Business Acquisition

Navigators Group

On May 23, 2019, The Hartford acquired Navigators Group, a specialty underwriter, for total consideration of $2.121 billion and recorded provisional estimates of the fair value of the assets acquired and liabilities assumed. In the second quarter of 2020, The Hartford finalized its provisional estimates and recorded additional assets of $9 and liabilities of $7 with a net reduction in

goodwill of $2. The measurement period adjustments, determined as if the accounting had been completed as of the acquisition date, had no effect on the Condensed Consolidated Statements of Operations. The following table presents the preliminary allocation of the purchase price to the assets acquired and liabilities assumed as of the acquisition date, the measurement period adjustments recorded, and the final purchase price allocation.

Fair Value of Assets Acquired and Liabilities Assumed at the Acquisition Date


	Preliminary Values as of May 23, 2019 (as previously reported)		Measurement Period Adjustments		Adjusted Values as of May 23, 2019
Assets
Cash and invested assets	$	3,848	$	3	$	3,851
Premiums receivable	492		6		498
Reinsurance recoverables	1,100		(3)		1,097
Prepaid reinsurance premiums	238		—		238
Other intangible assets	580		—		580
Property and equipment	83		—		83
Other assets	99		3		102
Total Assets Acquired	6,440		9		6,449
Liabilities
Unpaid losses and loss adjustment expenses	2,823		—		2,823
Unearned premiums	1,219		—		1,219
Long-term debt	284		—		284
Deferred income taxes, net	48		(1)		47
Other liabilities	568		8		576
Total Liabilities Assumed	4,942		7		4,949
Net identifiable assets acquired	1,498		2		1,500
Goodwill [1]	623		(2)		621
Net Assets Acquired	$	2,121	$	—	$	2,121

[1] Non-deductible for income tax purposes.

The following table presents supplemental pro forma amounts of revenue and net income for the Company for the nine months ended September 30, 2019, as though the business was acquired on January 1, 2018. Pro forma adjustments include the revenue and earnings of Navigators Group as well as amortization of identifiable intangible assets acquired.

Pro Forma Results


	Nine Months Ended September 30, 2019
Total Revenue	$	16,055
Net Income	$	1,532

Business Disposition

Sale of Continental Europe Operations

On September 30, 2020, the Company entered into a definitive agreement to sell our Continental Europe Operations. The transaction is expected to close by the second quarter of 2021, subject to customary closing conditions, including regulatory approvals. The complete sale of the Continental Europe Operations consists of multiple arrangements designed as a single transaction. The assets and liabilities of the Continental Europe Operations have been classified as held for sale in the Company's

Condensed Consolidated Balance Sheets beginning with the period ended September 30, 2020.

Total consideration less costs to sell is estimated to be approximately $14, resulting in an estimated loss on the sale of approximately $51, before tax, which has been recorded within net realized capital gains (losses) in the third quarter of 2020 in

the Condensed Consolidated Statements of Operations. The Company also recorded related income tax benefits of $19, for an estimated after-tax loss of $32 on the sale, in the third quarter of 2020. The accrual for the estimated before tax loss is included as a reduction of the carrying value of assets held for sale in the Company's Condensed Consolidated Balance Sheets as of September 30, 2020. The Continental Europe Operations are reported under the Commercial Lines segment. The estimate of consideration less costs to sell of $14 includes an estimate of

consideration that is contingent on how the ultimate amounts required to settle claims on 2020 and prior accident years, as determined at the end of 2024 compare with recorded reserves as currently estimated. The contingent consideration has been estimated at its fair value of $12 and could increase or decrease depending on how ultimate losses develop. Any change in the estimated fair value of contingent consideration in a future period would increase or decrease the estimated loss on sale in that period.

Carrying Value of Assets and Liabilities to be Transferred in Connection With the Sale [1]


	As of September 30, 2020
Assets
Investments and cash	$	138




Reinsurance recoverables and other	29
Total assets held for sale	167
Liabilities
Unpaid losses and loss adjustment expenses	74
Unearned premiums	35
Other liabilities	44
Total liabilities held for sale	$	153

[1] As of September 30, 2020, the estimated fair value of the disposal group is $14 based on the estimated consideration to be received less cost to sell. Within the disposal group, as of September 30, 2020, investments in fixed maturities and short-term investments, which are measured at fair value on a recurring basis, had a fair value of $80, of which $2 was based on quoted prices in active markets for identical assets and $78 was based on significant observable inputs. The remaining fair value less costs to sell for the disposal group is ($66), which is measured on a nonrecurring basis using significant unobservable inputs. See Note 5—Fair Value Measurements for more information.