hig-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-Q

____________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ______________

Commission file number 001-13958

____________________________________

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)


Delaware						13-3317783
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

One Hartford Plaza, Hartford, Connecticut 06155

(Address of principal executive offices) (Zip Code)

(860) 547-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	HIG	The New York Stock Exchange
6.10% Notes due October 1, 2041	HIG 41	The New York Stock Exchange

Depositary Shares, Each Representing a 1/1,000th Interest in a Share of 6.000% Non-Cumulative Preferred Stock, Series G, par value $0.01 per share	HIG PR G	The New York Stock Exchange

Indicate by check mark:

• whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☑

☐

• whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☑

☐

• whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Non-accelerated filer

☐

Accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

•

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

•

whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☑

As of October 25, 2023, there were outstanding 300,769,828 shares of Common Stock, $0.01 par value per share, of the registrant.

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS


Item	Description	Page
	PART I. FINANCIAL INFORMATION
1.	FINANCIAL STATEMENTS
	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	6
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022	7
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022	8
	CONDENSED CONSOLIDATED BALANCE SHEETS - AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022	9
	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022	10
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022	11
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	12
	NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES	12
	NOTE 2 - EARNINGS PER COMMON SHARE	15
	NOTE 3 - SEGMENT INFORMATION	15
	NOTE 4 - FAIR VALUE MEASUREMENTS	17
	NOTE 5 - INVESTMENTS	26
	NOTE 6 - DERIVATIVES	32
	NOTE 7 - PREMIUMS RECEIVABLE AND AGENTS' BALANCES	38
	NOTE 8 - REINSURANCE	39
	NOTE 9 - RESERVE FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES	41
	NOTE 10 - RESERVE FOR FUTURE POLICY BENEFITS	44
	NOTE 11 - OTHER POLICYHOLDER FUNDS AND BENEFITS PAYABLE	45
	NOTE 12 - INCOME TAXES	46
	NOTE 13 - DEBT	46
	NOTE 14 - COMMITMENTS AND CONTINGENCIES	46
	NOTE 15 - EQUITY	49
	NOTE 16 - CHANGES IN AND RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)	49
	NOTE 17 - EMPLOYEE BENEFIT PLANS	52
	NOTE 18 - RESTRUCTURING AND OTHER COSTS	52
2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	54
3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	[a]
4.	CONTROLS AND PROCEDURES	108
	PART II. OTHER INFORMATION
1.	LEGAL PROCEEDINGS	109
1A.	RISK FACTORS	109
2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	109
5..	OTHER INFORMATION	109
6.	EXHIBITS	110

	SIGNATURE	111

[a]The information required by this item is set forth in the Enterprise Risk Management section of Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference.

Forward-looking Statements

Certain of the statements contained herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “projects,” and similar references to future periods.

Forward-looking statements are based on management's current expectations and assumptions regarding future economic, competitive, legislative and other developments and their potential effect upon The Hartford Financial Services Group, Inc. and its subsidiaries (collectively, the "Company" or "The Hartford"). Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results could differ materially from expectations depending on the evolution of various factors, including the risks and uncertainties identified below, as well as factors described in such forward-looking statements, the Risk Factors of The Hartford's 2022 Form 10-K Annual Report, and our other filings with the Securities and Exchange Commission.

•Risks Relating to Economic, Political and Global Market Conditions:

◦challenges related to the Company’s current operating environment, including global political, economic and market conditions, and the effect of financial market disruptions, economic downturns, changes in trade regulation including tariffs and other barriers or other potentially adverse macroeconomic developments on the demand for our products and returns in our investment portfolios;

◦market risks associated with our business, including changes in credit spreads, equity prices, interest rates, inflation rate, foreign currency exchange rates and market volatility;

◦the impact on our investment portfolio if our investment portfolio is concentrated in any particular segment of the economy;

◦the impacts of changing climate and weather patterns on our businesses, operations and investment portfolio including on claims, demand and pricing of our products, the availability and cost of reinsurance, our modeling data used to evaluate and manage risks of catastrophes and severe weather events, the value of our investment portfolios and credit risk with reinsurers and other counterparties;

◦the ongoing effects of COVID-19, including exposure to COVID-19 business interruption property claims, the possibility of a resurgence of COVID-19 related losses in Group Benefits, and the potential for further legislative, regulatory or judicial actions pertaining to insurance underwriting and claims;

•Insurance Industry and Product-Related Risks:

◦the possibility of unfavorable loss development, including with respect to long-tailed exposures;

◦the significant uncertainties that limit our ability to estimate the ultimate reserves necessary for asbestos and environmental claims;

◦the possibility of another pandemic, civil unrest, earthquake, or other natural or man-made disaster that may adversely affect our businesses;

◦weather and other natural physical events, including the intensity and frequency of thunderstorms, tornadoes, hail, wildfires, flooding, winter storms, hurricanes and tropical storms, as well as climate change and its potential impact on weather patterns;

◦the possible occurrence of terrorist attacks and the Company’s inability to contain its exposure as a result of, among other factors, the inability to exclude coverage for terrorist attacks from workers' compensation policies and limitations on reinsurance coverage from the federal government under applicable laws;

◦the Company’s ability to effectively price its products and policies, including its ability to obtain regulatory consents to pricing actions or to non-renewal or withdrawal of certain product lines;

◦actions by competitors that may be larger or have greater financial resources than we do;

◦technological changes, including usage-based methods of determining premiums, advancements in automotive safety features, the development of autonomous vehicles, and platforms that facilitate ride sharing;

◦the Company's ability to market, distribute and provide insurance products and investment advisory services through current and future distribution channels and advisory firms;

◦the uncertain effects of emerging claim and coverage issues;

◦political instability, politically motivated violence or civil unrest, which may increase the frequency and severity of insured losses;

•Financial Strength, Credit and Counterparty Risks:

◦risks to our business, financial position, prospects and results associated with negative rating actions or downgrades in the Company’s financial strength and credit ratings or negative rating actions or downgrades relating to our investments;

◦capital requirements which are subject to many factors, including many that are outside the Company’s control, such as National Association of Insurance Commissioners ("NAIC") risk based capital formulas, rating agency capital models, Funds at Lloyd's

and Solvency Capital Requirement, which can in turn affect our credit and financial strength ratings, cost of capital, regulatory compliance and other aspects of our business and results;

◦losses due to nonperformance or defaults by others, including credit risk with counterparties associated with investments, derivatives, premiums receivable, reinsurance recoverables and indemnifications provided by third parties in connection with previous dispositions;

◦the potential for losses due to our reinsurers' unwillingness or inability to meet their obligations under reinsurance contracts and the availability, pricing and adequacy of reinsurance to protect the Company against losses;

◦state and international regulatory limitations on the ability of the Company and certain of its subsidiaries to declare and pay dividends;

•Risks Relating to Estimates, Assumptions and Valuations:

◦risks associated with the use of analytical models in making decisions in key areas such as underwriting, pricing, capital management, reserving, investments, reinsurance and catastrophe risk management;

◦the potential for differing interpretations of the methodologies, estimations and assumptions that underlie the Company’s fair value estimates for its investments and the evaluation of intent-to-sell impairments and allowance for credit losses on available-for-sale securities and mortgage loans;

◦the potential for impairments of our goodwill;

•Strategic and Operational Risks:

◦the Company’s ability to maintain the availability of its systems and safeguard the security of its data in the event of a disaster, cyber or other information security incident or other unanticipated event;

◦the potential for difficulties arising from outsourcing and similar third-party relationships;

◦the risks, challenges and uncertainties associated with capital management plans, expense reduction initiatives and other actions;

◦risks associated with acquisitions and divestitures, including the challenges of integrating acquired companies or businesses, which may result in our inability to achieve the anticipated benefits and synergies and may result in unintended consequences;

◦difficulty in attracting and retaining talented and qualified personnel, including key employees, such as executives, managers and employees with strong technological, analytical and other specialized skills;

◦the Company’s ability to protect its intellectual property and defend against claims of infringement;

•Regulatory and Legal Risks:

◦the cost and other potential effects of increased federal, state and international regulatory and legislative developments, including those that could adversely impact the demand for the Company’s products, operating costs and required capital levels;

◦unfavorable judicial or legislative developments;

◦the impact of changes in federal, state or foreign tax laws;

◦regulatory requirements that could delay, deter or prevent a takeover attempt that stockholders might consider in their best interests; and

◦the impact of potential changes in accounting principles and related financial reporting requirements.

Any forward-looking statement made by the Company in this document speaks only as of the date of the filing of this Form 10-Q. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.


Table of Contents

Part I - Item 1. Financial Statements

Item 1.

FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

The Hartford Financial Services Group, Inc.

Hartford, Connecticut

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of The Hartford Financial Services Group, Inc. and subsidiaries (the "Company") as of September 30, 2023, the related condensed consolidated statements of operations, comprehensive income (loss), and changes in stockholders' equity for the three-month and nine-month periods ended September 30, 2023 and 2022, and of cash flows for the nine-month periods ended September 30, 2023 and 2022, and the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2022, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows for the year then ended prior to retrospective adjustment for a change in the Company’s method of accounting for the reserve for future policy benefits (not presented herein); and in our report dated February 24, 2023, we expressed an unqualified opinion on those consolidated financial statements. We also audited the adjustments described in Note 1 that were applied to retrospectively adjust the December 31, 2022 consolidated balance sheet of the Company (not presented herein). In our opinion, such adjustments are appropriate and have been properly applied to the previously issued consolidated balance sheet in deriving the accompanying retrospectively adjusted condensed consolidated balance sheet as of December 31, 2022.

Basis for Review Results

This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ DELOITTE & TOUCHE LLP

Hartford, Connecticut

October 26, 2023


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Operations


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except for per share data)	2023		2022		2023		2022
	(Unaudited)
Revenues
Earned premiums	$	5,310	$	4,910	$	15,593	$	14,371
Fee income	330		328		977		1,031
Net investment income	597		487		1,652		1,537
Net realized losses	(90)		(166)		(161)		(649)
Other revenues	21		21		66		56
Total revenues	6,168		5,580		18,127		16,346
Benefits, losses and expenses
Benefits, losses and loss adjustment expenses	3,543		3,407		10,605		9,601
Amortization of deferred policy acquisition costs ("DAC")	517		464		1,510		1,351
Insurance operating costs and other expenses	1,226		1,206		3,667		3,641



Interest expense	50		50		150		163
Amortization of other intangible assets	18		18		53		53
Restructuring and other costs	1		3		4		10
Total benefits, losses and expenses	5,355		5,148		15,989		14,819
Income before income taxes	813		432		2,138		1,527
Income tax expense	162		92		405		300


Net income	651		340		1,733		1,227
Preferred stock dividends	6		6		16		16
Net income available to common stockholders	$	645	$	334	$	1,717	$	1,211




Net income available to common stockholders per common share
Basic	$	2.12	$	1.04	$	5.55	$	3.70
Diluted	$	2.09	$	1.02	$	5.48	$	3.65

See Notes to Condensed Consolidated Financial Statements.


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2023		2022		2023		2022
	(Unaudited)
Net income	$	651	$	340	$	1,733	$	1,227
Other comprehensive income (loss) ("OCI"):
Change in net unrealized gain (loss) on fixed maturities, available-for-sale ("AFS")	(671)		(1,180)		(354)		(4,669)
Change in unrealized losses on fixed maturities for which an allowance for credit losses ("ACL") has been recorded	1		(5)		(2)		(5)

Change in net gain (loss) on cash flow hedging instruments	(4)		39		(13)		63
Change in foreign currency translation adjustments	(1)		(19)		4		(27)
Change in liability for future policy benefits adjustments	15		24		12		96
Change in pension and other postretirement plan adjustments	6		13		16		37
Other comprehensive loss, net of tax	(654)		(1,128)		(337)		(4,505)
Comprehensive income (loss)	$	(3)	$	(788)	$	1,396	$	(3,278)

See Notes to Condensed Consolidated Financial Statements.


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Balance Sheets


(in millions, except for share and per share data)	September 30, 2023		December 31, 2022
	(Unaudited)
Assets
Investments:
Fixed maturities, AFS, at fair value (amortized cost of $41,723 and $39,533, and ACL of $20 and $12)	$	37,962	$	36,231
Fixed maturities, at fair value using the fair value option ("FVO")	332		333
Equity securities, at fair value	878		1,801
Mortgage loans (net of ACL of $46 and $36)	6,016		6,000
Limited partnerships and other alternative investments	4,664		4,177
Other investments	168		159
Short-term investments	3,300		3,859
Total investments	53,320		52,560
Cash	111		229
Restricted cash	70		115
Premiums receivable and agents' balances (net of ACL of $117 and $109)	5,535		4,949
Reinsurance recoverables (net of allowance for uncollectible reinsurance of $109 and $105)	6,963		6,964
Deferred policy acquisition costs	1,124		998
Deferred income taxes, net	1,486		1,437
Goodwill	1,911		1,911
Property and equipment, net	894		927
Other intangible assets, net	725		778
Other assets	2,377		2,140

Total assets	$	74,516	$	73,008
Liabilities
Unpaid losses and loss adjustment expenses	$	41,686	$	41,243
Reserve for future policy benefits	463		502
Other policyholder funds and benefits payable	645		658
Unearned premiums	8,680		7,815

Long-term debt	4,361		4,357
Other liabilities	5,002		4,757

Total liabilities	60,837		59,332
Commitments and Contingencies (Note 14)
Stockholders’ Equity
Preferred stock, $0.01 par value — 50,000,000 shares authorized, 13,800 shares issued at September 30, 2023 and December 31, 2022, aggregate liquidation preference of $345	334		334
Common stock, $0.01 par value —1,500,000,000 shares authorized, 344,960,228 shares issued at September 30, 2023 and December 31, 2022	3		3
Additional paid-in capital	1,869		1,895
Retained earnings	18,382		17,058
Treasury stock, at cost 42,523,441 and 29,848,980 shares	(2,731)		(1,773)
Accumulated other comprehensive income (loss) ("AOCI"), net of tax	(4,178)		(3,841)
Total stockholders’ equity	13,679		13,676
Total liabilities and stockholders’ equity	$	74,516	$	73,008

See Notes to Condensed Consolidated Financial Statements.


Table of Contents

THE HARTFORD FINANCIAL SERVICES GROUP, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except for share and per share data)	2023		2022		2023		2022
	(Unaudited)
Preferred Stock	$	334	$	334	$	334	$	334
Common Stock	3		4		3		4
Additional Paid-in Capital
Additional Paid-in Capital, beginning of period	1,864		3,264		1,895		3,309
Issuance of shares under incentive and stock compensation plans and other	(14)		(8)		(133)		(130)
Stock-based compensation plans expense	19		21		107		98

Additional Paid-in Capital, end of period	1,869		3,277		1,869		3,277
Retained Earnings
Retained Earnings, beginning of period	17,865		16,394		17,058		15,770


Net income	651		340		1,733		1,227
Dividends declared on preferred stock	(6)		(6)		(16)		(16)
Dividends declared on common stock	(128)		(123)		(393)		(376)
Retained Earnings, end of period	18,382		16,605		18,382		16,605
Treasury Stock, at cost
Treasury Stock, at cost, beginning of period	(2,390)		(2,502)		(1,773)		(1,740)
Treasury stock acquired	(354)		(350)		(1,061)		(1,200)

Issuance of shares under incentive and stock compensation plans from treasury stock and other	17		9		156		151
Net shares acquired related to employee incentive and stock compensation plans	(4)		(1)		(53)		(55)

Treasury Stock, at cost, end of period	(2,731)		(2,844)		(2,731)		(2,844)
Accumulated Other Comprehensive Income (Loss), net of tax
Accumulated Other Comprehensive Income, net of tax, beginning of period	(3,524)		(3,249)		(3,841)		128


Total other comprehensive loss	(654)		(1,128)		(337)		(4,505)
Accumulated Other Comprehensive Income (Loss), net of tax, end of period	(4,178)		(4,377)		(4,178)		(4,377)
Total Stockholders’ Equity	$	13,679	$	12,999	$	13,679	$