Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - HARTFORD FINANCIAL SERVICES GROUP, INC. | ex991earningsnewsrelease33.htm |
| 8-K - 8-K - HARTFORD FINANCIAL SERVICES GROUP, INC. | form8-kcover33118.htm |
INVESTOR FINANCIAL SUPPLEMENT
March 31, 2018
On December 3, 2017, The Hartford entered into an agreement to sell its life and annuity run-off business (formerly known as Talcott Resolution). As a result, the assets and liabilities of this business have been accounted for as held for sale and operating results of the life and annuity business are now included in discontinued operations for all periods presented.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
As of April 24, 2018 | ||||||||
Address: | ||||||||
One Hartford Plaza | A.M. Best | Standard & Poor’s | Moody’s | |||||
Hartford, CT 06155 | Insurance Financial Strength Ratings: | |||||||
Hartford Fire Insurance Company | A+ | A+ | A1 | |||||
Hartford Life and Accident Insurance Company | A | A | A2 | |||||
Maxum Casualty Insurance Company | A+ | NR | NR | |||||
Maxum Indemnity Company | A+ | NR | NR | |||||
- Hartford Fire Insurance Company ratings are on stable outlook at A.M. Best, Moody’s, and Standard and Poor’s | ||||||||
- Hartford Life and Accident Insurance Company ratings are on stable outlook at A.M. Best, Moody’s, and Standard and Poor’s | ||||||||
Internet address: | - Maxum Casualty Insurance Company ratings are on stable outlook at A.M. Best | |||||||
http://www.thehartford.com | - Maxum Indemnity Company ratings are on stable outlook at A.M. Best | |||||||
Other Ratings: | ||||||||
The Hartford Financial Services Group, Inc.: | ||||||||
Senior debt | a- | BBB+ | Baa2 | |||||
Contacts: | Commercial paper | AMB-1 | A-2 | P-2 | ||||
Sabra Purtill | Junior subordinated debentures | bbb | BBB- | Baa3 | ||||
Senior Vice President | ||||||||
Investor Relations & Treasurer | - Hartford Financial Services Group, Inc. senior debt and junior subordinated debentures are on stable outlook at A.M. Best, Standard and Poor’s and under review for upgrade at Moody's. | |||||||
Phone (860) 547-8691 | ||||||||
Sean Rourke | TRANSFER AGENT | |||||||
Assistant Vice President | Shareholder correspondence should be mailed to: | Overnight correspondence should be mailed to: | ||||||
Investor Relations | Computershare | Computershare | ||||||
Phone (860) 547-5688 | P.O. Box 505000 | 462 South 4th Street, Suite 1600 | ||||||
Louisville, KY 40233 | Louisville, KY 40202 | |||||||
COMMON STOCK
Common stock and warrants of The Hartford Financial Services Group, Inc. are traded on the New York Stock Exchange under the symbols “HIG” and "HIG/WS", respectively.
This report is for information purposes only. It should be read in conjunction with documents filed by The Hartford Financial Services Group, Inc. with the U.S. Securities and Exchange
Commission, including, without limitation, the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTOR FINANCIAL SUPPLEMENT
TABLE OF CONTENTS
CONSOLIDATED | Consolidated Financial Results | 1 |
Consolidated Statements of Operations | 2 | |
Operating Results by Segment | 3 | |
Consolidating Balance Sheets | 4 | |
Capital Structure | 5 | |
Statutory Capital to GAAP Stockholders’ Equity Reconciliation | 6 | |
Accumulated Other Comprehensive Income (Loss) | 7 | |
PROPERTY & CASUALTY | Property & Casualty Income Statements | 8 |
Property & Casualty Underwriting Ratios and Results | 9 | |
Commercial Lines Income Statements | 10 | |
Commercial Lines Underwriting Ratios | 12 | |
Commercial Lines Supplemental Data | 13 | |
Personal Lines Income Statements | 14 | |
Personal Lines Underwriting Ratios | 16 | |
Personal Lines Supplemental Data | 17 | |
P&C Other Operations Income Statements | 19 | |
GROUP BENEFITS | Income Statements | 20 |
Supplemental Data | 21 | |
MUTUAL FUNDS | Income Statements | 22 |
Asset Value Rollforward - Assets Under Management By Asset Class | 23 | |
CORPORATE | Income Statements | 24 |
INVESTMENTS | Investment Earnings Before Tax - Consolidated | 25 |
Investment Earnings Before Tax - Property & Casualty | 26 | |
Investment Earnings Before Tax - Group Benefits | 27 | |
Net Investment Income | 28 | |
Components of Net Realized Capital Gains (Losses) | 29 | |
Composition of Invested Assets | 30 | |
Invested Asset Exposures | 31 | |
APPENDIX | Basis of Presentation and Definitions | 32 |
Discussion of Non-GAAP and Other Financial Measures | 33 | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED FINANCIAL RESULTS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
HIGHLIGHTS | |||||||||||||||
Net income (loss) | $ | 597 | $ | (3,703 | ) | $ | 234 | $ | (40 | ) | $ | 378 | |||
Core earnings * | $ | 461 | $ | 293 | $ | 130 | $ | 303 | $ | 288 | |||||
Total revenues | $ | 4,691 | $ | 4,587 | $ | 4,192 | $ | 4,214 | $ | 4,169 | |||||
Total assets | $216,666 | $225,260 | $224,901 | $226,562 | $226,094 | ||||||||||
PER SHARE AND SHARES DATA | |||||||||||||||
Basic earnings per common share | |||||||||||||||
Income (loss) from continuing operations | $ | 1.20 | $ | (1.56 | ) | $ | 0.40 | $ | (0.42 | ) | $ | 0.82 | |||
Net income (loss) | $ | 1.67 | $ | (10.37 | ) | $ | 0.65 | $ | (0.11 | ) | $ | 1.02 | |||
Core earnings * | $ | 1.29 | $ | 0.82 | $ | 0.36 | $ | 0.83 | $ | 0.78 | |||||
Diluted earnings per common share | |||||||||||||||
Income (loss) from continuing operations | $ | 1.18 | $ | (1.56 | ) | $ | 0.40 | $ | (0.42 | ) | $ | 0.80 | |||
Net income (loss) | $ | 1.64 | $ | (10.37 | ) | $ | 0.64 | $ | (0.11 | ) | $ | 1.00 | |||
Core earnings * | $ | 1.27 | $ | 0.81 | $ | 0.35 | $ | 0.81 | $ | 0.76 | |||||
Weighted average common shares outstanding (basic) | 357.5 | 357.0 | 360.2 | 366.0 | 371.4 | ||||||||||
Dilutive effect of stock compensation | 4.4 | 4.8 | 4.5 | 3.8 | 4.2 | ||||||||||
Dilutive effect of warrants | 2.0 | 2.1 | 2.3 | 2.5 | 3.0 | ||||||||||
Weighted average common shares outstanding and dilutive potential common shares (diluted) | 363.9 | 363.9 | 367.0 | 372.3 | 378.6 | ||||||||||
Common shares outstanding | 358.1 | 356.8 | 357.5 | 362.8 | 369.2 | ||||||||||
Book value per common share | $ | 36.70 | $ | 37.82 | $ | 48.20 | $ | 47.65 | $ | 46.07 | |||||
Per common share impact of accumulated other comprehensive income [1] | $ | (0.67 | ) | $ | 1.86 | $ | 1.63 | $ | 1.36 | $ | (0.56 | ) | |||
Book value per common share (excluding AOCI) * | $ | 37.37 | $ | 35.96 | $ | 46.57 | $ | 46.29 | $ | 46.63 | |||||
Book value per diluted share | $ | 36.06 | $ | 37.11 | $ | 47.33 | $ | 46.84 | $ | 45.25 | |||||
Per diluted share impact of AOCI | $ | (0.65 | ) | $ | 1.82 | $ | 1.61 | $ | 1.34 | $ | (0.55 | ) | |||
Book value per diluted share (excluding AOCI) * | $ | 36.71 | $ | 35.29 | $ | 45.72 | $ | 45.50 | $ | 45.80 | |||||
Common shares outstanding and dilutive potential common shares | 364.5 | 363.6 | 364.1 | 369.1 | 375.9 | ||||||||||
RETURN ON EQUITY ("ROE") [2] | |||||||||||||||
Net income (loss) ROE | (19.3 | )% | (20.6 | )% | 2.7 | % | 3.9 | % | 5.4 | % | |||||
Core earnings ROE * | 7.8 | % | 6.7 | % | 5.9 | % | 6.9 | % | 5.1 | % | |||||
[1] | Accumulated other comprehensive income ("AOCI") represents after-tax unrealized gain (loss) on available-for-sale securities, other than temporary impairment losses recognized in AOCI, net gain (loss) on cash-flow hedging instruments, foreign currency translation adjustments and pension and other postretirement adjustments. |
[2] | For reconciliations of net income (loss) ROE to core earnings ROE, see Appendix, page 33. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Earned premiums | $ | 3,927 | $ | 3,801 | $ | 3,447 | $ | 3,455 | $ | 3,438 | |||||
Fee income | 323 | 313 | 291 | 286 | 278 | ||||||||||
Net investment income | 451 | 394 | 404 | 395 | 410 | ||||||||||
Realized capital gains (losses): | |||||||||||||||
Total other-than-temporary impairment (“OTTI”) losses | (2 | ) | (4 | ) | (4 | ) | (4 | ) | (3 | ) | |||||
OTTI losses recognized in other comprehensive income | 2 | — | 3 | 2 | 2 | ||||||||||
Net OTTI losses recognized in earnings | — | (4 | ) | (1 | ) | (2 | ) | (1 | ) | ||||||
Other net realized capital gains (losses) | (30 | ) | 64 | 27 | 57 | 25 | |||||||||
Total net realized capital gains (losses) | (30 | ) | 60 | 26 | 55 | 24 | |||||||||
Other revenues | 20 | 19 | 24 | 23 | 19 | ||||||||||
Total revenues | 4,691 | 4,587 | 4,192 | 4,214 | 4,169 | ||||||||||
Benefits, losses and loss adjustment expenses | 2,695 | 2,692 | 2,638 | 2,420 | 2,424 | ||||||||||
Amortization of deferred acquisition costs ("DAC") | 342 | 342 | 341 | 345 | 344 | ||||||||||
Insurance operating costs and other expenses | 1,037 | 1,042 | 952 | 1,650 | 919 | ||||||||||
Interest expense | 80 | 78 | 79 | 79 | 80 | ||||||||||
Amortization of other intangible assets | 18 | 11 | 1 | 1 | 1 | ||||||||||
Total benefits, losses and expenses | 4,172 | 4,165 | 4,011 | 4,495 | 3,768 | ||||||||||
Income (loss) before income taxes | 519 | 422 | 181 | (281 | ) | 401 | |||||||||
Income tax expense (benefit) | 91 | 980 | 36 | (129 | ) | 98 | |||||||||
Income (loss) from continuing operations, after tax | 428 | (558 | ) | 145 | (152 | ) | 303 | ||||||||
Income (loss) from discontinued operations, after tax | 169 | (3,145 | ) | 89 | 112 | 75 | |||||||||
Net income (loss) | 597 | (3,703 | ) | 234 | (40 | ) | 378 | ||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | (30 | ) | 59 | 25 | 53 | 23 | |||||||||
Less: Pension settlement, before tax | — | — | — | (750 | ) | — | |||||||||
Less: Integration and transaction costs associated with acquired business, before tax [1] | (12 | ) | (17 | ) | — | — | — | ||||||||
Less: Income tax benefit (expense) [2] | 9 | (893 | ) | (10 | ) | 242 | (8 | ) | |||||||
Less: Income (loss) from discontinued operations, after tax [3] | 169 | (3,145 | ) | 89 | 112 | 75 | |||||||||
Core earnings | $ | 461 | $ | 293 | $ | 130 | $ | 303 | $ | 288 | |||||
[1] | Integration and transaction costs related to the Group Benefits acquisition made in October 2017. |
[2] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
[3] | The three months ended March 31, 2018 and December 31, 2017 included an estimated gain on sale of $62 and loss on sale of $3.3 billion, respectively, related to the pending sale of the Company's life and annuity run-off business. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
OPERATING RESULTS BY SEGMENT
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Net income (loss): | |||||||||||||||
Commercial Lines | $ | 298 | $ | 286 | $ | 90 | $ | 258 | $ | 231 | |||||
Personal Lines | 89 | (74 | ) | 8 | 24 | 33 | |||||||||
P&C Other Operations | 17 | 7 | 18 | 20 | 24 | ||||||||||
Property & Casualty ("P&C") | 404 | 219 | 116 | 302 | 288 | ||||||||||
Group Benefits | 54 | 109 | 71 | 69 | 45 | ||||||||||
Mutual Funds | 34 | 33 | 26 | 24 | 23 | ||||||||||
Sub-total | 492 | 361 | 213 | 395 | 356 | ||||||||||
Corporate [1] | 105 | (4,064 | ) | 21 | (435 | ) | 22 | ||||||||
Net income (loss) | $ | 597 | $ | (3,703 | ) | $ | 234 | $ | (40 | ) | $ | 378 | |||
Core earnings (losses): | |||||||||||||||
Commercial Lines | $ | 302 | $ | 282 | $ | 81 | $ | 238 | $ | 224 | |||||
Personal Lines | 89 | (46 | ) | 7 | 20 | 32 | |||||||||
P&C Other Operations | 17 | 4 | 18 | 18 | 21 | ||||||||||
P&C | 408 | 240 | 106 | 276 | 277 | ||||||||||
Group Benefits | 85 | 67 | 66 | 61 | 40 | ||||||||||
Mutual Funds | 34 | 37 | 26 | 24 | 23 | ||||||||||
Sub-total | 527 | 344 | 198 | 361 | 340 | ||||||||||
Corporate | (66 | ) | (51 | ) | (68 | ) | (58 | ) | (52 | ) | |||||
Core earnings | $ | 461 | $ | 293 | $ | 130 | $ | 303 | $ | 288 | |||||
[1] | Includes discontinued operations from the Company's life and annuity run-off business accounted for as held for sale. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CONSOLIDATING BALANCE SHEETS
PROPERTY & CASUALTY | GROUP BENEFITS | MUTUAL FUNDS | CORPORATE [1] | CONSOLIDATED | ||||||||||||||||||||||||||||||
Mar 31 2018 | Dec 31 2017 | Mar 31 2018 | Dec 31 2017 | Mar 31 2018 | Dec 31 2017 | Mar 31 2018 | Dec 31 2017 | Mar 31 2018 | Dec 31 2017 | |||||||||||||||||||||||||
Investments | ||||||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale, at fair value | $ | 25,032 | $ | 25,571 | $ | 10,145 | $ | 10,489 | $ | 38 | $ | 49 | $ | 709 | $ | 855 | $ | 35,924 | $ | 36,964 | ||||||||||||||
Fixed maturities, at fair value using the fair value option | 28 | 30 | 10 | 11 | — | — | — | — | 38 | 41 | ||||||||||||||||||||||||
Equity securities, at fair value | 869 | — | 68 | — | 32 | — | 154 | — | 1,123 | — | ||||||||||||||||||||||||
Equity securities, available-for-sale, at fair value | — | 749 | — | 79 | — | 27 | — | 157 | — | 1,012 | ||||||||||||||||||||||||
Mortgage loans | 2,356 | 2,315 | 865 | 860 | — | — | — | — | 3,221 | 3,175 | ||||||||||||||||||||||||
Limited partnerships and other alternative investments | 1,414 | 1,375 | 235 | 213 | — | — | — | — | 1,649 | 1,588 | ||||||||||||||||||||||||
Other investments | 82 | 85 | 10 | 11 | — | — | — | — | 92 | 96 | ||||||||||||||||||||||||
Short-term investments | 1,217 | 1,268 | 364 | 398 | 182 | 146 | 622 | 458 | 2,385 | 2,270 | ||||||||||||||||||||||||
Total investments | 30,998 | 31,393 | 11,697 | 12,061 | 252 | 222 | 1,485 | 1,470 | 44,432 | 45,146 | ||||||||||||||||||||||||
Cash | 144 | 156 | 44 | 12 | 23 | 8 | 17 | 4 | 228 | 180 | ||||||||||||||||||||||||
Premiums receivable and agents’ balances | 3,554 | 3,511 | 440 | 399 | — | — | — | — | 3,994 | 3,910 | ||||||||||||||||||||||||
Reinsurance recoverables [2] | 3,453 | 3,476 | 242 | 236 | — | — | 344 | 349 | 4,039 | 4,061 | ||||||||||||||||||||||||
DAC | 601 | 594 | 53 | 47 | 9 | 9 | — | — | 663 | 650 | ||||||||||||||||||||||||
Deferred income taxes | 104 | 51 | (65 | ) | (103 | ) | 6 | 6 | 1,170 | 1,210 | 1,215 | 1,164 | ||||||||||||||||||||||
Goodwill | 157 | 157 | 723 | 723 | 180 | 180 | 230 | 230 | 1,290 | 1,290 | ||||||||||||||||||||||||
Property and equipment, net | 826 | 837 | 115 | 118 | — | — | 77 | 79 | 1,018 | 1,034 | ||||||||||||||||||||||||
Other intangible assets | 73 | 28 | 603 | 620 | 11 | 11 | — | — | 687 | 659 | ||||||||||||||||||||||||
Other assets | 954 | 897 | 562 | 365 | 89 | 111 | 944 | 857 | 2,549 | 2,230 | ||||||||||||||||||||||||
Assets held for sale | — | — | — | — | — | — | 156,551 | 164,936 | 156,551 | 164,936 | ||||||||||||||||||||||||
Total assets | $ | 40,864 | $ | 41,100 | $ | 14,414 | $ | 14,478 | $ | 570 | $ | 547 | $ | 160,818 | $ | 169,135 | $ | 216,666 | $ | 225,260 | ||||||||||||||
Unpaid losses and loss adjustment expenses | $ | 23,715 | $ | 23,775 | $ | 8,498 | $ | 8,512 | $ | — | $ | — | $ | — | $ | — | $ | 32,213 | $ | 32,287 | ||||||||||||||
Reserves for future policy benefits [2] | — | — | 444 | 441 | — | — | 234 | 272 | 678 | 713 | ||||||||||||||||||||||||
Other policyholder funds and benefits payable [2] | — | — | 481 | 492 | — | — | 319 | 324 | 800 | 816 | ||||||||||||||||||||||||
Unearned premiums | 5,408 | 5,282 | 42 | 40 | — | — | — | — | 5,450 | 5,322 | ||||||||||||||||||||||||
Debt | — | — | — | — | — | — | 5,168 | 4,998 | 5,168 | 4,998 | ||||||||||||||||||||||||
Other liabilities | 1,766 | 2,061 | 876 | 774 | 213 | 197 | 2,165 | 2,156 | 5,020 | 5,188 | ||||||||||||||||||||||||
Liabilities held for sale | — | — | — | — | — | — | 154,194 | 162,442 | 154,194 | 162,442 | ||||||||||||||||||||||||
Total liabilities | $ | 30,889 | $ | 31,118 | $ | 10,341 | $ | 10,259 | $ | 213 | $ | 197 | $ | 162,080 | $ | 170,192 | $ | 203,523 | $ | 211,766 | ||||||||||||||
Common stockholders' equity, excluding AOCI | 9,627 | 9,267 | 4,010 | 3,998 | 357 | 350 | (612 | ) | (784 | ) | 13,382 | 12,831 | ||||||||||||||||||||||
AOCI, after tax | 348 | 715 | 63 | 221 | — | — | (650 | ) | (273 | ) | (239 | ) | 663 | |||||||||||||||||||||
Total stockholders' equity | 9,975 | 9,982 | 4,073 | 4,219 | 357 | 350 | (1,262 | ) | (1,057 | ) | 13,143 | 13,494 | ||||||||||||||||||||||
Total liabilities and equity | $ | 40,864 | $ | 41,100 | $ | 14,414 | $ | 14,478 | $ | 570 | $ | 547 | $ | 160,818 | $ | 169,135 | $ | 216,666 | $ | 225,260 | ||||||||||||||
[1] | Includes discontinued operations from the Company's life and annuity run-off business accounted for as held for sale. |
[2] | Corporate includes reserves and reinsurance recoverables for life and annuity business retained by the Company. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CAPITAL STRUCTURE
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
DEBT | |||||||||||||||
Short-term debt | $ | 413 | $ | 320 | $ | 320 | $ | 320 | $ | 320 | |||||
Senior notes | 3,172 | 3,096 | 3,093 | 3,092 | 3,091 | ||||||||||
Junior subordinated debentures | 1,583 | 1,582 | 1,582 | 1,582 | 1,583 | ||||||||||
Total debt | $ | 5,168 | $ | 4,998 | $ | 4,995 | $ | 4,994 | $ | 4,994 | |||||
STOCKHOLDERS’ EQUITY | |||||||||||||||
Common stockholders' equity, excluding AOCI | $ | 13,382 | $ | 12,831 | $ | 16,648 | $ | 16,794 | $ | 17,216 | |||||
AOCI | (239 | ) | 663 | 585 | 494 | (207 | ) | ||||||||
Total stockholders’ equity | $ | 13,143 | $ | 13,494 | $ | 17,233 | $ | 17,288 | $ | 17,009 | |||||
CAPITALIZATION | |||||||||||||||
Total capitalization, including AOCI, after tax | $ | 18,311 | $ | 18,492 | $ | 22,228 | $ | 22,282 | $ | 22,003 | |||||
Total capitalization, excluding AOCI, after tax | $ | 18,550 | $ | 17,829 | $ | 21,643 | $ | 21,788 | $ | 22,210 | |||||
DEBT TO CAPITALIZATION RATIOS | |||||||||||||||
Total debt to capitalization, including AOCI | 28.2 | % | 27.0 | % | 22.5 | % | 22.4 | % | 22.7 | % | |||||
Total debt to capitalization, excluding AOCI | 27.9 | % | 28.0 | % | 23.1 | % | 22.9 | % | 22.5 | % | |||||
Total rating agency adjusted debt to capitalization [1] [2] | 29.9 | % | 28.8 | % | 24.3 | % | 25.2 | % | 25.0 | % | |||||
FIXED CHARGE COVERAGE RATIOS | |||||||||||||||
Total earnings to total fixed charges [3] | 7.1:1 | 3.1:1 | 2.2:1 | 1.7:1 | 5.7:1 | ||||||||||
[1] | The leverage calculation reflects adjustments related to the Company’s defined benefit plans' unfunded pension liability and the Company's rental expense on operating leases for a total adjustment of $1.0 billion and $1.2 billion for the three months ended March 31, 2018 and 2017, respectively. |
[2] | Reflects 25% equity credit for the Company's outstanding junior subordinated debentures. |
[3] | Calculated as year to date total earnings divided by year to date total fixed charges. Total earnings represent income from continuing operations before income taxes and total fixed charges, less undistributed earnings from limited partnerships and other alternative investments. Total fixed charges include interest expense, rent expense, capitalized interest and amortization of debt issuance costs. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
STATUTORY CAPITAL TO GAAP STOCKHOLDERS’ EQUITY RECONCILIATION
March 31, 2018
P&C | GROUP BENEFITS | |||||
U.S. statutory net income [1] | $ | 434 | $ | 92 | ||
U.S. statutory capital [2] | $ | 7,774 | $ | 2,112 | ||
U.S. GAAP adjustments: | ||||||
DAC | 601 | 53 | ||||
Non-admitted deferred tax assets [3] | 120 | 171 | ||||
Deferred taxes [4] | (570 | ) | (408 | ) | ||
Goodwill | 111 | 723 | ||||
Other Intangible Assets | 68 | 603 | ||||
Non-admitted assets other than deferred taxes | 625 | 145 | ||||
Asset valuation and interest maintenance reserve | — | 266 | ||||
Benefit reserves | (48 | ) | 78 | |||
Unrealized gains on investments | 480 | 34 | ||||
Other, net | 814 | 296 | ||||
U.S. GAAP stockholders’ equity | $ | 9,975 | $ | 4,073 | ||
[1] | Statutory net income is for the three months ended March 31, 2018. |
[2] | For reporting purposes, statutory capital and surplus is referred to collectively as "statutory capital". |
[3] | Represents the limitations on the recognition of deferred tax assets under U.S. statutory accounting principles ("U.S. STAT"). |
[4] | Represents the tax timing differences between U.S. GAAP and U.S. STAT. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
AS OF | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Fixed maturities net unrealized gain [1] | $ | 1,349 | $ | 2,121 | $ | 1,774 | $ | 1,696 | $ | 1,355 | |||||
Equities net unrealized gain [1] | — | 94 | 66 | 59 | 58 | ||||||||||
OTTI losses recognized in AOCI | (5 | ) | (3 | ) | (4 | ) | (3 | ) | (4 | ) | |||||
Net gain on cash flow hedging instruments | (24 | ) | 18 | 43 | 57 | 58 | |||||||||
Total net unrealized gain | $ | 1,320 | $ | 2,230 | $ | 1,879 | $ | 1,809 | $ | 1,467 | |||||
Foreign currency translation adjustments | 32 | 34 | 27 | 13 | 8 | ||||||||||
Pension and other postretirement adjustment | (1,591 | ) | (1,601 | ) | (1,321 | ) | (1,328 | ) | (1,682 | ) | |||||
Total AOCI [2] | $ | (239 | ) | $ | 663 | $ | 585 | $ | 494 | $ | (207 | ) | |||
[1] | On January 1, 2018, the Company adopted new accounting guidance that resulted in the reclassification from AOCI to retained earnings of $88 of stranded tax effects related to tax reform and $93 of net unrealized gains, after tax, related to equity securities. |
[2] | AOCI includes AOCI balances related to the life and annuity run-off business held for sale which totaled $892 and $1.0 billion as of March 31, 2018 and December 31, 2017, respectively. At closing of the sale, the Company's shareholders’ equity will be reduced by the amount of AOCI of the life and annuity run-off business. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Written premiums | $ | 2,658 | $ | 2,550 | $ | 2,626 | $ | 2,631 | $ | 2,710 | |||||
Change in unearned premium reserve | 88 | (89 | ) | (18 | ) | (19 | ) | 88 | |||||||
Earned premiums | 2,570 | 2,639 | 2,644 | 2,650 | 2,622 | ||||||||||
Fee income | 19 | 20 | 20 | 20 | 21 | ||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 1,537 | 1,615 | 1,672 | 1,646 | 1,612 | ||||||||||
Current accident year catastrophes | 103 | 179 | 352 | 155 | 150 | ||||||||||
Prior accident year development | (32 | ) | (42 | ) | (1 | ) | (10 | ) | 12 | ||||||
Total losses and loss adjustment expenses | 1,608 | 1,752 | 2,023 | 1,791 | 1,774 | ||||||||||
Amortization of DAC | 328 | 328 | 329 | 331 | 330 | ||||||||||
Underwriting expenses | 470 | 510 | 496 | 467 | 465 | ||||||||||
Amortization of other intangible assets | 1 | 2 | 1 | 1 | 1 | ||||||||||
Dividends to policyholders | 4 | 24 | 4 | 3 | 4 | ||||||||||
Underwriting gain (loss)* | 178 | 43 | (189 | ) | 77 | 69 | |||||||||
Net investment income | 322 | 281 | 303 | 302 | 310 | ||||||||||
Net realized capital gains (losses) | (9 | ) | 57 | 16 | 42 | 17 | |||||||||
Net servicing and other income | 5 | 6 | 9 | 4 | 5 | ||||||||||
Income before income taxes | 496 | 387 | 139 | 425 | 401 | ||||||||||
Income tax expense | 92 | 168 | 23 | 123 | 113 | ||||||||||
Net income | 404 | 219 | 116 | 302 | 288 | ||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | (8 | ) | 56 | 16 | 41 | 17 | |||||||||
Less: Income tax benefit (expense) [2] | 4 | (77 | ) | (6 | ) | (15 | ) | (6 | ) | ||||||
Core earnings | $ | 408 | $ | 240 | $ | 106 | $ | 276 | $ | 277 | |||||
ROE | |||||||||||||||
Net income [1] | 11.9 | % | 10.7 | % | 5.0 | % | 7.5 | % | 4.5 | % | |||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 1.4 | % | 1.7 | % | 0.3 | % | 0.1 | % | — | % | |||||
Less: Loss on reinsurance transaction, before tax | — | % | — | % | (7.5 | )% | (7.5 | )% | (7.7 | )% | |||||
Less: Income tax benefit (expense) [2] | (1.2 | )% | (1.4 | )% | 2.5 | % | 3.1 | % | 3.2 | % | |||||
Less: Impact of AOCI, excluded from core earnings ROE | (0.6 | )% | (0.7 | )% | (1.0 | )% | (1.2 | )% | (0.6 | )% | |||||
Core earnings [1] | 12.3 | % | 11.1 | % | 10.7 | % | 13.0 | % | 9.6 | % | |||||
[1] | Net income ROE and core earnings ROE for Property & Casualty assumes a portion of debt and interest expense accounted for within Corporate is allocated to Property & Casualty. For further information, see Appendix, page 33. |
[2] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PROPERTY & CASUALTY
UNDERWRITING RATIOS AND RESULTS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
UNDERWRITING GAIN (LOSS) | $ | 178 | $ | 43 | $ | (189 | ) | $ | 77 | $ | 69 | ||||
UNDERWRITING RATIOS | |||||||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 59.8 | 61.2 | 63.2 | 62.1 | 61.5 | ||||||||||
Current accident year catastrophes | 4.0 | 6.8 | 13.3 | 5.8 | 5.7 | ||||||||||
Prior accident year development [1] | (1.2 | ) | (1.6 | ) | — | (0.4 | ) | 0.5 | |||||||
Total losses and loss adjustment expenses | 62.6 | 66.4 | 76.5 | 67.6 | 67.7 | ||||||||||
Expenses | 30.4 | 31.1 | 30.5 | 29.4 | 29.6 | ||||||||||
Policyholder dividends | 0.2 | 0.9 | 0.2 | 0.1 | 0.2 | ||||||||||
Combined ratio | 93.1 | 98.4 | 107.1 | 97.1 | 97.4 | ||||||||||
Current accident year catastrophes and prior accident year development | 2.8 | 5.2 | 13.3 | 5.4 | 6.2 | ||||||||||
Underlying combined ratio * | 90.3 | 93.2 | 93.9 | 91.6 | 91.2 | ||||||||||
[1] | The following table summarizes unfavorable (favorable) prior accident year development. |
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Auto liability - Commercial Lines | $ | (5 | ) | $ | (3 | ) | $ | — | $ | — | $ | 20 | |||
Homeowners | (12 | ) | (14 | ) | — | — | — | ||||||||
Professional and general liability | 10 | 2 | — | — | 10 | ||||||||||
Package business | 8 | (3 | ) | (22 | ) | — | — | ||||||||
Bond | — | 22 | 20 | — | (10 | ) | |||||||||
Commercial property | (13 | ) | (3 | ) | 1 | (7 | ) | 1 | |||||||
Workers’ compensation | (25 | ) | (50 | ) | (9 | ) | — | (20 | ) | ||||||
Workers' compensation discount accretion | 10 | 7 | 5 | 8 | 8 | ||||||||||
Catastrophes | (3 | ) | (4 | ) | 1 | (10 | ) | (3 | ) | ||||||
Uncollectible reinsurance | — | (15 | ) | — | — | — | |||||||||
Other reserve re-estimates | (2 | ) | 19 | 3 | (1 | ) | 6 | ||||||||
Total prior accident year development | $ | (32 | ) | $ | (42 | ) | $ | (1 | ) | $ | (10 | ) | $ | 12 | |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Written premiums | $ | 1,851 | $ | 1,727 | $ | 1,702 | $ | 1,706 | $ | 1,821 | |||||
Change in unearned premium reserve | 140 | (7 | ) | (21 | ) | (14 | ) | 133 | |||||||
Earned premiums | 1,711 | 1,734 | 1,723 | 1,720 | 1,688 | ||||||||||
Fee income | 9 | 9 | 9 | 9 | 10 | ||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 971 | 990 | 1,009 | 994 | 968 | ||||||||||
Current accident year catastrophes | 69 | (21 | ) | 270 | 63 | 71 | |||||||||
Prior accident year development [1] | (19 | ) | (34 | ) | (3 | ) | — | 15 | |||||||
Total losses and loss adjustment expenses | 1,021 | 935 | 1,276 | 1,057 | 1,054 | ||||||||||
Amortization of DAC | 257 | 255 | 253 | 252 | 249 | ||||||||||
Underwriting expenses | 324 | 352 | 348 | 324 | 323 | ||||||||||
Amortization of other intangible assets | — | 1 | — | — | — | ||||||||||
Dividends to policyholders | 4 | 24 | 4 | 3 | 4 | ||||||||||
Underwriting gain (loss) | 114 | 176 | (149 | ) | 93 | 68 | |||||||||
Net servicing income (loss) | — | (1 | ) | 1 | 1 | — | |||||||||
Net investment income | 258 | 225 | 241 | 240 | 243 | ||||||||||
Net realized capital gains (losses) | (8 | ) | 47 | 13 | 32 | 11 | |||||||||
Other income (expenses) | 2 | 1 | (1 | ) | — | 1 | |||||||||
Income before income taxes | 366 | 448 | 105 | 366 | 323 | ||||||||||
Income tax expense | 68 | 162 | 15 | 108 | 92 | ||||||||||
Net income | 298 | 286 | 90 | 258 | 231 | ||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | (6 | ) | 45 | 12 | 32 | 11 | |||||||||
Less: Income tax benefit (expense) [2] | 2 | (41 | ) | (3 | ) | (12 | ) | (4 | ) | ||||||
Core earnings | $ | 302 | $ | 282 | $ | 81 | $ | 238 | $ | 224 | |||||
[1] | For further information, see Commercial Lines Income Statements (continued), page 11. |
[2] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
INCOME STATEMENTS (CONTINUED)
Prior accident year development included the following unfavorable (favorable) reserve development:
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Auto liability | $ | (5 | ) | $ | (3 | ) | $ | — | $ | — | $ | 20 | |||
Professional liability | 2 | 1 | — | — | — | ||||||||||
Package business | 8 | (3 | ) | (22 | ) | — | — | ||||||||
General liability | 8 | 1 | — | — | 10 | ||||||||||
Bond | — | 22 | 20 | — | (10 | ) | |||||||||
Commercial property | (13 | ) | (3 | ) | 1 | (7 | ) | 1 | |||||||
Workers’ compensation | (25 | ) | (50 | ) | (9 | ) | — | (20 | ) | ||||||
Workers' compensation discount accretion | 10 | 7 | 5 | 8 | 8 | ||||||||||
Catastrophes | (8 | ) | 1 | 1 | (2 | ) | — | ||||||||
Uncollectible reinsurance | — | (15 | ) | — | — | — | |||||||||
Other reserve re-estimates | 4 | 8 | 1 | 1 | 6 | ||||||||||
Total prior accident year development | $ | (19 | ) | $ | (34 | ) | $ | (3 | ) | $ | — | $ | 15 | ||
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
UNDERWRITING RATIOS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
UNDERWRITING GAIN (LOSS) | $ | 114 | $ | 176 | $ | (149 | ) | $ | 93 | $ | 68 | ||||
UNDERWRITING RATIOS | |||||||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 56.8 | 57.1 | 58.6 | 57.8 | 57.3 | ||||||||||
Current accident year catastrophes | 4.0 | (1.2 | ) | 15.7 | 3.7 | 4.2 | |||||||||
Prior accident year development | (1.1 | ) | (2.0 | ) | (0.2 | ) | — | 0.9 | |||||||
Total losses and loss adjustment expenses | 59.7 | 53.9 | 74.1 | 61.5 | 62.4 | ||||||||||
Expenses | 33.4 | 34.5 | 34.4 | 33.0 | 33.3 | ||||||||||
Policyholder dividends | 0.2 | 1.4 | 0.2 | 0.2 | 0.2 | ||||||||||
Combined ratio | 93.3 | 89.9 | 108.6 | 94.6 | 96.0 | ||||||||||
Current accident year catastrophes and prior accident year development | 2.9 | (3.2 | ) | 15.5 | 3.7 | 5.1 | |||||||||
Underlying combined ratio | 90.4 | 93.0 | 93.2 | 90.9 | 90.9 | ||||||||||
COMBINED RATIOS BY LINE OF BUSINESS | |||||||||||||||
SMALL COMMERCIAL | |||||||||||||||
Combined ratio | 89.0 | 83.9 | 101.5 | 90.4 | 91.7 | ||||||||||
Current accident year catastrophes | 3.4 | (1.2 | ) | 15.9 | 3.2 | 4.7 | |||||||||
Prior accident year development | (1.8 | ) | (2.7 | ) | (3.5 | ) | — | (0.3 | ) | ||||||
Underlying combined ratio | 87.5 | 87.8 | 89.2 | 87.2 | 87.3 | ||||||||||
MIDDLE MARKET | |||||||||||||||
Combined ratio | 98.1 | 94.2 | 119.7 | 99.8 | 100.4 | ||||||||||
Current accident year catastrophes | 6.6 | (1.5 | ) | 21.1 | 5.5 | 5.2 | |||||||||
Prior accident year development | (0.8 | ) | (3.2 | ) | 1.5 | (0.5 | ) | 1.4 | |||||||
Underlying combined ratio | 92.2 | 98.9 | 97.0 | 94.9 | 93.8 | ||||||||||
SPECIALTY COMMERCIAL | |||||||||||||||
Combined ratio | 98.2 | 100.5 | 99.4 | 97.6 | 101.3 | ||||||||||
Current accident year catastrophes | — | — | — | 0.2 | — | ||||||||||
Prior accident year development | 0.7 | 0.9 | 0.8 | 1.5 | 3.9 | ||||||||||
Underlying combined ratio | 97.5 | 99.6 | 98.6 | 95.9 | 97.5 | ||||||||||
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMMERCIAL LINES
SUPPLEMENTAL DATA
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
WRITTEN PREMIUMS | |||||||||||||||
Small Commercial | $ | 996 | $ | 882 | $ | 905 | $ | 936 | $ | 986 | |||||
Middle Market | 616 | 628 | 584 | 566 | 592 | ||||||||||
Specialty Commercial | 227 | 206 | 201 | 192 | 232 | ||||||||||
National Accounts | 97 | 87 | 84 | 71 | 99 | ||||||||||
Financial Products | 63 | 61 | 59 | 58 | 61 | ||||||||||
Bond | 48 | 51 | 51 | 52 | 53 | ||||||||||
Other Specialty | 19 | 7 | 7 | 11 | 19 | ||||||||||
Other | 12 | 11 | 12 | 12 | 11 | ||||||||||
Total | $ | 1,851 | $ | 1,727 | $ | 1,702 | $ | 1,706 | $ | 1,821 | |||||
EARNED PREMIUMS | |||||||||||||||
Small Commercial | $ | 914 | $ | 923 | $ | 919 | $ | 914 | $ | 890 | |||||
Middle Market | 581 | 594 | 585 | 587 | 583 | ||||||||||
Specialty Commercial | 204 | 206 | 208 | 207 | 203 | ||||||||||
National Accounts | 84 | 85 | 84 | 85 | 86 | ||||||||||
Financial Products | 59 | 60 | 62 | 60 | 60 | ||||||||||
Bond | 50 | 51 | 51 | 51 | 47 | ||||||||||
Other Specialty | 11 | 10 | 11 | 11 | 10 | ||||||||||
Other | 12 | 11 | 11 | 12 | 12 | ||||||||||
Total | $ | 1,711 | $ | 1,734 | $ | 1,723 | $ | 1,720 | $ | 1,688 | |||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | |||||||||||||||
New Business Premium | |||||||||||||||
Small Commercial | $ | 166 | $ | 155 | $ | 140 | $ | 147 | $ | 154 | |||||
Middle Market | $ | 141 | $ | 137 | $ | 112 | $ | 107 | $ | 128 | |||||
Renewal Price Increases [1] | |||||||||||||||
Standard Commercial Lines - Written | 2.5 | % | 2.8 | % | 3.5 | % | 3.4 | % | 3.2 | % | |||||
Standard Commercial Lines - Earned | 3.3 | % | 3.3 | % | 3.0 | % | 2.6 | % | 2.4 | % | |||||
Policy Count Retention | |||||||||||||||
Small Commercial | 82 | % | 83 | % | 83 | % | 83 | % | 85 | % | |||||
Middle Market | 78 | % | 79 | % | 76 | % | 75 | % | 80 | % | |||||
Policies in Force (in thousands) | |||||||||||||||
Small Commercial | 1,263 | 1,272 | 1,274 | 1,278 | 1,281 | ||||||||||
Middle Market | 66 | 66 | 67 | 66 | 66 | ||||||||||
[1] | Excludes Maxum, middle market specialty programs and livestock lines of business. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Written premiums | $ | 807 | $ | 823 | $ | 924 | $ | 925 | $ | 889 | |||||
Change in unearned premium reserve | (52 | ) | (82 | ) | 3 | (5 | ) | (45 | ) | ||||||
Earned premiums | 859 | 905 | 921 | 930 | 934 | ||||||||||
Fee income | 10 | 11 | 11 | 11 | 11 | ||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 566 | 625 | 663 | 652 | 644 | ||||||||||
Current accident year catastrophes | 34 | 200 | 82 | 92 | 79 | ||||||||||
Prior accident year development [1] | (13 | ) | (25 | ) | 2 | (10 | ) | (4 | ) | ||||||
Total losses and loss adjustment expenses | 587 | 800 | 747 | 734 | 719 | ||||||||||
Amortization of DAC | 71 | 73 | 76 | 79 | 81 | ||||||||||
Underwriting expenses | 143 | 155 | 145 | 140 | 137 | ||||||||||
Amortization of other intangible assets | 1 | 1 | 1 | 1 | 1 | ||||||||||
Underwriting gain (loss) | 67 | (113 | ) | (37 | ) | (13 | ) | 7 | |||||||
Net servicing income | 4 | 5 | 4 | 4 | 3 | ||||||||||
Net investment income | 40 | 34 | 36 | 35 | 36 | ||||||||||
Net realized capital gains (losses) | — | 6 | 2 | 5 | 2 | ||||||||||
Other income (expenses) | (1 | ) | — | 3 | (1 | ) | (1 | ) | |||||||
Income (loss) before income taxes | 110 | (68 | ) | 8 | 30 | 47 | |||||||||
Income tax expense | 21 | 6 | — | 6 | 14 | ||||||||||
Net income (loss) | 89 | (74 | ) | 8 | 24 | 33 | |||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | (1 | ) | 7 | 2 | 5 | 2 | |||||||||
Less: Income tax benefit (expense) [2] | 1 | (35 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||
Core earnings (losses) | $ | 89 | $ | (46 | ) | $ | 7 | $ | 20 | $ | 32 | ||||
[1] | For further information, see Personal Lines Income Statements (continued), page 15. |
[2] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
INCOME STATEMENTS (CONTINUED)
Prior accident year development included the following unfavorable (favorable) reserve development:
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Auto liability | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
Homeowners | (12 | ) | (14 | ) | — | — | — | ||||||||
Catastrophes | 5 | (5 | ) | — | (8 | ) | (3 | ) | |||||||
Other reserve re-estimates, net | (6 | ) | (6 | ) | 2 | (2 | ) | (1 | ) | ||||||
Total prior accident year development | $ | (13 | ) | $ | (25 | ) | $ | 2 | $ | (10 | ) | $ | (4 | ) | |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
UNDERWRITING RATIOS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
UNDERWRITING GAIN (LOSS) | $ | 67 | $ | (113 | ) | $ | (37 | ) | $ | (13 | ) | $ | 7 | ||
UNDERWRITING RATIOS | |||||||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Current accident year before catastrophes | 65.9 | 69.1 | 72.0 | 70.1 | 69.0 | ||||||||||
Current accident year catastrophes | 4.0 | 22.1 | 8.9 | 9.9 | 8.5 | ||||||||||
Prior accident year development | (1.5 | ) | (2.8 | ) | 0.2 | (1.1 | ) | (0.4 | ) | ||||||
Total losses and loss adjustment expenses | 68.3 | 88.4 | 81.1 | 78.9 | 77.0 | ||||||||||
Expenses | 23.9 | 24.1 | 22.9 | 22.5 | 22.3 | ||||||||||
Combined ratio | 92.2 | 112.5 | 104.0 | 101.4 | 99.3 | ||||||||||
Current accident year catastrophes and prior accident year development | 2.5 | 19.3 | 9.1 | 8.8 | 8.1 | ||||||||||
Underlying combined ratio | 89.8 | 93.1 | 94.9 | 92.6 | 91.2 | ||||||||||
PRODUCT | |||||||||||||||
Automobile | |||||||||||||||
Combined ratio | 93.1 | 101.7 | 106.3 | 100.8 | 97.5 | ||||||||||
Current accident year catastrophes | 0.5 | 0.7 | 4.8 | 2.3 | 1.4 | ||||||||||
Prior accident year development | (1.6 | ) | (0.7 | ) | — | (0.6 | ) | (0.4 | ) | ||||||
Underlying combined ratio | 94.2 | 101.7 | 101.6 | 99.1 | 96.6 | ||||||||||
Homeowners | |||||||||||||||
Combined ratio | 89.8 | 137.4 | 97.9 | 103.4 | 103.4 | ||||||||||
Current accident year catastrophes | 12.0 | 71.9 | 18.6 | 28.0 | 24.9 | ||||||||||
Prior accident year development | (1.1 | ) | (7.3 | ) | 0.4 | (2.1 | ) | (0.4 | ) | ||||||
Underlying combined ratio | 78.9 | 72.8 | 78.9 | 77.6 | 78.9 | ||||||||||
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
DISTRIBUTION | |||||||||||||||
WRITTEN PREMIUMS | |||||||||||||||
AARP Direct | $ | 654 | $ | 644 | $ | 735 | $ | 729 | $ | 687 | |||||
AARP Agency | 67 | 79 | 79 | 80 | 86 | ||||||||||
Other Agency | 77 | 90 | 100 | 104 | 105 | ||||||||||
Other | 9 | 10 | 10 | 12 | 11 | ||||||||||
Total | $ | 807 | $ | 823 | $ | 924 | $ | 925 | $ | 889 | |||||
EARNED PREMIUMS | |||||||||||||||
AARP Direct | $ | 681 | $ | 709 | $ | 713 | $ | 711 | $ | 708 | |||||
AARP Agency | 77 | 83 | 88 | 89 | 92 | ||||||||||
Other Agency | 92 | 102 | 108 | 117 | 123 | ||||||||||
Other | 9 | 11 | 12 | 13 | 11 | ||||||||||
Total | $ | 859 | $ | 905 | $ | 921 | $ | 930 | $ | 934 | |||||
PRODUCT LINE | |||||||||||||||
WRITTEN PREMIUMS | |||||||||||||||
Automobile | $ | 581 | $ | 578 | $ | 636 | $ | 638 | $ | 645 | |||||
Homeowners | 226 | 245 | 288 | 287 | 244 | ||||||||||
Total | $ | 807 | $ | 823 | $ | 924 | $ | 925 | $ | 889 | |||||
EARNED PREMIUMS | |||||||||||||||
Automobile | $ | 600 | $ | 634 | $ | 644 | $ | 652 | $ | 654 | |||||
Homeowners | 259 | 271 | 277 | 278 | 280 | ||||||||||
Total | $ | 859 | $ | 905 | $ | 921 | $ | 930 | $ | 934 | |||||
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
PERSONAL LINES
SUPPLEMENTAL DATA (CONTINUED)
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
STATISTICAL PREMIUM INFORMATION (YEAR OVER YEAR) | |||||||||||||||
New Business Premium | |||||||||||||||
Automobile | $ | 37 | $ | 35 | $ | 37 | $ | 38 | $ | 42 | |||||
Homeowners | $ | 9 | $ | 9 | $ | 11 | $ | 12 | $ | 12 | |||||
Renewal Written Price Increases | |||||||||||||||
Automobile | 9.7 | % | 11.1 | % | 11.8 | % | 10.4 | % | 10.3 | % | |||||
Homeowners | 9.5 | % | 9.0 | % | 8.5 | % | 9.1 | % | 8.9 | % | |||||
Renewal Earned Price Increases | |||||||||||||||
Automobile | 10.7 | % | 10.8 | % | 10.1 | % | 9.1 | % | 8.2 | % | |||||
Homeowners | 8.9 | % | 8.8 | % | 8.7 | % | 8.5 | % | 8.2 | % | |||||
Policy Count Retention | |||||||||||||||
Automobile | 80 | % | 80 | % | 80 | % | 81 | % | 82 | % | |||||
Homeowners | 82 | % | 83 | % | 83 | % | 83 | % | 82 | % | |||||
Premium Retention | |||||||||||||||
Automobile | 85 | % | 87 | % | 87 | % | 88 | % | 88 | % | |||||
Homeowners | 89 | % | 89 | % | 89 | % | 90 | % | 88 | % | |||||
Policies in Force (in thousands) | |||||||||||||||
Automobile | 1,641 | 1,702 | 1,768 | 1,839 | 1,905 | ||||||||||
Homeowners | 1,008 | 1,038 | 1,071 | 1,109 | 1,144 | ||||||||||
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
P&C OTHER OPERATIONS
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Losses and loss adjustment expenses | |||||||||||||||
Prior accident year development | $ | — | $ | 17 | $ | — | $ | — | $ | 1 | |||||
Total losses and loss adjustment expenses | — | 17 | — | — | 1 | ||||||||||
Underwriting expenses | 3 | 3 | 3 | 3 | 5 | ||||||||||
Underwriting loss | (3 | ) | (20 | ) | (3 | ) | (3 | ) | (6 | ) | |||||
Net investment income | 24 | 22 | 26 | 27 | 31 | ||||||||||
Net realized capital gains (losses) | (1 | ) | 4 | 1 | 5 | 4 | |||||||||
Other income | — | 1 | 2 | — | 2 | ||||||||||
Income before income taxes | 20 | 7 | 26 | 29 | 31 | ||||||||||
Income tax expense | 3 | — | 8 | 9 | 7 | ||||||||||
Net income | 17 | 7 | 18 | 20 | 24 | ||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | (1 | ) | 4 | 2 | 4 | 4 | |||||||||
Less: Income tax benefit (expense) [1] | 1 | (1 | ) | (2 | ) | (2 | ) | (1 | ) | ||||||
Core earnings | $ | 17 | $ | 4 | $ | 18 | $ | 18 | $ | 21 | |||||
[1] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Earned premiums | $ | 1,357 | $ | 1,162 | $ | 803 | $ | 805 | $ | 816 | |||||
Fee income | 44 | 34 | 19 | 19 | 19 | ||||||||||
Net investment income | 121 | 103 | 95 | 88 | 95 | ||||||||||
Net realized capital gains (losses) | (25 | ) | 4 | 9 | 13 | 8 | |||||||||
Total revenues | 1,497 | 1,303 | 926 | 925 | 938 | ||||||||||
Benefits, losses and loss adjustment expenses | 1,085 | 910 | 614 | 628 | 651 | ||||||||||
Amortization of DAC | 10 | 9 | 8 | 8 | 8 | ||||||||||
Insurance operating costs and other expenses [1] | 321 | 298 | 204 | 193 | 220 | ||||||||||
Amortization of other intangible assets | 17 | 9 | — | — | — | ||||||||||
Total benefits, losses and expenses | 1,433 | 1,226 | 826 | 829 | 879 | ||||||||||
Income before income taxes | 64 | 77 | 100 | 96 | 59 | ||||||||||
Income tax expense (benefit) | 10 | (32 | ) | 29 | 27 | 14 | |||||||||
Net income | 54 | 109 | 71 | 69 | 45 | ||||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | (26 | ) | 4 | 7 | 13 | 7 | |||||||||
Less: Integration and transaction costs associated with acquired business, before tax | (12 | ) | (17 | ) | — | — | — | ||||||||
Less: Income tax benefit (expense) [2] | 7 | 55 | (2 | ) | (5 | ) | (2 | ) | |||||||
Core earnings | $ | 85 | $ | 67 | $ | 66 | $ | 61 | $ | 40 | |||||
Margin | |||||||||||||||
Net income margin [3] | 3.6 | % | 8.4 | % | 7.7 | % | 7.5 | % | 4.9 | % | |||||
Core earnings margin [3] * | 5.6 | % | 5.2 | % | 7.2 | % | 6.7 | % | 4.3 | % | |||||
ROE | |||||||||||||||
Net income [4] | 10.9 | % | 10.5 | % | 11.6 | % | 11.0 | % | 10.7 | % | |||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | (0.1 | )% | 1.2 | % | 1.7 | % | 2.2 | % | 2.4 | % | |||||
Less: Integration costs | (1.2 | )% | (0.7 | )% | — | % | — | % | — | % | |||||
Less: Income tax benefit (expense) [2] | 2.3 | % | 1.8 | % | (0.6 | )% | (0.8 | )% | (0.9 | )% | |||||
Less: Impact of AOCI, excluded from core earnings ROE | (0.4 | )% | (0.4 | )% | (1.5 | )% | (1.5 | )% | (1.0 | )% | |||||
Core earnings [4] | 10.3 | % | 8.6 | % | 12.0 | % | 11.1 | % | 10.2 | % | |||||
[1] | The three months ended March 31, 2017 includes state guaranty fund assessments of $20, before tax, related to the liquidation of a life and health insurance company. |
[2] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
[3] | Excluding the state guaranty fund assessment related to the liquidation of a life and health insurance company, net income and core earnings margins for the three months ended March 31, 2017 are 6.3% and 5.8%, respectively. |
[4] | Net income ROE and core earnings ROE for Group Benefits assumes a portion of debt and interest expense accounted for within Corporate is allocated to Group Benefits. For further information, see Appendix, page 33. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
GROUP BENEFITS
SUPPLEMENTAL DATA
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
PREMIUMS | |||||||||||||||
Fully insured ongoing premiums | |||||||||||||||
Group disability | $ | 633 | $ | 539 | $ | 368 | $ | 360 | $ | 364 | |||||
Group life | 664 | 567 | 382 | 391 | 386 | ||||||||||
Other | 60 | 55 | 53 | 51 | 55 | ||||||||||
Total fully insured ongoing premiums | 1,357 | 1,161 | 803 | 802 | 805 | ||||||||||
Total buyouts [1] | — | 1 | — | 3 | 11 | ||||||||||
Total premiums | $ | 1,357 | $ | 1,162 | $ | 803 | $ | 805 | $ | 816 | |||||
SALES (GROSS ANNUALIZED NEW PREMIUMS) | |||||||||||||||
Fully insured ongoing sales | |||||||||||||||
Group disability | $ | 260 | $ | 77 | $ | 43 | $ | 32 | $ | 87 | |||||
Group life | 160 | 22 | 20 | 33 | 115 | ||||||||||
Other | 34 | 4 | 5 | 2 | 9 | ||||||||||
Total fully insured ongoing sales | 454 | 103 | 68 | 67 | 211 | ||||||||||
Total buyouts [1] | — | 1 | — | 3 | 11 | ||||||||||
Total sales | $ | 454 | $ | 104 | $ | 68 | $ | 70 | $ | 222 | |||||
RATIOS, EXCLUDING BUYOUTS | |||||||||||||||
Group disability loss ratio | 74.9 | % | 72.9 | % | 73.0 | % | 78.9 | % | 82.9 | % | |||||
Group life loss ratio | 80.9 | % | 80.2 | % | 77.7 | % | 74.2 | % | 73.1 | % | |||||
Total loss ratio | 77.4 | % | 76.1 | % | 74.7 | % | 76.1 | % | 77.7 | % | |||||
Expense ratio [2] [3] | 24.0 | % | 25.0 | % | 25.8 | % | 24.5 | % | 27.7 | % | |||||
[1] | Takeover of open claim liabilities and other non-recurring premium amounts. |
[2] | Integration and transaction costs related to the Group Benefits acquisition made in November 2017 are not included in the expense ratio. |
[3] | The three months ended March 31, 2017 includes state guaranty fund assessment totaling 2.5 pts related to the liquidation of a life and health insurance company. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Investment management fees | $ | 181 | $ | 179 | $ | 172 | $ | 162 | $ | 155 | |||||
Shareholder servicing fees | 21 | 21 | 24 | 27 | 24 | ||||||||||
Other revenue | 57 | 58 | 56 | 58 | 59 | ||||||||||
Total revenues | 259 | 258 | 252 | 247 | 238 | ||||||||||
Sub-advisory expense | 66 | 65 | 63 | 60 | 56 | ||||||||||
Employee compensation and benefits | 29 | 27 | 28 | 28 | 28 | ||||||||||
Distribution and service | 91 | 91 | 90 | 90 | 89 | ||||||||||
General, administrative and other | 30 | 19 | 31 | 31 | 30 | ||||||||||
Total expenses | 216 | 202 | 212 | 209 | 203 | ||||||||||
Income before income taxes | 43 | 56 | 40 | 38 | 35 | ||||||||||
Income tax expense | 9 | 23 | 14 | 14 | 12 | ||||||||||
Net income | $ | 34 | $ | 33 | $ | 26 | $ | 24 | $ | 23 | |||||
Less: Income tax expense | — | (4 | ) | — | — | — | |||||||||
Core earnings | $ | 34 | $ | 37 | $ | 26 | $ | 24 | $ | 23 | |||||
Daily average total Mutual Funds segment AUM | $117,301 | $113,830 | $109,640 | $105,625 | $101,114 | ||||||||||
Return on assets (bps, after tax) [1] | |||||||||||||||
Net income | 11.9 | 11.5 | 9.5 | 9.2 | 9.2 | ||||||||||
Core earnings | 11.9 | 12.8 | 9.5 | 9.2 | 9.2 | ||||||||||
ROE | |||||||||||||||
Net income [2] | 44.3 | % | 40.9 | % | 34.3 | % | 33.0 | % | 32.0 | % | |||||
Less: Income tax expense | (1.6 | )% | (1.6 | )% | — | % | — | % | — | % | |||||
Less: Impact of AOCI, excluded from core earnings ROE | 0.2 | % | (0.1 | )% | (0.3 | )% | (0.3 | )% | — | % | |||||
Core earnings [2] | 45.7 | % | 42.6 | % | 34.6 | % | 33.3 | % | 32.0 | % | |||||
[1] | Represents annualized earnings divided by daily average assets under management, as measured in basis points ("bps") which represents one hundredth of one percent. |
[2] | Net income ROE and core earnings ROE for Mutual Funds assumes a portion of debt and interest expense accounted for within Corporate is allocated to Mutual Funds. For further information, see Appendix, page 33. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
MUTUAL FUNDS
ASSET VALUE ROLLFORWARD
ASSETS UNDER MANAGEMENT BY ASSET CLASS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Equity Funds | |||||||||||||||
Beginning balance | $ | 63,740 | $ | 61,163 | $ | 58,047 | $ | 54,683 | $ | 50,826 | |||||
Sales | 4,175 | 3,060 | 3,630 | 4,076 | 3,987 | ||||||||||
Redemptions | (3,749 | ) | (3,276 | ) | (2,944 | ) | (3,269 | ) | (3,587 | ) | |||||
Net flows | 426 | (216 | ) | 686 | 807 | 400 | |||||||||
Change in market value and other | 536 | 2,793 | 2,430 | 2,557 | 3,457 | ||||||||||
Ending balance | $ | 64,702 | $ | 63,740 | $ | 61,163 | $ | 58,047 | $ | 54,683 | |||||
Fixed Income Funds | |||||||||||||||
Beginning balance | $ | 14,401 | $ | 14,454 | $ | 14,286 | $ | 13,973 | $ | 13,301 | |||||
Sales | 1,002 | 771 | 866 | 1,079 | 1,930 | ||||||||||
Redemptions | (1,030 | ) | (966 | ) | (861 | ) | (900 | ) | (1,406 | ) | |||||
Net flows | (28 | ) | (195 | ) | 5 | 179 | 524 | ||||||||
Change in market value and other | 5 | 142 | 163 | 134 | 148 | ||||||||||
Ending balance | $ | 14,378 | $ | 14,401 | $ | 14,454 | $ | 14,286 | $ | 13,973 | |||||
Multi-Strategy Investments Funds [1] | |||||||||||||||
Beginning balance | $ | 20,469 | $ | 19,571 | $ | 18,923 | $ | 18,142 | $ | 17,171 | |||||
Sales | 1,000 | 993 | 868 | 1,093 | 1,301 | ||||||||||
Redemptions | (914 | ) | (751 | ) | (792 | ) | (765 | ) | (892 | ) | |||||
Net flows | 86 | 242 | 76 | 328 | 409 | ||||||||||
Change in market value and other | (418 | ) | 656 | 572 | 453 | 562 | |||||||||
Ending balance | $ | 20,137 | $ | 20,469 | $ | 19,571 | $ | 18,923 | $ | 18,142 | |||||
Exchange-traded Products ("ETP") AUM | |||||||||||||||
Beginning balance | $ | 480 | $ | 409 | $ | 325 | $ | 278 | $ | 209 | |||||
Net flows | 194 | 42 | 60 | 33 | 22 | ||||||||||
Change in market value and other | (8 | ) | 29 | 24 | 14 | 47 | |||||||||
Ending balance | $ | 666 | $ | 480 | $ | 409 | $ | 325 | $ | 278 | |||||
Mutual Fund and ETP AUM | |||||||||||||||
Beginning balance | $ | 99,090 | $ | 95,597 | $ | 91,581 | $ | 87,076 | $ | 81,507 | |||||
Sales - mutual fund | 6,177 | 4,824 | 5,364 | 6,248 | 7,218 | ||||||||||
Redemptions - mutual fund | (5,693 | ) | (4,993 | ) | (4,597 | ) | (4,934 | ) | (5,885 | ) | |||||
Net flows - ETP | 194 | 42 | 60 | 33 | 22 | ||||||||||
Net flows - mutual fund and ETP | 678 | (127 | ) | 827 | 1,347 | 1,355 | |||||||||
Change in market value and other | 115 | 3,620 | 3,189 | 3,158 | 4,214 | ||||||||||
Ending balance | 99,883 | 99,090 | 95,597 | 91,581 | 87,076 | ||||||||||
Life and annuity run-off business held for sale | 15,614 | 16,260 | 16,127 | 16,098 | 16,123 | ||||||||||
Total Mutual Funds segment AUM | $ | 115,497 | $ | 115,350 | $ | 111,724 | $ | 107,679 | $ | 103,199 | |||||
[1] | Includes balanced, allocation, and alternative investment products. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
CORPORATE
INCOME STATEMENTS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Fee income | $ | 2 | $ | 2 | $ | 1 | $ | — | $ | 1 | |||||
Net investment income | 7 | 9 | 5 | 5 | 4 | ||||||||||
Net realized capital gains (losses) | 4 | (1 | ) | 1 | — | (1 | ) | ||||||||
Total revenues | 13 | 10 | 7 | 5 | 4 | ||||||||||
Benefits, losses and loss adjustment expenses [1] | 2 | 31 | — | — | — | ||||||||||
Insurance operating costs and other expenses [2] | 15 | (1 | ) | 26 | 16 | 18 | |||||||||
Pension settlement | — | — | — | 750 | — | ||||||||||
Interest expense | 80 | 78 | 79 | 79 | 80 | ||||||||||
Total expenses | 97 | 108 | 105 | 845 | 98 | ||||||||||
Loss from continuing operations before income taxes | (84 | ) | (98 | ) | (98 | ) | (840 | ) | (94 | ) | |||||
Income tax expense (benefit) | (20 | ) | 821 | (30 | ) | (293 | ) | (41 | ) | ||||||
Loss from continuing operations, net of tax | (64 | ) | (919 | ) | (68 | ) | (547 | ) | (53 | ) | |||||
Income (loss) from discontinued operations, net of tax [3] | 169 | (3,145 | ) | 89 | 112 | 75 | |||||||||
Net income (loss) | 105 | (4,064 | ) | 21 | (435 | ) | 22 | ||||||||
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 4 | (1 | ) | 2 | (1 | ) | (1 | ) | |||||||
Less: Pension settlement, before tax | — | — | — | (750 | ) | — | |||||||||
Less: Income tax benefit (expense) [4] | (2 | ) | (867 | ) | (2 | ) | 262 | — | |||||||
Less: Income (loss) from discontinued operations, after tax [3] | 169 | (3,145 | ) | 89 | 112 | 75 | |||||||||
Core losses | $ | (66 | ) | $ | (51 | ) | $ | (68 | ) | $ | (58 | ) | $ | (52 | ) |
[1] | Benefits incurred relates to life and annuity business retained by the Company. |
[2] | Includes stranded costs related to the life and annuity run-off business retained by the Company |
[3] | The three months ended March 31, 2018 and December 31, 2017 included an estimated gain on sale of $62 and loss on sale of $3.3 billion, respectively, related to the pending sale of the Company's life and annuity run-off business. The reduction in loss in the three months ended March 31, 2018 was largely due to the reclassification to retained earnings of $193 of tax effects stranded in AOCI due to the accounting for tax reform, partially offset by $107 of operating income from discontinued operations and the reclassification to retained earnings of $10 of net unrealized gains, net of shadow DAC, on equity securities. |
[4] | Generally represents federal income tax benefit (expense) related to before tax items not included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
CONSOLIDATED
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Net Investment Income | |||||||||||||||
Fixed maturities [1] | |||||||||||||||
Taxable | $ | 238 | $ | 226 | $ | 224 | $ | 224 | $ | 221 | |||||
Tax-exempt | 111 | 105 | 103 | 102 | 98 | ||||||||||
Total fixed maturities | 349 | 331 | 327 | 326 | 319 | ||||||||||
Equity securities | 6 | 10 | 4 | 5 | 5 | ||||||||||
Mortgage loans | 33 | 33 | 31 | 30 | 30 | ||||||||||
Limited partnerships and other alternative investments [2] | 73 | 29 | 48 | 39 | 58 | ||||||||||
Other [3] | 8 | 10 | 13 | 11 | 15 | ||||||||||
Subtotal | 469 | 413 | 423 | 411 | 427 | ||||||||||
Investment expense | (18 | ) | (19 | ) | (19 | ) | (16 | ) | (17 | ) | |||||
Total net investment income | $ | 451 | $ | 394 | $ | 404 | $ | 395 | $ | 410 | |||||
Annualized investment yield, before tax [4] | 4.2 | % | 3.8 | % | 4.1 | % | 4.1 | % | 4.2 | % | |||||
Annualized limited partnerships and other alternative investment yield, before tax [4] | 18.6 | % | 7.3 | % | 12.8 | % | 10.1 | % | 15.5 | % | |||||
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] * | 3.7 | % | 3.7 | % | 3.8 | % | 3.8 | % | 3.8 | % | |||||
Annualized investment yield, after tax [4] | 3.5 | % | 2.8 | % | 3.0 | % | 3.0 | % | 3.1 | % | |||||
Average reinvestment rate [5] | 3.8 | % | 3.3 | % | 3.4 | % | 3.5 | % | 3.5 | % | |||||
Average sales/maturities yield [6] | 3.3 | % | 3.3 | % | 4.1 | % | 3.7 | % | 3.6 | % | |||||
Portfolio duration (in years) [7] | 5.1 | 5.2 | 5.0 | 5.0 | 5.1 | ||||||||||
[1] | Includes income on short-term bonds. |
[2] | Other alternative investments include an insurer-owned life insurance policy which is invested in hedge funds and other investments. |
[3] | Primarily represents income from derivatives that qualify for hedge accounting and are used to hedge fixed maturities. |
[4] | Represents annualized net investment income divided by the monthly average invested assets at amortized cost as applicable, excluding repurchase agreement and securities lending collateral, if any, and derivatives amortized cost. |
[5] | Represents the annualized yield on fixed maturities and mortgage loans that were purchased during the respective period. Excludes U.S. Treasury securities, cash equivalent securities, and repurchase agreement and securities lending collateral, if any. |
[6] | Represents the annualized yield on fixed maturities and mortgage loans that were sold, matured, or redeemed, including calls and pay-downs, during the respective period. Excludes U.S. Treasury securities, cash equivalent securities, and repurchase agreement and securities lending collateral, if any. |
[7] | Excludes certain short-term securities. |
* Denotes financial measure not calculated in accordance with generally accepted accounting principles (non-GAAP).
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
PROPERTY & CASUALTY
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Net Investment Income | |||||||||||||||
Fixed maturities [1] | |||||||||||||||
Taxable | $ | 163 | $ | 158 | $ | 169 | $ | 169 | $ | 168 | |||||
Tax-exempt | 82 | 81 | 81 | 81 | 78 | ||||||||||
Total fixed maturities | 245 | 239 | 250 | 250 | 246 | ||||||||||
Equity securities | 4 | 4 | 4 | 4 | 4 | ||||||||||
Mortgage loans | 24 | 24 | 22 | 21 | 21 | ||||||||||
Limited partnerships and other alternative investments [2] | 58 | 23 | 34 | 32 | 45 | ||||||||||
Other [3] | 4 | 6 | 7 | 8 | 8 | ||||||||||
Subtotal | 335 | 296 | 317 | 315 | 324 | ||||||||||
Investment expense | (13 | ) | (15 | ) | (14 | ) | (13 | ) | (14 | ) | |||||
Total net investment income | $ | 322 | $ | 281 | $ | 303 | $ | 302 | $ | 310 | |||||
Annualized investment yield, before tax [4] | 4.3 | % | 3.8 | % | 4.0 | % | 4.1 | % | 4.2 | % | |||||
Annualized limited partnerships and other alternative investment yield, before tax [4] | 17.0 | % | 6.5 | % | 10.4 | % | 9.6 | % | 13.6 | % | |||||
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] | 3.7 | % | 3.7 | % | 3.7 | % | 3.8 | % | 3.7 | % | |||||
Annualized investment yield, after tax [4] | 3.5 | % | 2.8 | % | 2.9 | % | 3.0 | % | 3.1 | % | |||||
Average reinvestment rate [5] | 3.7 | % | 3.2 | % | 3.4 | % | 3.5 | % | 3.7 | % | |||||
Average sales/maturities yield [6] | 3.7 | % | 3.6 | % | 4.1 | % | 3.8 | % | 3.8 | % | |||||
Portfolio duration (in years) [7] | 4.9 | 5.0 | 5.0 | 5.0 | 5.0 | ||||||||||
Footnotes [1] through [7] are explained on page 25.
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTMENT INCOME BEFORE TAX
GROUP BENEFITS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Net Investment Income | |||||||||||||||
Fixed maturities [1] | |||||||||||||||
Taxable | $ | 70 | $ | 63 | $ | 50 | $ | 50 | $ | 49 | |||||
Tax-exempt | 27 | 24 | 21 | 21 | 20 | ||||||||||
Total fixed maturities | 97 | 87 | 71 | 71 | 69 | ||||||||||
Equity securities | 1 | 1 | — | — | — | ||||||||||
Mortgage loans | 9 | 9 | 9 | 9 | 10 | ||||||||||
Limited partnerships and other alternative investments [2] | 15 | 6 | 14 | 7 | 13 | ||||||||||
Other [3] | 4 | 4 | 5 | 4 | 6 | ||||||||||
Subtotal | 126 | 107 | 99 | 91 | 98 | ||||||||||
Investment expense | (5 | ) | (4 | ) | (4 | ) | (3 | ) | (3 | ) | |||||
Total net investment income | $ | 121 | $ | 103 | $ | 95 | $ | 88 | $ | 95 | |||||
Annualized investment yield, before tax [4] | 4.3 | % | 3.8 | % | 4.9 | % | 4.5 | % | 4.8 | % | |||||
Annualized limited partnerships and other alternative investment yield, before tax [4] | 28.3 | % | 12.2 | % | 29.4 | % | 13.3 | % | 28.9 | % | |||||
Annualized investment yield, before tax, excluding limited partnership and other alternative investments [4] [8] | 3.8 | % | 3.7 | % | 4.3 | % | 4.3 | % | 4.3 | % | |||||
Annualized investment yield, after tax [4] | 3.5 | % | 2.8 | % | 3.5 | % | 3.3 | % | 3.5 | % | |||||
Average reinvestment rate [5] | 3.9 | % | 3.4 | % | 3.6 | % | 3.6 | % | 3.6 | % | |||||
Average sales/maturities yield [6] | 3.0 | % | 2.9 | % | 4.3 | % | 3.9 | % | 4.0 | % | |||||
Portfolio duration (in years) [7] | 6.1 | 6.3 | 6.0 | 6.0 | 5.9 | ||||||||||
Footnotes [1] through [7] are explained on page 25.
[8] | Beginning in the fourth quarter of 2017, the average yield reflects the fact that invested assets acquired as part of the acquisition of Aetna's group life and disability business on November 1, 2017 were recorded at the then current yields which are lower than the yields of the remainder of the Group Benefits segment invested assets. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NET INVESTMENT INCOME
CONSOLIDATED
THREE MONTHS ENDED | |||||||||||||||
Net Investment Income by Segment | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | ||||||||||
Net Investment Income | |||||||||||||||
Commercial Lines | $ | 258 | $ | 225 | $ | 241 | $ | 240 | $ | 243 | |||||
Personal Lines | 40 | 34 | 36 | 35 | 36 | ||||||||||
P&C Other Operations | 24 | 22 | 26 | 27 | 31 | ||||||||||
Total Property & Casualty | $ | 322 | $ | 281 | $ | 303 | $ | 302 | $ | 310 | |||||
Group Benefits | 121 | 103 | 95 | 88 | 95 | ||||||||||
Mutual Funds | 1 | 1 | 1 | — | 1 | ||||||||||
Corporate | 7 | 9 | 5 | 5 | 4 | ||||||||||
Total net investment income by segment | $ | 451 | $ | 394 | $ | 404 | $ | 395 | $ | 410 | |||||
THREE MONTHS ENDED | |||||||||||||||
Net Investment Income From Limited Partnerships and Other Alternative Investments | Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | ||||||||||
Total Property & Casualty | $ | 58 | $ | 23 | $ | 34 | $ | 32 | $ | 45 | |||||
Group Benefits | 15 | 6 | 14 | 7 | 13 | ||||||||||
Total net investment income from limited partnerships and other alternative investments [1] | $ | 73 | $ | 29 | $ | 48 | $ | 39 | $ | 58 | |||||
[1] | Amounts are included above in total net investment income by segment. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPONENTS OF NET REALIZED CAPITAL GAINS (LOSSES)
CONSOLIDATED
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Net Realized Capital Gains (Losses) | |||||||||||||||
Gross gains on sales | $ | 19 | $ | 91 | $ | 46 | $ | 77 | $ | 61 | |||||
Gross losses on sales | (57 | ) | (29 | ) | (16 | ) | (22 | ) | (46 | ) | |||||
Equity securities [1] | 16 | — | — | — | — | ||||||||||
Net impairment losses | — | (4 | ) | (1 | ) | (2 | ) | (1 | ) | ||||||
Valuation allowances on mortgage loans | — | (1 | ) | — | — | — | |||||||||
Transactional foreign currency revaluation | 1 | — | — | 8 | 6 | ||||||||||
Non-qualifying foreign currency derivatives | (3 | ) | — | — | (7 | ) | (7 | ) | |||||||
Other net gains (losses) [2] [3] | (6 | ) | 3 | (3 | ) | 1 | 11 | ||||||||
Total net realized capital gains (losses) | $ | (30 | ) | $ | 60 | $ | 26 | $ | 55 | $ | 24 | ||||
Less: Net realized capital gains, included in core earnings, before tax | — | 1 | 1 | 2 | 1 | ||||||||||
Total net realized capital gains (losses) excluded from core earnings, before tax | (30 | ) | 59 | 25 | 53 | 23 | |||||||||
Less: Impacts of tax | (5 | ) | 22 | 10 | 20 | 8 | |||||||||
Total net realized capital gains (losses) excluded from core earnings | $ | (25 | ) | $ | 37 | $ | 15 | $ | 33 | $ | 15 | ||||
[1] | Effective January 1, 2018, with adoption of new accounting guidance for equity securities at fair value, includes all changes in fair value and trading gains and losses for equity securities. |
[2] | Includes changes in value of non-qualifying derivatives, including credit derivatives and interest rate derivatives used to manage duration. |
[3] | Includes periodic net coupon settlements on credit derivatives which are included in core earnings. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
COMPOSITION OF INVESTED ASSETS
CONSOLIDATED
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||||||||||||
Amount [1] | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount [1] | Percent | ||||||||||||||||
Total investments | $ | 44,432 | 100.0 | % | $ | 45,146 | 100.0 | % | $ | 42,246 | 100.0 | % | $ | 42,085 | 100.0 | % | $ | 40,864 | 100.0 | % | |||||
Asset-backed securities | $ | 911 | 2.5 | % | $ | 1,126 | 3.0 | % | $ | 1,350 | 4.0 | % | $ | 1,339 | 4.0 | % | $ | 1,325 | 4.1 | % | |||||
Collateralized debt obligations | 1,144 | 3.2 | % | 1,260 | 3.4 | % | 1,402 | 4.1 | % | 1,446 | 4.3 | % | 1,262 | 3.9 | % | ||||||||||
Commercial mortgage-backed securities | 3,311 | 9.2 | % | 3,336 | 8.9 | % | 2,969 | 8.7 | % | 2,907 | 8.7 | % | 2,814 | 8.7 | % | ||||||||||
Corporate | 12,634 | 35.2 | % | 12,804 | 34.7 | % | 11,372 | 33.4 | % | 11,265 | 33.4 | % | 11,075 | 34.3 | % | ||||||||||
Foreign government/government agencies | 1,082 | 3.0 | % | 1,110 | 3.0 | % | 984 | 2.9 | % | 922 | 2.7 | % | 845 | 2.6 | % | ||||||||||
Municipal [2] | 11,544 | 32.1 | % | 12,485 | 33.8 | % | 11,203 | 32.9 | % | 11,074 | 32.8 | % | 10,608 | 32.9 | % | ||||||||||
Residential mortgage-backed securities | 3,086 | 8.6 | % | 3,044 | 8.3 | % | 2,590 | 7.7 | % | 2,577 | 7.6 | % | 2,418 | 7.5 | % | ||||||||||
U.S. Treasuries | 2,212 | 6.2 | % | 1,799 | 4.9 | % | 2,156 | 6.3 | % | 2,190 | 6.5 | % | 1,931 | 6.0 | % | ||||||||||
Total fixed maturities, available-for-sale | $ | 35,924 | 100.0 | % | $ | 36,964 | 100.0 | % | $ | 34,026 | 100.0 | % | $ | 33,720 | 100.0 | % | $ | 32,278 | 100.0 | % | |||||
U.S. government/government agencies | $ | 4,972 | 13.8 | % | $ | 4,536 | 12.3 | % | $ | 4,324 | 12.7 | % | $ | 4,231 | 12.5 | % | $ | 3,830 | 11.9 | % | |||||
AAA | 5,812 | 16.2 | % | 6,072 | 16.4 | % | 5,535 | 16.3 | % | 5,525 | 16.4 | % | 5,333 | 16.5 | % | ||||||||||
AA | 6,942 | 19.3 | % | 7,810 | 21.1 | % | 7,211 | 21.2 | % | 7,355 | 21.8 | % | 6,966 | 21.6 | % | ||||||||||
A | 8,873 | 24.7 | % | 8,919 | 24.1 | % | 7,906 | 23.2 | % | 7,610 | 22.6 | % | 7,227 | 22.4 | % | ||||||||||
BBB | 7,839 | 21.8 | % | 7,931 | 21.5 | % | 7,350 | 21.6 | % | 7,172 | 21.2 | % | 7,010 | 21.6 | % | ||||||||||
BB | 890 | 2.5 | % | 1,005 | 2.7 | % | 959 | 2.8 | % | 1,085 | 3.2 | % | 1,152 | 3.6 | % | ||||||||||
B | 529 | 1.5 | % | 618 | 1.7 | % | 595 | 1.7 | % | 602 | 1.8 | % | 607 | 1.9 | % | ||||||||||
CCC | 64 | 0.2 | % | 69 | 0.2 | % | 139 | 0.4 | % | 132 | 0.4 | % | 143 | 0.4 | % | ||||||||||
CC & below | 3 | — | % | 4 | — | % | 7 | 0.1 | % | 8 | 0.1 | % | 10 | 0.1 | % | ||||||||||
Total fixed maturities, available-for-sale | $ | 35,924 | 100.0 | % | $ | 36,964 | 100.0 | % | $ | 34,026 | 100.0 | % | $ | 33,720 | 100.0 | % | $ | 32,278 | 100.0 | % | |||||
[1] | Amount represents the value at which the assets are presented in the Consolidating Balance Sheets (page 4). |
[2] | Primarily comprised of $8.5 billion in Property & Casualty and $2.9 billion in Group Benefits as of March 31, 2018. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
INVESTED ASSET EXPOSURES
MARCH 31, 2018
Cost or Amortized Cost | Fair Value | Percent of Total Invested Assets | ||||||
Top Ten Corporate Fixed Maturity and Equity Exposures by Sector, Available-for-sale | ||||||||
Financial services | $ | 3,059 | $ | 3,048 | 6.9 | % | ||
Utilities | 2,159 | 2,185 | 4.9 | % | ||||
Consumer non-cyclical | 1,730 | 1,722 | 3.9 | % | ||||
Technology and communications | 1,672 | 1,704 | 3.8 | % | ||||
Capital goods | 1,131 | 1,146 | 2.6 | % | ||||
Energy [1] | 1,105 | 1,118 | 2.5 | % | ||||
Consumer cyclical | 1,000 | 1,006 | 2.3 | % | ||||
Basic industry | 564 | 577 | 1.3 | % | ||||
Transportation | 530 | 532 | 1.2 | % | ||||
Other | 723 | 719 | 1.6 | % | ||||
Total | $ | 13,673 | $ | 13,757 | 31.0 | % | ||
Top Ten Exposures by Issuer [2] | ||||||||
New York State Dormitory Authority | $ | 297 | $ | 309 | 0.7 | % | ||
New York City Transitional Finance Authority | 268 | 281 | 0.6 | % | ||||
Commonwealth of Massachusetts | 230 | 244 | 0.6 | % | ||||
State of California | 204 | 217 | 0.5 | % | ||||
Goldman Sachs Group Inc. | 190 | 187 | 0.4 | % | ||||
New York City Municipal Water Finance Authority | 174 | 184 | 0.4 | % | ||||
JP Morgan Chase & Co. | 179 | 178 | 0.4 | % | ||||
Massachusetts State Development Finance Agency | 164 | 170 | 0.4 | % | ||||
Apple Inc. | 157 | 160 | 0.4 | % | ||||
Morgan Stanley | 155 | 154 | 0.3 | % | ||||
Total | $ | 2,018 | $ | 2,084 | 4.7 | % | ||
[1] | Excludes investments in foreign government, government agency securities or other fixed maturities that are correlated to energy exposure but are not direct obligations of or exposures to energy-related companies. |
[2] | Excludes U.S. government and government agency securities, mortgage obligations issued by government sponsored agencies, cash equivalent securities, and exposures resulting from derivative transactions. |
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
APPENDIX
BASIS OF PRESENTATION AND DEFINITIONS
All amounts are in millions, except for per share and ratio information unless otherwise stated. Amounts presented throughout this document have been rounded for presentation purposes.
The Hartford Financial Services Group, Inc. (the "Company", "we", or "our") currently conducts business principally in five reporting segments: Commercial Lines, Personal Lines, Property & Casualty Other Operations ("P&C Other Operations"), Group Benefits, and Mutual Funds, as well as a Corporate category.
Property & Casualty ("P&C") businesses consist of three reporting segments: Commercial Lines, Personal Lines and P&C Other Operations. Commercial Lines provides businesses with workers' compensation, property, automobile, liability, umbrella, marine and livestock coverages under several different products, primarily throughout the United States (“U.S.”), within its standard commercial lines, which consists of the Company's small commercial and middle market lines of business. Additionally, within Commercial Lines, a variety of customized insurance products and risk management services including workers' compensation, automobile, general liability, professional liability, bond, and specialty casualty coverages are offered through the segment's specialty commercial lines. Personal Lines provides automobile, homeowners and personal umbrella coverages to individuals across the U.S., including a special program designed exclusively for members of AARP. P&C Other Operations includes certain property and casualty operations, managed by the Company, that have discontinued writing new business and substantially all of the Company's asbestos and environmental exposures.
Group Benefits provides group life, accident and disability coverage, group retiree health and voluntary benefits to individual members of employer groups and associations. Group Benefits offers disability underwriting, administration, claims processing and reinsurance to other insurers and self-funded employer plans. On November 1, 2017, Hartford Life and Accident Insurance Company (HLA), a wholly owned subsidiary of the Company, completed the acquisition of Aetna's U.S. group life and disability insurance business through a reinsurance transaction. Aetna's group life and disability revenue and earnings since the acquisition date are included in the operating results of the Company's Group Benefits reporting segment.
Mutual Funds provides investment management, administration, distribution and related services to investors through investment products in both domestic and international markets. Mutual fund and exchange-traded products are sold primarily through retail, bank trust and registered investment advisor channels.
Corporate includes discontinued operations from the Company's life and annuity run-off business accounted for as held for sale, reserves for structured settlement and terminal funding agreement liabilities retained, capital raising activities (including debt financing and related interest expense), purchase accounting adjustments related to goodwill and other expenses not allocated to the reporting segments.
Certain operating and statistical measures have been incorporated herein to provide supplemental data that indicate current trends in the Company's business. These measures include sales, deposits, net flows, account value, insurance in-force, premium retention, renewal earned and written price increases and policy count retention. Premium retention is defined as renewal premium written in the current period divided by total premium written in the prior period. Renewal earned price increases represent the portions of the prior and current period renewal written price increases that have been earned based on the period of time the underlying renewal policies have been in effect. Renewal written price increases for Commercial Lines represent the combined effect of rate changes, amount of insurance and individual risk pricing decisions per unit of exposure since the prior year on policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Lines, renewal written price increases represent the total change in premium per policy since the prior year on those policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure. For Personal Lines, other changes in exposure include, but are not limited to, the effect of changes in number of drivers, vehicles and incidents, as well as changes in customer policy elections, such as deductibles and limits.
Policy count retention represents the ratio of the number of policies renewed during the period divided by the number of policies from the previous policy term period.
The Company, along with others in the property and casualty insurance industry, uses underwriting ratios as measures of performance. The loss and loss adjustment expense ratio is the ratio of losses and loss adjustment expenses to earned premiums. The expense ratio is the ratio of underwriting expenses (amortization of deferred policy acquisition costs and insurance operating costs and expenses, including certain centralized services and bad debt expense) less fee income to earned premiums. The policyholder dividend ratio is the ratio of policyholder dividends to earned premiums. The combined ratio is the sum of the loss and loss adjustment expense ratio, the expense ratio and the policyholder dividend ratio. These ratios are relative measurements that describe the related cost of losses, expenses and policyholder dividends for every $100 of earned premiums. A combined ratio below 100 demonstrates underwriting profit; a combined ratio above 100 demonstrates underwriting losses. The catastrophe ratio (a component of the loss ratio) represents the ratio of catastrophe losses to earned premiums. The prior accident year loss and loss adjustment expense ratio (a component of the loss ratio) represents the increase (decrease) in the estimated cost of settling catastrophe and non-catastrophe claims incurred in prior accident years as recorded in the current calendar year divided by earned premiums.
The Company, along with others in the insurance industry, uses underwriting ratios as measures of the Group Benefits segment's performance. The loss ratio is the ratio of benefits, losses and loss adjustment expenses to premiums and other considerations, excluding buyout premiums. The expense ratio is the ratio of insurance operating costs and other expenses to premiums and other considerations, excluding buyout premiums. Buyout premiums represent takeover of open claim liabilities and other non-recurring premium amounts.
DISCUSSION OF NON-GAAP AND OTHER FINANCIAL MEASURES
The Company uses non-GAAP and other financial measures in this Investor Financial Supplement to assist investors in analyzing the Company's operating performance. Because the Company's calculation of these measures may differ from similar measures used by other companies, investors should be careful when comparing the Company's non-GAAP and other financial measures to those of other companies. Non-GAAP measures are indicated with an asterisk the first time they appear in this document.
The Company uses the non-GAAP financial measure core earnings as an important measure of the Company's operating performance. The Company believes that core earnings provides investors with a valuable measure of the underlying performance of the Company’s businesses because it reveals trends in our insurance and financial services businesses that may be obscured by including the net effect of certain realized capital gains and losses, certain restructuring and other costs, integration and transaction costs in connection with an acquired business, pension settlements, loss on extinguishment of debt, gains and losses on reinsurance transactions, income tax benefit from reduction in deferred income tax valuation allowance, impact of tax reform on net deferred tax assets, and results of discontinued operations. Some realized capital gains and losses are primarily driven by investment decisions and external economic developments, the nature and timing of which are unrelated to the insurance and underwriting aspects of our business. Accordingly, core earnings excludes the effect of all realized gains and losses (net of tax) that tend to be highly variable from period to period based on capital market conditions. The Company believes, however, that some realized capital gains and losses are integrally related to our insurance operations, so core earnings includes net realized gains and losses such as net periodic settlements on credit derivatives. These net realized gains and losses are directly related to an offsetting item included in the income statement such as net investment income. Results from discontinued operations are excluded from core earnings for businesses held for sale because such results could obscure trends in our ongoing businesses that are valuable to our investors' ability to assess the Company's financial performance. Net income (loss) and income from continuing operations (during periods when the Company reports significant discontinued operations) are the most directly comparable U.S. GAAP measures to core earnings. Income from continuing operations is net income, excluding the income (loss) from discontinued operations. Core earnings should not be considered as a substitute for net income (loss) or income (loss) from continuing operations and does not reflect the overall profitability of the Company’s business. Therefore, The Company believes that it is useful for investors to evaluate net income (loss), income (loss) from continuing operations and core earnings when reviewing the Company’s performance. A reconciliation of net income to core earnings is set forth on page 2.
Core earnings per share is calculated based on the non-GAAP financial measure core earnings. The Company believes that the measure core earnings per share provides investors with a valuable measure of the Company's operating performance for many of the same reasons applicable to its underlying measure, core earnings. Net income per share is the most directly comparable U.S. GAAP measure. Core earnings per share should not be considered as a substitute for net income per share and does not reflect the overall profitability of the Company's business. Therefore, the Company believes that it is useful for investors to evaluate both net income per share and core earnings per share when reviewing our performance.
Book value per diluted share is a U.S. GAAP financial measure that represents a per share assessment of the value of a company's equity. It is calculated by dividing (a) common stockholders' equity by (b) common shares outstanding and dilutive potential common shares. The Company provides book value per diluted share to enable investors to assess the value of the Company’s equity. Reconciliations of book value per common share and book value per diluted share to book value per common share, excluding AOCI and book value per diluted share, excluding AOCI, are set forth on page 1.
The Company provides different measures of the return on stockholders' equity (“ROE”). Core earnings ROE is calculated based on non-GAAP financial measures. Core earnings ROE is calculated by dividing (a) core earnings for the prior four fiscal quarters by (b) average common stockholders' equity, excluding AOCI. Net income ROE is the most directly comparable U.S. GAAP measure. Net income ROE is calculated by dividing (a) net income for the prior four fiscal quarters by (b) average common stockholders' equity, including AOCI. ROEs at the segment level and for consolidated, represent a levered view of ROE as debt financing and related interest expense are attributed to the businesses consistent with the overall average debt to capitalization ratios of the consolidated entity. The Company excludes AOCI in the calculation of core earnings ROE to provide investors with a measure of how effectively the Company is investing the portion of the Company's net worth that is primarily attributable to the Company's business operations. The Company provides investors with return-on-equity measures based on its non-GAAP core earnings financial measures for the reasons set forth in the related discussion above.
A reconciliation of Net income ROE to Core earnings ROE is set forth below:
LAST TWELVE MONTHS ENDED | ||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | ||||||
Net income (loss) ROE | (19.3 | )% | (20.6 | )% | 2.7 | % | 3.9 | % | 5.4 | % |
Less: Net realized capital gains (losses), excluded from core earnings, before tax | 0.7 | % | 1.1 | % | (0.2 | )% | (0.2 | )% | (0.3 | )% |
Less: Loss on reinsurance transactions, before tax | — | % | — | % | (3.6 | )% | (3.6 | )% | (3.7 | )% |
Less: Pension settlement, before tax | (5.0 | )% | (4.9 | )% | (4.2 | )% | (4.2 | )% | — | % |
Less: Integration and transaction costs associated with an acquired business | (0.2 | )% | (0.1 | )% | — | % | — | % | — | % |
Less: Income tax benefit (expense) on items not included in core earnings | (4.3 | )% | (4.4 | )% | 3.2 | % | 3.5 | % | 2.4 | % |
Less: Income (loss) from discontinued operations, after tax | (18.4 | )% | (18.9 | )% | 1.8 | % | 1.8 | % | 1.9 | % |
Less: Impact of AOCI, excluded from denominator of core earnings ROE | 0.1 | % | (0.1 | )% | (0.2 | )% | (0.3 | )% | — | % |
Core earnings ROE | 7.8 | % | 6.7 | % | 5.9 | % | 6.9 | % | 5.1 | % |
The Company evaluates profitability of the individual P&C businesses primarily on the basis of underwriting gain (loss). Underwriting gain (loss) is a before tax measure that represents earned premiums less incurred losses, loss adjustment expenses and underwriting expenses and policyholder dividends. Underwriting gain (loss) is influenced significantly by earned premium growth and the adequacy of the Company's pricing. Underwriting profitability over time is also greatly influenced by the Company's pricing and underwriting discipline, which seeks to manage exposure to loss through favorable risk selection and diversification, its management of claims, its use of reinsurance and its ability to manage its expense ratio, which it accomplishes through its management of acquisition costs and other underwriting expenses. Net income (loss) is the most directly comparable U.S. GAAP measure. The Company believes that underwriting gain (loss) provides investors with a valuable measure of before tax profitability derived from underwriting activities, which are managed separately from the Company's investing activities. Reconciliations of underwriting gain (loss) to net income (loss) for the Company's P&C businesses are set forth on pages 8, 10, 14 and 19.
A catastrophe is a severe loss, resulting from natural or manmade events, including risks such as fire, earthquake, windstorm, explosion, terrorist attack and similar events. Each catastrophe has unique characteristics. Catastrophes are not predictable as to timing or loss amount in advance, and therefore their effects are not included in earnings or losses and loss adjustment expense reserves prior to occurrence. The Company believes that a discussion of the effect of catastrophes is meaningful for investors to understand the variability of periodic earnings.
Underlying combined ratio is a non-GAAP financial measure. Combined ratio is the most directly comparable GAAP measure. Underlying combined ratio represents the combined ratio before catastrophes and prior accident year development. The Company believes this ratio is an important measure of the trend in profitability since it removes the impact of volatile and unpredictable catastrophe losses and prior accident year loss and loss adjustment expense reserve development. A reconciliation of the combined ratio to the underlying combined ratio for Property & Casualty, Commercial Lines, and Personal Lines is set forth on pages 9, 12 and 16, respectively.
Core earnings margin is a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of, the Group Benefits segment's operating performance. Core earnings margin is calculated by dividing core earnings by revenues excluding buyouts and realized gains (losses). Net income margin is the most directly comparable U.S. GAAP measure. The Company believes that core earnings margin provides investors with a valuable measure of the performance of Group Benefits because it reveals trends in the business that may be obscured by the effect of buyouts and realized gains (losses). Core earnings margin should not be considered as a substitute for net income margin and does not reflect the overall profitability of Group Benefits. Therefore, the Company believes it is important for investors to evaluate both core earnings margin and net income margin when reviewing performance.
Return on Assets ("ROA"), core earnings, is a non-GAAP financial measure that the Company uses to evaluate, and believes is an important measure of the Mutual Funds segment’s operating performance. ROA is the most directly comparable U.S. GAAP measure. The Company believes that ROA, core earnings, provides investors with a valuable measure of the performance of the Mutual Funds segment because it reveals trends in our businesses that may be obscured by the effect of realized gains (losses). ROA, core earnings, should not be considered as a substitute for ROA and does not reflect the overall profitability of our Mutual Funds business. Therefore, the Company believes it is important for investors to evaluate both ROA, core earnings, and ROA when reviewing the Mutual Funds segment performance. ROA, core earnings is calculated by dividing core earnings by a daily average AUM.
Net investment income, excluding limited partnerships is the amount of net investment income earned from invested assets excluding the net investment income related to limited partnerships and other alternative investments. The company believes that net investment income, excluding limited partnerships, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments.
CONSOLIDATED
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Total net investment income | $ | 451 | $ | 394 | $ | 404 | $ | 395 | $ | 410 | |||||
Limited partnerships and other alternative investments | 73 | 29 | 48 | 39 | 58 | ||||||||||
Net investment income excluding limited partnerships | $ | 378 | $ | 365 | $ | 356 | $ | 356 | $ | 352 | |||||
PROPERTY & CASUALTY
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Total net investment income | $ | 322 | $ | 281 | $ | 303 | $ | 302 | $ | 310 | |||||
Limited partnerships and other alternative investments | 58 | 23 | 34 | 32 | 45 | ||||||||||
Net investment income excluding limited partnerships | $ | 264 | $ | 258 | $ | 269 | $ | 270 | $ | 265 | |||||
GROUP BENEFITS
THREE MONTHS ENDED | |||||||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | |||||||||||
Total net investment income | $ | 121 | $ | 103 | $ | 95 | $ | 88 | $ | 95 | |||||
Limited partnerships and other alternative investments | 15 | 6 | 14 | 7 | 13 | ||||||||||
Net investment income excluding limited partnerships | $ | 106 | $ | 97 | $ | 81 | $ | 81 | $ | 82 | |||||
Annualized investment yield, excluding limited partnerships is the annualized net investment income excluding limited partnerships and other alternative investments divided by the monthly average invested assets at amortized cost, excluding repurchase agreement and securities lending collateral, derivatives book value, and limited partnership and other alternative invested assets. The company believes that annualized net investment income, excluding limited partnerships, provides investors with an important measure of the trend in investment earnings because it excludes the impact of the volatility in returns related to limited partnerships and other alternative investments.
CONSOLIDATED
THREE MONTHS ENDED | ||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | ||||||
Annualized investment yield | 4.2 | % | 3.8 | % | 4.1 | % | 4.1 | % | 4.2 | % |
Annualized investment yield on limited partnerships and other alternative investments | 18.6 | % | 7.3 | % | 12.8 | % | 10.1 | % | 15.5 | % |
Annualized investment yield excluding limited partnerships and other alternative investments | 3.7 | % | 3.7 | % | 3.8 | % | 3.8 | % | 3.8 | % |
PROPERTY & CASUALTY
THREE MONTHS ENDED | ||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | ||||||
Annualized investment yield | 4.3 | % | 3.8 | % | 4.0 | % | 4.1 | % | 4.2 | % |
Annualized investment yield on limited partnerships and other alternative investments | 17.0 | % | 6.5 | % | 10.4 | % | 9.6 | % | 13.6 | % |
Annualized investment yield excluding limited partnerships and other alternative investments | 3.7 | % | 3.7 | % | 3.7 | % | 3.8 | % | 3.7 | % |
GROUP BENEFITS
THREE MONTHS ENDED | ||||||||||
Mar 31 2018 | Dec 31 2017 | Sept 30 2017 | Jun 30 2017 | Mar 31 2017 | ||||||
Annualized investment yield | 4.3 | % | 3.8 | % | 4.9 | % | 4.5 | % | 4.8 | % |
Annualized investment yield on limited partnerships and other alternative investments | 28.3 | % | 12.2 | % | 29.4 | % | 13.3 | % | 28.9 | % |
Annualized investment yield excluding limited partnerships and other alternative investments | 3.8 | % | 3.7 | % | 4.3 | % | 4.3 | % | 4.3 | % |