. The Nominating Committee focused its search principally on the experience it was losing with the departing directors, including public company leadership experience, and deep property and casualty industry experience. After reviewing a deep and diverse slate, the Nominating Committee identified two incredibly strong candidates in Larry De Shon, former CEO of Avis Budget Group, and Matt Winter, former President of The Allstate Corporation. Both of them joined the Board in February 2020. As described in this proxy statement, Larry and Matt bring to the Board extensive leadership and corporate governance experience, deep knowledge of distribution channels, strong operational skills and risk management expertise. We look forward to their contributions to our Board.

Board Effectiveness
As we’ve written about it the past, many of the Board’s strengths - its composition, heightened strategic focus, increased use of competitor data and market analytics, and enhanced communication - are the direct result of its rigorous annual evaluation process. In 2019, as part of its continuous improvement efforts, the Board underwent its first third-party evaluation. From January to March 2019, all twelve then-current Board members and select members of senior management were interviewed by an independent third-party to assess the Board’s effectiveness and identify opportunities to further improve performance. The outcome of this in-depth study confirmed that the Board is delivering highly effective oversight and governance of critically important business functions, but it also identified opportunities to further elevate the Board’s performance. Those opportunities included strengthening existing emergency CEO succession plan processes as well as select board practices, such as our director on-boarding process. As described in this proxy statement, we have improved our practices in these and other important areas of corporate governance. We believe it is a measure of the directors’ commitment to the company, its shareholders and management team that the Board has invested in a thorough review of how it functions.

Shareholder Engagement
The Hartford has a long history of robust engagement with its shareholders, and has received positive feedback from them in the past regarding our compensation program and related disclosure. Therefore, it was a surprise that, while we continued to receive majority support for our compensation program, Say-on-Pay results at our 2019 annual meeting were below our historical average, with support at 75%. While we believe the decline in support was due in large part to the underperformance of our stock in 2018, we wanted to hear whether shareholders had concerns with the program's design. At the Board’s direction, the company initiated an expanded engagement program with our institutional shareholders, reaching shareholders representing approximately 49% of shares outstanding. Generally, the shareholders we engaged continued to support the overall design of our compensation program; however, after taking into account feedback from those engagements, we enhanced our disclosure in this proxy statement on how the Compensation & Management Development Committee’s qualitative review impacts annual incentive awards. In addition, in February 2020, The Compensation Committee updated the payout curve for future long-term awards to target above median TSR.

As always, we are proud to work closely with management and our fellow directors to ensure that The Hartford is a well-governed, shareholder-focused company that is positioned to deliver sustainable long-term value to all of our stakeholders. As we have in the past, we will navigate the current global health crisis by leveraging the talent and dedication of our employees to deliver on our purpose and execute on our strategy. Thank you for your continued support.
Sincerely,
 
 
 
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Christopher J. Swift
Trevor Fetter
Chairman and Chief Executive Officer
Lead Director

 
2020 Proxy Statement
3


TABLE OF CONTENTS
PROXY SUMMARY
BOARD AND GOVERNANCE MATTERS
Item 1: Election of Directors
Governance Practices and Framework
Board Composition and Refreshment
Committees of the Board
The Board's Role and Responsibilities
Director Compensation
Certain Relationships and Related Party Transactions
Communicating with the Board
Director Nominees
AUDIT MATTERS
Item 2: Ratification of Independent Registered Public Accounting Firm
Fees of the Independent Registered Public Accounting Firm
Audit Committee Pre-Approval Policies and Procedures
Report of the Audit Committee
COMPENSATION MATTERS
Item 3: Advisory Vote to Approve Executive Compensation
Compensation Discussion and Analysis
Executive Summary
Components of the Compensation Program
Process for Determining Senior Executive Compensation (Including NEOs)
Pay for Performance
Compensation Policies and Practices
Effect of Tax and Accounting Considerations on Compensation Design
Compensation and Management Development Committee Interlocks and Insider Participation
Report of the Compensation and Management Development Committee
Executive Compensation Tables
CEO Pay Ratio
Item 4: Consideration and Approval of the 2020 Stock Incentive Plan
INFORMATION ON STOCK OWNERSHIP
Directors and Executive Officers
Certain Shareholders
INFORMATION ABOUT THE HARTFORD’S ANNUAL MEETING OF SHAREHOLDERS
Householding of Proxy Materials
Frequently Asked Questions
Other Information
APPENDIX A: RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
APPENDIX B: SUMMARY OF THE HARTFORD 2020 STOCK INCENTIVE PLAN
APPENDIX C: THE HARTFORD 2020 STOCK INCENTIVE PLAN

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PROXY SUMMARY

PROXY SUMMARY
This summary highlights information contained elsewhere in this proxy statement. It does not contain all the information you should consider and you should read the entire proxy statement carefully before voting.
BOARD AND GOVERNANCE HIGHLIGHTS
ITEM 1
ELECTION OF DIRECTORS
Each director nominee has an established record of accomplishment in areas relevant to overseeing our businesses and possesses qualifications and characteristics that are essential to a well-functioning and deliberative governing body.
The Board recommends a vote "FOR" each director nominee
 
Director Nominee, Age(1)
and Present or Most Recent Experience
Independent
Director since
Current
Committees(2)
Other Current
Public Company Boards
allardice.jpg
Robert B. Allardice III, 73
Former regional CEO,
Deutsche Bank Americas
2008
Audit
FIRMCo*
Ellington Residential Mortgage REIT
GasLog Partners
deshon.jpg
Larry D. De Shon, 60
Former President, CEO and COO,
Avis Budget Group
2020
Audit
FIRMCo
 
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Carlos Dominguez, 61
President,
Sprinklr
2018
Comp
FIRMCo
NCG
PROS Holdings(3)
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Trevor Fetter,(4) 60
Senior Lecturer,
Harvard Business School
2007
Comp
FIRMCo
 
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Kathryn A. Mikells, 54
Chief Financial Officer
Diageo plc
2010
Audit*
FIRMCo
Diageo plc
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Michael G. Morris, 73
Former Chairman, President and CEO,
American Electric Power Company
2004
Audit
FIRMCo
NCG*
Alcoa
L Brands
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Teresa W. Roseborough, 61
Executive Vice President, General Counsel and Corporate Secretary, The Home Depot
2015
Comp
FIRMCo
NCG
 
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Virginia P. Ruesterholz, 58
Former Executive Vice President,
Verizon Communications
2013
Comp*
FIRMCo
NCG
Bed Bath & Beyond

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Christopher J. Swift, 59
Chairman and CEO,
The Hartford
 
2014
FIRMCo
 
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Matt Winter, 63
Former President,
The Allstate Corporation
2020
FIRMCo
ADT
  H&R Block
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Greig Woodring, 68
Former President and CEO,
Reinsurance Group of America
2017
Audit
FIRMCo
 
* Denotes committee chair
(1)
As of April 9, 2020
(2)
Full committee names are as follows: Audit – Audit Committee; Comp – Compensation and Management Development Committee; FIRMCo – Finance, Investment and Risk Management Committee; NCG – Nominating and Corporate Governance Committee
(3)
Mr. Dominguez has been nominated to stand for election as a director at PROS Holdings, Inc.'s annual meeting on April 29, 2020
(4)
Mr. Fetter serves as the Lead Director. For more details on the Lead Director’s role, see page 14

 
2020 Proxy Statement
5

PROXY SUMMARY
 
 

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*Average independent nominee tenure of 6.6 years at April 9, 2020
GOVERNANCE BEST PRACTICES
The Board and management regularly review best practices in corporate governance and modify our governance policies and practices as warranted. Our current best practices are highlighted below.
Independent Oversight
Other than CEO, all directors are independent
Independent key committees (Audit, Compensation, Nominating)
Empowered and engaged independent Lead Director
Engaged Board /Shareholder Rights
All directors elected annually 
Majority vote standard (with plurality carve-out for contested elections)
Proxy access right
Director resignation policy
Over-boarding policy limits total public company boards, including The Hartford, to five for non-CEOs and two for sitting CEOs
Rigorous Board and committee self-evaluation conducted annually; third party Board evaluations conducted triennially
Meaningful Board education and training on recent and emerging governance and industry trends
Annual shareholder engagement focused on governance, compensation and sustainability issues
Good Governance
Board diversity of experience, tenure, age and gender
Mandatory retirement age of 75 and 15-year term limit promote regular Board refreshment
Annual review of CEO succession plan by the independent directors with the CEO
Annual Board review of senior management long-term and emergency succession plans
Stock-ownership guidelines of 6x salary for CEO and 4x salary for other named executive officers
Annual Nominating Committee review of The Hartford's political and lobbying policies and expenditures
Commitment to Sustainability
Board oversight of sustainability matters; Nominating Committee oversight of sustainability governance framework
Sustainability Governance Committee comprised of senior management charged with overseeing a comprehensive sustainability strategy and ensuring the full Board is briefed at least annually


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PROXY SUMMARY

SUSTAINABILITY PRACTICES
We believe that having a positive impact on the world is the right thing to do and a business imperative. Fostering and safeguarding human achievement has been our business for over two hundred years, and sustainability considerations are integral to our strategy. We recognize that people want to work for, invest in, and buy from an organization that shares their values. Our sustainability efforts address economic, environmental and social impacts as highlighted in four key areas:
ENVIRONMENT
SOCIAL
GOVERNANCE
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As an insurance company, we understand the risks that environmental challenges present to people and communities. As stewards of the environment, we are committed to mitigating climate change and reducing our carbon footprint incrementally each year.
We help individuals and communities prevail by building safe, strong and successful neighborhoods through targeted philanthropic investments, by partnering with like-minded national and local organizations, and by harnessing the power of our more than 19,000 employees to engage in their communities.
We are committed to building an inclusive and engaging culture where people are respected for who they are, recognized for how they contribute and celebrated for growth and exceptional performance. We value the diversity of our employees' skills and life experiences and invest deeply in their development so they can deliver on our strategy and propel our company forward.
We believe that doing the right thing every day is core to our character, and we are proud of our reputation for being a company that places ethics and integrity above all else.
To learn more, please access our Sustainability Highlight Report, which presents our sustainability goals and provides data on our sustainability practices and achievements, and our Global Reporting Initiative (GRI) Standards Response, which offers greater detail on our sustainability activities at: https://www.thehartford.com/about-us/corporate-sustainability.
AUDIT HIGHLIGHTS
ITEM 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
As a matter of good corporate governance, the Board is asking shareholders to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for 2020.
The Board recommends a vote "FOR" this item

 
2020 Proxy Statement
7

PROXY SUMMARY
 
 

COMPENSATION HIGHLIGHTS
ITEM 3
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
The Board is asking shareholders to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement. Our executive compensation program is designed to promote long-term shareholder value creation and support our strategy by (1) encouraging profitable growth consistent with prudent risk management, (2) attracting and retaining talent needed for long-term success, and (3) appropriately aligning pay with short- and long-term performance.
The Board recommends a vote "FOR" this item
STRATEGIC PRIORITIES
The Hartford’s strategy focuses on realizing the full potential of our product capabilities and underwriting expertise, becoming an easier company to do business with, and attracting, retaining and developing the talent needed for long-term success.
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Many initiatives and investments in 2019 advanced our position in each strategic focus area:
Closing on the acquisition of The Navigators Group, Inc. (“Navigators Group”), a global specialty insurance company.
Integrating the recent Group Benefits and Navigators Group acquisitions successfully, and maximizing our combined potential by deepening our distribution relationships, capitalizing on a broader product portfolio and meeting a wider array of customer needs.
Increasing the speed and ease of our interactions and business processes through data, digital technology and voice of customer, including expanded use of robotics and continued enhancements to underwriting and quoting platforms.
Continuing investment in new products and business models such as Spectrum, our next-generation package offering for small businesses, which offers customers tailored coverage recommendations as well as the ability to customize their own coverage, including real-time quote pricing. We are investing to maintain market leadership in small commercial as existing competitors and new entrants increase their focus on this business.
Improving employee experience. We are investing in our workforce and striving to attract, retain and develop the best talent in the industry, enhance our industry-leading position in diversity and inclusion, and sustain our ethical culture. We see the benefits of this commitment in our sustained top-decile employee engagement scores.
2019 FINANCIAL RESULTS
Our 2019 financial results were excellent, with strong financial results across most of our business lines. Full year 2019 income from continuing operations, net of tax, available to common stockholders and core earnings* were $2.1 billion, or $5.66 per diluted share and $5.65 per diluted share, respectively. Net income and core earnings return on equity ("ROE")* were 14.4% and 13.6%, respectively.
Highlighted below are year-over-year comparisons of our net income available to common stockholders and core earnings performance and our three-year net income ROE and core earnings ROE results. Core earnings is the primary determinant of our annual incentive plan funding, as described on page 43, and average annual core earnings ROE over a three-year performance period is the metric used for 50% of performance shares granted to Senior Executives, as described on page 46 (in each case, as adjusted for compensation purposes).
* Denotes a non-GAAP financial measure. For definitions and reconciliations to the most directly comparable GAAP measure, see Appendix A.
Net income ROE represents net income available to common stockholders ROE.

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PROXY SUMMARY

YEAR-OVER-YEAR PERFORMANCE
 
THREE-YEAR PERFORMANCE
    
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TOTAL SHAREHOLDER RETURNS
The following chart shows The Hartford's total shareholder return ("TSR") relative to  the S&P 500, S&P 500 Insurance Composite and S&P P&C indices and our 2019 Corporate Peer Group (provided on p. 53).
tsr_performance.jpg
* Includes reinvestment of dividends. Data provided by S&P Capital IQ.
SHAREHOLDER ENGAGEMENT & RESPONSIVENESS TO “SAY-ON-PAY” RESULTS
At our 2019 annual meeting, we received 75% support on Say-on-Pay. We believe the decline in support was, in large part, due to the underperformance of our stock price relative to peers and the broader market in 2018, and while we continued to receive majority support of our compensation program, we wanted to hear whether shareholders had concerns with the program's design. As a result, we doubled our annual engagement efforts. In the fall of 2019, management reached out to our top 50 shareholders, representing approximately 68% of shares outstanding and conducted calls or received written feedback from a total of 20 shareholders representing approximately 49% of shares outstanding.
As a result of shareholder feedback received in 2019, we made the following changes to enhance our disclosure and compensation program:

 
2020 Proxy Statement
9

PROXY SUMMARY
 
 

What we heard from shareholders
Actions taken
Support for overall compensation design, but requests for more detail regarding the Compensation Committee's qualitative review and adjustments to AIP
• Revised AIP description to more clearly explain the Compensation Committee's qualitative review, including the measures the Compensation Committee considers from a qualitative perspective, and the rationale for the magnitude of the adjustment
• Updated the AIP curve for 2020 awards to expand the range from +/- 15% to +/-20% of target, requiring greater outperformance to achieve above target awards
Questions regarding how CEO performance is measured
Revised CEO performance description to more clearly describe how individual performance aligns with the company's strategic priorities
Support for targeting above-median performance for the TSR component of performance share awards
Updated the TSR payout curve for performance share awards granted in 2020 to target the 55th percentile
COMPONENTS OF COMPENSATION AND PAY MIX
Compensation Component
Description
Base Salary
     Fixed level of cash compensation based on market data, internal pay equity, responsibility, expertise and performance.
Annual Incentive Plan ("AIP")
    Variable cash award based primarily on annual company operating performance against a predetermined financial target and achievement of individual performance goals aligned with the company's strategic priorities.
Long-Term Incentive Plan ("LTI")
     Variable awards granted based on individual performance, potential and market data.
     Designed to drive long-term performance, align senior executive interests with shareholders, and foster retention.
     Award mix (50% performance shares and 50% stock options) reflects stock price performance, peer-relative shareholder returns (stock price and dividends) and operating performance.
Approximately 91% of CEO target annual compensation and approximately 84% of other NEO target annual compensation are variable based on performance, including stock price performance:
Target Pay Mix — CEO
Salary
9%
Annual Incentive
24%
Long-Term Incentive
67%
 
 
 
 
 
 
 
Variable with Performance: 91%
Target Pay Mix — Other NEOs
Salary
16%
Annual Incentive
30%
Long-Term Incentive
54%
 
 
 
 
 
 
 
Variable with Performance: 84%

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PROXY SUMMARY

2019 COMPENSATION DECISIONS
2019 Compensation Decisions
 
Rationale
The Compensation Committee approved an AIP funding level of 148% of target.
 
Performance against the pre-established Compensation Core Earnings target produced a formulaic AIP funding level of 161% of target. The Compensation Committee reduced this funding level to 148% following its qualitative review, taking into account extraordinary returns on real estate partnerships and outperformance of Hartford Funds due to equity market returns significantly above operating plan assumptions. (pages 44-45)
The Compensation Committee certified a 2017-2019 performance share award payout at 130% of target.
 
The company's average annual Compensation Core ROE during the performance period was 11.1%, resulting in a payout of 200% of target for the ROE component (50% of the award). The company's TSR during the performance period was at the 37th percentile relative to 18 peer companies, resulting in a payout of 59% of target for the TSR component (50% of the award). (page 47)
The Compensation Committee (and, in the case of the CEO, the independent directors) approved the following compensation for the NEOS in 2019:
 
Base Salary
 
AIP Award
 
LTI Award
 
Total Compensation
NEO
2019
Change from 2018
 
2019
Change from 2018
 
2019
Change from 2018
 
2019
Change from 2018
Christopher Swift
$
1,150,000

 
$
4,440,000

(7.5)%
 
$
8,250,000

3.1%
 
$
13,840,000

(0.8)%
Beth Costello
$
725,000

 
$
1,850,000

(3.9)%
 
$
1,775,000

 
$
4,350,000

(1.7)%
Douglas Elliot
$
950,000

 
$
2,812,000

(7.8)%
 
$
5,150,000

3.0%
 
$
8,912,000

(1.0)%
Brion Johnson
$
600,000

4.3%
 
$
1,890,000

(16.0)%
 
$
1,750,000

9.4%
 
$
4,240,000

(4.2)%
William Bloom
$
625,000

8.7%
 
$
1,500,000

(3.2)%
 
$
1,250,000

13.6%
 
$
3,375,000

4.7%
This table provides a concise picture of compensation decisions made in 2019, and highlights changes from 2018. In most cases, Total 2019 Compensation is lower than that approved in 2018 due to the lower AIP awards for 2019; while 2019 awards were above target, final approved payouts were below those paid for the 2018 performance year. Another view of 2019 compensation for the NEOs is available in the Summary Compensation Table on page 57.
COMPENSATION BEST PRACTICES
WHAT WE DO
Compensation heavily weighted towards variable pay
Senior Executives generally receive the same benefits as full-time employees
Double trigger requirement for cash severance and equity vesting upon a change of control*
Cash severance upon a change of control limited to 2x base salary + bonus
Independent compensation consultant
Risk mitigation in plan design and annual review of compensation plans, policies and practices
Prohibition on hedging, monetization, derivative and similar transactions with company securities
Prohibition on Senior Executives pledging company securities
Stock ownership guidelines for directors and Senior Executives
Periodic review of compensation peer groups
Competitive burn rate and dilution for equity program
*Double trigger for equity awards applies if the awards are assumed or replaced with substantially equivalent awards.

 
2020 Proxy Statement
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PROXY SUMMARY
 
 

WHAT WE DON'T DO
û
No Senior Executive tax gross-ups for perquisites or excise taxes on severance payments
û
No individual employment agreements
û
No granting of stock options with an exercise price less than the fair market value of our common stock on the date of grant
û
No re-pricing of stock options
û
No buy-outs of underwater stock options
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No reload provisions in any stock option grant
û
No payment of dividends or dividend equivalents on unvested equity awards


ITEM 4
CONSIDERATION AND APPROVAL OF 2020 STOCK INCENTIVE PLAN
We are asking stockholders to approve the 2020 Stock Incentive Plan (the “Plan”), which is intended to replace the 2014 Incentive Stock Plan (the “2014 Plan”). The Plan authorizes the issuance of up to 11.25 million shares, which includes the remaining shares under the 2014 Plan, and makes certain other changes. On the recommendation of the Compensation and Management Development Committee, the Board approved the Plan and recommends approval by stockholders. The Plan is an important part of the pay-for-performance compensation program and the authorized number of shares available for grant permits the company to continue the program. The Board considers equity compensation that is aligned with the interests of the company's shareholders as a significant component in achieving its goal of attracting, retaining and developing talent needed for long-term success. A detailed summary of the Plan is attached to this proxy statement as Appendix B, which is qualified in its entirety by reference to the text of the Plan, which is attached to this proxy statement as Appendix C.
The Board recommends that shareholders vote “FOR” the approval of the 2020 Stock Incentive Plan.



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BOARD AND GOVERNANCE MATTERS

BOARD AND GOVERNANCE MATTERS
ITEM 1
ELECTION OF DIRECTORS
The Nominating Committee believes the director nominees possess qualifications, skills and experience that are consistent with the standards for the selection of nominees for election to the Board set forth in our Corporate Governance Guidelines described on pages 16-18 and have demonstrated the ability to effectively oversee The Hartford’s corporate, investment and business operations. Biographical information for each director nominee is described beginning on page 28, including the principal occupation and other public company directorships (if any) held in the past five years and a description of the specific experience and expertise that qualifies each nominee to serve as a director of The Hartford.
The Board recommends a vote "FOR" each director nominee
GOVERNANCE PRACTICES AND FRAMEWORK
At The Hartford, we aspire to be an exceptional company celebrated for financial performance, character, and customer value. We believe good governance practices and responsible corporate behavior are central to this vision and contribute to our long-term performance. Accordingly, the Board and management regularly consider best practices in corporate governance and shareholder feedback and modify our governance policies and practices as warranted. Our current best practices include:
Independent Oversight
Other than CEO, all directors are independent
Independent key committees (Audit, Compensation, Nominating)
Empowered and engaged independent Lead Director
Engaged Board /Shareholder Rights
All directors elected annually 
Majority vote standard (with plurality carve-out for contested elections)
Proxy access right
Director resignation policy
Over-boarding policy limits total public company boards, including The Hartford, to five for non-CEOs and two for sitting CEOs
Rigorous Board and committee self-evaluation conducted annually; third party Board evaluations conducted triennially
Meaningful Board education and training on recent and emerging governance and industry trends
Annual shareholder engagement focused on governance, compensation and sustainability issues
Good Governance
Board diversity of experience, tenure, age and gender
Mandatory retirement age of 75 and 15-year term limit promote regular Board refreshment
Annual review of CEO succession plan by the independent directors with the CEO
Annual Board review of senior management long-term and emergency succession plans
Stock-ownership guidelines of 6x salary for CEO and 4x salary for other named executive officers
Annual Nominating Committee review of The Hartford's political and lobbying policies and expenditures
Commitment to Sustainability
Board oversight of sustainability matters; Nominating Committee oversight of sustainability governance framework
Sustainability Governance Committee comprised of senior management charged with overseeing a comprehensive sustainability strategy and ensuring the full Board is briefed at least annually
The fundamental responsibility of our directors is to exercise their business judgment to act in what they reasonably believe to be the best interests of The Hartford and its shareholders. The Board fulfills this responsibility within the general governance framework provided by the following documents:
Articles of Incorporation
By-laws
Corporate Governance Guidelines (compliant with the listing standards of the New York Stock Exchange ("NYSE") and including guidelines for determining director independence and qualifications)

 
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Charters of the Board’s four standing committees (the Audit Committee; the Compensation and Management Development Committee ("Compensation Committee"); the Finance, Investment and Risk Management Committee ("FIRMCo"); and the Nominating and Corporate Governance Committee ("Nominating Committee"))
Code of Ethics and Business Conduct
Code of Ethics and Business Conduct for Members of the Board of Directors
Copies of these documents are available on our investor relations website at http://ir.thehartford.com or upon request sent to our Corporate Secretary (see page 77 for details).
DIRECTOR INDEPENDENCE
The Board annually reviews director independence under applicable law, the listing standards of the NYSE and our Corporate Governance Guidelines. In addition, per our Corporate Governance Guidelines, in order to identify potential conflicts of interest and to monitor and preserve the independence, any director who wishes to become a director of another for-profit entity must obtain the pre-approval of the Nominating Committee.
The Board has affirmatively determined that all directors other than Mr. Swift are independent.
BOARD LEADERSHIP STRUCTURE
Board Chair
 
Independent Lead Director
The roles of CEO and Chairman of the Board (“Chairman”) are held by Christopher Swift. Mr. Swift has served as CEO since July 1, 2014, and was appointed Chairman on January 5, 2015. In late 2014, before Mr. Swift assumed the role of Chairman, the Board deliberated extensively on our board leadership structure, seeking feedback from shareholders and considering corporate governance analysis. The Board concluded then, and continues to believe, that our historical approach of combining the roles of CEO and Chairman while maintaining strong, independent board leadership is the optimal leadership structure for the Board to carry out its oversight of our strategy, business operations and risk management.
The Board believes other elements of our corporate governance structure ensure independent directors can perform their role as fiduciaries in the Board’s oversight of management and our business, and minimize any potential conflicts that may result from combining the roles of CEO and Chairman. For example:
• All directors other than Mr. Swift are independent;
• An empowered and engaged Lead Director provides independent Board leadership and oversight; and
• At each regularly scheduled Board meeting, the non-management directors meet in executive session without the CEO and Chairman present (six such meetings in 2019).
As part of its evaluation process, the Board has committed to undertaking an annual review of its leadership structure to ensure it continues to serve the best interests of shareholders and positions the company for future success.
 
Whenever the CEO and Chairman roles are combined, our Corporate Governance Guidelines require the independent directors to elect an independent Lead Director. Trevor Fetter was elected our Lead Director in May 2017. The responsibilities and authority of the Lead Director include the following:
     Presiding at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;
     Serving as a liaison between the CEO and Chairman and the non-management directors;
     Regularly conferring with the Chairman on matters of importance that may require action or oversight by the Board, ensuring the Board focuses on key issues and tasks facing The Hartford;
     Approving information sent to the Board and meeting agendas for the Board;
     Approving the Board meeting schedules to help ensure that there is sufficient time for discussion of all agenda items;
     Maintaining the authority to call meetings of the independent non-management directors;
     Approving meeting agendas and information for the independent non-management sessions and briefing, as appropriate, the Chairman on any issues arising out of these sessions;
     If requested by shareholders, ensuring that he or she is available, when appropriate, for consultation and direct communication; and
     Leading the Board’s evaluation process and discussion on board refreshment and director tenure.
The Board believes that these duties and responsibilities provide for strong independent Board leadership and oversight.




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ANNUAL BOARD EVALUATION PROCESS
The Nominating Committee oversees the Board's multi-step evaluation process to ensure an ongoing, rigorous assessment of the Board’s effectiveness, composition and priorities. In addition to the full Board evaluation process, the standing committees of the Board undertake separate self-assessments on an annual basis.
In 2018, the Board further augmented its evaluation process with the adoption of third-party facilitated evaluations every three years, commencing in 2019. This was the most recent action in a multi-year effort to enhance the Board’s evaluation process, beginning with the adoption of individual director interviews in 2016. The Board sought and considered shareholder feedback on the merits of third party board evaluation and ultimately concluded that periodic third party board evaluations would promote more candid conversations, provide a neutral perspective, and help the Board benchmark its corporate governance practices.
The Board’s first third-party facilitated evaluation took place in 2019. From January to March 2019, all twelve then-current Board members and select members of senior management who routinely interact with the board were interviewed by an independent third-party to assess the Board’s effectiveness and identify opportunities to further improve performance. In addition, Board practices were benchmarked against the S&P 500 and Board members and select management completed a board culture survey. The evaluation resulted in a detailed Board effectiveness report, which confirmed that the Board is operating at a high standard and is successfully overseeing and monitoring the strategy and risks of the company. As part of the review, the Board identified potential opportunities to focus on for the 2019-2020 board year as part of its continuous improvement efforts, including strengthening existing emergency CEO succession plan and director on-boarding processes (described below).
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Board Evaluation and
Development of Goals
(May)

The Lead Director, or third-party evaluator, leads a Board evaluation discussion in an executive session guided by the Board’s self-assessment questionnaire and key themes identified through one-on-one discussions. The Board identifies successes and areas for improvement from the prior Board year and establishes formal goals for the year ahead.
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Annual Corporate Governance Review / Shareholder Engagement Program
(October to December)
The Nominating Committee performs an annual review of The Hartford's corporate governance policies and practices in light of best practices, recent developments and trends. In addition, the Nominating Committee reviews feedback on governance issues provided by shareholders during our annual shareholder engagement program.
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Interim Review of Goals
(December)
The Lead Director leads an interim review of progress made against the goals established during the Board evaluation discussion in May.
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Board Self-Assessment Questionnaires
(February)
The governance review and shareholder feedback inform the development of written questionnaires that the Board and its standing committees use to help guide self-assessment. The Board’s questionnaire covers a wide range of topics, including the Board’s:
• Fulfillment of its responsibilities under the Corporate Governance Guidelines;
• Effectiveness in overseeing our business plan, strategy and risk management;
• Leadership structure and composition, including mix of experience, skills, diversity and tenure;
• Relationship with management; and
• Processes to support the Board’s oversight function.
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One-on-One Discussions
(February to May)
The Lead Director, or third-party evaluator, meets individually with each independent director on Board effectiveness, dynamics and areas for improvement.

 
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BOARD COMPOSITION AND REFRESHMENT
DIRECTOR SUCCESSION PLANNING
The Nominating Committee is responsible for identifying and recommending to the Board candidates for Board membership. Throughout the year, the Nominating Committee considers the Board’s composition, skills and attributes to determine whether they are aligned with our long-term strategy and major risks. The succession planning process is informed by the results of the Board and committee evaluation processes, as well as anticipated needs in light of The Hartford’s retirement and tenure policies (described below). To assist the Nominating Committee in identifying prospective Board nominees when undertaking a search, the company retains an outside search firm. The Nominating Committee also considers candidates suggested by its members, other Board members, management and shareholders.
The Nominating Committee evaluates candidates against the standards and qualifications set forth in our Corporate Governance Guidelines as well as other relevant factors, including the candidate's potential contribution to the diversity of the Board. In 2018 the Board amended our Corporate Governance Guidelines to ensure that diverse candidates are included in the pool from which board candidates are selected.
The Nominating Committee's most recent director search began following the departure of two directors in spring of 2019. The Nominating Committee focused its search principally on the experience it was losing with the departing directors, including public company leadership experience and property and casualty industry experience, which culminated in the election of Larry De Shon, former CEO Avis Budget Group, and Matt Winter, former President of The Allstate Corporation. Both joined the Board in February 2020.
The graphic below illustrates our typical succession planning process, which begins with an assessment the Board's current skills and attributes, and then identifies skills or attributes that are needed, or may be needed in the future, in light of the company's strategy.
Overview of Director Search Process
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Development of Candidate Specification
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Screening of Candidates
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Meeting With Candidates
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Decision and Nomination
• Develop skills matrix to identify desired skills and attributes, including diversity

• Target areas of expertise aligned with our strategy
 
• Select outside search firms to lead process and/or consider internal or shareholder recommendations

• Screen candidates for each specification identified
 
• Top candidates are interviewed by Nominating Committee members, other directors, and management

• Finalist candidates undergo background and conflicts checks
 
• Nominating Committee recommendation of candidates and committee assignments to full Board

• Board consideration and adoption of recommendation
DIRECTOR TENURE & DIVERSITY
Tenure
The Nominating Committee strives for a Board that includes a mix of varying perspectives and breadth of experience. Newer directors bring fresh ideas and perspectives, while longer tenured directors bring extensive knowledge of our complex operations. As part of its annual evaluation process, the Board assesses its overall composition, including director tenure, and does not believe the independence of any director nominee is compromised due to Board tenure.

In order to promote thoughtful Board refreshment, the Board has adopted the following in our Corporate Governance Guidelines:
Retirement Age. With limited exceptions, an independent director may not be nominated to stand for election or reelection to the Board after his or her 75th birthday.
Tenure Policy. An independent director may not stand for reelection after serving as a director for 15 years.
The Board believes that these age and tenure policies provide discipline to the Board refreshment process, improve succession planning and support Board independence. Moreover, the policies supplement and strengthen the Board evaluation process as follows:
During the annual Board self-assessment process following an independent director's eighth year of service, the Lead Director (or the Chair of the Nominating Committee in the case of the Lead Director) will review with such independent director his or her independence, outside commitments, future plans and other matters that may impact ongoing service on the Board. 

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During the annual Board self-assessment process following an independent director's twelfth year of service and each year thereafter, discussions will also include the timing of the director’s retirement from the Board (i.e., after 15 years or earlier). 
Diversity
The Board believes a diverse membership with varying perspectives and breadth of experience is an important attribute of a well-functioning board and contributes positively to robust discussion at meetings. The Nominating Committee considers diversity in the context of the Board as a whole and takes into account considerations relating to race, gender, ethnicity and the range of perspectives the directors bring to their Board work. As part of its consideration of prospective nominees, the Board and the Nominating Committee monitor whether the directors as a group meet The Hartford’s criteria for the composition of the Board, including diversity considerations. As part of our continuing efforts to bring diverse perspectives to the Board:
Since 2010 the Board has appointed four women and two people of color as directors;
In 2016, Julie Richardson became chair of the Audit Committee and Virginia Ruesterholz became chair of the Compensation Committee, increasing female leadership on the Board; in 2019 Kathryn Mikells became chair of the Audit Committee, continuing female leadership on the Board; and
In 2018, the Board amended our Corporate Governance Guidelines to ensure that diverse candidates are included in the pool from which board candidates are selected.
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*Average independent nominee tenure of 6.6 years at April 9, 2020
DIRECTOR ONBOARDING AND ENGAGEMENT
All directors are expected to invest the time and energy required to gain an in-depth understanding of our business and strategy.  In 2019, we enhanced our onboarding program for new directors with the goal of reducing the learning curve for new members and enabling them to provide meaningful contributions to the oversight of the company as early in their tenures as possible. Our enhanced onboarding program consists of two phases.  Phase one is designed to provide a solid foundation on our businesses, financial performance, strategy, risk and governance.  New directors are initially provided an executive summary of materials, intended as a primer on the company, and the Director's Reference Guide, a more comprehensive, long-term resource for use throughout their Board service. In addition, new directors devote numerous briefing sessions with senior management to review key functional areas of the company and their committee assignment responsibilities.  Phase two is an opportunity for new directors to continue learning about the business after they have been on the Board for six to twelve months.  Directors are afforded time to familiarize themselves with the company so they can identify areas for additional education and development.  In addition, we have formalized our board mentorship program to help integrate members with experienced directors. New directors are also encouraged to attend all committee meetings during their first year to help accelerate their understanding of the company and the Board. 

Our Board members also participate in other company activities and engage directly with our employees at a variety of events throughout the year. Recent examples include speaking at Professional Women’s Network and Ethics and Compliance Week events, as well as attendance at an annual dinner with employees working on key strategic business priorities or engaged with our employee resource groups.


 
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SHAREHOLDER PROPOSED NOMINEES
The Nominating Committee will consider director candidates recommended by shareholders using the same criteria described above. Shareholders may also directly nominate someone at an annual meeting. Nominations for director candidates are closed for 2020. To nominate a candidate at our 2021 Annual Meeting, notice must be received by our Corporate Secretary at the address below by February 19, 2021 and must include the information specified in our By-laws, including, but not limited to, the name of the candidate, together with a brief biography, an indication of the candidate’s willingness to serve if elected, and evidence of the nominating shareholder’s ownership of our Common Stock.
Pursuant to our proxy access By-law, a shareholder, or group of up to 20 shareholders, may nominate a director and have the nominee included in our proxy statement. The shareholder, or group collectively, must have held at least 3% of our Common Stock for three years in order to make a nomination, and may nominate as many as two directors, or a number of directors equal to 20% of the board, whichever is greater, provided that the shareholder(s) and the nominee(s) satisfy the requirements in our By-laws. Notice of proxy access director nominees for inclusion in our 2021 proxy statement must be received by our Corporate Secretary at the address below no earlier than November 10, 2020 and no later than December 10, 2020.
In each case, submissions must be delivered or mailed to Donald C. Hunt, Corporate Secretary, The Hartford Financial Services Group, Inc., One Hartford Plaza, Hartford, CT 06155.

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COMMITTEES OF THE BOARD
The Board has four standing committees: the Audit Committee; the Compensation Committee; FIRMCo; and the Nominating Committee. The Board has determined that all of the members of the Audit Committee, the Compensation Committee and the Nominating Committee qualify as “independent” under applicable law, the listing standards of the NYSE and our Corporate Governance Guidelines. The current members of the Board, the committees on which they serve and the primary functions of each committee are identified below.
AUDIT COMMITTEE
CURRENT MEMBERS:*
R. Allardice
L. De Shon
K. Mikells (Chair)
M. Morris
G. Woodring
MEETINGS IN 2019: 10
The Audit Committee evaluated the accounting impacts related to the 2019 acquisition of The Navigators Group, Inc., including the adverse development cover related to Navigators Group's 2018 and prior accident year reserves, and integration risks associated with the acquisition. In addition, the Audit Committee conducted risk and control assessments of Operations, Technology, Group Benefits and Claims, and reviewed management's loss reserve estimates."
Kathryn Mikells, Committee Chair since 2019
ROLES AND RESPONSIBILITIES
     Oversees the integrity of the company's financial statements 
     Oversees accounting, financial reporting and disclosure processes and the adequacy of management’s systems of internal control over financial reporting
     Oversees the company's relationship with, and performance of, the independent registered public accounting firm, including its qualifications and independence
     Oversees the performance of the internal audit function
     Oversees the company's compliance with legal and regulatory requirements and our Code of Ethics and Business Conduct
     Discusses with management policies with respect to risk assessment and risk management
* The Board has determined that all members are “financially literate” within the meaning of the listing standards of the NYSE and “audit committee financial experts” within the meaning of the SEC’s regulations.


COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
CURRENT MEMBERS:
C. Dominguez
T. Fetter
T. Roseborough
V. Ruesterholz (Chair)

MEETINGS IN 2019: 6
Given shareholder support of our "Say on Pay" proposal was lower than our historical average, in 2019 the Committee devoted substantial attention to understanding shareholder and proxy advisor feedback and significantly expanded the reach of the company’s engagement efforts.   As a result, the Committee took actions to enhance proxy disclosure of compensation decisions and modify the long-term incentive plan design for 2020.”
Virginia Ruesterholz, Committee Chair since 2016
ROLES AND RESPONSIBILITIES
     Oversees executive compensation and assists in defining an executive total compensation policy
     Works with management to develop a clear relationship between pay levels, performance and returns to shareholders, and to align compensation structure with objectives
     Has sole authority to retain, compensate and terminate any consulting firm used to evaluate and advise on executive compensation matters
     Considers independence standards required by the NYSE or applicable law prior to retaining compensation consultants, accountants, legal counsel or other advisors
     Meets annually with a senior risk officer to discuss and evaluate whether incentive compensation arrangements create material risks to the company
     Responsible for compensation actions and decisions with respect to certain senior executives, as described in the Compensation Discussion and Analysis beginning on page 37
 

 
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FINANCE, INVESTMENT AND RISK MANAGEMENT COMMITTEE
CURRENT MEMBERS:
R. Allardice (Chair)
L. De Shon
C. Dominguez
T. Fetter
K. Mikells
M. Morris
T. Roseborough
V. Ruesterholz
C. Swift
M. Winter
G. Woodring
MEETINGS IN 2019: 5
“In 2019, FIRMCo remained focused on the company's significant risk exposures, including market risk, liquidity and capital requirements, insurance risks and cybersecurity. Additionally, in light of the company's acquisition of The Navigators Group, Inc., the Committee reviewed the impacts of the acquisition on the enterprise risk profile, including updates to our statutory capital at risk tolerance, reinsurance strategy and underwriting risk management.”
Robert B. Allardice III, Committee Chair since 2016
ROLES AND RESPONSIBILITIES
     Reviews and recommends changes to enterprise policies governing management activities relating to major risk exposures such as market risk, liquidity and capital requirements, insurance risks and cybersecurity
     Reviews the company's overall risk appetite framework, which includes an enterprise risk appetite statement, risk preferences, risk tolerances, and an associated limit structure for each of the company's major risks
     Reviews and recommends changes to financial, investment and risk management guidelines
     Provides a forum for discussion among management and the entire Board of key financial, investment, and risk management matters


NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Current Members:
C. Dominguez
M. Morris (Chair)
T. Roseborough
V. Ruesterholz

Meetings in 2019: 5
With the departure of two directors in the spring of 2019, the Nominating Committee quickly executed on its director succession planning protocols to identify candidates that would best complement the skills and attributes of the existing directors and position the Board to oversee the company's long-term strategy. Focusing on adding directors with recent public company leadership experience, the Committee's search culminated in the appointment of two seasoned and highly successful leaders: Larry De Shon, the former CEO of Avis Budget Group, and Matt Winter, the former President of Allstate.”
Michael G. Morris, Committee Chair since 2018
ROLES AND RESPONSIBILITIES
     Advises and makes recommendations to the Board on corporate governance matters
     Considers potential nominees to the Board 
     Makes recommendations on the organization, size and composition of the Board and its committees
     Considers the qualifications, compensation and retirement of directors
     Reviews policies and reports on political contributions
• Oversees the establishment, management and processes related to environmental, social and governance activities
 

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THE BOARD’S ROLE AND RESPONSIBILITIES
BOARD RISK OVERSIGHT
The Board as a whole has ultimate responsibility for risk oversight. We have a formal enterprise Risk Appetite Framework that is reviewed by the Board at least annually. In light of the evolution of the company's business and risk profile, including the acquisition of Navigators Group, the 2019 review of the Risk Appetite Framework included revised risk preferences, tolerances, and limits. Thus far in 2020, the Board has been focused on the market implications, underwriting impact and operational considerations resulting from the outbreak of novel coronavirus, or COVID-19.
The Board exercises its oversight function through its standing committees, each of which has primary risk oversight responsibility for all matters within the scope of its charter. Annually, each committee reviews and reassesses the adequacy of its charter and the Nominating Committee reviews all charters and recommends any changes to the Board for approval. The chart below provides examples of each committee’s risk oversight responsibilities.
 
 
 
BOARD OF DIRECTORS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AUDIT COMMITTEE
    Financial reporting
    Legal and regulatory compliance
    Operational risk
 
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
• Compensation programs
• Talent acquisition, retention and development
• Succession planning
 
FINANCE, INVESTMENT AND RISK MANAGEMENT COMMITTEE
     Insurance risk
     Market risk
    Liquidity and capital requirements
     Cybersecurity
 
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
    Governance policies and procedures
    Board organization and membership
    Sustainability governance
The Audit Committee discusses with management risk assessment and risk management policies. FIRMCo oversees the investment, financial, and risk management activities of the company and has oversight of all risks that do not fall within the oversight responsibility of any other standing committee. FIRMCo is also briefed on our risk profile and risk management activities.
With respect to cybersecurity risk oversight, senior members of our Enterprise Risk Management, Information Protection and Internal Audit functions provide detailed, regular reports on cybersecurity matters (including assessments conducted by, or in conjunction with, third parties) to the full Board; FIRMCo, which has principal responsibility for oversight of cybersecurity risk; and/or the Audit Committee, which oversees controls for the company's major risk exposures. The topics covered by these reports include The Hartford's activities, policies and procedures to prevent, detect and respond to cybersecurity incidents, as well as lessons learned from cybersecurity incidents and internal and external testing of our cyber defenses.

For a detailed discussion of management's day-to-day management of risks, including sources, impact and management of specific categories of risk, see Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2019.
BOARD AND SHAREHOLDER MEETING ATTENDANCE
The Board met six times during 2019 and each of the directors attended 75% or more of the aggregate number of meetings of the Board and the committees on which he or she served. We encourage our directors to attend the Annual Meeting of Shareholders, and all of our directors attended the Annual Meeting of Shareholders held on May 15, 2019.
TALENT DEVELOPMENT AND SUCCESSION PLANNING
Talent development and succession planning are important parts of the Board’s governance responsibilities. The CEO and independent directors conduct an annual review of succession and continuity plans for the CEO. Succession planning includes the identification and development of potential successors, policies and principles for CEO selection, and plans regarding succession in the case of an emergency or the retirement of the CEO. In 2019, we strengthened existing emergency succession plan processes for the CEO. In addition, each year, the Compensation Committee reviews succession and continuity plans for the CEO and each member of the executive leadership team that reports to the CEO. The Compensation Committee’s charter requires that it discuss the results of these reviews with the independent directors and/or the CEO. However, given the importance of the topic and the engagement of the full Board on the issue, all directors are invited to these sessions. The full Board routinely meets and interacts with employees who have been identified as potential future leaders of the company.

 
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In recent years, the Board's robust talent development and succession planning efforts have resulted in the seamless and well-managed transition of internal candidates into the company’s most senior roles.
BUSINESS ETHICS AND CONDUCT
“Always act with integrity and honesty, and be accountable in everything you do.”
The Hartford's Code of Ethics and Business Conduct
Striving to do the right thing every day and in every situation is fundamental to our culture, and we are proud that we have been recognized twelve times, including in 2020, by The Ethisphere® Institute as one of the “World’s Most Ethical Companies.” We have adopted a Code of Ethics and Business Conduct, which applies to all of our employees, including our principal executive officer, principal financial officer and principal accounting officer. We have also adopted a Code of Ethics and Business Conduct for Members of the Board of Directors (the “Board Code of Ethics”). These codes require that all of our employees and directors engage in honest and ethical conduct in performing their duties, provide guidelines for the ethical handling of actual or apparent conflicts of interest, and provide mechanisms to report unethical conduct. Directors certify compliance with the Board Code of Ethics annually.
We provide our employees with a comprehensive and ongoing educational program, including courses on our Code of Ethics and Business Conduct, potential conflicts of interest, privacy and information protection, marketplace conduct, and ethical decision-making. Hotlines and online portals have been established for employees, vendors, or others to raise ethical concerns and employees are encouraged to speak up whenever they have an ethics-oriented question or problem.
POLITICAL ACTIVITIES
The Nominating Committee reviews the company's political and lobbying policies and reports of political contributions annually. As part of our Code of Ethics and Business Conduct, we do not make corporate contributions to political candidates or parties, and we require that no portion of our dues paid to trade associations be used for political contributions. We do allow the use of corporate resources for non-partisan political activity, including voter education and registration. We have two political action committees (“PACs”), The Hartford Advocates Fund and The Hartford Advocates Federal Fund. The PACs are solely funded by voluntary contributions from eligible employees in management-level roles and directors. The PACs support candidates for federal and state office who are interested in understanding insurance issues and developing public policy to address them. Our website includes information on: (1) contributions made by The Hartford's PACs; (2) our policy on corporate contributions for political purposes; and (3) annual dues, assessments and contributions of $25,000 or more to trade associations and coalitions. To learn more, please access our 2019 Political Activities Report, at https://ir.thehartford.com/corporate-governance/political-engagement.
SUSTAINABILITY PRACTICES
We believe that having a positive impact on the world is the right thing to do and a business imperative. Fostering and safeguarding human achievement has been our business for over two hundred years, and sustainability considerations are integral to our strategy. We recognize that people want to work for, invest in, and buy from an organization that shares their values. Our sustainability efforts address economic, environmental and social impacts as highlighted in four key areas:
ENVIRONMENT
SOCIAL
GOVERNANCE
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As an insurance company, we understand the risks that environmental challenges present to people and communities. As stewards of the environment, we are committed to mitigating climate change and reducing our carbon footprint incrementally each year.
We help individuals and communities prevail by building safe, strong and successful neighborhoods through targeted philanthropic investments, by partnering with like-minded national and local organizations, and by harnessing the power of our more than 19,000 employees to engage in their communities.
We are committed to building an inclusive and engaging culture where people are respected for who they are, recognized for how they contribute and celebrated for growth and exceptional performance. We value the diversity of our employees' skills and life experiences and invest deeply in their development so they can deliver on our strategy and propel our company forward.
We believe that doing the right thing every day is core to our character, and we are proud of our reputation for being a company that places ethics and integrity above all else.

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Our sustainability strategy is built around measurable goals intended to both create long-term shareholder value and contribute positively to society at large. For example, by 2022 some of our goals are to:
Reduce non-biodegradable non-recyclable solid waste by 20% and eliminate the use of Styrofoam;
Reduce our facilities' use of both energy and water by 15%;
Double the percentage of hybrid or electric fleet vehicles, and move to 100% electric for campus shuttles and security vehicles;
Rank in the top quartile in the insurance industry for representation of women and people of color through three levels of reporting to the CEO
Provide one million small business customers and their employees with access to addiction prevention and educational resources to combat the opioid epidemic; and
Bring the total number of children deputized through our signature Junior Fire Marshal® program to more than 115 million.
To learn more, please access our Sustainability Highlight Report, which presents our sustainability goals and provides data on our sustainability practices and achievements, and our Global Reporting Initiative (GRI) Standards Response, which offers greater detail on our sustainability activities at: https://www.thehartford.com/about-us/corporate-sustainability.
ESG Governance
Under our Corporate Governance Guidelines, the full Board has oversight responsibility for The Hartford's corporate reputation and ESG activities. The Board receives a "deep dive" report on an ESG topic annually. The 2019 briefing detailed the company's progress towards reaching our 2022 sustainability goals as well as the increasing number of sustainability rating agencies that evaluate our ESG performance.
In addition to the Board's oversight responsibility of substantive ESG topics, the Nominating Committee retains oversight of the governance framework and processes related to ESG activities. This includes oversight of the company's Sustainability Governance Committee, a management committee comprised of senior leaders that sets and helps drive execution of the company's sustainability strategy. The Sustainability Governance Committee meets at least four times each year and reports to the full Board at least annually. In 2019, the Sustainability Governance Committee met eight times.

 
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BOARD AND GOVERNANCE MATTERS
 
 

DIRECTOR COMPENSATION
We use a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on the Board. Members of the Board who are employees of The Hartford or its subsidiaries are not compensated for service on the Board or any of its committees.
For the 2019-2020 Board service year, non-management directors received a $100,000 annual cash retainer and a $160,000 annual equity grant of restricted stock units (“RSUs”). Annual cash and equity retainer amounts have not increased since 2014. In December 2018, following a market assessment, the Board increased the Audit Committee Chair retainer from $25,000 to $35,000, the Nominating Committee Chair retainer from $15,000 to $20,000 and the Lead Director retainer from $35,000 to $40,000 to bring those retainers to market median levels effective for the 2019-2020 Board service year.
ANNUAL CASH FEES
Cash compensation for the 2019-2020 Board service year beginning on May 15, 2019, the date of the 2019 Annual Meeting of Shareholders, and ending on May 20, 2020, the date of the 2020 Annual Meeting, is set forth below. Directors may elect to defer all or part of the annual Board cash retainer and any Committee Chair or Lead Director cash retainer into RSUs, to be distributed as common stock following the end of the director’s Board service.
Annual Cash Compensation
Director Compensation Program
Annual Retainer
$100,000
Committee Chair Retainer
$35,000 – Audit
$25,000 – FIRMCO, Compensation
$20,000 – Nominating
Lead Director Retainer
$40,000
ANNUAL EQUITY GRANT
In 2019, directors received an annual equity grant of $160,000, payable solely in RSUs pursuant to The Hartford 2014 Incentive Stock Plan. Directors may not sell, exchange, transfer, pledge, or otherwise dispose of the RSUs.
The RSUs vest and are distributed as common stock at the end of the Board service year, unless the director has elected to defer distribution until the end of Board service. Resignation from the Board will result in a forfeiture of all unvested RSUs at the time of such resignation unless otherwise determined by the Compensation Committee.  However, RSUs will automatically vest upon the occurrence of any of the following events: (a) retirement from service on the Board in accordance with our Corporate Governance Guidelines; (b) death of the director; (c) total disability of the director, as defined in the 2014 Incentive Stock Plan; (d) resignation by the director under special circumstances where the Compensation Committee, in its sole discretion, consents to waive the remaining vesting period; or (e) a “change of control,” as defined in the 2014 Incentive Stock Plan. Outstanding RSUs are credited with dividend equivalents equal to dividends paid to holders of our common stock.
OTHER
We provide each director with $100,000 of group life insurance coverage and $750,000 of accidental death and dismemberment and permanent total disability coverage while he or she serves on the Board. We also reimburse directors for travel and related expenses they incur in connection with their Board and committee service.
STOCK OWNERSHIP GUIDELINES AND RESTRICTIONS ON TRADING
The Board has established stock ownership guidelines for each director to obtain, by the third anniversary of the director’s appointment to the Board, an ownership position in our common stock equal to five times his or her total annual cash retainer (including cash retainers paid for committee chair or Lead Director responsibilities). All directors with at least three years of Board service met the stock ownership guidelines as of December 31, 2019.
Our insider trading policy prohibits all hedging activities by directors, and permits directors to engage in transactions involving The Hartford's equity securities only through: (1) a pre-established trading plan pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934; or (2) during “trading windows” of limited duration following: (a) the filing with the SEC of our periodic reports on Forms 10-K and 10-Q, and (b) a determination by the company that the director is not in possession of material non-public information. Even if pre-clearance is granted, directors must make an independent determination that they do not possess material non-public information. In addition, our insider trading policy grants us the ability to suspend trading of our equity securities by directors.

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DIRECTOR SUMMARY COMPENSATION TABLE
We paid the following compensation to directors for the fiscal year ended December 31, 2019.
Name
Fees Earned or
Paid in Cash
($)(1)

 
Stock Awards
($)(2)

 
All Other
Compensation
($)

 
Total
($)

Robert Allardice
125,000

 
160,000

 
3,026

 
288,026

Carlos Dominguez
100,000

 
160,000

 
1,346

 
261,346

Trevor Fetter
140,000

 
160,000

 
1,070

 
301,070

Kathryn A. Mikells(3)
129,167

 
160,000

 
830

 
289,997

Michael G. Morris
120,000

 
160,000

 
3,026

 
283,026

Julie G. Richardson(3)
105,833

 
160,000

 
1,070

 
266,903

Teresa W. Roseborough
100,000

 
160,000

 
1,346

 
261,346

Virginia P. Ruesterholz
125,000

 
160,000

 
1,070

 
286,070

Greig Woodring
100,000

 
160,000

 
2,078

 
262,078

(1)
Directors Dominguez, Fetter, Mikells and Richardson each elected to receive vested RSUs in lieu of cash compensation. The vested RSUs will be distributed as common stock following the end of the director's Board service.
(2)
These amounts reflect the aggregate grant date fair value of RSU awards granted during the fiscal year ended December 31, 2019.
(3)
Kathryn Mikells replaced Julie Richardson as Audit Committee chair in July, 2019, resulting in pro rata Audit Committee Chair Retainers of $5,833 to Ms. Richardson for two months service and $29,167 to Ms. Mikells for 10 months service.
DIRECTOR COMPENSATION TABLE—OUTSTANDING EQUITY
The following table shows the number and value of unvested equity awards outstanding as of December 31, 2019. The value of these unvested awards is calculated using a market value of $60.77, the NYSE closing price per share of our common stock on December 31, 2019. The numbers have been rounded to the nearest whole dollar or share.
 
Stock Awards(1) 
Name
Stock
Grant Date
(2)
 
Number
of Shares or
Units of Stock
That Have Not
Vested (#)
(3) 

 
Market Value
of Shares or
Units of Stock
That Have Not
Vested ($)

Robert Allardice 
8/5/2019
 
2,843

 
172,769

Carlos Dominguez
8/5/2019
 
2,843

 
172,769

Trevor Fetter
8/5/2019
 
2,843

 
172,769

Kathryn A. Mikells
8/5/2019
 
2,843

 
172,769

Michael G. Morris 
8/5/2019
 
2,843

 
172,769

Julie G. Richardson
8/5/2019
 
2,843

 
172,769

Teresa W. Roseborough 
8/5/2019
 
2,843

 
172,769

Virginia P. Ruesterholz 
8/5/2019
 
2,843

 
172,769

Greig Woodring
8/5/2019
 
2,843

 
172,769

(1)
Additional stock ownership information is set forth in the beneficial ownership table on page 72.
(2)
The RSUs were granted on August 5, 2019, the first day of the scheduled trading window following the filing of our Form 10-Q for the quarter ended June 30, 2019.
(3)
The number of RSUs for each award was determined by dividing $160,000 by $56.56, the closing price of our common stock as reported on the NYSE on the date of the award. The number shown also reflects dividend equivalents credited to outstanding RSUs. The RSUs will vest on May 20, 2020, and will be distributed at that time in shares of the company’s common stock unless the director had previously elected to defer distribution of all or a portion of his or her annual RSU award until the end of Board service.  Directors Dominguez, Fetter, Mikells and Richardson have made elections to defer distribution of 100% of their RSU award.


 
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BOARD AND GOVERNANCE MATTERS
 
 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Board has adopted a Policy for the Review, Approval or Ratification of Transactions with Related Persons. This policy requires our directors and Section 16 executive officers to promptly disclose any actual or potential material conflict of interest to the Chair of the Nominating Committee and the Chairman for evaluation and resolution. If the transaction involves a Section 16 executive officer or an immediate family member of a Section 16 executive officer, the matter must also be disclosed to our General Auditor or Director of Compliance for evaluation and resolution.
We did not have any transactions requiring review under this policy during 2019.
COMMUNICATING WITH THE BOARD
Shareholders and other interested parties may communicate with directors by contacting Donald C. Hunt, Corporate Secretary of The Hartford Financial Services Group, Inc., One Hartford Plaza, Hartford, CT 06155. The Corporate Secretary will relay appropriate questions or messages to the directors. Only items related to the duties and responsibilities of the Board will be forwarded.
Anyone interested in raising a complaint or concern regarding accounting issues or other compliance matters directly with the Audit Committee may do so anonymously and confidentially by contacting EthicsPoint:
By internet
By telephone
By mail
by_internet.jpg
by_phone.jpg
by_mail.jpg
Visit 24/7
www.ethicspoint.com
1-866-737-6812 (U.S. and Canada)
1-866-737-6850 (all other countries)
The Hartford c/o EthicsPoint
P.O. Box 230369
Portland, Oregon 97281
 

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DIRECTOR NOMINEES
Eleven individuals will be nominated for election as directors at the Annual Meeting. The terms of office for each elected director will run until the next annual meeting of shareholders and until his or her successor is elected and qualified, or until his or her earlier death, retirement, resignation or removal from office.
In accordance with our Corporate Governance Guidelines, each director has submitted a contingent, irrevocable resignation that the Board may accept if the director fails to receive more votes “for” than “against” in an uncontested election. In that situation, the Nominating Committee (or another committee comprised of at least three non-management directors) would make a recommendation to the Board about whether to accept or reject the resignation. The Board, not including the subject director, will act on this recommendation within 90 days from the date of the Annual Meeting, and we will publicly disclose the Board's decision promptly thereafter.
If for any reason a nominee should become unable to serve as a director, either the shares of common stock represented by valid proxies will be voted for the election of another individual nominated by the Board, or the Board will reduce the number of directors in order to eliminate the vacancy.
The Nominating Committee believes that each director nominee has an established record of accomplishment in areas relevant to our business and objectives, and possesses the characteristics identified in our Corporate Governance Guidelines as essential to a well-functioning and deliberative governing body, including integrity, independence and commitment. Other experience, qualifications and skills the Nominating Committee looks for include the following:
Experience / Qualification
Relevance to The Hartford
Leadership
Experience in significant leadership positions provides us with new insights, and demonstrates key management disciplines that are relevant to the oversight of our business.
Insurance and Financial Services Industries
Extensive experience in the insurance and financial services industries provides an understanding of the complex regulatory and financial environment in which we operate and is highly important to strategic planning and oversight of our business operations.
Digital/Technology
Digital and technology expertise is important in light of the speed of digital progress and the development of disruptive technologies both in the insurance industry and more broadly.
Corporate Governance
An understanding of organizations and governance supports management accountability, transparency and protection of shareholder interests.
Risk Management
Risk management experience is critical in overseeing the risks we face today and those emerging risks that could present in the future.
Finance and Accounting
Finance and accounting experience is important in understanding and reviewing our business operations, strategy and financial results.
Business Operations and Strategic Planning
An understanding of business operations and processes, and experience making strategic decisions, are critical to the oversight of our business, including the assessment of our operating plan and business strategy.
Regulatory
An understanding of laws and regulations is important because we operate in a highly regulated industry and we are directly affected by governmental actions.
Talent Management
We place great importance on attracting and retaining superior talent, and motivating employees to achieve desired enterprise and individual performance objectives.
The Nominating Committee believes that our current Board is a diverse group whose collective experiences and qualifications bring a variety of perspectives to the oversight of The Hartford. All of our directors hold, or have held, senior leadership positions in large, complex corporations and/or charitable and not-for-profit organizations. In these positions, they have demonstrated their leadership, intellectual and analytical skills and gained deep experience in core disciplines significant to their oversight responsibilities on our Board. Their roles in these organizations also permit them to offer senior management a diverse range of perspectives about the issues facing a complex financial services company like The Hartford. Key qualifications, skills and experience our directors bring to the Board that are important to the oversight of The Hartford are identified and described below.




 
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BOARD AND GOVERNANCE MATTERS
 
 

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ROBERT B. ALLARDICE, III     INDEPENDENT
Professional highlights:
  Consultant to Chairman of Supervisory Board, Deutsche Bank (2002-2006)
• Regional Chief Executive Officer of North and South America, Advisory Director, Deutsche Bank Americas Holding Company (1994-1999)
• Consultant, Smith Barney (1993-1995)
• Founder of Merger Arbitrage Department, Chief Operating Officer of Equity Department, Founding member of Finance Committee, Morgan Stanley & Company (1974-1993)
Director since:  2008
Age:  73
Committees:
• Audit
• FIRMCo (Chair)
Other public company directorships:
   Ellington Residential Mortgage REIT (2013-present)
   GasLog Partners LP (2014-present)
Skills and qualifications relevant to The Hartford:
Mr. Allardice has served as a senior leader for multiple large, complex financial institutions, including as regional chief executive officer of Deutsche Bank Americas Holding Corporation, North and South America. He brings to the Board over 35 years of experience in the financial services industry, including at the senior executive officer level. His experience leading capital markets-based businesses is relevant to the oversight of our investment management company and corporate finance activities. In addition, Mr. Allardice has experience in a highly regulated industry, including interfacing with regulators and establishing governance frameworks relevant to the oversight of our business. He has extensive corporate governance experience from service as a director and audit committee member for several large companies, including seven years as Chairman of The Hartford's Audit Committee. 



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LARRY D. DE SHON     INDEPENDENT
Professional highlights:
• Avis Budget Group, Inc.
President (2017-2019)
Chief Executive Officer and Chief Operating Officer (2016-2019)
President and Chief Operating Officer (Oct. 2015-Dec. 2015)
President, International (2011-Oct. 2015)
Executive Vice President, Operations (2006-2011)
• UAL Corporation (parent of United Airlines)
Positions of increasing responsibility, including Senior Vice President positions in marketing, on-board service and global airport operations (1978-2006)
Director since:  2020
Age:  60
Committees:
• Audit
• FIRMCo
Other public company directorships:
   Avis Budget Group, Inc. (2015-2019)

Skills and qualifications relevant to The Hartford:
As a former chief executive officer and director of Avis Budget Group, Mr. De Shon brings to the Board extensive leadership and corporate governance experience, deep operating skills and international expertise. He has successfully led organizations through times of disruption and global transformations, developed innovative solutions to strengthen his companies’ positions in the marketplace and modernized systems for better customer and employee experiences. At Avis Budget Group Mr. De Shon created the first end-to-end digital car rental experience, migrated the platform to the cloud, and built one of the largest connected car fleets in the world. In addition, he oversaw businesses in Europe, the Middle East, Africa, Asia, Australia and New Zealand. Prior to joining Avis, Mr. De Shon had a 28-year career with United Airlines, most recently leading an organization of 23,000 employees in 29 countries.


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CARLOS DOMINGUEZ     INDEPENDENT
Professional highlights:
• Sprinklr Inc.
President (2015-present)
 Chief Operating Officer (2015-2018)
• Cisco Systems, Inc.
Senior Vice President, Office of the Chairman and Chief Executive Officer (2008-2015)
Senior Vice President, Worldwide Service Provider Operations (2004-2008)
Vice President, U.S. Network Services Provider Sales (1999-2004)
Positions of increasing responsibility in operations and sales (1992-1999)
Director since:  2018
Age:  61
Committees:
• Compensation
• FIRMCo
• Nominating
Other public company directorships:
 PROS Holdings, Inc. (2020-present)*
 Medidata Solutions, Inc. (2008-2019)
Skills and qualifications relevant to The Hartford:
Mr. Dominguez has more than 30 years of enterprise technology experience. He brings to the Board extensive and relevant digital expertise as the company focuses on data analytics and digital capabilities to continuously improve the way it operates and delivers value to customers. As President of Sprinklr Inc., Mr. Dominguez guides strategic direction and leads the marketing, sales, services, and partnerships teams for a leading social media management company. Prior to joining Sprinklr, he spent seven years as a technology representative for the Chairman and CEO of Cisco Systems, Inc. In this role, Mr. Dominguez engaged with senior executives in the Fortune 500 and government leaders worldwide, sharing insights on how to leverage technology to enhance and transform their businesses. In addition, he led the creation and implementation of Cisco's Innovation Academy, which delivered innovation content to Cisco employees globally.
*Mr. Dominguez has been nominated to stand for election as a director at PROS Holdings, Inc.'s annual meeting on April 29, 2020.


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TREVOR FETTER     INDEPENDENT
Professional highlights:
• Senior Lecturer, Harvard Business School (Jan. 2019-present)
• Tenet Healthcare Corporation
Chairman (2015-2017)
Chief Executive Officer (2003-2017)
President (2002-2017)
• Chairman and Chief Executive Officer, Broadlane, Inc. (2000-2002)
• Chief Financial Officer, Tenet Healthcare Corporation (1996-2000)
Director since:  2007
Age:  60
Committees:
• Compensation
• FIRMCo
Other public company directorships:
  Tenet Healthcare Corporation (2003-2017)
Skills and qualifications relevant to The Hartford:
Mr. Fetter has nearly two decades of experience as chief executive officer of multiple publicly traded companies. He has demonstrated his ability to lead the management, strategy and operations of complex organizations. As a Senior Lecturer at Harvard Business School, he teaches leadership and corporate accountability. He brings to the Board significant experience in corporate finance and financial reporting acquired through senior executive finance roles, including as a chief financial officer of a publicly traded company. He has experience navigating complex regulatory frameworks as the president and chief executive officer of a highly-regulated, publicly traded healthcare company. In addition, Mr. Fetter serves as The Hartford's lead director, providing strong independent Board leadership. He also has extensive corporate governance expertise from service as director of large public companies, including four years as Chairman of the Board’s Nominating and Corporate Governance Committee.





 
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BOARD AND GOVERNANCE MATTERS
 
 

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KATHRYN A. MIKELLS     INDEPENDENT
Professional highlights:
• Chief Financial Officer, Diageo plc (2015-present)
• Chief Financial Officer, Xerox Corporation (2013-2015)
• Chief Financial Officer, ADT Security Services (2012-2013)
• Chief Financial Officer, Nalco Company (2010-2011)
• UAL Corporation (parent of United Airlines)
Chief Financial Officer, Executive Vice President (2008-2010)
Head of Investor Relations (2007-2008)
Vice President, Financial Planning and Analysis (2006-2007)
Treasurer (2005-2006)
Director since:  2010
Age:  54
Committees:
• Audit (Chair)
• FIRMCo
Other public company directorships:
   Diageo plc (2015-present)
Skills and qualifications relevant to The Hartford:
Ms. Mikells has extensive experience in a variety of executive management positions, with a focus on leading the finance function of global organizations. She has significant experience in corporate finance and financial reporting acquired through senior executive roles in finance, including as a chief financial officer of multiple publicly traded companies. Ms. Mikells brings to the Board strong management and transformational skills, demonstrated during ADT’s successful transition into an independent company, as well as significant mergers and acquisitions experience acquired through the sale of Naclo to Ecolab and the merger of United Airlines with Continental Airlines. She has demonstrated risk management skills as a leader responsible for financial and corporate planning for domestic and international organizations. In addition, Ms. Mikells has strong talent development skills acquired through years of leading global finance divisions.



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MICHAEL G. MORRIS     INDEPENDENT
Professional highlights:
• American Electric Power Company, Inc.
Non-Executive Chairman (2012-2014)
Chairman, President and Chief Executive Officer (2004-2011)
• Chairman, President and Chief Executive Officer, Northeast Utilities (1997-2003)

Director since:  2004
Age:  73
Committees:
• Audit
• FIRMCo
• Nominating (Chair)
Other public company directorships:
   Alcoa Corporation (2002-present)
   American Electric Power Company, Inc. (2004-2014)
   L Brands, Inc. (2012-present)
   Spectra Energy Corp. (2013-2017)
   Spectra Energy Partners GP, LLC (2017-2018)
Skills and qualifications relevant to The Hartford:
Mr. Morris has over two decades of experience as chief executive officer and president of multiple publicly traded companies in the highly regulated energy industry. He brings to the Board significant experience as a senior leader responsible for the strategic direction and management of complex business operations. In addition, he has experience overseeing financial matters in his roles as chairman, president and CEO of AEP, and as chairman, president and CEO of Northeast Utilities. He has proven skills interacting with governmental and regulatory agencies acquired through years of leading various multi-national organizations in the energy and gas industries, serving on the U.S. Department of Energy’s Electricity Advisory Board, the National Governors Association Task Force on Electricity Infrastructure, the Institute of Nuclear Power Operations and as Chair of the Business Roundtable’s Energy Task Force. In addition, he has corporate governance expertise from service as a director and member of the audit, compensation, finance, risk management and nominating/governance committees of various publicly traded companies.







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TERESA WYNN ROSEBOROUGH     INDEPENDENT
Professional highlights:
• Executive Vice President, General Counsel and Corporate Secretary, The Home Depot (2011-present)
• Senior Chief Counsel Compliance & Litigation and Deputy General Counsel, MetLife, Inc. (2006-2011)
• Partner, Sutherland, Asbill & Brennan LLP (1996-2006)
• Deputy Assistant Attorney General, Office of Legal Counsel, U.S. Department of Justice (1994-1996)
Director since:  2015
Age:  61
Committees:
• Compensation
• FIRMCo
• Nominating
Other public company directorships:
   None
Skills and qualifications relevant to The Hartford:
Ms. Roseborough has over two decades of experience as a senior legal advisor in government, law firm and corporate settings. She has experience as a senior leader responsible for corporate compliance matters at major publicly traded companies and as an attorney focused on complex litigation matters, including before the U.S. Supreme Court. She brings to the Board extensive regulatory experience acquired as a government attorney providing legal counsel to the White House and all executive branch agencies, as well as corporate governance expertise from service as General Counsel and Corporate Secretary of a publicly-traded company. Ms. Roseborough also has in-depth knowledge of the financial services industry gained through senior legal positions at MetLife, Inc., a major provider of insurance and employee benefits.



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VIRGINIA P. RUESTERHOLZ     INDEPENDENT
Professional highlights:
• Verizon Communications, Inc.
Executive Vice President (Jan. 2012-Jul. 2012)
President, Verizon Services Operations (2009-2011)
President, Verizon Telecom (2006-2008)
President, Verizon Partner Solutions (2005-2006)
• Positions of increasing responsibility in operations, sales and customer service, New York Telephone (1984-2005)
Director since:  2013
Age:  58
Committees:
• Compensation (Chair)
• FIRMCo
• Nominating
Other public company directorships:
   Bed Bath & Beyond Inc. (2017-present)
   Frontier Communications Corporation (2013-2019)
Skills and qualifications relevant to The Hartford:
Ms. Ruesterholz has held a variety of senior executive positions, including as Executive Vice President at Verizon Communications and President of the former Verizon Services Operations. As a senior leader of a Fortune 100 company, she has held principal oversight responsibility for key strategic initiatives, navigated the regulatory landscape of large-scale operations, and led an organization with over 25,000 employees. Ms. Ruesterholz brings to the Board vast experience in large-scale operations, including sales and marketing, customer service, technology and risk management. Ms. Ruesterholz also brings to the Board substantial financial and strategic expertise acquired as president of various divisions within Verizon and is currently a Trustee of the Board of Stevens Institute of Technology where she served as Chairman of the Board from 2013-2018.





 
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BOARD AND GOVERNANCE MATTERS
 
 

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CHRISTOPHER J. SWIFT     
Professional highlights:
• The Hartford Financial Services Group, Inc.
Chairman (2015-present)
Chief Executive Officer (2014-present)
Executive Vice President and Chief Financial Officer (2010-2014)
• Vice President and Chief Financial Officer, Life and Retirement Services, American International Group, Inc. (2003-2010)
• Partner, KPMG, LLP (1999-2003)
• Executive Vice President, Conning Asset Management, General American Life Insurance Company (1997-1999)
• KPMG, LLP
Partner (1993-1997)
Auditor (1983-1993)
Director since:  2014
Age:  59
Committees:
• FIRMCo
Other public company directorships:
   None
Skills and qualifications relevant to The Hartford:
Mr. Swift has over 30 years of experience in the financial services industry, with a focus on insurance. As Chairman and CEO of The Hartford, he brings to the Board unique insight and knowledge into the complexities of our businesses, relationships, competitive and financial positions, senior leadership and strategic opportunities and challenges. Mr. Swift leads the execution of our strategy, directs capital management actions and strategic investments, and oversees the continuous strengthening of the company’s leadership pipeline. As Chief Financial Officer, he led the team that developed the company’s go-forward strategy. He is a certified public accountant with experience working at a leading international accounting firm, including serving as head of its Global Insurance Industry Practice.



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MATT WINTER     INDEPENDENT
Professional highlights:
• The Allstate Corporation
President (2015-2018)
President, Allstate Personal Lines (2013-2015)
President and Chief Executive Officer, Allstate Financial (2009-2012)
• American International Group, Inc.
Vice Chairman (Apr. 2009-Oct. 2009)
President and CEO, of AIG American General (2006-2009)
• Massachusetts Mutual Life Insurance Company
Executive Vice President (2002-2006)
Positions of increasing responsibility (1996-2002)
Director since:  2020
Age:  63
Committees:
• FIRMCo
Other public company directorships:
  ADT Inc. (2018-present)
  H&R Block, Inc. (2017-present)
Skills and qualifications relevant to The Hartford:
As President of The Allstate Corporation, Mr. Winter oversaw the complete range of Allstate’s P&C and life insurance products and was responsible for business operations, including field offices located across the U.S. and in Canada, and distribution through Allstate and independent agencies. He brings to the Board significant expertise in areas relevant to our business, including operations, distribution and risk management, gained from over 25 years as a senior leader in the insurance industry. Before joining Allstate, Mr. Winter held numerous senior executive positions at large insurance providers, including as vice chairman of American International Group, where he was responsible for a number of business units with global reach; and executive vice president at Massachusetts Mutual Life Insurance Company, where he led the company's domestic insurance businesses.





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GREIG WOODRING     INDEPENDENT
Professional highlights:
• Reinsurance Group of America
President and Chief Executive Officer (1993-2016)
• General American Life Insurance Company
Executive Vice President (1992-1993)
Head of Reinsurance (1986-1992)
Positions of increasing responsibility (1979-1986)
Director since:  2017
Age:  68
Committees:
• Audit
• FIRMCo
Other public company directorships:
  Reinsurance Group of America, Incorporated (1993-2016)
   Sun Life Financial Inc. (Jan. - April 2017)
Skills and qualifications relevant to The Hartford:
Mr. Woodring brings significant and valuable insurance industry and leadership experience to the Board, demonstrated by his more than two decades leading Reinsurance Group of America, Incorporated (RGA), a leading life reinsurer with global operations. During his tenure, RGA grew to become one of the world’s leading life reinsurers, with offices in 26 countries and annual revenues of more than $10 billion. Mr. Woodring has demonstrated skills in areas that are relevant to the oversight of the company, including risk management, finance, and operational expertise. Mr. Woodring serves as Chairman of the International Insurance Society, and is a fellow of the Society of Actuaries and a member of the American Academy of Actuaries. 

 
2020 Proxy Statement
33


AUDIT MATTERS
ITEM 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
In accordance with its Board-approved charter, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the independent external audit firm retained to audit the company’s financial statements. The Audit Committee has appointed Deloitte & Touche LLP (“D&T”) as the company’s independent registered public accounting firm for the fiscal year ending December 31, 2020. D&T has been retained as the company’s independent registered public accounting firm since 2002. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered public accounting firm.

In selecting D&T for fiscal year 2020, the Audit Committee carefully considered, among other items:
      The professional qualifications of D&T, the lead audit partner and other key engagement partners;
      D&T’s depth of understanding of the company’s businesses, accounting policies and practices and internal control over financial reporting;
      D&T’s quality controls and its processes for maintaining independence; and
      The appropriateness of D&T’s fees for audit and non-audit services.
The Audit Committee oversees and is ultimately responsible for the outcome of audit fee negotiations associated with the company’s retention of D&T. In addition, when a rotation of the audit firm’s lead engagement partner is mandated, the Audit Committee and its chair are involved in the selection of D&T’s new lead engagement partner. The members of the Audit Committee and the Board believe that the continued retention of D&T to serve as the company’s independent external auditor is in the best interests of the company and its investors.

Although shareholder ratification of the appointment of D&T is not required, the Board requests ratification of this appointment by shareholders. If shareholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain D&T.

Representatives of D&T will attend the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.

The Board recommends that shareholders vote “FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020.
FEES OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table presents fees for professional services provided by D&T, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, the “Deloitte Entities”) for the years ended December 31, 2019 and 2018.
 
Year Ended December 31, 2019

 
Year Ended December 31, 2018

Audit fees
$
10,947,000

 
$
10,171,000

Audit-related fees(1)
$
1,620,000

 
$
1,576,000

Tax fees(2)
$
316,000

 
$
182,000

All other fees(3)
$
123,000

 
$
592,000

Total
$
13,006,000

 
$
12,521,000

(1)
Fees for the years ended December 31, 2019 and 2018 principally consisted of procedures related to regulatory filings and acquisition or divestiture related services.
(2)
Fees for the years ended December 31, 2019 and 2018 principally consisted of tax compliance services.
(3)
Fees for the year ended December 31, 2019 and 2018 pertain to permissible services not related to financial reporting.
The Audit Committee reviewed the non-audit services provided by the Deloitte Entities during 2019 and 2018 and concluded that they were compatible with maintaining the Deloitte Entities’ independence.

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AUDIT MATTERS

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has established policies requiring pre-approval of audit and non-audit services provided by the independent registered public accounting firm. These policies require that the Audit Committee pre-approve specific categories of audit and audit-related services annually.
The Audit Committee approves categories of audit services and audit-related services, and related fee budgets. For all pre-approvals, the Audit Committee considers whether such services are consistent with the rules of the SEC and the PCAOB on auditor independence. The independent registered public accounting firm and management report to the Audit Committee on a timely basis regarding the services rendered by, and actual fees paid to, the independent registered public accounting firm to ensure that such services are within the limits approved by the Audit Committee. The Audit Committee’s policies require specific pre-approval of all tax services, internal control-related services and all other permitted services on an individual project basis.
As provided by its policies, the Audit Committee has delegated to its Chair the authority to address any requests for pre-approval of services between Audit Committee meetings, up to a maximum of $100,000. The Chair must report any pre-approvals to the full Audit Committee at its next scheduled meeting.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee currently consists of six independent directors, each of whom is “financially literate” within the meaning of the listing standards of the NYSE and an “audit committee financial expert” within the meaning of the SEC’s regulations. The Audit Committee oversees The Hartford's financial reporting process on behalf of the Board. Management has the primary responsibility for establishing and maintaining adequate internal financial controls, for preparing the financial statements and for the public reporting process. Deloitte & Touche LLP (“D&T”), our independent registered public accounting firm for 2019, is responsible for expressing opinions that (1) our consolidated financial statements present fairly, in all material respects, the financial position, results of operations and cash flows in conformity with generally accepted accounting principles and (2) we maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019.
In this context, the Audit Committee has:
(1)
Reviewed and discussed the audited financial statements for the year ended December 31, 2019 with management;
(2)
Discussed with D&T the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC; and
(3)
Received the written disclosures and the letter from D&T required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with D&T the independent accountant’s independence.
Based on the review and discussions described in this report, the Audit Committee recommended to the Board that the audited financial statements should be included in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for filing with the SEC.
Report Submitted: February 20, 2020
Members of the Audit Committee:
Kathryn A. Mikells, Chair
Robert B. Allardice, III
Larry De Shon
Michael G. Morris
Julie G. Richardson
Greig Woodring

 
2020 Proxy Statement
35


COMPENSATION MATTERS
ITEM 3
ADVISORY APPROVAL OF 2019 COMPENSATION OF NAMED EXECUTIVE OFFICERS
Section 14A of the Securities Exchange Act of 1934, as amended, provides our shareholders with the opportunity to vote to approve, on an advisory basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with the rules of the SEC. We currently intend to hold these votes on an annual basis.

As described in detail in the Compensation Discussion and Analysis beginning on page 37, our executive compensation program is designed to promote long-term shareholder value creation and support our strategy by: (1) encouraging profitable growth consistent with prudent risk management, (2) attracting and retaining talent needed for long-term success, and (3) appropriately aligning pay with short- and long-term performance. The advisory vote on this resolution is not intended to address any specific element of compensation; rather, it relates to the overall compensation of our NEOs, as well as the philosophy, policies and practices described in this proxy statement. You have the opportunity to vote for, against or abstain from voting on the following resolution relating to executive compensation:

RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and the narrative discussion contained in this proxy statement.

Because the required vote is advisory, it will not be binding upon the Board. The Compensation Committee will, however, take into account the outcome of the vote when considering future executive compensation arrangements.
The Board recommends that shareholders vote “FOR” the above resolution to approve our compensation of named executive officers as disclosed in the Compensation Discussion and Analysis, the compensation tables and the narrative discussion contained in this proxy statement.


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COMPENSATION MATTERS

COMPENSATION DISCUSSION AND ANALYSIS
This section explains our compensation philosophy, summarizes our compensation programs and reviews compensation decisions for the Named Executive Officers (“NEOs”) listed below. It also describes programs that apply to the CEO and all of his executive direct reports, other than senior executives directly supporting our Hartford Funds business who have an independent compensation program (collectively, “Senior Executives”).
Name
Title
Christopher Swift
Chairman and Chief Executive Officer
Beth Costello
Executive Vice President and Chief Financial Officer
Douglas Elliot
President
Brion Johnson
Executive Vice President and Chief Investment Officer; President of HIMCO
William Bloom
Executive Vice President, Operations, Technology & Data
EXECUTIVE SUMMARY
STRATEGIC PRIORITIES
The Hartford’s strategy focuses on realizing the full potential of our product capabilities and underwriting expertise, becoming an easier company to do business with, and attracting, retaining and developing the talent needed for long-term success.
strategy.jpg
Many initiatives and investments in 2019 advanced our position in each strategic focus area:
Closing on the acquisition of The Navigators Group, Inc. (“Navigators Group”), a global specialty insurance company.
Integrating the recent Group Benefits and Navigators Group acquisitions successfully, and maximizing our combined potential by deepening our distribution relationships, capitalizing on a broader product portfolio and meeting a wider array of customer needs.
Increasing the speed and ease of our interactions and business processes through data, digital technology and voice of customer, including expanded use of robotics and continued enhancements to underwriting and quoting platforms.
Continuing investment in new products and business models such as Spectrum, our next-generation package offering for small businesses, which offers customers tailored coverage recommendations as well as the ability to customize their own coverage, including real-time quote pricing. We are investing to maintain market leadership in small commercial as existing competitors and new entrants increase their focus on this business.
Improving employee experience. We are investing in our workforce and striving to attract, retain and develop the best talent in the industry, enhance our industry-leading position in diversity and inclusion, and sustain our ethical culture. We see the benefits of this commitment in our sustained top-decile employee engagement scores.
2019 FINANCIAL RESULTS
Our 2019 financial results were excellent, with strong financial results across most of our business lines. Full year 2019 income from continuing operations, net of tax, available to common stockholders and core earnings* were $2.1 billion, or $5.66 per diluted share and $5.65 per diluted share, respectively. Net income and core earnings return on equity ("ROE")* were 14.4% and 13.6%, respectively.
Highlighted below are year-over-year comparisons of our net income available to common stockholders and core earnings performance and our three-year net income ROE and core earnings ROE results. Core earnings is the primary determinant of our annual incentive plan ("AIP") funding, as described on page 43, and average annual core earnings ROE over a three-year performance period is the metric used for 50% of performance shares granted to Senior Executives, as described on page 46 (in each case, as adjusted for compensation purposes).
* Denotes a non-GAAP financial measure. For definitions and reconciliations to the most directly comparable GAAP measure, see Appendix A.
Net income ROE represents net income available to common stockholders ROE.

 
2020 Proxy Statement
37

COMPENSATION MATTERS
 
 

YEAR-OVER-YEAR PERFORMANCE
 
THREE-YEAR PERFORMANCE
    
netincome_graph2.jpgcoreearnings_graph2.jpgroe_graph2.jpgcoreroe_graph2.jpg
2019 BUSINESS PERFORMANCE
In February 2019, the company provided outlooks for the key business metrics highlighted below and updated those metrics for Commercial Lines in August 2019 after the acquisition of Navigators Group. These outlooks were management's estimates for 2019 performance based on business, competitive, capital market, catastrophe and other assumptions, and supported the company's 2019 operating plan, and were supplemented by the update to the outlook of Commercial Lines combined ratio and Commercial Lines underlying combined ratio for the second half of 2019 to incorporate Navigators Group. When setting the 2019 operating plan, both the Board and management concluded that these key business metrics would only be achievable with strong business performance. As described on page 43, performance relative to the outlooks is a major determinant of the formulaic AIP funding level.
Treatment of Navigators Group: The outlooks for Commercial Lines combined ratios provided in February 2019 did not make an assumption for the impact that the acquisition of Navigators Group would have on those ratios; however, the target Compensation Core Earnings (described below) included assumptions for Navigators Group earnings beginning on April 1, 2019. While the acquisition did not close until May 23, 2019, no adjustment was made to the Compensation Core Earnings target for the lack of Navigators Group earnings between April 1 and May 23, 2019, such that the delayed closing had the effect of reducing the formulaic AIP funding level.
Results: The Commercial Lines combined ratio and underlying combined ratio for second half 2019 was above the outlook provided in August 2019, primarily due to several large losses on the book of business acquired from Navigators Group. Excluding Navigators Group, the Commercial Lines combined ratio and underlying combined ratio for full year 2019 were within the outlook ranges provided in February 2019. Key business metrics for Personal Lines and Group Benefits were within or better than the outlook ranges provided in February 2019.
Key business metrics for full year 2019 provided in February 2019
Second Half 2019 Guidance for
Commercial Lines1
 
Personal Lines
 
Group Benefits
 
 
Combined ratio of 97.3 was above the outlook of 95.0 - 97.0 primarily due to several large losses on the book of business acquired from Navigators Group.
Underlying combined ratio* of 94.9, which excludes catastrophes and prior year development, was also above the outlook of 92.0 to 94.0 primarily due to several large losses on the book of business acquired from Navigators Group.
 
Combined ratio of 95.0 was better than outlook of 97.5 - 99.5 primarily due to lower than assumed current accident year catastrophes.
Underlying combined ratio of 91.9, which excludes catastrophes and prior year development, was in line with outlook of 91.0 - 93.0.
 
Net income margin of 8.8% was significantly better than outlook of 5.5% - 6.5% primarily due to a lower group disability loss ratio, higher net realized capital gains and higher net investment income.
Core earnings margin* of 8.9% was significantly better than outlook of 6.0% - 7.0%.
 
 
 
 
 
What is
combined ratio?
 
 
 
This ratio measures the cost of claims and expenses for every $100 of earned premiums. If the combined ratio is less than 100, the company is making an underwriting profit.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 The full year 2019 Commercial Lines combined ratio was 97.7. Excluding Navigators Group, the full year 2019 Commercial Lines combined ratio of 95.2 was in line with outlook of 94.5 - 96.5 provided in February 2019, primarily due to favorable prior accident year reserve development in workers’ compensation and package business, partially offset by higher than assumed catastrophe losses and higher non-catastrophe property losses. The full year 2019 Commercial Lines underlying combined ratio, which excludes catastrophes and prior year development, was 94.0. The full year 2019 Commercial Lines underlying combined ratio excluding Navigators Group of 92.9 was near the higher end of our outlook of 91.0 - 93.0 provided in February 2019, primarily due to higher than expected non-catastrophe property losses.
* Denotes a non-GAAP financial measure. For definitions and reconciliations to the most directly comparable GAAP measure, see Appendix A.

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COMPENSATION MATTERS

TOTAL SHAREHOLDER RETURNS
The following chart shows The Hartford's total shareholder return ("TSR") relative to  the S&P 500, S&P 500 Insurance Composite and S&P P&C indices and our 2019 Corporate Peer Group (provided on p. 53).
tsr_performance2.jpg
Includes reinvestment of dividends. Data provided by S&P Capital IQ.
SHAREHOLDER ENGAGEMENT & RESPONSIVENESS TO “SAY-ON-PAY” RESULTS
Our Board and management value shareholder views and engage with shareholders in different ways throughout the year to solicit feedback. Management and our investor relations team routinely speak with analysts and investors at investor conferences and other formal events, as well as group and one-on-one meetings. In September, we held an institutional investor and analyst panel discussion with directors at a Board meeting, a practice we began in 2011. In addition, we engage with shareholders annually on governance, compensation and sustainability issues to understand their concerns and ensure alignment on our practices in these areas.
From 2015 to 2018, our Say-on-Pay support averaged almost 96% and we received positive feedback from shareholders regarding our compensation program and related disclosure, including the Compensation Committee's use of informed discretion in our AIP. As a result of strong shareholder support and positive feedback, we made no material changes to our compensation program during that time.
At our 2019 annual meeting, we received 75% support on Say-on-Pay. We believe the decline in support was, in large part, due to the underperformance of our stock price relative to peers and the broader market in 2018, and while we continued to receive majority support of our compensation program, we wanted to hear whether shareholders had concerns with the program's design. As a result, we doubled our annual engagement efforts. In the fall of 2019, management reached out to our top 50 shareholders, representing approximately 68% of shares outstanding and conducted calls or received written feedback from a total of 20 shareholders representing approximately 49% of shares outstanding. This formal fall outreach was supplemented by:
Spring engagement (in advance of the 2019 annual meeting) in which we reached out to shareholders representing 55% of shares outstanding and engaged with shareholders representing 17% of shares outstanding;
Participation in corporate governance conferences where shareholders representing 45% of shares outstanding were present; and
Direct engagement with the two largest proxy advisory firms.

 
2020 Proxy Statement
39

COMPENSATION MATTERS
 
 

What we heard from shareholders
Actions taken
Support for overall compensation design, but requests for more detail regarding the Compensation Committee's qualitative review and adjustments to AIP
• Revised AIP description to more clearly explain the Compensation Committee's qualitative review, including the measures the Compensation Committee considers from a qualitative perspective, and the rationale for the magnitude of the adjustment
• Updated the AIP curve for 2020 awards to expand the range from +/- 15% to +/-20% of target, requiring greater outperformance to achieve above target awards
Questions regarding how CEO performance is measured
Revised CEO performance description to more clearly describe how individual performance aligns with the company's strategic priorities
Support for targeting above-median performance for the TSR component of performance share awards
Updated the TSR payout curve for performance share awards granted in 2020 to target the 55th percentile
COMPONENTS OF COMPENSATION AND PAY MIX
NEO compensation is heavily weighted towards variable compensation (annual and long-term incentives), where actual amounts earned may differ from target amounts based on company and individual performance. Each NEO has a target total compensation opportunity that is reviewed annually by the Compensation Committee (in the case of the CEO, by the independent directors) to ensure alignment with our compensation objectives and market practice.
Compensation Component
Description
Base Salary
     Fixed level of cash compensation based on market data, internal pay equity, responsibility, expertise and performance.
Annual Incentive Plan
    Variable cash award based primarily on annual company operating performance against a predetermined financial target and achievement of individual performance goals aligned with the company's strategic priorities.
Long-Term Incentive Plan
     Variable awards granted based on individual performance, potential and market data.
     Designed to drive long-term performance, align senior executive interests with shareholders, and foster retention.
     Award mix (50% performance shares and 50% stock options) reflects stock price performance, peer-relative shareholder returns (stock price and dividends) and operating performance.
Approximately 91% of CEO target annual compensation and approximately 84% of other NEO target annual compensation are variable based on performance, including stock price performance:
Target Pay Mix — CEO
Salary
9%
Annual Incentive
24%
Long-Term Incentive
67%
 
 
 
 
 
 
 
Variable with Performance: 91%
Target Pay Mix — Other NEOs
Salary
16%
Annual Incentive
30%
Long-Term Incentive
54%
 
 
 
 
 
 
 
Variable with Performance: 84%

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COMPENSATION MATTERS

2019 COMPENSATION DECISIONS
2019 Compensation Decisions
 
Rationale
The Compensation Committee approved an AIP funding level of 148% of target.
 
Performance against the pre-established Compensation Core Earnings target produced a formulaic AIP funding level of 161% of target. The Compensation Committee reduced this funding level to 148% following its qualitative review, taking into account extraordinary returns on real estate partnerships and outperformance of Hartford Funds due to equity market returns significantly above operating plan assumptions. (pages 44-45)
The Compensation Committee certified a 2017-2019 performance share award payout at 130% of target.
 
The company's average annual Compensation Core ROE during the performance period was 11.1%, resulting in a payout of 200% of target for the ROE component (50% of the award). The company's TSR during the performance period was at the 37th percentile relative to 18 peer companies, resulting in a payout of 59% of target for the TSR component (50% of the award). (page 47)
The Compensation Committee (and, in the case of the CEO, the independent directors) approved the following compensation for the NEOS in 2019:
 
Base Salary
 
AIP Award
 
LTI Award
 
Total Compensation
NEO
2019
Change from 2018
 
2019
Change from 2018
 
2019
Change from 2018
 
2019
Change from 2018
Christopher Swift
$
1,150,000

 
$
4,440,000

(7.5)%
 
$
8,250,000

3.1%
 
$
13,840,000

(0.8)%
Beth Costello
$
725,000

 
$
1,850,000

(3.9)%
 
$
1,775,000

 
$
4,350,000

(1.7)%
Douglas Elliot
$
950,000

 
$
2,812,000

(7.8)%
 
$
5,150,000

3.0%
 
$
8,912,000

(1.0)%
Brion Johnson
$
600,000

4.3%
 
$
1,890,000

(16.0)%
 
$
1,750,000

9.4%
 
$
4,240,000

(4.2)%
William Bloom
$
625,000

8.7%
 
$
1,500,000

(3.2)%
 
$
1,250,000

13.6%
 
$
3,375,000

4.7%
This table provides a concise picture of compensation decisions made in 2019, and highlights changes from 2018. In most cases, Total 2019 Compensation is lower than that approved in 2018 due to the lower AIP awards for 2019; while 2019 awards were above target, final approved payouts were below those paid for the 2018 performance year. Another view of 2019 compensation for the NEOs is available in the Summary Compensation Table on page 57.
COMPENSATION BEST PRACTICES
Our current compensation best practices include the following:
WHAT WE DO
Compensation heavily weighted towards variable pay
Senior Executives generally receive the same benefits as full-time employees
Double trigger requirement for cash severance and equity vesting upon a change of control*
Cash severance upon a change of control limited to 2x base salary + bonus
Independent compensation consultant
Risk mitigation in plan design and annual review of compensation plans, policies and practices
Prohibition on hedging, monetization, derivative and similar transactions with company securities
Prohibition on Senior Executives pledging company securities
Stock ownership guidelines for directors and Senior Executives
Periodic review of compensation peer groups
Competitive burn rate and dilution for equity program
* Double trigger for equity awards applies if the awards are assumed or replaced with substantially equivalent awards.

 
2020 Proxy Statement
41

COMPENSATION MATTERS
 
 

WHAT WE DON'T DO
û
No Senior Executive tax gross-ups for perquisites or excise taxes on severance payments
û
No individual employment agreements
û
No granting of stock options with an exercise price less than the fair market value of our common stock on the date of grant
û
No re-pricing of stock options
û
No buy-outs of underwater stock options
û
No reload provisions in any stock option grant
û
No payment of dividends or dividend equivalents on unvested equity awards

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COMPENSATION MATTERS

COMPONENTS OF THE COMPENSATION PROGRAM
Each Senior Executive has a target total compensation opportunity comprised of both fixed (base salary) and variable (annual and long-term incentive) compensation. In addition, Senior Executives are eligible for benefits available to employees generally. This section describes the three main components of our compensation program for Senior Executives and lays out the framework in which compensation decisions are made. For a discussion of the 2019 compensation decisions made within this framework, see 2019 Named Executive Officers' Compensation and Performance on page 49.
1. BASE SALARY
Each Senior Executive’s base salary is reviewed by the Compensation Committee (in the case of the CEO, the independent directors) annually, upon promotion, or following a change in job responsibilities. Salary decisions are based on market data, internal pay equity and level of responsibility, expertise and performance.
2. ANNUAL INCENTIVE PLAN AWARDS
Our employees, including the Senior Executives, are eligible to earn cash awards based on annual company and individual performance. Each employee has a target AIP opportunity. The Compensation Committee uses the following process to determine individual Senior Executive AIP awards.
Determination of AIP Funding Level
At the beginning of the year, the Compensation Committee set a “Compensation Core Earnings” target based on The Hartford’s operating plan, as well as threshold performance (85% of target), below which no AIP awards are earned, and a maximum funding level of 200% for performance significantly exceeding target (115% of target).
The Compensation Committee selected core earnings because:
It believes core earnings best reflects annual operating performance;
Core earnings is a metric commonly used by investment analysts when evaluating annual performance;
Core earnings is prevalent among peers; and
All employees can impact core earnings.
Certain adjustments are made to core earnings for compensation purposes to ensure employees are held accountable for operating decisions made that year, and are neither advantaged nor disadvantaged by the effect of certain external items that do not reflect operating year performance. At the beginning of the year, the Compensation Committee approves a definition of "Compensation Core Earnings." The definition lists adjustments that will be made to core earnings at year-end in order to arrive at Compensation Core Earnings, such as non-recurring tax benefits or charges, catastrophe losses above or below budget, and unusual or non-recurring items. The 2019 definition and a reconciliation from GAAP net income to Compensation Core Earnings are provided in Appendix A.
The outlook for certain key business metrics within the operating plan are announced to investors at the beginning of each year, which helps align the interests of our Senior Executives with our shareholders, as performance relative to the outlook is a major determinant of the formulaic AIP funding level.
To ensure a holistic review of performance, the Compensation Committee also considers a number of qualitative factors, including: quality of earnings, risk and compliance, peer-relative performance, expense management, and non-financial and strategic objectives. Informed by this qualitative review, the Compensation Committee may then adjust the formulaic funding up or down to arrive at an AIP funding level more commensurate with the company’s performance.
 
 
 
 
The Compensation Committee believes retaining the flexibility to adjust the formulaic AIP funding is aligned with shareholders because it allows the Compensation Committee to arrive at a final AIP funding level that best reflects holistic company performance and mitigates the risk inherent in a strictly formulaic approach, which may have unintended consequences due to events or market conditions unanticipated when goals are set, or may overemphasize short-term performance at the expense of long-term shareholder returns or undervalue achievements that are not yet evident in our financial performance. These factors are particularly relevant in the P&C insurance industry, where the “cost of goods sold” (that is, the amount of insured losses) is not known at the time of sale and develops over time — in some cases over many years. Because of this industry dynamic, approximately 80% of our 2019 Corporate Peer Group (listed on p. 53) include discretion in their annual award design.
 
 
 
 


 
2020 Proxy Statement
43

COMPENSATION MATTERS
 
 

2019 AIP Funding Level: When setting the 2019 operating plan, which forms the basis for the Compensation Core Earnings target, management and the Board anticipated continued underwriting discipline in Commercial Lines with some modest pressure on workers’ compensation, strong results in Group Benefits, improvement in Personal Lines underwriting results from lower catastrophe losses, relatively stable pricing, and lower limited partnership returns relative to the strong returns experienced in 2018. In addition, management included assumptions for Navigators Group earnings beginning on April 1, 2019.
The 2019 AIP Compensation Core Earnings target was set at $1.79 billion, which was 12% higher than the 2018 Compensation Core Earnings target of $1.59 billion, but 3% lower than the 2018 Compensation Core Earnings result of $1.84 billion, as 2018 results were significantly impacted by favorable items related to prior year development and partnership returns that were not expected to continue and were therefore not reflected in the 2019 target.
2019 Compensation Core Earnings
 
aip_chart.jpg
 
Actual Compensation Core Earnings for 2019 were $1.95 billion, which produced a formulaic AIP funding level of 161% of target, reflecting strong underlying financial performance across most of the company’s business units. Compensation Core Earnings were above target for 2019 principally due to favorable prior accident year reserve development in P&C, a lower than expected long-term disability loss ratio, higher net investment income from limited partnerships and alternative investments, higher mortgage loan income due to higher asset levels and prepayment penalties, and higher than expected Hartford Funds earnings due to significant equity market returns, partially offset by higher than expected non-catastrophe property losses across global specialty (including Navigators Group), small commercial package business and middle market inland marine. In addition, as described above, while the Compensation Core Earnings target included assumptions for Navigators Group earnings between April 1 and May 23, 2019, the delayed closing of the acquisition had the effect of reducing the formulaic AIP.
In assessing overall performance and arriving at the 2019 AIP funding level, the Compensation Committee started with the formulaic AIP funding level and undertook a qualitative review focused on the following:

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COMPENSATION MATTERS

FORMULAIC RESULTS
resultsmeasureda04.jpg
COMPENSATION CORE EARNINGS PERFORMANCE AGAINST PRE-ESTABLISHED TARGET
Total adjustments to arrive at Compensation Core Earnings reduced core earnings as reported by $108 million (See Appendix A for a description of all adjustments)
• Compensation Core Earnings against the pre-established target resulted in a formulaic AIP funding of 161% of target
downarrow01.jpg
QUALITATIVE REVIEW
 
 
 
 
 
quality_earnings.jpg
Quality of Earnings
 
strategic_nonfinancial.jpg
Strategic
• Achieved key business metric targets across most businesses, including outstanding results in Group Benefits
• Favorable non-catastrophe P&C prior year development
• Higher-than-expected partnership returns
• Outperformance of Hartford Funds primarily due to equity market returns significantly above operating plan assumptions
Importance: Understanding trends that drove earnings informs how the Compensation Committee thinks about holistic company performance
 
• Closed the Navigators Group acquisition in May 2019
• Launched next-generation Spectrum product in 45 states, providing a unique shopping experience in the industry
• Refinanced nearly $1.1 billion of outstanding debt, reducing weighted average coupon rate from 5.3% to 3.3%
Importance: Strategic accomplishments position the company for long term-growth and often represent significant successes in a given year, but such accomplishments may not be reflected or may reflect negatively in the quantitative formula

 
 
 
 
 
peerrelperformancea02.jpg
Peer-Relative Performance
 
ethics_compliance.jpg
Ethics and Compliance
• Top quartile EPS growth, ROE and one-year TSR
• Above-median book value per share growth and three-year TSR
Importance: Peer relative performance on key financial metrics and TSR is not captured in the quantitative formula and informs how the Compensation Committee thinks about holistic company performance
 
• Named to the 2019 list of most ethical companies by Ethisphere Institute for the eleventh time
• Named to the “Just 100” for the second consecutive year, and highest ranking insurance company
• Successful completion of Connecticut Department of Insurance 5-year statutory financial exam with no significant adverse findings
Importance: Linked to strategy of attracting and retaining talent, as prospective employees are significantly more likely to work for a company that has a strong reputation of ethical conduct
 
 
 
expense_management.jpg
Expense Management
 
• Operating plan controllable expenses slightly above target
Importance: Managing expenses is critical to maintaining competitive pricing and freeing up resources for investments in the business
 
 
 
As a result of its qualitative review, the Compensation Committee determined that, while strong 2019 results supported AIP funding above target, employees would be unduly rewarded for the following items, which were unanticipated when the goal was set and not the result of management efforts:
Extraordinary returns on real estate partnerships due to an unusually high number of real estate sales in 2019; and
Outperformance of Hartford Funds, primarily due to equity market returns significantly above operating plan assumptions.
Because these items accounted for an aggregate of 13 percentage points of the formulaic AIP funding level, the Compensation Committee decreased funding by a corresponding amount, resulting in a final AIP funding level of 148% of target, a level the Compensation Committee believed was more commensurate with overall company performance.

2020 AIP Curve: The Compensation Committee updated the AIP curve for 2020 awards, requiring greater outperformance to achieve above target awards. For 2020 performance, threshold performance, below which no AIP awards are earned, will go from 85% of target to 80% of target and funding for threshold performance will be reduced from 50% to 35% of target. Maximum funding level of 200% for performance significantly exceeding target will increase from 115% of target to 120% of target.


 
2020 Proxy Statement
45

COMPENSATION MATTERS
 
 

Determination of Individual NEO Awards
The AIP funding level multiplied by an individual’s target AIP opportunity produces an initial AIP award, which the Committee may adjust based on individual performance. In light of his responsibility for overall company performance, the CEO's AIP award has equaled the AIP funding level, without further adjustment, every year since he assumed the position in 2014. For awards granted to the NEOs in February 2020 for 2019 performance under the AIP, see 2019 Named Executive Officer's Compensation and Performance beginning on page 49.
3. LONG-TERM INCENTIVE AWARDS
The long-term incentive ("LTI") program is designed to drive long-term performance and encourage share ownership among Senior Executives, aligning their interests with those of shareholders. LTI awards are granted on an annual basis following an assessment of individual performance, potential and market data. 2019 LTI awards for Senior Executives consist of performance shares (50% of the award value) and stock options (50% of the award value). This LTI mix rewards for stock price performance, peer-relative shareholder returns (stock price and dividends) and operating performance.
2019-2021 Performance Shares (50% of LTI Award)
Performance shares are designed to reward and retain Senior Executives by allowing them to earn shares of our common stock based on pre-determined performance criteria. Performance shares have a three-year performance period and are settled in shares of common stock ranging from 0% to 200% of the number of performance shares granted depending upon the performance achieved on the following metrics:
Performance Metric
Rationale
Compensation Core ROE
(50% weighting)
Strategic measure that drives shareholder value creation
Peer-relative TSR
(50% weighting)
Measure of our performance against peers that are competing investment choices in the capital markets
Compensation Core ROE: For 50% of the performance share award, payouts at the end of the performance period, if any, will depend upon achieving a target average annual ROE over a three-year measurement period, as adjusted for compensation purposes. Because of the adjustments made for compensation purposes, Compensation Core ROE will differ from the ROE numbers provided in our financial statements. The Compensation Committee's definition of Compensation Core ROE for 2019 performance share awards is provided in Appendix A.
As illustrated in the graph at right, for 2019 performance share awards, the target level of performance is an average annual Compensation Core ROE for 2019, 2020, and 2021 of 11.9%, as reflected in the 2019-2021 operating plan. There is no payout for performance below threshold. The maximum Compensation Core ROE payout of 200% reflects ambitious goals that require performance significantly beyond target. Threshold and maximum reflect a range of +/-20% of target.

2019-2021 Compensation Core ROE
 
roe_chart.jpg
 
Peer-Relative TSR: For 50% of the performance share award, payouts, if any, will be based on company TSR performance at the end of the three-year performance period relative to a Performance Peer Group. The current Performance Peer Group represents 16 industry specific public companies against which we benchmark performance for compensation purposes. While there is some overlap, the Performance Peer Group is distinct from the Corporate Peer Group described on page 53, which includes mutual companies where financial data is not publicly available, as well as companies that compete with us for talent. The Compensation Committee believes that the Performance Peer Group should be limited to companies that (1) publish industry results against which to measure our performance and (2) are competing investment choices in capital markets. The Compensation Committee reviews the composition of the Performance Peer Group annually and did not make any changes to this group for 2019 performance share awards.
For each company in the Performance Peer Group, TSR will be measured using a 20-day stock price average at the beginning and the end of the performance period in order to smooth out any volatility. There is no payout for performance below the 30th

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percentile; 35% payout for performance at the 30th percentile; target payout for median performance; and 200% payout for performance at the 85th percentile:
2019 Performance Peer Group
 
Three-Year Relative TSR Ranking
 
Alleghany Corp.
 
tsrperformancechart.jpg
 
Allstate Corp.
 
 
American Financial Group, Inc.
 
 
Berkley (W. R.) Corp.
 
 
Chubb Ltd.
 
 
Cincinnati Financial Corp.
 
 
CNA Financial Corp.
 
 
Everest Re Group, Ltd.
 
 
Hanover Insurance Group, Inc.
 
 
Markel Corporation
 
 
Mercury General Corp.
 
 
MetLife, Inc.
 
 
Old Republic International Corp.
 
 
Progressive Corp.
 
 
Travelers Companies, Inc.
 
 
Unum Group
 
 
2020 TSR Payout Curve: In response to shareholder feedback, the Compensation Committee updated the TSR payout curve for performance share awards granted in 2020 to target above-median performance. There will be no payout for performance below the 30th percentile; 35% payout for performance at the 30th percentile; target payout for performance at the 55th percentile; and 200% payout for performance at the 85th percentile.
Stock Options (50% of LTI Awards)
The use of stock options directly aligns the interests of our Senior Executives with those of shareholders because options only have value if the price of our common stock on the exercise date exceeds the stock price on the grant date. The stock options are granted at fair market value, vest in three equal installments over three years, and have a 10-year term.
Certification of 2017-2019 Performance Share Awards
On February 28, 2017, the Compensation Committee granted Senior Executives performance shares tied 50% to achievement of average annual Compensation Core ROE(1)(2) goals over a three-year measurement period, and 50% to TSR performance relative to a peer group of 18 companies.(3) For the Core ROE component of the award, achievement of average annual Compensation Core ROE of 7.2%, 9.0% and 10.8% during the measurement period would have resulted in payouts of 50%, 100% and 200% of target, respectively. For the TSR component of the award, there would be no payout for performance below the 30th percentile, 35% payout for performance at the 30th percentile, target payout for median performance, and 200% payout for performance at the 85th percentile.
These performance shares vested as of December 31, 2019, the end of the three-year performance period, and the Compensation Committee certified a payout at 130% of target on February 19, 2020 based on the following results:
The average of the company's Compensation Core ROE for each year of the measurement period was 11.1%, resulting in a payout of 200% of target for the Compensation Core ROE component of the awards
The company's TSR during the performance period was at the 37th percentile relative to 18 peer companies, resulting in a payout of 59% of target for the TSR component
Details of the 2017 performance shares are given on pages 40-41 of our 2018 Proxy Statement filed with the Securities and Exchange Commission on April 5, 2018.
(1) Because threshold, target and maximum Compensation Core ROE values were established in February 2017 based on the company’s 2017-2019 operating plan before a decision to sell Talcott Resolution had been made, the definition of Compensation Core ROE for 2017 performance share awards was amended to include Talcott Resolution core earnings through September 30, 2017, the period in which management was both actively managing the business and separately reporting its results externally.
(2) As a result of the Tax Cuts and Jobs Act of 2017: (a) an adjustment was made pursuant to the definition of Compensation Core Earnings to use the previously enacted corporate income tax rate of 35%, which is higher than the current corporate income tax rate of 21%, and (b) the definition of average equity was amended to exclude the impact on average equity of the charge to earnings that was the result of the effect of the lower enacted corporate income tax rate on deferred tax assets.
(3) While the peer group at the time of the grant consisted of 19 companies, AXA subsequently acquired XL Group plc, resulting in a performance peer group of 18 companies for measuring TSR performance.

 
2020 Proxy Statement
47

COMPENSATION MATTERS
 
 

EXECUTIVE BENEFITS AND PERQUISITES
Senior Executives are eligible for the same benefits as full-time employees generally, including health, life insurance, disability and retirement benefits. Non-qualified savings and retirement plans provide benefits that would otherwise be provided but for the Internal Revenue Code limits that apply to tax-qualified benefit plans.
We provide certain additional perquisites to Senior Executives, including reimbursement of costs for annual physicals and associated travel, relocation benefits when a move is required, and occasional use of tickets for sporting and special events previously acquired by the company when no other business use has been arranged and there is no incremental cost to the company. The CEO also has the use of a company car and driver to allow for greater efficiency while commuting.
We own a fractional interest in a corporate aircraft to allow Senior Executives to safely and efficiently travel for business purposes. The corporate aircraft enables Senior Executives to use travel time productively by providing a confidential environment in which to conduct business and eliminating the schedule constraints imposed by commercial airline service. The CEO and President are permitted limited personal use of corporate aircraft to minimize their time spent on personal travel and to increase the time they are available for business purposes. Corporate aircraft also enables them to work more productively while traveling for time-sensitive personal matters. The CEO and President's use of corporate aircraft for personal travel is subject to an annual limit of $160,000 and $90,000, respectively, in aggregate incremental costs to the company. Fixed costs, which do not change based on usage, are excluded. Our aircraft usage policy otherwise prohibits personal travel via corporate aircraft by Senior Executives except in extraordinary circumstances. There was no personal use due to extraordinary circumstances in 2019.
From time to time, a Senior Executive’s expenses for a purpose deemed important to the business may not be considered “directly and integrally related” to the performance of the Senior Executive’s duties as required by applicable SEC rules. These expenses are considered perquisites for disclosure purposes. Examples of such expenses may include attendance at conferences, seminars or award ceremonies, as well as attendance of a Senior Executive’s spouse or guest at business events or dinners where spousal or guest attendance is expected.
Whenever required to do so under Internal Revenue Service regulations, we attribute income to Senior Executives for perquisites and the Senior Executive is responsible for the associated tax obligation.

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2019 NAMED EXECUTIVE OFFICERS' COMPENSATION AND PERFORMANCE
In evaluating individual performance, the Compensation Committee considered each NEO's achievements to advance the company's position in our strategic priorities of realizing the full potential of our product capabilities and underwriting expertise, becoming an easier company to do business with, and attracting, retaining and developing the talent needed for long-term success.
CHRISTOPHER SWIFT
Chairman and Chief Executive Officer
Mr. Swift has served as CEO since July 1, 2014; he was also appointed Chairman on January 5, 2015. As CEO, he is responsible for the company’s strategy and growth, capital allocation, performance, culture and leadership.
2019 Performance
In reviewing Mr. Swift’s performance, the independent directors took into account that under Mr. Swift’s leadership, the company:
• Achieved strong financial results across all business lines, delivering core earnings of $2.062 million that exceeded operating plan and top quartile performance against the Corporate Peer Group for core earnings ROE and core earnings per share growth.
• Successfully closed the acquisition of Navigators Group, began integration efforts and executed on our new business operating model, including related leadership appointments.
• Launched an ambitious digital transformation agenda, including the roll-out of an upgraded agent portal and Spectrum, an industry leading Small Commercial package offering that makes buying small business insurance easier in 45 states.
• Achieved top decile employee engagement and performance enablement scores as measured by Qualtrics Experience Management (XM) survey through continued focus on talent management and diversity and inclusion.
2019 Compensation Decisions
 
Salary. $1,150,000, unchanged from 2018.
 
AIP Award. Target of $3,000,000, unchanged from 2018. In recognition of the fact that Mr. Swift is responsible for overall company performance and progress toward achievement of the company's strategic priorities, the Compensation Committee approved a 2019 AIP award of $4,440,000 (148% of target), which was equal to the company AIP funding level of 148% for 2019.
 
LTI Award. In February 2019, based on its assessment of Mr. Swift's responsibilities and performance and Corporate Peer Group compensation, the Compensation Committee granted him an LTI award of $8,250,000, an increase of 3.1% from the previous year,  in the form of 50% stock options and 50% performance shares.

 
2020 Proxy Statement
49

COMPENSATION MATTERS
 
 

BETH COSTELLO
Executive Vice President and Chief Financial Officer
Ms. Costello has served as CFO since July 1, 2014. As the company’s CFO, Ms. Costello is responsible for finance, treasury, accounting and investor relations.
2019 Performance
In reviewing Ms. Costello’s performance, the Compensation Committee took into account that she:
Developed and executed a capital management plan that included a $1 billion share buyback authorization, an 8% dividend increase, and a $1.1 billion debt refinancing that significantly reduced the company's weighted average coupon rate.
Provided critical leadership for the Navigators Group acquisition, including planning for its financing, leading related rating agency and shareholder communications, and purchasing an adverse development cover for Navigators’ 2018 and prior loss reserves.
Engaged extensively with investors, analysts and rating agencies resulting in favorable recognition of the company’s investor relations program.
Strengthened organizational talent through key internal moves, supported diversity and inclusion as executive sponsor for the Flexible Abilities employee resource group, and achieved top decile employee engagement and enablement scores as measured by Qualtrics Experience Management (XM) survey.
2019 Compensation Decisions
 
Salary. $725,000, unchanged from 2018.
 
AIP Award. Ms. Costello's AIP target was increased from $1,200,000 in 2018 to $1,250,000 in 2019 based on an evaluation of performance, level of responsibility, experience and target compensation as compared to the Corporate Peer Group. For 2019, the Compensation Committee approved an AIP award of $1,850,000 (148% of target), which was equal to the company AIP funding level of 148% for 2019 to reflect her responsibility for overall company performance.
 
LTI Award. In February 2019, based on its assessment of Ms. Costello's responsibilities and performance and Corporate Peer Group compensation, the Compensation Committee granted her an LTI award of $1,775,000, unchanged from the previous year, in the form of 50% stock options and 50% performance shares.
DOUGLAS ELLIOT
President
Mr. Elliot has served as President of The Hartford since July 1, 2014. He leads the company’s Property & Casualty business lines (Small Commercial, Middle & Large Commercial, Personal Lines and Global Specialty) as well as Claims and Underwriting.
2019 Performance
In reviewing Mr. Elliot’s performance, the Compensation Committee took into account that he:
Delivered strong P&C core earnings as measured by top quartile ROE results.
Led the initial planning and organizational design work for the Navigators acquisition, resulting in tangible pricing momentum in Global Specialty and approximately $50 million of incremental sales across Middle & Large Commercial and Global Specialty through expanded product capabilities.
Launched next-generation Small Commercial package offering, Spectrum, in 45 states taking our industry-leading capabilities to a new level and making buying small business insurance even easier.
Continued focus on talent management, making significant progress in underwriting transformation and the technology roadmap and achieving top decile employee engagement and enablement scores as measured by Qualtrics Experience Management (XM) survey.
2019 Compensation Decisions
 
Salary. $950,000, unchanged from 2018.
 
AIP Award. Mr. Elliot's AIP target of $1,900,000 was unchanged from 2018. For 2019, the Compensation Committee approved an AIP award of $2,812,000 (148% of target), taking into account strong P&C core earnings and continued progress in realizing the full potential of our product capabilities, one of our key long-term strategic goals.
 
LTI Award. In February 2019, based on its assessment of Mr. Elliot's responsibilities and performance and Corporate Peer Group compensation, the Compensation Committee granted him an LTI award of $5,150,000, an increase of 3.0% from the previous year, in the form of 50% stock options and 50% performance shares.

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BRION JOHNSON
Executive Vice President and Chief Investment Officer; President of HIMCO
Mr. Johnson has served as Chief Investment Officer and President of Hartford Investment Management Company ("HIMCO") since May 16, 2012. As the leader of HIMCO, Mr. Johnson is responsible for the management of the company's investment portfolio, as well as for The Hartford's pension plan and institutional clients. In 2019 Mr. Johnson also assumed leadership of the company's Strategy and Ventures function.
2019 Performance
In reviewing Mr. Johnson’s performance, the Compensation Committee took into account that he:
Delivered strong performance across key investment measures for HIMCO, resulting in net investment income that exceeded the annual operating plan.
Continued progress on the separation of Talcott Resolution.
Established the Innovation Lab and worked collaboratively with business leaders and risk engineering to successfully pilot experiments using sensors and wearables.
Continued to strengthen organizational talent and achieved top decile employee engagement and enablement scores as measured by Qualtrics Experience Management (XM) survey.
2019 Compensation Decisions
 
Salary. In 2019, the Compensation Committee increased Mr. Johnson's salary from $575,000 to $600,000 based on his added responsibilities for Strategy and Ventures, and an evaluation of his performance, level of responsibility, experience and target compensation as compared to the Corporate Peer Group.
 
AIP Award. Mr. Johnson's AIP target of $1,400,000 was unchanged from 2018. For 2019, the Compensation Committee approved an AIP award of $1,890,000 (135% of target), taking into account investment portfolio performance as well as overall company performance.
 
LTI Award. In February 2019, based on its assessment of Mr. Johnson's increased responsibilities and performance and Corporate Peer Group compensation, the Compensation Committee granted him an LTI award of $1,750,000, an increase of 9.4% from the previous year, in the form of 50% stock options and 50% performance shares.
WILLIAM BLOOM
Executive Vice President, Operations, Technology & Data
Mr. Bloom has served as Executive Vice President of Operations, Technology & Data since July 1, 2014. He is responsible for The Hartford's information technology and operations organizations, as well as the company’s data and analytics strategy.
2019 Performance
In reviewing Mr. Bloom’s performance, the Compensation Committee took into account that he:
Delivered on major IT and digital investments that continue to enable the company to be easier to do business with, including integration activities for both the Aetna U.S. group life and disability business acquired in 2017 and Navigators Group.
Achieved significant annual savings while also improving vendor capabilities through renegotiation of several large vendor contracts.
Continued engagement with diversity and inclusion initiatives, including leadership of the Black Insurance Professionals Network employee resource group and Women in Technology.
Strengthened organizational talent through key internal moves and new hires, including a seasoned Chief Information Officer, while achieving top decile employee engagement and enablement scores as measured by Qualtrics Experience Management (XM) survey.
2019 Compensation Decisions
 
Salary. In 2019, the Compensation Committee increased Mr. Bloom's salary from $575,000 to $625,000 based on an evaluation of his performance, level of responsibility, experience and target compensation as compared to the Corporate Peer Group.
 
AIP Award. Mr. Bloom's AIP target was increased from $825,000 in 2018 to $950,000 in 2019 for the same reasons his salary was increased. For 2019, the Compensation Committee approved an AIP award of $1,500,000 (158% of target), taking into account exceptional IT product delivery, supporting our strategy of becoming an easier company to do business with.
 
LTI Award. In February 2019, based on its assessment of Mr. Bloom's responsibilities and performance and Corporate Peer Group compensation, the Compensation Committee granted him an LTI award of $1,250,000, a 13.6% increase from the previous year, in the form of 50% stock options and 50% performance shares.

 
2020 Proxy Statement
51

COMPENSATION MATTERS
 
 

PROCESS FOR DETERMINING SENIOR EXECUTIVE COMPENSATION (INCLUDING NEOs)
COMPENSATION COMMITTEE
The Compensation Committee is responsible for reviewing the performance of and approving compensation awarded to those executives who either report to the CEO or who are subject to the filing requirements of Section 16 of the Securities Exchange Act of 1934 (other than the CEO). The Compensation Committee also evaluates the CEO’s performance and recommends his compensation for approval by the independent directors. With this input from the Compensation Committee, the independent directors review the CEO’s performance and determine his compensation level in the context of the established goals and objectives for the enterprise and his individual performance. The Compensation Committee and the independent directors typically review performance and approve annual incentive awards for the prior fiscal year at their February meeting, along with annual LTI awards and any changes to base salary and target bonus. To assist in this process, the Compensation Committee reviews market and historical compensation information for each NEO to understand how each element of compensation relates to other elements and to the compensation package as a whole, including outstanding equity.
Annual Compensation Design, Payout and Performance Goal-Setting Process
 
December to January
• Review feedback from fall shareholder engagement
• Approve design of AIP and LTI programs for the upcoming year, including updates to Performance and Corporate Peer Groups
• Determine enterprise AIP funding based on the previous year's actual performance against the pre-established Compensation Core Earnings target and a review of qualitative factors
• Review Senior Executive stock ownership
 
February
• Review Senior Executive performance for previous year and determine individual AIP awards
• Establish AIP and LTI performance targets based on the company's three-year operating plan
• Review and approve current year total compensation recommendations for Senior Executives, including salary, AIP targets and LTI awards
 • Establish Senior Executive leadership goals and objectives for the current year
 
May to July
• Review Say-on-Pay voting results and recommendations of proxy advisory firms
• Review company pay equity status
• Review talent succession planning and diversity
 
September
• Review Enterprise Risk Management's annual compensation risk assessment
• Review AIP and LTI program design for the coming year
 
Ongoing
• Monitor the company's year-to-date performance in relation to targets
• Review and consider compensation plans, policies and practices in light of company performance, strategy, shareholder feedback and best practices
COMPENSATION CONSULTANT
Meridian Compensation Partners, LLP ("Meridian") is the Compensation Committee’s independent compensation consultant and has regularly attended Compensation Committee meetings since its engagement. Pursuant to the Compensation Committee's charter, Meridian has not provided services to the company other than consulting services provided to the Compensation Committee and, with respect to CEO and director compensation, the Board.
In 2019, following a review of its records and practice guidelines, Meridian provided the Compensation Committee a letter that confirmed its conformity with independence factors under applicable SEC rules and the listing standards of the NYSE.

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ROLE OF MANAGEMENT
Our Human Resources team supports the Compensation Committee in the execution of its responsibilities. Our Executive Vice President and Chief Human Resources Officer oversees the development of the materials for each Compensation Committee meeting, including market data, historical compensation and outstanding equity, individual and company performance metrics and compensation recommendations for consideration by the Compensation Committee (in the case of the CEO, by the independent directors). No member of our management team, including the CEO, has a role in determining their own compensation.
BENCHMARKING
On an annual basis, the Compensation Committee reviews and considers a number of factors in establishing or recommending a target total compensation opportunity for each individual including, but not limited to, market data, tenure in position, experience, sustained performance, and internal pay equity. Although the Compensation Committee strives for total compensation to be at median, it does not target a specific market position. The various sources of compensation information the Compensation Committee uses to determine the competitive market for our executive officers are described in more detail below.
2019 Corporate Peer Group
The Compensation Committee reviews the peer group used for compensation benchmarking (the "Corporate Peer Group") periodically or upon a significant change in business conditions for the company or its peers. As part of its review, the Compensation Committee considers many factors, including market capitalization, revenues, assets, lines of business and sources and destinations of talent. For this reason, the Corporate Peer Group differs from the Performance Peer Group described earlier for purposes of the TSR performance measure applicable to performance shares. For 2019, the Compensation Committee removed Marsh & McLennan Companies, Inc. and Prudential Financial Inc. from the Corporate Peer Group, and added American International Group, Inc. and Hanover Insurance Group, Inc., to better reflect competitors to the company's risk-based product businesses, its current business mix, and potential competitors for talent.
Data in millions – as of 12/31/2019(1) 
Company Name(2)
Revenues

 
Assets

 
Market Cap

Allstate Corp.
$
44,675

 
$
119,950

 
$
36,429

American International Group, Inc.
$
49,780

 
$
525,064

 
$
44,655

Berkley (W. R.) Corp.
$
7,902

 
$
26,643

 
$
12,692

Chubb Ltd.
$
34,230

 
$
176,943

 
$
70,545

Cigna Corp.
$
153,743

 
$
155,774

 
$
76,362

Cincinnati Financial Corp.
$
7,924

 
$
25,408

 
$
17,179

CNA Financial Corp.
$
10,767

 
$
60,612

 
$
12,165

Hanover Insurance Group, Inc.
$
4,891

 
$
12,491

 
$
5,384

Lincoln National Corp.
$
17,258

 
$
334,761

 
$
11,703

MetLife, Inc.
$
69,620

 
$
740,463

 
$
46,874

Principal Financial Group Inc.
$
16,222

 
$